All items from Delaware Bankruptcy Litigation

In this prior post, the preference actions filed by Jeoffrey L. Burtch, Chapter 7 Trustee of the Capitol Infrastructure, LLC bankruptcy estates, from April 22 through 24th were discussed.  Since the filing of these preference actions, a Pretrial Conference has been set for July 22, 2014 at 2:00 p.m. at US Bankruptcy Court, 824 Market St., 6th Fl., Courtroom #3, Wilmington, Delaware before the Honorable Kevin Gross.
In pretrial conferences held before the United States Bankruptcy Court for the District of Delaware, the Court will enter a scheduling order governing the pending preferences actions.  This order will generally include deadlines to issue discovery, take depositions, file dispositive motions, along with the scheduling of trial and other relevant dates.  A template scheduling order that has been approved by the Court can be found on the Court’s website, or by clicking here.
It is important that preference defendants review a proposed scheduling order with counsel in order to determine whether the plaintiff’s proposed order comports with the standard terms of such orders approved by the Bankruptcy Court in the District of Delaware.



Posted 28 weeks 4 days ago

From April 22 – 24, 2014, Jeoffrey L. Burtch, Chapter 7 Trustee of the Capitol Infrastructure, LLC bankruptcy estates, filed approximately 71 complaints seeking to avoid and recover alleged preferential transfers pursuant to Sections 547 and 550 of the Bankruptcy Code, and to disallow claims of the defendants pursuant to Section 502(d).
Capitol Infrastructure, LLC and various affiliated entities (the “Debtors”) filed petitions for bankruptcy in the United States Bankruptcy Court for the District of Delaware on April 26, 2012. By way of background, on October 15, 2012, the Court entered an Order converting the Debtors’ cases from Chapter 11 proceedings to Chapter 7 proceedings (the “Conversion Order”). One day after the Conversion Order was entered, Jeoffrey L. Burtch was appointed as the Chapter 7 Trustee of the Debtors’ estates.
The law firm of Cooch & Taylor represents the Chapter 7 Trustee in these various preference cases. The pretrial conference has not been scheduled. These adversary actions, as well as the Debtors’ bankruptcy proceeding, are before the Honorable Kevin Gross. To review one of the complaints filed in these actions, click here.
For readers looking for more information concerning preference litigation, including an analysis of defenses that can be asserted, below are several articles on this topic:



Posted 33 weeks 3 days ago

In the AFA Investment Inc. preference litigation, a summons has been issued scheduling the Pretrial Conference for June 30, 2014 at 11:30 a.m.  The hearing will be held before Judge Walrath in courtroom no. 4 on the 5th floor at the Bankruptcy Courthouse for the District of Delaware.  To view one of the summons issued in these preference cases, click here.
In pretrial conferences held before the United States Bankruptcy Court for the District of Delaware, the Court will enter a scheduling order governing the pending preferences actions.  This order will generally include deadlines to issue discovery, take depositions, file dispositive motions, along with the scheduling of trial and other relevant dates.  A template scheduling order that has been approved by the Court can be found on the Court’s website, or by clicking here.
It is important that preference defendants review a proposed scheduling order with counsel in order to determine whether the plaintiff’s proposed order comports with the standard terms of such orders approved by the Court in the District of Delaware.



Posted 35 weeks 4 days ago

On March 28, 2014, AFA Investment Inc. filed approximately 125 complaints seeking to avoid and recover alleged preferential transfers pursuant to Sections 547 and 550 of the Bankruptcy Code, to disallow claims of the defendants pursuant to Section 502(d), and seeking attorneys’ fees.  AFA Investment Inc., and various affiliated entities (the “Debtors”) filed petitions for bankruptcy in the District of Delaware on April 2, 2012.
By way of background, on July 2, 2013, the Court approved an Order approving the formation of an Advisory Committee for the purposes of management of prosecution of avoidance actions.  The Court confirmed the Debtors’ First Amended Joint Chapter 11 Plan of Liquidation on March 7, 2014.
The law firm of ASK LLP represents the Debtors in these various preference cases.  The pretrial conference has not been scheduled.  These adversary actions, as well as the Debtors’ bankruptcy proceeding, are before the Honorable Mary Walrath.  To review one of the complaints filed in these actions, click here.
For readers looking for more information concerning preference litigation, including an analysis of defenses that can be asserted, below are several articles on this topic:



Posted 37 weeks 3 days ago

In this prior post, a discussion was provided in connection with requiring a company to prepay for its goods or services in order to limit potential preferential exposure.  If a company heading into bankruptcy cannot prepay for its goods or services, however, another measure which can be taken by vendors to minimize their preferential exposure is to require that payment be made “substantially contemporaneous” with the goods or services provided to the company.
Under Section 547(c)(1) of the Bankruptcy Code, a debtor or trustee may not avoid and recover transfers that are (a) intended by the debtor and defendant to be a contemporaneous exchange for new value given to the debtor, and (b) are in fact a substantially contemporaneous exchange.  What this means is that even if a payment made by a debtor during the 90 day Preference Period is not a prepayment, a creditor can defend itself from liability for such transfer if the parties intended for the debtor’s payment, and the goods or services provided, to be contemporaneous exchanges, and the exchanges were in fact made close to the same time.



Posted 37 weeks 3 days ago

One question that clients often ask is what measures can be taken to reduce preferential exposure when dealing with a company that is sliding into financial insolvency.  Under Section 547 of the Bankruptcy Code, a debtor or trustee can seek to avoid and recover payments made to a vendor that provided goods or services to the debtor in the 90 days prior to the filing of bankruptcy.
It is important to take into account the fact that in order to demonstrate that a payment is “preferential”, the elements of Section 547(b) of the Bankruptcy Code must be met.  One of the elements that must be satisfied, among others, is that the transfer was made “for or on account of an antecedent debt owed by the debtor before such transfer was made”.  11 U.S.C. Section 547(b).
What this means is that the transfer must be in payment of goods or services previously provided to the debtor.  Accordingly, any transfer from the debtor to your company that is a prepayment cannot qualify as a preferential transfer by statute.  Therefore, in dealing with a company that is close to filing for bankruptcy, a good practice is to require that it pay up front for any goods or services.  Not only will this limit your preferential liability, but it will also allow your company to avoid having a large unpaid balance at the time of the debtor’s filing of bankruptcy, for which you may receive pennies on the dollar.



Posted 38 weeks 4 days ago

In the Optim Energy, LLC bankruptcy proceeding, the 341 Meeting of Creditors has been scheduled for March 18, 2014.  The Section 341 Meeting will be held at the J. Caleb Boggs Federal Building, 844 King Street, Room 5209, Wilmington, DE 19801, at 1:00 p.m.  Click here for a copy of this notice.
One way in which creditors can assert their interests is to attend the Section 341 Meeting of Creditors, in order to depose the debtor’s representative regarding the assets and liabilities of the bankruptcy estate.  Creditors may retain counsel to conduct such an examination of the debtor’s representative.  The Section 341 meeting of creditors is an integral component of a bankruptcy proceeding.  Creditors often want to know what information is made available, and what procedures are followed, during a typical meeting of creditors.
General topics that are discussed during a Section 341 meeting can include, among other things, the following:



Posted 40 weeks 3 days ago

It’s your worst nightmare: you provided goods and services to a financially struggling company, only to find out that it filed for bankruptcy, leaving your company with a large unpaid balance.  Worst yet, after the debtor filed for bankruptcy, you receive a demand letter in the mail threatening a lawsuit if you do not return payments that you received from the debtor, even though you earned that money by providing goods or services to that entity.  What sense does that make?
Unfortunately, this is the reality that many companies face when transacting business with an entity in the months prior to its bankruptcy filing.  Section 547 of the Bankruptcy Code allows a debtor to avoid and recover transfers that it made in the 90 days prior to its bankruptcy filing, regardless of whether it received anything in return. This section was enacted to preclude a debtor from paying off its favorite creditor(s), while leaving nothing for the rest of the debtor’s creditors.  Hence the term preference payment.
Where does this leave your company after receiving a demand letter or complaint in the mail for the return of such alleged preferential transfers?  Rest assured, the Bankruptcy Code also provides numerous defenses that you can raise in response to such a demand.  This post provides a brief summary of the elements of, and common defenses to, preference claims.
Elements of a Preference Claim



Posted 42 weeks 1 day ago

In the Tuscany International Drilling bankruptcy action, filed in the United States Bankruptcy Court for the District of Delaware, the United States Trustee recently filed a Statement that the Unsecured Creditors’ Committee Has Not Been Formed.  The Statement indicates that there was “insufficient response to the United States Trustee’s communications/contact for service on the committee.”
In Chapter 11 cases, an Official Committee of Unsecured Creditors is not uncommonly formed to collectively represent the interests of unsecured creditors.  Without a creditors committee, each unsecured creditor must represent their own interests in Court.
One way in which creditors can assert their interests is to attend the Section 341 Meeting of Creditors, in order to depose the debtor’s representative regarding the assets and liabilities of the bankruptcy estate.  As discussed in a prior post, the Section 341 meeting of creditors in the Tuscany bankruptcy action is scheduled for March 13, 2014 at 10:30 a.m.
To review prior articles related to the Tuscany bankruptcy, click on the following links:



Posted 42 weeks 5 days ago

Optim Energy, LLC and its subsidiaries and affiliates (“Optim” or the “Debtors”) filed for bankruptcy under Chapter 11 of the Bankruptcy Code on Wednesday, February 12, 2014 (the “Petition Date”) in the United States District Court for the District of Delaware.
According to Declaration of Nick Rahn, Chief Executive Officer of Optim Energy, LLC in Support of Chapter 11 Petitions and First Day Pleadings (the “Rahn Declaration”), the Debtors “are power plant owners principally engaged in the production of energy in Texas’s deregulated energy market.”  Rahn Declaration, ¶ 5.  The Debtors own and operate three power plants in eastern Texas.  Two of the plants are fueled by natural gas, and the third is coal fired.  See id.  According to the Petition, the Debtors’ assets are valued at $100 million to $500 million, and their debts are estimated at $500 million to $1 billion.
Events Leading to Bankruptcy



Posted 43 weeks 5 days ago