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Current decisions, news and commentary regarding commercial bankruptcy cases in Delaware.
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The American Bankruptcy Institute (ABI) will present Judge Walrath with the Judge William Norton, Jr. Judicial Excellence Award at the ABI luncheon during the 91st Annual Meeting of the National Conference of Bankruptcy Judges in Las Vegas on October 10. The Bankruptcy Court's press release is found here. Congratulations to Judge Walrath.
The August 2017 edition of the American Bankruptcy Institute Journal features an article by Eric Monzo co-authored with his fellow leadership member of the ABI’s Unsecured Trade Creditors’ Committee, Jennifer McLain McLemore, titled "Stoppage Notices Have Chilling Effect on Liens of Secured Creditors."
The Article discusses the importance of the Uniform Commercial Code on rights of unsecured creditors in attempting to securing rights to shipped goods and the application of such stoppage notices in the Sports Authority bankruptcy cases filed in Delaware.
Click below to read the full article. More ›
Deciding an appeal from the United States District Court for the District of Delaware, the United States Court of Appeals for the Third Circuit held that a probability of layoffs is necessary to trigger WARN Act notice requirements in Varela v. AE Liquidation, Inc. (In re AE Liquidation, Inc.).
The Worker Adjustment and Retraining Notification (WARN) Act generally requires employers to give sixty days’ notice to employees before effecting a mass layoff. The WARN Act contains exceptions to the notice requirement, including the “unforeseeable business circumstances” exception, excusing notice if “the closing or mass layoff is caused by business circumstances that were not reasonably foreseeable as of the time the notice would have been required.” The Third Circuit recently decided what constitutes reasonably foreseeable, in that is it once the layoff becomes probable (more likely than not), rather than whether there is a foreseeable possibility that a layoff may occur. More ›
Judge Shannon weaves Third Circuit’s holding from In re World Imports, Ltd. into his In re SRC Liquidation, LLC opinion. The Third Circuit held that receipt occurs when the buyer takes physical possession of the goods, therefore, under 11 U.S.C. § 503(b)(9), a creditor-seller may recover as a priority administrative expense the value of the goods received by the debtor-buyer within 20 days before a bankruptcy petition is filed. Judge Shannon applied this holding to the objection to the section 503(b)(9) claim before the Court. More ›
Trustee's Claims for Breach of Fiduciary Duty Survive Judgment on the Pleadings and Not Eliminated Because Governing Exculpation Provisions did not Eliminate Causes of Action
The Delaware Bankruptcy Court permitted the breach of fiduciary and related claims of a Chapter 7 Trustee to proceed over motions of defendants. Judge Kevin Gross was asked to dismiss the complaint following briefing on a motion for judgment on the pleadings. The opinion is styled as Stanziale v. Versa Capital Mgmt., LLC (In re Simplexity, LLC), No. 16-50212 (KG), 2017 WL 2385404 (Bankr. D. Del. June 1, 2017).
The motion for judgment on the pleadings followed a motion to dismiss the complaint that was decided in the Chapter 7 Trustee's favor in January and styled as Stanziale v. Versa Capital Mgmt., LLC (In re Simplexity, LLC), Case No. 14-10569 (KG), 2017 WL 65069 (Bankr. D. Del. Jan. 5, 2017). More ›
Bankruptcy Court Issues Decision Highlighting Subjective Prong of Ordinary Course of Business Defense
Bankruptcy Judge Mary Walrath's opinion in Stanziale v. Superior Technical Resources, Inc. (In re Powerwave Technologies, Inc.), Adv. No. 15-50085 (MFW) (Bankr. D. Del. Apr. 13, 2017) highlights and analyses the ordinary course of business defense in response to a preference complaint. The Opinion was the result of a motion for summary judgment on grounds including that the complaint was barred by the ordinary course of business defense provided in 11 U.S.C. § 547(c)(2). Specifically, the Court reviewed the "subjective prong" of the ordinary course of business defense, noting that “whether a given transaction was within the subjective ordinary course of business that had developed between the parties is a broad, fact-based inquiry requiring historic examination of the parties’ pre-preference period relations.” Opinion at *10. More ›
The Delaware District Court's decision in Opt-Out Lenders v. Millennium Lab Holdings II, LLC (In re Millennium Lab Holdings II, LLC) questions whether the bankruptcy court has the authority to approve nonconsensual third party releases as part of confirmation of a chapter 11 plan.
The Millennium chapter 11 plan sought to release certain of the debtor’s equity holders from fraud and RICO claims that the debtors’ lenders may have against them. The release was provided in exchange for a $325 million contribution by the debtor’s equity holders to the bankruptcy estate. The lenders objected to the release, but the Bankruptcy Court confirmed the chapter 11 plan over the objection. After confirmation, the lenders appealed to the district court and argued that the U.S. Supreme Court’s ruling in Stern v. Marshall and its progeny forbid a bankruptcy court from entering a final order approving nonconsensual third party releases. The District Court remanded the case to the Bankruptcy Court. More ›
The Delaware Bankruptcy Court decision of In re Nortel Networks Inc., No. 09-10138(KG), 2017 WL 932947 (Bankr. D. Del. Mar. 8, 2017) written by Judge Kevin Gross largely overruled certain noteholders’ objections to indenture trustee fees incurred in connection with the bankruptcy case. This ruling recognized the importance of the indenture trustee and its professionals as they strive to protect the noteholders in the bankruptcy process. (Note, Morris James represented the Indenture Trustee in this case. This ruling was very favorable and may be helpful for the corporate trust industry when administering accounts in default and in bankruptcy.)
Two hedge fund noteholders (the "Noteholders") holding approximately 90% of the outstanding 7.875% senior notes issued pursuant to an indenture qualified under the Trust Indenture Act of 1939, as amended, opposed the attorneys’ fees and other fees of the Indenture Trustee incurred in connection with the bankruptcy cases and sought to reduce the $8 million fee request by approximately 50% arguing that the Indenture Trustee did not discharge its duties properly. The Noteholders asserted that (1) the Indenture Trustee did not act prudently in assigning work to and supervising its attorneys, and (2) the attorneys’ fees charged were unreasonable. The Bankruptcy Court largely overruled these objections and permitted the Indenture Trustee to recover its fees permitted under the indenture. More ›
Morris James partner Eric J. Monzo and senior counsel Douglas N. Candeub will lead a group presentation regarding creditors' rights in sports retail bankruptcy cases. The presentation is offered through the Delaware Bankruptcy Inn of Court on Tuesday February 21, 2017. Issues subject to the discussion include those affecting commercial landlords, trade creditors, and the Bankruptcy Court's use of Consumer Privacy Ombudsmen to protect consumer privacy rights.
Morris James is uniquely situated to handle issues intersecting bankruptcy and privacy in Delaware and beyond through its bankruptcy/creditors' rights and data privacy practice groups.
Eric J. Monzo focuses his practice primarily on issues relating to business restructuring and insolvency. He regularly represents a wide range of stakeholders including corporate debtors, commercial creditors, official and unofficial committees, trustees, lender groups, agents to syndicated lending groups, financial institutions, principal financial and private equity sponsors, officers, insurers, accountants, and financial advisors.
Douglas N. Candeub has over twenty years of experience working to achieve effective outcomes for his clients in matters pertaining to bankruptcy, insolvency, corporate restructuring, and creditors’ rights. As a litigator, Doug represents business clients in both state and federal Court, at the trial and appellate level. As a business lawyer, he provides advice and representation to clients on business issues and disputes.
In overruling the lender's objection to a fee application, an unambiguous carve-out provision of a DIP Financing Order does not serve as a cap on professionals fees when plan of reorganization was confirmed. The Delaware Bankruptcy Court held that absent specific language in a DIP Financing Order, a dollar-amount cap on professionals' fee payment, or a carve out, does not come into play once a Chapter 11 plan is confirmed.
In In re Molycorp, Inc., Bankruptcy Judge Christopher Sontchi approved the Official Committee of Unsecured Creditors' professionals' fees, noting that a "fundamental statutory requirement of the Bankruptcy Code is that, unless the holder of a particular claim has agreed to a different treatment, allowed professionals' fees are administrative expenses that need to be paid in full under any confirmed plan." Op. at 2. The Court reviewed and accepted the Fee Examiner's recommendations that reflected reasonable compensation for actual and necessary expenses. More ›
In an interesting cross of bankruptcy and e-discovery/privacy law, the Bankruptcy Court for the District of Delaware denied the turnover motion of the foreign representatives (the "Foreign Representatives") of Chapter 15 debtor, Irish Bank Resolution Corporation Limited ("IBRC") seeking the contents of a Yahoo! email account. The Court ruled that the foreign representatives failed to present evidence that the contents of the account were property of the estate pursuant to section 542 of the Bankruptcy Code. More ›
On September 15, 2016, Delivery Agent, Inc. and three affiliates, Musictoday, LLC, Clean Fun Promotional Marketing, Inc., and Shop the Shows, LLC, filed chapter 11 petitions in the United States Bankruptcy Court for the District of Delaware. The case has been assigned to The Honorable Laurie Selber Silverstein and has been docketed as case no. 16-12051. More ›
Noble Environmental Power, LLC filed a chapter 11 petition in the United States Bankruptcy Court for the District of Delaware on September 15, 2016. The case has been assigned to The Honorable Brendan Linehan Shannon, and has been docketed as case no. 16-12055. More ›
On September 14, 2016, Golfsmith International Holdings, Inc. and twelve affiliates filed a Chapter 11 petition in the United States Bankruptcy Court for the District of Delaware. The case, docketed as 16-12033, has been assigned to The Honorable Christopher S. Sontchi. More ›