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Showing posts in Third Circuit Court of Appeals

Post-Confirmation Purchasers of Shares Be Aware:  Third Circuit Holds Shares are Subject to the Plan, Including Its Releases

Zardinovsky v. Arctic Glacier Income Fund (In re Arctic Glacier Int’l, Inc.), 901 F.3d 162 (3d Cir. 2018)

In this precedential Opinion, the Third Circuit Court of Appeals affirmed the decisions of the Delaware Bankruptcy and District courts holding that post-confirmation purchasers of shares are bound by the plan, including its releases and res judicata effect, where the purchasers had notice of the bankruptcy proceedings and the plan and where the sellers of the shares were represented in the bankruptcy proceedings.  In such a case, said the Court, purchasers are held, “like all buyers, to the terms… Read More

Third Circuit Upholds Bankruptcy Court’s Reconsideration Order Described by Dissent as “Troubling – If Not Dangerous – Precedent”

NextEra Energy, Inc. v. Elliott Associates, L.P. (In re Energy Future Holdings Corp.), No. 18-1109, 2018 WL 4354741 (3d Cir. Sept. 13, 2018), aff’g sub nom. 575 B.R. 616 (Bankr. D. Del. 2017)

In this precedential Opinion, the United States Court of Appeals for the Third Circuit (the “Third Circuit”) upheld the decision of the Delaware Bankruptcy Court reconsidering, and thereby denying, a previously approved $275 million termination fee (the “Termination Fee”) to a potential purchaser (NextEra Energy, Inc. (“NextEra”)) in the chapter 11 bankruptcy cases of Energy Future Holdings Corp. and its affiliated debtors (the “Debtors”). … Read More

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), aff’d by No. 18-1177, 2018 WL 6259315 (3d Cir. Nov. 28, 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… Read More

A Third Circuit Analysis of Fiduciary Duties in the Face of Bankruptcy

In re Ultimate Escapes Holdings, LLC, 682 Fed. Appx. 125 (2017)

In re Ultimate Escapes Holdings, LLC, No. 12-50849 (BLS), 2015 WL 1590132 (Bankr. D. Del. Feb. 5, 2015)

In affirming the decisions of the courts below, the Third Circuit in its Opinion of In re Ultimate Escapes Holdings, LLC not only provides a refresher on Delaware’s entire fairness and business judgment standards; it also sends a comforting signal to officers and directors faced with difficult decisions when a company is in financial distress and on the verge of bankruptcy.

As the merger negotiations continued, UE’s financial situation deteriorated.  An… Read More

Third Circuit Rules That Transfers By Non-Debtors Are Immune From Avoidance As Fraudulent Transfers

Crystallex Int’l Corp. v. Petroleos de Venezuela, S.A., 879 F.3d 79 (3d Cir. 2018)

In an Opinion that may also have repercussions in bankruptcy law, the Third Circuit Court of Appeals recently held in Crystallex Int’l Corp. v. Petroleos de Venezuela, S.A. that transfers by a non-debtor cannot be fraudulent under title 6, section 1304 of the Delaware Code (the “Delaware Uniform Fraudulent Transfer Act” or “DUFTA”).  Notwithstanding that the transfers at issue were allegedly orchestrated by a debtor with the express purpose of defrauding a creditor and notwithstanding the transferor’s intentional and knowing participation in the alleged… Read More

Third Circuit Holds That Layoffs Must Be Probable (Not Just Possible) for WARN Act Liability

Varela v. AE Liquidation, Inc. (f/k/a Eclipse Aviation Corp.) (In re AE Liquidation, Inc.), No. 16-2203, 2017 WL 3319963 (3d Cir. Aug. 4, 2017)

As we have discussed prior, under the Worker Adjustment and Retraining Notification (WARN) Act, employers may be liable if they do not give fair warning to their employees before a mass layoff.  Liability can be avoided if, among other things, the “mass layoff is caused by business circumstances that were not reasonably foreseeable at the time that notice would have been required.”  20 C.F.R. § 2102(b)(2)(A).  The question for the Third Circuit Court of Appeals… Read More

Decisions by Third Circuit and Delaware Bankruptcy Court Clarify that “Receipt” under Section 503(b)(9) Requires Physical Possession

Haining Wansheng Sofa Co., Ltd. v. World Imports Ltd. (In re World Imports, Ltd. et al.), No. 16-1357, 2017 WL 2925429 (3d Cir. Mar. 8, 2017) and In re SRC Liquidation, LLC, No. 15-10541 (BLS), 2017 WL 2992718 (Bankr. D. Del. July 13, 2017)

In two recent Opinions, the Third Circuit Court of Appeals and the Delaware Bankruptcy Court clarified that the word “received” in section 503(b)(9) of the Bankruptcy Code requires a showing that goods were delivered into the physical possession of a debtor or its agent within the 20 days before a debtor’s petition date (the “20-Day Period”).  Under the… Read More

Applying New York Law, Third Circuit Holds That Acceleration Clauses Do Not Negate Make-Whole Redemption Provisions Absent Clear Contractual Language

Delaware Trust Co. v. Energy Future Intermediate Holding Co. (In re Energy Future Holdings Corp.), 842 F.3d 247 (3d Cir. 2016)

Disagreeing with the United States Bankruptcy Court for the Southern District of New York, the Court of Appeals for the Third Circuit held in this Opinion that New York law requires the Energy Future debtors (“EFIH”) to pay redemption premiums (or a “make-whole”) to their first and second lien noteholders under the terms of governing indentures.  In doing so, the Court reversed the district court decision affirming the Delaware Bankruptcy Court’s ruling (discussed here) that the… Read More

Commencing an Involuntary Just Got Riskier – Petitioning Creditors May Face State Law Damages in Addition to Those Under Bankruptcy Code Section 303(i)

Rosenberg v. DVI Receivables XVII, LLC, No. 15-2622, 2016 WL 4501675 (3d Cir. Aug. 29, 2016)

In this federal preemption Opinion, the Third Circuit Court of Appeals held that section 303(i) of the Bankruptcy Code does not preempt state law claims by non-debtors for damages based on the filing of an involuntary bankruptcy petition.  The Court did not, however, opine on whether section 303(i) preempts state law claims brought by debtors.

The appeal originated from a 2008 involuntary bankruptcy proceeding commenced against Maury Rosenberg and his affiliated businesses.  The petition was dismissed and Mr. Rosenberg recovered fees, costs, and $6 million… Read More

Plan Confirmation Principles Not Categorically Applied in the Settlement Context

In re Energy Future Holdings, Corp., No. 15-1591, 2016 WL 2343322 (3d Cir. May 4, 2016)

The Third Circuit recently determined that a settlement in the form of a tender offer did not violate the Bankruptcy Code and was within the Bankruptcy Court’s discretion to approve.  In its ruling, the Court examined whether principles applicable to a plan of reorganization, such as the “equal treatment” rule embodied in 11 U.S.C. § 1123(a)(4), must be categorically applied in the settlement context, and found there is no such requirement.  Nonetheless, the Court affirmed the lower courts’ ruling on the grounds that… Read More