Bankruptcy Litigation Blog

To Shakespeare's Juliet, "a rose by any other name would smell as sweet."  To Gertrude Stein, "a rose is a rose is a rose."  In an article referenced here, titled "When Is a Lease Not a Lease? Seventh Circuit Adopts 'Substance Over' Form Test for True Lease Determination," Jones Day's Mark Douglas and  David Hatch reviewed the first of the 7th Circuit's rulings on whether UAL's airport leases were "true leases" or secured financings.

Last week, Judges Manion, Easterbrook, and Bauer, in the final installment of their "trilogy" on whether "a lease is a lease is a lease by any other name," concluded that the answer -- at least for airport leases -- depends on whether "the ground and facilities arrangements were addressed in separate documents."  United Air Lines, Inc. v. HSBC Bank USA (In re United Air Lines, Inc.), 2006 WL 1841461 (7th Cir. 7/6/06) (Manion, J.) (pdf).  Judge Manion, writing on behalf of the same unanimous panel that decided the previous two installments of the trilogy, summarized the facts and issues presented as follows:

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Knowing when a bankruptcy order is final and appealable is not always obvious in a bankruptcy case, as demonstrated by a recent decision from the Second Circuit in In re The Bennett Funding Group, Inc., 2006 WL 436006 (2d Cir., 2/24/06). You may recall The Bennett Funding Group, which in 1997 had earned the dubious distinction of being the largest Ponzi scheme in history. This scheme was effected through sales of bogus equipment leases, often pledged to multiple parties as collateral, and resulted in nearly $700 million in losses to approximately 12,000 hapless investors. It also landed Patrick Bennett, the Group's CFO, 30 years in jail.

Here, after nearly six years of litigation over who had right to insurance proceeds to cover shortfalls in lease collections, the bankruptcy trustee and the settlement class in the District Court for the Southern District of New York reached an agreement with certain lease collection insurers for payment of $27.5 million in exchange for full releases. The agreement, however, was expressly conditioned upon the occurrence of two events:

• first, entry of an order by the Bankruptcy Court for the Northern District of New York approving the settlement "substantially in the form annexed" (which proposed form of order was styled as a "Final Order and Judgment Pursuant to Rule 54(b) of the Federal Rules of Civil Procedure and to Rules 7054(B) and 9019 of the Federal Rules of Bankruptcy Procedure Approving Settlement and Compromise of Trustee's Claims Against the Settling Defendants");
• second, entry of a judgment approving the settlement agreement in the parallel class action case pending in the Southern District of New York.

According to the Second Circuit, the relevant facts were as follows:

• On May 22, 2003, the Bankruptcy Court issued a "Memorandum Decision, Findings of Fact, Conclusions of Law, and Order" on May 22, 2003 that granted the Trustee's 9019 motion and authorized the Trustee to consummate a settlement agreement.
• On June 12, 2003, the District Court for the Southern District of New York in connection with related class action litigation also approved the settlement agreement pursuant to a "Final Order and Judgment." The Southern District then remanded the case to the Bankruptcy Court for the distribution of settlement proceeds.
• On June 17, 2003, the objectors to the 9019 settlement moved to alter or amend the 9019 order pursuant to Rules 9023 and 9024 of the Federal Rules of Bankruptcy Procedure (which adopt Fed. R. Civ. P. 59 and 60, respectively).
• On June 23, 2003, pursuant to Rule 8002(c) of the Federal Rules of Bankruptcy Procedure (which permits a motion to extend the time to file a notice of appeal, but if the motion is filed untimely, requiring "excusable neglect"), the objectors moved the Bankruptcy Court for an extension of time to file a notice of appeal from the 9019 Order and filed a notice of appeal from that Order.
• On July 10, 2003, the Clerk of the Bankruptcy Court issued a certificate of non-compliance to the objectors, noting that the notice of appeal from the 9019 Order was untimely under Rule 8002.
• On February 9, 2004, the Bankruptcy Court ruled that the 9019 motion arose as "a discrete matter within the larger bankruptcy case," that the appeal was not timely filed, and that the objectors' other requests relief lacked merit.
• On February 2, 2005, the Northern District Court affirmed the bankruptcy court's judgment.

The Second Circuit affirmed, rejecting the appellants' arguments that "the Bankruptcy Court's 9019 Order did not constitute a final order [because]: (i) the 9019 Order did not conform to the proposed Final Order and Judgment that was attached to the Agreement; and (ii) the Agreement upon which it was based was contingent upon the Southern District Court's entry of a final judgment approving the Agreement." The Second Circuit ruled first that "nonconformity of the 9019 Order with the stipulated form of judgment did not affect the finality of the 9019 Order, which is final on its face." It then ruled, consistent with the Bankruptcy Court's ruling, that "the approval of the Bankruptcy Court and the approval of the Southern District Court were each 'distinct' and that each approval 'was, itself, a final order.'"

In conclusion, the Second Circuit summed up its views on finality as follows:

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Here's our popular weekly roundup of significant recently decided cases involving complex bankruptcy disputes for the week ended 11/20/05. Enjoy!

Administrative Claim - Critical Vendor - Setoff: In re TSLC I., Inc., 332 B.R. 476 (Bankr. M.D. Fla., 11/1/05)

Plan - Feasibility: In re Repurchase Corp., 332 B.R. 336 (Bankr. N.D. Ill., 10/31/05)

Plan - Third Party Release: Simmons v. 22 Acquisition Corp., 2005 WL 3018726 (E.D. Tex., 11/10/05)

Preference - Ordinary Course: In re Terry Manufacturing Company, Inc., 2005 WL 3003701 (M.D. Ala., 11/9/05)

Setoff - Mutuality: Universal Guaranty Life Ins. Co. v. Health Receivables Management, Inc. (In re Health Management Limited Partnership), 332 B.R. 360 (Bankr. C.D. Ill., 11/2/05).

Bonus Supplement: Reed Smith's guide to recent bankruptcy decisions.

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Here's our popular weekly roundup of significant recently decided cases involving complex bankruptcy disputes for the week ended 11/06/05. Guaranteed, you'll read here about decisions you won't ever find in West's Bankruptcy Reporter.

Reliance Ins. Co. v. Colonial Penn Franklin Ins. Co. (In re Montgomery Ward & Co., Inc.), 2005 WL 2877750 (3d Cir., 11/3/05)

In re Weber, 2005 WL 2862229 (BAP 10th Cir., 11/2/05)

Briarpatch Limited L.P. v. Geisler Roberdeau, Inc., 2005 WL 2861604 (S.D.N.Y., 11/1/05)

American Nat. Bank & Trust Co. v. Matrix IV, Inc. (In re S.M. Acquisitions Co.), 2005 WL 2857717 (Bankr. N.D. Ill., 10/31/05)

In re Toohey, 2005 WL 2850417 (Bankr. W.D. Ky., 10/27/05)

In re Ingrid Olsen, 2005 WL 2838986 (S.D.N.Y., 10/27/05)

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Here's our weekly roundup of significant recently decided cases involving complex bankruptcy disputes for the week ended 10/23/05.

In re Safety-Kleen, (2005 WL 2656399) (Bankr. D. Del., 10/19/05)

Illinois Department of Revenue v. Hayslett/Judy Oil, Inc., (2005 WL 2649994) (7th Cir., 10/18/05)

Boyer v. Gildea, (2005 WL 2648673) (N.D. Ind., 10/17/05)

SEC v. Great White Marine & Recreation, Inc., (2005 WL 2604454) (5th Cir., 10/14/05)

Dunlap v. Friedman's, Inc., (2005 WL 2561470) (S.D. W. Va., 9/30/05)

In re American Tissue, Inc., (2005 WL 2574014) (Bankr. D. Del., 9/27/05)

In re XO Communications, Inc., (2005 WL 2319155) (Bankr. S.D.N.Y., 9/23/05)

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Here's our weekly roundup of significant recently decided cases involving complex bankruptcy disputes.

In re Pro Page Partners, LLC, (2005 WL 2470831) (6th Cir., 10/6/05, subject to Circuit Rule 28(g) citation limitations)

In re Medical Wind Down Holdings III, Inc., (2005 WL 2456261) (Bankr. D. Del., 10/5/05)

In re EToys, Inc., (2005 WL 2456255) (Bankr. D. Del., 10/4/05)

In re The Bridge to Life, Inc., (2005 WL 2429730) (Bankr. E.D.N.Y., 9/30/05)

In re Stoll, (2005 WL 2420356) (Bankr. S.D.N.Y., 9/30/05)

In re Adelphia Communications Corp., (2005 WL 2414852) (S.D.N.Y., 9/29/05)

In re FV Steel and Wire Co., 2005 WL 2401636 (Bankr. E.D. Wis, 9/27/05)

In re PRS Insurance Group, Inc. (2005 WL 2333649) (Bankr. D. Del., 9/23/05)

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