A court-approved pre-plan settlement that would have resolved a dispute between a Chapter 11 creditors’ committee and the debtor’s secured lenders over the lenders’ liens was vacated by the U.S. Court of Appeals for the Second Circuit on March 5. Motorola, Inc. v. Official Committee of Unsecured Creditors and J.P. Morgan Chase Bank, N.A. (In re Iridium Operating LLC). The settlement also would have funded massive litigation against the debtor’s former parent, Motorola Inc.
Motorola’s Successful Argument
A recent ruling of the Bankruptcy Court for the Central District of California endorsed a path toward enforceability of prospective waivers of the automatic stay in certain circumstances. In short, such a waiver approved in a bankruptcy case may be enforceable in a subsequent bankruptcy case. This offers creditors a tactical opportunity to significantly better their position in such a subsequent case.
An involuntary bankruptcy case is typically commenced by a petition joined by at least three petitioning creditors.1 However, an involuntary petition may be filed by a single petitioning creditor if the debtor has 11 or fewer “qualified” creditors.2 This is often called the “numerosity” requirement. The Bankruptcy Code, in Section 303(b)(2), expressly defines which creditors count in the numerosity requirement.
The District Court sustained claims of breach of fiduciary duty, fraud and deepening insolvency asserted by the successor-in-interest to the Committee of Unsecured Creditors of DVI, a defunct company, against DVI’s former officers and directors.
The United States Supreme Court has unanimously held that federal bankruptcy law does not preclude an unsecured creditor from recovering attorney’s fees authorized under a prepetition contract and incurred postpetition in bankruptcy-related litigation with the debtor.
Earlier this year, we covered Judge Shelley Chapman’s ruling in the Sabine bankruptcy, permitting the Debtors to reject a handful of gathering and other midstream agreements. Previously, Judge Chapman permitted rejection on the grounds that the Debtors exercised their reasonable business judgement in doing so.
In a recent decision, the United States District Court for the Southern District of Texas affirmed the bankruptcy court’s rejection of the cost methodology to value the right to use common amenities in a condominium development and, in the process, bolstered the notion that bankruptcy courts have discretion in determining what valuation methodologies are appropriate under the facts and circumstances of a particular case.
In bankruptcy cases, things often move more slowly than people would like or expect. In addition to dealing with oversight by the bankruptcy court and the United States Trustee, a debtor typically spends significant time engaging with its lenders and secured creditors, committees of unsecured creditors, and any number of other key stakeholders. Court approval is needed for most significant events in the case, for anything out of the ordinary course of business, and, at times, even for small matters. Transparency, adequate notice and opportunity to object, and due process a
For almost 50 years, Douglas Chrismas has helmed his Los Angeles-based Ace Gallery, helping to put struggling artists on the map, while also organizing shows for famed artists such as Andy Warhol. But on April 6, 2016, Mr. Chrismas lost the keys to his storied gallery, after failing to make a $17 million court-ordered payment to settle debts in his 2013 bankruptcy case. The bankruptcy trustee will now control the reorganized business’ finances, with Mr. Chrismas continuing to oversee the curatorial and sales duties in an effort to satisfy creditors.
The U.S. Court of Appeals for the Fourth Circuit recently affirmed the dismissal of a borrower’s lawsuit against a bank, holding that the district court correctly found that sale orders entered in a prior bankruptcy case were res judicata and precluded the borrower’s new claims.
A copy of the opinion is available at: Link to Opinion.