The United States District Court in Delaware recently issued a welcome decision for private equity firms whose portfolio companies run afoul of the Worker Adjustment and Retraining Notification Act (the “WARN Act”). In In re Jevic Holding Corp. (PDF), the Court affirmed a bankruptcy court decision holding that Sun Capital Partners (“Sun”) was not liable for the WARN Act violations of Jevic Transportation Inc.
Is electricity goods or services? That seemingly simple yet confounding question is illustrated by three recent bankruptcy cases (all of which consider whether an electricity provider is entitled to an administrative expense priority under Bankruptcy Code Section 503(b)(9) for “the value of goods received by the debtor” in the ordinary course within 20 days prior to the automatic stay):
In its October 1, 2014 decision in Quadrant Structured Prods. Co. v. Vertin, et al., C.A. No. 6990, the Delaware Court of Chancery applied the protections afforded under the business judgment rule to investment strategies adopted by directors of insolvent corporations. The court held that the business judgment rule barred derivative claims asserted against directors by a creditor who had alleged that the company’s high-risk investment strategy was implemented for the purpose of benefitting the corporation’s controller at the creditors’ expense.
After an oversecured creditor obtained relief from the automatic stay and foreclosed on some property, the bankruptcy court asserted jurisdiction over disposition of the sale proceeds and denied in part the creditor’s claim for fees. The district court reversed and the case was appealed to the 5thCircuit.
It’s always risky when the Supreme Court grants certiorari in a bankruptcy case. While the Court’s opinion may bring clarity to the narrow question upon which certiorari was granted, it often creates a host of unintended problems in other areas.
Being one of the first defendants to settle claims has its pros and cons. On the one hand, defendants may avoid protracted litigation. On the other hand, future defendants may ultimately negotiate lower settlement amounts. To avoid “leaving money on the table,” defendants who settle early may seek to include an equal treatment provision, or “most favored nations” (MFN) clause, into the settlement agreement.
BACKGROUND
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A bankruptcy can be hazardous to the health of an executive’s bonus check. Sometimes, however, an executive can survive an attack on a bonus in a bankruptcy, and come out clean on the other side. For example, we covered here how one executive succeeded in keeping most of his incentive pa
As a general rule, bankruptcy courts do not enforce provisions in organizational documents, loan agreements, or other prepetition contracts that purport to alter or waive the protections of the Bankruptcy Code. As with most rules, however, there are exceptions.