In This Issue:
Eighth Circuit Rules that Bankruptcy Code's Cap on Lease Damage Claims Applies to Fraudulent Transfer Judgment
In Lariat Cos. v. Wigley (In re Wigley), 951 F.3d 967 (8th Cir. 2020), the U.S. Court of Appeals for the Eighth Circuit reversed a bankruptcy appellate panel decision and held that an individual debtor's joint liability with the guarantor of a real property lease for a fraudulent transfer judgment: (i) was not discharged as a result of the lease guarantor's prior bankruptcy discharge; but (ii) was nonetheless capped under section 502(b)(6) of the Bankruptcy Code. According to the Eighth Circuit, the fraudulent transfer judgment was "one step removed from the breach of the lease, but [the debtor's] liability results from the breach of the lease, so the cap applies." [read more ...]
Oversecured Creditor's Right to Contractual Default-Rate Interest Allowed Under State Law
In In re Family Pharmacy, Inc., 614 B.R. 58 (B.A.P. 8th Cir. 2020), an Eighth Circuit bankruptcy appellate panel reversed a bankruptcy court's order disallowing a secured creditor's claim for interest at the default rate under the parties' contract using a penalty-type analysis generally applied to liquidated damages provisions. According to the panel, such an analysis cannot be applied to default interest provisions. The panel also held that the bankruptcy court erred when it held that the default interest rate was unenforceable based on "equitable considerations." [read more ...]
Force Majeure Clause Triggered by Pandemic Shutdown Order Partially Relieves Chapter 11 Debtor from Timely Paying Postpetition Rent
In In re Hitz Restaurant Group, 2020 WL 2924523 (Bankr. N.D. Ill. June 3, 2020), the U.S. Bankruptcy Court for the Northern District of Illinois held that, because a government shutdown decree forced a restaurant to suspend on-premises dining, a force majeure clause in the restaurant's lease partially relieved the debtor from paying postpetition rent. [read more ...]
Expanding the Scope of the Bankruptcy Safe Harbor for Securities Transactions
In Holliday v. K Road Power Management, LLC (In re Boston Generating LLC), 2020 WL 3286207 (Bankr. S.D.N.Y. June 18, 2020), the U.S. Bankruptcy Court for the Southern District of New York held that: (i) section 546(e) of the Bankruptcy Code preempts intentional fraudulent transfer claims under state law because the intentional fraud exception expressly included in section 546(e) applies only to intentional fraudulent transfer claims under federal law; and (ii) payments made to the members of limited liability company debtors as part of a pre-bankruptcy recapitalization transaction were...
