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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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Tribal Sovereign Immunity Bars Preference Claims Against Casinos Subject to Recoupment Rights

Casino Caribbean, LLC v. Money Ctrs. of Am., Inc. (In re Money Ctrs. of Am., Inc.), Adv. Nos. 14-50437 (CSS), 16-50410 (CSS), 2017 WL 775780 (Bankr. D. Del. Feb. 28, 2017)

In this Opinion, the Delaware Bankruptcy Court addressed for the first time whether tribal sovereign immunity bars preference actions against casinos operated by (or on behalf of) Indian tribes.  After considering split authority from other jurisdictions, the Court ruled that it does, although the right to use preference liability defensively in support of a recoupment claim may still be preserved. Read More ›

Delaware Bankruptcy Court Permits Attorneys’ Fees in Fee Defense, Distinguishing ASARCO and Boomerang Tube

In re Nortel Networks Inc., No. 09-10138 (KG), 2016 WL 932947 (Bankr. D. Del. Mar. 8, 2017)

In the Nortel family of cases, the Delaware Bankruptcy Court sustained, in part, an objection to the attorneys’ fees sought by the Nortel Networks Capital Corporation Bonds Indenture Trustee (the “Indenture Trustee”), slashing its attorneys’ fee request by almost one million dollars.  However, the more noteworthy ruling came when Judge Gross permitted the Indenture Trustee’s attorneys’ fees for defending their fees, distinguishing the Supreme Court’s ruling in ASARCO and the Delaware Bankruptcy Court’s recent ruling in Boomerang Tube.  The Court held that the indenture explicitly provides for the payment of the Indenture Trustee’s attorneys’ fees, and clearly falls outside the circumstances of ASARCO and Boomerang Tube. Read More ›

Executoriness for Purposes of Kiwi Defense to Preference Action Determined on a Contract by Contract Basis; Purchase Orders Issued under Master Agreement Were Separate Divisible Contracts

PIRINATE Consulting Grp., LLC v. C.R. Meyer & Sons Co. (In re NewPage Corp.), No. 13-52429 (KG), 2017 WL 571478 (Bankr. D. Del. Feb. 13, 2017)

The Litigation Trustee (“Trustee”) of the NP Creditor Litigation Trust brought this adversary proceeding against C.R. Meyer & Sons Co. (“CRM”) seeking to avoid and recover over $2.3 million in alleged preferential transfers.  NewPage Corporation (“NewPage”) and its affiliates (collectively, “Debtors”) operated paper mills throughout the United States, and CRM handled maintenance and construction at the Escanaba, Michigan and Duluth, Minnesota mills.  Prior to the Debtors’ bankruptcy filing, the parties entered into a Master Construction Agreement (“Master Agreement”) pursuant to which CRM would provide services and items necessary to complete the work described in purchase orders to be issued from time to time under the agreement.  The Master Agreement refers to each purchase order issued by NewPage as a separate contract, and the purchase orders either reference the Master Agreement directly or through another purchase order.  In the course of the parties’ dealing, the purchase orders served to document work and facilitate payment. 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 ›

Delaware Bankruptcy Court Sidesteps Decision on “Novel” Bar to Joinder Doctrine; Movant Failed to Demonstrate Bad Faith For Involuntary Chapter 7 Petition

In re Luxeyard, Inc., 556 B.R. 627 (Bankr. D. Del. 2016)

Declining to opine upon the “bar to joinder doctrine,” the Delaware Bankruptcy Court in this Opinion applied the Third Circuit’s “totality of the circumstances” bad faith test to deny a motion to bar the joinder of additional petitioners to an involuntary petition under Section 303(c) of the Bankruptcy Code.  Simply put, the Debtor did not carry its burden to show there was a bad faith filing, and therefore, the Court need not consider the bar to joinder doctrine. Read More ›

Trustee’s Claims Against Insiders For Their Action (or Inaction) in the Face of Insolvency Survives Motion to Dismiss Despite Exculpation, Business Judgement, and Deeping Insolvency Defenses

Stanziale v. Versa Capital Mgmt., LLC (In re Simplexity, LLC), Case No. 14-10569 (KG), 2017 WL 65069 (Bankr. D. Del. Jan. 5, 2017)

According to the Chapter 7 Trustee of Simplexity, LLC (“Simplexity” and together with its affiliated debtors, the “Debtors”), numerous insiders of Simplexity (the “Defendants”) breached their fiduciary duties by refusing to seek bankruptcy protection for Simplexity when faced with actions by Simplexity’s lender, including the threat to sweep all available funds, thereby failing to preserve the value of the Debtors and exposing Simplexity to employment related claims.  In this Memorandum Opinion, the Delaware Bankruptcy Court resisted the Defendants’ arguments to dismiss the Trustee’s claims. Read More ›

Delaware Bankruptcy Court’s Local Rules For 2017 Now Effective

The Bankruptcy Court for the District of Delaware’s Local Rules for 2017 went effective today, February 1, 2017.  A copy of the 2017 Local Rules can be found here and a redline of the 2017 Local Rules against the 2016 Local Rules can be found here.

This year, the Court is clearly emphasizing cross-border bankruptcy cases.  Not only have the Local Rules been revised where appropriate to incorporate references to “chapter 15 cases” and “foreign representative(s)”, the Court has also fashioned a new rule—Local Rule 9029-2, setting forth the “Guidelines for Communication and Cooperation Between Courts in Cross-Border Insolvency Matters” (the “Guidelines”).  The Guidelines encompass new Part X of the Local Rules and represent the Court’s “best practices” for chapter 15 cases.  The parties are encouraged, but not required, to submit a protocol to the Court consistent with the Guidelines for its review and consideration at the outset of the cross-border case.  The Guidelines describe, among other things, procedural communications for the Court and the foreign court, efficiency in administration of the cross-border case, substantive communications between the courts, Court-orders for appearance in foreign proceedings, and procedures for joint hearings (set forth in “Annex A”).  If you are considering a cross-border representation (or involved in a chapter 15 case), it is advised to give Part X and “Annex A” a thorough review. 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 ›

Committee Professionals’ Carve-Out in DIP Financing Order Not Per Se Limit on Fees

In re Molycorp, Inc., No. 15-11357(CSS), 2017 WL 56703 (Bankr. D. Del. Jan. 5, 2017)

In this Opinion, Judge Sontchi found, among other things, that an unambiguous carve-out provision of a debtor-in-possession financing order (the “DIP Financing Order”) did not cap the professional fees and expenses of the Official Committee of Unsecured Creditors (the “Committee”) given that a plan of reorganization was confirmed.  Moreover, because the Committee’s professional did not agree to different treatment, its fees and expenses were administrative expenses that must be paid in full. 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 ›