February 02, 2018

MONTH-IN-BRIEF: Bankruptcy & Finance

Penny Christophorou, Taryn Darling

Commercial Finance

The Governor of New Jersey Signs Electronic Lien and Title Senate Bill

By Paul Hodnefield, CSC

The governor of New Jersey signed Senate Bill 2968 (2016) on 1/16/2018 to establish an electronic lien and title system for motor vehicles that will replace the current paper-based system. The new law took effect immediately, although it may be a year or more before the new system becomes operational.


Pennsylvania Enacts Voidable Transactions Act

By Paul Hodnefield, CSC

On December 22, 2017, the Pennsylvania governor signed Senate Bill 629 to enact, with a few non-uniform amendments, the Uniform Voidable Transactions Act (UVTA). The purpose of the new law is to amend Pennsylvania’s version of the Uniform Fraudulent Transfer Act, which addresses voidable transfers in the insolvency context. Like the UVTA, Pennsylvania’s new law provides a clear choice of law rule (the law of the debtor’s location) as applicable to voidable transaction claims, providing clarity where there previously had been conflicting and unpredictable court decisions. Like the UVTA, the new law clarifies who bears the burden in voidable transaction claims and addresses series entities and electronic communications. Pennsylvania retains the special definition of insolvency for partnerships that the UVTA deletes and has some non-uniform revisions to the defenses of direct and indirect transferees. Based on statistics maintained by the Uniform Law Commission, Pennsylvania is the 16th state to have enacted the UVTA. The new law takes effect on 2/20/2018.

Bankruptcy Law

Ninth Circuit Holds That Impaired Accepting Class Requirement Applies on a “Per Plan” Basis, Not “Per Debtor”

By Michael Enright, Robinson & Cole

The U.S. Court of Appeals for the Ninth Circuit recently rejected a secured creditor's challenge to confirmation of a Chapter 11 plan covering multiple debtors, holding that the language of Section 1129(a)(10) does not require the acceptance of the plan by at least one class of creditors of each of the debtors. Rather, acceptance of the overall plan by one impaired class was sufficient, even if the accepting class contained claims against less than all of the debtors. Matter of Transwest Resort Properties, Inc., No 16-16221 (9th Cir. January 25, 2018) featured a plan that included five debtors: two debtors that operated two separate resorts, two mezzanine debtors that owned the operating entities, and a holding company. Although certain classes accepted the plan, the secured creditor, which was the only creditor of the two mezzanine entities, did not. The Ninth Circuit held that one accepting impaired class was a sufficient basis to cram down the plan as to all of the debtors, even though no creditor of the mezzanine debtors accepted the plan. Notably, the secured creditor first raised the issue that the plan was effectively an impermissible substantive consolidation only on appeal, so the Ninth Circuit would not consider that issue. A creditor who does not accept a Ch. 11 plan covering multiple entities would be well-served to consider prior to confirmation whether an impermissible substantive consolidation is proposed and object expressly on that basis, along with any Section 1129(a)(10) arguments.

Penny Christophorou

Counsel; Cleary Gottlieb Steen & Hamilton LLP

Penelope L. Christophorou’s practice focuses on commercial financing, including secured transactions and bankruptcy law, derivative products, and structured finance. She represents leading financial institutions, corporate borrowers, private investment funds and sovereign clients on these matters.

Taryn Darling

Board Member, William H. Dwyer Inns of Court

Taryn began her career as a bankruptcy lawyer almost ten years ago. Her practice includes reorganization, insolvency, receivership, work-outs, and bankruptcy and all related litigation. Taryn has litigated at the trial level and appellate level on behalf of her clients in a number of adversary proceedings and in consumer protection litigation. Taryn’s clients include individuals, business owners, and closely held corporations and businesses. Her breadth of experience in the area of bankruptcy and insolvency enables her to take a preventive approach when clients come to her at the outset of a problem. Taryn develops creative solutions to mitigate the impact or consequences when it becomes clear that a bankruptcy or receivership is the best course of action.