Herrick Restructuring Review

Recent Blog Posts

  • There’s No Insolvency Exception to a Shareholder Vote Requirement to Transfer a Corporation’s Assets in Delaware In a recent Delaware Supreme Court decision, the Court held that there is no “insolvency exception” to the requirement in Section 271 of the DGCL that a transfer of all or substantially all of a corporation’s assets foreclosure transfer be approved by the corporation’s shareholders. The Delaware Supreme Court overruled a decision by the Delaware Chancery Court that used Section 271—which requires a shareholder vote when a corporation sells all or substantially all of its assets—to interpret a Class Vote Provision... More
  • Steven Smith Discusses the Recent Supreme Court Decision, Siegel v. Fitzgerald, with the ABF Journal Restructuring and Finance Litigation partner Steven B. Smith recently met with Phil Neuffer, the Managing Editor of ABF Journal, to discuss the recent United States Supreme Court decision Siegel v. Fitzgerald, No. 21-441, in which the Court unanimously held that a significant quarterly  fee increase applicable to debtors in the United States Trustee judicial districts and not to debtors in the Bankruptcy Administrator judicial districts located in North Carolina and Alabama violated the uniformity requirement of the Constitution’s Bankruptcy Clause.... More
  • Landmark Delaware Bankruptcy Court Ruling that Debtors Did Not Have to Pay Make-Whole Premium Was in Error, First Lien Lenders’ Argue on Appeal Last November, Judge John Dorsey of the Delaware Bankruptcy Court held in the Mallinckrodt chapter 11 case that the debtors did not have to pay a $94 million “make-whole” premium that was provided for in an indenture governing first lien notes. The indenture provides for automatic acceleration following an Event of Default, which includes a bankruptcy filing. Acceleration makes “the principal of, premium, if any, and interest on all the Notes . . . immediately due and payable . .... More
  • Congress May Consider Making $7.5 Million Debt Limit for Subchapter V Permanent: Should the Limit Be Increased? The introduction in 2020 of subchapter V for small business chapter 11 cases was the biggest structural reform in business bankruptcies since the enactment of the Bankruptcy Code in 1978. Subchapter V was enacted in 2019 as part of the Small Business Reorganization Act and became effective in February 2020.  It was originally limited to cases with $2,725,625 or less in debt, but when Congress passed the CARES Act in 2020 in response to the COVID pandemic, it increased the... More
  • SDNY Changes Its Judge Assignment Rules For Major Chapter 11 Cases  On November 22, 2021, the United States Bankruptcy Court for the Southern District of New York announced a modification to its judge-assignment scheme for “mega chapter 11 cases.” Under the new Local Bankruptcy Rule 1073-1(f), which took effect on December 1, 2021, mega chapter 11 cases will be randomly assigned among each of the district’s nine Bankruptcy judges irrespective of the courthouse in which the case is filed. A case will be considered a “mega” case if either the assets or liabilities... More
  • Debtors Beware: Congress Takes Aim At “Eve of Filing” Executive Compensation Some recent high profile restructuring debtors made multi-million dollar retention bonuses on the eve of bankruptcy filings. The U.S. Government Accountability Office (GAO) took notice of these pre-petition payments and, in September 2021, published a report with data showing that debtors may be “working around the [Bankruptcy] Code’s restrictions” by paying bonuses prior to filing bankruptcy. The GAO Report recommends that Congress amend the Bankruptcy Code to “bring pre-bankruptcy bonuses under court oversight” and “specify factors the court should consider... More
  • Equitable Mootness Doctrine Will Continue to Generate Controversy After Supreme Court Declines to Hear Appeal on the Issue The Supreme Court declined to take up a case this month concerning the doctrine of equitable mootness, a topic that continues to rile bankruptcy courts and generate controversy amongst practitioners and scholars. The Eighth Circuit Court of Appeals recently described the doctrine as one that is “misleadingly” labeled, but which allows courts to dismiss an appeal from a bankruptcy court’s ruling because the appeal has been rendered moot due to “equitable, prudential, or pragmatic considerations.” In most situations, the appeal... More
  • What the Bankruptcy Venue Reform Act of 2021 Could Mean for Corporate Debtors On September 23, 2021, United States Senators Elizabeth Warren (D-Mass.) and John Cornyn (R-Texas) introduced the Bankruptcy Venue Reform Act of 2021 (the “Venue Reform Act”), which would tighten the Bankruptcy Code’s venue rules for corporate debtors. A corporate filer would be limited to the district containing its principal place of business or the district where its principal assets have been located for the preceding 180 days. For a public company, the location listed in its SEC filings would be its presumptive principal place of business. The Venue Reform Act is intended to eliminate forum shopping by corporate... More
  • Judge Spares Ex-CEO of Bankrupt KIT Digital from Additional Jail Time Federal district court judge Paul Gardephe recently spared Keleil Isaza Tuzman from additional jail time, despite Tuzman’s December 2017 convictions for securities and mail fraud, the latest twist in the long, strange saga of KIT Digital. Tuzman was the founder and former CEO of KIT Digital Inc., a publicly traded software startup that offered video management products, but which ended up bankrupt and is now called Piksel Inc. The US Attorney sought a prison term of 17.5-22 years for Tuzman. Tuzman,... More
  • Discharging Student Loan Debt: The ABA Takes a Stand The House of Delegates for the American Bar Association recently passed Resolution 512 urging Congress to amend the Bankruptcy Code to permit student loans to be discharged in bankruptcy without proving “undue hardship” as is currently required. The resolution was co-sponsored by the Young Lawyers Division, the Law Student Division and the Standing Committee on Paralegals. The Young Lawyers Division submitted a report in support of the resolution (the “YLD Report”) which discussed the history of student loans and borrowers’... More