Tag Archives: bankruptcy

Justin Alberto Speaks at AIRA Bankruptcy & Restructuring Conference

Bayard Director and Co-Chair of the bankruptcy group, Justin R. Alberto was a panelist at the 35th Annual AIRA Bankruptcy & Restructuring Conference in Boston, Massachusetts on June 5, 2019. The full day program, titled the Financial Advisors’ Toolbox focused on educating practitioners about the fundamental tenets of bankruptcy law. Speakers provided information on timing and when a company should consider restructuring, various in court and out of court options, pre-bankruptcy planning, first and second day matters, issues impacting unsecured creditors and exit strategies.

Justin has participated in many large and complex commercial restructurings, with an emphasis on the representation of debtors, official committees of unsecured creditors and other key parties. He has significant experience negotiating and litigating issues involving valuation, structured finance, section 363 asset sales and contested confirmations in an array of industries including retail, healthcare, manufacturing, hospitality, energy and banking. He is a frequent speaker on issues involving valuation and debtor-in-possession financing. He presented at the Financial Advisors’ Toolbox for the past two years.

Judge Carey (Bankr. D. Del.) Grants Motion to Dismiss Derivative Breach of Fiduciary Duty Claim Because Creditors of Insolvent Limited Partnerships and Limited Liability Companies Lack Standing Under Applicable State Law

Written by: Gregory J. Flasser

Does a creditors’ committee have standing to pursue derivative breach of fiduciary duty claims on behalf of debtor entities formed as either a limited partnership or limited liability companies? Looking to applicable state law governing such entities, Judge Carey answered a resounding “no” in the case of Gavin/Solmonese LLC v. Citadel Energy Partners, LLC (In re Citadel Watford City Disposal Partners, L.P.), Case No. 17-50024 (KJC).

By way of background, on June 19, 2015, four limited partnership and limited liability companies formed under Delaware, North Dakota, and Wyoming law, respectively, filed petitions for relief under chapter 11 of the Bankruptcy Code.

Before effectiveness of the debtors’ chapter 11 plan and in accordance with an order granting standing, the creditors’ committee commenced an adversary proceeding asserting derivative breach of fiduciary duty claims on behalf of the debtors. The plan provided for the creation of a liquidation trust to administer certain assets and to pursue, prosecute, settle, or abandon causes of action involving said assets. The plan and liquidation trust agreement included therewith, also contemplated that the liquidation trustee would be substituted in as the real party in interest in causes of action commenced by or against the debtors, the debtors’ estates, or the creditors’ committee.

Shortly after effectiveness, the caption in the adversary proceeding was amended to reflect that the liquidation trustee would succeed the creditors’ committee as plaintiff. Thereafter, a defendant filed a motion to dismiss for lack of standing.

Applying the internal affairs doctrine, the Court found that the state laws of Delaware, North Dakota, and Wyoming governed in determining the standing of creditors to bring derivative breach of fiduciary duty claims. Section 17-1002 of the Delaware LP Act provides, in relevant part, “[i]n a derivative action, the plaintiff must be a partner or an assignee of a partnership interest at the time of bringing the action.” 6 Del. C. § 17-1002 (emphasis added). Finding the statutory language to be unambiguous, the Court held that the creditors’ committee did not have standing to assert derivative claims on behalf of the Delaware based debtor. To bolster his decision, Judge Carey cited well-developed precedent on this issue with respect to Delaware LLC law. See In re HH Liquidation, 590 B.R. 211, 283-85 (Bankr. D. Del. 2018) (holding that under the plain language of 6 Del. C. § 18-1002, a committee lacked standing to bring a breach of fiduciary duty claim on behalf of a Delaware LLC); see also In re PennySaver USA Publishing, LLC, 587 B.R. 445, 466-67 (Bankr. D. Del. 2018) (dismissing a chapter 7 trustee’s derivative claims for breach of fiduciary duties allegedly owed to a Delaware LLC).

Similarly, with respect to the North Dakota and Wyoming based debtors, the Court noted that the applicable statutes limit standing to members at the time an action is commenced. Accordingly, the Court held that the creditors’ committee’s derivative claims on behalf of those debtors must also be dismissed.

The liquidation trustee also argued that the confirmed plan provided the liquidation trustee standing because the plan assigned the liquidation trust assets—including the causes of action—to the liquidation trustee. The Court disagreed, finding that under the doctrine of assignment, the liquidation trustee could not receive more than its predecessor (the creditors’ committee) which, for the reasons set forth above did not have standing to begin with.

Last, the Court ruled that Rule 17(a)(3) regarding dismissal for failure to join the real party in interest did not cure the standing issue. The purpose of Fed. R. Civ. P. 17(a)(3) is to “prevent forfeiture of an action when determination of the right party to sue is difficult or when an understandable mistake has been made.” See Gardner v. State Farm Fire & Cas. Co., 544 F.3d 553, 563 (3d Cir. 2008) (citing U.S. for Use & Benefit of Wulff v. CMA Inc., 890 F.2d 1070, 1074 (9th Cir. 1989)). Here, the Court found that the parties were clearly identified, and the liquidation trustee presented no evidence of excusable mistake. For all these reasons, the Court granted the defendant’s motion to dismiss the derivative breach of fiduciary duty claims.

The liquidating trustee appealed the opinion on May 16, 2019.

A copy of the opinion can be found here.

Bayard Named M&A Award Winner for Chapter 11 Restructuring of Claire’s Stores, Inc.

Wilmington, Delaware, June 7, 2019 – Meritas™ member firm, Bayard, P.A. has been named a winner at the 11th Annual International M&A Awards in the category of Consumer Discretionary Deal of the Year.  Bayard received the award for its representation of the Official Committee of Unsecured Creditors in the successful chapter 11 restructuring of Claire’s Stores, Inc.  Bayard attorneys Justin R. Alberto, Erin R. Fay, and Gregory J. Flasser served as co-counsel in the matter.

Claire’s Stores, Inc. and certain of its subsidiaries successfully completed their financial restructuring and emerged from Chapter 11 bankruptcy in the fall of 2018.  The plan of reorganization in the case was confirmed by the United States Bankruptcy Court for the District of Delaware on September 21, 2018 and went into effect on October 12, 2018.  With support from their creditors and stakeholders, including an Ad Hoc Group of First Lien Creditors led by Elliott Management Corporation and Monarch Alternative Capital, LP, Claire’s Stores eliminated approximately $1.9 billion of debt from its balance sheet and gained access to $575 million in new capital.

The M&A Advisor was founded in 1998 to offer insights and intelligence on M&A activities.  Over the past 21 years they have established the premier global network of M&A, Turnaround, and Finance professionals.  Today, M&A Advisor recognizes the achievements of, and facilitates connections between, the industry’s top performers throughout the world, while providing a comprehensive range of services.  To learn more visit www.maadvisor.com.

Click here for the complete list of winners.

Bayard Selected as Co-Counsel to the Hospital Acquisitions, LLC Unsecured Creditors Committee

Wilmington, Delaware- Bayard, P.A. has been selected to serve as co-counsel to the Official Committee of Unsecured Creditors (the “Committee”) in In re Hospital Acquisitions, LLC (Case No. 19-10998 (BLS)) filed on May 6, 2019, in the United States Bankruptcy Court for the District of Delaware. On May 17, 2019, the Office of the United States Trustee formed the Committee. After its formation, the Committee selected Greenberg Traurig, LLP and Bayard, P.A. as its legal counsel and Alvarez & Marsal as its financial advisor. Bayard attorneys Justin R. Alberto, Erin R. Fay and Gregory J. Flasser are involved in the matter.

Hospital Acquisitions, LLC, headquartered in Plano, Texas, is a leading operator of long-term acute care hospitals in the United States.

Bayard Selected as Co-Counsel to the Kona Grill, Inc. Unsecured Creditors’ Committee

Wilmington, Delaware- Bayard has been selected to serve as co-counsel to the Official Committee of Unsecured Creditors (the “Committee”) in In re Kona Grill, Inc., et al., (Case No. 19-10953 (CSS)), filed on April 30, 2019 in the United States Bankruptcy Court for the District of Delaware. On May 16, 2019, the Office of the United States Trustee formed the Committee. After its formation, the Committee selected Kelley Drye & Warren, LLP and Bayard, P.A. as its legal counsel and Province, Inc. as its financial advisor. Bayard attorneys Justin R. Alberto, Erin R. Fay, and Gregory J. Flasser are involved in the matter.

Kona Grill, Inc., headquartered in Scottsdale, AZ., is known for its global flavors and innovative dishes made with only fresh ingredients, personalized service, and unique cultures. The company first opened its doors in 1998 in Scottsdale, Arizona and now operates 27 full-service, contemporary American restaurants. The company and its subsidiaries filed for chapter 11 protection on April 30, 2019. Kona Grill, Inc. operates a website at https://www.konagrill.com.

Judge Carey (Bankr. D. Del.) Applies Grossman’s “Exposure” Test and “Fair Contemplation” Test to Environmental Claims

By Erin R. Fay and Sophie E. Macon

It is settled law in the Third Circuit that a claim generally “arises” when a party is exposed pre-confirmation to a product or conduct giving rise to an injury that underlies a “right to payment” under the Bankruptcy Code. See Wright v. Corning, 679 F.3d 101 (3d Cir. 2012); Jeld-Wen, Inc. v. Van Brunt (In re Grossman’s), 607 F.3d 114, 125 (3d. Cir. 2010). The Third Circuit noted in Grossman’s, however, that it was not deciding when an environmental cleanup claim might arise where conflicting statutory frameworks exist. In West Salem Storage, LLC v. Exide Techs. (In re Exide Techs.), the Judge Carey of the Delaware Bankruptcy Court was faced with determining whether just such environmental cleanup claims arose before or after confirmation of a chapter 11 plan (that would discharge such claims). The Court held that whether it applied Grossman’s “exposure” test or the Ninth Circuit’s “fair contemplation” test, the environmental claims were discharged through the confirmed plan.

By way of background, West Salem purchased certain contaminated industrial property in 2011 that Exide Technologies had previously owned. In 1999, state regulators had restricted the property to industrial-only uses due to discovery of lead contamination in the property’s soil. From 2011-2017, West Salem leased the property to tenants for commercial and recreational uses. In February 2017, regulators discovered “high levels” of lead inside a structure on the property and closed the building.

Exide filed its second chapter 11 petition in March 2013 and its plan was confirmed in March 2015. West Salem was not listed as creditor in the bankruptcy filings and was not provided actual notice of the filing or plan. After incurring significant cleanup costs and other damages, West Salem filed an adversary proceeding seeking a declaratory judgment that Exide’s confirmed plan had not discharged West Salem’s claims.

Exide argued that, under the Grossman’s “exposure” test, West Salem’s claim arose either (a) prior to 2002, when the contaminating “conduct” occurred, or (b) in 2011, when West Salem purchased the property. West Salem argued that Grossman’s does not apply to environmental claims and that the Court should apply the Ninth Circuit’s “fair contemplation” test to its environmental claims. See California Dept. of Health Servs. v. Jensen (In re Jensen) to. 995 F.2d 925 (9th Cir. 1993). Under such test, future “response and natural resources damages” arising from pre-petition conduct are “claims” only if such costs “can be fairly contemplated by the parties at the time of the debtors’ bankruptcy.” Parties are deemed to “fairly contemplate” potential liability “when there are sufficient indicia of future costs based on prepetition conduct.”

West Salem further argued that, prior to discovery of the interior contamination in 2017, there was not “sufficient indicia” of future liability such that it should have “fairly contemplated” the costs associated with the interior lead contamination. The Court disagreed, holding that the deed restrictions imposed by state regulators on the property met the fair contemplation test. The Court also found that under the Grossman’s “exposure” test, West Salem’s claim arose in 2011 when it took title to the property and was put on notice about the lead pollution.

In addition, the Court held that West Salem was an unknown creditor because it was not listed in Exide’s books and records (instead Exide’s books and records listed a successor in the chain of title to whom the debtor sold the property) and that Exide had no obligation to undertake a title search or to send a notice to the property address. As an unknown creditor, West Salem was provided adequate notice through publication. For all these reasons, the Court granted Exide’s motion to dismiss West Salem’s complaint.

A copy of the Court’s opinion is available here.

GianClaudio Finizio Appointed to Meritas U.S. Leadership Committee

Wilmington, Delaware – Bayard, P.A. announced today that GianClaudio Finizio, director and leader of the firm’s insurance practice group, and member of the firm’s bankruptcy group, was selected to serve on the Meritas U.S. Leadership Committee. GianClaudio, also the firm’s Meritas member contact for Meritas, will serve a three- year term in this new role.  The Committee is comprised of 11 members from firms across the U.S. Region.  The Committee’s primary responsibility is to support the mission, values and goals of Meritas and will specifically participate in strategic planning, member recruitment, retention and development for the U.S. Region.

Meritas is the premier global alliance of 184 independent law firms spanning 93 countries.  Meritas firms provide businesses with a full range of high-quality specialized legal services in key markets around the world.  Bayard is Delaware’s sole member of Meritas. Meritas firms work collaboratively to serve clients, especially when dealing with complex matters across multiple jurisdictions.  Membership is by invitation only and all Meritas firms must adhere to uncompromising service standards to retain membership status.  Meritas uses a disciplined, analytical approach to quality control that includes exclusive peer-evaluations and formal firm reviews every three years.  With top-ranking law firms in the world’s key markets, Meritas delivers exceptional legal knowledge, personal attention and proven value to clients worldwide.

Bayard Names Scott Cousins and Justin Alberto Co-Chairs of Bankruptcy Group

Bayard, P.A. announces the appointment of Scott D. Cousins and Justin R. Alberto as Co-Chairs of the firm’s Corporate Bankruptcy and Restructuring Group, effective January 1, 2019. Together, they bring years of experience to their new roles. They look forward to leading the group and building on the legacy that Bayard has established over the last 60 years.

Scott has more than 25 years of experience in the restructuring field. He has participated in many of the largest and most complicated business reorganizations, liquidations and distressed sales and acquisitions in Delaware’s state and federal courts. He is also experienced in out of court restructurings and workouts. He has appeared in many bankruptcy jurisdictions across the country. In addition to his restructuring expertise during his years in private practice, Scott has wide-ranging experience in commercial transactions as a result of his role as in-house counsel for two large energy-related companies. From 2005 to early 2009, Scott served as General Counsel of NextEra Energy Resources LLC, a clean energy leader and one of the largest competitive energy suppliers in North America. He is a published author and a frequent speaker on issues and developments in bankruptcy and insolvency law.

Justin has participated in many large and complex commercial restructurings, with an emphasis on the representation of debtors, official committees of unsecured creditors and other key parties. In particular, Justin has significant experience negotiating and litigating issues involving valuation, structured finance, section 363 asset sales and contested confirmations in an array of industries including retail, healthcare, manufacturing, hospitality, energy and banking. He is a frequent speaker on issues involving valuation, debtor-in-possession finance, and a recurring guest lecturer of Commercial Bankruptcy Practice and Procedure at Temple University Beasley School of Law. In addition to his restructuring practice, Justin is an experienced litigator with trial experience in Delaware and other state and federal courts involving issues of corporate law and distressed commercial situations. Justin is also a certified mediator for the United States Bankruptcy Court for the District of Delaware and is included on the Register of Mediators and Arbitrators maintained by the Court.

Bayard, P.A. is a commercial law firm that also provides personal legal services. The firm combines the experience in complex legal transactions and litigation found in larger firms with the accessibility and personal attention typical of smaller firms. We make it our mission to understand our clients’ business or personal legal challenges without the inefficiencies associated with multiple layers of professionals. At Bayard, we are committed to our clients’ success through innovative approaches to their most demanding business and legal challenges.

Erin Fay Speaks at the 2018 ABI Winter Leadership Conference

Wilmington, DE- Erin Fay, a director in Bayard’s Business Restructuring and Liquidations group, served as a panelist at the American Bankruptcy Institute (ABI) Winter Leadership Conference entitled “The LLC’s Path Through Bankruptcy.” Erin was joined by experienced practitioners from firms across the U.S. to discuss the unique issues related to LLCs and bankruptcy law.
The conference took place from December 6-8th in Scottsdale, Arizona.

Erin R. Fay focuses her practice on corporate bankruptcy and restructuring. She has represented debtors, creditors’ committees, equity holders, lenders, secured and unsecured creditors, liquidating trusts, plan administrators, and other entities in various bankruptcy proceedings and out-of-court restructurings. Her experience further includes preparing companies for Chapter 7 filings and representing foreign representatives in Chapter 15 proceedings. Erin also has experience representing assignees in assignments for the benefit of creditors under Delaware law in the Delaware Court of Chancery.

For more information about the ABI and upcoming events, click here.

5 Bayard Attorneys Named on Delaware Today’s 2018 Top Lawyers List

Delaware Today surveyed local attorneys to determine the best Delaware lawyers and Bayard, P.A. is proud to announce that five attorneys from the firm were selected as 2018 Delaware Today Top Lawyers in their prospective practice areas.

Congratulations to the following Bayard attorneys who made the 2018 list:
Justin R. Alberto-Bankruptcy, Business
Curtis P. Bounds– Family Law
Stephen B. Brauerman– Corporate Law and Intellectual Property
Peter B. Ladig– Corporate Law
Kara M. Swasey– Family Law

The full list of Top Lawyers can be found in the November issue 2018 of Delaware Today or online by clicking here.

About Bayard
Bayard, P.A. is a commercial law firm that also provides personal legal services. The firm combines the experience in complex legal transactions and litigation found in larger firms with the accessibility and personal attention typical of smaller firms. We make it our mission to understand our clients’ business or personal legal challenges without the inefficiencies associated with multiple layers of professionals. At Bayard, we are committed to our clients’ success through innovative approaches to their most demanding business and legal challenges.

Bayard Selected as Delaware Counsel to the Brookstone Unsecured Creditors Committee

Bayard, P.A. has been selected to serve as Delaware counsel to the Official Committee of Unsecured Creditors (the “Committee”) in In re Brookstone Holdings Corp. (Case No. 18-11780 (BLS)). The Office of the United States Trustee formed the Committee on August 14, 2018. After its formation, the Committee selected Bayard, P.A. as its Delaware counsel, Cooley LLP as its lead counsel, and Province, Inc. as its financial advisor. Bayard attorneys Justin R. Alberto and Erin R. Fay are involved in the matter.

Brookstone Holdings Corp. (the “Debtors”) is a product developer and retailer of wellness, entertainment and travel products, headquartered in Merrimack, N.H.  The company announced its plans to close the remaining 101 mall retail locations in the immediate future. However, they will continue to operate their airport locations and continue operating its e-commerce website at http://www.brookstone.com/. The company filed for chapter 11 protection on Thursday, August 2, 2018, in the United States Bankruptcy Court for the District of Delaware.

Bayard Serves as Lead Counsel to ABT Molecular Imaging in its Chapter 11 Case

Bayard, P.A. is serving as lead counsel to ABT Molecular Imaging, Inc. (“ABT”) in its Chapter 11 case, filed on June 13, 2018 in the Bankruptcy Court for the District Court of Delaware.  ABT is a medical imaging company, headquartered in Knoxville, Tennessee.  ABT designs, manufactures and distributes the world’s first and only small-footprint Biomarker Generator for Fludeoxyglucose, the imaging agent used in positron emission tomography (“PET”).  Through its Chapter 11 case, ABT will solicit going concern bids for its business or, alternatively, reorganize through a chapter 11 plan.

Bayard attorneys Justin R. Alberto, Erin R. Fay, Daniel N. Brogan, and Gregory J. Flasser are involved in the matter.

 

Bayard Selected as Delaware Counsel to the Applebee’s Franchisee RMH Franchise Holdings Unsecured Creditors Committee

Bayard, P.A. has been selected to serve as Delaware counsel to the Official Committee of Unsecured Creditors (the “Committee”) in In re RMH Franchise Holdings, Inc. (Case No. 18-11092 (BLS)). The Office of the United States Trustee formed the Committee on May 24, 2018. After its formation, the Committee selected Bayard, P.A. as its Delaware counsel, Kelley Drye & Warren LLP as its lead counsel, and Zolfo Cooper, LLC as its financial advisor. Bayard attorneys Justin R. Alberto, Evan T. Miller and Erin R. Fay are involved in the matter.

RMH Franchise Holdings, Inc. (the “Debtors”), an Atlanta-based Applebee’s franchisee for 159 restaurants across 15 states, representing about 10% of all Applebee’s locations, filed for chapter 11 protection on Tuesday, May 8, 2018, in the United States Bankruptcy Court for the District of Delaware.

Bayard Selected as Co-Counsel to the Elements Behavioral Health, Inc. Unsecured Creditors Committee

Bayard has been selected to serve as co-counsel to the Official Committee of Unsecured Creditors (the “Committee”) in the Elements Behavioral Health, Inc. bankruptcy case, filed on May 23, 2018, in the United States Bankruptcy Court for the District of Delaware. The Committee was formed on June 6, 2018 and selected Bayard, P.A. and Arent Fox LLP as its legal counsel and Zolfo Cooper, LLC as its financial advisor. Bayard attorneys Justin R. Alberto, the lead director for Bayard’s representation, GianClaudio Finizio, and Daniel N. Brogan are involved in the matter.

Headquartered in Long Beach California, Elements Behavioral Health is a provider of behavioral health services and the largest independent provider of residential drug and alcohol addiction treatment in the United States.

Justin Alberto Speaks at the 2018 AIRA Bankruptcy & Restructuring Conference

Wilmington, DE- Justin R. Alberto, a director in Bayard, P.A.’s bankruptcy department spoke at the 34th Annual Bankruptcy & Restructuring Conference in Nashville, TN on Wednesday, June 13, 2018. The event was sponsored by the Association of Insolvency & Restructuring Advisors (AIRA). Justin participated in the Financial Advisors’ Toolbox program, an all-day session that focused on educating an intermediate practitioner on the skills needed to prepare and analyze a bankruptcy Plan of Reorganization or Liquidation. The group of speakers covered chapter 11 plan issues and common considerations, including class determination, feasibility, confirmation and post-effective date trusts and litigation.

Justin is a director in Bayard’s Restructuring and Liquidation Group and has experience representing debtors, official committees of unsecured creditors and other key parties in chapter 11 cases.

To learn more about the AIRA, visit their website at https://aira.org/.

Evan T. Miller Serves on Planning Committee for ABI Panel

Evan T. Miller, in his capacity as Education Director for the American Bankruptcy Institute’s (“ABI”) Young & New Members Committee, helped plan a panel discussion at the 36th Annual ABI 2018 Spring Meeting in Washington, D.C. last month.  The panel, hosted by the ABI’s Litigation and Young & New Members Committees, was titled Stern Revisited: In Re Millennium Lab Holdings and Beyond. Among other things, the panelists discussed the In re Millennium Lab Holdings case and the impact of Stern v. Marshall, 564 U.S. 462 (2011) on the same.

Evan now serves as a co-chair of the Young & New Members Committee and has been involved in planning or speaking at various panels, events and outings with the group. He is also very active in several other professional associations including Turnaround Management Association, the Philadelphia Bar Association and the Delaware Bankruptcy Inn of Court. Evan is also the creator of the Avoidance Action Update Blog at avoidanceactionupdate.bayardlaw.com.

Scott Cousins Speaks at Annual ABI Spring Meeting

Scott D. Cousins, a Director in Bayard’s Business Restructuring and Liquidations group, served as a panelist on a topic entitled Power Industry: What’s Next? at the American Bankruptcy Institute’s (ABI) 36th Annual Spring Meeting on Friday, April 20, 2018, in Washington, DC. The panel discussed the current state of the struggling nuclear and coal power industries; the growing gas and renewable energy sector and the effects of energy bankruptcy cases on the power industry. Scott and the other panelists also offered predictions with regard to future changes in the energy business and issues it may confront going forward.

Scott focuses his practice on corporate bankruptcy and restructuring. He has extensive experience handling matters in the power industry and a wealth of knowledge as a result of his role as General Counsel to NextEra Energy Resources LLC and at The Columbia Gas System, Inc. Scott has been recognized by Chambers USA, Best Lawyers, and is AV rated by Martindale-Hubbell. He is a published author and speaks frequently on bankruptcy and insolvency law.

For more information about the American Bankruptcy Institute, click here.