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.
Bankruptcy Court Holds That It Possesses Jurisdiction to Determine Amount of Workers' Compensation Owed By American Airlines to Former TWA Employee
In re TWA Inc. Post Confirmation Estate, No. 01-00056 (PJW), 2007 WL 2757148 (Bankr. D. Del. Sept. 21, 2007) (Judge Peter J. Walsh)
In this proceeding, the United States Bankruptcy Court for the District of Delaware held that it possessed subject matter jurisdiction to determine the amount of workers’ compensation benefits owed by American Airlines to a former employee of debtor Trans World Airlines. The matter was a core proceeding because it related to a claim filed against the debtor’s estate, even though the debtor was not liable for the claim. However, because the obligation was one assumed by American Airlines under the terms of the Bankruptcy Court’s order approving the sale of TWA’s assets to American, the Bankruptcy Court was required to interpret its own sale order, and thus this was a core proceeding.
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...Caribbean Supermarket Chain Pueblo Files For Chapter 11 Protection
This morning, Nutritional Sourcing Corporation - a holding company for affiliated debtors Pueblo International LLC and FLBN, LLC - along with these affiliates, filed petitions for Chapter 11 relief in the United States Bankruptcy Court for the District of Delaware. These cases have been assigned to the Honorable Peter J. Walsh.
According to press reports, debtors FLBN and Pueblo International operates the Pueblo chain of supermarkets in Puerto Rico and the U.S. Virgin Islands. According to press accounts, the St. Croix and St. Thomas, VI Pueblo supermarkets closed suddenly in recent weeks amid rumors of a sale of the chain to Whole Market Foods LLC, a St. Thomas-based company. According to Pueblo’s website, Pueblo was the first supermarket franchise in Puerto Rico and U.S. Virgin Islands, established in 1955. Pueblo also operates Blockbuster video stores in Puerto Rico and the Virgin Islands.
National Sourcing’s financial report for the fiscal year ending October 28, 2006 reports that rising oil prices and increased competition have had a deleterious effect on its performance. In recent years, the number of supermarkets and video stores operated by the debtors have decreased. This financial report also indicates that the debtors were highly leveraged.
The Fitness Company Files Chapter 11 Petition
On July 12, 2007, The Fitness Company and associated debtors filed petitions under Chapter 11 of the Bankruptcy Code in the United States Bankruptcy Court for the District of Delaware. These cases have been assigned to Judge Peter J. Walsh.
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Chapter 7 Trustee Fails To Demonstrate Likelihood of Success On Merits In Establishing That Proceeds of D&O Liability Policy Were Property of Estate
George L. Miller, Chapter 7 Trustee of World Health Alternatives, Inc. v. McDonald (In re World Health Alternatives, Inc.), 369 B.R. 805 (Bankr. D. Del. 2007) (Judge Peter J. Walsh)
The United States Bankruptcy Court for the District of Delaware held that the Chapter 7 trustee of the estate of debtor World Health Alternatives, Inc. was not entitled to a preliminary injunction to prevent the settlement of litigation pending against the debtor’s officers and directors in the United States District Court for the Western District of Pennsylvania. The Trustee sought to preserve, as alleged property of the estate, the proceeds of a directors and officers liability policy that provided coverage, first to the debtor’s officers and directors, then to the debtor for indemnification claims by the officers and directors and, lastly, for direct claims against the debtor. The trustee failed to demonstrate a likelihood of success on the merits in establishing that the proceeds were included in the property of the estate because there were no claims directly against the debtor in the District Court litigation, and because the directors and officers did not assert any indemnification claims against the debtor under the policy.
Continue Reading...Tweeter Home Entertainment Group, Inc. and Affiliates Seek Chapter 11 Protection
On Monday, June 11, 2007, Tweeter Home Entertainment Group, Inc. and certain related companies filed voluntary Chapter 11 bankruptcy petitions in the United States Bankruptcy Court for the District of Delaware. An exhibit to the petition lists $258.6 million in total assets and $190.4 million in total debts. The Tweeter petition has been given case number 07-10787 and the case has been assigned to The Honorable Peter J. Walsh.
Continue Reading...Bankruptcy Court Grants Limited Stay of Proceeding Pending District Court's Decision on Defendants' Request for Interlocutory Appeal
Haskell v. Goldman, Sachs & Co. (In re Genesis Health Ventures, Inc.), 367 B.R. 516 (Bankr. D. Del. 2007) (Judge Peter J. Walsh)
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.
Continue Reading...Adversary Proceeding Relating to Pre-Petition Insurance Coverage Dispute Was Non-Core Matter
Consolidated SWINC Estate and SWE&C Liquidating Trust v. ACE USA, Inc. (In re Stone & Webster, Inc.), 367 B.R. 523 (Bankr. D. Del. 2007) (Judge Peter J. Walsh)
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).
Continue Reading...Custom Foods Receives $25 Million In Interim Financing
At the hearing of First Day motions on April 17, 2007, Judge Peter J. 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.
Custom Food Products, Inc. Files In 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. Judge Peter J. Walsh is presiding over this case. 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.
Continue Reading...Ambiguous Plan Provisions Would Not Be Interpreted To Deny Potential Administrative Claimant Its Right To Payment In Full
Forklift LP Corp. v. iS3C, Inc. (In Re Forklift LP Corp.), 363 B.R. 388 (Bankr. D. Del. 2007) (Judge Peter J. Walsh)
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.
Continue Reading...Bankruptcy Court, Approving In Pari Delicto Defense, Grants Motion to Dismiss Trustee's Legal Malpractice and Fiduciary Duty Claims Against Debtors' Pre-Petition Counsel
In re Scott Acquisition Corp., 364 B.R. 562 (Bankr. D. Del. 2007) (Judge Peter J. Walsh)
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.
Continue Reading...Motion to Dismiss for Failure to Prosecute Denied; Bankruptcy Court Holds Five Year Period of Inactivity by Plaintiff Insufficient to Justify Sanction of Dismissal
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) (Judge Peter J. Walsh)
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.
Continue Reading...Transfer of Funds By Debtor To Rightful Owner Did Not Create Preference Liability Under 11 U.S.C. § 547(b) Where Debtor Acquired Funds By Conversion
Claybrook v. Consolidated Foods, Inc. (In re Bake-Line Group, LLC), 359 B.R. 566 (Bankr D. Del. Feb. 5, 2007) (Judge Peter J. Walsh)
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.
Motion For Abstention Denied On Grounds Of Judicial Estoppel
Finova Capital Corp. v. Cote (In re Finova Capital Corp.), 358 B.R. 113 (Bankr. D. Del. 2006) (Judge Peter J. Walsh)
The debtor sued the defendants in Vermont Superior Court for breach of contract. The Superior Court granted the defendants’ motion to dismiss on the basis of lack of jurisdiction, which, the Superior Court held, was vested with the Bankruptcy Court. The debtor then commenced an adversary proceeding in the Bankruptcy Court asserting the same breach of contact claims. The defendants moved the Bankruptcy Court to abstain, alleging that the Bankruptcy Court lacked personal jurisdiction. The Bankruptcy Court denied the motion on the basis of judicial estoppel.
Continue Reading...Stalking Horse Bidder Whose Bid Did Not Prevail At An Asset Foreclosure Sale Gets An Allowed Claim Against The Secured Party For The Break-up Fee, But No Other Damages
In re Finova Capital Corp., 356 B.R. 609 (Bankr. D. Del. 2006) (Judge Peter J. Walsh)
This case presents the bankruptcy court’s detailed findings and conclusions following a trial on a claim objection. The debtor, Finova Capital, a former middle market lender, objected to the proof of claim filed by Olsen Industries, a company which had been the initial but unsuccessful bidder for the assets of a company to which Finova had been an undersecured lender. The issues revolved around competing interpretations of a March 2000 letter agreement by which Olsen Industries agreed to serve as the stalking horse bidder in the public foreclosure sale of the assets of the company, Consolidated Industries, which manufactured and distributed gas furnaces. Olsen claimed that Finova breached the letter agreement and that it was thereby entitled to millions of dollars in damages. The court found no breach, apart from Olsen being entitled to its $100,000 break-up fee.
Continue Reading...Abstention In Favor Of Arbitration Warranted Where State Law Issues Predominate
In re Loewen Group Int'l, 344 B.R. 727 (Bankr. D. Del. 2006) (Judge Peter J. Walsh)
The reorganized debtor sued the buyer of certain real estate when the buyer refused to close. When the buyer counter-claimed, the debtor moved the Bankruptcy Court to abstain in favor of arbitration. The Court held that the factors that favored abstention were substantive. Specifically, the actions were state law issues, their resolution would not have an effect on the efficient administration of the estate, and the claims in the adversary proceeding were extremely remote from the underlying Chapter 11 case. The Court granted the abstention motion and referred the case to arbitration.
Continue Reading...Senior Lender's Carve Out for Benefit of General Unsecured Creditors Does Not Violate Absolute Priority Rule
In re World Health Alternatives, Inc., 344 B.R. 291 (Bankr. D. Del. 2006) (Judge Peter J. Walsh)
The Debtors, Committee, and Senior Lender moved for approval of a global settlement and the United States Trustee objected, arguing that the Committee was not authorized to borrow and/or compromise estate claims and causes of action at the expense of priority unsecured creditors in a Chapter 11 case. The Court approved the settlement. Funds set aside for the general unsecured creditors were part of the lender’s perfected security interest and not property of the estate, so the settlement did not violate the Code’s absolute priority rule.
Continue Reading...Letter Of Credit And Its Proceeds Are Not Property Of The Estate
In re Oakwood Homes Corp., 342 B.R. 59 (Bankr. D. Del. 2006) (Judge Peter J. Walsh)
Defendants moved to dismiss an adversary complaint seeking recovery of funds related to a surety bond and to a letter of credit.
The Court dismissed the counts in the complaint that sought to recover the letter of credit and the proceeds of the letter of credit as neither was property of the estate. However, the Court denied the motion to dismiss counts which sought to recover for alleged contract breaches between the debtors and the Defendants because the estate had a recognized interest in the contractual and equitable claims of the debtor, which were property of the estate.
The Court also granted leave to amend two fraudulent transfer counts.
