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Showing 11 posts in 9019 Settlements.

Plan Confirmation Principles Not Categorically Applied in the Settlement Context

In re Energy Future Holdings, Corp., No. 15-1591, 2016 WL 2343322 (3d Cir. May 4, 2016)

The Third Circuit recently determined that a settlement in the form of a tender offer did not violate the Bankruptcy Code and was within the Bankruptcy Court’s discretion to approve.  In its ruling, the Court examined whether principles applicable to a plan of reorganization, such as the “equal treatment” rule embodied in 11 U.S.C. § 1123(a)(4), must be categorically applied in the settlement context, and found there is no such requirement.  Nonetheless, the Court affirmed the lower courts’ ruling on the grounds that the settlement in this case provided equal treatment to creditors. Read More ›

Third Circuit Allows 363 Purchaser’s Funds to Bypass IRS and Satisfy Certain Administrative and General Unsecured Claims

In re ICL Holding Company, Inc., No. 14-2709, 2015 WL 5315604 (3d Cir. Sept. 14, 2015), aff’g sub nom United States v. LCI Holding Co., Inc., Nos. 13-924 (SLR), 13-1188 (SLR), 2014 WL 975145 (D. Del. March 10, 2014)

As discussed by the Delaware Bankruptcy Insider in March of last year, in ruling on a motion for stay the Delaware District Court determined that the Delaware Bankruptcy Court did not err when it approved a sale of substantially all of the assets of LCI Holding Company, Inc. and its affiliated debtors (the “Debtors”) and a settlement between the purchaser (the Debtors’ prepetition senior lender), the official committee of unsecured creditors, and the Debtors that (a) provided for the creation of an escrow from non-estate purchaser funds to, among other things, satisfy certain fees and expenses of professionals and certain expenses expected to be incurred by the Debtors in connection with their wind down and provide a distribution to allowed general unsecured claims and noteholder claims and (b) excluded the Internal Revenue Service (the “IRS”) from those creditors entitled to share in the escrowed funds.  The IRS, which asserted an administrative claim for tax liability resulting from the sale, appealed the approval of the sale and settlement to the Third Circuit Court of Appeals asserting that the sale and settlement violated the absolute priority rule by favoring creditors with an equal or lesser priority under the Bankruptcy Code’s distribution scheme.    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 ›

EFH Debtors’ First Lien Settlement and Related Tender Offer Upheld by District Court

Delaware Trust Co. v. Energy Future Immediate Holdings, LLC (In re Energy Future Holding Corp.), No. 14-723 (RGA) (D. Del. Feb. 19, 2015)

Energy Future Holding Corporation and its subsidiaries (the “Debtors”) commenced their chapter 11 proceedings with a series of settlements (together, the “Global Settlement”) reached with certain key creditor constituencies.  Although the Global Settlement was later withdrawn in large part, the Debtors sought and obtained Bankruptcy Court approval of their settlement (“First Lien Settlement”) reached with the $4 billion first lien noteholders of debtor Energy Future Intermediate Holdings, LLC.  Pursuant to the First Lien Settlement, a tender offer was proposed in order to exchange the first lien notes (comprised of approximately $3.5 billion of 10% notes due 2020 and approximately $500 million of 6 7/8% notes due 2017) for new debt obligations to be issued under the Debtors’ postpetition DIP facility.  Premiums were to be placed on the noteholders’ outstanding principal (5%) and accrued interest (1%).  In exchange, the noteholders would release all claims related to existing make-whole litigation. Read More ›

9019 Settlement Constituted Plan Modification; Third Circuit Remands to Bankruptcy Court For Consideration Under Section 1127

In re SCH Corp., No. 14-2888, 2015 WL 756552 (3d Cir. Feb. 24, 2015)

In April, the District Court affirmed an oral ruling of the Bankruptcy Court issued in the In re SCH Corp. post-confirmation bankruptcy proceedings, approving under Bankruptcy Rule 9019 and the Martin factors a post-confirmation settlement (the “Settlement”) reached between the debtors’ post-confirmation “Responsible Officer” and a subsidiary (“NCG”) of the debtors’ plan proponent and sponsor, secured lender, and asset acquiror (“LLCP”).  Our analysis of that ruling can be found here.  In this recent Opinion of the Third Circuit, the Court of Appeals vacated the District Court’s order, finding the Settlement to be a plan modification under section 1127 of the Bankruptcy Code, a secondary argument made by the appellants, the “CFI Claimants”, which was not addressed in detail before either the Bankruptcy or the District Courts. Read More ›

Practice Point: District Court Weighs in on Submission of Orders Under Certification of Counsel

Burtch v. Avnet, Inc., No. 13-060-LPS, 2015 WL 24318  (D. Del. Jan. 16, 2015)

This District Court Memorandum Order offers a cautionary tale to practitioners as to the proper—and often improper—use of certifications of counsel. Read More ›

State Law Enforceability of Post-Confirmation Settlement Agreement Not Dispositive; Bankruptcy Court Considers Bankruptcy Rule 9019 Standard

In re Filene’s Basement, LLC, No. 11-13511 (KJC), 2014 WL 1713416 (Bankr. D. Del. Apr. 29, 2014)

On April 29, 2014, the Honorable Kevin J. Carey issued another Memorandum in connection with the on-going disputes in the bankruptcy proceedings of reorganized Filene’s Basement, LLC and its affiliated reorganized debtors regarding a lease of non-residential real property located in Secaucus, New Jersey. Unlike Judge Carey’s prior decisions that determined a claim to percentage rent under the lease (an analysis of which may be found here), the issues presented to His Honor in this most recent dispute included the question of whether a settlement agreement presented by the reorganized debtors for court approval under Bankruptcy Rule 9019 but later withdrawn in the face of a higher and better offer could be enforced by the jilted counterparty. Read More ›

Bankruptcy Court’s Careful Consideration of Settlement’s Broad Benefit Recognized by District Court

CFI Class Action Claimants v. Singley (In re SCH Corp.), No. 12-1576 (SLR), 2014 WL 1340234 (D. Del. Apr. 2, 2014)

On April 2, 2014, the Honorable Sue L. Robinson of the District Court affirmed an oral ruling of the Bankruptcy Court approving a post-confirmation settlement.  As is commonplace in appeals of settlement orders, the District Court deferred to the Bankruptcy Court's development of the record and application of the Martin factors.   Read More ›

Debtors’ Funds Purchased in Section 363 Sale Permitted to be Disbursed to Debtors' Administrative and Unsecured Creditors Over IRS Objections

United States v. LCI Holding Co., Inc., Nos. 13-924 (SLR), 13-1188 (SLR), 2014 WL 975145 (D. Del. March 10, 2014)

On March 10, 2014, Judge Sue L. Robinson of the District Court denied the request of the United States, on behalf of the Internal Revenue Service, to stay disbursement of funds placed into escrow by a purchaser of debtor-assets intended to satisfy some but not all administrative and unsecured claims asserted against the debtors.   Simply put, the sale was appropriate under section 363 of the Bankruptcy Code and the escrowed funds were not property of the debtors' estates. Read More ›

Third Circuit Upholds Bankruptcy Court’s Approval of 9019 Settlement - Acknowledges Court's Bank of Knowledge Gathered Throughout a Bankruptcy Case

Mangano v. ID Liquidation One, LLC (f/k/a Indianapolis Downs, LLC), No. 13-3386, 2014 WL 6155944 (3d Cir. Feb. 19, 2014)

In this non-precedential Opinion, the Third Circuit affirmed an order entered by the District Court approving a settlement pursuant to Bankruptcy Rule 9019 between a set of long-standing litigants – the debtors, Indianapolis Down, LLC (n/k/a ID Liquidation One, LLC) and Indiana Downs Capital Corp. (n/k/a ID Liquidation Two, Inc.), and Power Plan Entertainment Casino Resorts Indiana, LLC and Live! Holdings, LLC.  In doing so, the Court dismissed the contention that an adequate record had not existed for the Bankruptcy Court to evaluate the merit and value of certain claims released under the settlement, holding that the Bankruptcy Court could rely on the record developed before the Court during the entirety of the chapter 11 cases. Read More ›