Legal Archives - Page 7 of 8

Court Determines That Ending Forbearance Does Not Equate to Economic Duress

If a lender ends a forbearance agreement, does that equate to bringing economic distress to the borrower? Reed Smith’s Brian Schenker summarizes the case and court findings in Interpharm Inc. vs. Wells Fargo Bank, N.A., 655 F.3d 136 (2d Cir. 2011) to show how the lender did not exceed the borrower’s rights under their established agreements and what it means for similar borrowers in the same situation.

Quite to the Contrary … There is a Supreme Right to Credit Bid

In the April 2010 ABF Journal article, “In re Philadelphia Newspapers, LLC: The Not-So-Secured Right to Credit Bid,” Jeffrey Wurst discussed the Third Circuit’s decision that in a sale of assets under a plan of reorganization, a secured lender did not have the right to credit bid. Since then, the Seventh Circuit allowed the secured creditor to credit bid. The resulting U.S. Supreme Court decision in RadLAX held that a sale of assets under a plan cannot prevent a secured creditor from credit bidding.

Secured Lender Loses to IP Owner in Dispute Over Proceeds of Trademarked Inventory

In Variety Wholesalers, Inc. v. Prime Apparel, the borrower sold to a customer certain goods that incorporated a trademark owned by the borrower’s vendor. This case highlights an often overlooked category of risk for secured lenders — the risks associated with financing inventory sold in violation of third-party intellectual property rights.

June 1, 2012 Blank Rome | Robert B. Stein ABF Journal

Ninth Circuit Adopts Equitable Mootness Test for Appeals of Plan Confirmation Orders in Thorpe Insulation

A recurring issue in Chapter 11 cases is the extent to which an appeal of an order confirming a plan of reorganization is rendered moot by events occurring after confirmation. In this article, Lesley Hawes discusses the doctrine of equitable mootness and explains why a creditor should care because the doctrine may determine the creditor’s fate under a confirmed plan.

April 7, 2012 Thorpe Insulation ABF Journal

Subordination Agreements… Losing the Upper Hand

Here’s something to think about: Does the UCC create a limit on the damages a senior credit presumes it can recover from a junior creditor if the junior creditor breaches? This article addresses a particular circumstance when a senior creditor’s contractual expectation may not be protected vis-à-vis a subordinate junior creditor as a result of the senior creditor’s misplaced reliance on a less than well-crafted subordination agreement.

November 1, 2011 subordination agreement ABF Journal

To Improve or Not to Improve? Pre-Disposition Preparation and Processing of Collateral

What constitutes commercial reasonableness in preparing and processing collateral for disposition is not expressly set forth in the Uniform Commercial Code. A general rule of thumb has developed under UCC lore: the secured creditor about to dispose of a car on default should wash the car, but probably should not overhaul its engine. This crude example is clear enough, but in between the two extremes of washing a car and overhauling its engine lies an immense middle ground.

October 1, 2011 collateral | secured creditor ABF Journal

Southern District Establishes Standards for ‘Good Faith’ Participation in Court-Ordered Mediation: Part II

The A.T. Reynolds & Sons, Inc. decision reverses the bankruptcy court’s order holding the secured lender in the underlying bankruptcy proceeding, and its counsel, in contempt for failing to mediate in good faith and imposing sanctions upon them. The decision not only vindicates the lender and its counsel for its “no pay” position taken at the mediation, but also articulates a clear and objective standard for parties’ future “good faith” participation in a court-ordered mediation. This is the conclusion of this two-part article.

September 1, 2011 Bankruptcy Court ABF Journal

Southern District Establishes Standards for ‘Good Faith’ Participation in Court-Ordered Mediation: Part I

August 1, 2011 Bankruptcy Court ABF Journal

TOUSA III: The Secured Lenders Take the Lead!

Once again, TOUSA’s Chapter 11 proceedings caught the attention of bankruptcy professionals as Judge Alan S. Gold of the U.S. Bankruptcy Court for the Southern District of Florida granted a motion that amounts to a score for the first and second lien holders.

May 2, 2011 11th Circuit | 11th Circuit Court of Appeals Rita Garwood

Champion Enterprises: Bankruptcy Court (Mostly) Dismisses Complaint Against Prepetition Lenders Based On Alleged Inequitable Conduct

Secured lenders are certain to find In re Champion Enterprises, Inc. useful, both in its holdings and its analysis, when challenged by complaints centered on alleged inequitable conduct from creditors’ committees or Chapter 7 trustees. This case succinctly reaffirms the principle that the use of leverage in negotiations does amount to inequitable conduct.

April 2, 2011 Champion Enterprises | Credit Suisse Rita Garwood

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