The following is a summary of a Minnesota bankruptcy case or a case relevant to Minnesota bankruptcy law.
Minnesota Bankruptcy Case:
Bremer Bank, N.A. v. John Hancock Life Ins. Co., 601 F.3d 824 (8th Cir. (Minn.) 4/13/10) (Murphy, J.).
Indenture Trustee Properly Exercised Both Lease and Indenture Remedies
The Eighth Circuit Court of Appeals affirms the district court’s grant of summary judgment against an out-of-the-money aircraft lessor that alleged breach of contract against the lender, lease participants, and the indenture trustee. A Northwest aircraft was financed as a lease in which 80% of the price was financed by loan participants, represented by an indenture trustee. The transaction documents set out remedies in the event of an indenture default and in the event of a lease default. During the Chapter 11, the lease was restructured between Northwest and the indenture trustee, with the lessor objecting. The restructure gave the participants an unsecured claim for lease rejection damages. The lessor sued the participants and the indenture trustee in district court for breach of contract, claiming technical violations of the remedy sections of the transaction documents. It claimed that the indenture trustee did not “declare” a default and did not exercise lease (as opposed to indenture) remedies. The Eighth Circuit rejects the lessor’s arguments, finding that the indenture trustee’s notification to Northwest declaring an acceleration sufficiently “declared” a default, and that the transaction documents entitled the trustee to exercise lease and indenture remedies concurrently. Finally, the court found that some of the remedies exercised were lease remedies, including the agreement for a rejection damage claim.
Credit: The preceding was a summary of a case relevant to Minnesota bankruptcy law. The case summary was prepared by the U.S. Bankruptcy Court through Judge Robert J. Kressel & attorney Faye Knowles.