Since the Delaware Supreme Court held in CML V, LLC v. Bax that creditors of a Delaware LLC lack standing to pursue derivative breach-of-fiduciary-duty claims, even if the LLC is insolvent or near insolvent, bankruptcy courts have decided a number of Bax-related issues in cases involving Delaware LLCs.

Federal bankruptcy judges, who are not appointed under Article III of the Constitution, do not have the power to enter a final judgment in all matters that come before them. Pursuant to 28 U.S.C. § 157(b)(2), they generally may enter a judgment in all cases under the Bankruptcy Code or in certain proceedings defined as “core proceedings.”

Bankruptcy

Legal Alert

Authors

George P. Angelich Partner New York, NY 212.457.5423 [email protected]

M. Douglas Flahaut Counsel Los Angeles, CA 213.443.7559 [email protected]

Kraus Carpet Inc., along with five subsidiaries and affiliates, has filed a petition for recognition of a foreign proceeding under chapter 15 of the Bankruptcy Code in the Bankruptcy Court for the District of Delaware (Lead Case No. 18-12057).

We have discussed plan releases in prior posts. Oftentimes, disputes involving plan releases revolve around whether, and in what contexts, third-party releases in plans are appropriate. Recently, the Third Circuit Court of Appeals addressed the relatively unique question of whether releases in a confirmed plan are binding upon post-confirmation purchasers of the debtor’s stock.

The Bottom Line

The purpose of bankruptcy is to provide for an orderly process by which a debtor’s assets can be fairly divided and distributed among creditors.

It is also meant to ensure that debtors can start fresh. Not all of a debtor’s assets are available to creditors—the Bankruptcy Code allows a debtor to keep certain assets safe in bankruptcy through various asset exemptions available under both state and federal law. One such exemption is Michigan’s bankruptcy-specific homestead exemption.

The Third Circuit denied a $275 million break-up fee to a bidder that was unsuccessful in its attempt to buy the crown-jewel assets in the high-profile EFH bankruptcy case. In re Energy Future Holdings Corp., No 18-1109, 2018 U.S. App. LEXIS 25945 (3rd Cir. Sept. 13, 3018). The court held that the bidder’s efforts didn’t result in a benefit to the debtors’ estates.

Open Roads Films, LLC, along with five of its subsidiaries and affiliates, has filed a petition for relief under Chapter 11 in the Bankruptcy Court for the District of Delaware (Lead Case No. 18-12012). The Debtors, based in Los Angeles, California, collectively comprise an independent distributor and licensor of motion pictures.

We generally advise clients to think carefully before commencing an involuntary bankruptcy petition against an alleged debtor.