BCLP Global Restructuring & Insolvency Developments

Global Restructuring & Insolvency Developments

Chapter 11 Bankruptcy

Main Content

Losing Both Ways: Debtor Diligence in the Identification of Claims

August 3, 2016

Categories

Two recent cases serve as reminders the devil is truly in the details. As to the front-end risks associated with an early § 363(f) sale, in In re Motors Liquidation Company[1](the “GM” case) we have seen a $10 billion reminder that identification and actual notice to persons with claims against the Debtor is an indispensable element to the “free and clear” result intended by such a sale.  On the back-end risks of a confirmed Chapter 11 Plan, In re AmCad Holdings, LLC[2]teaches that failing to specifically identify claims of the Debtor against others for retained jurisdiction under the Plan can defeat the intended jurisdiction of the Bankruptcy Court to adjudicate those omitted claims.

GM involves the ongoing troubles from the 2009 insolvency of the General Motors Corporation, the United States’ largest car manufacturer.  As opposed to the usual reorganization procedures of 11 U.S.C. §§ 1121?1129, which

Internet Service a Utility in Bankruptcy? It Might Be Now.

HTTP on a Computer Monitor

Editor’s Note:  One of the many fascinating things about restructuring work is its willingness to evolve by borrowing from other areas of the law.  Just as business practices change, new financing techniques evolve, and transactions become more complex, the bankruptcy world must adapt as well, to allow for a well functioning insolvency system and not a stilted, out of date process.  To that end, we at The Bankruptcy Cave love finding curious decisions in tangential fields of the law, and thinking about how they may change bankruptcy practice, or how bankruptcy practice may change them (for instance, click here for a neat post last year about “Obamacare” and bankruptcy, or here for the most recent edition of

Some Much Needed Transparency Required on Liquidating Trustees, Liquidating Trusts, Plan Documents, and Other Post-Confirmation Matters

July 10, 2016

Categories

We at The Bankruptcy Cave applaud the recent ruling by Judge Whipple of the Bankruptcy Court for the Northern District of Ohio, seeking to make the post-confirmation parties, processes, and procedures far more transparent. In In re Affordable Med Scrubs, LLC,[1] Judge Whipple declined to approve a disclosure statement for a secured creditor’s liquidating plan.  The key deficiencies were as follows:

 

  • Disclosure Must be Provided about the Liquidating Trustee: While the secured creditor’s disclosure statement did state who the liquidating trustee would be, it provided no disclosures about the putative trustee’s connections to key creditors and other parties in interest. We applaud this effort to require disclosures about a proposed liquidating trustee or plan administrator. The selection of a liquidating trustee or plan administrator is a murky process – at best, it is based on some vague (and undisclosed) considerations of pricing and experience of the individual or
  • Bankruptcy Courts Closing In – Will An Agreement Requiring Unanimous Consent To File For Bankruptcy Be Effective?

    Magnifying Glass and document close up

    We’ve all seen it.  The business opportunity looks enticing but is laced with risk about a potential bankruptcy filing down the road.  As bankruptcy lawyers we are often asked how deals can be structured to prevent a potential bankruptcy filing.  One approach (really, about the only approach, and it has its own risks) has been to structure the deal requiring unanimous member/manager/director consent to place the entity into bankruptcy but meanwhile adding a member/manager/director who may vote against taking the entity into bankruptcy in the future, or who may have interests and motives other than those of insiders.

    Two recent bankruptcy court decisions have called this practice into question, especially when this corporate structure is implemented when the company is in distress.  The Bankruptcy Court for the District of Delaware

    Sabine Lives On (and On): Bankruptcy Court Rejects Immediate Appeal to Second Circuit and Motion for Stay

    July 4, 2016

    Categories

    Editor’s Note:  On June 16, 2016, The Bankruptcy Cave gave you our summary of the controversial Sabine decision.  At that time, post-hearing motions were pending.  As luck would have it (we at The Bankruptcy Cave should start wagering on college football, or who will win JoJo’s heart, with this luck!), just a few days later the drama continued with some important rulings on the timing of any final resolution of these important issues.  Here’s the skinny:

    On June 15, 2016, Bankruptcy Judge Shelley Chapman of the Southern District of New York issued a follow on decision concerning rejection of certain midstream contracts in Sabine Oil & Gas Corporation’s (“Sabine”) Chapter 11 case.[i]  In its decision, the Court rejected Nordheim Eagle Ford Gathering, LLC’s (“Nordheim”) request for an immediate appeal to the Second Circuit Court of Appeals.  The Court also refused to stay enforcement

    Sabine – A New York Bankruptcy Judge’s Interpretation of Texas Property Law Encourages Compromise and Leaves an Industry in Limbo

    June 17, 2016

    Categories

    On March 9, 2016, Bankruptcy Judge Shelley Chapman of the Southern District of New York issued her decision on the Debtor’s motion to reject certain contracts in Sabine Oil & Gas Corporation’s Chapter 11 case.[i]  The decision, which allowed Sabine to reject “gathering agreements”[ii] between it and two “midstream operators,”[iii] Nordheim Eagle Ford Gathering, LLC and HPIP Gonzales Holdings, LLC, under Section 365(a) of the Bankruptcy Code, sent shockwaves through the midstream energy sector and leveled the playing field for bankrupt production companies.  Yet, the case leaves undecided the ultimate question – what midstream contracts are protected as real covenants running with the land?  That question may be months, or even years, away from any resolution.[iv]  In the interim, energy companies are left with Sabine, which implies producers can renegotiate midstream contracts in a slumping energy market, using the threat of bankruptcy and

    When Going “All In” Pays Off: The Third Circuit Upholds The Decision of the Bankruptcy Court in In re Trump Entertainment Resorts, Inc.

    In an appeal certified directly from the Bankruptcy Court for the District of Delaware (the “Bankruptcy Court”) to the Court of Appeals, the Third Circuit issued a ruling upholding Judge Kevin Gross’s decision that a chapter 11 debtor-employer may reject the continuing terms and conditions of a collective bargaining agreement (“CBA”) under 11 U.S.C. § 1113, despite that the CBA expired post-petition.

    The Bankruptcy Court’s Decision

    In December 2014, the Bankruptcy Cave first reported on the Bankruptcy Court’s decision in In re Trump Entertainment Resorts, Inc. (the “Bankruptcy Opinion”).  The controversy centered around whether provisions of the National Labor Relations Act (“NLRA”) that maintain the status quo of an expired CBA during negotiations for a new CBA mean that the expired CBA still exists as a contract that can be “rejected” under section 1113 of the Bankruptcy Code.  The Bankruptcy Opinion held in the affirmative –

    I Want to Use My Licensed Intellectual Property in My Company’s Chapter 11 Case by Assuming My Already Existing License, but My Lawyer Tells Me We Are in the Wrong State to Do It. Really?

    Editor’s Note: Our good colleagues at Willamette Management Associates were kind enough to feature a Bryan Cave Article in its Spring 2016 issue of Insights.  If you are a bankruptcy attorney, then no doubt at some point you have had to deal with the mind-numbing exercise of determining when IP contracts or licenses (or government contracts, remember West Electronics, folks?) can be assumed, or assumed and assigned, or neither.  This analysis can, in some circuits, result in a potentially huge loss of value to debtors and creditors, a la Sunterra.  Your editorial team at the Bankruptcy Cave is annoyed that this problem, and this circuit split, has existed for over 30 years; but we are relieved to have an up-to-date Bryan Cave article on this.  The article also includes a discussion of how the ABI Commission is planning to solve this problem.  The Insights article by can be found by clicking

    It Ain’t Over ‘Til It’s Over: Circuits are Limiting the Use of Equitable Mootness

    Open book100-105 dumps

    Over the summer, four appellate court decisions addressed the doctrine of equitable mootness: In re Tribune Media Co., 799 F.3d 272 (3d Cir. 2015); In re One2One Commc’ns, LLC, No. 13-3410, 2015 WL 4430302 (3d Cir. July 21, 2015); In re Sagamore Partners, Ltd., No. 14-11106, 2015 WL 5091909 (11th Cir. Aug. 31, 2015); and In re Transwest Resort Props., Inc., 801 F.3d 1161 (9th Cir. 2015). These decisions indicate a trend away from the doctrine’s application, or at least the presumption that it should be determinative.

    “‘Equitable mootness’ is a narrow doctrine by which an appellate court deems it prudent for practical reasons to forbear deciding an appeal when to grant the relief requested will undermine the finality and reliability of

    The attorneys of Bryan Cave LLP make this site available to you only for the educational purposes of imparting general information and a general understanding of the law. This site does not offer specific legal advice. Your use of this site does not create an attorney-client relationship between you and Bryan Cave LLP or any of its attorneys. Do not use this site as a substitute for specific legal advice from a licensed attorney. Much of the information on this site is based upon preliminary discussions in the absence of definitive advice or policy statements and therefore may change as soon as more definitive advice is available. Please review our full disclaimer.