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Showing 1 post in Unforeseeable Business Circumstances.

Amid Unforeseeable Failed Sale, Debtor Gave Employees Enough WARNing For Layoffs

Varela v. Eclipse Aviation Corp. (In re AE Liquidation, Inc.), Adv. No. 09-50265 (MFW), 2014 WL 6460805 (Bankr. D. Del. Nov. 18, 2014)

Eclipse Aviation Corporation (“Eclipse”) engineered, manufactured, and sold jet aircrafts.  In 2008, Eclipse defaulted on its secured notes.  Its board of directors contemplated liquidation, but eventually decided on a sale as a going-concern through Bankruptcy Code section 363 to Eclipse’s largest shareholder, European Technology and Investment Research Center (“ETIRC”).  ETIRC funded the Eclipse bankruptcy with $20 million in debtor-in-possession financing.  ETIRC later emerged as the stalking horse bidder, financed through a Russian state-owned bank.  On January 23, 2009, the Court entered an order approving the sale to ETIRC.  However, despite repeated assurances from ETIRC, the Russian financing never came through and the sale did not close.  On February 24, 2009, upon the filing of a motion by the senior secured creditors, the Court entered an order converting the case to chapter 7.  Eclipse contacted its employees that same day and gave them the bad news.  Thereafter, former employees (the “Plaintiffs”) filed a class action lawsuit alleging a violation of the federal Worker Adjustment and Retraining Notification Act (the “WARN Act”).  For general background on the WARN Act as analyzed in another case, click here. Read More ›