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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.
(302) 504-3725
kowens@ashbygeddes.com

Ashby & Geddes, P.A.
500 Delaware Avenue
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Bankruptcy Court Determines Issue of First Impression – Holds That Recovery Under Section 550 is Not Capped by The Amount of Creditor Claims

PAH Litigation Trust v. Water Street Healthcare Partners, L.P. (In re Physiotherapy Holdings, Inc.), Adv. Proc. No. 15-51238 (KG), 2017 WL 5054308 (Bankr. D. Del. Nov. 1, 2017)

On cross-motions for partial summary judgment, the Delaware Bankruptcy Court was confronted with a complex issue of first impression in the Third Circuit – whether damages in a fraudulent transfer action are capped to permit creditors to receive only the amount of their claims. Competing interests made the decision difficult.  On the one hand, there are numerous decisions outside of the Third Circuit holding that there is no cap… Read More

Judge Silverstein Tosses Bad Faith Filing in Rent-A-Wreck of America But Doesn’t Award Sanctions – Finds That a Filing to Employ the Powers of the Code is Alone Insufficient to Support Good Faith

In re Rent-A-Wreck of America, Inc., 580 B.R. 364 (Bankr. D. Del. 2018)

In this February 13, 2018 Opinion, Judge Silverstein of the Delaware Bankruptcy Court dismissed the voluntary chapter 11 proceedings filed by Rent-A-Wreck of America, Inc. (“RAWA”) and its wholly owned subsidiary, Bundy American, LLC (“Bundy”, and together with RAWA, the “Debtors”).  Judge Silverstein found that the Debtors did not file their petitions in good faith as required by 11 U.S.C. § 1112(b).  While the Court found that the Debtors’ actions in commencing the cases fell “on the dark side of the spectrum” which ranges… Read More

Security Interest Determined as of the Date of Petition, Not the Transaction, for Purposes of Stating a Preference Claim Under Section 547(b)(5)

Simplexity, LLC v. Sprint Corp. (In re Simplexity, LLC), 578 B.R. 255 (Bankr. D. Del. 2017)

In this Opinion, the Delaware Bankruptcy Court addressed when a security interest is determined for purposes of stating a preference claim under section 547(b)(5) of the Bankruptcy Code.  Distinguishing an earlier ruling by the Court in the context of insurance premium financing, Judge Kevin Gross ruled that security interests generally must be determined as of the petition date rather than the transaction date.  Judge Gross also set forth guidelines for how the valuation should be conducted using an “add back” method.

Under… Read More

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

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

Two Clear-Cut Decisions of the Supreme Court – Narrowing Both Section 546(e)’s Securities Safe Harbor in Merit and the Standard of Review for Non-Statutory Insider Determinations in U.S. Bank

Merit Mgmt. Group, LP v. FTI Consulting, Inc., 583 U.S. __ (2018)

U.S. Bank Nat’l Ass’n v. Vill. at Lakeridge, LLC, 583 U.S. __ (2018)

On February 27, 2018, the United States Supreme Court issued its unanimous holding in Merit Management Group, LP v. FTI Consulting, Inc.  The Opinion, delivered by Justice Sotomayor, addressed a Congressional limitation placed on a trustee’s power to avoid certain transfers, such as preferential transfers under 11 U.S.C. § 547 or constructively fraudulent transfers under 11 U.S.C. § 548(a)(1)(B).  More specifically, section 546(e) of the… Read More

We’re Back!

We’re back!  Thank you for your patience while the Delaware Bankruptcy Insider worked behind the scenes to address website matters.  While not all of the issues are completely resolved, the Insider will re-start blogging and bring to you its analysis regarding some recent Supreme Court rulings.  It will also analyze the other important rulings from the Delaware District Court and Delaware Bankruptcy Court that have been made over the last few months.  Thanks again for your patience and loyalty.