Tag Archives: Bankruptcy Court for the District of Delaware

Bayard Selected as Co-Counsel to the Insys Therapeutics, 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 Insys Therapeutics, Inc., et al., (Case No. 19-11292 (KG)), filed on June 10, 2019 in the United States Bankruptcy Court for the District of Delaware. On June 19, 2019, the Office of the United States Trustee formed the Committee. After its formation, the Committee selected Akin Gump Strauss Hauer & Feld, LLP and Bayard, P.A. as its legal counsel and Province, Inc. as its financial advisor.

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

Insys Therapeutics and its debtor affiliates operate a specialty pharmaceutical company that manufactures and markets, among other products, Subsys™, a sublingual fentanyl spray. Insys is the first opioid manufacturer to file for Chapter 11 protection amidst the nationwide opioid crisis Insys and its debtor affiliates filed for chapter 11 protection following criminal convictions of former management and only ten days after reaching a $225 million settlement with the US Justice Department.
Insys Therapeutics, Inc. operates a website at https://www.insysrx.com/.

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 Recognized at 2019 Turnaround Atlas Awards

Wilmington, Delaware- Bayard, P.A. was honored at the 11th Annual Turnaround Atlas Awards for its work in the chapter 11 cases of Claire’s Stores, Inc. Bayard attorneys Justin R. Alberto, Erin R. Fay, and Gregory J. Flasser served as co-counsel representing the Official Committee of Unsecured Creditors.

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, Claire’s Stores eliminated approximately $1.9 billion of debt from its balance sheet and gained access to $575 million in new capital.

The firm also received recognition for the Claire’s Stores, Inc. matter at the International M&A Awards. Click here for the announcement.

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 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.

Sara Bussiere Selected to Participate in the 2019 Federal Trial Practice Seminar

Wilmington, Delaware – Bayard’s Sara E. Bussiere has been selected as one of eight participants in the 2019 Federal Trial Practice Seminar. The program is sponsored by the United States District Court for the District of Delaware and the Delaware Chapter of the Federal Bar Association. The intensive eight-week instructional program provides lawyers an opportunity to work directly with Judges and experienced practitioners to practice and hone their trial skills.

The program will cover topics including Courtroom Presentation and Demeanor, Opening Statements, Direct Examination, Cross Examination, and Closing Arguments. At the end of the program, the participants will participate in a one-day Mock Trial in front of a jury comprised of Delaware citizens.

Sara E. Bussiere is an associate in Bayard’s Litigation Department. Sara concentrates her practice on corporate and commercial litigation in the Delaware Court of Chancery, Delaware Superior Court, and the United States District Court for the District of Delaware. Sara counsels clients concerning the General Corporation Law of the State of Delaware and Delaware’s alternative entity statutes. Sara has experience in a broad range of corporate matters, including fiduciary duty claims, corporate and alternative entity control disputes, advancement and indemnification claims, trade secret and noncompetition agreement disputes, and other breach of contract claims. Sara also has experience advising corporate entities in receivership or seeking dissolution.

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.

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.

Bayard’s Evan Miller Certified as Mediator by the United States Bankruptcy Court in Delaware

Evan T. Miller - Corporate Bankruptcy, Liquidation and Restructuring Attorney at Bayard, P.A.

Evan T. Miller – Corporate Bankruptcy, Liquidation and Restructuring Attorney at Bayard, P.A.

Bayard attorney Evan T. Miller was recently certified as a mediator for the United States Bankruptcy Court for the District of Delaware (the “Bankruptcy Court”) and is now included on the Register of Mediators and Arbitrators (the “Register”) maintained by the Bankruptcy Court.  In addition to his years of experience participating in mediation on behalf of disputants, Evan completed a mediation training protocol that qualified him for the Register under the Bankruptcy Court’s Local Rules.

Disputes in Delaware cases are often referred to mediation, either by agreement of the parties or by order of the Bankruptcy Court.  Local Rule 9019-3, for instance, provides that “[n]otwithstanding any provision of law to the contrary, the Court may refer a dispute pending before it to mediation and, upon consent of the parties, to arbitration;” Likewise, Local Rule 9019-5 states that the Bankruptcy Court “may assign to mediation any dispute arising in an adversary proceeding, contested matter or otherwise in a bankruptcy case.”  In addition, there is a Standing Order of Reference to mediation with respect to adversary proceedings brought under 11 U.S.C. § 547.