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Showing 22 posts in Claims.

Bankruptcy Court Fails to Find Wholesaler-Debtor Constructively Received Goods Delivered to Third Parties Twenty Days Before Bankruptcy; 503(b)(9) Claim Reclassified

In re ADI Liquidation, Inc., No. 14-12092 (KJC), 2017 WL 2712287 (Bankr. D. Del. June 22, 2017)

In this Opinion, the Delaware Bankruptcy Court examined whether a debtor, formerly known as Associated Wholesalers, Inc. (“AWI”), constructively received goods that were ordered by and delivered to its customers from claimant, Bimbo Bakeries USA, Inc. (“BBU”) during the twenty day period prior to AWI’s petition date (the “Twenty Day Goods”).  While the goods were never in AWI’s physical possession, AWI’s customers remitted payment for the goods to AWI, which then remitted payment to BBU after retaining a percentage.  BBU filed a large section 503(b)(9) claim on account of the Twenty Day Goods, to which AWI objected.  The question for Judge Carey was whether AWI constructively received the Twenty-Day Goods given its substantial involvement in facilitating the sales transactions between BBU and AWI’s customers.  If the answer was yes, the Court would have expanded the meaning of constructive receipt beyond the customary situation in which a third party recipient is a bailee for the debtor.  The Court, however, answered no and in doing so, drew parallels to “drop-ship transactions.”  A “drop-ship transaction” is a transaction in which a buyer purchases goods from a middleman, who in turn forwards the purchase order to a third party, who then fulfills and ships the order directly to the buyer.  In these situations, courts have found that the middleman does not take constructive possession of the goods.  And while the Delaware Bankruptcy Court found the AWI-BBU transaction similar, it also found the situation a step further removed given that AWI’s customers ordered their goods directly from BBU.  Accordingly, AWI never received the goods nor made the sales.  For those reasons, the Bankruptcy Court sided with AWI and permitted the reclassification of BBU’s section 503(b)(9) claim to a general unsecured claim. Read More ›

Delaware Bankruptcy Court Finds Debtor Did Not Properly Terminate Contract, Faces Significant Breach of Contract Damages

In re Outer Harbor Terminal, LLC, No. 16-10283 (LSS), 2017 WL 696676 (Bankr. D. Del. Feb. 21, 2017)

In the context of a claims objection, the Court adhered to unambiguous contract language in determining that the presence of a termination triggering event did not automatically terminate a contract, opening the door for potentially significant damages.  This matter will now proceed to the damages phase, where the non-debtor contract counterparty has alleged in its proof of claim an approximate $13.3 million in, among other things, breach of contract damages. Read More ›

Lack of “Scientific Certainty” Does Not Excuse Late Filing of a Proof of Claim

In re W.R. Grace & Co., No. 01-1139 (KG) (Bankr. D. Del. Dec. 28, 2016)

In this Opinion involving the standards for determining whether a party held an asbestos claim and excusable neglect for filing a late claim, the Court rejected Plum Creek Timber Co.’s (the “Claimant”) argument that it lacked “scientific certainty” with respect to its asbestos-related claim against W.R. Grace & Co. (together with its affiliated debtors, the “Debtors”).  Where the Claimant received actual and publication notice of the bar date in the case, the Court found the Claimant should have timely filed its claim even if it was contingent at the time of filing.  The Court also held that the Claimant did not satisfy the standards for excusable neglect and, as a result, granted the Debtors’ motion to enforce the discharge and injunction. Read More ›

Satisfaction of a Prepetition Loan by a DIP Loan Does Not Extinguish Vendor’s Reclamation Rights Under Section 546(c)

In re Reichhold Holdings US, Inc., No. 14-12237 (MFW), 2016 WL 4479286 (Bankr. D. Del. Aug. 24, 2016)

In this Memorandum Opinion, the Court overruled a limited reclamation claims objection asserted by a liquidating trustee, who argued that a creditor’s reclamation rights were cut-off by a postpetition loan that refinanced a prior perfected prepetition loan.  In doing so, the Court sided with the Sixth Circuit Court of Appeals and rejected a line of cases from the Bankruptcy Court for the Southern District of New York. Read More ›

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 ›

Unredeemed Gift Cards are Not Entitled to Priority Status Under Bankruptcy Code 507(a)(7)

In re City Sports, Inc., No. 15-12054 (KG), 2016 WL 4190090 (Bankr. D. Del. Aug. 4, 2016)

In what the Bankruptcy Court deemed a purely academic issue given the circumstances of the City Sports bankruptcy cases, Judge Gross held that unredeemed gift cards are not entitled to priority status, and instead, are properly classified as general unsecured claims.  In so doing, Judge Gross rejected and disagreed with a previous holding of the Delaware Bankruptcy Court wherein the court found that gift cards fall under the definition of “deposit” and accorded them priority status under the Bankruptcy Code.  See In re WW Warehouse, Inc., 313 B.R. 588, 592 (Bankr. D. Del. 2004) (Rosenthal, J.).  This lengthy Opinion dissects the plain meaning of Bankruptcy Code section 507(a)(7) and related case law before delving into the legislative history for further support. Read More ›

Stock-Based Compensation “Fits Squarely Within” the Bankruptcy Code’s Definition of “Equity Security”

GSE Envtl., Inc. v. Sorrentino (In re GSE Envtl., Inc.), No. 16-50377 (MFW), 2016 WL 3963978 (Bankr. D. Del. July 18, 2016)

In this Opinion, Judge Walrath ruled that stock-based compensation owed to the former chief executive officer (the “Defendant”) of GSE Environmental, Inc. and GSE Holding, Inc. (the “Debtors”) under his employment agreement constitutes an “equity security”, as that term is defined under the Bankruptcy Code.  See Op. at *5; 11 U.S.C. § 101(16). Read More ›

The Threshold Necessary for a “Substantial Contribution” Finding under Bankruptcy Code Section 503(b)(3)(D) is “Exceedingly Narrow” in Delaware

In re RS Legacy Corp., No. 15-10197, 2016 WL 1084400 (Bankr. D. Del. Mar. 17, 2016) (BLS)

In this Opinion, Judge Shannon denied an individual’s request for allowance and payment of an administrative expense claim for his substantial contribution to the case under Bankruptcy Code section 503(b)(3)(D) in the amount of $203,105.51, which consists of his counsel’s fees and expenses.  In so holding, the Court followed a well-developed body of case law showing that the threshold necessary for a contribution to be “substantial” is exceedingly narrow and such efforts cannot be self-interested. Read More ›

Unsecured Creditor Not Entitled to Postpetition Attorney’s Fees Provided For Under Enforceable Prepetition Contract

In re Tribune Media Co., No. 08-13141 (KJC), 2015 WL 7307305 (Bankr. D. Del. Nov. 19, 2015)

This Memorandum from the Honorable Kevin J. Carey of the Delaware Bankruptcy Court arose from a dispute over a $30 million unsecured claim for postpetition attorney’s fees and costs (the “Fee Claim”) submitted by an indenture trustee (the “Indenture Trustee”) for certain unsecured subordinated securities issued prepetition by debtor Tribune Company.  According to the Indenture Trustee, its Fee Claim should be allowed under the express terms of the governing indenture as well as the United States Supreme Court decision Travelers Casualty & Surety Company of America v. Pacific Gas & Electric Company, 549 U.S. 443, 452 (2007) (holding that “claims enforceable under applicable state law will be allowed in bankruptcy unless they are expressly disallowed”).  In tackling whether the Fee Claim should be allowed, the Bankruptcy Court acknowledged that the issue presented remains undecided by the Third Circuit Court of Appeals and is one over which courts “have long been divided”.  Op. at *5. Read More ›

Prepetition Claim of Third Party Service Provider for Fringe Benefits Provided to Debtors’ Employees Entitled to Priority Treatment Under Section 507(a)(5) of the Bankruptcy Code

In re Tropicana Entm’t, LLC, No. 08-10856 (KJC), 2015 WL 6112064 (Bankr. D. Del. Oct. 14, 2015)

In a recent post-confirmation dispute arising in the chapter 11 bankruptcy cases of Tropicana Entertainment, LLC and its related entities (collectively, the “Debtors”), the Honorable Kevin J. Carey was faced with a question over which courts are split—whether a prepetition claim asserted by a third party service provider of employee benefits is entitled to priority under section 507(a)(5) of the Bankruptcy Code.  The answer of the Delaware Bankruptcy Court was yes, such a claim may receive priority treatment pursuant to such section so long as it does not exceed the limitations specifically set forth therein. Read More ›