Recently, the United States Bankruptcy Court for the Southern District of Texas in In re Energy Partner’s Ltd.[1] held that employment agreements for professionals and other agents in a bankruptcy re-organization under 11 U.S.C. § 328 are subject to a heightened reasonableness standard because once a fee is approved by the court it will not be subject to review absent unforeseeable circumstances.[2] Energy Partners Ltd., an offshore oil and gas exploration company, and its affiliates filed a petition for relief under chapter 11 in May of 2009.[3] Two creditors committees appointed by the United States Trustee filed applications under section 328 requesting court approval to employ investment banking firms to provide two separate valuation reports on the bankrupt debtor corporation.[4] Each investment banking firm had requested a non-refundable fee of $500,000, plus various other administrative fees.[5] The court rejected the applications to employ the investment banks because the court determined that neither firm would provide a material benefit to the estate.[6]

Bankruptcy Code

503

510

Topics

Fraud

Business Reorganization

Bankruptcy Code

Topics

Bankruptcy Code

none

Topics

Health Care

Investment Banking

Master Repurchase Agreement Penetrates the Automatic Stay

By: Valerie Sokha

St. John's Law Student

American Bankruptcy Institute Law Review Staff

The derivatives provisions of the 2005 BAPCPA amendments greatly enlarged the scope of the financial contracts that are shielded from traditional bankruptcy limitations such as the automatic stay and the prohibition on ipso facto clauses. Those exceptions were reaffirmed in a strong anti-debtor opinion in American Home Mortgage, Holdings, Inc. v. Lehman Brothers Inc.

[1]

Although Lehman may now regret its victory since it is a debtor in its own bankruptcy case, it succeeded in defeating a number of theories that might have limited the scope of the exceptions. In an opinion relying in part on the market protection policy reflected by the exceptions, the Delaware Bankruptcy Court adopted a liberal definition of “repurchase agreement” that turned mostly on the intention of the parties as stated in the four corners of their agreement.

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