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Mark Silverman is a member in Dykema’s Chicago office practicing in the areas of business and financial services litigation. He is a member of the Firm's Financial Services Litigation Group and a co-team leader of the Firm’s Commercial Mortgage-Backed Securities Special Servicer Group. Mark’s practice covers a wide range of complex commercial litigation, lender’s liability defense, banking, fraudulent conveyance and general fraud litigation, class action litigation, contract disputes, commercial foreclosures, commercial real estate transactions, post-judgment collections proceedings, and general business disputes. Mark represents banks, credit unions, large CMBS special servicers, purchasers of non-performing commercial real estate and C&I loans and investors in loan enforcement litigation and commercial foreclosure actions.

In our latest installment of our series “Bankruptcy On Ice”, we tackle temporary suspension of bankruptcy proceedings in response to the closure of “non-essential businesses” and other critical protective measures being imposed to fight the spread of COVID-19. Last week, key decisions in the Pier 1 and Modell’s Sporting Goods bankruptcy cases extended temporary freezes and limited suspensions of proceedings as most states slowly begin to reopen.

Before we get to that, it is important to note that despite the entry of suspension orders freezing certain proceedings in a number of retail and restaurant bankruptcy cases, bankruptcy courts remain open for business across the country. They have not shut down, deadlines have not been extended ad infinitum, and interested parties must stay alert that all critical deadlines are met. And even in these bankruptcy cases now on ice, the courts have emphasized that their doors remain open to parties seeking relief due to exigent circumstances.
Continue Reading Bankruptcy On Ice III – The Freeze Extends Temporary Suspensions of Chapter 11 Cases

The Paycheck Protection Program (PPP) is one of two business loan programs created under the Coronavirus Aid, Relief and Economic Security (CARES) Act to assist companies by extending potentially forgivable credit to small business employers. The PPP is designed to help cover employee-related expenses and help employers avoid layoffs. The prospect of forgivable debt, coupled with relatively favorable terms, have put PPP loans in high demand and many businesses, including some which had already sought chapter 11 bankruptcy protection, have sought PPP loans.

The CARES Act contains no bar to the granting of PPP loans to bankrupt companies. That said, section 7(a)(6) of the Small Business Act requires qualifying small business loans to be “of such sound value or so secured as reasonably to ensure repayment.” As a result, the U.S. Small Business Administration (SBA) took the initial position that a PPP loan must meet the same requirements, and a loan cannot meet this standard if the borrower is a debtor in a bankruptcy case. 
Continue Reading Are Debtors Eligible to Receive PPP Loans? Bankrupt Companies and the SBA Wage War Over Critical CARES Act Program Eligibility

This article was originally published on Law360

The COVID-19 pandemic has caused, and continues to cause, massive humanitarian and economic upheaval with no clear end in sight. Borrowers are already scrambling to increase liquidity from their banks. Some will continue to operate openly, honestly, and in the best interests of the company and its stakeholders. Others will not.

Notwithstanding that lenders and governments are attempting to mitigate the crisis’s effects,[1] loan defaults are anticipated to be increasing, and accordingly, so will loan enforcement lawsuits.

In lawsuits stemming from the COVID-19 crisis, where the default was caused by more than just a lack of money—fraud, mismanagement, neglect, waste, misconduct—litigants, and the courts, may increasingly turn to equity receivers to help protect collateral and manage struggling businesses.
Continue Reading Illinois Courts May Increasingly Embrace Equity Receiverships

Last week, in our first of what we expect to be many articles in the series “Bankruptcy On Ice”, we wrote about the unprecedented suspensions of proceedings enacted in several major chapter 11 bankruptcies in response to the temporary store closures and critical protective measures being imposed to fight the spread of COVID-19.

Decisions by the bankruptcy courts presiding over the Modell’s Sporting Goods, Pier 1 Imports, and Craftworks cases have demonstrated how far bankruptcy courts are willing to extend their equitable powers to put bankruptcy matters on ice while debtors are unable to conduct liquidation sales or otherwise advance their cases. Notably, until stores are allowed to reopen, some bankruptcy courts have allowed debtors to defer payment of post-petition rent under unexpired leases despite clear provisions in the Bankruptcy Code prohibiting such payment holidays.
Continue Reading Bankruptcy on Ice II – an Early Spring Thaw for Bankruptcy Courts?

Unprecedented times call for unprecedented solutions. This has never been more true than now as our world struggles through impactful changes to our lives, both at work and at play, as a direct result of the COVID-19 pandemic. As social distancing, stay-at-home orders, and sheltering-in-place have forced the closing of shopping centers and retail stores, bars and restaurants, movie theaters, and other venues, “business as usual” has largely, but hopefully only temporarily, ground to a halt.

While these shutdowns have not resulted in a wave of new chapter 11 filings (yet), as many lenders and their borrowers patiently take advantage of the relief that the CARES Act and similar legislation has implemented, these unforeseen closures have had predictable yet damaging effects on the ability of pending pre-COVID-19 retail and restaurant debtors already in bankruptcy to reorganize, sell, or liquidate through the chapter 11 process. Store closures have naturally prevented debtors from conducting liquidation sales, and market uncertainty and volatility has complicated, and even paralyzed, preformed restructuring plans.
Continue Reading Bankruptcy on Ice – Retail Debtors Taking Steps to Freeze Chapter 11 Bankruptcy Proceedings Based on COVID-19 Issues

On April 1, 2020, Ohio’s Governor issued Executive Order 2020-08D, a copy of which is linked here. Issued pursuant to the Governor’s implied police powers to address the economic impact of COVID-19, the Executive Order requests that commercial landlords and their lenders (including their servicers) take certain steps to provide relief to small business commercial tenants and commercial real estate borrowers.

SUMMARY OF EXECUTIVE ORDER 2020-08D

The Executive Order is framed as a “request” that commercial landlords and lenders take certain actions–not an order commanding that they do so. Further, the Executive Order does not suspend any federal or state law.
Continue Reading Ohio Issues Executive Order Requesting Relief for Small Business Tenants and Commercial Real Estate Borrowers

The business, economic and financial fallout from the COVID-19 pandemic cannot be understated. While our families, friends, and clients are adjusting to these difficult, uncertain and stressful times – protecting our families, friends and communities from the spread of the virus, working from home, avoiding public spaces, and social distancing – businesses large and small are suffering from shutdowns, closures, breaks in supply chains, and the loss of business and revenue.

At a time when distressed situations will undoubtedly increase, it is logical, and reassuring, that Bankruptcy Courts will remain open for business in order to provide relief for troubled companies. The procedures may differ as many Bankruptcy Courts have implemented changes in order to address concerns raised by the potential spread of the virus. In this vital way, the Courts will continue to function uninterrupted.
Continue Reading Bankruptcy Courts Remain “Open For Business”