Challenge of Secured Creditors’ Liens and Claims by a Plaintiff Without Court’s Prior Blessing and Grant of Standing Survives Defendants’ Motion for Summary Judgment

AI Int’l Holdings (BVI) Ltd. v. MUFG Union Bank, N.A., et al. (In re The Weinstein Co. Holdings, LLC, et al.), No. 18-10601 (MFW), 2018 WL 6841349 (Bankr. D. Del. Dec. 20, 2018)

In this Memorandum Opinion, Judge Walrath of the Delaware Bankruptcy Court was given the rare opportunity to review and interpret language contained in the final order authorizing the Weinstein debtors (the “Debtors”) to obtain post-petition financing (the “Final DIP Order”) governing the investigation and challenge of the liens and claims of the Debtors’ prepetition lenders (the “Defendants”).  More specifically, Her Honor was tasked with… Read More

Practice Pointers – When Faced With A Dispute Over a Court Order, Seek Court Intervention Sooner Rather Than Later or Face Civil Contempt Sanctions

In re Washington Mutual, Inc., No. 08-12229 (MFW), 2018 WL 704361 (Bankr. D. Del. Feb. 2, 2018)

In this Opinion, Judge Walrath of the Delaware Bankruptcy Court imposed sanctions against the Washington Mutual Liquidating Trust (the “Liquidating Trust”) for its failure to comply with the Court’s final fee order (“Final Fee Order”) that awarded, among other things, a contingency fee (the “Contingency Fee”) to Grant Thornton, LLP (“Grant Thornton”) in connection with certain tax related work it provided postpetition to the Liquidating Trust.

Prepetition, Washington Mutual engaged Grant Thornton to develop a theory to challenge the constitutionality of… Read More

Battle Between Prepetition Lender and Consignor Over Inventory Continues – Bankruptcy Court Holds Parties Cannot Contract to Subject Relationship to UCC

TSA Stores, Inc. v. M J Soffe, LLC (In re TSAWD Holdings, Inc.), No. 16-50364 (MFW), 2017 WL 892329 (Bankr. D. Del. Mar. 6, 2017)

Prior to the petition date, consignment vendor M J Soffe, LLC (“Soffe”) sold approximately $5.4 million of goods to the Sports Authority debtors (the “Debtors”) pursuant to a Pay by Scan Agreement.  That agreement expressly provided that the arrangement between Soffe and the Debtors qualified as a “consignment” as such term is defined in section 9-102(a)(20) of the Uniform Commercial Code (“UCC”).  During the bankruptcy proceedings the Debtors sold the Disputed Goods, and litigation arose… Read More

Satisfaction of a Prepetition Loan by a DIP Loan Does Not Extinguish Vendor’s Reclamation Rights Under Section 546(c)

In re Reichhold Holdings US, Inc., No. 14-12237 (MFW), 2016 WL 4479286 (Bankr. D. Del. Aug. 24, 2016)

In this Memorandum Opinion, the Court overruled a limited reclamation claims objection asserted by a liquidating trustee, who argued that a creditor’s reclamation rights were cut-off by a postpetition loan that refinanced a prior perfected prepetition loan.  In doing so, the Court sided with the Sixth Circuit Court of Appeals and rejected a line of cases from the Bankruptcy Court for the Southern District of New York.

After Reichhold Holdings US, Inc. (the “Debtor”) filed its chapter 11 petition, Covestro LLC… 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

Practice Point: Substance Matters – Recent Rulings Confirm and Clarify Pleading Standards under Section 547

THQ, Inc. v. Starcom Worldwide, Inc. (In re THQ, Inc.), No. 14-51079 (MFW), 2016 WL 1599798 (Bankr. D. Del. Apr. 18, 2016).

Giuliano v. Haskett, (In re MCG Ltd. P’ship), No. 14-50536 (CSS), 545 B.R. 74 (Bankr. D. Del. Jan. 28, 2016).

Two recent rulings by the Delaware Bankruptcy Court confirm the well-known pleading standards that a preference complaint must do more than “merely parrot[] the language of section 547” to survive a motion to dismiss.  The cases also clarify the type of particularized facts that must be alleged to state a claim under section 547.

In THQ, Inc. v. Starcom Worldwide, Inc…. Read More