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    Ever-Expanding Safe Harbor Leaves Creditors’ Claims Stranded at Sea
    2016-04-12

    Second Circuit holds that Bankruptcy Code preempts creditors’ state law constructive fraud claims.

    Filed under:
    USA, Insolvency & Restructuring, Litigation, Latham & Watkins LLP, Federal preemption, Shareholder, Fraud, Leveraged buyout, Title 11 of the US Code, Second Circuit
    Authors:
    Mark A. Broude , David L Schwartz , Matthew L. Warren , Brett R. Schroeder
    Location:
    USA
    Firm:
    Latham & Watkins LLP
    United States Bankruptcy Court for the Southern District of New York Holds That Avoidance Powers Can Be Applied Extraterritorially, Resulting in a Split Within the Southern District of New York
    2016-02-02

    On January 4, 2016, the United States Bankruptcy Court for the Southern District of New York (the “Bankruptcy Court”) deviated from SDNY precedent and held that, despite the absence of clear Congressional intent, the avoidance powers provided for under Section 548 of the Bankruptcy Code can be applied extraterritorially. As a result, a fraudulent transfer of property of a debtor’s estate that occurs outside of the United States can be recovered under Section 550 of the Bankruptcy Code.

    Filed under:
    USA, New York, Insolvency & Restructuring, Litigation, A&O Shearman, Shareholder, Extraterritoriality, United States bankruptcy court
    Authors:
    Fredric Sosnick , Douglas P. Bartner , Joel Moss , Solomon J. Noh , Ned S. Schodek
    Location:
    USA
    Firm:
    A&O Shearman
    Extraterritorial Transactions - a Viable Way to “Take the Money and Run”?
    2016-01-15

    A foreign company makes a foreign distribution to foreign shareholders shortly before merging with a U.S. company in a highly-leveraged LBO.  The resulting company files a chapter 11 petition in the United States Bankruptcy Court for the Southern District of New York 13 months later.  Can the foreign transfer be avoided as a fraudulent conveyance under section 548 of the Bankruptcy Code?  Previously, the answer was almost certainly not (at least in the Southern District of New York).

    Filed under:
    USA, New York, Insolvency & Restructuring, Litigation, Weil Gotshal & Manges LLP, Shareholder, Extraterritoriality, United States bankruptcy court
    Location:
    USA
    Firm:
    Weil Gotshal & Manges LLP
    Once insolvent, always insolvent? Clarifying the curious case of derivative creditors
    2015-11-14

    Quadrant Structured Prods. Co., LTD. v. Vertin, 115 A.3d 525 (Del. Ch. 2015)

    Did you know as an officer or director of a Delaware corporation you may owe fiduciary duties to creditors and not just shareholders? If your company is insolvent, you do. But directly or derivatively? What duties? And what if your company later becomes solvent? The Court of Chancery decision Quadrant Structured Products Company, LTD. v. Vertin from earlier this year went a long way to clarifying this area of the law.

    Filed under:
    USA, Delaware, Company & Commercial, Insolvency & Restructuring, Litigation, Carrington Coleman, Shareholder
    Authors:
    Tim Gavin , Lance Currie
    Location:
    USA
    Firm:
    Carrington Coleman
    Northwest Airlines bankruptcy court rules that members of the “ad hoc equity committee” must disclose all data called for by Rule 2019
    2007-04-13

    Recently, in In re Northwest Airlines Corp.,1 Bankruptcy Judge Allan Gropper issued an opinion requiring a group of hedge funds that had formed an ad hoc committee of equity security holders (the “Ad Hoc Equity Committee”) to disclose “the amounts of claims or interests owned by the members of the committee, the times when acquired, the amounts paid therefor, and any sales or other disposition thereof” in order to comply with Rule 2019 of the Federal Rules of Bankruptcy Procedure (the “Bankruptcy Rules”).

    Background

    Filed under:
    USA, Aviation, Insolvency & Restructuring, Litigation, White & Case, Share (finance), Bankruptcy, Shareholder, Debtor, Hedge funds, Motion to compel, United States bankruptcy court
    Location:
    USA
    Firm:
    White & Case
    Delaware Chancery Court holds that creditor plaintiffs in derivative suits may satisfy standing requirement by showing corporation’s insolvency at time of suit, regardless of later solvency
    2015-05-26

    In Quadrant Structured Products Co., Ltd. v. Vertin, C.A. No. 6990-VCL, 2015 WL 2062115 (Del. Ch.

    Filed under:
    USA, Delaware, Insolvency & Restructuring, Litigation, Sheppard Mullin Richter & Hampton LLP, Shareholder, Standing (law), Credit derivative, Delaware Court of Chancery
    Authors:
    John P. Stigi III , Andrea N. Feathers
    Location:
    USA
    Firm:
    Sheppard Mullin Richter & Hampton LLP
    Can creditors directly sue company directors for breaches of fiduciary duties? The Delaware Supreme Court says “no”
    2007-05-25

    In a groundbreaking, and somewhat surprising decision, the Delaware Supreme Court recently held that creditors of a company that is either in the zone of insolvency or actually insolvent cannot, as a matter of law, directly sue directors of the company for breaches of the directors’ fiduciary duties.

    Filed under:
    USA, Company & Commercial, Insolvency & Restructuring, Litigation, Paul, Weiss, Rifkind, Wharton & Garrison LLP, Bankruptcy, Shareholder, Breach of contract, Fraud, Fiduciary, Board of directors, Accounting, Tortious interference, Personal jurisdiction, Commercial law, Federal Communications Commission (USA), Goldman Sachs, Delaware General Corporation Law, Court of Chancery, Delaware Supreme Court
    Location:
    USA
    Firm:
    Paul, Weiss, Rifkind, Wharton & Garrison LLP
    Third Circuit finds market price more probative than experts in establishing valuation of subsidiary at time of spin out
    2007-05-16

    The Third Circuit Court of Appeals recently upheld the dismissal of a suit by the shareholders and creditors of Vlasic Foods International, Inc., a former Campbell Soup subsidiary that had been “spun out” of the parent. The case, VFB, LLC v. Campbell Soup Co. (March 30, 2007), upholds the broad discretion of trial courts to determine valuation issues in the context of corporate transactions and, more specifi cally, gives great weight to market capitalization as a measure of value.

    Filed under:
    USA, Insolvency & Restructuring, Litigation, Faegre Drinker Biddle & Reath LLP, Bankruptcy, Shareholder, Market capitalisation, Breach of contract, Dividends, Testimony, Debt, Subsidiary, Valuation (finance), Third Circuit, Circuit court
    Location:
    USA
    Firm:
    Faegre Drinker Biddle & Reath LLP
    Bankruptcy trustees not entitled to injunctive relief that would give them priority to D&O policy proceeds
    2007-05-15

    The United States Bankruptcy Court for the District of Massachusetts has denied injunctive relief requested by two bankruptcy trustees seeking to stay the prosecution and settlement of shareholder actions proceeding against various former officers and directors of a bankrupt corporation. In re Enivid, 2007 WL 806627 (Bankr. D. Mass. Mar. 16, 2007).

    Filed under:
    USA, Insolvency & Restructuring, Insurance, Litigation, Wiley Rein LLP, Bankruptcy, Shareholder, Debtor, Injunction, Security (finance), Breach of contract, Class action, Fiduciary, Board of directors, Preliminary injunction, Liquidation, US Code, Trustee, United States bankruptcy court, US District Court for District of Massachusetts
    Location:
    USA
    Firm:
    Wiley Rein LLP
    Delaware’s high court affirms dismissal of creditor’s suit against directors
    2007-05-25

    The Delaware Supreme Court affirmed on May 18, 2007, the Delaware Chancery Court’s dismissal of a breach of fiduciary duty suit brought by a creditor against certain directors of Clearwire Holdings Inc. North American Catholic Educational Programming Foundation, Inc. v. Gheewalla, C.A. No. 1456-N (May 18, 2007).

    Whether a creditor may assert a direct claim against corporate directors for breach of fiduciary duty when the corporation is insolvent or in the so-called “zone of insolvency.”

    Answer: No.

    Filed under:
    USA, Company & Commercial, Insolvency & Restructuring, Litigation, Schulte Roth & Zabel LLP, Bankruptcy, Shareholder, Breach of contract, Fraud, Fiduciary, Board of directors, Limited liability company, Beneficiary, Standing (law), Good faith, Commercial law, Derivative suit, Westlaw, Delaware Court of Chancery, Delaware Supreme Court
    Location:
    USA
    Firm:
    Schulte Roth & Zabel LLP

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