The Bottom Line

On June 27, 2018, Judge Kevin Carey of the United States Bankruptcy Court for the District of Delaware ruled that a dismissal order in a bankruptcy case could provide for exculpation of the estate fiduciaries and their respective professionals. The ruling is a welcome result for all estate fiduciaries whose tireless efforts during a complex bankruptcy case fail to culminate in an approved plan of reorganization. Morrison & Foerster LLP represents the debtors in the matter.

Background

The bankruptcy of Energy Future Holdings has spawned numerous decisions in the various segments of its Chapter 11 case. Yet another such decision was handed down by the U.S. District Court for the District of Delaware in March of this year, in which the court addressed the question of what constitutes collateral, and proceeds of collateral, in a complex Chapter 11 reorganization.

In a pair of decisions in 2015, the United States Bankruptcy Court of the District of Delaware determined that neither the first lien notes trustee nor the second lien notes trustee of Energy Future Intermediate Holdings Corp. (“EFIH”), a subsidiary of Energy Future Holdings (“EFH”), was entitled to receive a make-whole on the repayment of the corresponding indebtedness resulting from the acceleration of that debt in the EFH bankruptcy case.