Determining Meaning of Debtors Principal Residence Under BAPCPA

By: Patrick McBurney

St. John's Law Student

American Bankruptcy Institute Law Review Staff

            Affirming the decision of the bankruptcy court, the Bankruptcy Appellate Panel for the First Circuit in Pawtucket Credit Union v. Picchi (In re Picchi),[1] held that a debtor was allowed to modify a creditor’s secured mortgage in a multi-family dwelling because a multi-family house does not fall within section 101(13A)’s definition of a debtor’s principal residence.[2] Pawtucket, the secured creditor, held a second mortgage on the debtor’s two-family home.[3] The debtor, Picchi, resided in one of the units, and rented out the second unit.[4] Picchi’s chapter 13 plan reduced Pawtucket’s secured claim to zero because the appraised value of the property was insufficient to satisfy the secured claim of Picchi’s senior lender.[5] The bankruptcy court determined that Pawtucket’s claim could be modified by Picchi and approved the plan.[6] 

Third Circuit Holds Post-petition Pension Fund Withdrawals Liability Is Entitled to Administrative Expense Priority Under Sectio

By: Brian Bergin
St. John’s Law Student
American Bankruptcy Institute Law Review Staff

            In a case of first impression, In re Marcal Paper Mills, Inc.,[1] the Third Circuit prorated the debtor’s pension fund withdrawal liability and gave administrative expense priority only to that portion related to the post-petition period. After filing its chapter 11 bankruptcy petition, Marcal Paper Mills, Inc. (“Marcal”) entered into a Memorandum of Understanding (the “MOU”) with certain unionized employees. The MOU required Marcal to continue making contributions to the union’s pension fund (the “Fund”) and required those unionized employees to continue working for Marcal. When Marcal sold its assets and terminated its distributing operation, Marcal’s ceased making contributions to the Fund.[2] The Fund filed an administrative claim against Marcal for $5,890,128 in withdrawal liability[3] on the basis of the Fund’s determination that Marcal had made a “complete withdrawal” [4] from the Fund under the meaning of Title IV of the Employee Retirement Income Security Act of 1974 (“ERISA”),[5] as amended by the Multiemployer Pension Plan Amendments Act of 1980 (“MPPAA”).[6]  After Marcal objected to its claim, the Fund amended its claim and sought administrative priority for only the portion of the withdrawal liability attributable to post-petition services provided by the unionized employees.[7]

Chapter 15 Does Not Permit Relief Manifestly Contrary to U.S. Public Policy

Applying the “public policy” exception of Chapter 15, the Bankruptcy Court for the Southern District of New York refused to enforce a German bankruptcy order that would have allowed the foreign representative[1] access to a chapter 15 debtor’s emails stored in the United States in In re Toft.[2]  This case represents one of the first decisions to explore the outer boundaries of the public policy exception in section 1506 of the Bankruptcy Code. This chapter 15 proceeding was brought pursuant to a German case, the foreign main proceeding,[3] in which the foreign representative was granted a “Mail Interception Order” on an ex parte basis.  The German “Mail Interception Order,” which was also recognized by the English courts,[4] allowed the foreign representative to, among other things, intercept the debtor’s postal and electronic mail without giving notice to the debtor, Dr. Toft.[5]  The Bankruptcy Court refused to grant comity to the decision of the German Court because the relief sought was “manifestly contrary” to U.S. public policy.[6]

Section 546(e) Safe Harbor Held Inapplicable to Small Private LBOs

Severance Compensation is Earned on Termination for Section 507(a)(4) Priority