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!


  • 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


  • 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


  • 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 “” 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


  • 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


©2018, Steve Jakubowski