New York partner Richard Bernard was quoted in the February 15, 2010 National Law Journal article, "Important Issues Percolate Up in Appeals Process."
According to the article, as a wave of bankruptcy filings makes its way through the courts, unresolved questions that will significantly affect future consumer and business bankruptcies are bubbling up in appeals to the district and circuit appellate courts. Many recent business bankruptcies that fall outside the traditional reorganization model are generating appeals, according to the article.
One particular case that is generating interest is the appeal filed by Metavante Corp., spawned by the September 2008 Lehman Brothers Holdings Inc. bankruptcy, the nation's largest-ever Chapter 11 case. The appeal concerns an interest-rate swap agreement into which Metavante entered with Lehman Brothers Special Financing in 2007 to protect it from interest-rate fluctuations for a $1.75 billion loan. Such swaps help borrowers of loans with floating interest rates manage payments when interest rates fluctuate, according to the article.
Bernard, who is representing Metavante, said the case ultimately boils down to whether the U.S. Bankruptcy Code imposes a time limit on parties with contracts not covered by the code to exercise their rights. The bankruptcy law has safe-harbor rules, which say that the code doesn't apply to certain contractual agreements governing complex financial markets, such as interest-rate swap agreements, Bernard said. "The actual swap agreement is not a simple agreement, and we're dealing with an issue of first impression regarding application of safe-harbor rules," Bernard said.