New Cases - Week of December 19, 2011

New Cases For the Week of December 19, 2011 - December 23, 2011

December 22, 2011
In re CIT Group (DBN)	Bankr. SD NY	The existence of a mere "connection" between a contract claim and the purchase or sale of a security is not enough to support a finding that the claim "arises from" the purchase or sale and should be subordinated unless the purposes of the statute would be served thereby. The real question is whether the claimant bargained for the risks and rewards of a holder of equity rather than a holder of debt.

December 21, 2011

In re USDigital Inc.
(DBN)

Bankr. DE

Non-core proceedings are those that (a) are not core under the statute; or (b) are core under the statute but over which the bankruptcy judge lacks the judicial power under the Constitution to enter final orders. The parties in a matter may stipulate that it is a non-core proceeding. The bankruptcy judge's power over non-core proceedings is limited to issuing proposed findings of fact and conclusions of law that are subject to de novo review by the district court. It is unclear whether the parties in a matter may stipulate that it is a core proceeding.

Equitable subordination is a core proceeding, and Stern is not applicable. Although there are several indications that Stern is a broad holding, it must be read narrowly. Stern can be read to have broad implications as to the judicial power of bankruptcy courts. To do so, however, is contrary to the letter and the spirit of the Supreme Court's holding.