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No matter how meritorious a claim may be, its ultimate value to creditors depends upon one thing — whether there is a viable source to satisfy any judgment obtained, since many D&Os do not have sufficient personal assets to satisfy any significant damages that may be awarded.
In the world of Chapter 11 negotiations, the creation of a litigation trust to pursue claims on behalf of unsecured creditors is a common strategy employed by official committees of unsecured creditors as a means to maximize creditor recoveries. Committees often seek to pursue avoidance actions and claims against a company’s directors and officers (D&Os) for breaches of fiduciary duties, among other things.
By Jacob H. Marshall and Randall Klein
As of Jan. 1, 2018, each jointly administered debtor with quarterly disbursements of at least $1,000,000 must pay a fee of 1% of all disbursements, up to $250,000 per quarter. Although this change in the law was only intended to address shortfalls in UST funding, it has taken a little-noticed component of bankruptcy and magnified it into a ticking tax-bomb for unsuspecting debtors and their lenders.
By Adam H. Friedman, Jonathan T. Koevary and Lauren B. Irby
In a case of first impression at the circuit level, the United States Court of Appeals for the Ninth Circuit held that section 1129(a)(10) of the Bankruptcy Code — which requires a favorable vote of at least one impaired class of creditors in order to confirm a Chapter 11 plan — applies on a “per-plan” basis, rather than a “per-debtor” basis.
By Daniel A. Lowenthal and J. Taylor Kirklin
Ultimately, Village at Lakeridge is noteworthy for what the Supreme Court did not decide. In granting certiorari, the Supreme Court declined to address whether the lower courts’ various “non-statutory insider” tests should be refined. As concurrences from Justices Sotomayor and Kennedy emphasized, though, that issue is ripe for increased scrutiny.
By Mark W. Page
The First Circuit Widens the Controversy
In In re Tempnology, the First Circuit held that the debtor’s rejection of a trademark license strips the nondebtor licensee of any right to continue to use the trademarks. In so doing, the court takes the same approach as the Fourth Circuit and rejects the approaches advocated by the Third and Seventh Circuits.