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The Delaware Bankruptcy Insider is a premier blog designed to bring its readers a comprehensive analysis of the latest Delaware corporate bankruptcy news and rulings.  Brought to you by Ashby & Geddes, P.A.

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Showing 4 posts in Discovery.

Creditors Committee Suing on Behalf of Estates Is Unable to Invade Debtors’ Attorney-Client Privilege Without a Showing of Insolvency

Official Comm. of Unsecured Creditors of HH Liquidation, LLC v. Comvest Grp. Holdings, LLC (In re HH Liquidation, LLC), No. 16-51204 (KG), 2017 WL 1906585 (Bankr. D. Del. May 8, 2017)

This adversary proceeding was commenced derivatively by an Official Committee of Unsecured Creditors (the “Committee”) against the Haggen, Inc. debtors’ officers, directors, and non-debtor affiliates (collectively, the “Defendants”) for, among other things, fraud and fraudulent transfers.  During the course of discovery, the Committee filed a motion to compel production of over 2,000 documents withheld by the debtors and the Defendants based on attorney-client privilege (the “AC Privileged Documents”).  Importantly, one law firm jointly represented the debtors and the Defendants at the time of the communications.  While the Honorable Kevin Gross of the Delaware Bankruptcy Court recognized the odd scenario presented, one in which the Committee was suing non-debtor entities on behalf of the debtor but was without access to the very documents the debtor would use if pursuing the action, the Court would not compel the production of the AC Privileged Documents. Read More ›

Delaware Bankruptcy Court Tackles Challenges to Email Privacy

In re Irish Bank Resolution Corp. (In Special Liquidation), 559 B.R. 627 (Bankr. D. Del. 2016)

Late last year, the foreign representatives (the “Foreign Representatives”) of chapter 15 debtor Irish Bank Resolution Corporation Limited (“IBRC”) were forced to get creative after their more traditional efforts to obtain discovery from a Yahoo! email account failed.  In connection with IBRC’s liquidation, significant international litigation is on-going related to the repayment evasion of billions in loans advanced by IBRC to companies owned or controlled by the Quinn Family.  In the course of that litigation, the Foreign Representatives discovered various email accounts believed to be connected to the Quinn Family and their attempts to conceal assets, including a Yahoo! email account maintained by a mysterious “Abdulla Rasimov” (the “Rasimov Account”).  The whereabouts of Mr. Rasimov are unknown, service of process has gone unacknowledged, and the Rasimov Account was closed during the proceedings described herein.  Accordingly, when their attempts to obtain the contents of the Rasimov Account through a Bankruptcy Rule 2004 order and an order to compel failed, the Foreign Representatives obtained from the Delaware Bankruptcy Court an order making them the “subscriber” of the account (the “Subscriber Order”).  With the Subscriber Order in hand, the Foreign Representatives then sought turnover of the account’s contents under sections 542(a) and 542(e) of the Bankruptcy Code from Yahoo! Inc. (“Yahoo”).  A maneuver Yahoo opposed. 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 ›

Discovery Regarding a Debtor’s Valuation and Solvency Held Relevant to Makewhole Dispute

CSC Trust Co. of Delaware v. Energy Future Intermediate Holdings Co. (In re Energy Future Holdings Corp.), No. 14-10979 (CSS) (Bankr. D. Del. Aug. 5, 2014)

In the CSC Trust Co. adversary proceeding pending in connection with the Energy Future Holdings Corp. bankruptcy proceedings, an indenture trustee for certain senior secured notes sought a declaration from the Court that certain debtors (the “EFIH Debtors”) are obligated to pay a redemption premium in connection with a proposed refinancing of the notes.  In his Opinion, Judge Sontchi held discoverable information regarding the EFIH Debtor’s valuation and solvency, finding that such information is relevant to the amount that may need to be paid should an enforceable makewhole provision be found.  Despite the foregoing, however, such information was held to be obtainable only from the EFIH Debtors and not from third parties—namely, an ad hoc committee of noteholders—as such parties did not take a position regarding, or intend to offer expert or other evidence on, the EFIH Debtors’ insolvency. Read More ›