mdiaz's blog

By: Nicholas Marcello

St. John’s Law Student

American Bankruptcy Institute Law Review Staff

In In re Genesys Research Institute, the United States Bankruptcy Court for the District of Massachusetts denied motions for reconsideration holding there was no error in approving the sale and disposition of research equipment and biological samples free and clear of liens, claims, and interests.[1] In support of its motion to sell research equipment by public auction and destroy experimental cancers cells, the Trustee of Genesys Research Institute, a debtor, argued that the costs and burdens of maintaining the biological materials warranted the prompt disposition of them.[2] The Trustee noted that no party appeared to take custody and control of the biological materials despite all marketing efforts.[3] The Trustee also represented that he had no ability to reorganize the research lab and that he was required to liquidate the debtor’s assets in furtherance of his duties as a chapter 11 trustee.[4] The Court approved the disposition of the cells and the sale of the equipment free and clear of all interest and liens over the objection of, among others, the Department of Energy (“DOE”).[5] The disposition of the research led to the incineration of (hundreds) of biological samples, backed by thousands of dollars in grants, which were part of vital cancer research.[6] The researcher’s work was considered to be “groundbreaking and paradigm-shifting in the field of cancer biology” because they were able to turn normal human cells into cancer cells.[7]

By: Allison N. Smalley

St. John’s Law Student

American Bankruptcy Institute Law Review Staff

In Securities Investor Protection Corporation v. Bernie L. Madoff Investment Securities, LLC,[1] the Bankruptcy Court for the Southern District of New York concluded that a recipient should return fictitious profits he gained through the Ponzi scheme operated by Bernard L. Madoff Investment Securities (“BLMIS”).[2] Andrew Cohen withdrew approximately $4 million from his account at BLMIS between January 18, 1996 and December 11, 2008.[3] Of that withdrawal, approximately $1.1 million was fictitious profit.[4] Irving Picard, as the trustee of BLMIS,[5] sought to recover the fictitious profits from several recipients, including Cohen, under Section 548 of the Bankruptcy Code.[6] As a defense, Cohen asserted that he gave “value” to BLMIS when he received the fictitious profits.[7] The bankruptcy court, however, rejected this defense and concluded that the District Court should find in favor of Picard.[8]

By: Christina Mavrikis

St. John’s Law Student

American Bankruptcy Institute Law Review Staff

In In re G-I Holdings, Inc., the Third Circuit of the United States Court of Appeals held that the New York City Housing Authority (“NYCHA”) could not repackage a claim for damages against G-I Holdings in the hopes of circumventing federal bankruptcy laws. G-I Holdings was the manufacturer of housing products containing asbestos. Seeking to address its asbestos related lawsuits, in 2001 GI Holdings filed for relief under Chapter 11 of the Bankruptcy Code in the Bankruptcy Court for the District of New Jersey. NYCHA submitted a half-billion dollar claim against G-I Holdings for property damage to its buildings. NYCHA claimed it had to take expensive measures to remove asbestos containing material from its buildings. In 2009, the District Court for the District of New Jersey and the Bankruptcy Court for the District of New Jersey approved a plan of reorganization that disposed all covered claims against G-I Holdings. Claim holders were also barred from reasserting such claims.

By: Parm Partik Singh

St. John’s Law Student

American Bankruptcy Institute Law Review Staff

A “foreign representative” must obtain recognition of a foreign proceeding pursuant to 11 U.S.C. § 1517 prior to “apply[ing] directly to a court in the United States.” However, under § 1509(f), a foreign representative may sue in a United States court “to collect or recover a claim which is the property of the debtor” without first obtaining recognition. The scope of this exception, however, is unclear.

By: Stephanie Hung

St. John’s Law Student

American Bankruptcy Institute Law Review Staffer

In In Re Omni Enterprises, an Alaska Bankruptcy Court held that a bank may enforce the security interest of a prior loan that has already been repaid to cure a new loan that is in default. In 2009, a borrower entered into a loan agreement with a bank for $1.3 million. The loan was partly secured by the borrower’s deposit accounts. After the 2009 loan was repaid, the borrower entered into a new loan agreement with the same bank for $2.6 million. The new loan was secured by, among other things, the borrower’s equipment, furnishings, and fixtures, but did not explicitly include the deposit accounts. In 2015, the borrower defaulted on the loan and the bank swept the deposit accounts, causing the borrower to file for chapter 7 under the Bankruptcy Code. According to the bank, it continued to have a lien on the deposit accounts notwithstanding the repayment of the 2009 loan. The borrower’s trustee then filed suit in the United States Bankruptcy Court for the District of Alaska. The Court ultimately agreed with the bank’s interpretation of the loan agreements, and held that the sweeping of the deposit accounts was permissible.