Earlier this month, the Chapter 7 Trustee (the "Trustee") appointed in the Indalex bankruptcy began filing avoidance actions against various Indalex creditors. For those not familiar with the Indalex bankruptcy, Indalex filed petitions for bankruptcy in the United States Bankruptcy Court for the District of Delaware on March 20, 2009. Prior to filing bankruptcy, Indalex was one of the largest aluminum extruders in the United States.
The Commonwealth Court of Pennsylvania, which is overseeing the liquidation of the insurer in the coverage dispute, entered an order approving the insurer’s denial of coverage under an excess policy for a $20 million settlement that two individual insureds paid into a Federal Trade Commission (FTC) redress fund. The court adopted the recommendation of the referee appointed to hear the coverage dispute, who applied California law and concluded that the insurer was entitled to summary judgment following briefing and oral argument. Wiley Rein represented the insurer before the referee.
A recent bankruptcy case merits the attention of credit managers and others involved in credit decisions. To avoid credit risk when dealing with a chapter 11 debtor in possession, you must verify that the debtor has court authority to use cash collateral prior to shipping or accepting payment.
A decision recently handed down by the Delaware Chancery Court, CML V, LLC v. Bax, indicates that creditors of a limited liability company (“LLC”) organized under Delaware law do not have standing to institute derivative suits against an LLC’s management, even when the LLC is insolvent, unless the right is expressly set forth in the LLC’s organizational documents or external agreements.
Background
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State Court Receiverships
Administrations, including "pre-packs", are not capable of constituting "insolvency proceedings...instituted with a view to the liquidation of the assets of the transferor" within the meaning of Regulation 8(7) of TUPE. Where there is a sale of an undertaking by an administrator, the employees assigned to the undertaking will automatically transfer to the buyer and receive unfair dismissal protection.
Key facts
Receiverships are on the rise in Ohio and across the Midwest. In most cases, the appointment of a receiver heralds the close of a business. Receiverships are also commonly part of a foreclosure proceeding. Calfee's Business Restructuring and Insolvency practice group lawyers have extensive experience with both state and federal court receiverships and we can assist you in determining the impact of a receivership on your business.
On March 17, 2010 we reported on the decision of a New York intermediate appellate court to apply New York law to disallowed claims under insurance policies issued by Midland Insurance Company, an insolvent multiline insurer placed into liquidation in New York.
The New York Court of Appeals decision on April 5, in the Midland Insurance Company liquidation (In re Liquidation of Midland Insurance Company1) is an important affirmation of policyholder rights. In this decision, New York’s highest court held that a policyholder is entitled to a claim and policy-specific choice of law analysis in the liquidation process, rejecting the Midland liquidator’s effort to make a blanket application of New York law to Midland’s 38,000 policyholders.
Washington Governor Christine Gregoire has signed into law a series of changes to the state Receivership Act that will make it easier (and possibly cheaper) for creditors to utilize the Receivership Act as a tool to resolve troubled loan situations with their borrowers. The revisions will become effective 90 days after the Legislature adjourns, making July 24, 2011, the likely effective date. The changes clarify a number of points that previously puzzled both judges and practitioners.
Creditors' Rights