Rudolph J Di Massa Jr

July 04, 2017 | The Legal Intelligencer

Under Section 365(a) of the Bankruptcy Code, a debtor in bankruptcy may assume executory contracts or unexpired leases to which the debtor was a party before its bankruptcy filing. Before it is permitted to do so, however, the debtor must cure any and all defaults existing under the agreement (see 11 U.S.C. 365(b)(1)), thereby making the nondebtor counter-party "whole" upon assumption.

By Rudolph J. Di Massa Jr. 
and Jarret P. Hitchings

15 minute read

May 25, 2017 | The Legal Intelligencer

A bankruptcy trustee may recover for the bankruptcy estate so-called "preferential transfers"—certain payments made by the debtor within 90 days before the commencement of a bankruptcy case. To prevail, the trustee must show (among other things) that the creditor received a greater amount as a result of the transfer in question than such creditor would have received in a hypothetical liquidation under Chapter 7, had the challenged transfer not occurred.

By Rudolph J. Di Massa Jr. 
and Chad E. Odhner

17 minute read

April 04, 2017 | The Legal Intelligencer

In Czyzewski v. Jevic Holding, 580 U.S. __ (2017), decided on March 22, the U.S. Supreme Court held that, without the consent of impaired ­creditors, a bankruptcy court cannot approve a ­"structured dismissal" that provides for distributions deviating from the ordinary priority scheme of the Bankruptcy Code.

By Rudolph J. Di Massa Jr. 
and Drew S. McGehrin

15 minute read

February 17, 2017 | The Legal Intelligencer

Inaction by a secured creditor in a ­bankruptcy case can have many ­implications with respect to that ­creditor's claim and its lien on collateral, as well as on any potential distribution from estate assets on account of the secured claim.

By Rudolph J. Di Massa Jr. 
and Walter W. Gouldsbury III

13 minute read

November 17, 2016 | The Legal Intelligencer

With the U.S. Court of Appeals for the Third Circuit's holding in Friedman's Liquidating Trust v. Roth Staffing (In re Friedman's), 738 F.3d 547 (3d. Cir. 2013), it became settled law in the Third Circuit that post-petition activities cannot be used to affect the calculation of preference liability or of "new value" defenses against such liability. The court's rationale in Friedman's was based largely on the concept that "new value" is something that can be provided strictly during the preference period (for noninsiders of the debtor, the "preference period" is the 90-day period immediately preceding the debtor's bankruptcy filing). However, the question not answered by Friedman's was whether, if allowed as an administrative expense claim, the value of post-petition goods and services could be set off against preference liability. In Official Committee of Unsecured Creditors of Quantum Foods v. Tyson Foods (In re Quantum Foods), No. 15-50254, 2016 (Bankr. D. Del. July 25), the Delaware Bankruptcy Court addressed whether a meat supplier could use its allowed post-petition administrative expense claim to set off its preference liability, or whether such an attempt would be akin to a subsequent new value defense in disguise (and therefore prohibited by the holding in Friedman's). In holding that setoff is permissible in this context, the Quantum Foods court confirmed that a supplier that continues to do business with a debtor after bankruptcy will likely either be paid for its post-petition sales to the debtor, or may otherwise avail itself of the opportunity to reduce any preference liability it might face.

By Rudolph J. Di Massa Jr. 
and Chad E. Odhner

13 minute read

August 18, 2016 | The Legal Intelligencer

In today's low interest rate environment, the difference between a contractual interest rate and the federal judgment rate can be quite significant. It is not surprising, therefore, that this issue has become hotly litigated in cases involving solvent Chapter 11 debtors.

By Rudolph J. Di Massa Jr., Lawrence J. Kotler and Catherine B. Heitzenrater

14 minute read

June 30, 2016 | The Legal Intelligencer

Puerto Rico is in the midst of a ­financial crisis. Over the past few years, its public debt skyrocketed while its government revenue sharply declined. In order to address its economic problems and to avoid mass public-worker layoffs and cuts in public services, the unincorporated U.S. territory issued billions of dollars in face value of municipal bonds. These bonds were readily saleable to investors in the United States due to their tax-exempt status and comparatively high yields. Now, however, Puerto Rico is unable to service its extraordinary public debt and has begun to default. While the specific causes of this crisis can be debated, the U.S. Supreme Court in Puerto Rico v. Franklin California Tax-Free Trust, No. 15-233 (U.S. June 13, 2016) recently confirmed that two restructuring tools are unavailable to Puerto Rico and its distressed municipalities: relief under Chapter 9 of the U.S. Bankruptcy Code and local legislation providing for the nonconsensual ­restructuring of municipal indebtedness.

By Rudolph J. Di Massa Jr. 
and Jarret P. Hitchings

12 minute read

May 20, 2016 | The Legal Intelligencer

Last year we wrote about Janvey v. Golf Channel, 780 F.3d 641 (5th Cir. 2015), in which the U.S. Court of Appeals for the Fifth Circuit held that advertising fees accepted by Golf Channel could be recovered as a fraudulent transfer by the court-appointed receiver of the failed Stanford International Bank Ponzi scheme. At that time, the circuit court reasoned that such advertising services, as a matter of law, provided no "value" from the perspective of creditors of the defunct scheme, as the entity providing these services contributed to a perpetuation of the scheme, albeit unintentionally. We expressed concern that this holding created uncertainty and risk for trade creditors who have unwittingly done business with a counterparty that operates a Ponzi scheme. On rehearing, however, the court vacated its holding and submitted a certified question to the Supreme Court of Texas to determine the applicability of the "reasonably equivalent value" defense under the Texas Uniform Fraudulent Transfer Act (TUFTA). Disagreeing with the federal circuit court, the Texas Supreme Court, in Janvey v. Golf Channel, No. 15-0489, (Texas April 1, 2016), ruled that "reasonably equivalent value" is determined ­objectively as of the time of the transfer, without reference to whether the transfer actually benefited creditors in retrospect.

By Rudolph J. Di Massa Jr. and Chad E. Odhner

7 minute read

April 01, 2016 | The Legal Intelligencer

The failure of debtors to accurately list and value assets in their bankruptcy schedules is certainly not a new phenomenon.

By Rudolph J. Di Massa Jr.
and Walter W. Gouldsbury III

17 minute read

February 17, 2016 | The Legal Intelligencer

On Aug. 4, 2015, in City of Concord, New Hampshire v. Northern New England Telephone Operations LLC (In re Northern New England Telephone Operations LLC), No. 14-3381 (2nd Cir. Aug. 4, 2015), the U.S. Court of Appeals for the Second Circuit addressed the circumstances under which a creditor's lien on the property of a debtor may be extinguished through a Chapter 11 plan of reorganization. In explaining how liens must be "dealt with" pursuant to a plan in order to be extinguished thereby, the court employed a four-part test to determine whether a creditor's liens are extinguished, or whether they pass through the bankruptcy unaffected. This case provides important guidance for creditors on how best to protect their liens on a debtor's assets, given that the traditional rule—that liens pass through bankruptcy cases unaffected—has been modified by the U.S. Bankruptcy Code.

By Rudolph J. Di Massa Jr. 
and Catherine B. Heitzenrater

8 minute read