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Recent Blog Posts

  • Debtors Beware: Congress Takes Aim At “Eve of Filing” Executive Compensation Some recent high profile restructuring debtors made multi-million dollar retention bonuses on the eve of bankruptcy filings. The U.S. Government Accountability Office (GAO) took notice of these pre-petition payments and, in September 2021, published a report with data showing that debtors may be “working around the [Bankruptcy] Code’s restrictions” by paying bonuses prior to filing bankruptcy. The GAO Report recommends that Congress amend the Bankruptcy Code to “bring pre-bankruptcy bonuses under court oversight” and “specify factors the court should consider... More
  • What the Bankruptcy Venue Reform Act of 2021 Could Mean for Corporate Debtors On September 23, 2021, United States Senators Elizabeth Warren (D-Mass.) and John Cornyn (R-Texas) introduced the Bankruptcy Venue Reform Act of 2021 (the “Venue Reform Act”), which would tighten the Bankruptcy Code’s venue rules for corporate debtors. A corporate filer would be limited to the district containing its principal place of business or the district where its principal assets have been located for the preceding 180 days. For a public company, the location listed in its SEC filings would be its presumptive principal place of business. The Venue Reform Act is intended to eliminate forum shopping by corporate... More
  • Texas Bankruptcy Court Dismisses NRA Bankruptcy Cases, Finding They Were Not Filed in Good Faith On May 11, 2021, Judge Harlin D. Hale dismissed the chapter 11 case filed by the National Rifle Association after finding that it was not filed in good faith. Judge Hale ruled that the case was “filed to gain an unfair litigation advantage” and to “avoid a state regulatory scheme,” which the Court found was “not for a purpose intended or sanctioned by the Bankruptcy Code.” Background In August 2020, the New York attorney general (“NYAG”) filed a complaint in New York... More
  • Proposed Law Would Extend COVID-19 Bankruptcy Relief When Congress passed the CARES Act last year, it included changes to the Bankruptcy Code that helped individuals and businesses. Many of these provisions expire on March 27, 2021 even though the economy has not yet returned to normal. The COVID-19 Bankruptcy Relief Extension Act of 2021, which has not passed yet, would extend the changes for another year. The proposed law also seeks to extend other COVID-19 bankruptcy relief provisions that were enacted through the Consolidated Appropriations Act of... More
  • Subchapter V: The Paper Anniversary When Congress passed the Small Business Reorganization Act (“SBRA”) in August 2019, we lived in a different world. The SBRA added a “Subchapter V” to the Bankruptcy Code for small business debtors, responding to longstanding criticism of the Bankruptcy Code’s costs and complexities on small businesses trying to reorganize. The SBRA became effective exactly one year ago, on February 19, 2020, and when many businesses in the United States shut their doors in March 2020, many thought that the timing... More
  • Second Circuit Does Not Flip Flop on Enforceability of Flip Clauses On August 11, 2020, the Second Circuit addressed the long-standing question of whether flip clauses are enforceable in bankruptcy. Affirming a Southern District of New York decision, the Court found in Lehman Brothers Special Financing Inc. v. Bank of America N.A. that flip clauses are protected under the safe harbor and therefore enforceable in bankruptcy.[1] Investors should take comfort that this decision puts the final nail in the coffin of the earlier controversial decisions in the Lehman Brothers chapter 11 proceedings that had... More
  • Bond Market Shaken (Not Stirred) As Supreme Court Declines To Hear Puerto Rico Municipal Bonds Dispute On January 13, 2020, the Supreme Court denied petitions for writ of certiorari on the question of whether payments on municipal bonds secured by special revenues are required during the issuer’s bankruptcy. Special revenue bonds are paid from pledged revenues generated from a specific activity. The case arose because after the Puerto Rico Highway and Transportation Agency (PRHTA) commenced its municipal reorganization case in 2017, it refused to make a July 2017 payment of $219 million, arguing that the automatic... More