All items from Delaware Bankruptcy Litigation

Introduction
On March 24, 2013, NAMCO, LLC ("NAMCO") filed a chapter 11 petition for bankruptcy in the United States Bankruptcy Court for the District of Delaware.  Based in Manchester, Connecticut, NAMCO sales swimming pool accessories and equipment throughout the Northeast and Mid-Atlantic United States.  See Declaration of Lee Diercks in Support of Chapter 11 Petition and First Day Motion (the "Declaration" or "Decl.") at *2.  In addition to selling pool supplies, NAMCO owns and operates a chemical repackaging center which allows the company to sell and distribute chemicals through its website.  Id.
Operations
Going in to bankruptcy, NAMCO operates thirty-seven (37) stores in ten states. The company's stores range anywhere in size from 11,000 to 60,000 square feet.  In addition to its retail stores, NAMCO operates in 190,000 square feet of office and distribution space and 40,000 square feet for its chemical repackaging center.  Id. at *3. 



Posted 1 year 1 week ago

Summary
In an 8 page decision signed February 21, 2013, Judge Gross of the Delaware Bankruptcy Court denied a Motion for Enlargement of Administrative Claim, holding that the movant failed to prove excusable neglect. Judge Gross’s opinion is available here (the “Opinion”).
The Opinion analyzes the motion pursuant to the excusable neglect factors provided in Pioneer Investment Services Co. v. Brunswick Assocs. Ltd. Partnership, 507 U.S. 380, 395 (1993) (“These include, as the Court of Appeals found, the danger of prejudice to the debtor, the length of the delay and its potential impact on judicial proceedings, the reason for the delay, including whether it was within the reasonable control of the movant, and whether the movant acted in good faith.”).Background



Posted 1 year 4 weeks ago

Summary
In a 25 page opinion published February 7, 2013, Judge Sontchi applied black-letter contract interpretation principles in conjunction with the bankruptcy rules in holding that a landlord was not entitled to damages resulting from a debtor's breach of its lease. Judge Sontchi’s opinion is available here (the “Opinion”). Background



Posted 1 year 6 weeks ago

Background
On February 25, 2013 (the "Petition Date"), Ormet Corporation and various related entities filed chapter 11 petitions for bankruptcy in the United States Bankruptcy Court for the District of Delaware.  As stated in the company's Declaration in Support of First-Day Motions and Applications (the "Decl.") at *4, Ormet began in 1956 as an aluminum manufacturer at a facility along the Ohio River in Hannibal, Ohio.  By 2004, the company had grown to eight facilities in six states with operations that included aluminum production, rolling, recycling and coating.  Id. 
Low prices for aluminum and high energy costs forced the company to file for bankruptcy protection in Ohio in January of 2004.  The Bankruptcy Court for the Southern District of Ohio confirmed Ormet's plan of reorganization in December of 2004.  Decl. at *5.  As the company enters bankruptcy a second time, this time in Delaware, Ormet operates an aluminum smelter facility in Hannibal Ohio (256 acres) and a refinery in Burnside, Louisiana (1,100 acres).  Decl. at *7.  In the weeks leading up to bankruptcy, Ormet employed over 1,100 individuals, 977 of which are represented by the United Steel, Paper and Forestry, Rubber, Manufacturing, Energy, Allied Industrial and Service Workers International Union.  Decl. at *8.
Reasons for Filing Bankruptcy



Posted 1 year 6 weeks ago

Background
On January 11, 2013, Handy Hardware Wholesale, Inc. ("Handy" or the "Debtor") filed a chapter 11 petition for bankruptcy in the United States Bankruptcy Court for the District of Delaware.  As stated in Handy's court filings, the company is a wholesale purchaser of hardware supplies which it in turn sells to its members at a discount.  See Declaration of Thomas J. Schifanella, Jr. in Support of Chapter 11 Petition and First Day Pleadings (the "Decl.") at *4.  The company's members operate over 1,300 retail stores, lumber yards and home centers in 14 states in the United States, Mexico, South America and Puerto Rico.  Id..  In order to purchase inventory for its members, Handy Hardware buys from over 1,300 vendors.  By purchasing in bulk, the company is able to purchase inventory at a reduced cost and pass the savings on to its members.  Id.
Events Leading to Bankruptcy
Handy Hardware began purchasing for its members in 1961.  Over the years the company continued to add more members.  In 1986, Handy began an expansion project wherein it expanded its Houston warehouse from 100,000 square feet to 560,000 square feet and built a second warehouse in Meridian, Mississippi.  Decl. at *15.  Whereas the Houston expansion was funded with cash, Handy funded the Meridian warehouse facility through a $20 million bond.  Decl. at *9. 



Posted 1 year 6 weeks ago

Summary
When a company files for bankruptcy, they gain a number of protections under federal law.  One of these protections is the “automatic stay” provided by 11 U.S.C. § 362. The automatic stay makes it illegal to continue prosecuting, or to initiate, an action against the debtor who is in bankruptcy.  Even if that debtor has injured you, it means that you cannot try to recover from them without getting the automatic stay lifted.  As more large bankruptcy cases are filed in Delaware, it becomes increasingly important that persons injured by debtors understand the legal hoops that they have to jump through in order to recover for their injuries.To aid in discussing this matter, imagine a situation in which a person (the “Injured”) is injured when hit by a truck belonging to the company (the “Debtor”).  The Injured files a lawsuit in state court to recover and the Debtor files for bankruptcy protection in Bankruptcy Court for the District of Delaware (“DE Bankruptcy Court”).  The last important assumption is that the Debtor, like most large companies, has insurance that can compensate the Injured.  While many of the principles of this post will apply in other courts, it will be discussed specifically in the context of this purely hypothetical situation.
The Automatic Stay



Posted 1 year 7 weeks ago

Introduction
On January 28, 2013 (the “Petition Date”), School Specialty, Inc, (“School Specialty” or “Debtor”), along with various affiliated entities, filed chapter 11 petitions for bankruptcy with the Delaware Bankruptcy Court. According to the Declaration of School Specialty’s Chief Administrative Officer, the company is one of the largest suppliers of educational products, equipment and curriculum for public school systems in the United States. See Declaration of Gerald T. Hughes in Support of Chapter 11 Petitions and First Day Motions (the “Decl.”) at *3. This post will look at School Specialty’s business and finances, why the company filed for bankruptcy as well as what the company’s objectives are while in bankruptcy.
 
Business Operations
 



Posted 1 year 10 weeks ago

Introduction
On January 21, 2013, Carl’s Patio, Inc., and various related entities, filed chapter 11 petitions for bankruptcy in the United States Bankruptcy Court for the district of Delaware. Carl’s Patio started in 1993 and describes itself in court filings as “one of the leading retailer merchandisers of upscale outdoor furniture and accessories in the country.” See Declaration in Support of Chapter 11 Petitions (the “Decl.”) at *2.  At the height of operations, the company operated retail locations in both California and Florida. However, prior to filing for bankruptcy, the Debtor closed five of its underperforming stores in California and four in Florida. The company currently operates ten retail stores and a warehouse in South Florida. Decl. at *4. Aside from retail locations, Carl’s Patio also sells its products online. Decl. at *5. 
 
Events Leading to Bankruptcy
 



Posted 1 year 11 weeks ago

Introduction
On January 11, 2013, Penson Worldwide ("Penson"), a clearing and settlement provider for the investment trading industry, filed chapter 11 petitions for bankruptcy in the United States Bankruptcy Court for the District of Delaware.  In papers filed with the Bankruptcy Court, Penson describes itself as a company that provides "execution, clearing, custody, settlement, and technology products and services to financial firms."  See Declaration of Bryce Engel in Support of Chapter 11 Petitions (hereinafter, the "Decl." ), at *3.  After its start in 1995, Penson grew to become one of the largest independent securities clearing brokers in the United States.  Through its subsidiaries, Penson also became one of the largest independent clearing brokers in Canada, Australia and the United Kingdom.  Id.
Reasons for Bankruptcy



Posted 1 year 12 weeks ago

Introduction
Earlier this week, RG Steel Sparrows Point, LLC ("RG Steel"), began filing complaints to avoid and recover what it contends are preferential transfers under sections 547 and 548 of the United States Bankruptcy Code.  For those not familiar with this bankruptcy proceeding, RG Steel originally filed chapter 11 petitions for bankruptcy in the Delaware Bankruptcy Court on May 30, 2012.  At the time the company filed for bankruptcy, RG Steel was the fourth largest flat-rolled steel company in the United States. Operating at full capacity, RG Steel produced over 8 million tons of steel per year.  This post will look at RG Steel's original business, why the company filed for bankruptcy and what are recent developments since the company has filed for bankruptcy protection.
Business Formation and Bankruptcy
At the time RG Steel and its affiliates filed for bankruptcy, the company operated steel production facilities in West Virginia, Maryland and Ohio.  The company was formed in 2011 as a result of a stock purchase agreement with Severstal U.S. Holdings II, Inc., and various related entities.  According to court filings, after RG Steel acquired Severstal it discovered a "working capital shortfall" resulting in liquidity problems and the company's ultimate bankruptcy filing.  The company also attributed its bankruptcy to declining steel prices while its costs for raw materials continued to rise.



Posted 1 year 13 weeks ago