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The Delaware Bankruptcy Insider is a premier blog designed to bring its readers a comprehensive analysis of the latest Delaware corporate bankruptcy news and rulings.  Brought to you by Ashby & Geddes, P.A.

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What Is The Proper Method For Analyzing Timing Of Payments For The Ordinary Course Of Business?

Stanziale v. Indus. Specialists Inc., a/k/a Indus. Specialists, LLC (In re Conex Holdings, LLC), Adv. No. 12-51170 (CSS), 2014 WL 7205203 (Bankr. D. Del. Dec. 18, 2014)

The Court in this Opinion addressed and clarified the methodology for showing whether payment timing is “ordinary” under the subjective prong of section 547(c)(2) of the Bankruptcy Code.  In so doing, it eschewed the use of weighted averages or other statistical methodologies, and found that payments were ordinary when they were within the range of the parties’ historical dealings and close to the historical average.

Under the facts of the case, the chapter… Read More

Tidbits From The Delaware Bankruptcy Court On In Pari Delicto and Equitable Subordination

Lightsway Litig. Servs., LLC v. Yung (In re Tropicana Enter., LLC), Adv. No. 10-50289 (KJC), 2014 WL 6704445 (Bankr. D. Del. Nov. 25, 2014)

In this Memorandum, the Honorable Kevin J. Carey disposes of certain claims against William J. Yung III (“Yung”), the former director and CEO of Tropicana Entertainment LLC (with its affiliated entities, the “Debtors”) and certain entities controlled by Yung, Wimar Tahoe Corporation (“Wimar”), the parent corporation of the Debtors, and Columbia Sussex Corporation (“Columbia” and together with Wimar and Yung, the “Defendants”).  Notably, the Court discusses—albeit briefly—two developing legal concepts in the Third Circuit… Read More

Amid Unforeseeable Failed Sale, Debtor Gave Employees Enough WARNing For Layoffs

Varela v. Eclipse Aviation Corp. (In re AE Liquidation, Inc.), Adv. No. 09-50265 (MFW), 2014 WL 6460805 (Bankr. D. Del. Nov. 18, 2014)

Eclipse Aviation Corporation (“Eclipse”) engineered, manufactured, and sold jet aircrafts.  In 2008, Eclipse defaulted on its secured notes.  Its board of directors contemplated liquidation, but eventually decided on a sale as a going-concern through Bankruptcy Code section 363 to Eclipse’s largest shareholder, European Technology and Investment Research Center (“ETIRC”).  ETIRC funded the Eclipse bankruptcy with $20 million in debtor-in-possession financing.  ETIRC later emerged as the stalking horse bidder, financed through a Russian state-owned bank.  On January 23,… Read More

Merely Labeling A Claim “Turnover” Under Bankruptcy Code Section 542 Does Not Always Yield A “Core” Claim

IPC Int’l Corp. v. Milwaukee Golf Shopping Center LLC (In re IPC Int’l Corp.), Adv. No. 14-50333 (MFW), 2014 WL 5544692 (Bankr. D. Del. Nov. 3, 2014)

In this adversary proceeding, Judge Walrath granted a motion to transfer venue, holding that all alleged claims (including a claim for turnover under Bankruptcy Code section 542) were non-core and that the interests of justice and convenience of the parties weighed in favor of transfer.

The IPC proceeding was commenced by the debtor, alleging turnover, breach of contract, and unjust enrichment to recover certain accounts receivable incurred mostly post-petition under a pre-petition services agreement (the… Read More

The Insider’s Scoop: EFH Bidding Procedures Approved But Significant Modifications Necessary To Cure Fundamental Flaws

Upon commencement of this mega-chapter 11 case, the Debtors filed and pursued assumption of a restructuring support agreement (“RSA”), which contemplated, among other things, the tax-free spinoff of the Debtor entities that control the economic interest in their non-debtor affiliate, Oncor, a company that provides residential and commercial electricity in Texas and has been estimated by the Debtors to be worth as much as $18 billion.  Over the summer, however, the Debtors were forced to abandon the RSA when certain bidders offered more value than was to be provided under the RSA transactions.

Post termination of the RSA, the Debtors… Read More

Issue Of First Impression: Delaware Bankruptcy Court’s Jurisdiction Encompasses The Authority To Approve Rejection Of Expired Collective Bargaining Agreements

In re Trump Entm’t Resorts, Inc., No. 14-12103(KG) (Bankr. D. Del. Oct. 17, 2014)

In a sharply written Opinion, the Honorable Kevin Gross decided an issue of first impression in Delaware:  whether the Court has jurisdiction under Bankruptcy Code section 1113 to rule on a debtor’s motion to reject a collective bargaining agreement (“CBA”) that expired post-petition but its obligations continued status quo pursuant to Federal labor law.  Judge Gross found that the language and legislative purpose of section 1113 establishes the Court’s jurisdiction to enter an order approving rejection.  Applying the facts of the case, His Honor granted the… Read More

Does A Post-Petition Draw On A Letter Of Credit Affect Subsequent New Value Under Section 547(c)(4)? A Closer Look At The Effect Of Post-Petition Payments In The Wake Of Friedman’s

Pirinate Consulting Grp., LLC v. Styron LLC (In re Newpage Corp., et al.), Adv. Proc. No. 13-52443 (KG), 2014 WL 4948421 (Bankr. D. Del. Oct. 1, 2014)

In the wake of the Third Circuit’s Friedman’s opinion, the Court in this decision addressed whether a preference defendant who draws on a letter of credit post-petition may still credit the relevant amounts as subsequent new value under section 547(c)(4) of the Bankruptcy Code.  In denying cross motions for summary judgment on the issue, Judge Kevin Gross illustrated that Friedman’s does not provide a bright line rule in all… Read More

Equitable Subordination Relief Granted; Recharacterization Relief Denied

U.S. v. State Street Bank and Trust Co., as Trustee for Junior Subordinated Secured PIK Notes, et al. (In re Scott Cable Communications, Inc.), Adv. Proc. No. 01-4605 (KJC), 2014 WL 5298031 (Bankr. D. Del. Oct. 15, 2014).

This recent and lengthy 90-page Opinion by the Honorable Kevin J. Carey arises from the chapter 11 proceedings of Scott Cable Communications, Inc. (“Scott Cable” or the “Company”) and concerns an adversary complaint in which the United States of America, on behalf of the Internal Revenue Service (the “Government” or the “IRS”), sought to recharacterize or equitably subordinate… Read More

Coal Supply Agreement Held Executory; Pre-petition Payments Thereunder Not Recoverable As Preferences

Pirinate Consulting Group, LLC v. Avoca Bement Corp. (In re Newpage Corp.), Adv. No. 13-52196 (KG), 2014 WL 4948215 (Bankr. D. Del. Oct. 1, 2014)

In this short Memorandum Opinion, Judge Gross was called upon to determine the executory nature of a pre-petition coal supply agreement (the “Coal Supply Agreement”) in order to decide whether certain pre-petition payments to the non-debtor contract counterparty were preferential.  In rendering its decision, the Court relied heavily upon the principles set forth by the Third Circuit in Sharon Steel Corp. v. Nat’l Fuel Gas Distrib. Corp., 872 F.2d 36, 39-40… Read More

Short History of Dealings? No More Gap Filling for Ordinary Course of Business Defense

Stanziale, Jr. v. Southern Steel & Supply, L.L.C. (In re Conex Holdings, LLC), Adv. No. 12-51211 (CSS), 2014 WL 5139240 (Bankr. D. Del. Oct. 14, 2014)

In this recent Opinion from the Honorable Christopher S. Sontchi, the Court was presented with cross-motions for summary judgment, both seeking a determination that six preferential transfers paid to the defendant by the debtor qualified for the ordinary course of business defense under section 547(c)(2) of the Bankruptcy Code.  Importantly, the transfers constituted the totality of the parties’ relationship.  In rendering His Honor’s Opinion denying both summary judgment requests, the… Read More