The recent decision by the US Third Circuit Court of Appeals in In re LTL Management, LLC did not address or negate the viability of divisive mergers of entities under the Texas Business Organizations Code (the “TBOC”). Various news articles concerning the decision have reported that the court disapproved of the so-called “Texas Two-Step” transactions undertaken by Johnson & Johnson (“J&J”) in the face of its mounting talc tort litigation.
A bankruptcy court’s recent denial of a debtor’s petition for bankruptcy relief on narrow grounds casts a long shadow on the viability of bankruptcy relief for those employed in the cannabis industry. Though confining the court’s holding to this debtor’s case, the court concluded that because the debtor engaged, and intended to continue engaging, in activities that violate the Federal Controlled Substances Act, the debtor could not objectively have filed for bankruptcy or proposed a plan of reorganization in good faith, as required by Federal bankruptcy law.
On Monday, January 30, 2023, the Third Circuit in In re LTL Management, LLC1 ordered debtor LTL Management, LLC’s (“LTL”) chapter 11 petition dismissed for failure to demonstrate that the petition was filed in good faith pursuant to the Bankruptcy Code.2 The dismissal of LTL’s bankruptcy will also result in the termination of an injunction staying numerous lawsuits against third-parties—including lawsuits against certain third-party retailers being sued for allegedly having sold certain allegedly contaminated products.
The latest amendments to the Federal Rules of Bankruptcy Procedure (the “Bankruptcy Rules”) took effect on December 1, 2022. This collection of modifications may be broadly divided into two categories: (i) amendments and a new rule promulgated to account for the Small Business Reorganization Act of 2019 (the “SBRA”), and (ii) amendments clarifying or consolidating non-SBRA specific Bankruptcy Rules.
SBRA-Related Amendments
On Oct. 18, the U.S. Bankruptcy Court for the Eastern District of Virginia approved the professional fee applications in the Nordic Aviation Capital bankruptcy cases, including the rates of each of the professionals as appropriate market rates.
Could bankruptcy protection be on the horizon for individuals and companies actively involved in the cannabis industry? Potentially yes, following President Biden’s October 6, 2022 request for the Secretary of Health and Human Services to begin the administrative process to review marijuana’s classification as a Schedule I substance under the Controlled Substance Act (“CSA”).
On Oct. 18, the U.S. Bankruptcy Court for the Eastern District of Virginia approved the professional fee applications in the Nordic Aviation Capital bankruptcy cases, including the rates of each of the professionals as appropriate market rates.
This settles any remaining uncertainty in how professionals' hourly rates will be considered for approval in bankruptcy courts in the district. In particular, the bankruptcy court noted that
Over the past decade, or so, we have seen situations in Chapter 11 cases where groups of creditors contracted with debtors for the exclusive right to provide new money on extremely favorable terms, with significant "backstop" fees paid in connection therewith, and other creditors in the same class were excluded from participating in such investments. E.g., Peabody Coal, CHC Helicopter, Pacific Drilling, Momentive and most recently, LATAM Airlines and TPC Group.
Settling any remaining uncertainty in how professionals’ hourly rates will be considered for approval in bankruptcy courts in the Eastern District of Virginia, on October 18, the Bankruptcy Court for the Eastern District of Virginia approved the professional fee applications in the Nordic Aviation bankruptcy cases, including the rates of each of the professionals as appropriate market rates. In particular, the Bankruptcy Court noted that, “[m]uch ink has since been spilled differentiating so-called ‘local’ rates from ‘national’ rates. The distinction is much ado about nothing.
Over the last two years, courtesy of a once-a-century pandemic, government-mandated business closures, nationwide stay-at-home orders, and—unprecedented—disruptions to the global supply chain have illuminated, previously unknown, vulnerabilities across a whole host of industries. Would anyone have seriously questioned the viability of office space two years ago? Now, inflation, in keeping with the recent chaos, may be upending the viability of another tried-and-tested institution: the supply contract.