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  • The Hertz Restructuring: A Rare Win for Public Stockholders On May 22, 2020, amidst the deepest possible gloom about COVID-19’s impact on travel, the car rental giant, Hertz Global, filed for Chapter 11. According to reporting by Barrons,[1] during the reorganization, Hertz drastically cut the size of its fleet and closed locations. Like most shareholders of bankrupt companies, Hertz owners were likely to be wiped out. But the economy is improving: travel has returned, Hertz’s creditors are being paid in full, and according to reporting by Barrons, its shareholders... More
  • Lessons from US v. Holmes: Limits of the Attorney-Client Privilege in Communications with Corporate Clients and their Executives On June 3, 2021, U.S. Magistrate Judge Nathanael M. Cousins ruled that ex-Theranos CEO Elizabeth Holmes could not assert attorney-client privilege to block disclosure of her communications with Theranos’s former counsel, Boies Schiller Flexner LLP, in connection with her upcoming criminal trial. Judge Cousins found that Holmes had not made it clear to Boies Schiller’s attorneys that she was seeking legal advice in her personal capacity, and as an executive of Theranos. As a result, her communications with Boies Schiller... More
  • Illinois Bankruptcy Court Weighs In on Chapter 7 Substantial Contribution Claims In re Concepts America, Inc., 625 B.R. 881 (Bankr. N.D. Ill. 2021), weighs in on a murky question: Can a creditor make an administrative expense priority claim because it made a substantial contribution in a case under chapter 7? The court answered no. In Concepts America, creditor Galleria Mall Investors LP moved the bankruptcy court for allowance and payment of an administrative expense claim pursuant to sections 503(b)(3)(A), (b)(3)(D), and (b)(4) of the Bankruptcy Code. Around May 2011, the Galleria entered into... More
  • Bad Faith or Business Judgment? Brooks Brothers’ minority shareholders and unsecured creditors, TAL Apparel Ltd. (“TAL Apparel”) and its subsidiary Castle Apparel Ltd. (“Castle”), recently brought an action against the men’s retailer’s former owners, the Del Vecchio family. TAL Apparel and Castle allege bad faith and more than $100 million in damages for losses arising from the Brooks Brothers bankruptcy. TAL Apparel alleges that the Del Vecchio family did not engage “in good faith” with potential buyers in 2019, and “put their own financial interests... More
  • Texas Bankruptcy Court Dismisses NRA Bankruptcy Cases, Finding They Were Not Filed in Good Faith On May 11, 2021, Judge Harlin D. Hale dismissed the chapter 11 case filed by the National Rifle Association after finding that it was not filed in good faith. Judge Hale ruled that the case was “filed to gain an unfair litigation advantage” and to “avoid a state regulatory scheme,” which the Court found was “not for a purpose intended or sanctioned by the Bankruptcy Code.” Background In August 2020, the New York attorney general (“NYAG”) filed a complaint in New York... More
  • Voting Rights Provisions in Intercreditor Agreements May Not Be Enforceable As Expected In an anomalous decision by the Bankruptcy Court in the District of Kansas, the court declined to enforce the voting provisions in subordination agreements that allowed the senior creditor to vote on behalf of a group of subordinated creditors. Reversing a trend of enforcing express voting restrictions in intercreditor agreements, the court invalidated the voting provision at issue, yet ultimately barred the subordinated creditors from participating in the confirmation process entirely. The decision bucks the trend of enforcing intercreditor agreements... More
  • Bronx Miracle Gospel Tabernacle: Lender’s Nightmare Continues In a recent appeal to the Second Circuit, Bronx Miracle Gospel Tabernacle Word of Faith (the “Church”), asks the Second Circuit for relief from the sale of its property by a bankruptcy trustee. The Church’s action seeks damages against the trustee and her counsel and the bankruptcy judge who approved the sale. The action claims that the Church’s religious rights under the Religious Freedom Restoration Act (“RFRA”) and the Constitution have been violated in the bankruptcy court. The Church’s appeal... More
  • A&P Liquidation Will Pay Administrative Creditors Just $.20 on the Dollar: Is There a Better Way? The Great Atlantic and Pacific Tea Company, better known as A&P, recently moved for approval of a structured dismissal of its most recent chapter 11 case. Debtors seek structured dismissal of their chapter 11 cases when they cannot confirm a chapter 11 plan. In this case, the A&P estate is massively administratively insolvent, meaning that it can’t pay expenses that became due after the bankruptcy filing. In theory, the bankruptcy judge, the United States trustee and the creditors committee monitor the... More
  • Hotels 2021: Restructurings on the Horizon? The Outlook A recent string of high-visibility hotel chapter 11 filings  has led investors and lenders to wonder what to expect for 2021. Recent filings include: Martinique Hotel, a 165-key property in Brooklyn – September 2020 Tillary Hotel, Brooklyn, a 174-key boutique property in Brooklyn – December 2020 Holiday Inn Resort Orlando Suites, a 777-key property in Orlando, Florida – January 2021 Wardman Park Hotel, a 1,152-key property in Washington, D.C. – January 2021 Eagle Hospitality REIT, filed chapter 11 petitions for 18 properties, including the... More
  • Recent Supreme Court Ruling Provides Important Protection for Secured Creditors On January 15, 2021, the Supreme Court unanimously ruled in City of Chicago v. Fulton that a secured party in possession of a debtor’s collateral does not violate the automatic stay by passively retaining possession after a debtor commences a bankruptcy case. When a debtor files a bankruptcy case, the Bankruptcy Code protects the debtor by imposing an automatic stay on efforts to collect prepetition debts or “any act . . . to exercise control over property” of the bankruptcy... More