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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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The Honorable Peter J. Walsh of the Bankruptcy Court for the District of Delaware Announces Retirement

In a short statement posted on the Bankruptcy Court’s website today, it was announced that effective January 1, 2015 Judge Walsh will step down from the bench after almost twenty-two years of service.

Third Circuit Upholds Voluntary Dismissal Order Challenged by Defendant

Carroll v. Prosser (In re Innovative Commn’c Corp.), No. 13-1324, 2014 WL 1979309 (3d Cir. May 16, 2014)

This Opinion issued by the Third Circuit on May 16, 2014 affirmed several orders of the District Court of the Virgin Islands relating to a fraudulent transfer action brought by the chapter 11 trustee of the Innovative Communication Corporation debtors (“ICC”) against Dawn Prosser.  Ms. Prosser became the subject of the action following her receipt of ICC property transferred from her husband Jeffrey Prosser, the ultimate owner and sole member of ICC.  Although a significant portion of the decision… Read More

Derivative Standing to Pursue Recharacterization, Equitable Subordination, and Breach of Fiduciary Duty Claims on behalf of Debtors Optim Energy, LLC Denied by Bankruptcy Court

In re Optim Energy, LLC, No. 14-10262 (BLS), 2014 WL 1924908 (Bankr. D. Del. May 13, 2014)

On May 13, 2014, the Honorable Brendan L. Shannon issued an Opinion denying an unsecured creditor’s request for derivative standing to pursue claims on behalf of debtor Optim Energy, LLC (“Optim Energy”) and its affiliated debtors (collectively, the “Debtors”) for recharacterization, equitable subordination, and breach of fiduciary duties against direct and indirect non-debtor owners, ECJV Holdings, LLC (“ECJV”) and Cascade Investments, L.L.C. (“Cascade”).  Walnut Creek Mining Company (“Walnut Creek”), the Debtors’ largest non-insider general unsecured creditor, alleged that the… Read More

IRS Not Required to File Proof of Claim for Certain Taxes Arising From Employee Wages Earned Pre-petition But Paid Post-petition

In re Goody’s LLC, No. 09-10124 (CSS) (Bankr. D. Del. May 13, 2014)

A recent Opinion issued by Judge Sontchi analyzed a motion filed by the debtors in In re Goody’s LLC to enforce plan injunctions and determine liability for certain employment taxes.  The issue in Goody’scentered on the post-petition payment of allowed pre-petition wage claims.  The debtors withheld employment taxes (the “Withheld Amounts”) from the wage payments, filed requisite tax returns, deposited the Withheld Amounts with the Internal Revenue Service (the “IRS”), and requested the IRS to apply the Withheld Amounts to the employees’ federal income and Social… Read More

Bankruptcy Court Permits Stipulated Dismissal Over Objection of Potential Intervenor

Tampa Port Auth. v. Taylor (In re Irish Bank Resolution Corp. Ltd.), No. 14-50084 (CSS), 2014 WL 1884916 (Bankr. D. Del. May 12, 2014)

In this Memorandum Order, the Honorable Christopher S. Sontchi allowed dismissal of an adversary proceeding by voluntary stipulation signed by the plaintiff and all defendants pursuant to Federal Rule of Civil Procedure 41(a)(1)(A)(ii).  The Court allowed the dismissal over the objection of Liberty Channelside, LLC (“Liberty”), which previously sought to intervene in the proceeding but had not yet been granted authority to do so.

By way of background, the adversary proceeding (the… Read More

Bankruptcy Court Awards Substantial Contribution Only to Spansion’s Ad Hoc Committee of Convertible Noteholders

In re Spansion Inc., No. 09-10690 (KJC) (Bankr. D. Del. May 14, 2014)

In this long-awaited Memorandum Order, the Honorable Kevin J. Carey recognized that the Ad Hoc Committee of Convertible Noteholders (the “Ad Hoc Convert Committee”) assisted the Court in determining the enterprise value of Spansion Inc. and its affiliated debtors (the “Debtors”) and thus, allowed a substantial contribution award for the committee’s directly attributable professional fees and expenses.  In the same Order, the Court held that the Ad Hoc Committee of Equity Security Holders of Spansion Inc. (the “Ad Hoc Equity Committee”) was not… Read More

Third Circuit Holds That Bankruptcy Code Section 502(e)(1)(B) Can Be Applied to Disallow Claims Against a Post-Confirmation Liquidation Trust

In re Caribbean Petroleum Corp., No. 13-2326, 2014 WL 1778050 (3d Cir. May 6, 2014)

On May 6, 2014, the Third Circuit affirmed the decision of the Bankruptcy Court in In re Caribbean Petroleum Corp. to grant a liquidating trustee’s motion to disallow a proof of claim pursuant to 11 U.S.C. § 502(e)(1)(B).  In doing so, the Court disregarded a challenge to the applicability of section 502(e)(1)(B) in the post-confirmation context.

Interek USA, Inc. (“Interek”) sought contribution from the Caribbean Petroleum debtors in the event that Interek was found liable in ongoing litigation related to a large explosion at the debtors’… Read More

Purchaser Cannot Escape Tax Lien Under Terms of Sale Order Despite Court’s Narrow Interpretation of “Permitted Encumbrances”

In re Joan Fabrics Corporation, No. 07-10479 (CSS) (Bankr. D. Del. May 5, 2014)

On May 5, 2014, the Honorable Christopher S. Sontchi issued an Opinion denying a purchaser’s motion to enforce a sale order and hold a North Carolina county in contempt for pursuing unpaid taxes.  In doing so, the Court considered specific circumstances of the sale and interpreted the terms of the asset purchase agreement under North Carolina law to conclude that the county’s actions did not violate the sale order.

On July 5, 2007, the Court approved a sale of several lots of… Read More

Fee-Shifting Provision in a Non-Stock Corporation’s Bylaws Can Be Valid and Enforceable Under Delaware Law

ATP Tour, Inc. v. Deutscher Tennis Bund (German Tennis Federation), No. 534, 2013 (Del. May 8, 2014)

On May 8, 2014, the Delaware Supreme Court addressed the validity of a fee-shifting provision in a Delaware non-stock corporation’s bylaws, holding that such a provision can be valid and enforceable under Delaware law if adopted by the appropriate corporate procedures and for a proper corporate purpose.

The fee-shifting issues considered by the Supreme Court in ATP Tour came in the form of certified questions from the Delaware District Court.  The District Court has presided over disputes between ATP Tour, Inc…. Read More

Irish Insolvency Proceeding of Irish Bank Resolution Corporation Limited Granted Recognition Under Chapter 15

In re Irish Bank Resolution Corp. Ltd. (In Special Liquidation), No. 13-12159 (CSS) (Bankr. D. Del. Apr. 30, 2014)

On December 18, 2013, the Honorable Christopher S. Sontchi entered an Order granting recognition under Chapter 15 of the Bankruptcy Code of the insolvency-related Irish proceeding of Irish Bank Resolution Corporation… Read More