All items from Bankruptcy Law Watch

Josef Mintz

Industrial Enterprises of America, Inc. v. Burtis (In re Pitt Penn Holding Co., Inc.), Case No. 09-11475 (BLS) (Jointly Administered), Adv. No. 11-51868 (BLS) (January 24, 2012) (J. Shannon) 

Victoria A.
Guilfoyle

In this decision, the U.S. Bankruptcy Court for the District of Delaware was faced with an issue of first impression in the 3rd Circuit: whether the two year look-back period set forth in § 548 of the Bankruptcy Code is subject to equitable tolling.  The court held that it was not.
Pitt Penn Holdings, Inc. and its affiliated debtors filed Ch. 11 petitions in the Bankruptcy Court for the District of Delaware on May 1, 2009 as a result of the massive securities fraud that was perpetuated by the Debtors’ CEO, John Mazutto.  The Debtors sought to recover millions of dollars of stock that Mazzuto improperly gave to friends, family and institutions, including his alma mater (Yale University) and former preparatory school (Tabor Academy).  Accordingly, the Debtors filed several adversary proceedings to recover, pursuant to § 548, allegedly fraudulent transfers. 

Regina Stango
Kelbon

Last week the Supreme Court decided a split in the circuits in an important decision for lenders.  Previously, I reported that the Third Circuit and the Fifth Circuit in Philadelphia Newspapers LLC and In re Pacific Lumber, Co., respectively, denied a secured creditor the right to credit bid its debt when the creditor’s collateral was being sold under a plan if the plan otherwise provided the creditor with the “indubitable equivalent” of its secured claims.  The Seventh Circuit, on the other hand, in consolidated appeals involving River Road Hotel Partners, LLC and the RadLAX cases, held that a secured creditor cannot be deprived of its right to credit bid at a sale conducted under a plan of reorganization. 
The Supreme Court in RadLAX Gateway Hotel, LLC and RadLAX Gateway Deck, LLC unanimously held that the debtor’s chapter 11 plan could not be confirmed where the plan provided for the sale of the bank’s collateral free and clear of the bank’s lien but did not permit the bank to credit bid at the sale.

Gregory Vizza

When drafting an adversary complaint to recover a preference, trustees must make a showing of entitlement to relief in compliance with the Supreme Court’s decisions in Twombly and Iqbal.  In dismissing the Trustees preference complaint for failure to state a claim, Judge Walrath’s opinion in Gellert v. The Lenick Company outlines what facts must be alleged in a preference claim to survive a motion to dismiss.  
The Litigation Trustee (“Trustee”) in Gellert, appointed under the Debtor’s confirmed plan of reorganization, filed a complaint against The Lenick Company (“Lenick”) to, inter alia, avoid transfers under sections 547 and 548 of the Bankruptcy Code.  Lenick moved to dismiss the Complaint pursuant to Rules 8(a) and 12(b)(6) arguing that the Complaint fails to establish a plausible claim for avoidance of preferential transfers.