Chip Bowles Featured in American Bankruptcy Institute Journal
BGD Partner Chip Bowles was recently featured in the American Bankruptcy Institute Journal, in a publication titled “Caveat Emptor for § 363 Sales? Known Creditors, Successor Liability and Notice Issues from the GM Chapter 11 Case” where he discusses the implications of Elliott v. GM LLC.
In Elliott v. GM LLC, the Second Circuit overruled the bankruptcy court’s finding that a “free and clear” sale order protected a purchaser from successor liability claims by known creditors, and confirming that creditors are entitled to notice of proceedings that affect their rights in bankruptcy.
Bowles elaborated on the decision’s importance in honoring the core bankruptcy requirements of disclosure and adequate notice by overruling, which reinforces the fundamental limits on the authority of bankruptcy courts. This decision demonstrated the overriding importance for debtors to forthrightly identify all of their creditors, including foreseeable contingent creditors, and make scrupulous efforts to provide all known creditors with actual notice where possible. As this case illustrates, the penalty for failing to do so is that the creditor that does not receive the required level of notice to the bankruptcy court’s orders. The scope of relief available from a bankruptcy court does not extend to extinguishing, or channeling, the independent liabilities of non-debtors that are not derivative of the debtor’s own pre-petition liability-causing conduct. Thus, bedrock constitutional requirements of due process “trump” even seemingly compelling justifications for expedience.