By Richard Levin (Jenner & Block LLP)
The bankruptcy courts and their appellate courts continue to explore issues of interest to practitioners and academics. This quarterly summary of recent developments in bankruptcy law covers cases reported during the first quarter of 2017.
Cases of note include the Supreme Court’s decision in Czyzewski v. Jevic Holding Corp., prohibiting a structured dismissal that includes priority-skipping distributions over the objection of holders of claims in the skipped class.
Two bankruptcy courts used various powers to impose harsh sanctions on two different banks for even harsher misbehavior. In re Sundquist imposed actual damages of $1 million and punitive damages of $45 million against Bank of America for a sustained campaign of stay violations, harassment, misinformation, and recalcitrance against homeowners who suffered serious medical and emotional damages as a result. In characterizing the bank’s action, the court began its opinion, “Franz Kafka lives.” Following a new concept in imposing punitive damages, the court directed $40 million of the award to various nonprofit institutions rather than to the homeowners. In In re Kraz, LLC, the court imposed actual and consequential contract damages for a bank’s repeated tendering of a false estoppel certificate (payoff demand) but denied punitive damages for lack of a tort to which to attach them.
In other cases of note, the Ninth Circuit clarified what is included in the section 502(b)(6) landlord damages cap (In re Kupfer) and refused to apply the automatic stay’s police or regulatory power exception to a Private Attorney General Act action (Porter v. Nabors Drilling), the Eleventh Circuit found “related to” jurisdiction in an action against a trustee for conspiracy to obstruct justice by hiring the judge’s fiancé but no appellate jurisdiction over a bankruptcy court’s report and recommendation (Wortley v. Bakst), and the New York district court applied the Rule of Explicitness in a non-bankruptcy priority dispute (U.S. Bank v. TD Bank),
The full memo is available here.