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    Business judgment rule protects board’s decision to maximize the value of an insolvent Delaware corporation even if it puts creditors at risk; but it does not protect transfers of value from the corporation to a controlling shareholder or related party
    2014-10-31

    Directors of an insolvent corporation face a host of difficult questions. Should they wind up operations or file for bankruptcy to preserve assets for creditors, or chart a riskier course that could lead the company back to profitability and possibly create value for shareholders? If they choose the riskier course and it fails, will the directors be potentially liable to creditors? The opinion issued by Vice Chancellor Laster of the Delaware Court of Chancery earlier this month in Quadrant Structured Products Co., Ltd. v. Vertin, C.A. No. 6990-VCL, slip op., 2014 Del. Ch.

    Filed under:
    USA, Delaware, Company & Commercial, Insolvency & Restructuring, Litigation, Mintz, Shareholder, Fiduciary, Business judgement rule, Delaware General Corporation Law
    Location:
    USA
    Firm:
    Mintz
    Are credit bids in a deep freeze?
    2014-01-31

    A Delaware bankruptcy court recently limited a secured creditor’s right to credit bid an acquired claim to the purchase price of that claim. In In re Fisker Auto. Holdings, Inc., 2014 Bankr. LEXIS 230 (Bankr. D. Del. January 17, 2014), the United States Bankruptcy Court for the District of Delaware addressed a motion by Fisker Automotive, Inc. (“Fisker”) to sell substantially all of its assets (the “Sale Motion”) to Hybrid Tech Holdings, LLC (“Hybrid”).

    Filed under:
    USA, Delaware, Insolvency & Restructuring, Litigation, Mintz, Secured creditor, United States bankruptcy court
    Authors:
    Eric R. Blythe
    Location:
    USA
    Firm:
    Mintz
    To release or not to release – if that is the question, what is the answer?
    2013-04-05

    In a recent decision by the Bankruptcy Court for the District of Delaware, the court adopted a flexible approach to consensual third party releases in a plan of reorganization. In In re Indianapolis Downs, LLC, 2013 Bankr. LEXIS 384 (Bankr. D. Del. Jan. 31, 2013), the court permitted third party releases where creditors failed to opt out of the release provisions of the plan either by not submitting their vote on the plan, or by voting against the plan but failing to check the “opt out” box on the ballot.

    Filed under:
    USA, Delaware, Insolvency & Restructuring, Litigation, Mintz, United States bankruptcy court
    Location:
    USA
    Firm:
    Mintz
    Distressed claims trading: insider trading may lead to disallowance of bankruptcy claims and breach of fiduciary duties
    2012-01-09

    In a significant expansion of the potential risk for distressed claims traders, the Delaware bankruptcy court has recently ruled1 that traders who engage in insider trading may have their claims subordinated to equity, and that traders who amass claims sufficient to block a plan of reorganization owe fiduciary duties to all other creditors and shareholders during plan negotiations.

    Filed under:
    USA, Delaware, Insolvency & Restructuring, Litigation, White Collar Crime, Mintz, Bankruptcy, Security (finance), Fiduciary, Insider trading, Bank holding company, United States bankruptcy court
    Authors:
    Paul J. Ricotta
    Location:
    USA
    Firm:
    Mintz
    Federal district court affirms bankruptcy court holding that inadequate consideration exclusion bars coverage
    2009-08-25

    A federal district court in Delaware, applying New York law, has affirmed a bankruptcy court's dismissal of an adversary proceeding brought by a bankrupt home mortgage company against its directors and officers liability insurers, holding that coverage for a pre-petition lawsuit against the mortgage company was barred by application of an “inadequate consideration” exclusion.Delta Fin. Corp. v. Westchester Surplus Lines Ins. Co., 2009 WL 2392882 (D. Del. Aug. 4, 2009).

    Filed under:
    USA, Delaware, Insolvency & Restructuring, Insurance, Litigation, Wiley Rein LLP, Bankruptcy, Costs in English law, Unsecured debt, Consideration, Mortgage loan, Fair market value, Holding company, Cashflow, United States bankruptcy court
    Location:
    USA
    Firm:
    Wiley Rein LLP
    Bankruptcy court holds inadequate consideration exclusion bars coverage
    2008-12-16

    A federal bankruptcy court, applying New York law, has dismissed an adversary proceeding brought by a bankrupt home mortgage company against its directors and officers liability insurers, holding that coverage for a pre-petition lawsuit against the mortgage company was barred by application of an “inadequate consideration” exclusion. Delta Fin. Corp. v. Westchester Surplus Lines Ins. Co., Case No. 07-11880 (CSS) (Jointly Administered) (Bankr. D. Del. Dec. 15, 2008). The court also held that the coverage dispute was a non-core proceeding.

    Filed under:
    USA, Delaware, Insolvency & Restructuring, Insurance, Litigation, Wiley Rein LLP, Bankruptcy, Costs in English law, Unsecured debt, Waiver, Consideration, Mortgage loan, Fair market value, Holding company, Cashflow, Delaware Supreme Court, United States bankruptcy court
    Location:
    USA
    Firm:
    Wiley Rein LLP
    Trustees have no standing to object to disbursement of policy proceeds in interpleader action
    2012-07-20

    The United States Bankruptcy Court for the District of Delaware, applying federal law, has held that a Liquidation Trustee and a Litigation Trustee (the Trustees) did not have standing to object to the disbursal of policy proceeds in an insurer’s interpleader action because they had no existing claims or realistic potential claims for coverage under the policy. Federal Insurance Co. v. DBSI, Inc., 2012 WL 2501090 (Bankr. D. Del. June 27, 2012).

    Filed under:
    USA, Delaware, Insolvency & Restructuring, Insurance, Litigation, Wiley Rein LLP, Bankruptcy, Standing (law), United States bankruptcy court
    Location:
    USA
    Firm:
    Wiley Rein LLP
    Actions based on same course of conduct are related claims; application of I v. I exclusion unclear where claims brought by trustee on behalf of debtor and subsidiaries
    2011-09-19

    The United States Bankruptcy Court for the District of Delaware, applying federal law, has held that certain lawsuits brought by a bankruptcy trustee were related claims, even though they alleged unique causes of action, because they were based upon the same course of conduct.  The court also found that the trustee was pursuing claims both on behalf of the policyholder-debtor and its subsidiaries, and therefore the application of the insured versus insured exclusion was “unclear.”  Nonetheless, the court found that the individual insureds were entitled to 100% of their defense cos

    Filed under:
    USA, Delaware, Insolvency & Restructuring, Litigation, Wiley Rein LLP, Bankruptcy, Costs in English law, Debtor, Board of directors, Liquidation, Subsidiary, Causality, Racketeer Influenced and Corrupt Organizations Act 1970 (RICO) (USA), Westlaw, Delaware Supreme Court, United States bankruptcy court, US District Court for District of Delaware, Trustee
    Location:
    USA
    Firm:
    Wiley Rein LLP
    A skilled examiner can make all the difference
    2010-11-29

    The U.S. Bankruptcy Code provides for the appointment of a bankruptcy examiner to investigate the debtor with respect to allegations of fraud, dishonesty, incompetence, misconduct or mismanagement. The right examiner, with a clearly defined mission, will have a major influence on the bankruptcy process. The difference between a successful financial restructuring or liquidation-resulting in substantial recoveries for the key constituencies-and a time-consuming (and asset-consuming) meltdown, can depend on the approach of the examiner and the examiner's support team.

    Filed under:
    USA, Delaware, Insolvency & Restructuring, Litigation, White Collar Crime, Wiley Rein LLP, Bankruptcy, Debtor, Unsecured debt, Fraud, Debt, Liquidation, Leveraged buyout, US Department of Justice, Lehman Brothers, Enron, Delaware Supreme Court, United States bankruptcy court, US District Court for District of Delaware, US District Court for SDNY, Trustee
    Authors:
    H. Jason Gold , Rebecca L. Saitta
    Location:
    USA
    Firm:
    Wiley Rein 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

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