Our Delaware Corporate and Alternative Entity Law attorneys closely follow the opinions coming from Delaware’s Supreme Court and Court of Chancery. Our 2017 Year to Date Review is a collection of brief summaries of selected cases concerning Delaware Corporate and Alternative Entity Law. While this list is a selection of important cases, our intent is to provide our readers with the rationale behind a court’s holding to ultimately provide information that may be helpful in strategic and business decisions concerning litigation and commercial arrangements.

Unsecured creditors frequently find themselves in the lurch when a company files for bankruptcy. One of the few mechanisms for recovering the value of goods supplied to a debtor prior to a bankruptcy case is an administrative expense claim under Section 503(b)(9) of the Bankruptcy Code. In an administratively solvent bankruptcy case, an administrative expense claim will allow a creditor to obtain payment in full of the value of goods received by the debtor within the twenty-day period immediately preceding the bankruptcy petition date.

In a May 16, 2017 ruling, the United States District Court for the District of Delaware affirmed the order of the bankruptcy court denying a party’s motion to compel arbitration. In doing so, the District Court adhered to traditional rules of contract interpretation in holding that the relevant arbitration provision was not written broadly enough to include the type of dispute pending before the bankruptcy court, and thus, the bankruptcy court retained jurisdiction.

The United States Supreme Court recently held that the submission of a proof of claim in a Chapter 13 bankruptcy case for payment of a time-barred claim did not violate the Fair Debt Collection Practices Act (the “Act”). Overturning the decision of the Eleventh Circuit Court of Appeals, the Court explained that the Bankruptcy Code includes certain safeguards which limit the potential for abuse, and thus, the assertion of a time-barred claim in bankruptcy proceedings did not constitute a practice prohibited under the Act.

In a May 8, 2017 ruling, the Delaware Bankruptcy Court denied the official committee of unsecured creditors from accessing certain documents withheld from production based on the attorney-client privilege. Despite the purpose underlying the committee’s creation, the court distinguished the role of the committee from that of a bankruptcy trustee and barred the production of privileged documents in the absence of a finding of insolvency. This ruling hampers the ability of a creditor’s committee to root out fraud and potentially recover money for the benefit of the bankruptcy estate.