Here’s an aggregation of 35 of my Twitter posts from June 16-18, 2018, with links to important cases, articles, and news briefs that restructuring professionals will find of interest. Don’t hesitate to reach out and contact me to discuss any posts, and thank you for reading!
BK RELATED CASES:
- 363 APA Traps – BK-ED-TN: Words relating to “Excluded Assets” NOT to put in an 363 sale asset purchase agreement unless you’re prepared for a fight with the trustee. “The Parties agree to work together, in good faith, to finalize this exhibit as soon as practicable after the Effective Date.” In re HC Liquidation Inc
- Executory Contracts Defined – 2d Cir: Second Circuit says it “need not resolve the question of which test” applies for determining whether a contract is executory: the Countryman test or the 2d Cir’s “some performance due test.” Guess the 2d Cir is reconsidering whether the latter holds. In re NanoDynamics Inc
- Federal Priority Statute in BK – B-ED-VA: “While the US Objection seeks to disproportionally re-prioritize the estate distribution in favor of the US, Congress has made clear that the Federal Priority Statute cannot be invoked for that purpose.” In re Health Diagnostic Laboratory Inc
- Informal Proofs of Claim – BK-SD-TX: “Informal proof of claims arise from a common law doctrine whereby pre-bar date filings not conforming to the FRBP’s formal filing requirements are treated as informal proofs of claim that can be amended to conform to the rules.” In re Houston Bluebonnet LLC
- Lis Pendens Filings by BK Trustees – BK-WD-MI: Even without an adversary based on a fraudulent conveyance theory, bankruptcy trustees sometimes file lis pendens to guard against unauthorized post-petition transfers (like those that the Defendants evidently intended to effect here). In re Rosich
- Maritime Liens – 2d Cir: Sub-subcontractor who supplied bunkers to a vessel at the direction of the subcontractor didn’t furnish them on order of vessel’s owner or its agent and so wasn’t entitled to a maritime lien. There is no evidence that the charterer of the vessel agreed to be bound by the subcontractor’s purchase. ING Bank NV v MV TEMARA IMO No 9333929
- Petition – Wet Signatures – BK-MD-PA: “I believe the effort to convince me that wet signatures [on the petition] are required has been misdirected. The real issue is whether FRBP 1008 and 9011 have been complied with.” In re Klitsch
- Preferences – Insider Loans – BK-ED-MI finds fact issue exists as to whether multiple sporadic insider loans over the years enables the one loan paid during the preference period to have been deemed incurred in the “ordinary course of business.” Matter of Oakland Physicians Medical Center LLC
- Publication Notice – 363 Sale – Due Process – BK-ED-KY: A “known” party is entitled to actual notice of the sale and confirmation process. Notice by publication of the sale 14 yrs ago that excluded this party did not satisfy constitutional due process. In re HNRC Dissolution Co
- Punitive Damages – Stay Violations – BK-SD-OH: “Rarely has the Court seen such a blatant violation of the automatic stay as is presented in this case. Sanctions in the form of attorneys’ fees, costs, and punitive damages will be imposed.” Ct assesses punitives at three times fees & costs. In re Stringer
- “Related to” Jurisdiction – Indemnity & Alter Ego Claims – BK-DE The potential indemnity claim of the CEO/Director/Majority Shareholder satisfies the Pacor “related to” jurisdiction test. Also “related to” jurisdiction exists based on the creditor’s attempt to pierce the corporate veil because any finding of veil piercing requires a finding of liability against Debtor. In re LTC Holdings Inc
- Solvency Analysis – Supplementary Proceedings – ND-IL: Per FRCP 69(a), supplementary proceedings to enforce a money judgment are governed by law of forum state, and “[n]othing in that statute, or IL Supreme Ct rules on supplementary proceedings, expressly prohibits a judgment creditor from filing a 2d motion to compel turnover of the same assets that were the subject of a previous, unsuccessful motion in the same proceeding…. [Further,] [a]t least one other court applying Illinois law has declined to discount the value of a legal claim that, like the Trustee’s here, was pending at the time of an alleged fraudulent conveyance and was subsequently reduced to judgment.” In re Emerald Casino Inc
INTERESTING CASES FROM ILLINOIS COURTS & THE UNITED STATES SUPREME COURT:
- 1st Amendment – Political Apparel Ban – SCOTUS: Justice Roberts put together an interesting 7-2 majority in the MN Voters Alliance case. As I was reading the opinion, I had thought the case would be decided in favor of the ban on political badges inside a polling place. Instead, the Court ruled that the statute was incapable of reasoned application under the First Amendment since the statute didn’t define “political,” which could have an expansive meaning, and that Minnesota’s construction as the meaning of referred to “messaging” presents line-drawing problems. One thing evident from this term’s opinions, however, is the importance of the First Amendment to all the justices and how protection of this right is paramount to them all. The tenor of today’s political discourse must be weighing on their collective judicial conscience. Minnesota Voters Alliance v Mansky
- Bad Neighbors & Bad Fences – IL-AP-3d: This case proves that bad fences can make for bad neighbors too. Court rules the defendant could be required to pay a just cost to build a division fence with adjoining landowners per the IL Fence Act, but that it was error for the trial court to say that the defendant was required to pay 1/2 the cost because there were issues of fact regarding whether the defendant violated the Fence Act by removing a preexisting division fence between the parties’ properties without notice, which act itself requires the defendant to pay for replacement of the fence. Judith Mottl Kerr Trust v Holm
- Interpreting Foreign Law in US Courts – SCOTUS: In determining, for purposes of considering an action under the Sherman Act, that Chinese law required the fixing of price & quantity of Vitamin C exports, the Appellate Court should have considered sources beyond the amicus brief filed by China’s Ministry of Commerce. Animal Science Products Inc v Hebei Welcome Pharmaceutical Co Ltd
- Lis Pendens – Jurisdiction – Subsequent Purchasers – IL-AP-4th: Court examines the “jurisdiction over both the person and the res” requirement for a lis pendens notice to be effective and concludes that it doesn’t require personal jurisdiction over a subsequent purchaser & only refers to the property owner at the time of the action. Bonnell v City of Grafton
- Preliminary Injunction – Trademarks – Evidentiary Needs – 7th Cir: Court affirms a grant of injunction against ads vividly implying that milk from rbST-treated cows is unwholesome, ruling that consumer surveys or other “hard” evidence of actual consumer confusion are unnecessary at the preliminary injunction stage. Eli Lilly and Company v Arla Foods Inc
- Restrictive Covenants – Non-Solicitation – ND-IL: Court examines the plain meaning of “introduces” in an action to enforce a non-solicitation provision that precluded a party from soliciting entities that the party seeking to enforce the provision “introduces” to the other. Syncreon Technology (USA) LLC v CRST Specialized Transportation Inc
- Term Limits – 7th Cir: City referendum providing for a term limit for the office of Mayor that prevented a candidate from running for Mayor based on his 20 consecutive years as alderman didn’t violate his equal protection rights, even if aimed a him in particular. The referendum was rationally related to the city’s legitimate governmental interest in imposing term limits. Jones v Markiewicz-Qualkinbush
BK RELATED NEWS & ARTICLES:
- 5th Am. Takings – Property Purchased in 363 Sale: Court of Federal Claims Confirms that EPA Was Responsible for “Taking” Steel Making Byproduct Purchased by a Private Party [that bought assets from a trustee in bankruptcy pursuant to an APA and entered sale order]. Court of Federal Claims Confirms that EPA Was Responsible for “Taking” Steel Making Byproduct Purchased by a Private Party, by Anthony Cavender of Pillsbury, via the Gravel-2-Gavel Construction and Real Estate Blog
- Municipal BK Filings: “Only 13 Chapter 9 filings occurred in 2011, 12 in 2012, eight in 2013, 10 in 2014, and three 2015, six in both 2016 and 2017, and three so far in 2018.” Chapter 9 Municipal Bankruptcy Statistics: Use by Number, Type and Year, by Jim Spiotto, with Jeff Garceau of Chapman Strategic Advisors
- Receivership Appointment Orders: “Parties drafting receivership orders seeking to prevent ousted principals/control persons from divesting the receiver should make sure the appointment order clarifies who has power to act on behalf of the entity, incl. the power to file a BK case.” Receiver’s Appointing Order Language Controls Who Can File A Corporate Bankruptcy, by Peter Davidson of Ervin Cohen & Jessup
- Successor Liability – Withdrawal Liability: Asset purchaser deemed a successor and liable for seller’s withdrawal liability even though it lacked actual knowledge of the liability. Cconstructive notice of the liability was sufficient to impose withdrawal liability on the asset purchaser. Ninth Circuit’s Expansion of Successor Liability May Make Asset Purchases More Costly, by Grace Ristuccia and Thomas Vasilijevich of Ogletree Deakins
LAW RELATED NEWS & ARTICLES:
- Bad Neighbors & Bad Gardens – Rand Paul: This is why I have a gardener cut my lawn and trim the bushes. Court documents give new details about the yard dispute that left Rand Paul with 6 broken ribs: A neighbor turned violent after the senator allegedly tormented him with an “unsightly” pile of debris, via VOX
- Commodities – Contractual Payment Security Structures: “A case from Houston State Ct may cause U.S. energy companies to more carefully consider the nature, size and timing of payment security they are asking for as they race to sell and export hydrocarbon commodities to new and emerging market buyers.” Lessons for Sellers in Contracting with Emerging Market Buyers: The “Three R’s” to Structuring Payment Security Provisions, by Dan Rogers and Monica Hwang of King & Spalding
- Inbound Investments – Structuring: The most interesting of choices is the “flip,” where the non-US business creates a US Holdco w/ the non-US company as its subsidiary. This is done bec. “US venture capital investors typically prefer to invest in US-based companies.” Coming to America and accessing the US markets, by Louis Lehot, Philipp Tsukanov, and Anton Ziajka of DLA Piper
- Know Your Customer – Beneficial Ownership Rule: “Per the rule, a covered financial institution must verify, when a new account is opened, the beneficial owners opening the account. If there are multiple layers of legal entities, it must look through each layer to identify the beneficial owners.” BSA/AML ALERT: The Beneficial Ownership Rule Becomes Effective Today, by multiple authors from Vedder Price
- Spotify’s Direct License Model: Spotify’s moves don’t breach contracts with labels that preclude it from buying master recordings or competing in a meaningful way. Here it won’t control copyrights or sign artists like a record label; rather it licenses music from artists owning the rights.” Spotify shakes record labels by dealing directly with artists: Streaming group cuts out middlemen by licensing music from bands themselves
LIFE, BUSINESS, AND THE WORLD GENERALLY:
- Branding & Packaging: “The new testing process shows the increasing sophistication of an overlooked area of manufacturing. . . . If you sell over the internet, the 1st physical contact a brand has with its customer is the box; if you get it wrong, it’s brand damage.” Cardboard boxes take center stage in deal activity: Rapid e-commerce growth spurs consolidation in packaging sector, via Financial Times
- Elon Musk & “Flame-Throw Cash” Entrepreneurs: “Perhaps then it’s time to celebrate entrepreneurs who are willing to literally flame-throw cash. After all, if a business blows up, as Brad DeLong has argued, ‘investors lose and we get to use their stuff for free.’ ” Who cares if Elon is incinerating capital?, by Jamie Powell via Financial Times
- Google’s Lofty Tech Valuations: “The deal for a less than 1 per cent stake is the latest step in a low-profile China strategy being quietly stitched together by Google, whose core search engine has been blocked in China since 2010.” Google pays $550m for stake in China’s JD.com: Deal is latest step in low-profile strategy in China, where its search engine is blocked, via Financial Times
- Private Equity Fundraising: “The pace of private equity fundraising led to concern about their ability to spend all that cash profitably, especially with equity valuations running near all-time highs. But the ramp-up in buyouts shows they are barreling ahead in the face of that challenge.” LBO Volume Surges as KKR, Others Put $1 Trillion Cash Pile to Work: Leveraged buyout deals are on a pace for best year since 2007, via Wall Street Journal
- Ultrasonic Noise: “We have turned very rapidly into a kind of Wild West of ultrasonic devices, vastly outstripping any kind of evidence-based guidelines for their use.” Can Ultrasonic Noise Make You Sick?: Ultrasonic signals from sensors and other devices are all around us, and the health effects of their interactions aren’t clear, via Wall Street Journal
- UPS’s New Business Model: “The reason for the intensive push [to spend $20B in cap ex] is the way UPS’s business has been flipped on its head. The bulk of its shipments once went to corporations or retailers. Now, more than half of its packages go to homes.” UPS’s $20 Billion Problem: Operations Stuck in the 20th Century: As the package giant tries to satisfy America’s 21st-century shopping-and-shipping mania, it is striving to bring its delivery network out of a past era, via Wall Street Journal
©2018, Steve Jakubowski