Our Delaware Corporate and Alternative Entity Law attorneys closely follow the opinions coming from Delaware’s Supreme Court and Court of Chancery. Our 2017 Year to Date Review is a collection of brief summaries of selected cases concerning Delaware Corporate and Alternative Entity Law. While this list is a selection of important cases, our intent is to provide our readers with the rationale behind a court’s holding to ultimately provide information that may be helpful in strategic and business decisions concerning litigation and commercial arrangements.

The Delaware bankruptcy court recently decided that a debtor could not assign a trademark license absent the consent of the licensor. The court concluded that federal trademark law and the terms of the license precluded assignment without consent. Because the debtor could not assign the license under any circumstances (consent was not forthcoming), the court held that cause existed to annul the automatic stay to permit the licensor to “move on with its trademark and its business.”

The Bottom Line

Peekay Acquisition, LLC, along with sixteen (16) of its affiliates and subsidiaries, has filed a petition for relief under Chapter 11 in the Bankruptcy Court for the District of Delaware (Lead Case No. 17-11722). Headquartered in Auburn, Washington, Peekay is a leading specialty retailer of a broad selection of lingerie, sexual health and wellness products and accessories.

The Bottom Line

Prospector Offshore Drilling S.à r.l., and 3 of its affiliates, has filed for chapter 11 bankruptcy protection in the United States Bankruptcy Court for the District of Delaware (Lead Case No. 17-11572). The entities are affiliates of the Paragon debtors that filed for chapter 11 on February 14, 2016.

Exculpation provisions in operating agreements must be carefully crafted in order to protect members, managers, directors and officers for breaches of fiduciary duties. In In re Simplexity, LLC, the Chapter 7 trustee sued the former officers and directors (who were also members and/or managers) for failing to act to preserve going concern value and exposing the debtors to WARN Act claims. The defendants argued the exculpation language in the operating agreements shielded against breach of fiduciary duty liability.

The Bankruptcy Court for the District of Delaware recently issued a decision that will undoubtedly influence strategies in bankruptcy cases involving plugging and abandonment liabilities. The court’s ruling in Venoco, LLC v. City of Beverly Hills illuminates the Bankruptcy Code’s rehabilitative purposes by explaining that financial harm, without more, is not sufficient to enjoin a debtor’s actions.

What Happened

Keystone Tube Company, LLC and four affiliates, including A.M. Castle & Co. (OTC: CASL), HY-Alloy Steels Company, Keystone Service, Inc. and Total Plastics, Inc., have filed chapter 11 petitions before the United States Bankruptcy Court for the District of Delaware (Lead Case No. 17-11330). The debtors are a specialty metals distribution company.

TRANSACTIONAL

LITIGATION/CONTROVERSY

June 8, 2017

Bankruptcy Alert

Insolvency at Its Limits: What Management and Creditors of Insolvent LLCs and LPs Should Know About Fiduciary Duties Waivers and Standing, Inside and Outside of Bankruptcy

By Isley M. Gostin, Craig Goldblatt and George W. Shuster, Jr.