Posted on May 30, 2007 by MorrisJames Delaware
Haskell v. Goldman, Sachs & Co. (In re Genesis Health Ventures, Inc.), Adv. Pro. No. 04-53375 (PJW), 2007 WL 1321730, -- B.R. -- (Bankr. D. Del. May 4, 2007)
In this adversary proceeding commenced by investors in reorganized debtor Genesis Health Ventures, the non-debtor defendants requested leave of the United States District Court for the District of Delaware to take an interlocutory appeal from a decision of the Bankruptcy Court denying the defendants, who were senior secured debt holders, the protections of 11 U.S.C. § 1144. The defendants moved for a stay of proceedings pending the district court’s decision. The bankruptcy court granted a limited stay of the proceedings, balancing the need to move forward with the possibility that the request may remain before the district court for an extended period without being decided.
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Posted on May 30, 2007 by MorrisJames Delaware
In re W.R. Grace & Co., Case No. 01-01139 (JKF), 2007 WL 1138467, -- B.R. -- (Bankr. D. Del. Apr. 17, 2007)
The law firm of Speights & Runyan filed thousands of claims on behalf of creditors in the W.R. Grace & Co. bankruptcy. The debtors moved to expunge and disallow 71 of these claims, contending that Speights & Runyan lacked express authority to file the proofs of claim as of the time that they were filed. The United States Bankruptcy Court for the District of Delaware held that, although a claimant may authorize the filing of a claim after it is filed, if the ratification occurs after the bar date has passed, that ratification is insufficient to make the claim timely filed. Accordingly, because authorization for these 71 claims was not established as of the deadline for filing proofs of claim, the Court expunged and disallowed the claims.
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Posted on May 30, 2007 by MorrisJames Delaware
In re RNI Wind Down Corp., Case No. 06-10110 (CSS), 2007 WL 949647 (Bankr. D. Del. March 29, 2007)
The Plan Administrator in the bankruptcy case of RNI Wind Down Corporation and its affiliated debtors objected to a request for payment of fees and expenses pursuant to the debtors’ plan of reorganization by the indenture trustee of pre-petition notes of the debtors. The parties agreed to a settlement and moved for approval of the agreement. The Delaware Bankruptcy Court refused to approve the settlement, finding that the legal invoices and request for fees were so heavily redacted and inspecific as to make it impossible for the court to determine whether they were reasonable, and thus whether the settlement was equitable and fair. The court also determined that the plan did not modify the indenture agreement, which was a pre-petition contract among non-debtors, and that it lacked jurisdiction over claims arising under the indenture.
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Posted on May 29, 2007 by MorrisJames Delaware
On May 22, 2007, United States Trustee Kelly Beudin Stapleton appointed an Official Committee of Equity Security Holders in the Hancock Fabrics, Inc. case (07-10353 (BLS)). The members of the committee are Berg & Berg Enterprises LLC of Cupertino, California, Trellus Management of New York and Warren B. Kanders of Stamford, Connecticut. Sonnenschein Nath & Rosenthal of New York and Morris Nichols Arsht & Tunnell LLP of Wilmington, Delaware will serve as counsel to the equity committee.
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Posted on May 29, 2007 by MorrisJames Delaware
Cont’l Airlines, Inc. v. Eastern Pilots Merger Comm. (In re Cont’l Airlines, Inc.), 484 F.3d 173 (3d Cir. 2007)
In their third visit to the United States Court of Appeals for the Third Circuit, a group of former pilots of Eastern Airlines appealed from a decision of the United States District Court for the District of Delaware enjoining them from proceeding to arbitration with debtor Continental Airlines and its pilots. Because the Eastern pilots sought arbitration under their former collective bargaining agreement (the “CBA”) with Eastern Airlines (which became an obligation of Continental Airlines when it merged with Eastern), and the debtors’ obligations under the CBA had been discharged, the debtors would not be compelled to appear at an arbitration in which no award against them would be possible. The Continental pilots were not a party to the CBA, and could not be bound by its arbitration provision.
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Posted on May 23, 2007 by MorrisJames Delaware
On May 21, 2007, The Holliston Mills, Inc., filed a chapter 11 bankruptcy petition in the United States Bankruptcy Court for the District of Delaware. The petition has been assigned case number 07-10687 and Chief Bankruptcy Judge Mary F. Walrath is handling the matter.
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Posted on May 18, 2007 by MorrisJames Delaware
Consolidated SWINC Estate and SWE&C Liquidating Trust v. ACE USA, Inc. (In re Stone & Webster, Inc.), Adv. Pro. No. 07-50390 (PJW), 2007 WL 1334498, -- B.R. -- (Bankr. D. Del. May 4, 2007)
The liquidating trusts of the Stone & Webster debtors commenced an adversary proceeding against insurers of the debtors in connection with a coverage dispute that had been waged for many years, including well before the petition date. The insurers moved for a determination of the core/non-core status of the adversary proceeding. The United States Bankruptcy Court for the District of Delaware determined that the suit was merely a pre-petition state law breach of contract action over which the court had no jurisdiction under the United States Supreme Court’s decision in Northern Pipeline Constr. Co. v. Marathon Pipe Line Co., 458 U.S. 50, 71 (1982).
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Posted on May 14, 2007 by MorrisJames Delaware
Liberty Brands, LLC, a manufacturer of tobacco products with brand names including Always Save, Best Choice, Circle Z and Sonic (according to a May 8, 2007 Annual Approved Tobacco List posted on the website for the North Carolina Department of Justice www.ncdoj.com/DocumentStreamerClient), filed a Chapter 11 bankruptcy petition in the United States Bankruptcy Court for the District of Delaware on Thursday, May 10, 2007. The petition has been assigned case number 07-10645. It lists assets of less than $10 million with liabilities falling between $10 and $50 million.
Posted on May 8, 2007 by MorrisJames Delaware
On Monday, May 7, 2007, in the Delaware bankruptcy court, three creditors, Weavering Capital (UK) Ltd., Weavering Capital AB, and Niels Vejgaard Holding A/S, claiming to hold promissory note claims of $1.350 million, filed an involuntary petition against 121 Sportsnet, Inc., f/k/a Palo Alto Golf, LLC, with a location in Palo Alto, California. The matter has been assigned case number 07-10619.
Posted on May 8, 2007 by MorrisJames Delaware
Mission Critical Enterprises, Inc., a full service design and consulting company according to its website, filed for Chapter 11 protection on May 4, 2007, listing estimated liabilities at $1 million or less.
Posted on May 4, 2007 by MorrisJames Delaware
In re Armstrong World Indus, Inc., No. 00-4471, 2007 WL 1138824, -- B.R. – (D. Del. Apr. 17, 2007)
A fee auditor was appointed to review all requests for fees and expenses incurred in connection with the preparation for and hearing on debtor Armstrong World Industries, Inc.’s Fourth Amended Plan of Reorganization. To the extent that the fee auditor recommended reductions of fees and expenses of certain professionals, there were no objections to most of those recommendations. However, objections to certain fees and expenses of a consultant to the debtor and one law firm were presented at a hearing in the United States District Court for the District of Delaware. The court adopted the fee auditor’s recommendations, finding that the consultant’s fees for the attendance of a testifying witness and four non-testifying professionals at the plan confirmation hearing were unreasonable, and disallowed the fees of two supporting professionals. The court also disallowed the fees of two supporting professionals incurred in connection with deposition preparation. Finally, the court disallowed certain food expenses requested by the future claimants’ counsel, finding that the expenses were exorbitant.
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Posted on May 4, 2007 by MorrisJames Delaware
In re Machne Menachem, Inc., No. 05-5425, 2007 WL 1157015 (3d. Cir. Apr. 19, 2007)
An insider of debtor Machne Menachem, Inc. purchased the claims of four unsecured creditors to alter the composition of the class of non-insider unsecured claimants. When the debtor’s plan or reorganization was then approved by voters and confirmed by the United States Bankruptcy Court for the Middle District of Pennsylvania, a former director of the debtor, who also was the proponent of a competing plan, appealed the confirmation order to the district court, arguing that the plan violated the good faith requirement of the plan confirmation provisions of the Bankruptcy Code. The district court reversed the bankruptcy court, and the Third Circuit affirmed the reversal, finding that the debtor impermissibly gerrymandered the classes to secure the necessary votes in favor of the plan.
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Posted on May 1, 2007 by MorrisJames Delaware
Yesterday, April 30, 2007, Pac-West Telecomm, Inc. and certain related entities filed chapter 11 petitions in the United States Bankruptcy Court for the District of Delaware. The case has been assigned case number 07-10562. The petition lists assets of approximately $54 million and liabilities of approximately $66 million.
Other filing entities are PWT of New York, Inc., PWT Services, Inc., Pac-West Telecomm of Virginia, Inc., Installnet, Inc., and U.S. Net Solutions, Inc.
Posted on April 27, 2007 by MorrisJames Delaware
Just days ago, the MAS Litigation Trust, spawned from the bankruptcy of Meridian Automotive Systems, Inc., filed nearly 300 actions to recover avoidable transfers. The causes of action seek avoidance of preferential transfers under Section 547 of the Bankruptcy Code as well as avoidance of fraudulent transfers under Section 548. In addition, the complaints seek denial of claims under Section 502(d) and recovery of all avoided transfers under Section 550.
In what is sure to feel like double jeopardy, many of the defendants now being sued by Meridian also suffered Meridian's purchase of Cambridge Industries Holdings, Inc. out of its own bankruptcy, Case No. 00-1919 (Bankr. D. Delaware), only to be sued by the Cambridge liquidating trustee for preferences and fraudulent conveyances.
Posted on April 26, 2007 by MorrisJames Delaware
In re Machne Menachem, Inc., No. 05-5425, 2007 WL 1157015 (3d. Cir. Apr. 19, 2007)
An insider of debtor Machne Menachem, Inc. purchased the claims of four unsecured creditors to alter the composition of the class of non-insider unsecured claimants. When the debtor’s plan or reorganization was then approved by voters and confirmed by the United States Bankruptcy Court for the Middle District of Pennsylvania, a former director of the debtor, who also was the proponent of a competing plan, appealed the confirmation order to the district court, arguing that the plan violated the good faith requirement of the plan confirmation provisions of the Bankruptcy Code. The district court reversed the bankruptcy court, and the Third Circuit affirmed the reversal, finding that the debtor impermissibly gerrymandered the classes to secure the necessary votes in favor of the plan.
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Posted on April 23, 2007 by MorrisJames Delaware
Judge Burton R. Lifland of the Bankruptcy Court for the Southern District of New York issued a decision on Thursday (here) that will undoubtedly be the discussion topic at many future bankruptcy conferences. In his April 19, 2007 decision in the Dana Corporation bankruptcy, Judge Lifland held (i) there is no federal right of reclamation created by 11 U.S.C § 546(c), and (2) unless an individual reclamation claimant holds a claim in excess of a superior claimant's claim, the reclamation claim is valueless.
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Posted on April 20, 2007 by MorrisJames Delaware
W.R. Grace & Co. v. Chakarian (In re W.R. Grace & Co.), Case No. 01-01139 (JKF), Adv. Pro. No. 01-771, 2007 WL 1129174, -- B.R. – (Bankr. D. Del. Apr. 13, 2007)
In an opinion interpreting the Third Circuit’s Pacor standard for related-to jurisdiction, the Court held that state court actions against the State of Montana in which the W.R. Grace & Co. debtors were named as co-defendants – but which causes of action were enjoined – could proceed to the extent that they sought to establish the liability of the State of Montana. Because Montana would have to bring subsequent claims against the Debtors for indemnity and contribution, the state court actions had no “conceivable” effect on the bankruptcy estate, as contemplated by Pacor, so as to vest the Court with related-to jurisdiction over the claims. The Court therefore denied the Debtors’ motion to expand a preliminary injunction against the suits to the state of Montana.
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Posted on April 20, 2007 by MorrisJames Delaware
In re W.R. Grace & Co., Case No. 01-01139, Docket No. 15197 (Bankr. D. Del. April 13, 2007)
The State of Montana filed a motion for relief from the automatic stay to join debtor W.R. Grace & Co. as a third-party defendant in asbestos-related litigation pending in Montana state courts. The claims asserted in those actions arose out of Grace’s former vermiculite mining and processing operation in Montana.
The United States Bankruptcy Court for the District of Delaware analyzed Montana’s request under the standard articulated by the court in In re Rexene Products Co. and In re Continental Airlines, Inc. That standard requires consideration of the prejudice and hardships to the parties, as well as the likelihood that the creditor would ultimately prevail on the merits. The court denied the motion, finding that the debtor, the bankruptcy estate and the other creditors would suffer great prejudice if Montana were permitted to proceed against the debtor in state court, and that Montana’s claims for indemnity and contribution were premature, but preserved in Montana’s proof of claim.
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Posted on April 18, 2007 by MorrisJames Delaware
At the hearing of First Day motions on April 17, 2007, Judge Walsh authorized Custom Food Products, Inc. to borrow up to $25 million in interim post-petition DIP financing from Wachovia Capital Finance Corporation (inclusive of a letter of credit subfacility of $5 million and an over-advance subfacility of $3 million). A final hearing to approve the post-petition financing has been set for May 16, 2007 at 10:30 a.m.
Posted on April 16, 2007 by MorrisJames Delaware
Custom Food Products, Inc., located in Carson, California, filed a voluntary Chapter 11 petition on April 13, 2007 in the Bankruptcy Court for the District of Delaware. The petition has been assigned case number 07-10495. The petition lists between $1 million and $100 million in assets, and a similar amount of liabilities. The petition was filed by Klee, Tuchin, Bogdanoff & Stern LLP located in Los Angeles, California, and by the Wilmington, Delaware office of Pachulski Stang Ziehl Young Jones & Weintraub LLP.
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Posted on April 16, 2007 by MorrisJames Delaware
Pickett v. Integrated Health Servs., Inc. (In re Integrated Health Servs., Inc.), No. 06-2279, 2007 WL 1073011 (3d Cir. Apr. 11, 2007)
Prior to the petition date of debtor Integrated Health Services, Inc., the debtor issued a memo assigning some interest in a corporate golf club membership to its Executive Vice President and Chief Financial Officer, C. Taylor Pickett. This membership was later scheduled by the debtor as an asset of the debtor on schedules signed by Pickett. After Pickett left employment of the debtor almost two years after the petition date, the debtor removed Pickett as the corporate designee on the membership. Pickett then sought a declaratory judgment from the bankruptcy court that the membership was assigned to him, and that the debtor had no interest in it. The bankruptcy court granted summary judgment in favor of the debtor, finding the assignment memo to be ambiguous, and that the parties’ behavior evidenced that they believed that the debtor retained ownership of the membership. The district court affirmed, and the Third Circuit affirmed the district court order.
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Posted on April 16, 2007 by MorrisJames Delaware
Today, Morris James LLP announced the publication of its bankruptcy law blog, the Delaware Business Bankruptcy Report, www.debusinessbankruptcy.com, the first blog devoted entirely to the Delaware commercial bankruptcy practice.
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Posted on April 11, 2007 by MorrisJames Delaware
Joan Fabrics Corporation and Madison Avenue Designs LLC filed voluntary Chapter 11 petitions on April 10, 2007 in the Bankruptcy Court for the District of Delaware. They have been assigned case numbers 07-10479 and 07-10480, respectively. Each petition lists between $1 million and $100 million each in assets and liabilities. The petitions were filed by Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. in Boston, Massachusetts, and by the Wilmington office of Pachulski, Stang, Ziehl Young, Jones & Weintraub LLP.
Posted on April 3, 2007 by MorrisJames Delaware
On Monday, April 2, 2007, New Century Mortgage Corporation and certain affiliated companies filed for bankruptcy protection in the United States Bankruptcy Court for the District of Delaware pursuant to chapter 11 of the Bankruptcy Code. New Century listed assets and liabilities each in excess of $100 million. New Century's counsel is O'Melveny & Myers, LLP in San Francisco, California. New Century's Delaware counsel is Richards, Layton & Finger, P.A.
Posted on March 28, 2007 by MorrisJames Delaware
Forklift LP Corp. v. iS3C, Inc. (In Re: Forklift LP Corporation), Case No. 00-1730 (KJC), Adv. Pro. No. 03-56113 (PJW) (Bankr. D. Del. March 21, 2007)
In connection with pending litigation over a failed post-petition software upgrade, the plaintiff asserted that even if its challenge to defendant’s right to payment was unsuccessful, the defendant’s administrative claim was subject to the provisions of the confirmed Plan, which, the plaintiff contended, resulted in defendant receiving less than full payment. Defendant moved for partial summary judgment on its right to receive payment in full, arguing that the Plan was ambiguous. The Court agreed, and held that the ambiguity in the Plan would not deny defendant its right to payment in full in light of the clear language of the Confirmation Order, the Disclosure Statement and the doctrine of judicial estoppel.
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Posted on March 27, 2007 by MorrisJames Delaware
Giuliano v. Fairfield Group Health Care Centers Limited Partnership (In Re: Lexington Healthcare Group, Inc.), Case No. 03-11007 (MFW), Adv. Pro. No. 06-50915 (MFW) (Bankr. D. Del. March 20, 2007)
The Chapter 7 Trustee filed a complaint against a nursing home landlord under Section 542 of the bankruptcy code seeking turnover of a $2.2 million security deposit posted by the Debtor’s predecessor. The landlord filed a motion to dismiss under FRBP 12(b)(6) claiming that a turnover action under Section 542 may only be used to obtain property which is undisputedly property of the bankruptcy estate. Noting that the Trustee had not pled an absolute right to the security deposit, and that a genuine dispute existed over rights to it, the Court agreed and dismissed the turnover action.
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Posted on March 26, 2007 by MorrisJames Delaware
Integrated Water Res., Inc. v. Shaw Envntl., Inc. (In re IT Group, Inc.), 361 B.R. 417(Bankr. D. Del. 2007).
The Plaintiff in this adversary proceeding sought to amend its complaint to add a claim for breach of contract against the IT Trust. The Plaintiff asserted that the Trust had violated the terms of a settlement agreement and releases contained therein by assigning its claims against the Plaintiff to a third party. The Court granted the motion to amend, finding that there was no undue delay by the Plaintiff, there was no undue prejudice to the Trust, and that the proposed amendment was not futile.
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Posted on March 13, 2007 by MorrisJames Delaware
In re Global Home Prods., LLC, Case No. 06-10340 (KG), ---- B.R. ----, 2007 WL 689747 (Bankr. D. Del. March 6, 2007).
The debtors proposed bonus plans for management and certain sales staff, which were based on performance and incentives. The debtors’ unionized employees objected to the plan, characterizing it as a Key Employee Retention Plan (KERP), approval of which was subject to the rigorous requirements of 11 U.S.C. § 503(c). The court approved the plans, finding that section 503(c) was inapplicable, as the plans were primarily incentivizing, rather than retentive or in the nature of severance. Accordingly, the court measured whether the plans were formulated according to a proper exercise of the debtors’ business judgment, and finding that they were, approved them under the less exacting business judgment standard of 11 U.S.C. § 363.
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Posted on March 13, 2007 by MorrisJames Delaware
In re Scott Acquisition Corp., Case No. 04-12594 (PJW), ---- B.R. ----, 2007 WL 676692 (Bankr. D. Del. March 6, 2007)
The Chapter 7 Trustee of the estate of debtors Scott Acquisition Corporation and Scotty’s Inc. filed a complaint against the debtors’ pre-petition counsel, asserting legal malpractice, breach of fiduciary duty and fraudulent transfer claims. The claims arose from a series of transactions between the debtors and insiders of the debtors, in which the defendants represented both the debtors and the insiders. The defendants filed a motion to dismiss the legal malpractice and breach of fiduciary duty claims, asserting that the trustee was estopped from prosecuting those claims by the equitable defense of in pari delicto. The United States Bankruptcy Court for the District of Delaware granted the motion, finding the in pari delicto defense barred those claims, but permitted the fraudulent transfer count to go forward.
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Posted on March 9, 2007 by MorrisJames Delaware
In re American Pad & Paper Co., 478 F.3d 546, 2007 WL 624346 (3rd Circuit, 2007).
Steven Singer, the Chapter 7 Trustee of American Pad & Paper Co. and its co-debtors, was elected under 11 U.S.C. § 702 more than two years after the entry of the order for relief in the debtors’ cases. Singer was elected subsequent to the appointment of an interim trustee under section 701, who was appointed eleven days before the two-year anniversary of the entry of the order for relief.
Singer thereafter commenced avoidance actions against approximately 150 defendants, many of whom moved to dismiss on the basis that such actions were time-barred by 11 U.S.C. § 546(a), which requires that such avoidance actions by filed by the later of two years after the entry of the order for relief, or one year after the appointment of a trustee under section 702, 1104, 1163, 1202 or 1302, if that appointment occurred before the two years after the entry of the order for relief. The Bankruptcy Court dismissed those actions, and the District Court affirmed. The Third Circuit affirmed, finding that under the plain language of the statute, the actions were time-barred.
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Posted on March 9, 2007 by MorrisJames Delaware
Fruehauf Trailer Corp. v. Nat. Union Fire Ins. Co. of Pittsburgh, PA (In re Fruehauf Trailer Corp.), Case Nos. 96-1563–1572, Adv. Pro. No. 98-514, 2007 WL 676248 (Bankr. D. Del. March 2, 2007)
The defendants filed this motion to dismiss for failure to prosecute under Federal Rule of Civil Procedure 41(b), after a period of inactivity in the instant adversary proceeding of more than five years. The court denied the motion, finding that the plaintiff asserted cognizable claims, and that the most drastic sanction of dismissal was inappropriate. The Court held that giving the defendants the benefit of the doubt in all issues of fact that became vague as a result of the passage of time was sufficient to counter-balance the prejudice to defendants caused by the delay. In addition, the Court found that it was obliged to refer the matter to arbitration, pursuant to the agreement between the debtor and the defendants.
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Posted on March 6, 2007 by MorrisJames Delaware
Simon & Schuster, Inc. v. Advanced Marketing Services Inc. (In re Advanced Marketing Services Inc.), No. 07-50004 (CSS) (Bankr. D. Del. Feb. 27, 2007)
Simon & Schuster, a creditor of debtor Advanced Marketing Services, Inc., filed a reclamation claim against the debtor, and sought to have a temporary restraining order put in place to prevent the debtor from selling the S&S goods that were subject to the reclamation claim. The court denied the motion in a previously reported opinion. (here)
S&S then sought to pursue an appeal of the court’s interlocutory order denying the TRO motion, moved the District Court for leave to appeal, and requested that the Bankruptcy Court certify that the case was suitable for direct appeal to the United States Court of Appeals for the Third Circuit, pursuant to 11 U.S.C. § 158(d)(2). The Bankruptcy Court declined to decide the request, finding that, because the District Court and Bankruptcy Court were being asked to make an almost identical set of findings, judicial resources would best be used by deferring to the District Court to decide the motion for leave to appeal. Moreover, respect for the hierarchy of the courts warranted deference to the District Court.
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Posted on March 2, 2007 by MorrisJames Delaware
In re Valley Media, Inc., No. 06-2163, 2007 WL 559785 (3d Cir. Feb. 23, 2007).
The Massachusetts Department of Revenue filed a proof of claim in the bankruptcy case of Valley Media, Inc., asserting that Valley owed the commonwealth for uncollected sales tax for goods drop-shipped on behalf of retailers by Valley to customers in Massachusetts. The United States Bankruptcy Court for the District of Delaware sustained the debtor’s objection to the claim, finding that the term “delivery” is defined in accordance with the Uniform Commercial Code, and further finding that such shipments were not a “delivery in the commonwealth” subject to sales tax under Massachusetts law. The United States District Court for the District of Delaware sustained the objection, and the Third Circuit affirmed.
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Posted on February 14, 2007 by MorrisJames Delaware
Broadway Advisors, LLC v. Hipro Elecs., Inc. (In re Gruppo Antico, Inc.), Case No. 02-1328 (PJW), Adv. Pro. No. 03-58480 (KJC), 2007 WL 414494 (Bankr. D. Del. Feb. 7, 2007)
Vendor Hipro Electronics, Ltd. of Taiwan sold computer parts to the debtor prior to the commencement of the debtor’s bankruptcy case. However, in the period running up to the petition date, the debtor sent payments for Hipro Taiwan invoices to another Hipro entity, Hipro Electronics, Inc., in Texas. Hipro USA forwarded those checks to Hipro Taiwan, who deposited the checks into their own account. The debtor, however, commenced a preference action against Hipro USA. Hipro USA filed a motion for judgment on the pleadings. The court held that, because Hipro USA never deposited the funds, it was not a transferee of the debtor, and therefore could not be liable for the avoidance of the payments that the debtor sent to Hipro USA.
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Posted on February 13, 2007 by MorrisJames Delaware
Mfrs. and Traders Trust v. Wyo. Sand and Stone, Case No. 05-4113, 2007 WL 397377 (3d Cir. Feb. 6, 2007).
A lender holding a security interest in vehicles of the debtor executed releases of those liens, and delivered those releases to an auctioneer selling the debtor’s vehicles. Execution of the releases prior to auction was purportedly going to assist in obtaining a higher price for the vehicles. An unsecured creditor of the debtor asserted that the proceeds of the sale did not belong to the lender because the liens were released prior to the sale. The Third Circuit Court of Appeals affirmed the bankruptcy court’s holding that by executing the releases, the lender released its liens.
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Posted on February 12, 2007 by MorrisJames Delaware
Claybrook v. Consolidated Foods, Inc. (In re Bake-Line Group, LLC), Case No. 04-10104 (MFW), Adv. Pro. No. 06-50322 (PJW), 2007 WL 329695 (Bankr D. Del. Feb. 5, 2007)
The debtor came into possession of a check made payable to the preference defendant when the postman mistakenly delivered the check to the debtor. The debtor converted the check, depositing it into the debtor’s bank account. The defendant learned of the debtor’s actions, and demanded and received from the debtor a check to cover the funds that the debtor had converted. Days later, the debtor commenced its bankruptcy case.
The plaintiff in this adversary proceeding, the trustee of the debtor’s estate, sued the defendant to recover the payment as a preferential transfer. The court granted summary judgment in favor of the defendant, finding that the debtor converted the funds, and never had any interest in them that it could transfer.
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Posted on February 2, 2007 by MorrisJames Delaware
Hayes v. Genesis Health Ventures, Inc. (In re Genesis Health Ventures, Inc.), Civ. A. No. 06-397 (JJF), Case No. 00-2692 (PJW) (D. Del. Jan. 26, 2007)
The appellant filed a notice of appeal from an order of the Bankruptcy Court imposing sanctions against the appellant. However, although the notice of appeal was dated eight days after the date of entry of the order, it was not filed until fifteen days after the date of entry of the order appealed from. Because the ten day deadline to file a notice of appeal under Federal Rule of Bankruptcy Procedure 8002(a) was jurisdictional, the District Court found that it lacked jurisdiction to adjudicate the appeal.
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Posted on January 29, 2007 by MorrisJames Delaware
In re Advanced Marketing Services, Inc., 360 B.R. 421 (Bankr. D. Del. 2007)
Simon & Schuster asserted a reclamation demand in excess of $5 million, and filed an adversary Complaint against the debtor to enforce its reclamation rights. In support of the complaint, Simon & Schuster sought a temporary restraining order to prevent the debtor from selling its goods. The court denied the application for the TRO, finding that the goods that were the object of the reclamation demand were subject to a prior, superior security interest of the debtors’ pre-petition and post-petition lenders. Accordingly, S&S was unable to show that it had a likelihood of success on the merits.
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Posted on January 16, 2007 by MorrisJames Delaware
FSQ, Inc. v. Integrated Health Servs., Inc. (In re Integrated Health Services, Inc.), Case No. 00-00389 (MFW), Adv. Pro. No. 02-05193 (MFW), ---- B.R. ----, 2007 WL 60799 (Bankr. D. Del. January 9, 2007)
FSQ sued the Debtors to recover $1,268,762 in payments allegedly due to FSQ by the Debtors’ estates with respect to a reconciliation of claims during a period in which FSQ managed the Debtors’ health-care facilities. The parties filed cross motions for summary judgment. The Court denied FSQ’s motion, and granted the Debtors’ motion for summary judgment, find that the claims asserted by FSQ had been released pursuant to agreements between the parties that settled all claims arising during the time that FSQ managed the Debtors’ facilities, and prior to FSQ being granted licenses to operate the facilities themselves.
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