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Suspected misconduct prompts creditors to seek appointment of bankruptcy examiners

In late 2011, bondholders in the bankruptcy case of power company Dynegy Holdings, LLC (Dynegy) moved for the appointment of a bankruptcy examiner to investigate certain transactions that occurred immediately prior to the filing of Dynegy's bankruptcy petition. The transactions at issue involve the alleged transfer of millions of dollars in assets to Dynegy's parent company (a non-debtor) approximately two months prior to the bankruptcy filing.

USA, Insolvency & Restructuring, Litigation, Wiley Rein LLP, Bankruptcy, Debtor
In re Lett: preserving APR plan confirmation objections on appeal

Earlier this year, the United States Court of Appeals for the Eleventh Circuit decided in In re Lett that objections to a bankruptcy court’s approval of a cram-down chapter 11 plan on the basis of noncompliance with the “absolute priority rule” may be raised for the first time on appeal. The Eleventh Circuit ruled that “[a] bankruptcy court has an independent obligation to ensure that a proposed plan complies with [the] absolute priority rule before ‘cramming’ that plan down upon dissenting creditor classes,” whether or not stakeholders “formally” object on that basis.

USA, Insolvency & Restructuring, Litigation, Jones Day, Debtor, Unsecured debt, Interest, Debt, Standard of review, Remand (court procedure), Dissenting opinion, Stay of execution, Title 11 of the US Code, United States bankruptcy court, Eleventh Circuit
Hospital's bankruptcy examiner identifies millions of dollars in unauthorized payments; cites law firm for breach of duty

In a case illustrating the effective use of a bankruptcy examiner, the examiner appointed by the court in the North General Hospital bankruptcy case has concluded that the hospital made over $3 million in unauthorized post-bankruptcy filing payments to the detriment of unsecured creditors. Prior to its bankruptcy filing, North General Hospital and certain related corporate debtors operated a hospital in the Harlem section of Manhattan.

USA, Healthcare & Life Sciences, Insolvency & Restructuring, Wiley Rein LLP, Bankruptcy, Debtor, Unsecured debt, Breach of contract, Fiduciary, Debt, Liquidation, Severance package, Title 11 of the US Code, Chief financial officer
A skilled examiner can make all the difference

The U.S. Bankruptcy Code provides for the appointment of a bankruptcy examiner to investigate the debtor with respect to allegations of fraud, dishonesty, incompetence, misconduct or mismanagement. The right examiner, with a clearly defined mission, will have a major influence on the bankruptcy process. The difference between a successful financial restructuring or liquidation-resulting in substantial recoveries for the key constituencies-and a time-consuming (and asset-consuming) meltdown, can depend on the approach of the examiner and the examiner's support team.

USA, Delaware, Insolvency & Restructuring, Litigation, White Collar Crime, Wiley Rein LLP, Bankruptcy, Debtor, Unsecured debt, Fraud, Debt, Liquidation, Leveraged buyout, US Department of Justice, Lehman Brothers, Enron, Trustee, Delaware Supreme Court, United States bankruptcy court, US District Court for District of Delaware, US District Court for the Southern District of New York
Supreme Court holds oral argument in Schwab v. Reilly: analyzing a trustee’s duty to object to a facially valid exemption to avoid the risk that an undervalued asset be deemed “fully exempt”?

United States Supreme Court

Washington, D.C.

November 3, 2009

USA, Insolvency & Restructuring, Litigation, Wiley Rein LLP, Tax exemption, Bankruptcy, Debtor, Statutory interpretation, Interest, Consideration, Trustee, Supreme Court of the United States, United States bankruptcy court, Third Circuit