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Showing posts in Judge Christopher S. Sontchi

“Thread-bare” Complaint Alleging Collective and Non-Specific Breaches of Fiduciary Duty Dismissed Against Individual Officers and Directors

Stanziale v. Heico Holdings, Inc. (In re Conex Holdings, LLC), Adv. No. 13-50941 (CSS), 2014 WL 3883712 (Bankr. D. Del. Aug. 8, 2014)

In this short Memorandum Opinion, the Bankruptcy Court dismissed a chapter 7 trustee’s claims for breaches of fiduciary duties against certain officers and directors under Texas common and statutory law.  In doing so, Judge Sontchi held that the trustee failed to plead facts with any specificity as to how each officer and director breached his duties.  However, the Court allowed the trustee leave to amend his complaint within 30 days to allege… Read More

A New Look at Section 547(c)(4): Is “Paid Subsequent New Value” Non-Exclusive of Other Defenses?

Miller v. JNJ Logistics LLC (In re Proliance Int’l, Inc.), No. 11-52514 (CSS), 2014 WL 3956485 (Bankr. D. Del. Aug 14, 2014)

Following precedent, Judge Christopher S. Sontchi held in this Opinion that “paid subsequent new value” (“Paid SNV”) may offset a creditor’s preference exposure under section 547(c)(4) of the Bankruptcy Code.  However, in a potentially significant departure from the Court’s earlier decision in Pillowtex, Judge Sontchi ruled that, as long a trustee states a prima facie claim for an “otherwise avoidable” transfer under section 547(b),  the amount of a creditor’s Paid SNV defense may… Read More

Post-Sale Data May Be Useful to Confirm the Reasonableness of Pre-Sale Projections and Valuations But It is of No Relevance In a Breach of Fiduciary Duty Action

Miller v. Am. Capital, Ltd. (In re NewStarcom Holdings, Inc.), Adv. No. 10-50063 (CSS), 2014 WL 3865822 (Bankr. D. Del. Aug. 6, 2014)

In this breach of fiduciary duty action arising from the prepetition “fire” sale of the debtors’ subsidiary (“Old Matco”) to insiders, the chapter 7 trustee sought to compel defendants to produce post-sale financial information of the sold-subsidiary so that the reasonableness of any valuation performed as of the sale date could be determined.  The defendants objected to the production on the grounds that the request was, among other things, irrelevant to the fiduciary claims, arguing… Read More

The Insider’s Scoop: May Investment Bankers be Retained by Debtors as Independent Contractors? “No” Says the Delaware Bankruptcy Court

In re MacKeyser Holdings, LLC, No. 14-11550 (CSS) (Bankr. D. Del. Aug. 7, 2014)

In the recently filed chapter 11 proceedings of MacKeyser Holdings, LLC and its affiliated debtors (“Debtors”), the Debtors sought to retain Hammond Hanlon Camp (“H2C”) as their exclusive investment banker under sections 327 and 328 of the Bankruptcy Code.  H2C’s proposed engagement agreement included a provision disclaiming its role as a fiduciary to the Debtors.  More specifically, it provided that “H2C shall act as an independent contractor under this Agreement and not in any other capacity including any fiduciary capacity.”

H2C’s carve-out… Read More

Claims Arising From Purchaser Wrongdoing Following Entry of Sale Order But Prior to Closing Barred and Enjoined by Section 363(f)

In re NE Opco, Inc., No. 13-11483 (CSS), 2014 WL 3884217 (Bankr. D. Del. Aug. 8, 2014)

In the chapter 11 proceedings of NE Opco, Inc. and its affiliated debtors (the “Debtors”), the Honorable Christopher J. Sontchi was presented with a unique set of circumstances leading to the following question—whether pre-closing claims against a purchaser, related to the sale and arising from conduct occurring after the entry of a sale order, should be barred and enjoined by the section 363(f) finding in the sale order.  The Court held that they should.

The claimant, Mr. Torres (“Torres”), had… Read More

Discovery Regarding a Debtor’s Valuation and Solvency Held Relevant to Makewhole Dispute

In the CSC Trust Co. adversary proceeding pending in connection with the Energy Future Holdings Corp. bankruptcy proceedings, an indenture trustee for certain senior secured notes sought a declaration from the Court that certain debtors (the “EFIH Debtors”) are obligated to pay a redemption premium in connection with a proposed refinancing of the notes.  In his Opinion, Judge Sontchi held discoverable information regarding the EFIH Debtor’s valuation and solvency, finding that such information is relevant to the amount that may need to be paid should an enforceable makewhole provision be found.  Despite the foregoing, however,… 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

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

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