News 25 Jun. 2012

Curtis Bankruptcy Article Published in NYLJ

An article by Curtis Restructuring and Insolvency partners Jerrold L. Bregman and Michael A. Cohen and associate Peter J. Buenger, entitled, 'Bankruptcy Sale 'Free and Clear' May Not Shield Against Successor Liability,' was published in the June 25, 2012 special 'Corporate Restructuring and Bankruptcy” supplement of The New York Law Journal on page S6.

The article analyzes the recent New York District Court decision in Morgan Olson v. Frederico (In re Grumman Olson Indus.), which held that principles of due process override provisions in a bankruptcy court's order approving a bankruptcy sale, issued pursuant to section 363 of the Bankruptcy Code, that purported to insulate a purchaser from successor liability for future tort claims, based on the debtor's pre-petition conduct, where the tort claimant had not yet been injured as of the date the sale order was entered.

The Grumman decision, the authors write, provides a 'cautionary tale for buyers' who participate in bankruptcy sales, and 'brings to light an important exception to the general rule that assets sold under the supervision of the bankruptcy court, pursuant to Bankruptcy Code §363, can be cleansed, and sold 'free and clear' of all claims and interests except for those for which the purchaser explicitly bargains.'