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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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Karen B. Skomorucha Owens, Esq.
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Practice Pointers: Bankruptcy Court Lacks Authority to Transfer Pursuant to 28 U.S.C. § 1631 and A Post-Petition Action Satisfies “Is Commenced” Element for Purposes of Mandatory Abstention

Troisio v. Erickson (In re IMMC Corp.), No. 15-1043 (GMS), 2018 WL 259941 (D. Del. Jan. 2, 2018)

In this Opinion from the Delaware District Court, Judge Sleet affirmed the Bankruptcy Court’s decision denying a liquidating trustee’s motion pursuant to 28 U.S.C. § 1631 to transfer an adversary proceeding to the United States District Court for the Eastern District of Pennsylvania. Relying on plain statutory language, the District Court found that the Bankruptcy Court lacked transfer authority under 28 U.S.C. § 1631 – which limits transfer power to only the courts listed in section 610 – because… Read More

Bankruptcy Court Determines Issue of First Impression – Holds That Recovery Under Section 550 is Not Capped by The Amount of Creditor Claims

PAH Litigation Trust v. Water Street Healthcare Partners, L.P. (In re Physiotherapy Holdings, Inc.), Adv. Proc. No. 15-51238 (KG), 2017 WL 5054308 (Bankr. D. Del. Nov. 1, 2017)

On cross-motions for partial summary judgment, the Delaware Bankruptcy Court was confronted with a complex issue of first impression in the Third Circuit – whether damages in a fraudulent transfer action are capped to permit creditors to receive only the amount of their claims. Competing interests made the decision difficult.  On the one hand, there are numerous decisions outside of the Third Circuit holding that there is no cap… Read More

The Bar Date Is Like A Statute Of Limitations; It Must Be Followed

In re Nortel Networks Inc., No. 09-10138 (KG), 2017 WL 2821535 (Bankr. D. Del. June 29, 2017)

In this Opinion, the United States Bankruptcy Court for the District of Delaware (the “Bankruptcy Court”) rendered a seemingly “harsh” decision necessitated by the “unreasonable relief” requested.  Op. at 16.  Seven years after the September 30, 2009 deadline to file proofs of claim (the “Bar Date”), SNMP Research International, Inc. (“SNMPRI”) and SNMP Research, Inc. (“SNMPR”, and together with SNMPRI, “SNMP”) moved for authority for SNMPRI to file amended proofs of claim and an order adding SNMPR… Read More

Stern Requires More Than Subject Matter Jurisdiction, Bankruptcy Court Must Also Have Constitutional Adjudicatory Authority to Approve Nonconsensual Third-Party Releases in a Plan

Opt-Out Lenders v. Millennium Lab Holdings II, LLC, No. 16-110-LPS, — F.Supp.3d —, 2017 WL 1032992 (D. Del. Mar. 17, 2017) corrected and superseded by 2017 WL 1064997 (D. Del. Mar. 20, 2017)

In this Opinion, the United States District Court for the District of Delaware (the “District Court”) examines the bankruptcy court’s authority post-Stern v. Marshall, 131 S. Ct. 2594 (2011), to enter a final order releasing and permanently enjoining a non-debtor’s state law fraud and federal RICO claims against non-debtors absent consent.  Following two recent United States Supreme Court cases—Stern and Wellness Int’l Network, Ltd. v…. Read More

Bankruptcy Court Finds “Close Nexus” Between Adversary Proceeding and Plan Necessary to Exercise Post-Confirmation, “Related to” Jurisdiction

Emerald Capital Advisors Corp. v. Karma Auto. LLC (In re FAH Liquidating Corp.), Adv. No. 16-51528 (KG), 2017 WL 663521 (Bankr. D. Del. Feb. 16, 2017)

In denying the motion to dismiss filed by Wanxiang Clean Energy USA LLC (“Wanxiang”) and Karma Automotive LLC (“Karma” and together with Wanxiang, “Defendants”), the Bankruptcy Court found that it has both “arising in” and “related to” jurisdiction to hear an adversary proceeding filed by the Trustee for the FAH Liquidating Trust (“Trustee”) over two years after confirmation.

A more fulsome history of the bankruptcy cases filed by Fisker Automotive Holdings, Inc. and Fisker… Read More

Executoriness for Purposes of Kiwi Defense to Preference Action Determined on a Contract by Contract Basis; Purchase Orders Issued under Master Agreement Were Separate Divisible Contracts

PIRINATE Consulting Grp., LLC v. C.R. Meyer & Sons Co. (In re NewPage Corp.), No. 13-52429 (KG), 2017 WL 571478 (Bankr. D. Del. Feb. 13, 2017)

The Litigation Trustee (“Trustee”) of the NP Creditor Litigation Trust brought this adversary proceeding against C.R. Meyer & Sons Co. (“CRM”) seeking to avoid and recover over $2.3 million in alleged preferential transfers.  NewPage Corporation (“NewPage”) and its affiliates (collectively, “Debtors”) operated paper mills throughout the United States, and CRM handled maintenance and construction at the Escanaba, Michigan and Duluth, Minnesota mills.  Prior to the Debtors’ bankruptcy filing, the parties entered into… Read More

Pac Sun Class Representative Denied Permission to File Class Proof of Claim on Behalf of Priority Claimants

In re Pacific Sunwear of California, Inc., No. 16-10882 (LSS) (Bankr. D. Del. June 22, 2016 and Aug. 8, 2016)

In the first of two related Opinions, Judge Laurie Selber Silverstein granted claimant Tamaree Beeney permission to file a class proof of claim for alleged violations of California wage and hour laws under California’s Private Attorney General Act (“PAGA”), but limited her representative role to absent class members who hold non-priority general unsecured claims.  In the second Opinion, the Court denied reconsideration of Her Honor’s ruling and further disallowed another claimant from representing the priority class in… Read More

Bankruptcy Court Sidesteps Corporate Governance Issue, Deciding Motion to Dismiss Chapter 11 Cases on Other Grounds

In re Intervention Energy Holdings, LLC, No. 16-11247 (KJC), 2016 WL 3185576 (Bankr. D. Del. June 3, 2016)

In this Opinion, Judge Kevin J. Carey denies a secured creditor and common member’s motion to dismiss the Chapter 11 cases of two Delaware limited liability companies for lack of corporate authority, siding with other federal courts that have “consistently refused to enforce waivers of federal bankruptcy rights.”  Op. at *10.  In doing so, the Court declines “the parties’ invitation to decide what may well be a question of first impression of state law (i.e., determining the scope of LLC… Read More

Third Circuit Approves of Structured Dismissals That Deviate From the Bankruptcy Code’s Priority Scheme – But Only in Rare Cases

Official Comm. of Unsecured Creditors v. CIT Group/Business Credit, Inc. (In re Jevic Holding Corp.), No. 14-1465, 2015 WL 2403443 (3d Cir. May 21, 2015)

The Third Circuit Court of Appeals (the “Third Circuit”) answered a novel question of bankruptcy law in the affirmative—whether a chapter 11 case can ever be resolved in a “structured dismissal” (a disposition that winds up the bankruptcy with certain conditions attached instead of simply dismissing the case and restoring the status quo ante) that deviates from the priority scheme of the Bankruptcy Code.  In rare cases, the Bankruptcy… Read More

Walking the Fine Line Between “Legitimate Zeal of Attorneys Representing their Client” and “Dilatory or Aggressive Litigation Practices” That May Lead to Sanctions

In re Prosser, No. 14-1633, 2015 WL 305523 (3d Cir. Jan. 26, 2015)

This precedential Opinion should serve as a warning to practitioners—a bankruptcy court can (and will) impose sanctions under 28 U.S.C. § 1927 for litigation tactics that rise to the level of bad faith.  On appeal, the United States Court of Appeals for the Third Circuit (the “Third Circuit”) reversed an order entered by the District Court of the Virgin Islands (the “District Court”) vacating the imposition of sanctions by the District Court of the Virgin Islands, Division of St. Thomas and St. John, Bankruptcy Division (the… Read More