May 9, 2009
Chrysler Bidding Procedures Approved - Sale Hearing to be May 27
The Order approving the bidding procedures is 65 pages. You can access it here. All of you who want to overbid have until May 20 to submit your bid. It has to be $100 million more than the Fiat bid.
May 8, 2009
Phoenix Coyotes File Chapter 11
U.S. Bankruptcy Court District of Arizona (Phoenix)
Bankruptcy Petition #: 2:09-bk-09488-RTBP
Assigned to: Chief Judge Redfield T. Baum PCT Sr.
Dewey Ranch Hockey, LLC
State Route 69
Dewey, AZ 86327
Tax ID / EIN: 26-4761961
Coyotes Hockey, LLC
6751 N. Sunset Blvd., #200
Glendale, AZ 85305
Tax ID / EIN: 86-0989289
represented by THOMAS J. SALERNO
SQUIRE, SANDERS & DEMPSEY, LLP
40 N. CENTRAL, #2700
PHOENIX, AZ 85004
Fax : (602)253-8129
April FIlings in the Central District of California Hold Steady
In April, 2009, the Central District saw 8,398 total filings compared to 8,518 in March, 6,967 in February and 5,999 in January.
Chapter 13s were 1,815 or 22% of total filings - same percentage as last month. That is 363 new petitions per trustee.
Chapter 11s in the first quarter totaled 91 of which 28 were individual petitions.
This info can be found at the Bankruptcy Data Project.
May 7, 2009
Great Analysis of Chrysler Sale by Chicago Attorney Steve Jakubowski
With three part harmony, a little orchestration and stuff like (thx to Alice's Restaurant). Steve's blog is at www.bankruptcylitigationblog.com. If I knew I could get in, I would go to the sale hearing if I knew when it was (not set yet). This is absolutely a sub rosa plan of reorganization - it also violates 363(f) if it's free and clear of non-consenting secured creditors. I can't imagine the pressure though on Judge Gonzalez to approve it. The free world is at stake or so the motion says.
May 6, 2009
April Bankruptcy Filings
There were 128,720 total bankruptcy petitions filed in April, 2009. This compares to 131,000 in March, 102,000 in February and 89,000 in January. The April rate equates to 1,550,000 for a year or pretty close to the 1,597,000 in 2004, 1,660,000 in 2003 and 1,578,000 in 2002.
May 5, 2009
Chrysler Motion to Approve Sale of Substantially All of its Assets to Fiat
Chrysler has filed its motion to approve the sale to Fiat. The motion has attached the actual sale agreement with Fiat and the "Definitions Addendum." The 250 page motion and attachments can be accessed here. The supporting Points and Authorities can be accessed here. Chrysler is taking the position that the lienholders are being paid the full "economic value" of their liens and therefore 363(f) has been met as to non-consenting lienholders. I'm positive that I have read that that analysis is flawed because it takes away the 363(f) protections give to lienholders, i.e., that a sale will not be approved free and clear of all liens unless the lienholders agree or are paid in full (and a couple of other exceptions). Chrysler is also arguing that the sky will fall on all of us if this sale is not completed right now.
There is no hearing date yet for the sale motion. Presumably that will be in a few weeks.
May 4, 2009
9th Circuit Rules that Reliance of Original Creditor Sufficient to Finding in Favor of Assignee that Debt Is Non-Dischargeable
Brief by my University of West Los Angeles School of Law student, Roksana Moradi:
Boyajian v. New Falls Corp., --- F.3d ---, 2009 WL 1163874- (9th Cir. 2009)
Issue: Must the assignee of a debt itself have relied on the materially false statement to make the debt non-dischargeable, or is it enough that the original creditor did so?
Holding: Enough that original creditor relied on the false statement.
Judge William Fletcher,
In 1999, the Boyajians’ company, Blue Diamond Straw & Toothpick Company, Inc. (“Blue Diamond”), entered into a lease agreement with the Epic Funding Corporation (“Epic”). In order to obtain the lease, the Boyajians each submitted personal financial statements, and each signed a “Continuing Guaranty of Indebtedness” in which they personally guaranteed Blue Diamond’s obligations under the lease. Epic relied on the Boyajians’ statements in agreeing to the lease. In 2002, Epic sold its interest in the lease to Cupertino National Bank. By May of that year, Blue Diamond and the Boyajians failed to make the required payments and in October Cupertino filed a civil action against them. A default judgment was entered and Cupertino was awarded damages totaling $193,132.69. In May 2003 Cupertino assigned the judgment to Stornawaye Capital who subsequently assigned its interest in the judgment to New Falls Corporation (“New Falls”) in 2004.
The Boyajians each filed Chapter 7 bankruptcy petitions in 2004 and New Falls filed an adversary complaint against them seeking, inter alia, a ruling that the judgment owed by the Boyajians was nondischargeable under § 523(a)(2)(B). New Falls contended that the personal financial statements submitted by the Boyajians in order to obtain the lease were materially false, and that discharge was therefore unavailable. Although the judgment was entered in favor of New Falls’ predecessor-in-interest, New Falls alleged that it was assigned all rights to the judgment, including the right to non-dischargeability under§ 523(a)(2)(B). That section of the Code provides an exception to discharge of a debt where the debt was obtained by means of a materially false written financial statement, one “on which the creditor to whom the debtor is liable for such money, property, services, or credit reasonably relied.”
Both sides moved for summary judgment and the bankruptcy court granted summary judgment to the Boyajians. The court held that “reliance [under § 523(a)(2)(B)(iii)] has to go to [New Falls] not to the predecessor in interest, and that at the time [New Falls] . . . purchased this debt this information was a few years old, and that there couldn’t have been reliance by [New Falls].” New Falls appealed to the BAP, which reversed, holding that barring any limitations in the assignment itself, § 523(a)(2)(B)(iii) permits an assignee to stand in the shoes of its assignor and to pursue an exception to discharge based on the assignor’s reliance on materially false financial statements. In the view of the BAP, the bankruptcy court erred by failing to take account of “the legal implications of an assignment.”
The Ninth Circuit Court of Appeals affirmed the BAP ruling that the bankruptcy court erred. The Boyajians position that the plain meaning of § 523(a)(2)(B)(iii) required the creditor asserting non-dischargeability to have itself relied on the allegedly materially false financial statement. The appellate court disagreed, holding that the language “‘obtained by’ clearly indicates that the fraudulent conduct occurred at the inception of the debt, i.e., the debtor committed a fraudulent act to induce the creditor to part with his money or property.” And quoting FDIC v. Meyer (In re Meyer), 120 F.3d 66, 70 (7th Cir. 1997), “the very reason that the institution of assignment exists is to enable Creditor to transfer its rights against Debtor . . .to Assignee . . . .”. Therefore, assuming New Falls was indeed the recipient of a general assignment of the original judgment, it can stand in the shoes of its assignor and pursue a nondischargeability action under § 523(a)(2)(B).
May 3, 2009
Circuit Court of Appeals Cases from Last Week
2nd Circuit Court of Appeals, May 01, 2009
Adams v. Marwil, --- F.3d ---, 2009 WL --------- (2nd Cir. 2009)(appointment of a chapter 11 trustee not warranted where district court had already appointed new management of the debtor and UST 2) the showed no cause for removal of the management)
6th Circuit Court of Appeals, April 29, 2009
Reinhardt v. Vanderbilt Mortgage & Fin., Inc., --- F.3d ---, 2009 WL --------- (6th Cir. 2009)(debtor's plan could modify secured claim because mobile home did not constitute real property under Ohio law)
7th Circuit Court of Appeals, April 29, 2009
Levey v. Systems Div., Inc. , --- F.3d ---, 2009 WL --------- (7th Cir. 2009)(defendant's alter ego claims were neither property of the estate nor related to the bankruptcy proceeding and therefore not subject to the automatic stay or to an injunction under Bankruptcy Code sec. 105)
8th Circuit Court of Appeals, April 29, 2009
Contemporary Industries Corp. v. Frost , --- F.3d ---, 2009 WL --------- (8th Cir. 2009)(payments defendants received in exchange for their privately-held stock were exempt settlement payments within the meaning of former Bankruptcy Code sec. 546(e); and bankruptcy court properly granted summary judgment on plaintiff's state law claims for unjust enrichment and illegal and/or excessive shareholder distributions as the claims were preempted by former Bankruptcy Code sec. 546(e))
9th Circuit Court of Appeals, April 28, 2009
Price v. Lehtinen, --- F.3d ---, 2009 WL --------- (9th Cir. 2009)(Bankruptcy Court has inherent power to sanction attorneys; notice to attorney here was sufficient)
9th Circuit Court of Appeals, May 01, 2009
Boyajian v. New Falls Corp., --- F.3d ---, 2009 WL --------- (9th Cir. 2009)(In an action to declare Debtor's obligation under a lease agreement nondischargeable, summary judgment for Debtor is reversed where Plaintiff-Creditor stood in the shoes of its predecessor and could thus state a claim based on its predecessor's reliance on Debtor's inaccurate financial statements)
10th Circuit Court of Appeals, May 01, 2009
C & M Props., L.L.C. v. Burbidge, --- F.3d ---, 2009 WL --------- (10th Cir. 2009)(Court of Appeals lacked jurisdiction because the Bankruptcy Court had previously remanded the malpractice claims to state court)
11th Circuit Court of Appeals, April 29, 2009
W.R. Huff Asset Mgmt. Co. v. Kohlberg, Kravis, Roberts & Co., --- F.3d ---, 2009 WL --------- (11th Cir. 2009)(In an action for fraudulent transfer of assets, appeal dismissed, where: 1) the order was not effectively unreviewable on appeal; and thus 2) the Court of Appeals lacked subject matter jurisdiction)
Thanks to Findlaw.com.