When a person takes an action against an individual debtor in bankruptcy in violation of the automatic stay imposed under Section 362(a) the debtor is entitled to recover damages under Section 362(k)(1) to include costs and attorneys’ fees. An issue regarding the extent of damages to be recovered has centered on whether the fees that shall be awarded are limited to those incurred in ending the stay violation, or if they also include the fees incurred in pursuing the damage award, including defending the award on appeal.

Orchard Acquisition Company, LLC, along with four of its affiliates and subsidiaries (including the J.G. Wentworth Company, LLC), has filed a petition for relief under Chapter 11 in the Bankruptcy Court for the District of Delaware (Lead Case No. 17-12914). The Petition estimates the Debtors’ assets and liabilities to both be between $100 – $500 million.

Charming Charlie Holdings, Inc., a fashion accessories retailer based in Houston, Texas, has, along with six of its affiliates and subsidiaries, filed a petition for relief under Chapter 11 in the Bankruptcy Court for the District of Delaware (Lead Case No. 17-12906). According to the Petition, Charming Charlie has an estimated $50 – $100 million in assets and $100 – $500 million in liabilities.

Dextera Surgical Inc. (NASDAQ: DXTR), a designer and manufacturer of surgical devices based in Redwood City, CA, has filed a petition for relief under Chapter 11 in the Bankruptcy Court for the District of Delaware (Case No. 17-12913). The Petition estimates that Dextera has $10 – $50 million in both assets and liabilities.

Mammoet-Starneth LLC, an international engineering company that designs and constructs giant observation wheels and structures, has filed a petition for relief under Chapter 11 in the Bankruptcy Court for the District of Delaware (Case No. 17-12925).

One of the fundamental elements of the American bankruptcy system is the automatic stay under section 362 of the bankruptcy code. The stay protects the debtor and its assets from creditor activity, in order to facilitate equitable treatment of creditors in the collective bankruptcy process. The remedies provided for violations of the stay allow the estate to enforce the protections provided by section 362.

“[T]he Bankruptcy Code does not permit [an undersecured] creditor . . . to advance an unsecured claim for post-[bankruptcy] attorneys’ fees,” held the U.S. District Court for the Eastern District of North Carolina on Nov. 27, 2017. Summitbridge Nat’l Invs. Iii v. Faison, 2017 U.S. Dist. LEXIS 195267, *8 (E.D. N. C. Nov. 27, 2017). Affirming the bankruptcy court, the district court agreed that “the Code is most properly interpreted to allow only oversecured creditors to add post-[bankruptcy] attorneys’ fees.” Id., at *10.

Distressed and special situations investors should take note of the U.S. Bankruptcy Court’s recent decision in Oi’s Chapter 15 case. We present our takeaways for investors.

Boston Herald, Inc., along with three affiliates and subsidiaries, has filed a petition for relief under Chapter 11 in the Bankruptcy Court for the District of Delaware (Lead Case No. 17-12883). The Herald’s Petition estimates both its assets and liabilities to be between $10 – $50 million.

(Bankr. S.D. Ind. Dec. 4, 2017)

The bankruptcy court grants the motion to dismiss, finding the defendant’s security interest in the debtor’s assets, including its inventory, has priority over the plaintiff’s reclamation rights. The plaintiff sold goods to the debtor up to the petition date and sought either return of the goods delivered within the reclamation period or recovery of the proceeds from the sale of such goods. Pursuant to 11 U.S.C. § 546(c), the Court finds the reclamation rights are subordinate and the complaint should be dismissed. Opinion below.