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A Bankruptcy Conundrum: When You Must Seek Relief To Seek Relief

Though bankruptcy filings are down in 2021, the expiration of the Paycheck Protection Program and reopening of the courts nationwide could lead to a rise in bankruptcy filings with many businesses still struggling to cope with the economic and supply chain aftereffects of the pandemic and consumer purchasing habits. These bankruptcies, in turn, will have an inevitable ripple effect on creditors and other claimants, whose abilities to collect on claims and exercise rights, are significantly restricted by the automatic stay.

USA, Insolvency & Restructuring, Litigation, Sheppard Mullin Richter & Hampton LLP, Supply chain, Paycheck Protection Program
Second Circuit Holds that Contingent Equity-Based Compensation of Former Lehman Employees are Subordinate to Creditor Claims

In In re Lehman Bros. Holdings Inc. 855 F.3d 459 (2d Cir. 2017), the United States Court of Appeals for the Second Circuit affirmed a district court order subordinating the claims of former Lehman Bros.

USA, Banking, Insolvency & Restructuring, Litigation, Sheppard Mullin Richter & Hampton LLP, Lehman Brothers, Title 11 of the US Code
Delaware Chancery Court holds that creditor plaintiffs in derivative suits may satisfy standing requirement by showing corporation’s insolvency at time of suit, regardless of later solvency

In Quadrant Structured Products Co., Ltd. v. Vertin, C.A. No. 6990-VCL, 2015 WL 2062115 (Del. Ch.

USA, Delaware, Insolvency & Restructuring, Litigation, Sheppard Mullin Richter & Hampton LLP, Shareholder, Standing (law), Credit derivative, Delaware Court of Chancery
Delaware Court of Chancery rejects contemporaneous ownership requirement for creditors asserting derivative claims

In Quadrant Structured Products Co. v. Vertin, C.A. No. 6990-VCL, 2014 Del. Ch. LEXIS 193 (Del. Ch. Oct. 1, 2014), the Delaware Court of Chancery held that when creditors of insolvent firms assert derivative claims, they need not meet the contemporaneous ownership requirement applied to stockholder-plaintiffs.

USA, Delaware, Company & Commercial, Insolvency & Restructuring, Litigation, Sheppard Mullin Richter & Hampton LLP, Fiduciary, Standing (law), Credit default swap, Derivative suit, Delaware General Corporation Law, Delaware Court of Chancery
Delaware Supreme Court holds receiver is required to defend lawsuits after a corporation is wound-up; finds no generally applicable statute of limitation for claims against a dissolved corporation

In Anderson v Krafft-Murphy Co. Inc., 2013 Del. LEXIS 597 (Del. Nov. 26, 2013), the Delaware Supreme Court held that Sections 278 and 279 of the Delaware General Corporation Law, 8 Del. C.

USA, Delaware, Insolvency & Restructuring, Insurance, Litigation, Sheppard Mullin Richter & Hampton LLP, Legal personality, Shareholder, Statute of limitations, Delaware General Corporation Law, Court of Chancery, Delaware Court of Chancery, Delaware Supreme Court
California Supreme Court resolves Court of Appeal split, holding that Section 2010 of the California Corporations Code -- California's "Survival Statute" -- does not apply to foreign corporations

In Greb v. Diamond Int’l Corp., 2013 WL 628328 (Cal. Feb. 21, 2013), the California Supreme Court unequivocally and unanimously laid to rest the assertion that dissolved foreign corporations may be sued in California after the time of the statute of limitations provided by the laws under which the foreign corporations were incorporated.

USA, California, Company & Commercial, Insolvency & Restructuring, Litigation, Sheppard Mullin Richter & Hampton LLP, California Supreme Court, California courts of appeal, California superior courts
New York high court applies the "single-entity exemption" in the Securities Litigation Uniform Standards Act of 1998

In RGH Liquidating Trust v. Deloitte & Touche, LLP, 2011 WL 2471542 (N.Y.

USA, New York, Capital Markets, Insolvency & Restructuring, Litigation, White Collar Crime, Sheppard Mullin Richter & Hampton LLP, Bond (finance), Tax exemption, Bankruptcy, Security (finance), Fraud, Class action, Liquidation, Investment company, Exclusive jurisdiction, Securities fraud, Deloitte, Pension Benefit Guaranty Corporation
Ninth Circuit rules that D&O policies' "insured versus insured" exclusion applies to debtors-in-possession and assignee creditors during bankruptcy proceedings

In Biltmore Assocs., LLC v. Twin City Fire Insurance Co., 2009 WL 1976071 (9th Cir.

USA, Insolvency & Restructuring, Insurance, Litigation, Sheppard Mullin Richter & Hampton LLP, Bankruptcy, Shareholder, Debtor, Fiduciary, Debt, Debtor in possession, Trustee, Ninth Circuit