Bankruptcy & Restructuring

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Checking-In: Chapter 9, Chapter 11 or Ineligible?

February 23, 2018 | Blog | By William Kannel

Last week, President Trump unveiled his proposal to fix our nation’s aging infrastructure. While the proposal lauded $1.5 trillion in new spending, it only included $200 billion in federal funding. To bridge this sizable gap, the plan largely relies on public private partnerships (often referred to as P3s) that can use tax-exempt bond financing.
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The First Circuit Casts a Shadow on Sunbeam

February 12, 2018 | Blog | By Amanda M. Blaske

In the recently decided case, Mission Product Holdings, Inc. v. Tempnology, LLC, the United States Court of Appeals for the First Circuit took a hardline position that trademark license rights are not protected in bankruptcy. Bankruptcy Code section 365(n) permits a licensee to continue to use intellectual property even if the debtor rejects the license agreement.
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In Massachusetts, Directors and Investors Acting in their Normal Capacities Do Not Have Personal Liability for Wage Act Violations

February 8, 2018 | Blog

The Massachusetts Supreme Judicial Court recently held that the Massachusetts Wage Act does not impose personal liability on board members or investors acting in their normal capacities.
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Split Third Circuit Holds Transfer By Non-Debtor Cannot Be Fraudulent Transfer

January 31, 2018 | Blog

Refusing to rely on “equitable principles” when interpreting the Delaware Uniform Fraudulent Transfer Act (DUFTA), the Third Circuit (2-1 decision) in Crystallex Int’l Corp. v. Petroleos De Venezuela, S.A, et als. held that a transfer by a non-debtor cannot be a fraudulent transfer.
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A Momentive Decision: Second Circuit Splits with Third Circuit on Make Whole Premiums; Adopts Sixth Circuit’s Two-Step Approach in Selecting an Interest Rate in Chapter 11 Cramdowns

October 25, 2017 | Blog | By Kaitlin R. Walsh

Last week the Second Circuit issued its long-awaited opinion on the appeals of plan confirmation taken by the first lien, 1.5 lien and subordinated noteholders in In re MPM Silicones, LLC (“Momentive”). With one exception, the Court determined that the plan confirmed by the bankruptcy court in September 2014 comports with Chapter 11 of the Bankruptcy Code.
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Bankruptcy Restrictions in Operating Agreement Held Unenforceable

October 4, 2017 | Blog

In In Re Lexington Hospitality Group, LLC, the United States Bankruptcy Court for the Eastern District of Kentucky thwarted a lender’s efforts to control whether its borrower could file bankruptcy.
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Delaware Court Holds that Trademark License Cannot be Assigned Without Consent

August 28, 2017 | Blog

The Delaware bankruptcy court recently decided that a debtor could not assign a trademark license absent the consent of the licensor. The court concluded that federal trademark law and the terms of the license precluded assignment without consent.
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Exculpatory Provisions Under Delaware Law: Say What You Mean And Mean What You Say

July 10, 2017 | Blog

Exculpation provisions in operating agreements must be carefully crafted in order to protect members, managers, directors and officers for breaches of fiduciary duties. In In re Simplexity, LLC, the Chapter 7 trustee sued the former officers and directors (who were also members and/or managers) for failing to act to preserve going concern value and exposing the debtors to WARN Act claims. 
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SCOTUS to Settle Circuit Split on Rule Applicable to Recharacterization of Debt to Equity Disputes

July 5, 2017 | Blog | By Kaitlin R. Walsh

The Supreme Court has granted certiorari to decide the question of whether bankruptcy courts should apply state law or a federal rule of decision when determining whether to recharacterize a debt claim as a capital contribution.
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First Circuit Rules that Bankruptcy Court “Retention of Jurisdiction” Provisions Not Enough to Establish Jurisdiction

June 15, 2017 | Blog

It is very common for bankruptcy court orders to provide that the court retains jurisdiction to enforce such orders. Similarly, chapter 11 confirmation orders routinely provide that the bankruptcy court retains jurisdiction over all orders previously entered in the case. 
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Supreme Court to Resolve Circuit Split on Scope of 546(e)’s Safe Harbor Provision

May 15, 2017 | Blog | By Kaitlin R. Walsh

Earlier this month, the Supreme Court announced that it will review the scope of Bankruptcy Code section 546(e)’s safe harbor provision. Section 546(e) protects from avoidance those transfers that are made “by or to (or for the benefit of)” a financial institution, except where there is actual fraud.
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Bankruptcy Settlements Post-Jevic: Potential New Requirements for Priority-Altering Settlements

May 9, 2017 | Blog

As noted in a recent Distressing Matters post, the United States Supreme Court in In re Jevic Holding Corp. held that debtors cannot use structured dismissals to make payments to creditors in violation of ordinary bankruptcy distribution priority rules. 
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When Hiding Assets Doesn't Work: How Mintz Recovered $20M for Cheated Client

April 19, 2017 | Blog | By Eric Blythe

In a recent American Law Journal article, "When Hiding Assets Doesn't Work: How Mintz Recovered $20M for Cheated Client," Daniel Pascucci and Joe Dunn detail the extensive efforts used to hold a judgment creditor accountable -- 10 years and $20 million later, the case exemplifies the old saying that you can run, but you can't hide.
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Keep On Truckin’: Priority Rules Still Rule in Structured Dismissals

April 11, 2017 | Blog | By Aaron Williams

In 2015, Distressing Matters reported on the Third Circuit’s decision in In re Jevic Holding Corp., wherein that panel ruled that, in rare circumstances, bankruptcy courts may approve the distribution of settlement proceeds in a manner that violates the Bankruptcy Code’s statutory priority scheme.
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Can a Creditor’s Inaction Violate the Automatic Stay?

March 28, 2017 | Blog | By Amanda M. Blaske

The filing of a bankruptcy case puts in place an automatic injunction, or stay, that halts most actions by creditors against a debtor. But can a creditor violate the automatic stay by not acting?
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Delaware Bankruptcy Court Issues Important Guidelines Concerning Payment of Indenture Trustee's Professional Fees

March 15, 2017 | Blog

In Nortel Networks, Inc., Case No. 09-0138(KG), Doc. No. 18001 (March 8, 2017), the Delaware Bankruptcy Court ruled on the objections of two noteholders who asked the Court to disallow more than $4.4 million of the $8.1 million of the fees sought by counsel to their indenture trustee.
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Buyer Beware: Bankruptcy Assets not “Free and Clear” if Due Process is Lacking

February 28, 2017 | Blog

One of the most powerful and oft used devices in bankruptcy is the sale of assets “free and clear” of liens, claims and interests. One issue a buyer at a bankruptcy sale must consider, however, is whether due process has been met with respect to parties whose liens, claims and/or interests are released through such sale. 
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Massachusetts Bankruptcy Court Sends a Reminder on Avoiding the Substantive Consolidation Trap

February 13, 2017 | Blog

There are numerous reasons why a company might use more than one entity for its operations or organization: to silo liabilities, for tax advantages, to accommodate a lender, or for general organizational purposes. Simply forming a separate entity, however, is not enough.
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Make-Whole Momentum Halted: Third Circuit Rejects Momentive Rationale and Requires Debtor to Pay Make-Whole Premium

November 28, 2016 | Blog | By Kaitlin R. Walsh

In a recent decision (“Energy Future Holdings”) poised to have wide-reaching implications, the Third Circuit Court of Appeals reversed the decisions of the Bankruptcy and the District Courts to hold that a debtor cannot use a voluntary Chapter 11 bankruptcy filing to escape liability for a “make-whole” premium if express contractual language requires such payment when the borrower makes an optional redemption prior to a date certain.
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Can the Corporate Veil be Pierced Against a Former Shareholder?

October 19, 2016 | Blog

A recent opinion issued by the United States District Court for the Northern District of Illinois reminds us that corporate veil-piercing liability is not exclusive to shareholders. Anyone who is in control of and misuses the corporate structure can be found liable for the obligations of the corporation. 
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