In its continuing efforts to ease the financial burdens of litigants, the Ad Hoc Committee for Electronic Discovery of the U.S. District Court for the District of Delaware recently amended the court's Default Standard for Discovery (the Standard). This revision continues a recent trend on the part of the federal courts, which have attempted to lower the costs associated with e-discovery by offering guidelines designed to streamline the process. Some examples of this trend include the following:In September 2011, the U.S. Court of Appeals for the Federal Circuit unveiled a Model Order for E-Discovery in Patent Cases designed to reduce discovery costs.In November 2011, the U.S. District Court for the Southern District of New York implemented Standing Order M10-468, In re: Pilot Project Regarding Case Management Techniques for Complex Civil Cases in the Southern District of New York, which details the court's expectations regarding e-discovery.In January 2012, Chief Judge Randall R. … [Read more...] about District of Delaware Adopts Default Standards for E-Discovery
U s bankruptcy court for the district of delaware
We have been closely monitoring the battle over the legality of class and collective action waivers under the National Labor Relations Act (NLRA). The National Labor Relations Board (NLRB) has been steadfast in its position that such waivers run afoul of the NLRA. The Fifth Circuit was the first Circuit Court to weigh in, consistently holding in a pair of decisions in 2012 and 2014, and again in 2016 that class and collective action waivers are permissible and enforceable. The Fifth Circuit rule presented a significant problem for the NLRB’s position as employers with sufficient contacts in Fifth Circuit states could appeal an NLRB decision invalidating their arbitration agreements to the Fifth Circuit.However, earlier this year, the Seventh Circuit became the first Circuit Court to agree with the NLRB’s stance against class and collective action waivers. Soon thereafter, the Ninth Circuit also joined the Seventh Circuit and the NLRB, thereby widening the … [Read more...] about Momentum Continues Against Validity of Class and Collection Action Waivers – Delaware District Court Judge Refuses to Enforce Class Action Waiver
Most loan contracts include provisions allowing the collection of attorneys’ fees in the event the borrower defaults. These attorney fee provisions are routinely enforced in collection suits brought in state courts.However the federal bankruptcy courts operate independent of the state court debt collection system. Bankruptcy cases often generate a variety of controversies that will not occur in a state court collection suit. Thus, the issue frequently has arisen whether a general unsecured creditor may be allowed a state law-based contract claim against the bankruptcy estate for the attorneys’ fees the creditor incurs during a bankruptcy case.In the bankruptcy proceeding of the Tribune Media Company, an indenture trustee filed a proof of claim for more than $30 million of attorneys’ fees it had incurred in connection with that bankruptcy. The trust indenture included customary text permitting the indenture trustee to recover costs and expenses … [Read more...] about We Need An Answer: Are Unsecured Creditors Entitled To Recover Attorneys’ Fees Incurred During A Bankruptcy?
More than seven years is a long time to wait for a loaned painting to be returned. But after such a long wait, Sandro Botticelli’s Madonna and Child (1485) is being returned to its owner, Kraken Investments Limited (Kraken). Kraken had consigned the painting to a gallery for sale, but the gallery’s bankruptcy intervened. For a time, it seemed that the painting would never be returned to Kraken, and that instead the gallery’s lender’s security interest would take priority, leaving Kraken within only an unsecured claim in the bankruptcy case. That dispute has only recently been resolved, with a reversal giving the Botticelli back to Kraken. [See Kraken Investments Ltd. v. Jacobs (In re Salander-O’Reilly Galleries, LLC), Case No. 14-cv-03544 (S.D.N.Y. Nov. 25, 2014)] It has been, for many, a cautionary tale.collapse of Salander O’Reilly Galleries, LLC (SOG). In 2007, SOG was facing numerous lawsuits alleging that SOG and its … [Read more...] about Botticelli’s ‘Madonna and Child’: The Risks of Art Consignment
In an important decision for debtors and creditors alike, the United States Bankruptcy Court for the District of Delaware has ruled that provisions in a limited liability company operating agreement, granting the company’s lender absolute power to prevent the company from filing a bankruptcy petition are unenforceable as against public policy. In re: Intervention Energy Holdings, LLC, 2016 WL 3185576 (Bankr. D. Del. 2016).The facts involved in the case are straight-forward. The debtors—a parent limited liability company and its subsidiary—found themselves in financial straits compelling them to seek a forbearance agreement with their lender. The lender agreed to forbear, but only on the condition that the debtors amend their respective operating agreements to include a provision admitting the lender as a member of the parent and further requiring the unanimous consent of the members of the parent for any voluntary filing for bankruptcy by either the parent or the … [Read more...] about Delaware Bankruptcy Court Holds LLC Operating Agreement Provisions Placing Sole Power in Company’s Lender to Prevent a Bankruptcy Filing are Void as Against Public Policy
On June 25, 2017, Takata’s US arm, TK Holdings Inc. and certain affiliates excluding certain foreign debtors such as Takata Corporation (Japan) (the “Takata US Debtors”),1 filed chapter 11 cases seeking bankruptcy protection in the Bankruptcy Court for the District of Delaware. The Takata US Debtors filed the chapter 11 cases (a) to facilitate a sale of their and their foreign affiliates’ assets to Key Safety Systems (“Key”) (or possibly a bidder, if any, that tops Key Safety Systems’ offer) for approximately USD $1.6 billion, and (b) to address unsecured trade and litigation claim debt and products liability claims stemming from alleged defective airbag components provided by Takata. An announcement was also made that Takata had obtained debtor-in-possession financing of approximately USD $226 million to undertake its contemplated sale and restructuring transactions.To stabilize its supply chain and operations and thereby maintain … [Read more...] about Takata Declares Bankruptcy: What are the Key Next Steps for Suppliers?
On March 11, 2016, Judge Christopher Sontchi of the U.S. Bankruptcy Court for the District of Delaware issued an opinion in the Energy Future Holdings bankruptcy that resolved an intercreditor dispute over $90 million in proceeds to be distributed under the plan of reorganization. The Court determined that distributions under a plan of reorganization and monthly adequate protection payments made pursuant to a cash collateral order were governed solely by the plan and order, and were not required to be distributed in accordance with a waterfall provision in an intercreditor agreement. BackgroundIn April 2014, Texas Competitive Electric Holdings LLC and its affiliates (“TCEH”) commenced chapter 11 proceedings in the Bankruptcy Court for the District of Delaware. TCEH’s bankruptcy case is one of the largest bankruptcy cases in United States history, in part because TCEH has one of the largest capital structures of any chapter 11 debtor. As of the … [Read more...] about Delaware Bankruptcy Court Rules TCEH First Lien Distributions Governed by Bankruptcy Code, Not by Intercreditor Agreement Waterfall
In Dore v. Sweports, Ltd., C.A. No. 10513-VCL (Del. Ch. January 31, 2017), plaintiffs John A. Dore, Michael J. O’Rourke, and Michael C. Moody (together, “Plaintiffs”) sought indemnification under the Delaware General Corporation Law (“DGCL”) and corporate bylaws, for expenses incurred in connection with three legal proceedings that occurred in Illinois, as well as those incurred enforcing their indemnification rights in Delaware. BackgroundDefendant Sweports, Ltd. (“Sweports”) is a Delaware corporation with its principal office in Illinois that acts as a holding company for the intellectual property rights for certain cleaning products and holds a majority interest in UMF Corporation (“UMF”). UMF uses Sweports’ intellectual property to manufacture anti-microbial products that are primarily used in the healthcare and hospitality industries. George Clarke (“Clarke”) founded both Sweports and UMF, and effectively … [Read more...] about Delaware Chancery Court Reexamines the Limits of Indemnification of Corporate Directors, Officers, and Others
It was the first hearing in the chapter 11 bankruptcy of Tampa, Fla.-based Anchor Glass Container Corp., and U.S. Bankruptcy Judge C. Timothy Corcoran had to ask: What prompted one of the largest glass container manufacturers in the country to bypass the bankruptcy courts of Del aware, where it was incorporated, in favor of filing in the Middle District of Florida, where it was headquartered?After all, over the last decade, the U.S. Bankruptcy Court for the District of Delaware has been considered the reigning venue of big bankruptcies for three very simple, very important reasons: Its judges understand complex bankruptcies, cases move quickly and professional fees get approved.Bankruptcy lawyer Robert A. Sori- ano, who represented Anchor Glass in its reorganization, confirms the response. “We felt the case would get more TLC if it were filed where the corporation was headquartered,” says Sori- ano, who heads the bankruptcy and creditors’ rights department at … [Read more...] about Delaware Dethroned
A recent ruling in the American Airlines bankruptcy case enforcing an automatic acceleration upon bankruptcy provision serves as a reminder that the enforceability of so-called ipso facto provisions in debt instruments remains an unsettled, forum-dependent question. In the American Airlines case, the question of the enforceability of an automatic acceleration upon bankruptcy provision arose in an unconventional context: the invalidity of the provision was argued not by the debtor but by the indenture trustee. The issue in dispute was whether a refinancing of certain taxable debt would require the debtor to pay (i) a make-whole premium due upon an optional redemption of the debt or (ii) par per the indenture provisions automatically accelerating the debt at par upon a bankruptcy. The U.S. Bankruptcy Court for the Southern District of New York held that the automatic acceleration provision had been triggered and controlled the amount … [Read more...] about AMR Decision Highlights Bankruptcy Court Split on Enforceability of Ipso Facto Clauses