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Showing 8 posts in Automatic Stay.

Applying New York Law, Third Circuit Holds That Acceleration Clauses Do Not Negate Make-Whole Redemption Provisions Absent Clear Contractual Language

Delaware Trust Co. v. Energy Future Intermediate Holding Co. (In re Energy Future Holdings Corp.), 842 F.3d 247 (3d Cir. 2016)

Disagreeing with the United States Bankruptcy Court for the Southern District of New York, the Court of Appeals for the Third Circuit held in this Opinion that New York law requires the Energy Future debtors (“EFIH”) to pay redemption premiums (or a “make-whole”) to their first and second lien noteholders under the terms of governing indentures.  In doing so, the Court reversed the district court decision affirming the Delaware Bankruptcy Court’s ruling (discussed here) that the make-whole payments were not due. Read More ›

Delaware Bankruptcy Court Won’t Allow Automatic Stay To Be Used As Litigation “Sword”

In re Scarborough-St. James Corp., --- B.R. ----, 2015 WL 4940043 (Bankr. D. Del. Aug. 18, 2015)

In her Honor’s first published Opinion, Judge Silverstein refused to permit a debtor to use the automatic stay as an offensive litigation tactic and granted a landlord’s motion for relief of the stay so that it could proceed with an eviction proceeding against the debtor.  Using the familiar three-pronged balancing test, the Court held that cause exists to allow the continued action because the debtor will not suffer great prejudice, the hardship to the landlord considerably outweighs the hardship to the debtor, and the landlord made the requisite “slight” showing of probability of success on the merits. Read More ›

Delaware Bankruptcy Court Walks “Interpretive Tightrope” Between Automatic Stay And The Norris-La Guardia Act

In re Trump Entm’t Resorts, Inc., No. 14-12103 (KG) (Bankr. D. Del. July 21, 2015)

Aligning itself with Sixth and Second Circuit law, the Delaware Bankruptcy Court ruled that activities described in, and protected by, the Norris-La Guardia Act (“NLA”) do not constitute violations of the automatic stay under Bankruptcy Code section 362.  Although wrestling to reconcile the two statutes, an anti-injunction labor law on the one hand and a broad bankruptcy-based injunction statute on the other, the Bankruptcy Court relied on the uncontroverted congressional intent that the automatic stay cannot enjoin certain NLA protected activities, and instructed the Debtors to “lodge their complaint” with Congress.  Op. at 23. Read More ›

UPDATE – After Trial And Despite Likelihood Of Success On The Merits, Bankruptcy Court Holds No “Cause” To Lift Automatic Stay, Ending Make-Whole Adversary Proceeding in EFH

Delaware Trust Co. v. Energy Future Intermediate Holding Co. (In re Energy Future Holdings Corp.), Adv. Pro. No. 14-50363 (CSS), --- B.R. ---- (Bankr. D. Del. July 8, 2015)

Previously, the Delaware Bankruptcy Court determined that an evidentiary hearing was necessary on the issue of whether “cause” exists to lift the automatic stay with respect to the make-whole dispute.  For a general background of the facts and law, see our recent blog post here.  Now, after a three-day trial, Judge Sontchi has held that, under the totality of the circumstances, cause does not exist to lift the automatic stay to allow the Trustee* to waive the default, decelerate the Notes, and collect the Applicable Premium (the make-whole payment). Read More ›

Automatic Stay Held Not Applicable to Shareholder’s Right to Compel Shareholder Meeting

In re SS Body Armor I, Inc., No. 10-11255 (CSS), 2015 WL 1523775 (Bankr. D. Del. Apr. 1, 2015)

In this Opinion, Delaware Bankruptcy Court Judge Christopher S. Sontchi adopted previous holdings of the Court of Appeals for the Second Circuit and the Delaware District Court to rule that the right of a shareholder to compel a shareholder meeting for the purpose of electing a new board of directors continues during a bankruptcy proceeding unimpaired by the automatic stay.  See Manville Corp. v. Equity Sec. Holders Comm. (In re Johns-Manville Corp.), 801 F.2d 60 (2d Cir. 1986); Official Bondholder Comm. v. Chase Manhatten [sic] Bank (In re Marvel Entm’t Grp., Inc.), 209 B.R. 832 (D. Del. 1997); see also NKFW Partners v. Saxon Indus., Inc., No. 7468, 1984 WL 8234 (Del. Ch. Aug. 8, 1984).  The right extends to commencing state court proceedings to compel a shareholder meeting, but is not unfettered.  As noted by Judge Sontchi, the bankruptcy court is entitled to enjoin a meeting or the implementation of a meeting’s results if “clear abuse” is found (i.e. a showing that the shareholders’ action to elect a new board would delay and jeopardize a debtor’s reorganization).  Such injunction must be sought from either the bankruptcy court through an adversary proceeding as required by Bankruptcy Rule 7001(7) or the state court presiding over the motion to compel.  Read More ›

Significant Headway Made Relating To EFH Make-Whole Dispute, But Stay Relief Motion And Make-Whole Liability Hang In The Balance

Delaware Trust Co. v. Energy Future Intermediate Holding Co. (In re Energy Future Holdings Corp.), Adv. Pro. No. 14-50363 (CSS), --- B.R. ---- (Bankr. D. Del. Mar. 26, 2015)

On March 26, 2015, Judge Sontchi made a significant, but not entirely dispositive, ruling in the on-going make-whole litigation encompassed within the Energy Future Holdings Corp. (with its affiliates, the “Debtors”) bankruptcy proceedings.  In this Opinion, Judge Sontchi granted summary judgment for the Debtors in part, ruling that (i) the bankruptcy filing caused an automatic redemption and no “Applicable Premium” or make-whole was due; (ii) the EFIH Debtors’ did not file bankruptcy to intentionally default under the parties’ indenture agreement (the “Indenture”); (iii) the Trustee’s right to waive the automatic default and rescind acceleration of the Notes was not barred by the language of the Indenture; (iv) the Trustee’s attempt to waive the default and decelerate the Notes by sending a notice was barred by the automatic stay; and (v) the Trustee has no other claims under the Indenture or New York law arising out of the alleged breach of the Indenture by the EFIH Debtors.  Importantly, the Court denied summary judgment on whether the Trustee could establish “cause” to lift the automatic stay nunc pro tunc to a date on or before the EFIH refinancing, which would allow the Trustee to waive the default, decelerate the Notes, and collect the Applicable Premium. Read More ›

Third Circuit’s Hypothetical Test Wins The Day As Bankruptcy Court Grants Donald And Ivanka Trump Relief From The Automatic Stay

In re Trump Entm’t Resorts, Inc., No. 14-12103 (KG), WL (Bankr. D. Del. Feb. 20, 2015)

On February 20, 2015, the Honorable Kevin Gross granted relief from the automatic stay so that Donald and Ivanka Trump (the “Trumps”) may continue their action against Trump Entertainment Resorts, Inc. and certain affiliated debtors (the “Debtors”) seeking to terminate a trademark license agreement (the “Trademark License Agreement”) and remove, among other things, the “Trump” name from the Debtors’ buildings.  Following Third Circuit precedent, Judge Gross ruled that under the “hypothetical test” the Trademark License Agreement could not be assumed or assigned by the Debtors under Bankruptcy Code section 365(c)(1), and therefore, “cause” existed under section 362(d)(1) to grant stay relief. Read More ›

Despite German Decisional and Statutory Authority, Bankruptcy Court Must Still Review Debtorʼs Professional Fees for Reasonableness

In re Solar Trust of America, LLC, No. 12-11136 (KG) (Bankr. D. Del. Jan. 12, 2015)

In this Memorandum Opinion issued by the Honorable Kevin Gross in the chapter 11 cases of Solar Trust of America, LLC (“STA”) and its affiliated debtors, the Delaware Bankruptcy Court determined that a post-petition decision of a German appellate court violated the automatic stay and thus, was void as a matter of law. Read More ›