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To successfully reorganize in Chapter 11, a bankrupt company may need to retain key employees who understand the company’s business and who can design and implement the company’s reorganization plan. Retaining and properly incentivizing these employees during a Chapter 11 case can be challenging for a number of reasons.

Italian bankruptcy law — Royal Decree No. 267 of 16 March 1942 — (the Bankruptcy Law) underwent a substantial reform between 2005 and 20091, mainly aimed at introducing (i) a more efficient regulation of the pre-bankruptcy agreement procedure (concordato preventivo)2 and (ii) new pre-bankruptcy schemes of arrangements, in the form of the out-of-court debt restructuring plan (piano attestato di risanamento)3 and the debt restructuring agreement (accordo di ristrutturazione dei debiti)4.

The court's decision in In re Imerys Talc America, Inc. clarifies the appointment standard for future claimants representatives in the Third Circuit under Section 524(g) of the US Bankruptcy Code.

In a precedential decision, the US Court of Appeals for the Third Circuit upheld the appointment of James L. Patton, Jr. as the legal representative for future talc claimants (FCR) by the bankruptcy court in the Imerys Talc America chapter 11 cases.1

Issuers face numerous restructuring alternatives, both within and outside the bankruptcy process

The Bankruptcy Court for the District of New Jersey denied motions to dismiss the chapter 11 case of the newly created subsidiary of Johnson & Johnson, LTL Management LLC, and granted the debtor’s motion to stay prosecution of actions asserting talc related personal injuries against its J&J affiliates and the products distributors. This is the first opinion outside the North Carolina bankruptcy court approving the use of the so-called Texas Two Step as a bankruptcy execution strategy.

The Motions to Dismiss

A recent decision of the New York Court of Appeals, Sutton v. Pilevsky held that federal bankruptcy law does not preempt state law tortious interference claims against non-debtors who participated in a scheme that caused a debtor—in this case a bankruptcy remote special purpose entity—to breach contractual obligations intended to ensure that the entity remains a Special Purpose Entity (SPE) and to facilitate the lenders’ enforcement of remedies upon a future bankruptcy filing, if any.

The Second Circuit Court of Appeals recently held in In re Tribune Company Fraudulent Conveyance Litigation, No. 13-3992-cv (L) (2d Cir., Dec. 19, 2019) that Bankruptcy Code Section 546(e) barred claims seeking to avoid payments made by Tribune to its shareholders as part of a leveraged buyout (LBO).

After Energy Future Holdings (EFH), maybe not so much. The size of the break-up fee approved by the bankruptcy court in EFH was undoubtedly large by any account – US$275 million. But it was approved following all necessary filings, notice and hearings. All parties and counsel involved were highly sophisticated and experienced. The court that approved the fee was the Delaware bankruptcy court, by all accounts one of the most experienced and sophisticated bankruptcy courts in the nation. And there wasn’t even a hint of fraud, misrepresentation or failure to disclose material facts.

Directors and officers (D&Os) of troubled companies should be highly sensitive to D&O insurance policies with Prior Act Exclusion. While policies with such exclusion may be cheaper, a recent decision by the U.S. Court of Appeal for the Eleventh Circuit raises the spectre that a court may hold a loss to have more than a coincidental causal connection with the officer’s conduct pre-policy period and make the (cheaper) coverage worthless.