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Showing 9 posts by Stacy Lynn Newman.

Pac Sun Class Representative Denied Permission to File Class Proof of Claim on Behalf of Priority Claimants

In re Pacific Sunwear of California, Inc., No. 16-10882 (LSS) (Bankr. D. Del. June 22, 2016 and Aug. 8, 2016)

In the first of two related Opinions, Judge Laurie Selber Silverstein granted claimant Tamaree Beeney permission to file a class proof of claim for alleged violations of California wage and hour laws under California’s Private Attorney General Act (“PAGA”), but limited her representative role to absent class members who hold non-priority general unsecured claims.  In the second Opinion, the Court denied reconsideration of Her Honor’s ruling and further disallowed another claimant from representing the priority class in Ms. Beeney’s absence. Read More ›

Bankruptcy Court Sidesteps Corporate Governance Issue, Deciding Motion to Dismiss Chapter 11 Cases on Other Grounds

In re Intervention Energy Holdings, LLC, No. 16-11247 (KJC), 2016 WL 3185576 (Bankr. D. Del. June 3, 2016)

In this Opinion, Judge Kevin J. Carey denies a secured creditor and common member’s motion to dismiss the Chapter 11 cases of two Delaware limited liability companies for lack of corporate authority, siding with other federal courts that have “consistently refused to enforce waivers of federal bankruptcy rights.”  Op. at *10.  In doing so, the Court declines “the parties’ invitation to decide what may well be a question of first impression of state law (i.e., determining the scope of LLC members’ freedom to contract under applicable state law provisions) when an alternate ground for decision is present.”  Id. at *6. Read More ›

Third Circuit Approves of Structured Dismissals That Deviate From the Bankruptcy Code’s Priority Scheme – But Only in Rare Cases

Official Comm. of Unsecured Creditors v. CIT Group/Business Credit, Inc. (In re Jevic Holding Corp.), No. 14-1465, 2015 WL 2403443 (3d Cir. May 21, 2015)

The Third Circuit Court of Appeals (the “Third Circuit”) answered a novel question of bankruptcy law in the affirmative—whether a chapter 11 case can ever be resolved in a “structured dismissal” (a disposition that winds up the bankruptcy with certain conditions attached instead of simply dismissing the case and restoring the status quo ante) that deviates from the priority scheme of the Bankruptcy Code.  In rare cases, the Bankruptcy Code “permits a structured dismissal, even one that deviates from the [section] 507 priorities, when a bankruptcy judge makes sound findings of fact that the traditional routes out of Chapter 11 are unavailable and that a settlement is the best feasible way of serving the interests of the estate and its creditors.”  The Third Circuit found that this was one of those rare cases. Read More ›

Walking the Fine Line Between “Legitimate Zeal of Attorneys Representing their Client” and “Dilatory or Aggressive Litigation Practices” That May Lead to Sanctions

In re Prosser, No. 14-1633, 2015 WL 305523 (3d Cir. Jan. 26, 2015)

This precedential Opinion should serve as a warning to practitioners—a bankruptcy court can (and will) impose sanctions under 28 U.S.C. § 1927 for litigation tactics that rise to the level of bad faith.  On appeal, the United States Court of Appeals for the Third Circuit (the “Third Circuit”) reversed an order entered by the District Court of the Virgin Islands (the “District Court”) vacating the imposition of sanctions by the District Court of the Virgin Islands, Division of St. Thomas and St. John, Bankruptcy Division (the “Bankruptcy Court”) under 28 U.S.C. § 1927, which requires a finding that an “attorney has (1) multiplied proceedings; (2) in an unreasonable and vexatious manner; (3) thereby increasing the cost of the proceedings; and (4) doing so in bad faith or by intentional misconduct.” Read More ›

Plaintiff Successfully Obtains Venue Transfer Given Change in Circumstances; District Court Sua Sponte Transfers Venue of Related Cases

Zazzali v. Wavetronix LLC (In re DBSI, Inc.), No. 12-cv-1211 (GMS), et al. (D. Del. Sept. 25, 2014)

This Memorandum Opinion issued by Judge Sleet of the Delaware District Court relates to multiple bankruptcy and securities proceedings pending in Delaware stemming from the alleged Ponzi scheme perpetrated by directors of the DBSI entities.  The bankruptcy actions (collectively, the “Bankruptcy Cases”) at issue are: (i) a declaratory action commenced by several parties, including Wavetronix LLC, (collectively, the “Moving Parties”) related to investments, promissory notes and membership interests in or made by a DBSI debtor; and (ii) an adversary proceeding commenced by the DBSI post-confirmation liquidating trustees against Wavetronix seeking to enforce certain promissory notes.  While the Moving Parties initially chose to file the declaratory action in Delaware, Wavetronix allegedly discovered several affirmative defenses implicating the federal RICO statute while preparing its answer to the liquidating trustees’ complaint.  The Moving Parties then sought to withdraw the reference and transfer both Bankruptcy Cases to the District of Idaho.  Ultimately, the District Court granted their requests.  In doing so, the Court also sua sponte transferred related actions commenced in the District Court by the liquidating trustee against hundreds of defendants, alleging violations of the Securities Exchange Act, breaches of contract, common law fraud, negligence, and breach of fiduciary duties (the “Securities Cases”). Read More ›

Post-Sale Data May Be Useful to Confirm the Reasonableness of Pre-Sale Projections and Valuations But It is of No Relevance In a Breach of Fiduciary Duty Action

Miller v. Am. Capital, Ltd. (In re NewStarcom Holdings, Inc.), Adv. No. 10-50063 (CSS), 2014 WL 3865822 (Bankr. D. Del. Aug. 6, 2014)

In this breach of fiduciary duty action arising from the prepetition “fire” sale of the debtors’ subsidiary (“Old Matco”) to insiders, the chapter 7 trustee sought to compel defendants to produce post-sale financial information of the sold-subsidiary so that the reasonableness of any valuation performed as of the sale date could be determined.  The defendants objected to the production on the grounds that the request was, among other things, irrelevant to the fiduciary claims, arguing that the Court’s decision on the claims should be informed only by the decision-making process performed, and the information available, at the time of the sale.  The Court agreed with the defendants and found the request irrelevant. Read More ›

The Insider’s Scoop: May Investment Bankers be Retained by Debtors as Independent Contractors? “No” Says the Delaware Bankruptcy Court

In re MacKeyser Holdings, LLC, No. 14-11550 (CSS) (Bankr. D. Del. Aug. 7, 2014) [Transcript Ruling]

In the recently filed chapter 11 proceedings of MacKeyser Holdings, LLC and its affiliated debtors (“Debtors”), the Debtors sought to retain Hammond Hanlon Camp (“H2C”) as their exclusive investment banker under sections 327 and 328 of the Bankruptcy Code.  H2C’s proposed engagement agreement included a provision disclaiming its role as a fiduciary to the Debtors.  More specifically, it provided that “H2C shall act as an independent contractor under this Agreement and not in any other capacity including any fiduciary capacity.” Read More ›

Third Circuit Affirms Confirmation of Plan with Reasonable Classification Scheme and Secured Creditor’s Right to Vote Subordinated Debt

In re Coastal Broadcasting Sys., Inc., 2014 WL 2808260 (3d Cir. June 23, 2014)

On June 23, 2014, the Third Circuit Court of Appeals issued an Opinion affirming the Delaware District Court’s decision to affirm confirmation of a chapter 11 plan of reorganization.  In doing so, the Court upheld the enforceability of a voting assignment in a subordination agreement that arose from a pre-petition out-of-court restructuring. Read More ›

Purchaser Cannot Escape Tax Lien Under Terms of Sale Order Despite Court’s Narrow Interpretation of “Permitted Encumbrances”

In re Joan Fabrics Corporation, No. 07-10479 (CSS) (Bankr. D. Del. May 5, 2014)

On May 5, 2014, the Honorable Christopher S. Sontchi issued an Opinion denying a purchaser’s motion to enforce a sale order and hold a North Carolina county in contempt for pursuing unpaid taxes.  In doing so, the Court considered specific circumstances of the sale and interpreted the terms of the asset purchase agreement under North Carolina law to conclude that the county’s actions did not violate the sale order. Read More ›