Here’s an aggregation of 28 of my Twitter posts from the beginning of July 2018, with links to cases, articles, and news briefs that restructuring professionals should find of interest. Thanks for reading!

LIFE, BUSINESS, AND THE WORLD GENERALLY:

BK RELATED CASES:

  • 363 Sales – Successor Liability – Statutory Tenants’ Rights (BK-SD-NY):  Debtor’s attempt to cut off Statutory Tenants’ rights under NY Loft Law via a §363(f) sale appears an issue of 1st impression, but cases involving rent-controlled apartments are analogous, and attempts to trump state housing laws via 363 sales have consistently failed, as they do here. In re Bridge Associates of Soho Inc
  • Accountant Malpractice – Statute of Limitations (5thCir.):  The 5th Circuit finds itself rather shocked at “inexplicabl[e]” actions of Firefighters’ Retirement System’s counsel in prosecuting action malpractice against Grant Thornton that resulted in dismissal on limitations grounds, saying: “At the absolute latest, Plaintiffs were aware of these potential claims on January 17, 2014, when they filed this lawsuit in state court. Once they were aware of the claim, they had one year [under Louisiana law] to file a written request for a review panel. Inexplicably, they waited more than three more years before filing their first request for panel review. . . . Because filing a lawsuit in state court does not suspend the peremptive period for accounting malpractice claims, Plaintiffs’ claims . . . were filed outside the peremptive period and are therefore extinguished.” Firefighters Retirement System v Grant Thornton LLP
  • Automatic Stay – Attorney’s Fees (BK-D-NJ):  Fee application for damages on account of a stay violation is found “excessive” and to meet the 3rd Circuit’s parameters and the lodestar analysis. “A fee application seeking three times the amount in controversy doesn’t bear any resemblance to proportionality” & were not reasonable for prosecution of the sanctions motion. In re Manley Toys Limited
  • Debtor’s Counsel – Fee Applications – Obligations to CRO (BK-D-CT):  Debtor’s law firm owed no fiduciary duty to the Debtor’s retained business manager to file a fee application on the business manager’s account. The CRO “could have filed its own fee app but failed to do so [and it] simply fails to allege that [Debtor’s counsel] was in control to the exclusion” of the CRO. In re Jackson
  • D&O Litigation – Indemnities (BK-SD-TX):  “Director’s costs of litigation, which accrued when the UGHS affiliates lost their corporate charters, may only be indemnified if an implied request to defend the affiliates existed which was sufficient to trigger indemnification. . . . The issue of whether a request for services may be implied across affiliates has yet to be directly addressed under Texas law. . . . The broad wording of these indemnification provisions and the lack of prerequisite acts as conditions to indemnification support the idea that Senior Living intended to allow indemnification even absent an explicit request for defense. “Court finds that the statutory requirements for “permissive indemnity” have been satisfied so the director is entitled to indemnification. In re UGHS Senior Living Inc
  • Jurisdiction – Prepetition Accounts Receivable (BK-D-DE):  Court has subject-matter jurisdiction over actions to recover disputed prepetition accounts receivable. Such actions by a Chapter 7 trustee, at least before discharge or close of a debtor’s liquidation, conceivably impacts a debtor’s estate, so non-core ‘related-to’ jurisdiction exists. In re PennySaver USA Publishing LLC
  • Proof of Claim – Affixing Client Signature Without Client Review (BK-D-ME):   Court denies motion for sanctions by the US Trustee against Resurgent for its practice of affixing an employee’s signature to a proof of claim and then filing the proof of claim, all without prior review of the proof of claim by that employee. In re Cushman
  • Retention Applications – Restructuring Managers (BK-D-DE):  A sigh of relief reverberates among restructuring managers after the Court holds that, as for Alvarez & Marsal and its designated interim CEO, Section 327(a) doesn’t apply, so they can be retained under Sec 363(b) to provide Debtors with an interim CEO & other personnel. In re Nine West Holdings Inc
  • Secured Claims – Default Interest – Attorney’s Fees Defending Claims Objection (BK-CD-CA):  Default interest due secured creditor is an unenforceable penalty that can’t be collected per CA Civ Code Sec.1671(b). Further, the Debtors is the prevailing party on claims objections, so not only are attorney’s fees in defending against the objections to claims are denied, but fees incurred in objecting are allowed. In re Altadena Lincoln Crossing LLC
  • Secured Claims – Judgment Liens  – Attorney’s Fees (8th Cir.): We disagree with any notion that the judgment liens are somehow not part of Starion’s secured claim. The judgment liens came about because of the Workout Agreement and confessions of judgment wherein Starion agreed to forebear on various other secured loan defaults…. Even though judgment liens under ND Law aren’t entitled to attorney’s fees, ‘these judgment liens did not simply come out of left field but were always part of the secured claim and arose from a workout, presumably to avoid what now seems was inevitable—bankruptcy.’ ” In re McCormick
  • Settlement Agreements – Breach – BK-D-NM:  Court examines busted settlements and whether the damages for breach are based on the original claim or the settled amount. In re WM Distribution Inc

BK RELATED NEWS & ARTICLES:

  • 363 Sales – Lease Rejection:  The following article, “Spanish Peaks’ Reinvigoration of the Precision Industries Debate: Rejection in the Context of a § 363 Sale Free and Clear of Commercial Leasehold Interests” won 3d place in the 10th Annual ABI Law Student Writing Competition.” Spanish Peaks: What Happens When Leases Collide with a Bankruptcy Sale?, by Nick Binder, Michigan State Univ. Law School, via ABI
  • Structured Dismissals – Exculpation – Estate Professionals:  “Judge Kevin Carey [BK-D-DE] ruled that a dismissal order in a bankruptcy case could provide for exculpation of the estate fiduciaries and their respective professionals. The ruling is a welcome result for all estate fiduciaries whose [] efforts during a complex bankruptcy case fail to culminate in an approved plan of reorganization.” Court Approves Exculpation in Structured Dismissal, by Raff Ferraioli, Andrew Kissner and Jennifer Marines of Morrison Foerster, via JD Supra
  • Veil-Piercing – Married Couples:  “Pennsylvania’s veil-piercing law recognizes a husband and wife as ‘one person,’ absent death or divorce. Therefore, to hold only one shareholder liable and not the other is ‘legally untenable’ under Pennsylvania law.” Biz Row Veil-Piercing Ignored Pa. Law, 3rd Circ. Says, by Jeannie O’Sullivan via Law360

LAW RELATED NEWS & ARTICLES:

  • Beats Electronics – Breach of Contract Trial:  Very interesting trial to follow. Law360 did a nice job on this, noting “[t]he thing the Beats parties and Lamar didn’t agree on, and still don’t, is who deserves how much credit for creating the popular line of headphones.” Susman Godfrey’s Brian Melton told Law360: “We decided to … make it clear we weren’t challenging what they had accomplished in their musical careers (and that we were even fans ourselves) but stress that this case was about the contract and whether Beats fulfilled its obligations.” Steve Morrissey of Susman Godfrey partner added: “The contract itself was both poorly drafted and the result of people who didn’t agree on some basic things deciding to punt key ambiguities like this down the road for a jury to decide if necessary.” Susman Says Beating Beats Was All About 3rd-Party Status, by RJ Vogt, via Law360
  • SEC Enforcement Power – Kokesh Impact:  “The rationale behind the Kokesh ruling is filtering down to lower courts as they consider whether other forms of relief that the SEC commonly pursues might also be subject to a five-year statute of limitations, such as injunctions and industry bars.” Kokesh Spread Could Pose Risk To SEC Enforcement Power, by Dunstan Prial via Law360
  • Social Media – Defamation – Unmasking Anonymous Accounts:  “Many high-level people in the industry have told [the plaintiff bringing the defamation action against the anonymous Instagram poster] that he will never work again unless he can publicly clear his name,” Hence the lawsuit. Instagram Account That Sought Harassment Tales May Be Unmasked, by Sapna Maheshwari at The New York Times

INTERESTING CASES FROM ILLINOIS COURTS:

  • Dog Bites – Landlord Responsibility (IL-AP-2d):   “Trial court did not err in dismissing the plaintiff’s complaint against the landlord because the landlord had not voluntarily assumed a duty to protect the plaintiff from their tenant’s dog.” Seyller v Rose Rakowski Declaration of Trust
  • Remedies – Legal vs. Equitable (IL-AP-1st):  “This case involves the intersection of law and equity and whether a legal remedy was adequate such that equitable relief was inappropriate. . . . [Here, the plaintiff] “obtained an adequate legal remedy on his breach-of-contract action, and thus he was barred, as a matter of law, from pursuing his equitable claim of rescission.” Horwitz v. Sonnenschein Nath and Rosenthal

©2018, Steve Jakubowski

Here’s an aggregation of 49 of my Twitter posts from the last week of June 2018, with links to important cases, articles, and news briefs that restructuring professionals should find of interest. Don’t hesitate to reach out and contact me to discuss any posts, and thank you for reading!

BK RELATED CASES:

  • 363 Sale – Successor Liability – Chrysler – BK-SD-NY:  Claim versus New Chrysler can proceed for “conduct-based negligence & failure to warn claims” based on a 2015 post-sale accident in a 2004 Durango manufactured pre-sale was not barred by the Sale Order and Amended Master Transaction Agreement (“MTA”). “The Motion mischaracterizes the [Sale Agreement] MTA and attempts to draw a distinction between ‘conduct-related’ liabilities and ‘product-related’ liabilities that is not supported by the language of the Amended MTA.” In re Old Carco LLC
  • 363 Sale – Successor Liability – Withdrawal Claims – ND-IL:  Court dismisses as moot under BK Code Sec. 363(m) an appeal of an unstayed 363 sale order where the sole objective of the appeal was to allow the appellant to assert successor withdrawal liability claims against the Buyer. In re Central Grocers Inc
  • Avoidance Actions – Fictitious Profits – Recap of the Law – BK-SD-NY:  Court provides a primer on the law in rejecting arguments from certain Madoff customers that they gave “value” within the meaning of BK Code Sec. 548(c) in exchange for their withdrawal of fictitious profits. Securities Investor Protection Corporation v Bernard L Madoff Investment Securities
  • Claims Purchases – Anti-Assignment Clause Effect – BK-D-DE:  Anti-assignment clause in promissory note was legally valid and so voided the note transfer. Further, Debtors’ breach of the Notes didn’t render anti-assignment clause unenforceable: a non-breaching party can’t emerge post-breach w/more rts than it had pre-breach. In re Woodbridge Group of Companies LLC
  • Claims Purchases – Standing – Timing of Transfer – 5th Cir:  Debtor’s owner, who purchased a claim in order to obtain standing after the BK Ct entered an order appointing special counsel that would pursue the owner on veil piecing theories, lacks standing to object on appeal. He can’t belatedly claim creditor status & get standing retroactively. In re Technicool Systems Incorporated
  • Mineral Leases – Prepetition Settlement – Protection Through 544(a) Powers – 5th Cir:  Debtor’s mineral lease, ratified in settlement prepetition, can’t be dissolved for nonpayment of amounts due under the settlement agreement since: the public record shows that the consideration had been fully paid; no 3d party was placed on notice of the remaining payments due; BK Code Sec. 544(a) vests in the debtor the rights of a third party as bona fide purchaser. Matter of Goodrich Petroleum Corporation
  • Removal – Party Requirement – Requirement of Service – BK-ED-NC:  If a debtor seeking removal hasn’t been formally served, then it’s not a “party” to the state court suit per 28 USC § 1452 and so removal is improper since the Court can’t permit circumvention of the requirement that only a proper “party” may remove a state action to federal court. Problem here was that although everyone knew the plaintiff meant to sue the debtor, the service was on a DE corp with the same name as the FL corp that should have been named and served. In re Providence Wireless LLC
  • Unjust Enrichment – Pleading Requirements – BK-SD-NY:  Unjust enrichment claim dismissed where the complaint fails to allege that the buyer under the APA received any benefits for which it didn’t pay, even though it purchased assets from the debtor and “goodwill” from the owners (which itself was a challenged transfer). In re The Moyer Group Inc

INTERESTING CASES FROM ILLINOIS COURTS & THE UNITED STATES SUPREME COURT:

  • Chevron Deference Reconsidered – SCOTUS:  Concurring and dissenting ops by Justices Kennedy and Alito, respectively, show they are troubled by the impact of the Court’s decision in Pereira on the “now increasingly maligned” Chevron decision. Per Chevron, Justice Alito writes, “if a federal statute is ambiguous & the agency that is authorized to implement it offers a reasonable interpretation, then a Ct is supposed to accept that interpretation.” For his part, Justice Kennedy is troubled by Chevron’s “reflexive deference.” Pereira v Sessions
  • Extraterritoriality – US Statutes – SCOTUS:  The Court reviews the 2-step approach to deciding questions regarding the extraterritoriality of a statute. This is a significant case for attorneys representing a trustee seeking extraterritorial application of US BK laws in avoidance actions. WesternGeco LLC v ION Geophysical Corp
  • Infringement – Shotgun Litigation – ND-IL:  Litigation strategy of suing an alleged software patent infringer’s unsuspecting customer is stayed indefinitely until the main infringement case against the software developer is disposed of. Mantissa Corporation v Old Second Bancorp Inc
  • Prevailing Party – Fees and Costs Distinguished – IL-AP-2d:  Payment of court costs by a party seeking to voluntarily dismiss its claims is routine and was (i) uncontested by plaintiff and (ii) not a significant issue in the litigation between the parties. But to be a “prevailing party” for purposes of recovering fees, the party must have achieved success on a significant issue. Thus, the award of costs to the defendant does not show that it was the prevailing party in the litigation.  Tanna Farms LLC v Golfvisions Management Inc
  • Restraint of Trade – Credit Card Anti-Steering Provisions:  US failed to prove anticompetitive effects merely by showing an increase in merchant fees. Its focus on just one side of a two-sided market meant that it failed to show that prices as a whole were greater than expected in a competitive market. Ohio v American Express Co
  • Restrictive Covenants – Confidential Information:  Complaint for misappropriation by former employees of confidential information survives motion to dismiss, with the Court stating: “Whether restrictive covenants are enforceable depends on the specific facts and circumstances of the individual case, . . . including “the near permanence of customer relationships, the employee’s acquisition of confidential information through his employment, and time and place restrictions.” Apex Physical Therapy LLC v Ball
  • Stare Decisis – SCOTUS:  Wayfair is a very interesting read. The pillars of stare decisis are crumbling in the cyber age, with the Court stating: “When it decided Quill, the Court could not have envisioned a world in which the world’s largest retailer would be a remote seller.” South Dakota v Wayfair Inc
  • Statutory Interpretation – “Under” – SCOTUS:  “For purposes of statutory interpretation, the word ‘under’ is a chameleon that must draw its meaning from its context.” Here, under the Illegal Immigration Reform & Immigrant Responsibility Act of 1996, it means “in accordance with” or “according to.” Pereira v Sessions
  • Textualists vs. Contextualists – SCOTUS:  The philosophical battle between textualists and contextualists is in fully display here as Justices Gorsuch and Breyer respectfully snipe at the flaws in the other’s use of the “traditional tools of statutory interpretation.” Wisconsin Central Ltd v US
  • Tortious Interference – Injunctive Relief – ND-IL:  Preliminary injunction issued on a tortious interference claim asserting that Party “A” breached an agreement that that Party “B” induced the breach. “A” initially refused to sell Party “C”s sinks to “B” because another party had the rights to the sink. “B” was displeased with “A”s decision & insisted on getting the sinks whose design he had seen. “A” subsequently crafted a virtually-identical sink to sell to “B”. Empire Industries Inc v Winslyn Industries LLC

BK RELATED NEWS & ARTICLES:

LAW RELATED NEWS & ARTICLES:

LIFE, BUSINESS, AND THE WORLD GENERALLY:

©2018, Steve Jakubowski

Here’s an aggregation of 28 of my Twitter posts from mid-June 2018, with links to important cases, articles, and news briefs that restructuring professionals should find of interest. Don’t hesitate to reach out and contact me to discuss any posts, and thank you for reading!

BK RELATED CASES:

  • Avoidance Actions – Heightened Pleading Standards – BK-WD-MI:  “The Complaint’s allegation that the ‘Debtors’ made an aggregate amount or series of transfers over time to unidentified transferees, without further detail, doesn’t satisfy the heightened pleading standard for actual fraudulent transfer claims. In re Great Lakes Comnet Inc
  • Bank Holding Co. – Tax Allocation Agreement – 10th Cir:  A tax allocation agreement creates an agency between the bank holding company and the bank so that the agreement’s treatment of tax refunds doesn’t differ from the general rule that a refund in a joint return belongs to the loss generator. Consequently, the FDIC, as receiver, gets the bank’s $4.8M refund. In re United Western Bancorp Inc
  • Collateral – 506(c) Surcharge – BK-ND-WV:  Court refuses to surcharge lender’s collateral for unpaid chapter 11 attorney’s fees since they were not incurred primarily to protect or preserve the collateral, didn’t provide the lender with a direct & quantifiable benefit, & were not reasonable and necessary to preserve or dispose of the collateral. In re Tara Retail Group Inc
  • Commercial Leases – Expiration – BK-ED_MI:  When has a non-residential real property lease “been terminated by the expiration of the stated term of the lease” per 362(b)(10)? Court here holds not if lease was terminated early based on lessor’s right to terminate it if the debtor-lessee defaults. In re Indiana Hotel Equities LLC
  • Conversion – Intangible Rights – BK-ND-IL:  In recounting sordid facts as few can, Judge Cox notes that Illinois court don’t recognize an action for conversion of intangible rights. Conversion of commercial paper, however, is an exception to the general rule on the theory that the intangible right associated with commercial paper is merged into the specific document. In re Santilli
  • Disclosure Statement – Unconfirmable Plan – Retention of Equity – BK-ED-NC:  Court refuses to approve disclosure statement where plan, on its face, is not confirmable in light of its proposal that the owner retain his equity interest in the Debtor without adding “new value” to the Debtor. In re CHL LLC
  • Fiduciary Duties – LLC Managers to Members – BK-ED-TX:  Under Texas law, “a formal fiduciary relationship does not exist between managers and members. As such, a fiduciary relationship, if any, must exist via an informal relationship.” Higher Perpetual Energy LLC v Higher Power Energy LLC
  • Fraudulent Transfer – Collapsing Transactions – Resultant Situs of Transfer as Domestic or Foreign – BK-SD-NY:  “The Court is not aware of any case considering the implications of collapsing a multi-step transaction on a determination of the situs of an alleged fraudulent transfer. However, it is clear that in directing courts analyzing fraudulent transfer claims to consider the “composite implications” in collapsing a multi-step transfer, the Second Circuit did not limit that review only to the implications for assessing reasonably equivalent value.” In re CIL Limited
  • Liquor Licenses – Security Interests – BK-D-AK:  Case here proves that maintaining security interests or priorities to proceeds from the sale of a liquor license requires much care and consideration. In re Aqua Pesca LLC
  • Structured Dismissal – Effect on Pending Adversaries – BK-D-NM:  A bankruptcy court can retain jurisdiction after case dismissal over non-core, related proceedings commenced before dismissal, though ordinarily non-core, related-to proceedings are also dismissed upon dismissal of the underlying bankruptcy  case. “In a structured dismissal where a plan is not confirmed, claims to unclaimed funds only arise after the case is dismissed and are not governed by any provision of the BK Code. As such, claims to unclaimed funds do not arise in or arise under and so are non-core.” In re Dees FoodService ABQ Inc
  • Turnover Motions – Procedural Requirements – BK-CD-CA:  Fed. R. Bankr. P. 7001 requires an adversary to recover money or property from third parties who are not the debtor. Thus, a 542 turnover motion is procedurally deficient to recover property in which tenants are living and rents that they’re withholding. In re Grand View Financial LLC
  • Unjust Enrichment – Pleading Standards – BK-WD-MI:  “[T]he law operates to imply a contract in order to prevent unjust enrichment, and . . . this will not occur if there is already an express contract on the same subject matter. . . . In order to state a claim for unjust enrichment, the Trustee must plead some benefit was derived separate & apart from the [contract between the parties].” In re Great Lakes Comnet Inc

INTERESTING CASES FROM ILLINOIS COURTS & THE UNITED STATES SUPREME COURT:

  • Power Purchase Agreements – Thorny Contractual Provisions Dissected – ND-IL:  Court holds that the PPAs unambiguously require NIPSCO to pay the “cost to cover.” Court also dissects thorny contractual provisions regarding “metered output,” “unexcused failure to take,” “force majeure,” “voluntary curtailments” in NIPSO’s battle with Iberdrola, the second largest wind power company. Barton Windpower LLC v Northern Indiana Public Service Company
  • Veil Piercing – Summary Judgment – IL-AP-1st:  “Plaintiffs failed to establish any genuine issue of material fact on plaintiffs’ corporate veil-piercing claim as to whether adhering to the corporate fiction would promote an injustice.” Buckley v Abuzir

LAW RELATED NEWS & ARTICLES:

  • Athletic Injuries – Premises Liability:  The results in Bush’s and Ryan’s suits could cause the NFL owners try to expand the scope of the collective bargaining agreement to further prevent these sorts of lawsuits. Jenner’s Nelson says: “I am not sure they will be successful,” he said. “But given now that you have had two lawsuits, I suspect they will want to nip it in the bud.” Reggie Bush Injury Award Likely To Spur Pro-Athlete PI Suits, by Zachary Zagger at Law360
  • Collateral Transfers – Lender Response to a Debtor’s “Pulling a J. Crew”:  Resignation comes as PetSmart’s lenders challenge the company’s transfer of more than 1/3 of the equity in Chewy.com to separate entities, putting it beyond creditor reach. A lender instructed Citigroup not to release the liens & guarantees on the Chewy stake. Citigroup Resigns as PetSmart’s Term Loan Agent, by Katherine Doherty and Eliza Ronalds-Hannon at Bloomberg
  • Sandbagging Delaware:  Dealmakers may be surprised at the doubts cast in recent judicial comments on the “pro-sandbagging” reputation of Delaware. Parties may wish to account for comments by the Delaware Supreme Court in negotiating sandbagging-related purchase agreement provisions. Sandbagging in Delaware, by Daniel Wolf of Kirkland & Ellis, via Harvard Law School Forum on Corporate Governance and Financial Regulation

LIFE, BUSINESS, AND THE WORLD GENERALLY:

©2018, Steve Jakubowski

Some more Sunday reading for you with an aggregation of 25 of my Twitter posts from mid-June 2018, with links to important cases, articles, and news briefs that restructuring professionals should find of interest. Don’t hesitate to reach out and contact me to discuss any posts, and thank you for reading!

BK RELATED CASES:

  • Automatic Stay – Lien Priority Proceedings – ND-AL:  Court refuses to stay proceedings to determine priority of creditors’ liens on collateral owned by a recently filed bankruptcy debtor. ServisFirst Bank v Harding Enterprises LLC
  • Avoidance Actions – 544(b) Limitations – BK-ND-IL:  The Trustee “asserts that because Concepts has claims against the HoldCos who made the transfers, Concepts (and therefore the Trustee) is a creditor who has standing to avoid those transfers, [stating]: ‘So in other words, the Trustee does not need to rely on Section 544’s ‘hypothetical creditor’ standing since the Debtor is itself a creditor of the transferor entities.’ ” The Court rules, however, that “the argument is flawed. . . . If the Trustee wishes to avoid a transfer of an interest of Concepts in property that is voidable under IL law by an unsecured creditor, he must use § 544(b) as the legal basis for his suit. And§ 544(b) limits his avoidance claims to prepetition transfers.” In re Concepts America Inc
  • Bond Collateral – Specific or Cross-Collateralized – BK-ED-LA:  Was the collateral security “bond specific” or “cross-collateralized” among several bonds? Court find that the collateral security here is not bond specific and that sureties may retain the collateral security they hold and apply it to obligations on all outstanding bonds. Otto Candies LLC v Citigroup Inc In re Factory Sales And Engineering Inc
  • Collateral Disposition – Crushed Cars – BK-ND-IL:  Judge Schmetterer, who sure liked this case, rules that a creditor loses its security interest when the impounded vehicle that secured its loan was inadvertently crushed for disposal. Nor was it entitled to be “specially classified” or obtain other special treatment as an unsecured creditor. In re Hill
  • Corporate Opportunity – Standards – BK-ND-IL:  “There are no allegations in the complaint from which the court could plausibly infer that the Trustee stated a claim for usurpation of corporate opportunity against Draft Town. . . . [The Defendant, Ted] used DraftTown to collect to collect what he asserts are management fees from various HoldCos, . . . but [t]his allegation is wholly insufficient to support a claim against Draft Town for usurpation of corporate opportunity. As stated above, there must be allegations from which the court can plausibly infer that Draft Town was a fiduciary of Concepts who took advantage of a business opportunity that belonged to Concepts and failed to disclose and tender the opportunity to Concepts.this is insufficient to support a claim against Draft Town for usurpation of corporate opportunity.” In re Concepts America Inc
  • Discovery Violations – Sanctions – Default Judgment – BK-WD-MI:  Another interesting opinion from Judge Dales, holding that the debtor’s failure to comply with discovery orders warrants entry of default judgment. The argument that the debtor was working 2-3 jobs and that his schedule prevented him from responding to discovery wasn’t credible and did not hold up on cross-examination as the timing of his supposed professional engagements became less clear. In re Aroney
  • Fee Orders – Res Judicata Effect – BK-D-NM:  Court reminds that, per the NM Supreme Court, malpractice claims by a debtor against its bankruptcy court is precluded by the bankruptcy court’s prior final order approving fees, which held that “a claim for attorney fees can have a res judicata effect on a later claim for malpractice.”  In re Aquatic Pools Inc
  • Forum Non Conveniens – Conditions to Dismissal – SD-FL:  Here’s a creative order granting a forum non conveniens motion to dismiss. This one conditions dismissal on a host of conditions, including that “Defendant shall consent to the enforcement of any final Mexican judgment against it in Mexico or the US.” Otto Candies LLC v Citigroup Inc

INTERESTING CASES FROM ILLINOIS COURTS & THE UNITED STATES SUPREME COURT:

  • Contract Interpretation – Last Antecedent Rule – IL AP-1st:  “We interpret the contracts in light of their punctuation and the last antecedent rule. The last antecedent doctrine, a long-recognized grammatical canon . . . provides that relative or qualifying words, phrases, or clauses are applied to the words or phrases immediately preceding them and are not construed as extending to or including other words, phrases, or clauses more remote. Courts apply the doctrine generally to all written instruments.” Henning v Smithfield Construction Group Inc
  • Injunctions – Timeliness – SCOTUS:  Benisek reminds that delay in seeking injunctive relief is contrary to first principles, and probably fatal to the request: “The balance of equities & public interest tilt against preliminary injunctive relief. A party requesting it must show reasonable diligence.” Benisek v Lamone
  • Settlement Agreement – Releases – Scope – IL-AP-3d:  Dismissal of a complaint against former employees was upheld because broad release language in a settlement agreement in a federal action involving the same parties was unambiguous and, by its express terms, released all claims and liabilities between the parties, including those alleged in the state action under Illinois Trade Secret Act. Engineered Abrasives Inc v Richerme
  • Standing – Article III – SCOTUS:  Justice Robert pulls together another impressive 9-0 sweep on Art III standing, getting all 9 justices to agree that (i) the “threshold requirement” for Article III standing, under which a plaintiff must show “a personal stake in the outcome, distinct from a ‘generally available grievance about government’ ” and (ii) “[a] citizen’s interest in the overall composition of the legislature is embodied in his right to vote for his representative [a]nd the citizen’s abstract interest in policies adopted by the legislature on the facts here is a nonjusticiable ‘general interest common to all members of the public.’ ” Gill v Whitford

BK RELATED NEWS & ARTICLES:

LAW RELATED NEWS & ARTICLES:

  • Arguments – Syllogisms – Universality:  “It is possible to reduce every argument to a syllogism, and it is possible to reduce every reason offered in support of an argument to a syllogism. Our reasoning is always stretched on this frame: If this is true, and that is true, then such and such must follow.” Twitter post from Prof. Bryan A. Garner, quoting Percy Marks
  • Collateralized Loan Obligations – Weakened Protections:  “Now investors are wholeheartedly embracing the CLO. Collateralized loan obligations — vehicles underpinned by bank lending — are enjoying a boom. Institutional investors have piled into the products, which pool predominantly US or European corporate loans into one portfolio, before divvying up slices of the vehicle based on perceived risks.” High demand for collateralised loans weakens lender protections: Clamour for the products as rates rise risks driving down the quality of assets, by Eric Platt at Financial Times
  • Covenant Lite – Enhancing Voting Rights:  “Covenant Review, a credit research firm, warned that the significant loosening of covenants remains a risk and that lenders need to make sure they have proper voting standards in the credit agreements. ‘While it is encouraging to see that at least one judge reads the commercial reasonableness standard to potentially preclude NYDJ-style attacks, it would be ill-advised for investors to view that as the takeaway in this case,’ Covenant Review said in a note.” Tensions rise as private equity-backed companies push limits, via Jonathan Schwarzberg at Reuters

LIFE, BUSINESS, AND THE WORLD GENERALLY:

©2018, Steve Jakubowski

Here’s an aggregation of 35 of my Twitter posts from June 16-18, 2018, with links to important cases, articles, and news briefs that restructuring professionals will find of interest. Don’t hesitate to reach out and contact me to discuss any posts, and thank you for reading!

BK RELATED CASES:

  • 363 APA Traps – BK-ED-TN:  Words relating to “Excluded Assets” NOT to put in an 363 sale asset purchase agreement unless you’re prepared for a fight with the trustee. “The Parties agree to work together, in good faith, to finalize this exhibit as soon as practicable after the Effective Date.” In re HC Liquidation Inc
  • Executory Contracts Defined – 2d Cir:  Second Circuit says it “need not resolve the question of which test” applies for determining whether a contract is executory: the Countryman test or the 2d Cir’s “some performance due test.” Guess the 2d Cir is reconsidering whether the latter holds. In re NanoDynamics Inc
  • Federal Priority Statute in BK – B-ED-VA:  “While the US Objection seeks to disproportionally re-prioritize the estate distribution in favor of the US, Congress has made clear that the Federal Priority Statute cannot be invoked for that purpose.” In re Health Diagnostic Laboratory Inc
  • Informal Proofs of Claim – BK-SD-TX:  “Informal proof of claims arise from a common law doctrine whereby pre-bar date filings not conforming to the FRBP’s formal filing requirements are treated as informal proofs of claim that can be amended to conform to the rules.” In re Houston Bluebonnet LLC
  • Lis Pendens Filings by BK Trustees – BK-WD-MI:  Even without an adversary based on a fraudulent conveyance theory, bankruptcy trustees sometimes file lis pendens to guard against unauthorized post-petition transfers (like those that the Defendants evidently intended to effect here). In re Rosich
  • Maritime Liens – 2d Cir:  Sub-subcontractor who supplied bunkers to a vessel at the direction of the subcontractor didn’t furnish them on order of vessel’s owner or its agent and so wasn’t entitled to a maritime lien. There is no evidence that the charterer of the vessel agreed to be bound by the subcontractor’s purchase. ING Bank NV v MV TEMARA IMO No 9333929
  • Petition – Wet Signatures – BK-MD-PA:  “I believe the effort to convince me that wet signatures [on the petition] are required has been misdirected. The real issue is whether FRBP 1008 and 9011 have been complied with.” In re Klitsch
  • Preferences – Insider Loans – BK-ED-MI finds fact issue exists as to whether multiple sporadic insider loans over the years enables the one loan paid during the preference period to have been deemed incurred in the “ordinary course of business.” Matter of Oakland Physicians Medical Center LLC
  • Publication Notice – 363 Sale – Due Process – BK-ED-KY:   A “known” party is entitled to actual notice of the sale and confirmation process. Notice by publication of the sale 14 yrs ago that excluded this party did not satisfy constitutional due process. In re HNRC Dissolution Co
  • Punitive Damages – Stay Violations – BK-SD-OH:  “Rarely has the Court seen such a blatant violation of the automatic stay as is presented in this case. Sanctions in the form of attorneys’ fees, costs, and punitive damages will be imposed.” Ct assesses punitives at three times fees & costs. In re Stringer
  • “Related to” Jurisdiction – Indemnity & Alter Ego Claims – BK-DE  The potential indemnity claim of the CEO/Director/Majority Shareholder satisfies the Pacor “related to” jurisdiction test. Also “related to” jurisdiction exists based on the creditor’s attempt to pierce the corporate veil because any finding of veil piercing requires a finding of liability against Debtor. In re LTC Holdings Inc
  • Solvency Analysis – Supplementary Proceedings – ND-IL:  Per FRCP 69(a), supplementary proceedings to enforce a money judgment are governed by law of forum state, and “[n]othing in that statute, or IL Supreme Ct rules on supplementary proceedings, expressly prohibits a judgment creditor from filing a 2d motion to compel turnover of the same assets that were the subject of a previous, unsuccessful motion in the same proceeding…. [Further,] [a]t least one other court applying Illinois law has declined to discount the value of a legal claim that, like the Trustee’s here, was pending at the time of an alleged fraudulent conveyance and was subsequently reduced to judgment.” In re Emerald Casino Inc

INTERESTING CASES FROM ILLINOIS COURTS & THE UNITED STATES SUPREME COURT:

  • 1st Amendment – Political Apparel Ban – SCOTUS:   Justice Roberts put together an interesting 7-2 majority in the MN Voters Alliance case. As I was reading the opinion, I had thought the case would be decided in favor of the ban on political badges inside a polling place. Instead, the Court ruled that the statute was incapable of reasoned application under the First Amendment since the statute didn’t define “political,” which could have an expansive meaning, and that Minnesota’s construction as the meaning of referred to “messaging” presents line-drawing problems. One thing evident from this term’s opinions, however, is the importance of the First Amendment to all the justices and how protection of this right is paramount to them all. The tenor of today’s political discourse must be weighing on their collective judicial conscience. Minnesota Voters Alliance v Mansky
  • Bad Neighbors & Bad Fences – IL-AP-3d:  This case proves that bad fences can make for bad neighbors too. Court rules the defendant could be required to pay a just cost to build a division fence with adjoining landowners per the IL Fence Act, but that it was error for the trial court to say that the defendant was required to pay 1/2 the cost because there were issues of fact regarding whether the defendant violated the Fence Act by removing a preexisting division fence between the parties’ properties without notice, which act itself requires the defendant to pay for replacement of the fence. Judith Mottl Kerr Trust v Holm
  • Interpreting Foreign Law in US Courts – SCOTUS:   In determining, for purposes of considering an action under the Sherman Act, that Chinese law required the fixing of price & quantity of Vitamin C exports, the Appellate Court should have considered sources beyond the amicus brief filed by China’s Ministry of Commerce. Animal Science Products Inc v Hebei Welcome Pharmaceutical Co Ltd
  • Lis Pendens – Jurisdiction – Subsequent Purchasers – IL-AP-4th:  Court examines the “jurisdiction over both the person and the res” requirement for a lis pendens notice to be effective and concludes that it doesn’t require personal jurisdiction over a subsequent purchaser & only refers to the property owner at the time of the action.  Bonnell v City of Grafton
  • Preliminary Injunction – Trademarks – Evidentiary Needs – 7th Cir:   Court affirms a grant of injunction against ads vividly implying that milk from rbST-treated cows is unwholesome, ruling that consumer surveys or other “hard” evidence of actual consumer confusion are unnecessary at the preliminary injunction stage. Eli Lilly and Company v Arla Foods Inc
  • Restrictive Covenants – Non-Solicitation – ND-IL:   Court examines the plain meaning of “introduces” in an action to enforce a non-solicitation provision that precluded a party from soliciting entities that the party seeking to enforce the provision “introduces” to the other. Syncreon Technology (USA) LLC v CRST Specialized Transportation Inc
  • Term Limits – 7th Cir:  City referendum providing for a term limit for the office of Mayor that prevented a candidate from running for Mayor based on his 20 consecutive years as alderman didn’t violate his equal protection rights, even if aimed a him in particular. The referendum was rationally related to the city’s legitimate governmental interest in imposing term limits. Jones v Markiewicz-Qualkinbush

BK RELATED NEWS & ARTICLES:

LAW RELATED NEWS & ARTICLES:

LIFE, BUSINESS, AND THE WORLD GENERALLY:

©2018, Steve Jakubowski

Here’s an aggregation of 60 of my Twitter posts from June 8-15, 2018, with links to important cases, articles, and news briefs that restructuring professionals will find of interest. Don’t hesitate to reach out and contact me to discuss any posts. Thanks for reading!

BK RELATED CASES:

  • Appraisal of LLC Member Interests – BK-ED-WI:  Court analyzes “appraisal” rights of ch. 7 trustee as owner of a Wisconsin LLC’s member interests and supports the trustee’s view that what’s appraised is not the LLC interest itself, but the underlying property of the LLC. Given the LLC’s intention to limit transferability beyond family members, it is unreasonable to read the buy-out price in the Operating Agreement of “one-third (1/3) a formal appraisal” to mean a valuation that factors in deductions or discounts for “lack of control” or “lack of marketability.” “Applying any kind of discount for lack of control or similar considerations is inconsistent with the [Operating] Agreement’s stated purposes and would allow the remaining membership groups to purchase one-third of the LLC’s assets for lee than one-third their appraised value, reaping a windfall at the expense of the exiting family member. A discount for lack of marketability is likewise inappropriate when the Agreement obligates the remaining membership groups to purchase the exiting member’s interest.” In re Stebnitz
  • Cramdown – Partial “Dirt for Debt” Plan – Till – BK-SD-MS:  In a cramdown fight, Court rules the debtor’s expert is “more credible because of his decades of experience, his specialization in such equipment, and understanding of how the Debtors use the trucks, and so accepts his opinion as to the replacement value. Further, a partial “dirt for debt” plan is allowable under § 1129 even when the dirt is over-the-road equipment. Also, cramdown rate of 6%, or 1.25% over the current prime rate, is appropriate. In re National Truck Funding LLC
  • Discharge Violation – Intent Irrelevant – 1st Cir:  IRS willfully violates discharge order if employee, knowing of the order, intentionally violates it. The IRS’s good faith belief that it has a right to collect the debts is irrelevant to whether it willfully violated the discharge order. Internal Revenue Service v Murphy
  • Estate D&O Litigation – Motion to Dismiss – BK-DE:  Judge Gross covers a wide variety of issues in deciding a motion to dismiss a multi-count complaint against D&O’s of the failed company. A worthwhile read. In re Liquid Holdings Group Inc
  • Executory Contracts – Assumption & Assignment – Restrictive Covenants – BK-ED-VA:  Court overrules objection of landlord to proposed assignment “free and clear of the use restriction” because the landlord failed to establish “actual and substantial detriment would be incurred if the deviation in use was permitted.” In re Toys R Us Inc
  • Interplay of Fraudulent Transfer & Unjust Enrichment Actions – BK-DE:  “Trustee’s claim for fraudulent transfer, as narrowed by the Decision, covers substantially less of the amount transferred to BMW than its unjust enrichment claim, which implicates the full amount of the Transfers (approximately $33 million).  The Court agrees that reversal on the unjust enrichment claim would leave the Trustee with a viable claim for fraudulent transfer (albeit in a reduced amount), and vice versa. In either case, a colorable claim would remain to proceed to discovery. In re FAH Liquidating Corp (Fisker)
  • Plan Modification – Standing to Object – BK-SD-MS:  “This Court agrees that a creditor that has voted to reject the plan lacks standing to object to the plan’s modification.” In re National Truck Funding LLC
  • Preemption of CA Labor Code via KERP Order – BK-DE:  Bankruptcy law, enforced by the KERP Order, preempts the CA Labor Code. The KERP letter agreements include a waiver of potential prepetition bonus claims in return for administrative claims, which agreements are valid and enforceable, notwithstanding contrary state law. In re Old BPSUSH Inc (Easton/Bauer Sports)
  • Retention of Jurisdiction Provisions – BK-UT:  “Neither the bankruptcy court nor the parties can write their own jurisdictional ticket. . . . Where a bankruptcy court lacks jurisdiction, retention of jurisdiction provisions are ‘fundamentally irrelevant’.” In re CS Mining LLC
  • Removal – GM Ignition Switch Litigation – SDNY:  “The Court certainly understands New GM’s interest in seeking to bring this case to federal court and make it part of the MDL. Nevertheless, the bankruptcy of Old GM doesn’t provide New GM with an open-ended ticket to remove cases from state court at will merely because they Old GM cars. . . . Where, as here, the relevant legal principles have been settled and all that is left is to apply those principles to a case in a straightforward manner, the arguments for removal fall short so the motion to remand is granted.” In re General Motors LLC Ignition Switch Litigation
  • Rule 2004 Consent Directives for the Fleeing Debtor – 9th BAP:   In furtherance of the debtor’s obligation to provide recorded information to the trustee and in furtherance of trustee’s duty to investigate the debtor’s affairs, the Court has authority per BK Code section 105 and Bankruptcy Rule 2004 to compel a debtor to execute a consent directive, which the trustee could then send to international banks and financial entities in an attempt to identify undisclosed assets. In re Mastro
  • Rule 9006(b) Limitations – BK-CT:  Rule 9006(b) can’t enlarge the deadline per §546(a) for commencing avoidance actions. Section 546(a) is a statute of limitations, and like any statute of limitations is subject to equitable tolling.” In re Walnut Hill Inc
  • Sale of Avoidance Actions – 9th BAP:  Trustee’s sale of avoidance claims to creditor prevented that creditor from later pursuing claims derivatively on the Trustee’s behalf. In re Blasingame
  • Tax Sale Avoidance – BK-NJ:  “This court previously determined that a transfer of property to a municipality pursuant to a tax sale and foreclosure, where there was no competitive bidding, can constitute a fraudulent conveyance . . . not barred by BFP v. Resolution Trust Corp. . . . “Generally, unaccepted offers are not admissible evidence in support of fair market value of property, . . . [but] unconsummated contracts have evidentiary weight.” Court holds that $530,000 isn’t reasonably equivalent value to $429,767, finding that “the dollar amount of difference more important than any percentage guideline.” The City’s receipt of $100K more than its debt through this transfer is “not an insignificant amount considering the $372K in claims it could be applied to pay,” and thus the Debtor “did not receive reasonably equivalent value in exchange.” In re GGI Properties LLC

INTERESTING CASES FROM ILLINOIS COURTS & THE UNITED STATES SUPREME COURT:

  • Arbitration Clauses – Multiple Disputes – IL AP 1:  “If a party has allegedly breached an arbitration clause with respect to one dispute, [] that same party [may] nevertheless demand arbitration on a different, unrelated, dispute.” Radiant Star Enterprises LLC v Metropolis Condominium Association
  • Causation – SCOTUS:  “The phrase ‘by reason of’ denotes some form of causation. . . . But there are several types of causation. When a statute includes an undefined causation requirement, context decide[s]” whether the statute demands but-for as compared to proximate or sole causation. This opinion is very thought-provoking, with ascerbic writing on both sides, in its own way reflecting the sharpening of tones generally on both sides of high-charged debates. Husted v A Philip Randolph Institute
  • Contracts Clause – SCOTUS:  The Court’s decision in Sveen v. Melin is interesting for States with massive underfunded pensions that hamper growth & vitality. The case starts with the proposition that “not all laws affecting pre-existing contracts violate the Contracts Clause. . . . In answering that question, the Court has considered the extent to which the law undermines the contractual bargain, interferes with reasonable expectations and prevents the party from safeguarding or reinstating his rights. . . . If such factors show a substantial impairment, the inquiry turns to the legislation’s means & ends. In particular, the Ct has asked whether the state law is drawn in an ‘appropriate’ & ‘reasonable’ way to advance ‘a significant and legitimate public purpose.’ ” Justice Gorsuch, the lone dissenter, citing de Braxton (famous for the line in 1240 that an “ounce of prevention is worth a pound of cure”), writes: “Because legislation often disrupts existing social arrangements, it usually applies only prospectively. This longstanding and ‘sacred’ principle ensures that people have fair warning of the law’s demands. It also prevents majoritarian legislatures from condemning disfavored minorities for past conduct they are powerless to change.” He descends from these lofty heights to ask whether MN’s auto-revocation-on-divorce statute substantially impaired pre-existing contractual arrangements, finding that it most obviously & uncategorically does. Sveen v Melin
  • Diversity Jurisdiction – Corp. Citizenship – 7th Cir:  “What matters for the citizenship of a corporation is its state of incorporation and its principal place of business, not its ‘headquarters’.” Dalton v Teva North America
  • Equitable Ownership Defined – 7th Cir:  By invoking equitable-ownership standing, Hill thinks “equitable” means common law “equity” (i.e., in fairness he ought to be the share’s owners). But that is not how Delaware cases use the term “equitable” when it comes to equitable ownership. Plaintiff has alleged that he has “some kind of contractual right to the stock,” but that’s “not the same as being the current equitable owner of the stock.” Hill v Lynn
  • Non-Solicitation Covenants – ND-IL:  “[T]he terms of the non-solicitation covenant go beyond what is reasonably necessary to protect Call One’s near-permanent relationships with customer. . . . [It] also is broader than reasonably necessary to protect Call One’s confidential information. [The] alleged misappropriation of [a] Customer Report does not justify prohibiting [the employee] from soliciting any entity that was a customer since 2003 [but isn’t now].” Call One Inc v Anzine
  • Tax Sale Redemptions – IL Supreme Ct:  Court didn’t abuse its discretion in granting equitable relief and extending the period of redemption despite the owners’ failure to timely adhere to the IL Code’s provisions regarding the tendering of payment to redeem the property. In re Application for a Tax Deed
  • Zoning – Gun Shops & the 2nd Amendment – ND-IL:  “The Second Amendment was never intended to be a battering ram, used to push aside the beliefs and concerns of American citizens. The idea that a gun range and gun store located in the middle of a small village is incompatible with concepts of a more perfect Union or the enjoyment of domestic Tranquility—an idea espoused in a public forum by its residents—is entitled to credence. There is nothing about such a view to render it arbitrary, unreasonable, or capricious. Chicago Gun Club LLC v Village of Willowbrook Illinois

BK RELATED NEWS & ARTICLES:

  • Absolute Priority Rule – Indiv. BK Cases:  Chart shows 4th, 5th, 6th, 9th, 10th have adopted the “narrow” approach, while none follows the “broad” approach. While there’s a split of authority in the 1st, 7th, 8th, and 11th Circuits, they are likely to come around to the narrow approach. The Absolute Priority Rule (Probably) Still Applies in Individual Bankruptcy Cases, by Steve Sather, via CLLA Bankruptcy Blog
  • Advance Conflicts Waivers in BK:  Dan McGuire gets to defend against allegations that, “prepetition, Winston not only failed to inform Netflix it was deliberately seeking to undermine Netflix’s interest through these Ch 11 cases, it repeatedly denied it,” the company said. Winston & Strawn Accused Of Conflict In Relativity Ch. 11, via Law360
  • Archdiocese Settlement:  Pie chart on settlement funding sources: 32% property sales; 25% insurance fund; 35% unrestricted funds; 8% “voluntary parish contributions.” 75% of the $210 million settlement is paid by parishioners through asset sales & cash contributions. Archdiocese needs $40M for sex abuse settlement. Here’s where it’s looking, via MPR News
  • Corporate Waste:  Seeing “it takes an extreme factual scenario for a plaintiff to state a claim for . . . waste,” Court concludes that the compensation was sufficiently unusual to state a claim for relief, especially since the Board allegedly knew he couldn’t provide the bargained for services. The Return of “Waste of Corporate Assets”, by Mike Peregrine of McDermott Will & Emery, via Lexology
  • Diligence Fees:  Whether to pay for a BK suitor’s diligence costs is considered in a piece that itself draws no conclusions but juxtaposes denial of a hail mary $500K “work fee” to a suitor that-if successful-might save 20K jobs with the $12.6M in fees for 3 months work by BK professionals in the case. The high cost of going broke, via BizTimes Milwaukee
  • European Distressed Debt Market Predictions:  “The majority predict market conditions will be as challenging in 2018 as in 2017. Property and construction (71%) are expected to provide the best opportunities in 2018, followed by oil & gas and transportation (70%), and shipping (66%).” European Distressed Debt Market Outlook 2018, by Orrick, Herrington & Sutcliffe, via JD Supra
  • Golf Course Redevelopment:  “Whether this bust can be a boon or a wash for suburbs & cities will be decided by hundreds of small zoning fights over the next decade. If recent pushes to down zone are an indication, it will take effort & forethought to get them productively redeveloped. Dead Golf Courses Are the New NIMBY Battlefield, via CityLab
  • Indenture Trustee Fees in BK:  Court states: “[Section] 503(b)(3)(D) is not the only way where such expenses can be approved and paid in a case. And I think it is perfectly appropriate to agree . . . to the payment of those expenses without the necessity of a court having to approve them after the fact in order to get the parties to come to the table and negotiate [a] successful reorganization. . . . I think the fact that [Southeastern Grocers] agreed to that . . . was perfectly appropriate, and that there is no necessity that I review those expenses or otherwise interfere with that agreement. Delaware Judge Rejects Challenge to Payment of Fees for Indenture Trustee in Southeastern Grocers Chapter 11 Case, by Ben Feder of Kelley Drye & Warren, via Bankruptcy Law Insights Blog
  • Lessor Priority Over DIP Lender:  Lease from Peoria provided that all property on site passed to it 90 days after lease termination. Because the Debtor never possessed post-termination rights in “structures” or “below-grade improvements,” the DIP lender’s superpriority bankruptcy liens didn’t attach to them. A Lesson in DIP Financing Due Diligence, by Dan Reynolds of Jones Day
  • Marketing Joint Ventures that Fail:  Useful ruling for failed marketing joint ventures. Here, BTG failed to honor its obligation to market an anti-toxicity drug, failed to hire enough sales reps, disregarded outside advice about its sales force size, and to diligently develop a commercial plan in good faith. Del. Justices Uphold $56M Award In Drug Contract Dispute, via Law360
  • Medallion Auctions:  This auction will be interesting. “Last year, 46 medallions were reportedly sold at an auction in Queens for an average price of $186,000, snatched up by Connecticut-based MGPE, a hedge fund presumably seeking yield on a distressed asset.” 139 Taxi Medallions Will Be Offered at Bankruptcy Auction, via NY Post
  • Midstream Gathering Contracts in BK:  By limiting ruling to horizontal privity, Nordheim argued, the 2d Cir. avoided the issue of whether the covenants in Sabine’s agreement dedicating all production to Nordheim’s gathering facilities and requiring Sabine to pay gathering fees “touch and concern” the driller’s land. 2nd Circ. Urged To Seek Texas Justices’ View On Sabine Case, via Law360
  • Moore v. Bay:  I’ve disliked Moore v. Bay since reading about it in law school and have railed against it since this blog started. See my collection of posts here. Here’s a recent take on Moore v. Bay. Bankruptcy Court Determines Issue of First Impression – Holds That Recovery Under Section 550 is Not Capped by The Amount of Creditor Claims, by Stacy Newman, via Ashby & Geddes’ Delaware Bankruptcy Insider Blog
  • Penthouse IP Sale in BK:  I was wondering what these assets would fetch in this 363 sale. The winner was “XVideos.com” from among the 400 bidders for Penthouse’s intellectual property, videos, publications, broadcasting & digital rights. Penthouse Global Media sold for $11.2 million at auction to porn site owner, via LA Times
  • Plan Support Agreements:   “PSAs have become a mainstay in BK restructurings so it’s vital to have a clear understanding of the legal terms of a contemplated PSA. We examine certain key provisions typical in a PSA and provide a brief survey of provisions agreed to by Debtors in BK.” Plan Support Agreements: Key Considerations for Creditors, by Greg Plotko and Richard Lee, via NY Law Journal
  • Pre-Negotiated Plan Terms – Walking Co.:  The deal in this prenegotiated plan: old equity cancelled, some old investors inject $10.2M for all the equity, subject to dilution by the exercise of warrants for up to 7.5% of the new shares for subordinated noteholders. The Walking Company’s Ch. 11 Plan Gets Court Approval, via Law360
  • Private Equity as BK Litigation Targets:  Wintrob’s Oaktree Capital Group and Brodsky’s Aurelius Capital Management are kicking back at private equity owners in separate Chapter 11 cases, as investors lose patience for tactics that buyout firms use to reduce their own risks. In Retailer Bankruptcies, Private Equity Comes Under Fire: Funds dispute post-LBO asset transfers, bankruptcy loans, via Bloomberg
  • Restrictive Covenants in BK:  “If reorganization is entirely dependent on whether a restrictive covenant can be rejected under section 365(a) or discarded by section 363(f), debtors (as well as trustees) must take special note of the underlying characteristics of the covenant. As illustrated, the prevailing view is that restrictive covenants which touch and concern the affected parcel will remain affixed to the estate’s property post-petition, regardless of whether the covenant has features of a contract and there are reciprocal duties imposed on both sides. The Limitations of Sections 363(f) and 365(a) in Severing Restrictive Covenants from Real Property, by Daniel Lev of SulmeyerKupetz, via 34 Cal. Bankr. J. 261
  • Student Loan Debt:  Women are carrying nearly two-thirds of the country’s outstanding student loan debt. Women have $890 billion in student loan debt, the country’s biggest share, via CNBC Personal Finance

LAW RELATED NEWS & ARTICLES:

  • AICPA Guide to Portfolio Co. Valuation:  “The [649 pp] Guide is designed to provide investment companies that invest in securities issued by privately held enterprises with an overview of the valuation process and the roles and responsibilities of the various parties involved in the valuation process.” AICPA Draft Guide Available for Comment: Valuation of Portfolio Company Investments of Venture Capital and Private Equity Funds, by Kelley Howes of Morrison & Foerster, via Lexology
  • Athlete Injuries / Stadium Liability:  “Reggie Bush didn’t allege that the collective bargaining agreement mandated medical care or that other contractual protections were absent, but that the St. Louis Rams and the stadium manager failed to warn him of dangerous conditions that caused him to slip on a concrete surface around the field.” Rams Must Pay Reggie Bush $12.5M For Injury, Jury Finds, via Law360
  • Attorney-Client Privilege:  ‘Until the Delaware Supreme Court ruling in Wal-Mart v. Indiana Electr. Pension Trust Fund, the exception has never been expanded to allow for shareholders to obtain privileged documents in a pre-litigation Section 220 books and records demand.” Boards Beware: Delaware “Garners” Support for Fiduciary Exception to Attorney-Client Privilege, by Sabrina Hendershot, Delaware J. Corp. Law
  • Baseball & Antitrust:  “Jim Figliulo said the now-upheld 7th Cir decision is ‘indefensible and ridiculous’ as it expands the antitrust exemption beyond ‘the business of baseball’ and into other areas, including the business conducted by the rooftop seating owners.” Justices Won’t Take Up MLB Antitrust Exemption Challenges, via Law360
  • Class Action Fee Requests:  Robbins Geller: “As a percentage of reasonably recoverable damages, the settlement is several times greater than the average recovery in other cases under the PSLRA, but the 13.1% fee is far below the average award.” Judge:”You may be being greedy.” Attys Defend $16M LendingClub Fee Bid That ‘Shocked’ Judge
  • Discovery – Forensic Computer Imaging:  Interesting decision from ND-IL Magistrate Judge Jeff Cole, who first agreed with Motorola’s request for images of computers in a trade secret misappropriation case, but then changed his mind. The decision is also useful in providing arguments objecting to forensic computer imaging requests. A “Crowbar to Get Everything”: Motorola v. Hytera and the Issues with Imaging Computers in Discovery, by Fisher Phillips, via JD Supra
  • Lebron James’s IP Dispute:  Following up on my post from the Week of May 25-31:  “The Social Club James, Carter, Uninterrupted Digital Ventures LLC and Uninterrupted employee Cree Nix in April, alleging they had infringed the ‘Shop Talk’ mark with ‘The Shop,’ which has garnered about 4 million views, according to The Social Club’s complaint. The suit also claims that The Social Club pitched the idea to representatives of Uninterrupted but that the company simply took the idea for itself. On Friday, James and Carter called that allegation “bare-bones and conclusory.” LeBron James Denies Role In ‘Shop’ Show In TM Dispute, via Law360
  • Property Rights in a Driverless World:  “The broad use of autonomous vehicles may provide [municipalities] opportunities to repurpose significant amounts of this land [that today is currently designated right of way]. Before doing so, however, it will be necessary to understand the nature of the public’s rights to use particular right of way — rights that may vary from road to road within the same city.” Right Of Way And Property Rights In A Driverless World, via Law360
  • Statistical Evidence Limitations:  Panel agrees that statistician’s methodology was too tainted with potential bias & error and that, as a statistician, he wasn’t qualified to determine what data should have alerted Pfizer to a possible link between its drug and the disease. 4th Circ. Upholds Ax Of Expert Testimony In Lipitor MDL, via Law360

LIFE AND THE WORLD GENERALLY:

©2018, Steve Jakubowski

Here’s an aggregation of some of my Twitter posts from June 1-7 2018, with links to important cases, articles, and news briefs that restructuring professionals will find of interest. Don’t hesitate to reach out and contact me to discuss any posts. Thanks for reading!

BK RELATED CASES:

 

INTERESTING CASES FROM ILLINOIS AND OTHER COURTS:

  • Personal Jurisdiction – 7th Cir:   “Directing pleadings, discovery, and other litigation communications to an Illinois citizen facing suit in some other state—even in furtherance of a tortious scheme—is simply not the same as targeting that citizen in Illinois.” John Crane Inc v Shein Law Center Ltd
  • Mandatory Arbitration – Cook County – IL AP 1:  “The Illinois Supreme Court authorized the Cook County mandatory arbitration program and thus approved any deviations between that program’s rules and the Illinois supreme court’s rules.” Jones v State Farm Mutual Automobile Insurance Company
  • Systematic Oppression in the Federal Judiciary and Legal Profession – SD-MS:  Instead of entering a routine order appointing a receiver in an SEC enforcement action, US District Judge Reeves takes the opportunity to rail against the lack of diversity in the federal judiciary and the legal profession. . . . The Court believes that particular care is necessary in appointing officers of the federal judiciary, an institution that fails to reflect the diversity of the public it serves. . . . It is indisputable that systematic oppression lies behind much of the judiciary’s lack of diversity. . . . Deeper patterns of exclusion appear in Mississippi. The Court will require the Receiver to take steps to guarantee its hiring practices are as inclusive as possible.” Securities And Exchange Commission v Adams

BK RELATED NEWS & ARTICLES:

LAW RELATED NEWS & ARTICLES:

LIFE AND THE WORLD GENERALLY:

 

©2018, Steve Jakubowski

Here’s an aggregation of some of my Twitter posts from May 25-31, 2018, with links to important cases, articles, and news briefs that restructuring professionals will find of interest. Don’t hesitate to reach out and contact me to discuss any posts. Thanks for reading!

BK RELATED CASES:

  • Midstream O&G Contracts – 2nd Cir. affirms the bankruptcy court’s decision in Sabine Oil, which authorized the rejection of midstream oil and gas contracts, stating: “Regarding the horizontal privity requirement, there is no meaningful legal distinction between the contract in Clear Lake & the one at issue here. Neither contract conveyed a property interest in subject land (in this case, the mineral estate). Accordingly, both fail to establish horizontal privity of estate and therefore both fail to create a real covenant.” In re Sabine Oil And Gas Corporation
  • Golden Shares – 5th Cir (1) “golden share” op. finds nothing worth mining, stating: “We decline to answer the BK Ct’s 1st certified question regarding the enforceability of “blocking provisions” & “golden shares” generally. That question is appropriately reserved for a case in which it is not hypothetical.” The rest of the 5th’s “Golden Share” opinion, however, is worth mining by private equity investors regarding when a person becomes a “minority controlling shareholder” under Delaware law (with the Court concluding here that “if Boketo is a controlling shareholder of FSNA, then the tail is wagging the dog.” In re Franchise Services of North America Inc.
  • Golden Shares – 5th Cir (2)Here’s a good analysis of the 5th Circuit’s “golden shares” decision in Franchise Services of N. America: Fifth Circuit Allows Shareholder-Creditor To Block Bankruptcy Filing, by Sarah Borders, Deff Dutson, and Sarah Primrose of King & Spalding
  • Standing – 9th:  Failure to attend noticed hearing on and to object to the Ch 7 trustee’s untimely motion to assume an executory contract were irrelevant to whether the assumption order directly & adversely affected pecuniary interests for standing purposes. Matter of Point Center Financial Inc 
  • Buying Avoidance Actions – D-AZ:  The 9th Cir permits a sale of the trustee’s avoiding powers, including to an affiliate of the defendant to the action, and the creditor who purchased those avoidance powers is not required to pursue those powers for the benefit of all creditors. SVP Financial Services Partners LLLP
  • Lease Assumption via §365(p) but Not Reaffirmed – SD-CA:  In a case of 1st impression, Ct examines whether a lease assumption agreement per Code §365(p) is enforceable after discharge if the lease assumption has not been reaffirmed per §524(c) and holds that reaffirmation is not required if the lease is assumed per Code section 365(p)(2). Bobka v Toyota Motor Credit Corporation
  • DOL Claims & Dischargeability – ED-VA US Dept of Labor claims for unpaid wages are not subject to §523(a)(7)’s discharge exception since liquidated damages award sought by the Secretary serves a compensatory purpose, not a penal purpose. Acosta v JM Osaka Inc
  • IP Rights Post-Rejection – BK-CT takes a bold step in support of a nondebtor’s IP rights post-rejection & “respectfully declines to follow the 1st Cir holding [in Tempnology] and similarly aligns with the plain language reading of Section 365(g) advanced by Judge Easterbrook in the 7th Circuit.” In re Sima International Inc 
  • Summary Judgment Denial as Non-Final Orders – BK-DE  compiles cases in ruling that denial of summary judgment motion is not a final order implicating the bankruptcy court’s authority as a non-Article III court to enter final judgments. In re Anderson News LLC
  • Claims Objections and Choice of Forum Clauses – BK-DE:  Objection to proof of claim is properly heard in the BK Ct despite “multiple challenges to Plaintiff’s choice of forum” and defendant’s request to dismiss, enforce a forum selection clause, abstain, or otherwise transfer the case to a NY court. In re Penson Worldwide
  • Mortgage Foreclosure and Offsetting Claims – BK-SD-FL:  FL 5-yr statute of limitations for mortgage foreclosures doesn’t reduce a lender’s secured claim by subtracting amounts that were contractually due, absent acceleration, more than five years prior to commencement of the bankruptcy case. In re BCML Holding LLC
  • Maritime LIens and BK Jurisdiction – BK-HI cleans up on remand post-9th Cir reversal & holds that the stay does not apply to Plaintiff’s maritime claims & that the BK Ct lacked jurisdiction to rule on plaintiff’s maritime lien or to authorize the trustee’s sale of the vessel free and clear of the lien. In re Sea Hawaii Rafting LLC
  • Insurer’s Duty of Disclosure in Settlement – BK-ND-IL won’t dismiss case alleging CNA fraudulently concealed documents relating to disputed insurance policies from the Debtor. Further because of the special relationship between CNA and the Debtor, CNA violated its duty to disclose the documents, which prompted the parties to enter into a settlement agreement, which is approved herein. In re Oakfabco Inc
  • Waiver of 5th Am. Privilege – BK-ND-IL:  In another well-cited opinion by Judge Thorne holds that because the 5th Amendment privilege was never raised in response to the discovery request, any such objection was waived. In re Wolf
  • FERC Proceedings and the Automatic Stay – BK-ND-OH enjoins FERC proceeding, saying it does not involve police powers, would interfere with the Court’s jurisdiction over executory contracts, and creates potential admin claims. In re FirstEnergy Solutions Corp
  • GM Ignition Switch MDL and related BK Appeals – SD-NY reviews 8 preceding opinions from the bankruptcy court and 2d Cir in issuing 11 rulings on appeals from bankruptcy court rulings as well as bellweather products liability trials in the GM MDL Litigation. In re Motors Liquidation Company
    • Court reverses BK Ct’s 2015 ruling on fraudulent concealment claims against New GM, holding that plaintiffs can proceed on breach of duty claims for not disclosing ignition defects & thus depriving plaintiffs of the ability to file timely proofs of claim, stating: “That is, the mere fact that they allege a form of injury relating to the bankruptcy proceedings does not mean that they allege a duty arising from those proceedings.”
    • Court further reverse BK Ct ruling that the claims of purchasers of used GM vehicles without the Ignition Switch Defect were barred by the Sale Order to the same extent as the claims of their predecessors in interest, stating: “Plaintiffs purchased GM vehicles & suffered accidents after the Closing Date, they fall squarely within the scope of the 2d Circuit’s holding that the Sale Order cannot be applied to those who ‘had no relation with Old GM prior to bankruptcy.’ “

INTERESTING CASES FROM ILLINOIS AND OTHER COURTS:

  • Standing and Remand Rights – 7th Cir:  Upon finding that patrons in action removed to federal court lacked Article III standing, the district court was required to remand the case back to state court rather than dismiss it. Collier v SP Plus Corporation
  • Takings Claims Arising from the Harvey Flooding in Houston – Fed. Cl. For those of you who like interesting takings cases, here’s one relating to the construction of dams that worked perfectly, but also flooded the land upstream in last year’s Houston floods. “The government’s argument based on preexistence fails. Palazzolo explicitly rejects the ‘sweeping[ ] rule’ that ‘[a] purchaser or a successive title holder … is deemed to have notice of an earlier-enacted restriction and is barred from claiming that it effects a taking. [Palazollo] explained that ‘[t]he State may not put so potent a Hobbesian stick into the Lockean bundle,’ thereby “put[ting] an expiration date on the Takings Clause,’ ‘strip[ping landowners] of the ability to transfer the interest which [they] possessed before the prior to the regulation,’ and ‘secur[ing] a windfall [to the State].’ [Palazzolo, 533 U.S.] at 627.”  In re Upstream Addicks and Barker (Texas) Flood-Control Reservoirs
  • Insurance Duty to Defend Mixed Claims – IL AP 1:  Legal malpractice claims alleging willful conduct throughout the complaint are excluded from insurance coverage and so there is no duty to defend. Illinois State Bar Association Mutual Insurance Company v Leighton Legal Group LLC

BK RELATED NEWS & ARTICLES:

  • Banking & Bankruptcy:  Prof. Steve Lubben concludes: “After nearly a decade of waffling between ‘special’ & ‘normal’ bankruptcies for banks, we are ready to build upon what we learned & take the necessary further step: stop feigning that bank insolvency can or should happen in BK Ct.” A Functional Analysis of Sifi Insolvency, via SSRN
  • Dairy Woes in VTExcellent raw video interviews with dairy farmers from Vermont. “Hinsdale said he tried for a year to sell the farm & found no buyers, even though it was priced less than the $2.5M the barn alone cost to build. Up to 800 people attended the auction, but only 300 bid. Farmers wanted to see what dairy assets are worth.” Says the farmer on the video, “If I gave them the farm, it wouldn’t cash flow; . . . the mantra is ‘get big or get our.’ ” Vermont dairy is in crisis: 4 years of bad prices take a toll even on industry leaders. Vermont dairy is in crisis: 4 years of bad prices take a toll even on industry leaders, via Burlington Free Press
  • Defeating Bankruptcy Law by Contract:  There’s a lot to digest in Professor Westbrook’s trailer for his 2018 remake of “The End of Bankruptcy,” the Baird & Rasmussen 2002 classic. The End of Bankruptcy, by Jay Lawrence Westbrook via Credit Slips Blog
  • Farm Bankruptcy:  This is a sad story. I wonder if the Chapter 7 trustee will pursue an avoidance action for the transfer of the farm to the joint debtors’ son 2 years before the filing. Maine organic farming icons file for bankruptcy, via BDN Business
  • Fiscal Expansion and BK:  Don’t expect bankruptcies for a while. “Larry Summers has described the US [programme of fiscal expansion and reform] (accurately) as ”the most rapid increase in the debt-to-GDP ratio during peak business cycle times that has ever been seen in peacetime’.” Consequences of the Great Fiscal Divergence: Policy is raising US bond yields but effects on the dollar are ambiguous, via FT
  • Franchisee Bankruptcy:  This dispute is worth following between Applebees & its 2nd largest franchisee, now in BK, involves the intersection of bankruptcy and franchise law. Copy of complaint here. Applebee’s Sues Franchisee In Ch. 11 Over Deal Breaches
  • Necco:  “The company’s treats include Mary Jane candies, Clark Bars, Squirrel Nut Zippers and Sweethearts, the heart-shaped Valentine’s Day candy bearing romantic messages such as ‘Kiss Me’ and ‘Be Mine.’ Necco wafers have been around since before the Civil War.” Maker of Necco Wafers Gets Sweet Reprieve at Bankruptcy Auction, via WSJ
  • Pension Withdrawal Liability Settlement:  “That obligation, valued at $95M, will be paid by the warehouse’s former owner, C&S Wholesale Grocers, which supplies Tops with about two-thirds of its merchandise. Tops already paid $29M of it. C&S will pay the remaining $65M due.” Pension Deal Removes Potential $180 Million Hurdle in Tops Bankruptcy, via The Buffalo News.
  • Retail:  “Perhaps retail’s death is more a misunderstanding of a sector adapting to demand not just from the internet, but also a lopsided societal structure; where affluent urbanites shop in LCD lit stores, while the masses get by on Dunkin & Dollar General.” Retail is not dead, via FT
  • Valuation:  Profs Morrison & Ayotte examine BK Ct opinions on valuation disputes with the goals of (1) understanding how parties and expert witnesses justify opposing views and (2) guiding judges in resolving valuation disputes, especially the pervasive errors in expert discounted cash flow (DCF) testimony. Valuation Disputes in Corporate Bankruptcy, via SSRN

LAW RELATED NEWS & ARTICLES:

LIFE AND THE WORLD GENERALLY:

©2018, Steve Jakubowski

Here’s an aggregation of some of my Twitter posts from May 16-24, 2018, with links to important cases, articles, and news briefs that restructuring professionals will find of interest. Don’t hesitate to reach out and contact me to discuss any posts.  Thanks for reading!

BK RELATED CASES:

  • 9th Cir.:  Tax-sale buyer & prior owner of contaminated property had a “contractual relationship” through the tax deed, so CERCLA’s 3d party defense to liability (which exempts facility owners from liability for contamination if a 3d party caused the contamination & as long as the owner did not have a contractual relationship with the third party) did not apply to a tax purchaser. California Department of Toxic Substances Control v Westside Delivery LLC
  • BAP-10: “The determination of the factors that justify separate classification of claims is a question of law reviewed de novo, but whether the requisite factors have been established is a question of fact reviewed for clear error.” In re Novinda Corp
  • CD-CA: Even if DHCS didn’t know the amt of its claim before BK filing, it could fairly contemplate the existence of its Hospital Quality Assurance quarterly fee. This is enough to satisfy the fair contemplation test, so the claim is not administrative. In re Gardens Regional Hospital and Medical Center Inc
  • D-IL:  A creditor’s judgment lien attaches to a debtor’s contingent future interests in property held as tenants by the entirety, but those contingent future interests—like the tenancy interests themselves—are exempt under § 522(b)(3). Jaffe v Williams
  • BK-DE:  Judge Shannon finds Till rate in Chapter 13 plan should be prime plus 2% for an auto loan, stating: “The Court is not persuaded by Ally’s arguments that a 3% adjustment is necessary due to a rapid depreciation rate of cars.” In re Burton
  • BK-ND-GA wades into the murky waters of alleged fraudulent transfers of LLC interests, examining the nature of the rights assigned, the timing of the transfer, and the value of the interests transferred. In re White
  • BK-ND-IL:  Judge Thorne holds that a same-sex couple with a “Certificate of Civil Union” under IL law, but not a certificate of marriage, were the substantive equivalent of married under IL law & so were “spouses,” eligible to file a joint Ch 13 petition. In re Simmons

INTERESTING CASES FROM ILLINOIS COURTS:

  • IL AP 1Future Chief Justice Neville of the Illinois Supreme Court presiding rules that if a general release references a specific claim, but there was a second claim known to one party and not the other, then the general release is limited to the specific claim referenced. Young v Meadows
  • IL AP 1A $210,000 charge for one day of surgery is “not reasonable under any definition of reasonable.” Illinois Neurospine Institute PC v Maczuga
  • IL AP 1A foreclosure buyer’s payment of condo assessments can occur after confirmation of the foreclosure sale, but should include assessments accruing the month following the foreclosure sale, not the sale’s confirmation. V And T Investment Corporation v West Columbia Place Condominium Association

LAW RELATED NEWS & ARTICLES:

LIFE AND THE WORLD GENERALLY:

 

©2018, Steve Jakubowski

Here’s an aggregation of some of my Twitter posts from May 10-15, 2018, with links to important cases, articles, and news briefs that restructuring professionals will find of interest. Don’t hesitate to reach out and contact me to discuss any posts.

May 10 – 15, 2018

BK RELATED CASES:

  • BK-ED-CA rules it has specific personal jurisdiction over Hong Kong resident whose only specific connection to the alleged ponzi scheme at a CA winery was buying a crapload of discount cases (a fr. transfer?) online from the comfort of his HK home. In re Fox Ortega Enterprises Inc
  • BK-ED-MIGood practice tip from ED-MI (Packard). When getting an order dismissing a BK case in favor of an existing state receivership proceeding, make sure the order of dismissal covers not only the debtor but “any other person.” This prevents involuntary petitions from being filed. In Re Packard Square LLC

INTERESTING CASES FROM THE UNITED STATES SUPREME COURT:

LAW RELATED NEWS & ARTICLES:

DISTRESSED INDUSTRY NEWS:

LIFE AND THE WORLD GENERALLY:

Thanks for reading!

©2018, Steve Jakubowski