In Official Committee of Unsecured Creditors v. UMB Bank, N.A. (In re Residential Capital, LLC), 2013 BL 317120 (Bankr. S.D.N.Y. Nov. 15, 2013), the court held that unamortized original issue discount ("OID") arising from fair-market-value debt exchanges should not be disallowed as unmatured interest under section 502(b) of the Bankruptcy Code. According to the court, there existed "no commercial or business reason, or valid theory of corporate finance, to justify treating claims generated by face value and fair value exchanges differently in bankruptcy" because: (i) the market value of the old debt is likely depressed in both a fair-value and a face-value exchange; (ii) OID is created for tax purposes in both fair-value and face-value exchanges; and (iii) there are concessions and incentives in both fair-value and face-value exchanges. Furthermore, the court emphasized, both kinds of exchanges offer companies out-of-court restructuring opportunities to avoid the cost and expense of a bankruptcy filing. Accordingly, the court held that the Second Circuit's ruling in LTV Corp. v. Valley Fidelity Bank & Trust Co. (In re Chateaugay Corp.), 961 F.2d 378 (2d Cir. 1992), which addressed the bankruptcy treatment of OID generated in connection with a face-value exchange (i.e., one in which the principal amount of the debt is not reduced), should control in fair-value and face-value situations.

Section 1111(b) provides that a secured claim will be treated as a recourse claim even if it is not actually recourse to the debtor by contract or under applicable state law. This means that the creditor will have a secured claim to the extent of the value of its collateral and an unsecured claim for any deficiency, unless the class of claims of which the secured creditor is a member makes a "section 1111(b) election" to have all claims in the class treated as fully secured. In In re B.R. Brookfield Commons No. 1, LLC, 2013 BL 305268 (7th Cir. Nov. 4, 2013), the Seventh Circuit concluded that "under § 1111(b)(1) (A), the existence of a valid and enforceable lien is the only prerequisite for § 1111(b)(1)(A) to apply," and hence, regardless of whether a nonrecourse second-lien claim is secured by any value in the collateral, section 1111(b)(1)(A) treats the nonrecourse claim as if it had recourse against the estate.

In In re MDC Systems, Inc., 488 B.R. 74 (Bankr. E.D. Pa. 2013), the court rejected the majority view concerning which law should be consulted to calculate the cap on future rent claims under section 502(b)(6) of the Bankruptcy Code. The court ruled that "[i]n no sense should the state law determination of whether a 'surrender' or 'repossession' occurred such as would eliminate any future claim for rent reserved control the [Bankruptcy Code's limitation on landlord claims]."


In In re Pax Am. Dev., LLC, 2013 BL 317133 (Bankr. C.D. Cal. Nov. 15, 2013), the bankruptcy court, relying on the Ninth Circuit's ruling in Tilley v. Vucurevich (In re Pecan Groves of Arizona), 951 F.2d 242 (9th Cir. 1991), held that, because the only legal beneficiaries of the automatic stay are the debtor and the bankruptcy trustee, a creditor does not have standing to seek damages for violation of the automatic stay.

By contrast, in In re Killmer, 2013 BL 317124 (Bankr. S.D.N.Y. Nov. 15, 2013), the court ruled that "[s]ince the automatic stay is meant to prevent creditors from racing to the courthouse to the detriment of other creditors, the Court sees no reason why a creditor who has been harmed by a stay violation should not be able to seek redress for its injury."

In In re Ampal-American Israel Corp., 2013 BL 345421 (Bankr. S.D.N.Y. Dec. 16, 2013), the court similarly concluded that a creditor has standing to seek damages for violation of the automatic stay and that, if the creditor is an individual, he or she may seek damages for willful violation of the stay under section 362(k) of the Bankruptcy Code. However, because the complaining individuals were former officers and directors of the debtor (i.e., potential litigation defendants), the court ruled that the movants lacked "prudential" standing, since they: (i) lacked creditor status; and (ii) were complaining about a third party's potential assertion of estate claims (which, if true, would cause only generalized rather than specific injury).


In re Tronox Inc., 2013 BL 344086 (Bankr. S.D.N.Y. Dec. 12, 2013), raised "issues of first impression regarding the application of the fraudulent conveyance laws in the face of significant environmental and tort liability." The bankruptcy court ruled that entities which orchestrated the divestiture of a group of companies' oil and gas assets valued at approximately $14 billion, while leaving the companies with billions in legacy environmental and tort liabilities, acted with intent to "hinder and delay" the companies' creditors and that the spinoff transaction was consequently avoidable in the chapter 11 cases of the debtor companies as an actual fraudulent transfer under Oklahoma's version of the Uniform Fraudulent Transfer Act and section 544(b) of the Bankruptcy Code. The court also ruled that the transaction was avoidable as a constructively fraudulent transfer because the debtors were rendered insolvent as a consequence of the spinoff transaction and did not receive reasonably equivalent value in exchange.

The court determined that the debtors were entitled to recover damages but that the transferee defendants would be entitled to a claim against the bankruptcy estates under section 502(h) of the Bankruptcy Code in the amount of whatever damages they could prove they suffered as a consequence of avoidance. The bankruptcy court rejected the defendants' argument that the transferee of an avoided fraudulent transfer is always entitled to a section 502(h) claim equal to the amount of the avoided transfer, but it left for another day a calculation of the allowed amount of the claim. That calculation will require consideration of, among other things, the percentage dividend realized by general unsecured creditors under the debtors' confirmed chapter 11 plan and whether the percentage dividend should be adjusted to account for the "dilutive effect" of inclusion of the section 502(h) claim in the creditor pool.

In The Majestic Star Casino, LLC v. Barden Development, Inc. (In re The Majestic Star Casino, LLC), 716 F.3d 736 (3d Cir. 2013), the Third Circuit considered as a matter of first impression whether a nondebtor company's decision to abandon its classification as an "S" corporation for federal tax purposes— forfeiting the pass-through tax benefits that the parent company and its chapter 11 debtor subsidiary had enjoyed—is void as a postpetition transfer of "property of the bankruptcy estate" or is avoidable under sections 362, 549, and 550 of the Bankruptcy Code. Rejecting the rationale of In re Trans- Lines West, Inc., 203 B.R. 653 (Bankr. E.D. Tenn. 1996), and its progeny, the Third Circuit ruled that S-corp status is neither "property" nor "property of the estate" within the meaning of section 541 of the Bankruptcy Code and, consequently, that the parent company's actions were not void or avoidable.

In Paloian v. LaSalle Bank, N.A., 619 F.3d 688 (7th Cir. 2010), the Seventh Circuit ruled as a matter of first impression that the trustee of a securitized investment pool can be a "transferee" within the meaning of section 550(a)(1) of the Bankruptcy Code for the purpose of avoiding transfers. However, the court of appeals rejected a bankruptcy court's finding that a chapter 11 debtor was insolvent by valuing its contingent liabilities at 100 percent, while valuing contingent assets at zero, and it remanded the case below for further findings on the issue of solvency. As part of that analysis, the bankruptcy court had considered whether a purportedly bankruptcy-remote special purpose entity ("SPE") formed as a subsidiary of the chapter 11 debtor whose sole purpose was to purchase and hold the debtor's receivables was truly a separate entity and therefore bankruptcy-remote.

On remand, the bankruptcy court ruled in Paloian v. LaSalle Bank, N.A. (In re Doctors Hosp. of Hyde Park, Inc.), 2013 BL 273656 (Bankr. N.D. Ill. Oct. 4, 2013), that the SPE was indeed "operationally" separate and distinct from the debtor. Cognizant of the repercussions for the distressed lending industry if it concluded otherwise, the court wrote that "[an SPE's] status as an independent economic unit is the entire basis on which the lender chooses to extend credit" and that there is "good reason to avoid judicial disruption of commercial transactions based on a balancing of factors susceptible to subjective interpretation." The bankruptcy court dismissed the fraudulent transfer claims because the trustee failed to establish that the debtor was insolvent or that the payments the trustee sought to recover were made with the debtor's property (as distinguished from the SPE's property).

In Richardson v. Checker Acquisition Corp. (In re Checker Motors Corp.), 495 B.R. 355 (Bankr. W.D. Mich. 2013), the court held that: (i) insolvency for the purpose of avoiding a constructive fraudulent transfer under section 548(a)(1)(B) of the Bankruptcy Code is determined solely on the basis of claims within the meaning of the definition of "claim" in section 101(5); and (ii) a chapter 11 debtor's withdrawal liability from a multi-employer pension plan does not become a "claim" within the meaning of section 101(5) until the debtor has actually withdrawn from the plan. The court ruled that the chapter 1 1 trustee could not rely upon the debtor's potential withdrawal liability to establish constructive fraud under section 548(a)(1)(B) because the debtor had not withdrawn from the multi-employer plan prior to the commencement of its bankruptcy case.


The ability of a bankruptcy court to reorder the priority of claims or interests by means of equitable subordination or recharacterization of debt as equity is generally recognized. Even so, the Bankruptcy Code itself expressly authorizes only the former of these two remedies. This has led to uncertainty in some courts concerning the extent of their power to recharacterize claims as equity and the circumstances warranting recharacterization. The Ninth Circuit had an opportunity to consider this issue in Official Committee of Unsecured Creditors v. Hancock Park Capital II, L.P. (In re Fitness Holdings International, Inc.), 714 F.3d 1141 (9th Cir. 2013). The court ruled that "a court has the authority to determine whether a transaction creates a debt or an equity interest for purposes of § 548, and that a transaction creates a debt if it creates a 'right to payment' under state law." By its ruling, the Ninth Circuit overturned long-standing Ninth Circuit bankruptcy appellate panel precedent to the contrary and became the sixth federal circuit court of appeals to hold that the Bankruptcy Code authorizes a court to recharacterize debt as equity.

In Lindsey v. Pinnacle Nat'l Bank (In re Lindsey), 726 F.3d 857 (6th Cir. 2013), the Sixth Circuit contributed to a growing split in authority by holding that it did not have appellate jurisdiction to review a district court's affirmance of a bankruptcy court order confirming a chapter 11 plan. The Sixth Circuit joined the Second, Eighth, Ninth, and Tenth Circuits in foreclosing an automatic right of appellate review from an order denying confirmation of a plan. See In re Lievsay, 118 F.3d 661 (9th Cir. 1997); In re Lewis, 992 F.2d 767 (8th Cir. 1993); In re Simons, 908 F.2d 643 (10th Cir. 1990); Maiorino v. Branford Savings Bank, 691 F.2d 89 (2d Cir. 1982). By contrast, the Third, Fourth, and Fifth Circuits have held that a debtor may seek immediate appellate review of an order denying confirmation of its proposed plan when, on balance, consideration of certain pragmatic factors, such as judicial economy and expeditious resolution of the bankruptcy case, lean in the debtor's favor. See Mort Ranta v. Gorman, 721 F.3d 241 (4th Cir. 2013); In re Armstrong World Indus., 432 F.3d 507 (3d Cir. 2005); In re Bartee, 212 F.3d 277 (5th Cir. 2000).

The U.S. Supreme Court's 2011 ruling in Stern v. Marshall, 132 S. Ct. 56 (2011), continues to complicate the day-to-day operation of bankruptcy courts scrambling to deal with a deluge of challenges—strategic or otherwise—to the scope of their "core" authority to issue final orders and judgments on a wide range of disputes. In Stern, the court ruled that, to the extent that 28 U.S.C. § 157(b)(2)(C) purports to confer authority on a bankruptcy court to finally adjudicate a state law counterclaim against a creditor which filed a proof of claim, the provision is constitutionally invalid. The mayhem among bankruptcy and appellate courts continued throughout 2013.

In Wellness Int'l Network, Ltd. v. Sharif, 727 F.3d 751 (7th Cir. 2013), the Seventh Circuit sided with the Sixth Circuit (see Waldman v. Stone, 698 F.3d 910 (6th Cir. 2012)), by ruling that: (i) a constitutional objection based on Stern is not waivable because it implicates separation-of-powers principles, and thus, the objection may be raised for the first time on appeal; and (ii) consent cannot cure such a constitutional deficiency. The Seventh Circuit based its ruling on many of the same principles articulated in Waldman, noting that Stern did not raise questions of subject matter jurisdiction (which is not waivable), but instead called into question the structural division of authority between Article III courts and non-Article III courts (e.g., bankruptcy courts), as contemplated by the U.S. Constitution.

The Seventh Circuit also questioned the current practice of many courts of resolving Stern issues by permitting appellate courts to "construe" orders of bankruptcy courts as reports and recommendations, subject to adoption by the district court, should the district court decide that the bankruptcy court lacked the constitutional authority to enter a final order. The Seventh Circuit suggested in dicta that bankruptcy courts may not hear pretrial matters because there is no explicit statutory authorization for bankruptcy courts to hear such matters, as is the case with magistrate judges.

In Peterson v. Somers Dublin Ltd., 729 F.3d 741 (7th Cir. 2013), the Seventh Circuit ruled that a waiver of the right to a judgment by an Article III court is enforceable and that the court's decision in Wellness Int'l (issued only two weeks earlier) had involved the issue of "forfeiture" rather than "waiver," or "a belated objection rather than unanimous consent." The Seventh Circuit also noted the following about the effect of the defendant's filing of a proof of claim:

The current dispute comes within a bankruptcy judge's authority, notwithstanding Stern, because all of the defendants submitted proofs of claim as the Funds' creditors and thus subjected themselves to preference-recovery and fraudulent-conveyance claims by the Trustee. See 11 U.S.C. § 502(d). The Supreme Court held in [Katchen v. Landy, 382 U.S. 323 (1966), and Langenkamp v. Culp, 498 U.S. 1043 (1991)] that Article III authorizes bankruptcy judges to handle avoidance actions against claimants. Stern stated that its outcome is consistent with those decisions. [Wellness Int'l] likewise observes . . . that there is no constitutional problem when a bankruptcy judge adjudicates a trustee's avoidance actions against creditors who have submitted claims.

On June 24, 2013, the U.S. Supreme Court agreed to review the Ninth Circuit's 2012 ruling that a Stern objection is waivable. See Executive Benefits Insurance Agency, Inc. v. Arkison (In re Bellingham Insurance Agency, Inc.), 702 F.3d 553 (9th Cir. 2012), cert. granted, 133 S. Ct. 2880 (2013). In Bellingham Insurance, the Ninth Circuit ruled that, even though a federal statute empowers bankruptcy judges to enter final judgments in fraudulent conveyance actions against a "nonclaimant" (i.e., someone who has not filed a proof of claim), the U.S. Constitution forbids entry of a final order because those claims do not fall within the "public rights exception." However, the court explained, defendants in such avoidance proceedings may (and in this case did) consent to the entry of a final judgment by the bankruptcy court, even if that consent was implied from the defendants' failure to assert their right to entry of final judgment by an Article III court. In addition, the Ninth Circuit emphasized that a bankruptcy court may still hear and make recommendations regarding any statutorily "core" proceedings in which the court lacks the authority to enter a final judgment.

In Frazin v. Haynes & Boone, LLP (In re Frazin), 732 F.3d 313 (5th Cir. 2013), the Fifth Circuit held that, under Stern, the bankruptcy court lacked jurisdiction to enter a final judgment on a chapter 13 debtor's state law negligence, deceptive trade practices, and breach-of-fiduciary-duty counterclaims against attorneys seeking payment of fees for services performed in connection with the representation of the debtor in nonbankruptcy litigation. The court noted that "[a]lthough the [Supreme] Court stated that its decision [in Stern] was 'narrow,' its reasoning was sweeping." The Fifth Circuit concluded that, with respect to state law counterclaims that are not necessarily resolved in the claims-allowance process, Stern unequivocally overruled circuit precedent holding that a bankruptcy court can enter final judgments in all statutorily core proceedings. The Fifth Circuit rejected the argument that a debtor can consent to final adjudication in a bankruptcy court, writing that when "separation of powers is implicated in a given case, the parties cannot by consent cure the constitutional difficulty."

In BP RE, LP v. RML Waxahachie Dodge, LLC (In re BP RE, LP), 2013 BL 313900 (5th Cir. Nov. 11, 2013), the Fifth Circuit held that, on the basis of Stern, if the parties to a noncore state law adversary proceeding brought by a debtor against a third party consent to bankruptcy court adjudication, the bankruptcy court has statutory power to adjudicate the case but lacks constitutional authority to enter a final judgment. According to the court, "Parties cannot consent to circumvention of Article III that impinges on the structural interests of the judicial branch," and "notions of consent and waiver cannot be dispositive because the limitations serve institutional interests that the parties cannot be expected to protect." The Fifth Circuit vacated the bankruptcy court's putative final judgment and remanded the case below for the court to issue proposed findings of fact and conclusions of law as to the debtor's state law claims that were related to the bankruptcy estate.

In Nortel Networks Inc. v. Joint Adm'rs for Nortel Networks UK Ltd., 2013 BL 339861 (3d Cir. Dec. 6, 2013), the Third Circuit declined to compel arbitration between divisions of Nortel Networks Corp. ("Nortel") and their creditors in a battle over the division of $7.5 billion in liquidation proceeds of the defunct Canadian telecom company, ruling that the agreement at the heart of the dispute does not require arbitration. The court affirmed a bankruptcy court ruling (see In re Nortel Networks Inc., 2013 BL 92666 (Bankr. D. Del. Apr. 3, 2013)), rejecting a request by the U.K. division of Nortel to prevent the bankruptcy court from deciding the dispute over the company's asset allocation.

Nortel liquidated substantially all of its assets in 2009 after seeking court protection in the U.S., the U.K., and Canada, raising approximately $9 billion. The company, its global affiliates, and other creditors reached an agreement at the outset of the bankruptcy proceedings to expedite the sale process by deferring any decision regarding allocation of the sales proceeds among the stakeholders involved. Of those proceeds, approximately $7.5 billion are being held in an escrow account in New York. According to the Third Circuit, the absence of any express use of the word "arbitration" in the agreement demonstrated that there was no intent to use arbitration as a means of resolving disputes over sales proceeds. The administrators of Nortel's U.K. division argued that the parties agreed to arbitration because the contract used the term "dispute resolver." However, the Third Circuit concluded that the term could encompass many things, including arbitrators, mediators, or the courts. The court also rejected the U.K. administrators' contention that the bankruptcy court authorized arbitration when it approved the agreement.


Until 2013, no circuit court of appeals had weighed in on the implications of the U.S. Supreme Court's pronouncement in Bank of Amer. Nat'l Trust & Savings Ass'n v. 203 North LaSalle Street P'ship, 526 U.S. 434 (1999), that property retained by a junior stakeholder under a cram-down chapter 11 plan in exchange for new value "without benefit of market valuation" violates the "absolute priority rule." That changed with In re Castleton Plaza, LP, 707 F.3d 821 (7th Cir. 2013), where the Seventh Circuit reversed a bankruptcy court ruling that a proposed plan under which an "insider" of the debtor would receive 100 percent of the equity in the reorganized company in exchange for a cash contribution passed muster under the absolute priority rule despite less than full payment of senior creditors. As a matter of first impression, the Seventh Circuit ruled that: (i) a distribution under the plan of new equity to the insider (the sole former shareholder's spouse) conferred a benefit on the former shareholder; and (ii) the sufficiency of the "new value" proffered by the insider had not been tested by competition and thus violated the absolute priority rule.

Soon after the Seventh Circuit handed down Castleton Plaza, a bankruptcy court in the Seventh Circuit applied the ruling to preclude confirmation of a new value plan providing for distribution of new equity to an insider without competition. See In re GAC Storage Lansing, LLC, 2013 BL 53422 (Bankr. N.D. Ill. Feb. 27, 2013) ("In light of the Castleton decision, the Court determines that the absolute priority rule applies, despite the fact that Schwartz is not a direct owner or investor. The Debtor's Plan proposes to give Schwartz, an insider of the Debtor, preferential access to an investment opportunity in the Reorganized Debtor and is therefore subject to competitive bidding, as the holding in Castleton instructs."), amended sub nom. In re GAC Storage El Monte, LLC, 489 B.R. 747 (Bankr. N.D. Ill. 2013).

In In re RTJJ, Inc., 2013 BL 31910 (Bankr. W.D.N.C. Feb. 6, 2013), the court held that market valuation is not necessary when the debtor's exclusive right to propose and solicit acceptances for a plan has expired. "[W]hen exclusivity has expired and there is no option value to the right to propose a plan," the court wrote, "the value of the property being retained should be determined based on normal valuation basis (i.e., the balance sheet of the reorganized debtor or by capitalizing its projected income)."

A long-standing legal principle is that liens pass through bankruptcy unaffected. Like every general rule, however, this tenet has exceptions. One of them can be found in section 1141(c) of the Bankruptcy Code, which provides that, under certain circumstances, "the property dealt with by [a chapter 11] plan is free and clear of all claims and interests of creditors." Although the language of the provision is unambiguous, several courts have added a judicial gloss by requiring the creditor to "participate in the reorganization" as a prerequisite to the application of section 1141(c).

Precisely what constitutes such "participation," however, is an unsettled question. This controversial issue was addressed by the Fifth Circuit in Acceptance Loan Co., Inc. v. S. White Transp., Inc. (In re S. White Transp., Inc.), 725 F.3d 494 (5th Cir. 2013), wherein the court ruled that the level of participation necessary to trigger extinguishment of a lien under section 1141(c) "requires more than mere passive receipt of effective notice" of the chapter 11 case. The ruling is a cautionary tale for plan proponents intent upon ensuring that the terms of a chapter 11 plan providing for the treatment of secured creditor claims are binding.

The importance of finality in the context of confirmation of a chapter 11 plan that provides for the reorganization or liquidation of a debtor was the subject of the Fifth Circuit's ruling in Anti-Lothian Bankr. Fraud Comm. v. Lothian Oil, Inc. (In re Lothian Oil, Inc.), 2013 BL 17873 (5th Cir. Jan. 23, 2013). The court ruled that the 180-day limitation period in section 1144 of the Bankruptcy Code for seeking revocation of a plan confirmation order on the basis of fraud may not be tolled.

In In re Indianapolis Downs, LLC, 486 B.R. 286 (Bankr. D. Del. 2013), the debtor's equity holders attempted to thwart confirmation of a prenegotiated chapter 11 plan by arguing that a "lockup," or plan support, agreement among the debtors and a large group of secured creditors violated the solicitation requirements of the Bankruptcy Code and that the votes of the signatory creditors should therefore be disallowed, or "designated." The bankruptcy court rejected the argument in an important ruling that may finally put to rest any lingering doubts about the validity of postpetition lockup agreements, at least in Delaware.

In In re Residential Capital, LLC, 2013 BL 171624 (Bankr. S.D.N.Y. June 27, 2013), the court concluded that the business judgment standard applies when considering whether a postpetition plan support agreement among chapter 11 debtors and various stakeholders should be approved. It also held that the "solicitation" prohibition in section 1125 of the Bankruptcy Code did not apply to the plan support agreement because approval of such an agreement does not ensure that a plan embodying its terms will be confirmed, nor does it bind the objecting parties from challenging, or the court from rejecting, a plan substantially on the terms set forth in the agreement.

The process of classifying claims and interests under a chapter 1 1 plan is sometimes an invitation for creative machinations designed to muster adequate support for confirmation of the plan. "Strategic" classification can entail, among other things, "artificial impairment," or the discretionary "manufacturing" of an impaired class as a way to satisfy section 1129(a)(10) of the Bankruptcy Code, which provides that a plan may be confirmed only if a class of impaired claims accepts the plan. In Western Real Estate Equities, LLC v. Village at Camp Bowie I, LP (In re Village at Camp Bowie I, LP), 710 F.3d 239 (5th Cir. 2013), the Fifth Circuit joined the Ninth Circuit (see L & J Anaheim Assocs. v. Kawasaki Leasing Intl., Inc. (In re L & J Anaheim Assocs.), 995 F.2d 940 (9th Cir. 1993)), in holding that section 1129(a) (10) "does not distinguish between discretionary and economically driven impairment." However, the court held that artificial impairment may be relevant in assessing whether a chapter 11 plan has been proposed in bad faith.

In In re Texas Grand Prairie Hotel Realty, LLC, 2013 BL 56845 (5th Cir. Mar. 4, 2013), the Fifth Circuit clarified its position regarding the applicability of the Supreme Court's decision in Till v. SCS Credit Corp., 541 U.S. 465 (2004), to the selection of an appropriate cram-down interest rate in a chapter 11 plan. The court affirmed a lower-court ruling in which the debtors and their secured creditor stipulated to the use of Till's "prime rate plus" method, but it emphasized that Till, which was a plurality decision construing cram-down confirmation in a chapter 13 case, does not provide the exclusive methodology by which chapter 11 cram-down interest rates are set. The Fifth Circuit explained that Till's "prime-plus approach" was endorsed by a plurality of the Supreme Court and many bankruptcy courts, and thus, the court could not find that relying on Till constituted reversible error. However, the court wrote that "we do not suggest that the prime-plus formula is the only—or even the optimal—method for calculating the Chapter 11 cram down rate."


In re KB Toys Inc., 2013 BL 317570 (3d Cir. Nov. 15, 2013), added yet another chapter to the ongoing controversy concerning whether sold or assigned claims can be subject to disallowance under section 502(d) of the Bankruptcy Code on the basis of the seller's receipt of a voidable transfer. The decision was an unwelcome missive for claims traders. For the first time since the enactment of the Bankruptcy Code in 1978, a circuit court of appeals concluded that "because § 502(d) permits the disallowance of a claim that was originally owned by a person or entity who received a voidable preference that remains unreturned, the cloud on the claim continues until the preference payment is returned." By its ruling, which the court was careful to emphasize "only concerns trade claims," the Third Circuit staked out what now can fairly be characterized as the majority approach to this issue.

In Westcon Grp. N. Am., Inc. v. RBS Citizens, N.A. (In re NobleHouse Techs., Inc.), 2013 BL 355106 (Bankr. N.D.N.Y. Dec. 24, 2013), the court denied a motion under section 510(c) of the Bankruptcy Code to equitably subordinate a claim asserted by an assignee of bank debt based in part on misconduct alleged to have been committed by the assignor. Even so, the court, citing Enron Corp. v. Avenue Special Situations Fund II, LP (In re Enron Corp.), 333 B.R. 205 (Bankr. S.D.N.Y. 2005), noted that "[t]he parties agree that Citizens did not engage in inequitable conduct. [But] [t]he transfer of CAC's claim to Citizens . . . was subject to all defenses and liabilities, including, equitable subordination."


The latest salvo regarding "triangular setoff" in bankruptcy was fired by a Delaware bankruptcy court in Sass v. Barclays Bank PLC (In re American Home Mortgage Holdings, Inc.), 501 B.R. 44 (Bankr. D. Del. 2013). The court ruled that, without moving for relief from the stay, the nondebtor counterparty to a swap or repurchase agreement cannot exercise control over estate property by retaining funds in exercising alleged triangular setoff rights because the mutuality required by section 553 of the Bankruptcy Code is lacking.

Section 552(b)(2) of the Bankruptcy Code provides that if a creditor prior to bankruptcy obtained a security interest in rents paid to the debtor, that security interest extends to postpetition rents, to the extent provided in the security agreement. Courts have disagreed, however, on the question of whether the debtor must provide "adequate protection" with respect to such postpetition rents. In Putnal v. SunTrust Bank, 489 B.R. 285 (M.D. Ga. 2013), the court joined what appears to be a growing majority of courts in holding that a secured creditor's interest in postpetition rents is entitled to separate and independent adequate protection, even if the creditor's interest in the rent-producing real property itself is adequately protected. In so ruling, the district court expressly rejected two approaches—the "replacement lien" and "dual valuation" theories—which some courts have employed in holding that no separate adequate protection with respect to postpetition rents is required.


October 17, 2013, marked the eight-year anniversary of the effective date of chapter 15 of the Bankruptcy Code. Governing cross-border bankruptcy and insolvency cases, chapter 15 is patterned after the Model Law on Cross- Border Insolvency (the "Model Law"), a framework of legal principles formulated by the United Nations Commission on International Trade Law in 1997 to deal with the rapidly expanding volume of international insolvency cases. The Model Law has now been adopted in one form or another by 20 nations or territories. There were several notable rulings handed down in 2013 in connection with cross-border bankruptcy cases.

In a matter of first impression, the Second Circuit ruled in Morning Mist Holdings Ltd. v. Krys (In re Fairfield Sentry Ltd.), 714 F.3d 127 (2d Cir. 2013), that a foreign debtor's center of main interests ("COMI") must be determined on the basis of the debtor's "activities at or around the time the Chapter 15 petition is filed," rather than on the commencement date of the foreign proceeding. The court also held that the "public policy" exception to chapter 15 relief in section 1506 of the Bankruptcy Code is to be narrowly construed.

In Jaffé v. Samsung Electronics Co., Ltd., 2013 BL 335753 (4th Cir. Dec. 3, 2013), the bankruptcy court had entered an order in July 2009 recognizing the German insolvency proceeding of Qimonda AG ("Qimonda"), once one of the world's largest manufacturers of dynamic random access memory, as well as a supplemental order pursuant to section 1521 of the Bankruptcy Code (authorizing discretionary relief) that made section 365 of the Bankruptcy Code, which does not normally apply to cases under chapter 15, "applicable in this proceeding." The German administrator informed licensees of Qimonda's 4,000 cross-licensed U.S. patents that their licenses were being canceled in the German insolvency proceeding pursuant to a provision in the German Insolvency Code akin to section 365. Thereafter, certain U.S. patent licensees asserted that they were entitled to the protections of section 365(n), which, unlike section 365's counterpart in German law, limits a bankruptcy trustee's ability to unilaterally reject licenses to the debtor's intellectual property by giving licensees the option to retain their rights under the licenses.

The administrator then sought modification of the U.S. bankruptcy court's supplemental order to remove the reference to section 365 altogether or to qualify it by inserting a proviso that section 365 would apply "only if the Foreign Representative rejects an executory contract pursuant to Section 365 (rather than simply exercising the rights granted . . . pursuant to the German Insolvency Code)." In In re Qimonda AG, 2009 BL 249856 (Bankr. E.D. Va. Nov. 19, 2009), the court ruled that deference to German law was appropriate, and it entered an amended supplemental order that maintained the general applicability of section 365 but included the proviso (somewhat modified) requested by the administrator. The licensees appealed to the district court, which affirmed the ruling in part in In re Qimonda AG Bankruptcy Litigation, 433 B.R. 547 (E.D. Va. 2010), but remanded the case below to determine whether restricting the applicability of section 365(n) was "manifestly contrary to the public policy of the United States" and whether the licensees would be "sufficiently protected" if section 365(n) did not apply.

On remand, the bankruptcy court ruled in In re Qimonda AG, 462 B.R. 165 (Bankr. E.D. Va. 2011), that the protections of section 365(n) are available to licensees of U.S. patents in a chapter 15 case, even when those protections are not available under the foreign law applicable to the foreign debtor. The court found that a refusal to apply section 365(n) was "manifestly contrary to the public policy of the United States" within the meaning of section 1506 and resulted in the licensees' not being "sufficiently protected." The court accordingly denied the foreign representative's motion to strike section 365(n) from the amended supplemental order. Due to the importance of the issue, the district court certified a direct appeal of the ruling to the Fourth Circuit. See Jaffé v. Samsung Electronics Co., Ltd. (In re Qimonda AG), 470 B.R. 374 (E.D. Va. 2012).

The Fourth Circuit affirmed in Jaffé v. Samsung. At the outset, the court observed that:

[t]his appeal presents the significant question under Chapter 15 of the U.S. Bankruptcy Code of how to mediate between the United States' interests in recognizing and cooperating with a foreign insolvency proceeding and its interests in protecting creditors of the foreign debtor with respect to U.S. assets, as provided in 11 U.S.C. §§ 1521 and 1522.

The Fourth Circuit ruled, among other things, that the bankruptcy court reasonably exercised its discretion in balancing the interests of the licensees against the interests of the debtor and in finding that application of section 365(n) was necessary to ensure that licensees of Qimonda's U.S. patents were sufficiently protected.

In In re Drawbridge Special Opportunities Fund LP, 2013 BL 341634 (2d Cir. Dec. 11, 2013), the Second Circuit, on direct appeal from a bankruptcy court, held that a foreign debtor must have either a business or property in the U.S. to make the debtor's foreign bankruptcy or insolvency proceeding eligible for recognition under chapter 15. The court reversed a bankruptcy court's 2012 order granting chapter 15 recognition to the Australian bankruptcy proceeding of Queensland, Australia-based property finance group Octaviar Administration Pty Ltd. ("Octaviar"), concluding that the bankruptcy court: (i) erroneously found that section 109(a) of the Bankruptcy Code, which requires a debtor to either own property or conduct business in the U.S., does not apply to a foreign entity seeking relief under chapter 15; and (ii) improperly granted chapter 15 recognition to Octaviar's Australian bankruptcy proceeding in the absence of any evidence that Octaviar was domiciled, did business, or had assets in the U.S.

Section 103(a) of the Bankruptcy Code, the Second Circuit explained, clearly states that "this chapter"—i.e., chapter 1, which includes section 109(a)—and "sections 307, 362(o), 555 through 557, and 559 through 562 apply in a case under chapter 15." Among other things, the court rejected arguments by Octaviar's foreign representatives that: (i) Octaviar need not comply with section 109(a) because technically it is a debtor not under the Bankruptcy Code, but under Australian law, noting that "the presence of a debtor is inextricably intertwined with the very nature of a Chapter 15 proceeding, both in terms of how such a proceeding is defined and in terms of the relief that can be granted"; and (ii) to qualify for recognition of its Australian bankruptcy proceeding under chapter 15, Octaviar was required only to meet the definition of "debtor" in section 1502(1) (i.e., "an entity that is the subject of a foreign proceeding") and not section 109(a).

In re Fairfield Sentry Limited, 484 B.R. 615 (Bankr. S.D.N.Y. 2013), contributed to the ongoing debate about the role of "comity" (the recognition that one sovereign nation extends within its territory to the legislative, executive, or judicial acts of another sovereign, with due regard for the rights of its own citizens) in cross-border bankruptcy cases under chapter 15. Recourse to chapter 15 generally, and the utilization of section 363 of the Bankruptcy Code in chapter 15, can be especially valuable in cases where the representative of a foreign debtor wants to monetize assets located in the U.S. and where the foreign insolvency scheme involved does not provide for "free and clear" sales. In Fairfield Sentry, the court emphasized the preeminent role of comity in chapter 15, ruling that plenary review by a U.S. court under section 363 of a sale transaction approved by a foreign tribunal is not appropriate.

By contrast, the bankruptcy court in In re Kemsley, 489 B.R. 346 (Bankr. S.D.N.Y. 2013), was more critical of a foreign court's determinations that would support a finding of COMI or an "establishment" for purposes of recognition under chapter 15. In Kemsley, the U.S. bankruptcy court concluded that the COMI of an individual chapter 15 debtor should be determined as of the date of the commencement of his foreign bankruptcy proceeding, rather than the chapter 15 petition date. Because the debtor was living in the U.S. at the time he commenced an insolvency proceeding in the U.K., the bankruptcy court ruled that his COMI was in the U.S. at that time, despite the U.K. court's determination that he was eligible to file for insolvency in the U.K. The bankruptcy court accordingly refused to recognize the debtor's U.K. bankruptcy case as a "foreign main proceeding" under chapter 15. Also, on the basis of its conclusion that the debtor did not even have a "place of operations" in the U.K. for carrying out nontransitory economic activity, the court denied the petition for recognition of the U.K. bankruptcy case as a "foreign nonmain proceeding."

In In re Worldwide Educ. Services, Inc., 494 B.R. 494 (Bankr. C.D. Cal. 2013), the court ruled that "the standard of proof for preliminary injunctive relief should apply" to a foreign representative's emergency motion during the "gap" period

between the filing of a chapter 15 petition and the court's entry of an order of recognition for implementation of a provisional stay under sections 105, 362, and 1519 of the Bankruptcy Code. However, the court also noted that an adversary proceeding subject to the procedural rules set forth in Part VII of the Federal Rules of Bankruptcy Procedure is not required to request provisional injunctive relief during the gap period.

In In re ABC Learning Ctrs. Ltd., 728 F.3d 301 (3d Cir. 2013), the Third Circuit held that an Australian liquidation proceeding should be recognized as a "foreign main proceeding" under chapter 15 even though: (i) the debtor's assets were fully encumbered by liens; and (ii) an Australian receivership was pending concurrently with the liquidation. The court also ruled that the automatic stay prevented the efforts of an unsecured judgment creditor to levy on the debtor's U.S. assets because, although fully leveraged, the assets were "property of the debtor."

In In re AJW Offshore, Ltd., 488 B.R. 551 (Bankr. E.D.N.Y. 2013), the court ruled that the Bankruptcy Code does not prohibit a bankruptcy court from authorizing a foreign representative in a chapter 15 case to employ turnover powers available under sections 542 and 543 of the Bankruptcy Code. According to the court, access to turnover powers under section 1521(a)(7) is conditioned upon the provision of sufficient protections to creditors and other stakeholders under section 1522, which requires a balancing of the respective parties' interests.

In In re Millard, 2013 BL 325599 (Bankr. S.D.N.Y. Nov. 21, 2013), the court ruled that a foreign debtor need not be insolvent as a condition to recognition of the debtor's foreign bankruptcy or insolvency proceeding under chapter 15 of the Bankruptcy Code. According to the court, a ruling to the contrary "would require a rewriting of [chapter 15]."

In In re Sino-Forest Corporation, 2013 BL 328891 (Bankr. S.D.N.Y. Nov. 25, 2013), the bankruptcy court, addressing the issue for the first time since the Fifth Circuit's decision in Ad Hoc Group of Vitro Noteholders v. Vitro S.A.B. de C.V. (In re Vitro S.A.B. de C.V.), 701 F.3d 1021 (5th Cir. 2012), ruled that an order of a foreign insolvency court approving a third-party nondebtor release as part of a global settlement is entitled to comity in a chapter 15 case.


In Rajala v. Gardner, 709 F.3d 1031 (10th Cir. 2013), the Tenth Circuit joined the Second Circuit and departed from the Fifth Circuit by holding that an allegedly fraudulently transferred asset is not property of the estate until recovered pursuant to section 550 of the Bankruptcy Code and therefore is not covered by the automatic stay. According to the court, its decision "gives Congress's chosen language its ordinary meaning, and abides by a rule against surplusage."


In In re Eastman Kodak Co., 495 B.R. 618 (Bankr. S.D.N.Y. 2013), the court, in an apparent matter of first impression, held that a commercial lease timely assumed under section 365(d)(4) of the Bankruptcy Code may be assigned at a later date after the expiration of the provision's 210-day deadline. According to the court, interpreting the Bankruptcy Code to permit the assignment of a previously assumed commercial lease beyond the deadline for assumption "reasonably balances the goal of providing protection to landlords and the goal of maximizing the value of a debtor's estate."

Section 365(d)(3) of the Bankruptcy Code mandates a trustee or chapter 11 debtor in possession to timely satisfy postpetition "obligations" under any unexpired lease of commercial property with respect to which the debtor is the lessee pending a decision to assume or reject the lease. The timing of certain "obligations" arising under an unexpired lease has created some controversy. In a matter of first impression, the court held in WM Inland Adjacent LLC v. Mervyn's LLC (In re Mervyn's Holdings, LLC), 2013 BL 5408 (Bankr. D. Del. Jan. 8, 2013), that a claim arising from an indemnification obligation under a commercial lease was entitled to administrative expense status under section 365(d)(3). According to the court, although the indemnification "claim" arose prepetition because it was contained in a prepetition contract, the indemnification "obligation" for purposes of section 365(d) did not arise until litigation was filed for breach postpetition.


In Marciano v. Chapnick (In re Marciano), 708 F.3d 1123 (9th Cir. 2013), the Ninth Circuit disagreed with the Fourth Circuit's approach in Platinum Fin. Servs. Corp. v. Byrd (In re Byrd), 357 F.3d 433 (4th Cir. 2004), ruling that an unstayed, enforceable state court judgment—despite an appeal—is per se a claim against the debtor that is not contingent as to liability or the subject of a bona fide dispute as to liability or amount for the purpose of determining whether the claimant is eligible to be a petitioning creditor in an involuntary bankruptcy case under section 303(b)(1) of the Bankruptcy Code.

By contrast, in In re Fustolo, 2013 BL 347141 (Bankr. D. Mass. Dec. 16, 2013), the court adopted the minority Byrd approach to the question on the basis of: (i) First Circuit bankruptcy and appellate panel precedent adopting the burden-shifting approach set forth in Byrd, although not specifically with respect to unstayed state court judgments on appeal; and (ii) evidence that a bona fide dispute existed in the case before it regarding the amount of the judgment, which satisfied the standard articulated in Byrd. Although respectful of the rationale of the Ninth Circuit in Marciano, the court wrote that "the instant case exemplifies the rare circumstance where the amount of the judgment is in bona fide dispute." The court also held that, where only part of a claim is subject to dispute, the claimant can nevertheless qualify as a petitioning creditor, provided the undisputed portion of the claim exceeds the statutory threshold in section 303(b)(1).


"Safe harbors" in the Bankruptcy Code designed to minimize "systemic risk"—disruption in the securities and commodities markets that could otherwise be caused by a counterparty's bankruptcy filing—have been the focus of a considerable amount of judicial scrutiny in recent years. A ruling handed down by the Second Circuit in 2013 widens a rift among the federal circuit courts of appeal concerning the scope of the Bankruptcy Code's "settlement payment" defense to avoidance of a preferential or constructively fraudulent transfer. In Official Committee of Unsecured Creditors v. American United Life Insurance Co. (In re Quebecor World (USA) Inc.), 719 F.3d 94 (2d Cir. 2013), the Second Circuit held that securities transfers may qualify for this section 546(e) safe harbor even if the financial institution involved in the transfer is "merely a conduit."

In Grayson Consulting, Inc. v. Wachovia Securities, LLC (In re Derivium Capital LLC), 716 F.3d 355 (4th Cir. 2013), the Fourth Circuit, in addition to finding that the transfer of certain securities as part of a Ponzi scheme could not be avoided because it did not involve "property of the debtor," ruled as a matter of first impression at the court of appeals level that commission payments can be shielded from recovery by the "settlement payment" defense of section 546(e).

In Whyte v. Barclays Bank PLC, 494 B.R. 196 (S.D.N.Y. 2013), the trustee of a chapter 11 plan litigation trust to which certain creditors' state law claims had been assigned attempted to avoid payments made to a swap participant as constructive fraudulent transfers under state law and section 544(b) of the Bankruptcy Code, despite the safe harbor for such transfers in section 546(g). The trustee argued that, because section 546(g) applies only to "an estate representative who is exercising federal avoidance powers under [section 544 of] the Bankruptcy Code," section 546(g) should not apply to "claims asserted by creditors" or by a litigation trustee acting on their behalf. The court rejected this contention, holding that section 546(g) impliedly preempted the trustee's attempt to resuscitate fraudulent-avoidance claims as the assignee of certain creditors "where, as here, she would be expressly prohibited by section 546(g) from asserting those claims as assignee of the debtor-in-possession's rights (or, indeed, as the functional equivalent of a bankruptcy trustee)."

In re Lehman Brothers Holdings Inc., 2013 BL 349216 (Bankr. S.D.N.Y. Dec. 19, 2013), is the most recent decision considering the scope of the safe harbor for liquidating, terminating, and accelerating swap agreements. The court examined what it means for a nondefaulting swap counterparty to have the unlimited contractual right to liquidate a swap agreement and whether that protected right extends to the contractually prescribed procedures for calculating amounts due and owing from one counterparty to another. It concluded that "the right of the non-defaulting party to rely upon contractual norms for disposing of collateral is an integrated aspect of what it means to cause the liquidation of a swap agreement and necessarily is protected by the language of Section 560 of the Bankruptcy Code." A contrary ruling, the court wrote, "would strip away the defining characteristics of a contractual right to liquidation that by statute may not be limited in any manner," relegating the nondefaulting party "to the bare ability to cause a liquidation without reference to the related 40 provisions of the swap agreement that enable counterparties to achieve a predictable, agreed resolution of their respective contractual obligations."


In Sun Capital Partners III, LP v. New England Teamsters & Trucking Indus. Pension Fund, 724 F.3d 129 (1st Cir. 2013), the First Circuit held as a matter of first impression that a private equity fund which exercised management control over one of its portfolio companies qualified as a "trade or business" that could be held jointly and severally liable for the multi-employer pension plan withdrawal liability incurred by the portfolio company under the Employee Retirement Income Security Act of 1974.

Angles v. Flexible Flyer Liquidating Trust (In re Flexible Flyer Liquidating Trust), 2013 BL 35609 (5th Cir. Feb. 11, 2013), examined a debtor-employer's responsibilities under the federal Worker Adjustment and Retraining Notification Act, 29 U.S.C. § 2101 et seq. ("WARN"). The Fifth Circuit affirmed a bankruptcy court determination that a debtor-employer was not required to give 60-day WARN notification to its employees because a sudden, unanticipated termination of financing which forced the company to file for bankruptcy protection satisfied WARN's notification exception for "unforeseeable business circumstances."


In In re Motions for Access of Garlock Sealing Technologies LLC, 488 B.R. 281 (D. Del. 2013), the court reversed lower-court rulings denying a chapter 11 debtor access to exhibits accompanying statements filed under Rule 2019 of the Federal Rules of Bankruptcy Procedure by attorneys representing multiple asbestos claimants in 12 separate bankruptcy cases. According to the court, "As the 2019 Exhibits are judicial records that were filed with the Bankruptcy Court, there is a presumptive right of public access to them," and the appellees failed to rebut that presumption. The ruling reflects a growing trend promoting the public interest in transparency in asbestos-related bankruptcy cases.


In In re City of Detroit, 2013 BL 337226 (Bankr. E.D. Mich. Dec. 5, 2013), the bankruptcy court ruled that the City of Detroit is eligible to be a debtor under chapter 9 of the Bankruptcy Code, making Detroit the largest U.S. city ever to be adjudged eligible for bankruptcy protection. Among other things, the court concluded that: (i) chapter 9 does not violate the uniformity requirement of the Bankruptcy Clause (Art. I § 8) or the Contract Clause (Art. I § 10) of the U.S. Constitution; (ii) chapter 9 does not violate the Tenth Amendment in accordance with long-standing U.S. Supreme Court precedent; (iii) the Michigan law (§ 18 of P.A. 436, M.C.L. § 141.1558 ("P.A. 436")) specifically authorizing a municipality to file for chapter 9 protection is not unconstitutional; (iv) the state court's ruling in Webster v. State of Michigan, No. 13-734-CZ (Mich. July 19, 2013), that P.A. 436 violates the Michigan Constitution is void because it was entered after the chapter 9 filing date in violation of the automatic stay; (v) Detroit is insolvent within the meaning of section 101(32)(C) of the Bankruptcy Code; (vi) the size of Detroit's debts and problems made it "impracticable" for Detroit's emergency manager to negotiate concessions from creditors before recommending the chapter 9 filing; and (vii) Detroit filed its chapter 9 petition in good faith, as required by section 921(c).

The court also made it clear that the Pensions Clause of the Michigan Constitution (Art. IX § 24) simply ensures that public employee pensions are treated as contractual obligations rather than gratuitous promises. According to the court, "Because under the Michigan Constitution, pension rights are contractual rights, they are subject to impairment in a federal bankruptcy proceeding" like other contractual obligations. The court cautioned, however, that it would be careful before approving any cuts in monthly payments to retirees, noting that it "will not lightly or casually exercise the power under federal bankruptcy law to impair pensions." On December 17, 2013, the bankruptcy court certified that Detroit's eligibility for bankruptcy involves a matter of public importance, so that if an appeal is authorized, it should go directly to the Sixth Circuit. At the same time, however, the bankruptcy court recommended that no appeal should be authorized at this time because it would disrupt the progress of the ongoing bankruptcy case.

Jones Day is representing the City of Detroit in connection with its chapter 9 filing.

In In re City of Stockton, 486 B.R. 194 (Bankr. E.D. Cal. 2013), the court ruled that Rule 9019 of the Federal Rules of Bankruptcy Procedure, which applies to settlements in cases under other chapters of the Bankruptcy Code, does not apply to chapter 9 debtors due to the jurisdictional limitations imposed on a bankruptcy court by section 904 of the Bankruptcy Code. Section 904 provides that, absent the consent of a chapter 9 debtor, a bankruptcy court "may not . . . interfere with . . . any of the political or governmental powers of the debtor . . . [or] any of the property or revenues of the debtor." The court reasoned that a settlement and payments made pursuant thereto would fall within the purview of section 904 because it would necessarily involve the use of the debtor's property and revenues. On the basis of the provision's plain language, the court held that, although a chapter 9 debtor may seek court approval of a settlement with creditors, it is not required to do so.


On October 7, 2013, the U.S. Supreme Court (see Argentina v. NML Capital, Ltd., 2013 BL 277670 (Oct. 7, 2013)), denied the Republic of Argentina's seemingly premature petition for the court to review a nonfinal 2012 ruling by the Second Circuit (NML Capital, Ltd. v. Republic of Argentina, 699 F.3d 246 (2d Cir. 2012)). That ruling upheld a lower court's orders barring Argentina from paying holders of debt restructured in 2005 and 2010 without also paying holdout bondholders in full, but it remanded to the trial court on the issue of implementation of the remedy.

On November 1, 2013, in a summary order without explanation, a three-judge panel of the Second Circuit refused to lift a stay of execution, pending possible en banc or U.S. Supreme Court review, of its August 23, 2013, ruling upholding a lower court's order directing Argentina to pay holdout bondholders $1.33 billion. See NML Capital, Ltd. v. Republic of Argentina, 727 F.3d 230 (2d Cir. 2013).

On November 18, 2013, the Second Circuit rejected Argentina's request that the court reconsider its August 23 ruling en banc. The court also denied requests by groups holding restructured bonds to reconsider the case.

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