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    Vermont rejects Fairpoint reorganization plan
    2010-07-02

    On Monday, the Vermont Public Safety Board (VPSB) threw up a roadblock against Fairpoint Communications’ quest to emerge from bankruptcy with the issuance of a 96- page order that rejects the company’s plan of reorganization. Saddled with debt accruing from its $2.3 billion purchase of landline phone assets from Verizon Communications in 2008, Fairpoint—a regional provider of landline telephone services in the states of Vermont, New Hampshire and Maine—filed for Chapter 11 bankruptcy protection in October of 2009.

    Filed under:
    USA, Vermont, Insolvency & Restructuring, Telecoms, Paul, Weiss, Rifkind, Wharton & Garrison LLP, Bankruptcy, ISP, Board of directors, Broadband, Option (finance), Debt, Verizon Communications
    Authors:
    Patrick S. Campbell
    Location:
    USA
    Firm:
    Paul, Weiss, Rifkind, Wharton & Garrison LLP
    Policy proceeds not property of bankruptcy estate because payment of proceeds would not affect estate assets
    2010-07-27

    The United States Bankruptcy Court for the District of Delaware has held that policy proceeds were not part of the insured entity’s bankruptcy estate because previous entity claims were dismissed with prejudice, it was highly speculative that the bankruptcy trustee would approve indemnification of directors and officers and the policy’s priority of payment provision provided that entity coverage was only available after payment of proceeds for direct coverage to insured persons. In re Downey Fin. Corp., 428 B.R. 595 (D. Del. Bankr. May 7, 2010).

    Filed under:
    USA, Delaware, Insolvency & Restructuring, Insurance, Litigation, Wiley Rein LLP, Bankruptcy, Security (finance), Class action, Board of directors, Interest, Prejudice, Subsidiary, Federal Deposit Insurance Corporation (USA), Office of Thrift Supervision, United States bankruptcy court, US District Court for District of Delaware
    Location:
    USA
    Firm:
    Wiley Rein LLP
    Shandler v. DLJ Merchant Banking, Inc., C.A. No. 4797-VCS (Del. Ch. July 26, 2010) (Strine, V.C.)
    2010-08-05

    In this memorandum opinion, the Court of Chancery considered a motion to dismiss claims brought on behalf of Insilco Technologies, Inc. (“Insilco”) by the plaintiff, a bankruptcy court appointed Creditor Trustee. Among other claims, plaintiff brought claims for breach of fiduciary duty against Insilco’s controlling stockholder, a group of affiliated funds (the “DLJ Funds”) allegedly dominated and controlled by DLJ, Inc. and DLJ Merchant Banking, Inc. (“DLJMB”) (collectively, “DLJ”), and a group of DLJ-affiliated directors who comprised a majority of Insilco’s board.

    Filed under:
    USA, Delaware, Company & Commercial, Insolvency & Restructuring, Litigation, Potter Anderson & Corroon LLP, Bankruptcy, Shareholder, Breach of contract, Fiduciary, Board of directors, Investment banking, Memorandum opinion, Court of Chancery, United States bankruptcy court
    Location:
    USA
    Firm:
    Potter Anderson & Corroon LLP
    Court approves $125 million New Century settlement
    2010-08-10

    Yesterday, a federal judge preliminary approved a $125 million cash settlement for former shareholders of New Century Financial Corp. (“New Century”). New Century was the second largest subprime mortgage originator before it filed for bankruptcy in April 2007. In February 2008, Michael J.

    Filed under:
    USA, California, Capital Markets, Insolvency & Restructuring, Alston & Bird LLP, Bankruptcy, Shareholder, Board of directors, Subprime lending, General counsel, Underwriting, Preferred stock, Securities fraud, KPMG, Securities Act 1933 (USA), Chief executive officer, Chief financial officer, US District Court for Central District of California
    Authors:
    Tara Castillo
    Location:
    USA
    Firm:
    Alston & Bird LLP
    Court emphasizes risks of dealing with known insolvent entity
    2010-08-16

    A recent 7th Circuit Court of Appeals decision shows the risks of dealing with an entity known to be insolvent and demonstrates that claimants, however deserving, can expect little sympathy from the courts. (Fusion Capital Fund II, LLC v. Richard Ham and Carla Aufdenkamp No. 09-3723 decided August 2, 2010)

    Filed under:
    USA, Insolvency & Restructuring, Litigation, Masuda Funai Eifert & Mitchell Ltd, Shareholder, Fraud, Board of directors, Limited liability company, Tortious interference, Attorney's fee, US Securities and Exchange Commission
    Authors:
    Stephen M. Proctor
    Location:
    USA
    Firm:
    Masuda Funai Eifert & Mitchell Ltd
    Too-big-to-fail bailout avoidance provisions
    2010-08-24

    Title II of the Act, designated "Orderly Liquidation Authority" – effective July 21, 2010 – establishes what is intended to be an orderly liquidation process for "financial companies" whose collapse or potential collapse are determined to constitute a risk to the financial system as a whole. Such systemically significant institutions would be liquidated under these new procedures, rather than being treated under existing bankruptcy laws. (The intent of Act is that most-failing financial companies will continue to be administered under existing bankruptcy laws.)

    Filed under:
    USA, Banking, Insolvency & Restructuring, Duane Morris LLP, Bankruptcy, Shareholder, Injunction, Security (finance), Board of directors, Federal Reserve Board, Standard of review, Liquidation, Bank holding company, Underwriting, Subsidiary, Federal Deposit Insurance Corporation (USA), Federal Reserve (USA), Financial Stability Oversight Council, Dodd-Frank Wall Street Reform and Consumer Protection Act 2010 (USA), Bank Holding Company Act 1956 (USA), US Secretary of the Treasury
    Authors:
    Lee J. Potter, Jr. , Benjamin A. Haverstick
    Location:
    USA
    Firm:
    Duane Morris LLP
    Dead zone? Direct claims by creditors of a California corporation may not lie against management based on management's allegedly shifting duties when corporation is in the zone of insolvency or even insolvent
    2010-08-25

    The California Court of Appeal recently rejected the argument that directors and officers owe fiduciary duties to the company's creditors when the company is in the so-called "zone of insolvency," or is even clearly insolvent. In Berg & Berg Enterprises, LLC v. John Boyle, et al., 100 Cal. Rptr. 3d 875 (Cal. Ct. App. 6th Dist. Oct. 29, 2009), the California court expounded that "there is no broad, paramount fiduciary duty of due care or loyalty that directors of an insolvent corporation owe the corporation's creditors solely because of a state of insolvency." Id. at 893-94.

    Filed under:
    USA, California, Company & Commercial, Insolvency & Restructuring, Litigation, Sheppard Mullin Richter & Hampton LLP, Shareholder, Breach of contract, Fiduciary, Board of directors, Good faith, Delaware Supreme Court, California courts of appeal
    Authors:
    Robert Sahyan
    Location:
    USA
    Firm:
    Sheppard Mullin Richter & Hampton LLP
    Ross Holding and Management Co., et al. v. Advance Realty Group, LLC, et al., C.A. no. 4113-VCN (Del. Ch. September 2, 2010)
    2010-09-10

    In this memorandum opinion, the Court of Chancery granted plaintiffs’ motion to amend their complaint in part, and denied their motion to appoint a receiver for Advance Realty Group, LLC, a Delaware limited liability company (“ARG”) conducting business as a real estate investment and development company. Plaintiffs, all of whom are members of ARG, initially brought claims for breach of fiduciary duty and contract against ARG and the other defendants, which include members of ARG’s managing board (the “Board”), its senior management, and its principal investors.

    Filed under:
    USA, Delaware, Insolvency & Restructuring, Litigation, Potter Anderson & Corroon LLP, Fiduciary, Board of directors, Limited liability company, Debt, Common law, Memorandum opinion, Constitutional amendment, Delaware General Corporation Law, Court of Chancery, Delaware Supreme Court
    Location:
    USA
    Firm:
    Potter Anderson & Corroon LLP
    Financial regulatory reform - new orderly liquidation authority of FDIC; and resolution plans
    2010-09-02

    I. Introduction

    Filed under:
    USA, Banking, Capital Markets, Insolvency & Restructuring, Dentons, Bankruptcy, Consumer protection, Board of directors, Federal Reserve Board, Liquidation, Depository institution, Bank holding company, Default (finance), Convertible bonds, US Securities and Exchange Commission, Federal Deposit Insurance Corporation (USA), Federal Reserve (USA), Financial Stability Oversight Council, Lehman Brothers, Dodd-Frank Wall Street Reform and Consumer Protection Act 2010 (USA), Bank Holding Company Act 1956 (USA), US Secretary of the Treasury
    Authors:
    Mark I. Sokolow , Matthew Dyckman , Douglas J. McClintock , Gary L. Goldberg , Eleni Zanias
    Location:
    USA
    Firm:
    Dentons
    Dodd-Frank, Title II: where the FDIC and the “orderly liquidation authority” meet the Bankruptcy Code
    2010-08-31

    The FDIC is currently responding to one of the worst financial crises in the history of the nation’s banking system. Sheila Bair, Chairman of the FDIC, expects that 2010 “will be the high water mark for the banking crisis.”1 Just over the last two years, 268 banks have failed in the United States, which is nearly ten times the number of failed banks during the prior eight-year period.2

    Filed under:
    USA, Banking, Insolvency & Restructuring, Morrison & Foerster LLP, Bankruptcy, Shareholder, Board of directors, Government agency, Bailout, Federal Reserve Board, Liquidation, Depository institution, Broker-dealer, Bank holding company, Default (finance), Systemic risk, Federal Deposit Insurance Corporation (USA), Federal Reserve (USA), Dodd-Frank Wall Street Reform and Consumer Protection Act 2010 (USA), Federal Deposit Insurance Act 1950 (USA)
    Authors:
    Joseph Gabai , Larren M. Nashelsky , Alexandra Steinberg Barrage , Renee L. Freimuth
    Location:
    USA
    Firm:
    Morrison & Foerster LLP

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