Delaware Chapter 11 Filings - 2008
Commercial Chapter 11 case filings in the United States Bankruptcy Court for the District of Delaware in 2008:
Continue Reading...Delaware Bankruptcy Court Off to Busy Start in 2008
Lending credence to speculation that 2008 will be a busy year for the United States Bankruptcy Court for the District of Delaware, several large cases have filed in Delaware in the opening weeks of the year.
On January 18, 2008, Domain Home Furnishings filed a petition for relief under Chapter 11 of the Bankruptcy Code. This case is being jointly administered under case number 08-10132. Judge Walsh is presiding over this case. Domain is a furniture retailer with twenty-seven locations throughout the Northeast and Mid-Atlantic. According to papers that the debtor filed in the case, Domain hopes to reorganize its business.
On January 22, 2008, Buffets Holdings, Inc. and its related debtors commenced Chapter 11 cases. These cases are being presided over by Chief Judge Mary F. Walrath, and are being jointly administered under case number 08-10141. The debtors operate 626 restaurants in thirty-nine states under the Tahoe Joe’s Famous Steakhouse, Old Country Buffet, HomeTown Buffet, Ryan’s and Fire Mountain brands. The debtors, who employ 37,000 people, have obtained debtor-in-possession financing of $385 million. Indications are that the debtors intend to reorganize their businesses, and continue to operate.
Also on January 22, 2008, Answer Financial, Inc. filed a Chapter 11 petition. This case is being presided over by Chief Judge Mary F. Walrath, under case number 08-10140. Answer Financial is an insurance agency that operates over the Internet and phone. According to its petition, the debtor has between $1,000,001 and $10 million in assets, and between $50,000,001 and $100 million in liabilities.
Buyer of Debtor's Assets Did Not Purchase Receivables Related to Unassumed and Unassigned Contract
Integrated Water Res., Inc. v. Shaw Envtl., Inc. (In re IT Group, Inc.), 377 B.R. 471 (Bankr. D. Del. 2007) (Judge Mary F. Walrath)
Shaw Environmental, Inc. purchased in bankruptcy substantially all the assets of debtor IT Group, Inc. However, among the debtor’s executory contracts that were not assumed and assigned to Shaw was a sub-subcontract with Integrated Water Resource. Pursuant to the sub-subcontract, the debtor provided environmental remediation work in Cape Canaveral, Florida. When Shaw filed suit in California Superior Court to collect from Integrated an account receivable that Integrated allegedly owed under the sub-subcontact, Integrated commenced an adversary proceeding in the United States Bankruptcy Court for the District of Delaware to enjoin the California action. In this opinion, the Court granted summary judgment in favor of Integrated, finding that the sub-subcontract and any receivables associated with it were expressly excluded from the asset purchase agreement between Shaw and the IT Group.
Continue Reading...Delaware Chapter 11 Filings - 2007
Commercial Chapter 11 case filings in the United States Bankruptcy Court for the District of Delaware in 2007:
Continue Reading...Sale of Premises Subject to a Lease Rejected by Debtor Eliminates Portion of Landlord's Rejection Damages Claim
In re FLYi, Inc., 377 B.R. 140 (Bankr. D. Del. 2007) (Judge Mary F. Walrath)
The debtor rejected a lease of non-residential real property, and the landlord filed its rejection damages claim. Thereafter, the landlord sold the premises. The trust for the debtor’s estate objected to the claim. The Court sustained the objection in part, finding that when the landlord sold the premises, it exercised full dominion, eliminating any claim it had against the debtor for rent arising after the sale of the premises.
Continue Reading...Court Reconsiders Order, Grants Trustee's Counsel Fees In Excess of Carve-Out and Approves Reduction of Carve-Out for Unsecured Creditors
In re Argose, Inc., 377 B.R. 148 (Bankr. D. Del. 2007) (Judge Mary F. Walrath)
The Trustee of the debtor’s Chapter 7 estate entered into a stipulation with the debtor’s secured lenders for the payment of fees to Trustee’s counsel. The stipulation permitted a carve-out for Trustee’s counsel of $50,000, which could be renegotiated depending on the “complexity” of the sale of the debtor’s assets. The stipulation also carved out $50,000 for unsecured creditors. The Court entered an order approving the stipulation. After asset sales that returned far less for the estate than anticipated, Trustee’s counsel submitted final fee applications for $81,393.50. After the Court approved the application, the Trustee paid the fee to his counsel. The Trustee then moved to modify the order approving the stipulation to allow the higher fees, and represented to the Court that, as a consequence, after payment of the Trustee’s commissions, there would be insufficient funds to pay to the unsecured creditors their full $50,000 carve out. The Court denied the motion, and the Trustee moved for reconsideration. On reconsideration, the Court reversed itself, finding that the stipulation permitted this course of action.
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Aspen Executive Air, LLC Files Chapter 11 Case in Delaware
Aspen Executive Air, LLC, a Colorado-based company, has filed a Chapter 11 petition in the United States Bankruptcy Court for the District of Delaware. This case has been assigned to Chief Judge Mary F. Walrath under case number 07-11341. The debtor filed this case on September 14, 2007, but, as of the date of this writing, has not filed any motions in the case. According to the debtor's petition, Calim Venture Partners II
Wireless Payment Technology Innovator Creditel Files Chapter 11 Petition
On July 13, 2007, Virtual Fonlink, Inc. d/b/a Creditel filed a voluntary petition for relief under Chapter 11 of the Bankruptcy in the United States Bankruptcy Court for the District of Delaware. This case is pending before Chief Judge Mary F. Walrath.
MediCor Ltd. Files Chapter 11 Petition in Delaware
On June 29, 2007, MediCor Ltd., a Delaware corporation, and seven affiliated debtors filed voluntary petitions for bankruptcy under Chapter 11. Chief Judge Mary F. Walrath of the United States Bankruptcy Court for the District of Delaware has been assigned to these cases. The debtor’s petition described its businesses as “a global health care company that acquires, develops, manufactures and markets products primarily for esthetic, plastic and reconstructive surgery and dermatology markets.”
Continue Reading...The Holliston Mills, Inc. Seeks Chapter 11 Protection
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 presiding over the matter.
Continue Reading...Up in Smoke: Liberty Brands, LLC files for Chapter 11 Protection
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.
Mission Critical Enterprises, Inc. Files Chapter 11
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.
Decisions From Delaware Factor Into NY Bankruptcy Court's Denial Of Reclamation Claims
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.
Continue Reading...Trustee Failed To State A Claim For Turnover Under 11 U.S.C. § 542 Where Genuine Dispute Existed As To Whether Security Deposit Was Property Of The Estate
Giuliano v. Fairfield Group Health Care Centers Ltd. P'ship (In Re Lexington Healthcare Group, Inc.), 363 B.R. 713 (Bankr. D. Del. 2007) (Judge Mary F. Walrath)
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.
Continue Reading...Plaintiff Could Amend Its Complaint Against The IT Trust To Assert A Breach Of Contract Claim Arising From Trust's Alleged Violation Of Settlement Agreement And Release
Integrated Water Res., Inc. v. Shaw Envntl., Inc. (In re IT Group, Inc.), 361 B.R. 417(Bankr. D. Del. 2007) (Judge Mary F. Walrath)
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.
Continue Reading...On Cross Motions For Summary Judgment, Court Grants Summary Judgment In Favor Of Debtor In Dispute Over Reconciliation Of Accounts
FSQ, Inc. v. Integrated Health Servs., Inc. (In re Integrated Health Servs., Inc.), 358 B.R. 637 (Bankr. D. Del. 2007) (Judge Mary F. Walrath)
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.
Continue Reading...Court Grants Summary Judgment To Recipient Of Alleged Fraudulent Transfer On "Settlement Payment" Defense Of 11 U.S.C. § 546(e)
Official Comm. of Unsecured Creditors of the IT Group, Inc. v. Acres of Diamonds, L.P. (In re the IT Group, Inc.), 359 B.R. 97 (Bankr. D. Del. 2006) (Judge Mary F. Walrath)
Within a year prior to the petition date of the IT Group, Inc. debtors, defendant Acres of Diamonds L.P. sold to Organic Waste Technologies, Inc. five shares of the common stock of Keystone Recovery, Inc. Organic Waste paid for the shares by making a wire transfer of $575,000 from debtor IT Corporation’s Citibank account. Prior to confirmation of the debtors’ Chapter 11 plan, the debtors commenced a preference action against Acres, seeking to avoid and recover the $575,000 payment. The complaint was thereafter amended to add a fraudulent transfer cause of action, and amended again to drop the preference claim.
The court granted Acres’ motion for summary judgment, finding that the transfer was a payment for securities, made by a financial institution, and therefore excepted from avoidance under section 546(e) of the Bankruptcy Code.
Continue Reading...Court Applies Federal Contracts Dispute Act to Calculate Pre-Judgment Interest; Reduces Amount Sought from $490,000 to $75,000
Shaw Group v. Bechtel Jacobs Co. (In re IT Group, Inc.), 359 B.R. 90 (Bankr. D. Del. 2006) (Judge Mary F. Walrath)
Shaw Group, successor to the Debtors in this case under an Asset Purchase Agreement, prevailed on its Motion for Summary Judgment against contractor Bechtel Jacobs with respect to its breach of contract and unjust enrichment claims against Bechtel, by an order of the Court dated September 21, 2006. Shaw then moved for prejudgment interest, and the Court granted the motion, holding that the Contracts Dispute Act governed this question.
Continue Reading...Partial Summary Judgment Was Appropriate Where Chapter 7 Trustee Filed Preference And Fraudulent Transfer Claims After Statute Of Limitations Ran, And Where Trustee Merely Recited Fraudulent Transfer Statute, But Alleged No Facts In Support Of Claims
Burtch v. Dent, (In re Circle Y of Yoakum, Tx.), 354 B.R. 349 (Bankr. D. Del. 2006) (Judge Mary F. Walrath)
The Chapter 7 Trustee of debtor Circle Y’s estate asserted claims under sections 547 and 548 of the Bankruptcy Code relating to payments made to an insider more than one year before the petition date. The Bankruptcy Court held that those claims were time-barred. Also, because the Trustee’s fraudulent transfer claims pled no facts in support of the Trustee’s allegations, but merely recited relevant statutory language, the Bankruptcy Court dismissed those claims for failure to plead fraud with sufficient particularity. However, the Court granted the Chapter 7 Trustee leave to amend to add additional payments where those payments were part of a discernible pattern with payments alleged in the Trustee’s original complaint.
Continue Reading...Entry Of Final Judgment Denied Where Summary Judgment Only Granted Partial Relief
Fluor Enters. Corp. v. Orion Refining Corp. (In re Orion Refining Corp.), 355 B.R. 433 (Bankr. D. Del. 2006) (Judge Mary F. Walrath)
The Court granted summary judgment as to two counts of a four count complaint. Because each count sought relief under a common set of operative facts, the Court did not exercise its discretion to enter final judgment on each of the two counts as to which it entered summary judgment.
Continue Reading...Fraudulent Transfer Complaint Dismissed For Lack Of Personal Jurisdiction
Astropower Liquidating Trust v. Xantrex Tech (In re Astropower Liquidating Trust), Case No. 04-10322 (MFW), Adv. Pro. No. 05-50867, 2006 WL 2850110 (Bankr. D. Del. Oct. 2, 2006) (Judge Mary F. Walrath)
Defendants Merrill Lynch Asset Management and Merrill Lynch Investment Managers Limited moved to dismiss a fraudulent transfer complaint for lack of personal jurisdiction. Finding that the minimum contacts requirement for personal jurisdiction was not met, the Court dismissed the complaint.
Continue Reading...Cure Claim Allowed Only For Such Repairs As Are Necessary To Permit Landlord's Premises To Be Used For A Specific Purpose
In re Fleming Cos., Inc., Case No. 03-10945 (MFW), 2006 WL 2320974 (Bankr. D. Del. Aug. 9, 2006) (Judge Mary F. Walrath)
Where the Debtor assumed and assigned a lease of non-residential real property to a third-party, and the property was in deplorable condition at the time of assumption, under Wisconsin law, the landlord could recover the amount necessary to restore the property to its particular purpose as a grocery store as “cure” pursuant to sections 365 and 503(b).
Continue Reading...Leave To Amend Complaint Is Freely Given Where There Is No Prejudice To The Non-moving Party
PCT v. Authentic Specialty Foods, Inc. (In re Fleming Cos., Inc.), 347 B.R. 163 (Bankr. D. Del. 2006) (Judge Mary F. Walrath)
In this adversary proceeding, after eight months of litigation, the plaintiff sought leave to amend its complaint to add three additional causes of action. The Court found that, where discovery deadlines had not expired and where the plaintiff was willing to allow defendant to take additional discovery, the Court held there was no prejudice to the defendant, no undue delay by plaintiff, and amendment would not be futile and allowed the amendment.
Continue Reading...Employee Payroll Deductions For Health Benefits Do Not Constitute Preferential Transfers When Paid Into A Health Plan
Golden v. The Guardian (In re Lenox Healthcare, Inc.), 343 B.R. 96 (Bankr. D. Del. 2006) (Judge Mary F. Walrath)
When Guardian Life Insurance Company of America was sued by the Chapter 11 Trustee for Lenox Healthcare, Inc. for alleged preferential, fraudulent and unauthorized post-petition transfers it received, Guardian moved for summary judgment in part on the basis that the transfers it received were actually deductions taken by Lenox from its employees’ paychecks for the purpose of procuring health benefits. As a result, Guardian argued, the funds received by it were not transfers of the debtor’s interest in property, and therefore were not recoverable as preferences. The Bankruptcy Court (Judge Mary F. Walrath) agreed.
Continue Reading...Court Denies Indemnitee's Motion for Administrative Expense, Finding That Indemnity Obligation of Debtors-Indemnitor Arose Pre-Petition Under Applicable State Law
In re ANC Rental Corp., 341 B.R. 178 (Bankr. D. Del. 2006) (Judge Mary F. Walrath)
The claimant, Joan Martin, filed a motion for allowance and payment of an administrative expense against the estate of the debtors. The claim arose out of a pre-petition agreement under which the claimant rented a car from debtor Alamo Rent-A-Car. Martin was involved in a serious car accident in which two died. Post-petition, representatives of the other parties to the accident sued Martin and the debtors, who were found jointly and severally liable. The Minnesota court presiding over that matter found that the debtors had an indemnity obligation to Martin, and found the debtors primarily liable for payment of damages. Martin paid the settlement amount, and then filed an administrative expense motion against the debtors’ estate. The Bankruptcy Court denied the motion, finding that the indemnity obligation was an implied term of the car rental agreement, and therefore was a pre-petition obligation of the debtors that was not entitled to be allowed and paid as an administrative expense.
Continue Reading...Law Firm Disqualified For Concurrent Conflict Of Interest
In re Meridian Auto. Sys., 340 B.R. 740 (Bankr. D. Del. April 17, 2006) (Judge Mary F. Walrath)
A law firm that pre-petition represented a holder of first and second lien secured debt cannot thereafter represent an informal committee of first lien lenders when the debtor seeks bankruptcy protection. The committee representation is, by its nature, adverse to the interests of holders of other tranches of debt, and the representation therefore is prohibited by Model Rule of Professional Conduct 1.9(a).
Continue Reading...Property In Dispute Between A Debtor, Contractor, And A Buyer Of The Debtor's Assets Remains Property Of The Buyer
In re Orion Refining Corp. (Syracuse v. Orion Refining Corp.),341 B.R. 470 (Bankr. D. Del. 2006) (Judge Mary F. Walrath)
A contractor sought summary judgment on a complaint he filed to determine title to surplus materials located at a facility the Debtor sold to a third-party. The Debtor filed a cross-motion for partial summary judgment asserting that title to the surplus materials passed to the purchaser of the facility. The Court denied the contractor’s summary judgment motion because the buyer’s interest in the surplus materials as a third party purchaser could not be challenged based upon the contractor’s claim against the debtor. The Court also granted the debtor’s cross motion and released sale proceeds held in escrow to the debtor.
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