In a three-line order, the Delaware Supreme Court recently affirmed the Court of Chancery’s dismissal of a suit by a creditor against Athilon Capital Corp. and its sole shareholder, Merced Capital Partners, arising from claims of self-interested transactions by Merced. Quadrant Structured Products Company, Ltd. v. Vertin serves as a reminder of the limited recourse of creditors against controlling shareholders of a debtor that is solvent, even in the cases of egregious conduct.

The Facts

Virtually all public indentures contain provisions allowing the issuer to cure ambiguities and make other technical changes to the debt documentation without debtholder consent. When the purported ambiguities have substantive consequences, however, issuers may not be able to get away with an amendment that lacks debtholder approval. InGSO Coastline Credit Partners L.P. v. Global A&T Electronics Ltd. (NY App. Div. 1st Dept. May 3, 2016), a New York lower court bought into a “cure of ambiguity” argument and on that basis granted a motion to dismiss.

As you know, the last two years have seen a somewhat improved, but by no means robust, business climate. At the same time, structural shifts in the law firm business model have been both highly publicized and memorably demonstrated.

The Bottom Line:

On May 26, 2009, Lehman Brothers Holdings Inc. and its affiliated U.S. chapter 11 debtors (“Lehman” or the “U.S. Debtors”) filed a motion (“Motion”) requesting the U.S. Bankruptcy Court (“Bankruptcy Court”) to set August 24, 2009 at 5:00 p.m. (ET) as the deadline for filing proofs of claim against the U.S. Debtors (the “Bar Date”). The Motion1 seeks entry of a proposed order (“Proposed Order”), that (i) establishes the Bar Date; (ii) approves the Proof of Claim Form; and (iii) approves the proposed notice procedures and form for the Bar Date notices.

Overview

Recently, in Shady Bird Lending, LLC v. The Source Hotel, LLC (In re The Source Hotel, LLC), Case No. 8:21-cv-00824-FLA (C.D. Ca. June 8, 2022), the Central District of California District Court adopted the majority view that a non-income producing property could be a “single asset real estate,” or SARE, debtor. The district court held that a hotel, which was not yet producing income, met the definition of a SARE.

Background

The Bottom Line

Recently, in In re Dura Automotive Systems, No. 19-12378 (Bankr. D. Del. June 9, 2020), the Bankruptcy Court for the District of Delaware held that granting the Official Committee of Unsecured Creditors (the Committee) derivative standing on behalf of the debtors – a Delaware limited liability company – was precluded by the Delaware Limited Liability Company Act (the Delaware LLC Act).

What Happened?

For retail companies contemplating filing for chapter 11 protection, not only is the time of year of the filing important, but also the expected time frame the case will last. This is particularly important given that the 2005 amendments to the Bankruptcy Code modified Section 365(d)(4) to provide that Debtors must assume or reject unexpired leases of nonresidential property within 120 days of the filing.

The Bottom Line

In one of the first applications of the Supreme Court’s ruling on the scope of section 546(e) in Merit Management, Delaware Bankruptcy Court Judge Carey found that section 546(e)’s safe harbor did not apply to fraudulent transfers between two parties that were not financial institutions, even if the transaction passed through financial intermediaries.

What Happened

The Bottom Line