Delaware Business Bankruptcy Report: Morris James LLP Lawyers and Attorneys

MAS Litigation  Trust v. Plastech LDM (In re Meridian Automotive Sys.-Composite Ops., Inc., Case No. 05-11168 (MFW), Adv. Pro. No. 07-51195 (KG), 2007 WL 4292130 (Bankr. D. Del. Dec. 5, 2007) (Judge Kevin Gross)

The trustee of the litigation trust for the estate of debtor Meridian Automotive Systems, Inc. attempted to serve an adversary complaint by naming and serving an entity that does not exist, and addressed such service to an incorrect address and without addressing service to an officer or agent of the defendant.  On the putative defendant’s motion, the United States Bankruptcy Court for the District of Delaware dismissed the complaint, finding that service did not comport with the requirements of Fed. R. Bankr. P. 7004(b)(3).

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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.

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In re Am. Pad & Paper Co., 478 F.3d 546 (3d Cir. 2007) (Circuit Judge Dolores Korman Sloviter)

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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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.

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Hayes v. Genesis Health Ventures, Inc. (In re Genesis Health Ventures, Inc.), Civ. A. No. 06-397 (JJF), Case No. 00-2692 (PJW), 2007 WL 211209 (D. Del. Jan. 26, 2007) (Judge Joseph J. Farnan, Jr.)

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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In re Nellson Nutraceutical, Inc., 356 B .R.364 (Bankr. D. Del. 2006) (Judge Christopher S. Sontchi)

At trial to determine the enterprise value of the Debtors, the Debtors’ expert tendered a valuation opinion based on a metric of EBITDA minus capital expenditures. Because this methodology is not generally accepted by experts in the field, and, moreover, was invented by the Debtors’ expert for use in this trial, the Court held that this method lacked reliability, and the Debtors’ expert’s testimony was therefore inadmissible under Federal Rule of Evidence 702.

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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.

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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.

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Banks v. Moore (In re Banks), No. 06-1828, 204 Fed. Appx. 141, 2006 WL 2818950 (3d Cir. Oct. 3, 2006) (per curiam)

This court of appeals ruling affirming a default judgment in favor of a creditor in an adversary action on non-dischargability turned on the principle that “the debtor who failed to keep the court apprised of his proper mailing address has only himself to blame.” In this case, the debtor’s new address was the county jail. This decision was entered per curiam and is marked as “not precedential.”

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