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