In re Intervention Energy Holdings, LLC, Case No. 16-11247 (D. Del. June 3, 2016), the Bankruptcy Court for the District of Delaware dealt with the issue of whether a Delaware LLC lacked authority to file a Chapter 11 petition under the Bankruptcy Code because the limited liability company agreement of the LLC in question required the consent of all members and one member did not consent to the filing.
This is the first of three follow-up blogs to our earlier publication Assignment for the Benefit of Creditors: General Overview. This blog explores ABC’s lack of statutory automatic stay and whether there is a functional and practical equivalent. The next blog will discuss whether a creditor may file a claim after the statutory 120-day deadline.
We have written on other occasions on Civic Partners Sioux City, LLC.
The bankruptcy courts have a long history of being willing to use their judicial power under the Bankruptcy Code to prevent perceived efforts by debtors to inappropriately shield their assets from creditors. This is true even when the debtors employ structures and devices that are complex and crafted in seeming compliance with applicable law.
A bankruptcy court’s asset sale order limiting specific pre-bankruptcy product liability claims required prior “actual or direct mail notice” to claimants when the debtor “knew or reasonably should have known about the claims,” held the U.S. Court of Appeals for the Second Circuit on July 13, 2016. In re Motors Liquidation Co., 2016 U.S. App. LEXIS 12848, *46-47 (2d Cir. July 13, 2016).
“Whoever is careless with the truth in small matters cannot be trusted with important matters.”
– Albert Einstein
The Seventh Circuit Court of Appeals in Unsecured Creditors Committee of Sparrer Sausage Co., Inc. v. Jason’s Foods, Inc., 2016 WL 3213090 (7th Cir. June 10, 2016) expanded the scope of the ordinary course defense in a bankruptcy preference action. This case provides an excellent road map for a creditors’ rights attorney defending a preference suit and suggests arguments for increasing the payments a creditor can retain even if those payments were made during the 90-day preference period.
For those who may be considering an investment in life settlements (see my previous blog for background), recent bankruptcy filings of life settlement entities have raised a concern not often considered when determining whether or not to invest: what would happen if the entity that owns or manages the underlying insurance policy(s) ends up in bankruptcy. Life settlement companies typically include provisions in their purchase agreements that downplay the potential ramifications of a bankruptcy filing.
Estate professionals are under continued scrutiny. Unlike other professionals, getting paid is not simply a matter of sending a bill. The bankruptcy court, appropriately so, closely oversees the amount and timing of payment of estate professional fees. And proper disclosure under the Bankruptcy Code and the Federal Rules of Bankruptcy Procedure (the “Bankruptcy Rules”) is critical for all estate professionals.
Remember Sabena, the ill-fated Belgian airline that declared bankruptcy in 2001? Well, to quote Ford Madox Ford, this is the saddest story I have ever heard.