Young and New Members

Circuit Courts Divided over Whether U.S. Trustee Fee Increase Is Constitutional

The U.S. Trustee Program (USTP), an arm of the Department of Justice that provides oversight for bankruptcies in all but two states, is funded by fees charged to debtors (U.S. Trustee fees). In Alabama and North Carolina, a Bankruptcy Administrator program, run by the Judicial Conference of the United States, provides a similar function and charges its own fees (Bankruptcy Administrator fees). Congress initially provided that the Bankruptcy Administrator districts would eventually become U.S. Trustee districts, but the division is now permanent.

Young and New Member May 2021

Third Circuit Holds that Setoff Rights Under § 553 Require “Strict Bilateral Mutuality” and Finds that “Triangular Setoffs” Are Unenforceable

In a recent decision in “a matter of first impression,” the U.S. Court of Appeals for the Third Circuit squarely rejected the view that “triangular setoffs” fall within the protective circle of § 553 of the Bankruptcy Code. In so ruling, the court, in its decision in In re Orexigen Therapeutics Inc.,[1] adopted the view that “strict bilateral mutuality” is required for § 553 to apply and that parties “cannot transform a triangular set of obligations into bilateral mutuality” with contractual provisions.

CARES Act Modifications to Bankruptcy Provisions Extended to March 27, 2022

On March 27, President Joseph Biden signed the COVID-19 Relief Extension Act into law. The Act extends for another full year the provisions of the Coronavirus Aid, Relief and Economic Security Act (CARES Act) that temporarily modified the Bankruptcy Code and the Small Business Reorganization Act of 2019 (SBRA), or subchapter V of chapter 11. The SBRA was enacted to make chapter 11 more accessible and affordable for small businesses.

Interplay Between the New York State Eviction Moratorium and a Bankruptcy Judge’s Authority to Enter a Dispossess Order

In 2020, New York State passed the COVID-19 Emergency Eviction and Foreclosure Prevention Act of 2020[1] (“moratorium”). With some exceptions, it suspends eviction and foreclosure proceedings for nonpayment of rent or mortgage against tenants or property owners facing financial hardship.[2] Courts have generally held that state laws imposing eviction moratoriums during the COVID-19 pandemic are constitutional exercises of the state’s police powers. For example, in Elmsford Apartments Associates LLC v.

Young and New Members March 2021

A Note from Your Young and New Members Co-Chairs: A Look Back on 2020

Although COVID-19 forced many in our legal community to adapt to working remotely, the Young and New Members Committee remained incredibly productive this year. Below are some highlights — both past and future — since our update earlier this year.

Quarterly Newsletters

Affirmative Misrepresentations and Failures to Disclose Are Different Animals

On April 10, 2020, a panel of the Eleventh Circuit Court of Appeals unanimously held in Lawson-Ross v. Great Lakes Higher Ed. Corp. that the Higher Education Act’s (HEA) disclosure requirements do not preempt misrepresentation claims furnished by applicable state law.[1] Ultimately, the court’s holding rests on a common-sense conclusion: An affirmative misrepresentation is not the same thing as a failure to disclose.

Background and Procedural History

What Constitutes a Debtor Engaged in Commercial or Business Activities?

By enacting the Small Business Reorganization Act of 2019 (SBRA), Congress sought to provide small businesses the opportunity to avail themselves of the benefits of chapter 11 reorganization under the Bankruptcy Code.^[2] As the heart of the SBRA, subchapter V aims to lower the high costs and complexities associated with chapter 11 reorganization and to streamline the confirmation process to enable small businesses to effectively reorganize under the Bankruptcy Code.^[3]

Young and New Members December 2020