Delaware Bankruptcy Litigation : Delaware Bankruptcy Lawyer & Attorney : Fox Rothschild Law Firm : Financial Restructuring & Bankruptcy Litigation

Summary

In an 8 page decision signed February 21, 2013, Judge Gross of the Delaware Bankruptcy Court denied a Motion for Enlargement of Administrative Claim, holding that the movant failed to prove excusable neglect. Judge Gross’s opinion is available here (the “Opinion”).

The Opinion analyzes the motion pursuant to the excusable neglect factors provided in Pioneer Investment Services Co. v. Brunswick Assocs. Ltd. Partnership, 507 U.S. 380, 395 (1993) (“These include, as the Court of Appeals found, the danger of prejudice to the debtor, the length of the delay and its potential impact on judicial proceedings, the reason for the delay, including whether it was within the reasonable control of the movant, and whether the movant acted in good faith.”).

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Summary

In a 25 page opinion published February 7, 2013, Judge Sontchi applied black-letter contract interpretation principles in conjunction with the bankruptcy rules in holding that a landlord was not entitled to damages resulting from a debtor's breach of its lease. Judge Sontchi’s opinion is available here (the “Opinion”).

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On May 29, 2012, the United States Supreme Court issued an opinion in the Radlax Gateway Hotel bankruptcy proceeding regarding the viability of a plan of reorganization that prohibited a bank from credit-bidding on the debtors’ assets.  See Radlax Gateway Hotel, LLC, et al., v. Amalgamated Bank, __S.Ct.__ No. 11-166, 2012 WL 1912197 (U.S. May 29, 2012)(hereinafter “Opinion at * ___”).  The debtors in Radlax (“Debtors”) purchased a hotel at the Los Angeles International Airport, along with an adjacent property. Debtors intended to renovate the hotel and develop the adjacent lot into a parking garage.  Opinion at *1.  Things did not go as planned for the Debtors.  The costs to develop the garage were greater than originally expected.  Debtors were $120 million in debt to their lenders and out of funds needed to complete the project.  Opinion at *2.  Soon thereafter, Debtors filed chapter 11 petitions for reorganization in the United States Bankruptcy Court for the Northern District of Illinois.  Id.

During the course of the bankruptcy proceeding, Debtors filed a plan of reorganization whereby they proposed to auction off substantially all of their assets to the highest bidder, with a “stalking horse” bidder providing an initial bid of $55 million.  Under the Debtors’ auction procedures, however, the Debtors’ secured lender would not be allowed to bid on the Debtors’ property using the debt it owed to offset the purchase price.  Said another way, the plan prohibited the lenders from credit-bidding on the assets.  Opinion at *3.  Instead, under the plan the lenders would be required to bid on the assets using cash.  Id.  

The Bankruptcy Court denied the Debtors’ sale procedures motion, finding that the proposed auction procedures violated 11 U.S.C. sec. 1129(b)(2)(A)’s requirements of cramdown plans.  Opinion at *3.  Debtors’ appealed and the Bankruptcy Court certified the appeal directly to the United States Court of Appeals for the Seventh Circuit.  The Seventh Circuit accepted the certification and affirmed the decision of the Bankruptcy Court.  Id.  In doing so, the Seventh Circuit held that sec. 1129(b)(2)(A) “does not permit debtors to sell an encumbered asset free and clear of a lien without permitting the lien holder to credit-bid.”  Id., citing River Road Hotel Partners, LLC, et al. v. Amalgamated Bank, 651 F.3d 642 (7th Cir. 2011).  

The Supreme Court noted that “[t]he parties debate at some length the purposes of the Bankruptcy Code, pre-Code practices, and the merits of credit-bidding.”  Opinion at *10.  To the Court, however, the focus should be on the language of the relevant Code section - 1129(b)(2)(A), as it governs when a plan may be confirmed over the objection of secured creditor.  In order for a plan to be “fair and equitable” with respect to an objecting creditor’s claim, the plan must provide:

    (i)(I)  that the holders of such claims retain the liens securing such claims,  whether the property subject to such liens is retained by the debtor or transferred  to another entity, to the extent of the allowed amount of such claims; and (II) that each holder of a claim of such class receive on account of such claim deferred cash payments totaling at least the allowed amount of such claim, of a value, as of  the effective date of the plan, of at least the value of such holder’s interest in the        estate’s interest in such property;

    (ii)  for the sale, subject to section 363(k) of this title, of any property that is subject to the liens securing such claims, free and clear of such liens, with such liens to attach to the proceeds of such sale, and the treatment of such liens on proceeds under clause (i) or (iii) of this subparagraph; or
    
    (iii)  for the realization of such holders of the indubitable equivalent of such  claims. 
11 U.S.C. sec. 1129(b)(2)(A); Opinion at *4. 

Under clause (ii) above, debtor’s property may be sold free and clear of a secured creditor’s lien, “subject to section 363(k).”  Section 363(k) permits a creditor to credit-bid on the sale of a debtor’s assets up to the amount of its claim.  Opinion at *4.  The Radlax Debtors, however, sought to confirm a plan that did not authorize credit-bidding, arguing that the plan was confirmable under clause (iii) which allows a creditor to receive its indubitable equivalent of its claim.  The Court, however, rejected Debtors’ argument, finding it “hyperliteral and contrary to common sense.”  Opinion at *5.  

The Court observed that it “is a commonplace of statutory construction that the specific governs the general.”  Opinion at *5, citing Morales v. Trans World Airlines, Inc., 504 U.S. 374, 384.  In the present Code section, clause (ii) is a specific Code provision that spells out the requirements for selling collateral free of liens, whereas clause (iii) is broader provision that says nothing about a sale free of liens.  Opinion at *7.  Therefore, the Court held that as a matter of law, no bid procedures like the one proposed by the Debtors (prohibiting credit bidding) could satisfy the requirements of 11 U.S.C. sec. 1129(b)(2)(A).  Opinion at *9.  In doing so, the Court affirmed the decision of the Court of Appeals below.  Opinion at *10.  

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Jason Cornell is an equity partner with the law firm Fox Rothschild LLP.  Jason is a member of Fox Rothschild's Financial Services Department and practices before the United States Bankruptcy Court for the District of Delaware.  You can reach Jason at 302 252 5833 or jcornell@foxrothschild.com.

 

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Earlier this summer, the Delaware Bankruptcy Court issued an opinion in the New Century Holdings bankruptcy addressing the definition and purpose of the "Divestiture Rule."  See Carr v. New Century TRS Holdings, Inc. (In re New Century TRS Holdings, Inc.), Adv. No. 09-52251(KJC)(Bankr. D. Del. June 7, 2012)(hereinafter "Opinion at *___").  Under the Divestiture Rule, an appeal from a bankruptcy court order divests the lower court of any further jurisdiction over the subject of the appeal.  Opinion at *4, citing In re Whispering Pines Estates, Inc., 369 B.R. 752, 757 (1st Cir. BAP); In re Washington Mutual, Inc., 461 B.R. 200, 217-18 (Bankr. D. Del. 2011).  In New Century, a former borrower (the "Borrower") filed an adversary proceeding against New Century (the "Debtor") alleging various lender liability claims.  The parties eventually reached a settlement resolving the adversary proceeding. Opinion at *2. 

After receiving the settlement payment, the Borrower filed a notice of dismissal of the adversary proceeding. The Borrower later filed a Request to Stay Dismissal arguing that she had obtained evidence that would show the bankruptcy trustee (the "Trustee"), representing the Debtor's estate had made false representations in the course of settlement negotiations.  Opinion at *3.  After conducting an evidentiary hearing, the Bankruptcy Court issued an order denying the Borrower's Request to Stay Dismissal.  In response, the Borrower filed a motion for reconsideration which the Court subsequently denied and the Borrower appealed.  Id.

In the New Century Opinion, the Court considered the Borrower's Motion for Sanctions (the "Motion"), which the Borrower filed approximately two months after filing the Notice of Appeal.  In dismissing the Borrower's Motion, the Court invoked the Divestiture Rule.  According to the Court, the purpose of the Rule is "to avoid the confusion of placing the same matter before two courts at the same time and preserve the integrity of the appeal process."  Opinion at *4, citing Whispering Pines, 369 B.R. at 757.  The New Century Court noted, however, the obvious limitations of the Rule - "the appeal of one ruling does not stay the entire bankruptcy case."  Opinion at *4, citing WaMu, 461 B.R. at 218. 

The Whispering Pines court explained the purpose of limiting the Divestiture Rule:

... a bankruptcy case typically raises a myriad of issues, many totally unrelated and unconnected with the issues involved in any given appeal.  The application of a broad rule that a bankruptcy court may not consider any request filed while an appeal is pending has the potential to severly hamper a bankruptcy court's ability to administer cases in a timely manner.

Opinion at *5, citing Whispering Pines, 369 B.R. at 758.  In denying the Motion for Sanctions, the New Century Court found that the issues raised in the Motion are directly related to the issues on appeal.  Based on this finding, the Court applied the Divestiture Rule to the Motion and found that the Court lacked jurisdiction to grant the relief requested by the Borrower.  Opinion at *5. 

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Jason Cornell is a bankruptcy attorney with the law firm Fox Rothschild LLP. Jason practices before the United States Bankruptcy Court for the District of Delaware.  You can contact Jason at jcornell@foxrothschild.com or at 302 252 5833.

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The Third Circuit released a precedential opinion on May 14, 2012 that can greatly impact bankruptcy debtors attempting to reorganize as well as their secured creditors.  A copy of the opinion is available here (the "Opinion").  Because Fox Rothschild was directly involved in this case and argued before the Third Circuit, I will only be providing a brief summary of the Opinion.

Central to the Opinion is the Third Circuit's interpretation of 11 U.S.C. § 506(a), a portion of which is quoted in the Opinion as follows:

An allowed claim of a creditor secured by a lien on property in which the estate has an interest . . . is a secured claim to the extent of the value of such creditor's interest in the estate‟s interest in such property . . . and is an unsecured claim to the extent that the value of such creditor's interest . . . is less than the amount of such allowed claim. Such value shall be determined in light of the purpose of the valuation and of the proposed disposition or use of such property . . . .

Opinion at *13-14.  The Third Circuit then confirmed the value given to the collateral by the Bankruptcy Court, which resulted in the second lien holder having its secured claim valued at 0 and the entire value of its claim treated as unsecured. For all of the specifics and details (which are quite important in this Opinion) please follow the link above or contact Michael Viscount, Joshua Klein or Samuel Israel.

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Summary

In a straight-forward 9 page decision signed May 1, 2012, Judge Walrath of the Delaware Bankruptcy Court granted a defendant’s motion to dismiss a preference complaint, but granted the plaintiff leave to amend. Judge Walrath’s opinion is available here (the “Opinion”).  Numerous posts on this blog discuss other opinions issued by the Delaware Bankruptcy Court dealing with preference payments, as can be seen here. PREFERENCE OPINION POSTS.

Additionally, this opinion is very similar to that discussed in this prior post: Decision in Everything But Water, LLC Requires Preference Claimants to Identify Transferees Specifically in Granting Motion to Dismiss.

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Summary

In an 18 page decision signed April 12, 2012, Judge Walsh of the Delaware Bankruptcy Court provided a fairly thorough analysis of the effect of the Stern v. Marshall opinion issued by the Supreme Court, in his opinion denying a motion to dismiss. Judge Walsh’s opinion is available here (the “Opinion”).  A blog post discussing the Stern v. Marshall opinion is available here: Stern v. Marshall: Effects on Delaware.

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Summary

In an opinion issued March 16, 2012, Judge Sontchi of the Delaware Bankruptcy Court ruled that unpaid debts subject to a judicial lien are dischargeable in bankruptcy. Judge Sontchi’s opinion is available here (the “Opinion”).  The Opinion, like all those published by Judge Sontchi, walks readers through the relevant law in making its final ruling; in this case determining what liens are dischargeable pursuant to the bankruptcy code.

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In a 17 page decision entered March 9, 2012, Judge Carey of the Delaware Bankruptcy Court granted a motion for relief from the Bankruptcy Code’s automatic stay to allow an undersecured creditor to exercise its remedies against a debtor’s collateral.  A copy of Judge Carey's opinion is available here (the "Opinion").  The Opinion was issued in a case nearly identical to that discussed in this post: Dirt-for-Debt, or Just Dirt: Judge Carey's Latest Decision in All Land Investments, LLC.

The Debtor is related to that in the Dirt-for-Debt post. The creditor moving for relief from stay is the same.  The experts are the same. Judge Carey’s decision and holdings are the same. If you like the feeling of déjà vu, by all means, read the opinion referenced in the Dirt-for-Debt post and this opinion both.  If you are only going to read one, though, make it the Dirt-for-Debt opinion as Judge Carey provides more information regarding the debtors, and it makes for a better visualization of what happened.

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Summary

In a 28 page decision dated March 9, 2012, Judge Carey of the Delaware Bankruptcy Court denied confirmation of a debtor’s plan and granted the motion to lift the automatic stay filed by a creditor with a lien against a majority of the debtor’s assets.  Judge Carey’s opinion is available here (the “Opinion”).  A Dirt-for-Debt exchange is one where a debtor conveys to a secured creditor the collateral securing its loan in full satisfaction of the creditor’s claim. A more important aspect of this term, however, is that it is very catchy (it got your attention - didn’t it?) and was used by Judge Carey in the Opinion.
 

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On March 14, 2012, Judge Sontchi of the Delaware Bankruptcy Court issued an opinion in the Carolina Fluid Handling Intermediate Holding Corp. bankruptcy case.  When a Fox Rothschild client is (or could be) affected by a ruling, rather than summarize the opinion, I will be providing a link to the opinion.  The opinion is available here.

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Summary

In an 8 page decision signed January 6, 2012, Judge Walrath of the Delaware Bankruptcy Court allowed a plaintiff to amend a preference complaint to include additional transfers, even though the statute of limitations had expired. Judge Walrath’s opinion is available here (the “Opinion”).  Numerous posts on this blog discuss other opinions issued by the Delaware Bankruptcy Court dealing with preference payments, as can be seen here:  Preference Opinion Posts.

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Summary

In an opinion issued January 4, 2012, Judge Sontchi of the Delaware Bankruptcy Court provided an easy to follow primer in preference law in the course of granting in part and denying in part a preference defendant’s motion for summary judgment. Judge Sontchi’s opinion is available here (the “Opinion”).  The Opinion provides an excellent framework for all preference defendants to understand why preference laws are in place and the reasoning behind their existence. The first half of the Opinion would make a fantastic introduction to any discussion of two of the most common preference defenses, the “ordinary course of business” and “new value” defenses. Please bear in mind, however, that the Opinion was issued in response to a motion for summary judgment, which applies different standards than an opinion written following a complete trial. The below blog posts address other opinions written in response to motions for summary judgment:

SemCrude Decision Delineates the Process for Analyzing Motions for Continuance vs. Motions for Summary Judgment

Decision in DBSI Delays Motion for Summary Judgment

Decision in New Century TRS Holdings, Inc. Holds That Publication in 2 Newspapers is Insufficient to Grant a Motion for Summary Judgment

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Summary

In a very easy to follow opinion issued October 21, 2011, Judge Sontchi of the Delaware Bankruptcy Court denied a motion to dismiss an avoidance action for improper venue or, in the alternative, to transfer venue of the action. Judge Sontchi’s opinion is available here (the “Opinion”). The Opinion provides an excellent framework for all preference defendants to analyze how applicable this defense may be in actions brought against them. The following posts have addressed issues of venue:

Decision in NWL Holdings, Inc., Limits the Ability of Defendants to Transfer Preference Actions

Decision in DBSI Inc., Reminds Us that District Courts have Personal Jurisdiction Throughout the United States

Decision in DHP Holdings Considers Forum Selection Clause in Deciding Whether to Grant Motion to Change Venue

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On June 23, 2011, the Supreme Court issued a ruling that has sent waves through bankruptcy courts across the nation. Stern v. Marshall, 131 S.Ct. 2594 (2011), is the latest opinion in a long running dispute between the estate of Vickie Lynn Marshall, better known as Anna Nicole Smith, and the estate of her late husband’s son, Pierce Marshall.

There have been numerous reviews and analyses of this opinion, so this blog post won’t focus on the specifics of the Stern decision. Rather, this post will attempt to illustrate the effects of the decision on the Delaware Bankruptcy Courts. One review of the Stern decision that I would recommend was written by Brett Axelrod of Fox Rothschild, and is available here: Axelrod Discussion of Stern v. Marshall. 

I do not doubt that the Delaware Judiciary has asked counsel in numerous hearings if Stern v. Marshall affects its ability to rule on the requested relief (I have personally witnessed this). And since the Stern decision was published, three of the sixteen published decisions of the Delaware Bankruptcy Court have explicitly mentioned it.

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Summary

In an 11 page decision signed June 30, 2011, Judge Walrath of the Delaware Bankruptcy Court granted a motion to dismiss, holding that a preference complaint must clearly identify the alleged preference transferee. Judge Walrath’s opinion is available here (the “Opinion”).  A number of decisions on motions to dismiss under Federal Rule of Civil Procedure 12(b)(6) have been released recently. If you’d like to review some of these rulings, the following blog posts provide a solid start:

Decision in Tweeter Opco Once Again Reminds Trustees of the Specificity Requirement in Pleading Preference Actions

Decision in Crucible Materials Requires Preference Claims to Contain More Than Just Recitations of the Code

Decision in DBSI Inc., Holds that the "Particularity" Requirement of F.R.C.P. 12(b)(6) and 9(b) was Satisfied, Notwithstanding the Number of Alleged Fraudulent Transfers

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Summary

In an 24 page decision signed June 20, 2011, Judge Shannon of the Delaware Bankruptcy Court partially granted several parties’ motions for a continuance opposing several motions for summary judgment, holding that a motion for continuance must be analyzed before even considering a motion for summary judgment. Judge Shannon’s opinion is available here (the “Opinion”).   To those who follow this blog, I apologize that this entry is a bit out of order, but the Court occasionally publishes an opinion out of order and I haven't quite perfected time travel.

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Summary

In a 23 page decision signed July 15, 2011, Judge Walsh of the Delaware Bankruptcy Court denied a motion to allow a plaintiff to file an amended complaint, holding that the amended complaint was too deficient to survive a motion to dismiss and therefore would not be allowed. Judge Walsh’s opinion is available here (the “Opinion”).

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Summary

In his first published opinion since returning from a well-deserved vacation, Judge Sontchi of the Delaware Bankruptcy Court ruled that facially plausible allegations are sufficient to protect a complaint, which sought to recharacterize another party’s bankruptcy claims, from being dismissed pursuant to Federal Rule of Civil Procedure (“FRCP”) 12(b)(6). Judge Sontchi’s opinion is available here (the “Opinion”).  For the principles of an analysis under FRCP 12(b)(6), please review the posts listed below:

Decision in Tweeter Opco Once Again Reminds Trustees of the Specificity Requirement in Pleading Preference Actions

Decision in Crucible Materials Requires Preference Claims to Contain More Than Just Recitations of the Code

Decision in DBSI Inc., Holds that the "Particularity" Requirement of F.R.C.P. 12(b)(6) and 9(b) was Satisfied, Notwithstanding the Number of Alleged Fraudulent Transfers

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Summary

In a 24 page decision signed July 8, 2011, Judge Walrath of the Delaware Bankruptcy Court granted a motion to for summary judgment, holding a non-debtor defendant liable with the Debtor as a single employer for alleged WARN Act violations. Judge Walrath’s opinion is available here (the “Opinion”).

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Summary

In a 12 page decision signed July 6, 2011, Judge Walrath of the Delaware Bankruptcy Court granted a motion to dismiss, holding that a complaint that sets forth only conclusory allegations parroting the statutory language of the Bankruptcy Code is insufficient. Judge Walrath’s opinion is available here (the “Opinion”).

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Summary

In a 20 page decision signed July 1, 2011, Judge Shannon of the Delaware Bankruptcy Court partially granted a motion to dismiss, holding that the allegations of fraud in the complaint were insufficiently pled as to one of the defendants. Judge Shannon’s opinion is available here (the “Opinion”).  It seems that claims of fraud appear with some regularity in Delaware’s Bankruptcy Court, so this post will focus on the Opinion’s discussion of pleading claims for fraud. Below are links to two recent blog posts concerning opinions in which fraud was discussed:

Decision in DBSI Inc., Holds that the "Particularity" Requirement of F.R.C.P. 12(b)(6) and 9(b) was Satisfied, Notwithstanding the Number of Alleged Fraudulent Transfers

Decision in In Re: Donna K. Brady Holds: Officers Aren't Contractors

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Summary

In an 11 page decision signed June 22, 2011, Judge Walsh of the Delaware Bankruptcy Court denied a motion to dismiss, holding that the Bankruptcy Court of the District of Delaware has personal jurisdiction over an insider of a debtor when the debtor files for bankruptcy in the District of Delaware. Judge Walsh’s opinion is available here (the “Opinion”).  DBSI’s preference actions have resulted in Judge Walsh publishing a number of opinions. Here are some of our prior posts dealing with DBSI preference actions:

Decision in DBSI Delays Motion for Summary Judgment

Decision in DBSI Inc., Holds that the "Particularity" Requirement of F.R.C.P. 12(b)(6) and 9(b) was Satisfied, Notwithstanding the Number of Alleged Fraudulent Transfers

Trustee In DBSI Bankruptcy Files Adversary Actions

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Summary

In an 11 page opinion published June 14, 2011, Judge Walrath ruled that a Chapter 7 Trustee’s lack of specificity in pleading a preference action was grounds for dismissal under FRCP 12(b)(6). Judge Walrath’s opinion is available here (the “Opinion”).

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Summary

In a 14 page opinion published June 7, 2011, Judge Carey ruled that publication of notice in only two newspapers was insufficient information to grant a motion to dismiss based on adequacy of notice. Judge Carey’s opinion is available here (the “Opinion”).

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Summary

In a 30 page opinion published June 1, 2011, Judge Walrath ruled that funds held in a “rabbi” trust in order to pay for a “top hat” plan are property of the bankruptcy estate. Read on for the definition of “top hat” plans. Judge Walrath’s opinion is available here (the “Opinion”).  The background and opinion in this case are complex, so while this post will try to explain the situation, it will necessarily lack specificity that is found in the Opinion. I would encourage you to read the opinion as Judge Walrath appears to have taken great care to explain each piece of her analysis in great detail.

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Summary

In an 11 page opinion published May 27, 2011, Judge Walsh granted a motion under F.R.C.P. 56(d) and quoted another opinion which says “where the facts are in possession of the moving party a continuance of a motion for summary judgment for purposes of discovery should be granted almost as a matter of course.” Judge Walsh’s opinion is available here (the “Opinion”).

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Summary

In an 21 page opinion published May 25, 2011, Judge Shannon ruled that, “the fact that an agent may represent more than one principal does not alter the well-established doctrine that an agent with authority is capable of binding its principal.” Opinion at *2-3. Judge Shannon’s opinion is available here (the “Opinion”).
 

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Summary
In an 11 page opinion published May 18, 2011, Judge Shannon ruled that, in the context of a motion to dismiss, the officer of a corporation, which is itself a contractor, is not also a contractor by virtue of her position within the corporation. Judge Shannon’s opinion is available here (the “Opinion”).

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Summary

In an opinion published May 20, 2011, Judge Walsh held that a settlement agreement which is rejected in a bankruptcy proceeding is “Core” and will be decided by the Bankruptcy Court, even when it contains a jurisdictional clause that requires the agreement to be interpreted according to the laws of New York. Judge Walsh’s opinion is available here (the “Opinion”).

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Judge Carey released an order amending his Memorandum Opinion dated May 10, 2011 in the New Century TRS Holdings, Inc. bankruptcy. His previous opinion had misstated the amount of a settlement between the two parties in the adversary proceeding which gave rise to the opinion. Through this order, the misstated settlement amount was corrected to reflect that the settlement amount was $60,000 rather than $65,000 as contained in Judge Carey’s original Opinion.A link to Judge Carey’s most recent order is here.

As is my custom when discussing changed opinions, here is a link to the old opinion.

And my summary of the opinion, which remains unchanged, is here.

Multiple Decisions in New Century TRS Holdings, Inc., Hold: When You Settle a Claim, You Get What You Contract For

It is good to know that when something is wrong, you can count on the Delaware Judiciary to help you get it fixed. Just be sure to ask for it using the correct methods. In this instance a motion was used, in other situations, it may only take a phone call.

John Bird practices with the law firm Fox Rothschild LLP in Wilmington, Delaware. You can reach John at 302-622-4263, or jbird@foxrothschild.com.

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Judge Walsh released an amended Opinion in the NEC Holdings Corp. case on May 18, 2011. His previous opinion had an incomplete citation of 28 U.S.C. § 157(b)(2). It shows just how serious our judges are about the Bankruptcy Code.

In an effort to keep followers of this blog fully apprised of every opinion released by the Delaware Bankruptcy Court, I have linked to Judge Walsh’s newly corrected opinion here.

His previous opinion is here.

And my summary of the opinion, which remains unchanged, is here:

Decision in NEC Holdings Corp., Holds Non-Debtor Environmental Liabilities to be Non-Core

John Bird practices with the law firm Fox Rothschild LLP in Wilmington, Delaware. You can reach John at 302-622-4263, or jbird@foxrothschild.com.

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Summary
In two separate decisions arising from adversary proceedings in the New Century TRS Holdings, Inc., et al. (the “Debtors”) bankruptcy, signed May 10, 2011, Judge Carey of the Delaware Bankruptcy Court denied requests to stay dismissal, requiring each of the moving parties to accept the limitations of their settlement agreements. The first opinion was made in the case Leslie Marks v. New Century TRS Holdings, Inc., and is available here (the “Marks Opinion”). The second opinion was made in the case Anita B. Carr v. New Century TRS Holdings, Inc., and is available here (the “Carr Opinion” and together with the Marks Opinion, the “Opinions”).

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Summary

In a 10 page decision signed May 5, 2011, Judge Walsh of the Delaware Bankruptcy Court denied a motion to dismiss and held that the plaintiff Litigation Trustee satisfied the “particularity” requirements of Federal Rules of Civil Procedure 12(b)(6) and 9(b), despite having his complaint allege that each transfer within a 13 page list of transfers was fraudulent.  Judge Walsh’s opinion is available here (the “Opinion”).

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Summary

In a 5 page decision signed May 4, 2011, Judge Walsh of the Delaware Bankruptcy Court held that a proceeding initiated by a Debtor, seeking contribution relating to environmental claims is non-core. Judge Walsh’s opinion is available here (the “Opinion”).

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Summary

In a 28 page decision signed April 29, 2011, Judge Gross of the Delaware Bankruptcy Court determined that in order for a transfer to be considered “substantially contemporaneous” as used by Bankruptcy Code §547(c), it does not necessarily need to comply with the timing requirements of §547(e). Judge Gross’s opinion is available here (the “Opinion”). 

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Summary

In a 13 page decision signed, April 11, 2011, Judge Carey of the Delaware Bankruptcy Court granted a motion disallowing a creditor’s late-filed bankruptcy claim, and held that if there is no legal requirement that a party respond to an affidavit, a lack of response does not bind a party to that affidavit nor can it be considered an admission by that party.  Judge Carey’s opinion is available here.

Background

Mr. Muhammad  took out a loan from New Century Mortgage Corporation (a “Debtor”) in order to purchase a home.  Then, after the loan was sold to another servicer, the Debtor entered bankruptcy.  Mr. Muhammad had troubles with the new servicer, and eventually was informed that his home was being foreclosed upon.  Opinion at *3. 

Mr. Muhammad filed a claim in the bankruptcy case based, in part, on numerous documents with names such as “Affidavit of Truth” or “Statement-of-Specific-Facts” which he had previously filed with the office of his County Register of Deeds.  The Debtors never responded to the documents filed with the Register of Deeds, but they did object to Mr. Muhammad’s claim as late-filed.

Judge Carey’s Opinion

Judge Carey addressed the timing of Mr. Muhammad’s claim, then addressed the question of the affect of the affidavits and statements-of-fact filed by Mr. Muhammad.

Timing of Claim Filing

Judge Carey held that because there was no pleading of excusable neglect, nor did Mr. Muhammad claim that he did not receive notice of the bar date, there was no “basis for permitting him to file a late claim.” Opinion at *7-8.  The Third Circuit Court held that the bar date “is a drop-dead date that bars all prepetition claimants who received the required notice.”  Opinion at *8.  There is no room for argument here, if the debtors provided the right notice, either you file on time, or you are out of luck.

Statements-of-Fact

Judge Carey cited opinions of the Third Circuit and the Western District of Virginia to support his opinion that there is “no legal authority … that would require the Debtors to respond to the Affidavits and Statements or be bound by their contents for failing to respond.”  Opinion at *9.  There are only a few specific times when the failure of a person or company to respond to a statement is considered an admission that the statement is true, and there are specific rules governing how the statements have to be phrased to make them binding.  Because these conditions were not met in this case, Judge Carey did not consider the Affidavits to be binding on the Debtors.

Before filing papers in court, remember that even if something contains “legalistic language,” it can still be “lacking in any substance,” and just because your opponent doesn’t respond to your claim, it doesn’t make it an admission on their part.  See Opinion at *8-9.  Lastly, if someone who owes you money enters bankruptcy protection, you MUST file a claim before the bar date.  Otherwise you must either convince the court that missing the claims bar date was the result of excusable neglect or risk having your claim disallowed in its entirety.

John Bird practices with the law firm Fox Rothschild LLP in Wilmington, Delaware.  You can reach John at 302-622-4263, or jbird@foxrothschild.com.

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Summary

In a 15 page decision signed yesterday, April 5, 2011, Judge Sontchi of the Delaware Bankruptcy Court determined that when a company receives pleadings in a bankruptcy case, even if served on their “doing business as” name, they have received proper service. Judge Sontchi’s opinion is available here.

Background

Select AirCargo (“AirCargo”) had provided services to Advanced Marketing Services, Inc., (“AMS”) under the name PAC. AirCargo and PAC were the same company – identical in all but name. It’s exactly like when a person, like myself, goes by their middle name. Nothing is different but the name.

AMS and several of its affiliates entered Chapter 11 bankruptcy protection in December of 2006. In November of 2007, the Court confirmed their chapter 11 Plan, and Curtis Smith was appointed as the Plan Administrator. As the Plan Administrator, part of Mr. Smith’s job was to prosecute preference actions, including the action against PAC.

AirCargo had filed a claim in the bankruptcy case, so it had been receiving notices in the bankruptcy case. When Mr. Smith brought the preference action, he served the complaint on PAC. But AirCargo confused the documents related to the preference action with those related to the main bankruptcy case, and never filed an answer. Opinion at *4. Because no response was filed, Mr. Smith obtained a default judgment against PAC for the entire amount in controversy. Not until the U.S. Marshal’s Office levied Select AirCargo’s bank accounts for roughly $77,000, did they appear to realize what was happening and file a motion to vacate the default judgment. Opinion at *5-6.

Judge Sontchi’s Opinion

Judge Sontchi declined to vacate the default judgment and provided multiple reasons why service was proper on AirCargo. These reasons include: (1) AirCargo and PAC used the same address, (2) AirCargo did business with AMS under the name PAC, and (3) AirCargo filed its claim under the name PAC.

As to AirCargo’s defense that they confused the preference pleadings with those of the underlying bankruptcy, Judge Sontchi said “Select AirCargo was culpable in receiving, yet ignoring, numerous pleadings it received from the Plaintiff and orders from the Court.” In other words, mailings from the Court are never “Junk Mail”.

Jason Cornell, this blog's primary contributor, has written numerous posts about preference actions, which are available here.

John Bird practices with the law firm Fox Rothschild LLP in Wilmington, Delaware. You can reach John at 302-622-4263, or jbird@foxrothschild.com

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Summary

In a 17 page decision signed on February 24, 2011, Judge Walrath of the Delaware Bankruptcy Court applied a twelve factor test in determining if a preference action against an out-of-state defendant could be transferred by that defendant to another jurisdiction more convenient to it.   In her opinion issued in response to a motion by Harko, Inc., Judge Walrath held that because the twelve factors favored keeping the action in Delaware or were neutral, that the preference action would not be transferred. Judge Walrath’s opinion is available here. 

Background

NWL Holdings, Inc. and several of its affiliates entered Chapter 11 bankruptcy protection in November of 2008. In February of 2009, the Debtors’ cases were converted to Chapter 7 liquidations and a Chapter 7 Trustee was appointed by the Court. Later in 2007, the Chapter 7 Trustee began filing preference actions against a number of parties, including Harko, Inc. (adversary proceeding 10-52768). In response to the preference action, Harko filed a motion to dismiss for lack of personal jurisdiction or to transfer venue of the adversary proceeding.

Judge Walrath’s Opinion

In a detailed, step by step process, Judge Walrath explained that a bankruptcy court’s forum is the entire nation, and bankruptcy courts have personal jurisdiction throughout the United States. Following this reasoning, Judge Walrath denied Harko’s motion to dismiss for lack of personal jurisdiction. 

Judge Walrath then moved to a discussion of a twelve factor test that bankruptcy courts apply when determining if an action should be moved to another venue. The twelve factors come from a decision by the Third Circuit, Jumara v. State Farm Ins. Co., 55 F.3d 873 (3d Cir. 1995). Any defendant interested in attempting to transfer a case out of a court in the Third Circuit should attempt to frame their arguments according to the following twelve factors:

1) plaintiff’s choice of forum;

2) defendant’s forum preference;

3) whether the claim arose elsewhere;

4) the location of books and records and/or the possibility of viewing premises if applicable;

5) the convenience of the parties as indicated by their relative physical and financial condition;

6) the convenience of the witnesses, but only to the extent that the witnesses may actually be unavailable for trial in one of the fora;

7) the enforceability of the judgment;

8) practical considerations that would make the trial easy, expeditious, or inexpensive;

9) the relative administrative difficulty in the two fora resulting from congestion of the courts’ dockets;

10) the public policies of the fora;

11) the familiarity of the judge with applicable state law; and

12) the local interest in deciding local controversies at home.

Jason Cornell, this blog's primary contributor, has previously posted the following article about transferring actions to a different venue:

Decision in DHP Holdings Considers Forum Selection Clause in Deciding Whether to Grant Motion to Change Venue

John Bird practices with the law firm Fox Rothschild LLP in Wilmington, Delaware.  You can reach John at 302-622-4263, or jbird@foxrothschild.com.

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