On August 10, 2017, the Supreme Court dismissed the writ of certiorari in PEM Entities LLC v. Levin as improvidently granted. See No. 16-492, 2017 WL 3429146, at *1 (U.S. Aug. 10, 2017).  This decision leaves the circuit courts split on the issue of whether to use federal or state law in recharacterizing insider debt

A recent decision in the Bankruptcy Court for the District of Delaware explored the limits of mandatory subordination under section 510(b) of the Bankruptcy Code. In In re FAH Liquidating Corp., No. 13-13087(KG), 2017 WL 95115 (Bankr. D. Del. Jan. 10, 2017), Judge Kevin Gross ruled that membership units in special purpose vehicles that

The Bankruptcy Code contains specific provisions that permit the subordination or disallowance of claims of insiders or others that may not, at equity, be entitled to the same status as a regular prepetition claim holder. For example, such claims may be equitably subordinated under section 510(c) or disallowed under certain subsections of section 502. In

Bank of New York Mellon lost priority status for its claim of $312 million in the liquidation of Sentinel Management Group when the 7th Circuit held that it should have suspected Sentinel was misusing customer assets and conducted an investigation into the source of the collateral Sentinel had posted.  The 7th Circuit clarified the doctrine

In a recent opinion providing guidance to bankruptcy courts on a developing issue of law, the Second Circuit affirmed a decision of the District Court for the Southern District of New York subordinating contribution claims pursuant to section 510(b) of the Bankruptcy Code because they arose from the purchase or sale of a security of

On June 1, 2015, the U.S. Supreme Court issued its decision in Bank of America v. Caulkett.[1] The Court’s unanimous opinion, which was written by Justice Thomas, established that junior mortgage lienholders maintain a “secured” claim against a bankrupt debtor even where the junior mortgage lien is completely underwater. Further, an underwater junior

Mandatory subordination pursuant to section 510(b) of the Bankruptcy Code is commonly applied where claims arise from the purchase or sale of securities that were issued by the debtor.  Less common is the situation where a debtor seeks subordination of claims that arise from a transaction involving securities of an affiliate of the debtor.  This