New Cases For the Week of August 21, 2011 - August 25, 2011

 

August 26, 2011
In re Renew Energy, LLC
(DBN)
Bankr. WD WI

To establish a defense under 11 USC 546(e) (settlement payment), the defendant must show that the debtor's payment to it was: (i) a settlement payment and (ii) made by or to a "forward contract merchant." The term "settlement payment" is payment of an obligation that arose under a "forward contract" (rather than under a simple commodities contract).

Therefore, to determine whether a payment is a "settlement payment," the court must determine whether the contract for which the payment was made was a "forward contract."

Here, the debtor, an ethanol producer, made payments to a gasoline seller for gasoline deliveries that occurred several times a month over several months. The contract pricing was structured so that the debtor and the seller could hedge their exposure to gasoline price swings. These were "forward contracts." By proving that the contracts were "forward contracts," the seller necessarily proved that it was a "forward contract merchant" and was thus entitled to the 546(e) defense.

In re Teleservices Group, Inc
(DBN)
Bankr. WD MI

"For over twenty-five years, my colleagues and I have operated with the understanding that we were properly constituted judges capable of rendering final judgments in many, but not all, matters arising in connection with a bankruptcy proceeding...However, Stern v. Marshall reveals how misplaced my confidence has been...I may take umbrage at the suggestion that my independence as a decision-maker would ever be compromised by the threat of not being reappointed or having my compensation reduced. But there remains the appearance that I could be so influenced and that alone is enough...My frustration with Stern is that it offers virtually no insight as to how to recalibrate the core/non-core dichotomy so that I can again proceed with at least some assurance that I will not be making the same constitutional blunder with respect to some other aspect of Authority Section 157(b)(2)...At most, I am told that a judicially recognized "public rights" exception might permit a non-Article III judge to act on his own with respect to some aspects of the bankruptcy process. [FN21] However, as Stern itself concedes, the Court has yet to give clear definition to this exception as a general proposition, let alone as to how it might apply in the bankruptcy arena...One alternative would be to play it safe and simply refer without reflection every future determination I make to a district judge for his or her final review. However, I do not see how I can do so in good faith given Authority Section 157(b)(3)'s direction that I must decide even in instances when not requested whether I have the ability or not under that section to enter a final order. Cf. 28 U.S.C. § 157(b)(3). Moreover, I suspect that the Article III judges in my district would not be pleased with the extra workload such an approach would impose upon them. "

"The taking that Trustee has in mind in this (avoidance action) adversary proceeding requires the oversight of a judicial officer with the independence that is only guaranteed by life tenure and salary protection." The court can only enter a final judgment in the avoidance action if all parties consent.

     
August 25, 2011
In re Motors Liquidation Company
(DBN)
Bankr SD NY Judge: "Frankly, I bring nothing to the table here... especially since so much has already been accomplished in helping New GM and the UAW get back to business as usual, I think it's better for the New York bankruptcy court to minimize its role in New GM affairs" The court abstains from hearing a dispute between New GM and the UAW regarding interpretation of a 363 order entered by the court.
In re Borders Group, Inc.
(DBN)
Bankr. SD NY There is nothing inherently wrong with non-lawyer professionals (here, a compensation consultant) retaining their own counsel to assist in preparing fee applications, and receiving expense reimbursement (within appropriate limits) for the cost of doing so, if their engagement letters and retention orders permit it. However, such counsel cannot perform work related to the consultant's scope of work.
In re Sud Properties, Inc.
(DBN)
Bankr. ED NC The "indubitable equivalent" standard is stringent and the burden for establishing it is more than a mere preponderance. It is "akin to clear and convincing standard." Analyzing partial "dirt for debt" plans requires a two-step process. The analysis distinguishes between the preponderance standard that pertains to value and risk determinations, and the stringent indubitable equivalent standard that courts must apply to conclude that a secured creditor will realize the full value of its secured claim. There is inherent difficulty in satisfying the indubitable equivalent standard. If any doubt exists, the plan should not be confirmed
     
August 23, 2011
In re Legal Xtranet, Inc.
(DBN)
Bankr. WD TX In evaluating a recoupment defense, the bankruptcy court is required to follow state court precedent regarding state common law (here, the law of Texas). Because Texas was neither a British colony nor an American territory, Texas common law is determined by Texas statute and adoption of the Texas Supreme Court and not directly by inheritance from the English common law. Recoupment has a narrow scope under Texas common law and "must be predicated upon a factor which would vitiate a contract either in whole or in part as of the time the contract was mad.
In re Terrestar Networks, Inc.
(DBN)
Bankr. SD NY Although the "equities of the case" exception in 11 USC 552 is likely intended to deal with the situation where unencumbered assets are used to increase the value of encumbered assets, the exception is not so limited by its text, and thus summary judgment is not warranted with respect to the exception even though it is clear that the stereotypical factual paradigm ( i.e., unencumbered assets benefitting encumbered assets) is not present in this case.
In re Momenta, Inc.
(DBN)
Bankr D NH A seller may have an administrative expense reclamation claim in a drop shipment situation (i.e., goods shipped to a debtor's customer directly from the seller), so long as the debtor at some point had constructive possession of the goods. However, if goods pass from one common carrier to another, until ultimately reaching the third party purchaser, the goods are never "received" by the debtor and the seller would have no right to an administrative expense claim.
In re The Spa At Sunset Isles Condominium Association, Inc.
(DBN)
Bankr. SD FL Pursuant to the Supremacy Clause, 11 USC 506(c) (surcharge) applies without reference to contrary State law. Accordingly, where a State law prohibits a foreclosing lender from being charged with condominium association fees until the lender has actually taken title, section 506(c) nevertheless allows the lender's collateral to be surcharged for such fees.
     
 
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