Lease Profit Sharing Provisions Held Per Se Unenforceable Under 11 U.S.C. § 365(f)(1)

Antone Corp. v. Haggen Holdings, LLC (In re Haggen Holdings, LLC), No. 15-1136 (GMS), 2017 WL 3730527 (D. Del. Aug. 30, 2017)

In this Opinion, Judge Sleet of the Delaware District Court affirmed the holding of Judge Gross of the Delaware Bankruptcy Court that profit sharing provisions contained in leases are per se unenforceable anti-assignment provisions under section 365(f)(1) of the Bankruptcy Code.  The provision at issue on appeal entitled the landlord to fifty percent of any “net profits” of the subject lease should the debtor-tenant assign it.  In connection with its proposed sale in… Read More

Consummated Plan Based Upon Qualified Bid for Equity Received Pursuant to Sale Process Not “Sale Transaction” for Purposes of Investment Banker’s Retention Agreement

In re Hipcricket, Inc., Case No. 15-10104 (LSS), 2015 WL 5728552 (Bankr. D. Del. Sept. 29, 2015)

In this Memorandum Order, Judge Silverstein approved Canaccord Genuity Inc.’s (“Canaccord”) success fee for its work as an investment banker to Hipcricket, Inc. (the “Debtor”) over an objection of Hal L. Baume (the “Distribution Trustee”).  By the terms of Canaccord’s retention, a success fee was due to it unless a proposed buyer provided debtor in possession financing as part of “a contemplated sale transaction” and such sale transaction was consummated.  In this case, the Distribution Trustee asserted that the consummated plan,… Read More

Third Circuit Allows 363 Purchaser’s Funds to Bypass IRS and Satisfy Certain Administrative and General Unsecured Claims

In re ICL Holding Company, Inc., No. 14-2709, 2015 WL 5315604 (3d Cir. Sept. 14, 2015), aff’g sub nom United States v. LCI Holding Co., Inc., Nos. 13-924 (SLR), 13-1188 (SLR), 2014 WL 975145 (D. Del. March 10, 2014)

As discussed by the Delaware Bankruptcy Insider in March of last year, in ruling on a motion for stay the Delaware District Court determined that the Delaware Bankruptcy Court did not err when it approved a sale of substantially all of the assets of LCI Holding Company, Inc. and its affiliated debtors (the “Debtors”) and a settlement between the purchaser (the Debtors’… Read More

Underwater Lender Could Not Be Compelled To Accept Money Satisfaction Of Its Property Interests; Sale Free And Clear Under 363(f) Denied

In re Ferris Props., Inc., No. 14-10491 (MFW), 2015 WL 4600248 (Bankr. D. Del. July 30, 2015)

On July 30, 2015, the Delaware Bankruptcy Court denied a debtors’ request to sell properties free and clear of liens and encumbrances pursuant to section 363(f) of the Bankruptcy Code, holding that the mortgagee, whose claim would not be paid in full from the sale proceeds, could not be compelled to accept a money satisfaction of its interests in the properties and did not consent to the sale.  A debtor may sell property free and clear of any interest in such… Read More

The Insider’s Scoop: EFH Bidding Procedures Approved But Significant Modifications Necessary To Cure Fundamental Flaws

Upon commencement of this mega-chapter 11 case, the Debtors filed and pursued assumption of a restructuring support agreement (“RSA”), which contemplated, among other things, the tax-free spinoff of the Debtor entities that control the economic interest in their non-debtor affiliate, Oncor, a company that provides residential and commercial electricity in Texas and has been estimated by the Debtors to be worth as much as $18 billion.  Over the summer, however, the Debtors were forced to abandon the RSA when certain bidders offered more value than was to be provided under the RSA transactions.

Post termination of the RSA, the Debtors… 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

Bankruptcy Court Allows Sale Free and Clear of Successor Liability Claims

In re Ormet Corp., No. 13-10334 (MFW), 2014 WL 3542133 (Bankr. D. Del. July 17, 2014)

In this Memorandum Opinion, Judge Walrath overruled an objection to a sale of the debtors’ assets free and clear of the objector’s successor liability claim, and granted a stay waiver under Bankruptcy Rules 6004(h) and 6006(d) to allow the sale to close immediately.  In reaching its conclusion, the Court emphasized the integral nature of Bankruptcy Code section 363(f) to the bankruptcy process, enabling debtors to sell assets free and clear of any claims—something not available outside of the bankruptcy… 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

Debtors’ Funds Purchased in Section 363 Sale Permitted to be Disbursed to Debtors’ Administrative and Unsecured Creditors Over IRS Objections

United States v. LCI Holding Co., Inc., Nos. 13-924 (SLR), 13-1188 (SLR), 2014 WL 975145 (D. Del. March 10, 2014)

On March 10, 2014, Judge Sue L. Robinson of the District Court denied the request of the United States, on behalf of the Internal Revenue Service (the “IRS”), to stay disbursement of funds placed into escrow by a purchaser of debtor-assets intended to satisfy some but not all administrative and unsecured claims asserted against the debtors.  During the chapter 11 bankruptcy cases of LCI Holding Company, Inc. and its affiliated debtors (the “Debtors”), the Debtors’ prepetition… Read More

Fisker’s Capped Credit Bidder is Denied Interlocutory Appeal and Direct Certification to the Third Circuit

Hybrid Tech Holdings, LLC v. Official Committee of Unsecured Creditors (In re Fisker Automotive Holdings, Inc.), No. 14-99 (GMS), 2014 WL 546036 (D. Del. Feb. 7, 2014); Hybrid Tech Holdings, LLC v. Official Committee of Unsecured Creditors (In re Fisker Automotive Holdings, Inc.), No. 14-99 (GMS), 2014 WL 576370 (D. Del. Feb. 12, 2014)

Chief Judge Sleet of the District Court has denied the emergency request of Hybrid Tech Holdings, LLC (“Hybrid”) for leave to appeal the Bankruptcy Court’s order capping for cause Hybrid’s credit bid as well as Hybrid’s emergency request for… Read More