Monthly Archives: June 2012

Cadwalader Presents to LSTA on 11th Circuit TOUSA Decision

Cadwalader attorneys Peter Friedman, Doug Mintz and Josh Brant, joined by Morgan Stanley Executive Director Colin Adams, recently addressed the Loan Syndications and Trading Association and discussed their views on the 11th Circuit’s recent controversial TOUSA decision upholding a bankruptcy court’s decision finding that certain loans and liens constituted fraudulent transfers. Continue reading

SDNY Bankruptcy Court Opens Door For Rule 2004 Use in Chapter 15

On May 25, 2012, Judge Allan L. Gropper of the United States Bankruptcy Court for the Southern District of New York approved a motion to compel the production of certain documents under section 1521 of the Bankruptcy Code. In his decision, Judge Gropper also suggested that the broad discovery provisions of Bankruptcy Rule 2004 may apply to chapter 15 discovery requests, but stopped short of making such a ruling. In re Millennium Global Emerging Credit Master Fund Limited, Case No. 11-13171 (ALG), (Bankr. S.D.N.Y May 25, 2012). Continue reading

Court Holds that Noteholders Cannot Meddle in Deutsche Bank’s Suit

On May 18, 2012, Judge Rosemary M. Collyer of the District Court for the District of Columbia held that a group of Washington Mutual Bank’s (WaMu) noteholders could not intervene as defendants in a breach of contract lawsuit brought against WaMu’s receiver and JPMorgan Chase Bank. The noteholders sought to intervene solely on the basis that the lawsuit could exhaust funds in the receivership and, in turn, diminish the noteholders’ recovery. The District Court held that regardless of whether the lawsuit would exhaust funds in the receivership, the noteholders could not intervene because they lacked a present and direct interest in the lawsuit, particularly because their interests were contingent on the resolution of a contractual issue under the applicable securitization agreements that had not yet been determined. Deutsche Bank National Trust Company v. Federal Deposit Insurance Corporation, Civil Action No. 09-1656 (RMC) (D. D.C. May 18, 2012). Continue reading

Vitro: Chapter 15 and the Limits of Comity: Texas Bankruptcy Court Refuses to Enforce Third Party Release Provisions in Mexican Plan of Reorganization

On June 13, 2012, Judge Harlin D. Hale of the United States Bankruptcy Court for the Northern District of Texas refused to enforce provisions of a Mexican plan of reorganization that purported to extinguish guarantees by the debtor’s non-debtor subsidiaries. In refusing to enforce the non-debtor release, Judge Hale held both that the release of non-debtor guarantors was contrary to United States public policy and that the release did not merit enforcement under the specific criteria of chapter 15 for granting relief to a foreign debtor. The decision demonstrates that, while comity is the primary consideration governing chapter 15 cases, it is not without limit. The decision should also indicate to creditors that third party releases of non-debtor guarantors created in cases pending outside the U.S. are not likely to be enforced in the United States. Vitro, S.A.B. de C.V. v. ACP Master, Ltd. (In re Vitro), No. 11-33335-HDH-15, 2012 Bankr. LEXIS 2682 (Bankr. N.D. Tex. June 13, 2012). Continue reading

Download the June 14 Distressed Energy Investments Program Materials

On June 14, Cadwalader hosted a discussion on the ever-changing business landscape for energy companies created by recent market changes, FERC regulations and the Dodd-Frank Act. Keynote speaker, The Honorable Donna L. Nelson, Chairman of the Public Utility Commission of … Continue reading

What’s Yours is Mine, and What’s Mine is Mine? SDNY Expands the “Unfinished Business” Doctrine to Include Non-Contingency Client Matters In Possible Dewey Preview

The recent chapter 11 case of the storied New York law firm, Dewey & LeBoeuf LLP, will raise a host of issues attendant to the dissolution of a modern day “big law” firm partnership. Chief among these issues is likely to be whether the profits earned by former Dewey partners in completing Dewey’s open client matters belong to Dewey or the former Dewey partners. Continue reading

Eleventh Circuit Upholds a Bankruptcy Court’s Exclusive Jurisdiction to Enforce its Own Chapter 11 Discharge Injunctions

On May 30, 2012, the United States Court of Appeals for the Eleventh Circuit held that a bankruptcy court in one federal district lacks jurisdiction to determine whether a debt was discharged under a chapter 11 plan confirmation order issued by a bankruptcy court in another federal district. Alderwoods Group, Inc. v. Garcia, 1:10-cv-20509-KMM, 2012 U.S. App. LEXIS 10891 (11th Cir. May 30, 2012). The decision makes it clear that a debtor must seek enforcement of its discharge order in the same federal court that granted the discharge in the first place. Continue reading

KB Toys: Delaware Bankruptcy Court Weighs in on Claims Trading

On May 4, 2012 Judge Kevin J. Carey of the U.S. Bankruptcy Court for the District of Delaware held that a claim against a debtor’s estate, transferred to a third party, is subject to the same infirmities as in the hands of the original holder of the claim. In re KB Toys, Inc., — B.R. —-, 2012 WL 1570755, at *11 (Bankr. D. Del. 2012). Judge Carey’s opinion diverged from, and criticized, the decision of the U.S. District Court for the Southern District of New York in Enron Corp. v. Springfield Assocs., L.L.C., 379 B.R. 425 (S.D.N.Y. 2007). In that case, the court held that whether the disabilities of the original holder are inherited by a subsequent transferee turns on whether the transfer is by way of sale or assignment. Continue reading

The Devil (Dog) ® is in the Details: Bankruptcy Court Denies Hostess’s Motion to Reject Collective Bargaining Agreements on Narrow Factual Grounds

The recent bankruptcy case of Hostess has centered on Hostess’s attempts to reject collective bargaining agreements with its unions. Hostess has emphasized that realigning labor costs is essential to its ability to successfully reorganize. Section 1113 of the Bankruptcy Code sets forth detailed requirements that a debtor must meet to modify or reject CBAs. Bankruptcy courts’ ultimate decision to authorize rejection of a CBA frequently turns on a detailed examination of the evidence presented in support of the rejection motion. This post discusses the recent ruling of Judge Robert Drain of the United States Bankruptcy Court for the Southern District of New York denying Hostess’s motion to reject several CBAs with local affiliates of the International Brotherhood of Teamsters. Although the court did not issue a written opinion of its decision, we have reviewed and analyzed the lengthy hearing transcript. See Transcript of Hearing, In re Hostess Brands, Inc., No. 12-22052 (RDD) (Bankr. S.D.N.Y. May 14, 2012). Judge Drain analyzed extensively the parties’ proposed modifications to the CBAs. Although he found that most of the key modifications related to withdrawing from multiemployer pension plans were necessary and thus permitted under applicable law, he did not authorize the rejection because the Teamsters had cause to reject Hostess’s final proposal. Judge Drain’s holding turned on a relatively minor point of fact pertaining to a one percent difference in proposed EBITDA margin – an issue only addressed briefly in the pleadings and the ruling. Continue reading

Loose Lips Sink Hostile Bids: Delaware Chancery Court Enforces Non-Disclosure Agreement with Injunctive Relief

In an eloquent account of consensual merger negotiations between Martin Marietta and Vulcan Materials, the two largest players in the domestic aggregates business, Chancellor Leo Strine of the Court of Chancery of Delaware recently prohibited Martin Marietta from using information shared by Vulcan in connection with consensual merger negotiations to pursue a hostile takeover bid and related proxy contest. Martin Marietta Materials, Inc. v. Vulcan Materials Company, 2012 Del. Ch. LEXIS 93 (Del. Ch. May 4, 2012).
The decision offers a real world application of the limitations on use and information gained in non-disclosure agreements. While the court decided this case in the Delaware corporate law context, restructuring parties in and out of bankruptcy frequently obtain information under similar restrictions. Indeed, information may be exchanged in connection with the marketing and sale of assets, or in connection with out-of-court work outs. Recipients of this information should exercise caution when using information obtained consensually to pursue non-consensual or aggressive strategies.
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