mdiaz's blog

By: Tyler Levine

St. John’s Law Student

American Bankruptcy Institute Law Review Staff

In In re Hellas[1] the United States Bankruptcy Court for the Southern District of New York stayed an adversary proceeding on the ground of forum non-conveniens.[2] Plaintiffs, the [liquidators of] Hellas Telecommunications (Luxembourg) II SCA (“Hellas II”), filed a complaint in the Bankruptcy Court following recognition of the foreign liquidators of Hellas II under Chapter 15 of the Bankruptcy Code. The plaintiffs sought to avoid and recover an initial transfer from Hellas II to its parent’s entity of approximately $1.57 billion and also to avoid and recover $973.7 million that was later transferred to several named defendants and an unmanned class of transferees.[3] Initially, the court denied the forum non-conveniens motion because it had the jurisdiction to adjudicate the claims under Sections 213 and 423 of the U.K. Insolvency Act.[4] Thereafter, plaintiffs commenced a similar action under U.K. law, in the U.K., against nine dismissed defendants.[5] In response to this new avoidance action filed in the U.K., the defendants filed another forum non-conveniens motion on January 19, 2016, and the court concluded that in light of this new U.K. action it is now best to litigate all the claims in one forum.

By: Derek Piersiak

St. John’s Law Student

American Bankruptcy Institute Law Review Staff

In In re: Arctic Glacier International, Inc v. Arctic Glacier Income Fund, the United States Bankruptcy Court for the District of Delaware ruled that distributions would be made to unitholders as of the bankruptcy plan’s “Unitholder Distribution Record Date,” and not to the persons who held the units as of FINRA’s ex-date, which fell after the record date.[1] The ex-date is the date on and after which a security is traded without a specific dividend or distribution.[2] Under Arctic Glacier’s reorganization plan, “any distribution, no matter its size, must be made to those who [held] units as of the Unitholder Distribution Record Date, which must be at least 21 days prior to the date on which the distribution is actually paid out, i.e., the payable date.”[3] The plaintiffs purchased units after the plan’s record date.[4] When Arctic Glacier made distributions to those who held units as of the record date, the plaintiffs sued Arctic Glacier, alleging that under U.S. securities laws, Arctic Glacier should have made distributions to the plaintiffs.[5]

By: Dylan Lackowitz

St. John’s Law Student

American Bankruptcy Institute Law Review Staff

Like other states, New Jersey allows third parties to purchase tax liens at auction.[1] These liens against real property are a result of property owners failing to pay local property taxes.[2] Successfully bidding on the lien at auction gives the purchaser the right to foreclose on the property and to seek a judgment on the debt note.[3] In New Jersey, the bidding begins at 18% interest, and each bid lowers the interest rate that would have been assessed on the tax debt.[4] Once the bidding reaches 0%, the bidding parties will then bid on a premium payable to the municipality holding the lien.[5] The party that wins at auction pays the municipality the tax debt owed by the delinquent property owner and any premium incurred during the bidding process in exchange for the tax lien, as evidenced by a tax sale certificate and its accompanying rights.[6] New Jersey law, however, also provides that any holder of a tax sale certificate, who knowingly charges or exacts an excess fee in connection with the redemption of any tax sale certificate, shall forfeit such tax sale certificate to the person who was charged such excessive fee.[7] In In re Princeton Office Park, L.P., the United States Court of Appeals for the Third Circuit held that the United States Bankruptcy Code (the “Code”) does not preempt state law regarding the allowance of claims.[8] Therefore, the Third Circuit held that Plymouth Park Tax Services LLC’s (“Plymouth”) claim in bankruptcy against Princeton Office Park L.P. (“Princeton”) was disallowed because Plymouth charged Princeton an excessive fee in connection with the redemption of a tax sale certificate.[9]

By: Colleen Angus-Yamada

St. John’s Law Student

American Bankruptcy Institute Law Review Staff

Almost thirty years after the Bankruptcy Court for the Southern District of New York confirmed the Chapter 11 plans of Johns-Manville Corporation (“Manville”) and Manville Forest Products (“MFP”), pursuant to which creditors were enjoined from pursuing asbestos claims against them, a plaintiff sought to recover from Graphic Packaging International (“Graphic”), a purported successor of MFP. In In re Johns-Manville Corp.,[1] the Bankruptcy Court enjoined Ms. Berry from pursuing asbestos claims arising from her exposure to asbestos on her husband’s work clothes.[2] According to the Bankruptcy Court, because Graphic is a successor of MPF, a bankruptcy debtor and a wholly-owned subsidiary of Manville, Ms. Berry must first pursue her asbestos claims against the Manville Personal Injury Trust (the “Trust”) in accordance with the Chapter 11 Plan (the “Manville Plan”).[3]

By: William Accordino

St. John’s Law Student

American Bankruptcy Institute Law Review Staffer

In In re Lehman Brothers Holdings Inc. (“Lehman”), Judge Shelley C. Chapman of the United States Bankruptcy Court for the Southern District of New York dismissed a complaint filed by Lehman Brothers Holding Inc. (“LBHI”) and Lehman Brothers Special Financing Inc. (“LBSF”) challenging the early termination of forty-four credit default swap agreements.[1] The complaint alleged the subsequent liquidation of the collateral underlying those agreements after the early termination and the distribution of those proceeds violated the Bankruptcy Code (“Code”) despite LBSF’s default.[2] Of the forty-four swap agreements, the court found five contained provisions that “effected an ipso facto modification of LBSF’s rights . . . .”[3] However, the distributions from those transactions were protected by the Code’s safe harbor provision.[4] Judge Chapman found the priority provisions in the other thirty-nine swap agreements did not operate as ipso facto clauses because they did not modify any rights of LBSF.[5] The payment priority for those agreements was not set at any time prior to the termination of the swap, thus no right to payment priority could be modified by a termination.[6] As a result, all nineteen counts of the complaint were dismissed for failure to state a cause of action.[7]