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Dead Zone? Direct Claims by Creditors of a California Corporation May Not Lie Against Management Based on Management's Allegedly Shifting Duties When Corporation Is in the Zone of Insolvency or Even Insolvent

by admin | Wed, 08/25/2010 - 07:38

The California Court of Appeal recently rejected the argument that directors and officers owe fiduciary duties to the company's creditors when the company is in the so-called "zone of insolvency," or is even clearly insolvent. In Berg & Berg Enterprises, LLC v. John Boyle, et al., 100 Cal. Rptr. 3d 875 (Cal. Ct. App. 6th Dist. Oct. 29, 2009), the California court expounded that "there is no broad, paramount fiduciary duty of due care or loyalty that directors of an insolvent corporation owe the corporation's creditors solely because of a state of insolvency."  Id.

When Are Goods Received For The Purpose Of Asserting Administrative Priority Status Under Section 503(b)(9) Of The Bankruptcy Code?

by admin | Thu, 05/06/2010 - 07:07

A bankruptcy court recently held that in order for a supplier of goods on credit to establish an administrative claim under Bankruptcy Code section 503(b)(9) in the bankruptcy case of its buyer, the supplier will need to show that its buyer "physically" received the goods within 20 days prior to the buyer's bankruptcy filing, regardless of when title to the goods passed. In Re Circuit City Stores, Inc., et al., Case No. 08-35653, No. 7149 (Bankr. E.D. VA April 8, 2010).

Top 10 Best Practices For Lenders On Problem Loans

by admin | Wed, 04/14/2010 - 07:26

Since the start of the financial crisis, the number of problem loans has increased as real estate values declined, credit markets tightened, and various companies struggled to survive and stay in business during this recession. For lenders who made loans secured by real estate or personal property collateral during better economic conditions, these lenders are now being faced with loan defaults and having to decide whether to workout the loan (e.g., by giving an extension of maturity date, or restructuring the interest rate or other loan terms, or waiving certain defaults) or to exercise it

One's Crisis is Another's Opportunity: Section 363 Sales

by admin | Wed, 03/31/2010 - 15:00

With the increasing numbers of companies which were once thought to be giants of industry filing for bankruptcy, more opportunities to purchase major assets are becoming available to savvy buyers looking to expand their business or asset base. The Bankruptcy Code provides debtors with the ability to liquidate all or a part of their assets through court-supervised sales and buyers with the ability to obtain those assets at more favorable prices than they would pay if the sale were consummated outside of a bankruptcy.

Equitable Subordination of a Creditor's Secured Claim when such Secured Creditor is, itself, in Bankruptcy

by admin | Thu, 02/18/2010 - 14:23

In a majority opinion dated December 15, 2009, the Ninth Circuit Bankruptcy Appellate Panel held that a chapter 11 debtor may not equitably subordinate a creditor's claim and transfer the lien securing that claim, when such creditor is, itself, in bankruptcy, before first obtaining relief from the automatic stay under section 362 of the U.S. Bankruptcy Code in such creditor's bankruptcy case. Lehman Commercial Paper v. Palmdale Hills Prop. (In re Palmdale Hills Prop., LLC), 2009 Bankr. LEXIS 4294 (B.A.P. 9th Cir. Dec. 15, 2009).  

The Bankruptcy Files: Haute Couture Edition

by admin | Fri, 10/16/2009 - 12:41

To read this article on bankruptcies in the fashion industry published by American Lawyer, please click here, or visit the AmLaw Daily website.

Bankruptcy Court Allows General Growth's "Bankruptcy-Remote"

by admin | Thu, 09/10/2009 - 08:24

In a decision made on August 11, 2009, the U.S. Bankruptcy Court for the Southern District of New York allowed solvent, special purpose entity subsidiaries of a bankrupt parent company, General Growth Properties, Inc., to maintain their Chapter 11 bankruptcy cases, raising several important issues related to the use of special purpose entities structured to be "bankruptcy-remote." 

New FCA Rules Put Lenders and Brokers Directly in Their Gun Sights

by admin | Fri, 08/14/2009 - 08:14

The author is a member of the Firm's Government Contracts & Regulated Industries Practice Group. For additional articles and postings concerning this and related topics, please refer to Sheppard Mullin's Government Contracts Blog, which can be found at www.governmentcontractslawblog.com.

I.  INTRODUCTION

The Precedential Value of an Unprecedented Sale - Lessons from Chrysler

by admin | Tue, 07/14/2009 - 11:14

On June 10, 2009, the sale of substantially all of Chrysler's assets closed, just 42 days after the country's third largest automaker filed for bankruptcy protection. The closing followed a contentious sale hearing before the Bankruptcy Court, an expedited appeal to the Second Circuit Court of Appeals and a brief stay imposed by the United States Supreme Court. The source of the contention: three Indiana state pension funds, arguing that the sale of Chrysler's assets constituted a sub rosa plan of reorganization that upended the priority scheme of the Bankruptcy Code. Rejecting the I

Considerations for Service on an Unsecured Creditor's Committee

by admin | Tue, 04/14/2009 - 18:35

With bankruptcy filings up by more than 25% in the recent past, and with the promise of many more to come in the near future, an increasing number of businesses and individuals may find themselves listed amongst the largest unsecured creditors of a debtor and with much to lose in a bankruptcy case. As one of the largest creditors, these same businesses and individuals may also find themselves being solicited to serve on “official” unsecured creditors’ committees.