In the recent decision of Paragon Offshore, No. 16-10386 (CSS), 2021 (Bankr. D. Del. June 28, 2021), the U.S. Bankruptcy Court for the District of Delaware (the court) addressed the issue of whether the Office of the United States Trustee (OUST) could collect its quarterly fees against assets that were previously transferred to a litigation trust (the litigation trust) free and clear of any and all claims, liens and other encumbrances pursuant to a confirmed plan of liquidation.

On Monday, March 10, 2014, the companies that own and operate the Sbarro pizza chain, Sbarro LLC and 33 affiliates, filed for bankruptcy reorganization under Chapter 11 of the federal Bankruptcy Code.  The Sbarro companies operate 217 restaurants in the U.S. and there are 582 franchised restaurants, 176 in the U.S. and 406 at international locations.

Bed Bath & Beyond, the home goods retailer, has filed bankruptcy under Chapter 11 and plans to conduct liquidation sales and close all of its brick-and-mortar stores by June 30, as reported by The New York Times. The retailer points to an inability to adjust to the growth of online shopping as a reason for its downfall.

Is a debtor “engaged in commercial or business activities” for Subchapter V eligibility?

Such question has been addressed on many occasions and by many courts.

The trend seems to be toward a conclusion that the nature and quantity of “commercial or business activities” required for Subchapter V eligibility is this:

• Nature = “easily met”; and
• Quantity = “not much.”

The latest opinion to confirm the trend is In re Robinson, Case No. 22-2414, Southern Mississippi Bankruptcy Court (issued April 17, 2023; Doc. 90).

On April 17, 2023, the Fifth Circuit issued an opinion holding that a senior lender who uses economic leverage and exercises its statutory and contractual rights upon a borrower’s default, including the right to credit bid as part of a bankruptcy sale process—despite adverse impact on a junior lender—remains a “good faith” purchaser entitled to the protections under Section 363(m) of the Bankruptcy Code.

Subchapter V of chapter 11 of the United States Bankruptcy Code, which took effect in 2020, has undergone significant developments since its enactment, as courts continue to interpret its provisions, intended to streamline the chapter 11 process for smaller debtors in bankruptcy. Recent data and judicial decisions have given greater context to not only the popularity of Subchapter V, but also its substantive boundaries, with some of these key developments discussed below.

Subchapter V Filings Increase 81% Year-Over-Year in April

In In re Nine West LBO Securities Litigation (Case No. 20-2941) (S.D.N.Y. Dec. 4, 2020), a federal district court denied in part a motion to dismiss claims brought by the Nine West liquidating trustee against former directors (the "Defendants") of The Jones Group, Inc. (the "Company"), Nine West's predecessor, for, among other things, (i) breaches of their fiduciary duties of care and loyalty, and (ii) aiding and abetting breaches of fiduciary duties. The litigation arises from the 2014 LBO of the Company by a private equity sponsor ("Buyer").

In the recent decision of Paragon Offshore, No. 16-10386 (CSS), 2021 (Bankr. D. Del. June 28, 2021), the U.S. Bankruptcy Court for the District of Delaware (the court) addressed the issue of whether the Office of the United States Trustee (OUST) could collect its quarterly fees against assets that were previously transferred to a litigation trust (the litigation trust) free and clear of any and all claims, liens and other encumbrances pursuant to a confirmed plan of liquidation.

On Monday, March 10, 2014, the companies that own and operate the Sbarro pizza chain, Sbarro LLC and 33 affiliates, filed for bankruptcy reorganization under Chapter 11 of the federal Bankruptcy Code.  The Sbarro companies operate 217 restaurants in the U.S. and there are 582 franchised restaurants, 176 in the U.S. and 406 at international locations.

Bed Bath & Beyond, the home goods retailer, has filed bankruptcy under Chapter 11 and plans to conduct liquidation sales and close all of its brick-and-mortar stores by June 30, as reported by The New York Times. The retailer points to an inability to adjust to the growth of online shopping as a reason for its downfall.