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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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Showing posts in Claims

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

Unredeemed Gift Cards are Not Entitled to Priority Status Under Bankruptcy Code 507(a)(7)

In re City Sports, Inc., No. 15-12054 (KG), 2016 WL 4190090 (Bankr. D. Del. Aug. 4, 2016)

In what the Bankruptcy Court deemed a purely academic issue given the circumstances of the City Sports bankruptcy cases, Judge Gross held that unredeemed gift cards are not entitled to priority status, and instead, are properly classified as general unsecured claims.  In so doing, Judge Gross rejected and disagreed with a previous holding of the Delaware Bankruptcy Court wherein the court found that gift cards fall under the definition of “deposit” and accorded them priority status under the Bankruptcy Code.  See In re WW Warehouse,… Read More

Stock-Based Compensation “Fits Squarely Within” the Bankruptcy Code’s Definition of “Equity Security”

GSE Envtl., Inc. v. Sorrentino (In re GSE Envtl., Inc.), No. 16-50377 (MFW), 2016 WL 3963978 (Bankr. D. Del. July 18, 2016)

In this Opinion, Judge Walrath ruled that stock-based compensation owed to the former chief executive officer (the “Defendant”) of GSE Environmental, Inc. and GSE Holding, Inc. (the “Debtors”) under his employment agreement constitutes an “equity security”, as that term is defined under the Bankruptcy Code.  See Op. at *5; 11 U.S.C. § 101(16).

Defendant’s pre-petition employment agreement provided for monthly compensation in the amount of $186,000, payable in $100,000 of cash and $86,000 of company stock.  After the bankruptcy… Read More

Set Off of Administrative Claim Against Preference Liability is Permissible and Not a “Disguised New Value Defense”

Official Comm. of Unsecured Creditors of Quantum Foods, LLC v. Tyson Foods, Inc. (In re Quantum Foods, LLC), No. 15-50254 (KJC), 2016 WL 4011727 (Bankr. D. Del. July 25, 2016)

In this Opinion, the Delaware Bankruptcy Court addressed a question that remained in the wake of the Third Circuit’s Opinion in Friedman’s: although post-petition goods and services may not be counted as subsequent new value under section 547(c)(4) of the Bankruptcy Code, may they still be used to offset alleged preference liability?  See Friedman’s Liquidating Tr. v. Roth Staffing Co., LP (In re Friedman’s Inc.), 738… Read More

The Threshold Necessary for a “Substantial Contribution” Finding under Bankruptcy Code Section 503(b)(3)(D) is “Exceedingly Narrow” in Delaware

In re RS Legacy Corp., No. 15-10197, 2016 WL 1084400 (Bankr. D. Del. Mar. 17, 2016) (BLS)

In this Opinion, Judge Shannon denied an individual’s request for allowance and payment of an administrative expense claim for his substantial contribution to the case under Bankruptcy Code section 503(b)(3)(D) in the amount of $203,105.51, which consists of his counsel’s fees and expenses.  In so holding, the Court followed a well-developed body of case law showing that the threshold necessary for a contribution to be “substantial” is exceedingly narrow and such efforts cannot be self-interested.

The issue before the Court arose from… Read More

Unsecured Creditor Not Entitled to Postpetition Attorney’s Fees Provided For Under Enforceable Prepetition Contract

In re Tribune Media Co., No. 08-13141 (KJC), 2015 WL 7307305 (Bankr. D. Del. Nov. 19, 2015)

This Memorandum from the Honorable Kevin J. Carey of the Delaware Bankruptcy Court arose from a dispute over a $30 million unsecured claim for postpetition attorney’s fees and costs (the “Fee Claim”) submitted by an indenture trustee (the “Indenture Trustee”) for certain unsecured subordinated securities issued prepetition by debtor Tribune Company.  According to the Indenture Trustee, its Fee Claim should be allowed under the express terms of the governing indenture as well as the United States Supreme Court decision Travelers Casualty & Surety Company… Read More

Prepetition Claim of Third Party Service Provider for Fringe Benefits Provided to Debtors’ Employees Entitled to Priority Treatment Under Section 507(a)(5) of the Bankruptcy Code

In re Tropicana Entm’t, LLC, No. 08-10856 (KJC), 2015 WL 6112064 (Bankr. D. Del. Oct. 14, 2015)

In a recent post-confirmation dispute arising in the chapter 11 bankruptcy cases of Tropicana Entertainment, LLC and its related entities (collectively, the “Debtors”), the Honorable Kevin J. Carey was faced with a question over which courts are split—whether a prepetition claim asserted by a third party service provider of employee benefits is entitled to priority under section 507(a)(5) of the Bankruptcy Code.  The answer of the Delaware Bankruptcy Court was yes, such a claim may receive priority treatment pursuant to such section… Read More

On the Eve of the EFH Confirmation Hearing, Bankruptcy Court Issues Opinion on Unsecured Noteholders’ Entitlement to Post-Petition Interest

In re Energy Future Holdings Corp., No. 14-10979, 2015 WL 6660787 (Bankr. D. Del. Oct. 30, 2015)

On the eve of the multi-week confirmation hearing scheduled in the chapter 11 cases of Energy Future Holdings Corp., Judge Sontchi of Delaware’s Bankruptcy Court issued several significant decisions, one of which—analyzed here—rules on whether unsecured creditors are entitled to receive post-petition interest on their claims under four sections of the Bankruptcy Code—section 502(b)(2), section 1129(a)(7) (“Best Interests Test”), section 1129(b) (“Cramdown”), and section 1124(1) (“Unimpairment”).*  First, as a threshold matter, the Court held that an allowable portion of an unsecured claim… Read More

Court Interprets Section 502(b)(6)(A); Holds “15%” A Measure of the Remaining Lease Term and Not a Measure of the Remaining Rent Due Under the Lease

In re Filene’s Basement, LLC, et al., No. 11-13511 (KJC) (Bankr. D. Del. Apr. 16, 2015)

In this Opinion, Delaware Bankruptcy Court Judge Kevin Carey ruled on a question that has evenly divided courts nationwide and remained unanswered by the Third Circuit Court Appeals – namely, whether the “15 percent” referenced in section 502(b)(6)(A) of the Bankruptcy Code refers to the remaining term of a lease or the remaining rent due under a lease.  Section 506(b)(6), which places a statutory cap on a landlord’s claim resulting from the termination of a debtor’s lease of real property, provides in relevant part… Read More

Should Administrative Expense Claims Be Valued by the Contract Rate or the Actual Use of the Service?

In re Highway Techs., Inc., No. 13-11326 (KJC) (Bankr. D. Del. Jan. 30, 2015)

In this Memorandum, the Honorable Kevin Carey determined whether to value an administrative expense claim at the full contract rate or the actual use of the goods and services provided to the debtor.  The Court held that the creditor, Wynne Systems (“Wynne”), is entitled to an administrative claim for only the debtor’s actual use.  In doing so, the Court also denied Wynne’s request for attorney’s fees as an administrative claim, holding that those fees are not an actual and necessary cost of preserving the… Read More