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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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Delaware District Court Holds Subordination Agreements Enforceable to Subordinate Junior Secured Creditor’s Timely Filed Claim to Those Tardily Filed by a Senior Secured Creditor

Bank of New York Mellon Trust Co. v. Miller (In re Franklin Bank Corp.), No. 13-1713-RGA, 2014 WL 3611596 (D. Del. July 21, 2014)

In this Memorandum Opinion, Judge Andrews of Delaware’s District Court vacated an order of the Bankruptcy Court and held that a secured creditor who tardily filed its claims years after the applicable bar date did not waive its ability to enforce subordination agreements to subordinate a junior secured creditor’s timely filed claims.  The District Court further held that, despite the Bankruptcy Court’s contrary ruling, the senior creditor’s failure to… Read More

Bankruptcy Court Allows Sale Free and Clear of Successor Liability Claims

In re Ormet Corp., No. 13-10334 (MFW), 2014 WL 3542133 (Bankr. D. Del. July 17, 2014)

In this Memorandum Opinion, Judge Walrath overruled an objection to a sale of the debtors’ assets free and clear of the objector’s successor liability claim, and granted a stay waiver under Bankruptcy Rules 6004(h) and 6006(d) to allow the sale to close immediately.  In reaching its conclusion, the Court emphasized the integral nature of Bankruptcy Code section 363(f) to the bankruptcy process, enabling debtors to sell assets free and clear of any claims—something not available outside of the bankruptcy… Read More

Bankruptcy Court’s Jurisdiction Held Not to Extend to Post-Confirmation ERISA/LMRA Claims Asserted Against Reorganized Debtor

Int’l Union v. Visteon Corp., No. 1:13-cv-01742-RGA, 2014 WL 3547014 (D. Del. July 18, 2014)

Through this decision, Delaware District Court Judge Andrews retained jurisdiction over a post-confirmation proceeding commenced by a group of retirees formerly employed by Visteon Corporation (“Visteon”).  More specifically, the plaintiffs asserted, under the Labor-Management Relations Act and the Employee Retirement Income Security Act, that Visteon and others wrongfully terminated their post-employment benefits following Visteon’s emergence from bankruptcy – a right which was reserved by Visteon in its confirmed plan of reorganization.  The defendants urged the District Court to refer the… Read More

An Estate Release Does Not Preclude Tort Plaintiffs From Pursuing Direct, Particularized Claims Against Released Parties

In re Caribbean Petroleum Corp. et al., No. 10-12553 (KG), 2014 WL 3360563 (Bankr. D. Del. July 9, 2014)

In this Memorandum Opinion, the Honorable Kevin Gross held (i) that the Bankruptcy Court has post-confirmation jurisdiction to decide the extent and scope of releases contained in plans it considers and confirms and that (ii) the release at issue made by the debtors in favor of their former officers and/or directors did not prevent third-party tort claimants from pursuing their claims against such released parties. In reaching its jurisdictional conclusion, the Court relied upon the Third… Read More

Third Circuit Affirms Bankruptcy Court’s Excision of Inadequately Disclosed Third-Party Release From Plan of Reorganization

In re Lower Bucks Hosp., 2014 WL 2981215 (3d Cir. July 3, 2014)

In this Opinion, the Third Circuit held that non-consensual third-party releases were correctly severed from a proposed plan of reorganization because of significant disclosure deficiencies.  In doing so, the Court reminds all practitioners of a hallmark of plan drafting and solicitation—that “ailure to do so in a clear and conspicuous manner risks excision of the release from the plan.”  Because… Read More

Third Circuit in SCH Corporation and Delaware District Court in Tribune Emphasize the Importance of Examining the Relief Sought by Appellants When Deciding An Appeal Equitably Moot

In re SCH Corp., 2014 WL 2724606 (3d Cir. June 17, 2014); Wilmington Trust Co. v. Tribune Co. (In re Tribune Co.), 2014 WL 2797042 (D. Del. June 18, 2014) (consolidated appeals)

In In re Semcrude, L.P., 728 F.3d 314 (3d Cir. 2013), the Third Circuit discussed the analytical framework for evaluating the well-known equitable mootness factors: “(1) whether the reorganization plan has been substantially consummated,… Read More

Third Circuit Affirms Confirmation of Plan with Reasonable Classification Scheme and Secured Creditor’s Right to Vote Subordinated Debt

In re Coastal Broadcasting Sys., Inc., 2014 WL 2808260 (3d Cir. June 23, 2014)

On June 23, 2014, the Third Circuit Court of Appeals issued an Opinion affirming the Delaware District Court’s decision to affirm confirmation of a chapter 11 plan of reorganization.  In doing so, the Court upheld the enforceability of a voting assignment in a subordination agreement that arose from a pre-petition out-of-court restructuring.

Prior to its bankruptcy filing, Coastal Broadcasting Systems, Inc. (“Coastal”) effectuated an out-of-court restructuring whereby the company redeemed the shares of two shareholders (the “Appellants”) in exchange for a $1.7… Read More