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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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Karen B. Skomorucha Owens, Esq.
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Showing posts in Third Circuit Court of Appeals

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

Third Circuit Holds that Minimum Threshold under Section 547(c)(9) Requires Transfer-by-Transfer Analysis

Slobodian v. U.S. Internal Revenue Serv. (In re Net Pay Solutions, Inc.), No. 15-2833, 2016 WL 2731676 (3d. Cir. May 10, 2016)

In this precedential Opinion, the United States Court of Appeals for the Third Circuit (the “Third Circuit”) addressed whether multiple transfers may be aggregated for purposes of meeting the statutory minimum under section 547(c)(9) of the Bankruptcy Code.  The Court affirmed the ruling of the United States District Court for the Middle District of Pennsylvania (the “District Court”) that they may not be aggregated where the transfers are for the benefit of different creditors on distinct… Read More

Third Circuit Affirms Debtors’ Right to Reject Expired Collective Bargaining Agreement Under Section 1113

In re Trump Entm’t Resorts, Unite Here Local 54, Appellant, No. 14-4807, 2016 WL 191926 (3d. Cir. Jan. 15, 2016), aff’g In re Trump Entm’t Resorts, Inc., 519 B.R. 76 (Bankr. D. Del. 2014)

On direct appeal, the Third Circuit Court of Appeals has affirmed a Delaware Bankruptcy Court ruling (see previous post here) that debtors’ powers under section 1113 of the Bankruptcy Code to reject a collective bargaining agreement remain in effect even if the agreement has expired.

Under the facts of the underlying case, a collective bargaining agreement (the “CBA”) between the Trump Entertainment Resorts debtors (the “Debtors”) and their… Read More

Third Circuit Holds That Bad Faith Determined by the Totality of the Circumstances Provides an Independent Basis for Dismissing an Involuntary Petition

In re Forever Green Athletic Fields, Inc., No. 14-3906, 2015 WL 6080665 (3d Cir. Oct. 16, 2015)

Despite no dispute that the petitioning creditors satisfied the statutory requirements for commencing an involuntary chapter 7 proceeding under section 303(b)(1) of the Bankruptcy Code and that the putative debtor was not paying its debts as they came due, this precedential Opinion of the Third Circuit Court of Appeals adopted the “totality of the circumstances” standard for determining bad faith under section 303 and affirmed the decisions of the lower courts that dismissed the proceeding as a bad faith filing.

In ruling so,… Read More