Getting Noticed in the Digital Age: Delaware Bankruptcy Court Finds Email Notice Satisfies Due Process but Not Rule 2002

In re Cyber Litigation Inc., 2021 WL 4927550 (Bankr. D. Del. Oct. 21, 2021)

In this Memorandum Opinion, Judge Goldblatt of the Delaware Bankruptcy Court considered whether a bar date notice sent via email to the principal of an unsecured creditor was sufficient to disallow the creditor’s untimely proof of claim. The Court ultimately concluded that the email notice comported with constitutional due process standards but did not meet the requirements of Bankruptcy Rule 2002, which instructs that such notices be provided to creditors by mail. As a result, the debtor’s timeliness objection was… Read More

Delaware Bankruptcy Court Finds Debtor Did Not Properly Terminate Contract, Faces Significant Breach of Contract Damages

In re Outer Harbor Terminal, LLC, No. 16-10283 (LSS), 2017 WL 696676 (Bankr. D. Del. Feb. 21, 2017)

In the context of a claims objection, the Court adhered to unambiguous contract language in determining that the presence of a termination triggering event did not automatically terminate a contract, opening the door for potentially significant damages.  This matter will now proceed to the damages phase, where the non-debtor contract counterparty has alleged in its proof of claim an approximate $13.3 million in, among other things, breach of contract damages.

Outer Harbor Terminal, LLC (the “Debtor”) provided stevedoring services—docking and loading/unloading… 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

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

Bar Date Notice Insufficient For Unknown Creditors Despite Publication Nationally And Locally

White v. Jacobs (In re New Century TRS Holdings, Inc.), No. 13-1719-SLR, 2014 WL 4100749 (D. Del. Aug. 19, 2014)

The central question in this appeal was whether notice of a debtors’ claims bar date was constitutionally sufficient to afford unknown creditors due process.*  Although publication notice of a bar date in national and local newspapers is often deemed sufficient for unknown creditors, the Delaware District Court held that, under the circumstances of this case, the notice was insufficient and vacated the Bankruptcy Court’s ruling.  In so ruling, the District Court observed that “when the bar… Read More

More Opinions Addressing Pro Se Claimants in New Century TRS Holdings, Inc

Konar v. New Century TRS Holdings, Inc (In re New Century TRS Holdings, Inc), Adv. No. 12-50187 (KJC), 2014 WL 2198247 (Bankr. D. Del. May 23, 2014); In re New Century TRS Holdings, Inc, No. 07-10416, 2014 WL 2511339 (Bankr. D. Del. May 30, 2014) (“Cromwell”); In re New Century TRS Holdings, Inc, No. 07-10416, 2014 WL 2446823 (Bankr. D. Del. May 30, 2014) (“Russell”)

In In re New Century TRS Holdings, Inc, the Honorable Kevin J. Carey has spent significant time adjudicating pro se claimants’ late-filed proofs of claims that assert various alleged injuries relating to their respective mortgages.  In fact, in… 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

Mortgage Borrower’s Claim Against New Century for “Mortgage Fraud” Disallowed and Expunged

In re New Century TRS Holdings, Inc., Case No. 07-10416 (KJC) (Bankr. D. Del. Apr. 10, 2014)

On April 10, 2014, the Honorable Kevin J. Carey issued a Memorandum sustaining an objection to a proof of claim filed by a pro se mortgage borrower (the “Claimant”) in the bankruptcy proceeding of New Century Mortgage Corporation (“New Century”).  This is Judge Carey’s third opinion in recent months denying pro se borrower claims in New Century.  A joint summary of the two other opinions may be found here.

The Claimant filed proof of its claim (the… Read More

Creditors’ Proofs of Claim Denied as Untimely Filed

In re New Century TRS Holdings, Inc., No. 07-10416 (KJC) (Bankr. D. Del. Mar. 4, 2014) (“Cromwell“); In re New Century TRS Holdings, Inc., Adv. No. 11-53199 (KJC) (Bankr. D. Del. Mar. 7, 2014) (“Silva“)

On March 4, 2014, Judge Carey issued a Memorandum denying pro se creditor Cromwell’s motion for an order approving her proof of claim as timely filed.  Then on March 7, 2014, Judge Carey issued a second Memorandum in the same bankruptcy case denying a similar motion filed by pro se creditor Silva.  The Court follows a similar analysis when applying the excusable neglect standard… Read More

Federal False Claims Act Proof of Claim Disallowed

In re ATLS Acquisition, LLC, No. 13-10262 (PJW), 2014 WL 490931 (Bankr. D. Del. Feb. 6, 2014)

In this lengthy 71-page Opinion, Judge Walsh tackled the reverse claims provision of the Federal False Claims Act, see 31 U.S.C. § 3729(a)(7) (2006), infrequently opined upon by, or relevant to, the Delaware Bankruptcy Court.  While the intricacies of the medical supply industry and its interconnectedness to the Federal government are interesting in their own right, the effects of this Opinion will not likely be wide reaching.

In short, former employees (the “Relators”) of Liberty Medical Supply,… Read More