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Current decisions, news and commentary regarding commercial bankruptcy cases in Delaware.
Morris James Blogs
Cystallex Int'l Corp. v. Petróleos de Venezuela, S.A. et al., 879 F.3d 79 (3d Cir. 2018). As a matter of law, a transfer by a non-debtor cannot be a fraudulent transfer under the Delaware Uniform Fraudulent Transfer Act ("DUFTA") even where the debtor exercised complete control over the non-debtor and allegedly orchestrated transfers through the non-debtor to frustrate creditors. A copy of the January 3, 2018 opinion is found here. More ›
The charitable nonprofit form creates unique issues of corporate governance. Officers and directors owe fiduciary duties to their charitable institutions, and insolvency or reorganization complicates issues, particularly with regard to the handling of endowment funds.
Donors can specify how gifts are to be spent, making those funds restricted and inviolable from general use. Having restricted endowment funds on hand but lacking availability to them may further complicate the equation. The board’s perception of its predicament may be clouded because its balance sheet may appear to be flush with cash, yet some funds remain out of reach, unavailable for general use. More ›
Morris James LLP is pleased to announce it received 29 recognitions in Delaware Today magazine’s 2017 Delaware Top Lawyers issue. The recognized lawyers were chosen by their peers in a survey to members of the Delaware State Bar Association.
Gretchen S. Knight, Lewis C. Ledyard III, Rich Galperin, Ian D. McCauley and James H. McMackin III, distinguished in bold, received the most votes of any lawyer in their respective categories. Morris James attorneys were rated as “Top Lawyers” in 12 separate practice areas, and Keith Donovan was recognized in multiple categories. More ›
Third Circuit Dismisses Appeal of Unsuccessful Bidder as Moot for Failure to Seek Stay Pending Appeal of Sale Order
In an opinion dated October 24, 2017, a copy of which is found here, the United States Court of Appeals for the Third Circuit dismissed the appeal of a unsuccessful bidder as statutorily moot pursuant to Bankruptcy Code section 363(m). The bankruptcy case is In re: Pursue Capital Management, LLC, a chapter 7 bankruptcy case filed in the United States Bankruptcy Court for the District of Delaware (Case No. 16-3953-LSS). More ›
In re Millennium Lab Holdings II, LLC et. al., 15-12284 (LSS) (Bankr. D. Del. Oct. 2, 2017): A party intentionally relinquishes or abandons any constitutional objection to the Bankruptcy Court's adjudicatory authority to enter final orders when the party fails to object and place the objection squarely before the Bankruptcy Court. More ›
In O2Cool, LLC v. TSA Stores, Inc. et. al., (In re: TSAWD Holdings, Inc. et. al., 16-10527-MFW) Adv. No. 16-51014-MFW (Bankr. D. Del. Sept. 20, 2017) the Bankruptcy Court ruled that ineffective stop shipment notices allowed goods in transit to become property of the estate. More ›
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 ›