The Supreme Court now has three bankruptcy cases on its docket for the term to begin in October. Today, the high court granted certiorari in PEM Entities LLC v. Levin, 16-492 (Sup. Ct.), to determine whether bankruptcy courts should employ state or federal law in deciding whether to recharacterize debt as equity.
Employing federal law, the bankruptcy court recharacterized the debtor’s principal secured loan as equity, in part because a group of insiders had purchased the loan at a large discount from the original lender. The district court and the Fourth Circuit upheld the bankruptcy court. Following denial of rehearing en banc, the purchasers of the loan filed a petition for certiorari.
The Supreme Court granted certiorari to resolve a split of circuits, where two circuits employ state law and four invoke federal law. In essence, the issue pits Section 502 against Section 105(a). The choice of law will make no practical difference in those states that follow federal law.
The case will likely be argued in the Supreme Court in November or December.
On May 1, the Supreme Court granted certiorari in Merit Management Group LP v. FTI Consulting Inc., 16-784 (Sup. Ct.), to decide whether the “safe harbor” for securities transactions applies under Section 546(e) when a financial institution acts only as a “mere conduit.” To read ABI’s discussion of Merit Management, click here.
In late March, the justices agreed to hear U.S. Bank NA v. The Village at Lakeridge LLC, 15-1509 (Sup. Ct.), and decide whether the purchaser of a claim automatically takes on the seller’s insider status. To read ABI’s discussion of Lakeridge, click here.
Tomorrow, ABI will have a full discussion of PEM Entities.