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Governmental Agency Can’t Foot the Bill by Repackaging its Claim

By: Christina Mavrikis

St. John’s Law Student

American Bankruptcy Institute Law Review Staff

In In re G-I Holdings, Inc., the Third Circuit of the United States Court of Appeals held that the New York City Housing Authority (“NYCHA”) could not repackage a claim for damages against G-I Holdings in the hopes of circumventing federal bankruptcy laws. G-I Holdings was the manufacturer of housing products containing asbestos. Seeking to address its asbestos related lawsuits, in 2001 GI Holdings filed for relief under Chapter 11 of the Bankruptcy Code in the Bankruptcy Court for the District of New Jersey. NYCHA submitted a half-billion dollar claim against G-I Holdings for property damage to its buildings. NYCHA claimed it had to take expensive measures to remove asbestos containing material from its buildings. In 2009, the District Court for the District of New Jersey and the Bankruptcy Court for the District of New Jersey approved a plan of reorganization that disposed all covered claims against G-I Holdings. Claim holders were also barred from reasserting such claims.

Foreign Representatives May Bypass The Recognition Process To Recover Debtor’s Property

By: Parm Partik Singh

St. John’s Law Student

American Bankruptcy Institute Law Review Staff

A “foreign representative” must obtain recognition of a foreign proceeding pursuant to 11 U.S.C. § 1517 prior to “apply[ing] directly to a court in the United States.” However, under § 1509(f), a foreign representative may sue in a United States court “to collect or recover a claim which is the property of the debtor” without first obtaining recognition. The scope of this exception, however, is unclear.

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Bankruptcy Court’s Interpretation of Parties’ Contracts Expands Scope of Preference Avoidance

By: Stephanie Hung

St. John’s Law Student

American Bankruptcy Institute Law Review Staffer

In In Re Omni Enterprises, an Alaska Bankruptcy Court held that a bank may enforce the security interest of a prior loan that has already been repaid to cure a new loan that is in default. In 2009, a borrower entered into a loan agreement with a bank for $1.3 million. The loan was partly secured by the borrower’s deposit accounts. After the 2009 loan was repaid, the borrower entered into a new loan agreement with the same bank for $2.6 million. The new loan was secured by, among other things, the borrower’s equipment, furnishings, and fixtures, but did not explicitly include the deposit accounts. In 2015, the borrower defaulted on the loan and the bank swept the deposit accounts, causing the borrower to file for chapter 7 under the Bankruptcy Code. According to the bank, it continued to have a lien on the deposit accounts notwithstanding the repayment of the 2009 loan. The borrower’s trustee then filed suit in the United States Bankruptcy Court for the District of Alaska. The Court ultimately agreed with the bank’s interpretation of the loan agreements, and held that the sweeping of the deposit accounts was permissible.

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