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Plan Confirmation

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My Company Went Through Bankruptcy And All I Got Was This Lousy Release – How to Get a Non-Consensual Release of Third Parties in a Chapter 11 Plan

October 29, 2018

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Officers and directors work hard to shepherd their company through bankruptcy. But, even after all that hard work, creditors can still turn around and sue them individually for alleged acts prior to the bankruptcy.  What kind of thanks is that?  A debtor wishing to protect these hard-working officers and directors may seek to include a third party release in the plan.  However, if all parties do not agree, third party releases over objecting classes are closely analyzed because they are considered a “dramatic measure to be used cautiously, and [] only appropriate in unusual circumstances.”  In re Dow Corning Corp., 280 F.3d 648, 658 (6th Cir. 2002).  Fortunately, this post will discuss the steps officers and directors may take with the debtor to increase the likelihood of plan approval, with third party releases intact, over the objections of some parties.

Initially, the debtor must look to where it

Supreme Court Grants Cert on, of all Things, the Standard of Review for Determining Non-Statutory Insider Status

Last December, we updated you that the Supreme Court was considering whether to grant review of In re The Village at Lakeridge, LLC, 814 F.3d 993 (9th Cir. 2016). Our original post is here.  On March 27, 2017, the Supreme Court granted review of Village at Lakeridge, but only as to one question presented, the most boring one in our view.  (Seems like after giving us bankruptcy professionals a thrill with a deep, insightful, and important ruling like Jevic, the Supreme Court is going back to bankruptcy matters that range from the esoteric to the downright irrelevant; oh well.)

In The Village at Lakeridge, a non-statutory insider acquired a $2.76 million claim against the debtor from an insider for $5,000.  Id. at 997.  The debtor attempted to confirm its plan (which included a cramdown of U.S. Bank’s claim) by arguing that the assignee

Supreme Court Weighs Granting Cert on Bankruptcy Issues Involving Surcharge and Voting Rights of Assignee of Insider Claim

December 5, 2016

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The Supreme Court is considering whether to grant review of two bankruptcy cases.  On October 3, 2016, the Supreme Court invited the Solicitor General to file briefs expressing the views of the United States.  Because the Supreme Court’s justices normally give significant weight to the federal government’s recommendations regarding interpretations of federal statutes (here, the Bankruptcy Code), the Solicitor General’s forthcoming briefs could influence whether the Supreme Court grants cert. on the two notable bankruptcy cases.

Southwest Securities v. Segner

The first case under consideration is Southwest Securities v. Segner (In re Domistyle, Inc.), 811 F.3d 691 (5th Cir. 2015).  At the commencement of this case, the trustee believed the debtor possessed equity in certain real property that could benefit unsecured creditors.  Id. at 693-94.  The property was encumbered by Southwest Securities’ lien.  After marketing the property for a year, the trustee was unable to sell the property and ultimately abandoned it

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