Earlier this month, Mattress Firm, Inc., and its affiliated debtors (collectively, “Mattress Firm”) filed for chapter 11 protection in the United States Bankruptcy Court for the District of Delaware.  Through the bankruptcy, Mattress Firm expects to complete a prepackaged restructuring within 45 to 60 days.

Commercial landlords need to pay close attention to this bankruptcy.  Mattress Firm has already filed court motions for approval to reject up to 700 leases and will begin to close roughly 200 stores in the next few days.

Specifically, the Debtors have filed seven omnibus motions to reject hundreds of unexpired leases of nonresidential property.  The Debtors have also provided notice of “Cure Amounts” to those commercial landlords for which leases have been rejected.  The Debtors’ strategy in this bankruptcy proceeding is to renegotiate their leases or reject them outright.

The rights of Mattress Firm’s commercial landlords will invariably be impacted.  Below is a link to a previous post titled “Ten Things Every Commercial Landlord Should Know About a Tenant in Bankruptcy.”  This link provides a brief summary of some of the issues landlords should consider when a commercial tenant such as Pacific Sunwear files for bankruptcy.

Carl D. Neff is a partner with the law firm of Fox Rothschild LLP.  Carl is admitted in Delaware and regularly practices before the United States Bankruptcy Court for the District of Delaware. You can reach Carl at (302) 622-4272.

Starting on September 14, 2018, George Miller, as Chapter 7 Trustee of the DA Liquidating Corporation, f/k/a Delivery Agent, Inc., et al. (“Debtors”) filed approximately 84 complaints seeking the avoidance and recovery of allegedly preferential and/or fraudulent transfers under Sections 547 and 550 of the Bankruptcy Code.

Delivery Agent and its affiliated debtors filed voluntary petitions for bankruptcy in the U.S. Bankruptcy Court for the District of Delaware on September 15, 2016.  Delivery Agent had originally filed for Chapter 11 protection in September with $80 million in debt, after a struggle with disappointing profitability and a need to increase cash and revenues from online platforms allowing viewers to buy goods from entertainment sites or their televisions.  The case was converted to a chapter 7 proceeding last year.

The various avoidance actions are pending before the Honorable Laurie S. Silverstein.  The Pretrial Conference has been set for November 15, 2018.

For readers looking for more information concerning claims and defenses in preference litigation, attached is a booklet prepared by this firm on the subject: “A Preference Reference: Common Issues that Arise in Delaware Preference Litigation.”

Carl D. Neff is a partner with the law firm of Fox Rothschild LLP.  You can reach Carl at (302) 622-4272 or at cneff@foxrothschild.com.

On April 5, 2018, VER Technologies Holdco LLC, along with eight subsidiaries and affiliates (collectively, “VER”), filed a voluntary petition for relief under Chapter 11 of the Bankruptcy Code in the U.S. Bankruptcy Court for the District of Delaware (Case No. 18-10834).

VER, based in Glendale, CA, is an engineering and equipment company that, among other things, lit the red carpet for the Academy Awards show.  VER filed for bankruptcy after negotiating a proposed restructuring deal with creditors. The Debtors listed $1 billion in liabilities and less than $50,000 worth of assets in its Chapter 11 petition.  According to the Debtors’ petition, VER filed for Chapter 11 having entered into a restructuring support agreement and will be seeking approval of DIP Financing provided by its pre-petition senior lenders.

Bank of America Corp. will act as the agent for lenders providing VER with funding to keep operating while under Bankruptcy Court supervision.  The Debtors in these bankruptcy cases are represented by the law firm of Kirkland & Ellis.  The cases have been assigned to the Honorable Kevin Gross.

Carl D. Neff is a partner with the law firm of Fox Rothschild LLP.  You can reach Carl at (302) 622-4272 or at cneff@foxrothschild.com.

On January 31, 2018, Hancock Fabrics Inc., the post-effective date debtor, filed approximately 68 complaints seeking the avoidance and recovery of allegedly preferential and/or fraudulent transfers under Sections 547, 548 and 550 of the Bankruptcy Code. The Debtors filed voluntary petitions for bankruptcy in the U.S. Bankruptcy Court for the District of Delaware on February 2, 2016 under Chapter 11 of the Bankruptcy Code.  On June 20, 2017, the Court entered an order confirming the Debtors’ Second Amended Joint Chapter 11 Plan of Liquidation. The various avoidance actions are pending before the Honorable Brendan Shannon.  For preference defendants looking for an analysis of defenses that can be asserted in response to a preference complaint, below are several articles on this topic:

Preference Payments: Brief Analysis of Preference Actions and Common Defenses

Minimizing Preference Exposure: Require Prepayment for Goods or Services

Minimizing Preference Exposure (Part II) – Contemporaneous Exchanges

Carl D. Neff is a partner with the law firm of Fox Rothschild LLP.  You can reach Carl at (302) 622-4272 or at cneff@foxrothschild.com.

On December 29, 2017, Life Settlement Absolute Return I, LLC (“LSAR”), along with Senior LS Holdings, LLC (“Senior LS”; collectively with LSAR, the “Debtors”), filed petitions for relief under Chapter 11 in the Bankruptcy Court for the District of Delaware (Case Nos. 17-13030 and 17-13031).

According to the Declaration in Support of the First Day Motions of Robert J. Davey, III (“Davey Declaration”), LSAR was formed as a special purpose vehicle to invest in life insurance policies in the life settlement market. LSAR has comprehensive agreements with third-parties for the provision of management, administrative and operational services.  Senior LR operates as a holding company for the policies.

According to the Davey Declaration, the Debtors have been unable to pay their existing debt, primarily because many insureds have outlived their actuarial life expectancy, prolonging LSAR’s receipt of cash from the death benefits of the policies.  Thus, it became financially difficult for LSAR to continue servicing premium payments on the policies.

The Debtors have have filed a number of first day motions, including a cash collateral motion, a joint administration motion, and a motion to maintain the Debtors’ bank accounts.  As of the date of this post, the first day hearing has not yet been noticed.  The cases have been assigned to the Honorable Mary F. Walrath.

Carl D. Neff is a partner with the law firm of Fox Rothschild LLP.  You can reach Carl at (302) 622-4272 or at cneff@foxrothschild.com.

On November 17, 2017, Real Industry, Inc., along with its subsidiaries and affiliates (collectively the “Debtors” or “Real Industry”), filed a petition for relief under Chapter 11 in the Bankruptcy Court for the District of Delaware (Case No. 17-12464).

According to the Declaration in Support of First Day Motions of Michael J. Hobey, liquidity issues and certain singular negative events have led to Real Industry’s bankruptcy filing. The Debtors operate an aluminum recycling and alloy production company based in Beachwood, Ohio.

Contemporaneously, Real Alloy Holding, Inc. and its U.S. subsidiaries filed petitions for voluntary Chapter 11 reorganization in the U.S. Bankruptcy Court for the District of Delaware.  However, Real Alloy’s operations in Germany, United Kingdom, Norway, Canada and Mexico and its Goodyear, Ariz. joint venture are not included in the filings.

The First Day Hearing is scheduled for Monday, November 20th at 1:00 PM at US Bankruptcy Court, 824 Market St., 5th Fl., Courtroom #5, Wilmington, Delaware.  The Debtors have have filed a number of First Day Motions, including, but not limited to, the following:

  • Motion to Pay Employee Wages and Maintain and Continue Certain Compensation and Benefit Programs Postpetition;
  • Motion for Continuation of Utility Service and Approval of Adequate Assurance of Payment to Utility Company Under Section 366(b);
  • Motion to Pay Critical Trade Vendor Claims and Authorizing the Debtors to Pay Certain Prepetition Claims of Shippers, Warehousemen, and Materialmen; and Authorizing Banks to Honor and Process Checks and Electronic Transfer Requests Related Thereto; and
  • Motion to Authorize Debtors to (A) Continue Performing Under Prepetition Hedging and Trading Arrangements and Honor Obligations Related Thereto, and (B) Enter Into and Perform Under New Postpetition Hedging Arrangements.

The cases have been assigned to the Honorable Kevin J. Carey.  The proposed claims and noticing agent is Prime Clerk LLC.

Carl D. Neff is a partner with the law firm of Fox Rothschild LLP.  You can reach Carl at (302) 622-4272 or at cneff@foxrothschild.com.

Effective November 6, 2017, the U.S. Bankruptcy Court for the District of Delaware will start making audio recordings of certain proceedings available to the public through PACER, as well as the standard ECF notifications received by counsel.  The recordings themselves will be an attachment to a PDF document, and will be in MP3 format.

Initially it will only be for proceedings before Judge Kevin J. Carey, although it may expand to other Judges in the future.  Click here for the notification posted by the Clerk’s Office, and click here for instructions on accessing the audio files through ECF notification or PACER.

Included with the notification are details regarding confidential, sealed or personal information that may come up during a hearing and how that is being handled.  Short answer, counsel will have to move to seal the entire recording, as partial redactions are not possible.

Carl D. Neff is a partner with the law firm of Fox Rothschild LLP.  You can reach Carl at (302) 622-4272 or at cneff@foxrothschild.com.

In the recent decision of Indian Harbor Ins. Co. v. Zucker, 860 F.3d 373 (6th Cir. 2017), the Sixth Circuit Court of Appeals held that a liquidation trustee’s suit against the debtor’s former directors and officers (D&Os) falls within the “insured-versus-insured” exclusion in the debtor’s liability insurance policy.

The liquidation trustee sued the D&Os for $18.8 million, alleging breach of fiduciary duties.  The insurance company filed a suit for a declaratory judgment that it had no obligation to cover any damages from the lawsuit because the trustee’s claims fell within on the “insured-versus-insured” exclusion, which excluded from coverage “any claim made against an Insured Person . . . by, on behalf of, or in the name or right of, the Company or any Insured Person,” except for derivative suits by independent shareholders and employment claims.  The District Court held that exclusion applied.  The Circuit Court affirmed.

The Sixth Circuit held that, “[a]s a voluntary assignee, the Trust stands in [debtor] Capitol’s shoes and possesses the same rights subject to the same defenses.  Just as the exclusion covers a lawsuit ‘by’ Capitol, it covers a lawsuit ‘by’ the Trust ‘in the . . . right’ of Capitol.”

The fact that the debtor became a new entity – a debtor in possession – upon filing for bankruptcy did not change the result because “this new-entity argument surely would not work before bankruptcy.  Capitol could not have dodged the exclusion by transferring a mismanagement claim to a new company – call it Capitol II – for the purpose of filing a mismanagement claim against the [D&Os].  No matter how legally distinct Capitol II might be, the claim would still be ‘by, on behalf of, or in the name or right of’ Capitol.  The same conclusion applies to a claim filed after bankruptcy.”

The Sixth Circuit acknowledged that the purpose of the “insured-versus-insured” exception was to prevent people within the insured company from “push[ing] the costs of mismanagement onto an insurance company just by suing (and perhaps collusively settling with) past officers who made bad business decisions.”  Nevertheless, it mattered not that the bankruptcy court approval of the plan transferring the causes of action provided “a safeguard against the collusive suits that insured-versus-insured exclusions seek to prevent” because it did “not eliminate the practical and legal difference between an assignee and a court-appointed trustee that receives the right to sue on the estate’s behalf by statute.”

Carl D. Neff is a partner with the law firm of Fox Rothschild LLP.  You can reach Carl at (302) 622-4272 or at cneff@foxrothschild.com.

Starting on September 12, 2017, Peter Kravitz, as Settlement Trustee of the Samson Settlement Trust, filed approximately 293 complaints seeking the avoidance and recovery of allegedly preferential and/or fraudulent transfers under Sections 547, 548 and 550 of the Bankruptcy Code.

Samson Resources Corporation and its affiliated debtors filed voluntary petitions for bankruptcy in the U.S. Bankruptcy Court for the District of Delaware on September 16, 2015 under Chapter 7 of the Bankruptcy Code.  The Debtors were an onshore oil and gas exploration and production company with interests in various oil and gas leases primarily located in Colorado, Louisiana, North Dakota, Oklahoma, Texas, and Wyoming.  On February 13, 2017, the Court entered an order confirming the Global Settlement Joint Chapter 11 Plan of Reorganization of Samson Resources Corporation and Its Debtor Affiliates. The cases are jointly administered pursuant to Rule 1015(b) of the Bankruptcy Rules.

The various avoidance actions are pending before the Honorable Christopher S. Sontchi.  As of the present date, the Pretrial Conference has not yet been scheduled.

For readers looking for more information concerning claims and defenses in preference litigation, attached is a booklet prepared by this firm on the subject: “A Preference Reference: Common Issues that Arise in Delaware Preference Litigation.”

Carl D. Neff is a partner with the law firm of Fox Rothschild LLP.  You can reach Carl at (302) 622-4272 or at cneff@foxrothschild.com.

Starting on September 5, 2017, the Official Committee of Unsecured Creditors on behalf of the bankruptcy estates of HH Liquidation, LLC and its affiliated debtors (“Debtors”) filed approximately 178 complaints seeking the avoidance and recovery of allegedly preferential and/or fraudulent transfers under Sections 547 and 550 of the Bankruptcy Code.

The Debtors filed voluntary petitions for bankruptcy in the U.S. Bankruptcy Court for the District of Delaware on September 8, 2015 under Chapter 11 of the Bankruptcy Code.  On September 21, 2015, pursuant to section 1102 of the Bankruptcy Code, the Office of the United States Trustee appointed the Official Committee of Unsecured Creditors.

The various avoidance actions are pending before the Honorable Kevin Gross.  For preference defendants looking for an analysis of defenses that can be asserted in response to a preference complaint, below are several articles on this topic:

Preference Payments: Brief Analysis of Preference Actions and Common Defenses

Minimizing Preference Exposure: Require Prepayment for Goods or Services

Minimizing Preference Exposure (Part II) – Contemporaneous Exchanges

Carl D. Neff is a partner with the law firm of Fox Rothschild LLP.  You can reach Carl at (302) 622-4272 or at cneff@foxrothschild.com.