Business Reorganization Committee Newsletter

vol 18, num 1 | January 2019

Business Reorganization

AN ABI COMMITTEE NEWSLETTER

Visit the Business Reorganization Committee page

► IN this issue:

Co-Chairs Corner
3d Cir. EFH Decision Affirms Disallowance of $275M Break-Up Fee
Debtor in Possession May Modify Executory Contract Without Court Approval
District Court Confirms Bankruptcy Jurisdiction to Grant Third-Party Releases: In re Millennium Labs Holdings, II LLC
Beware When Buying Claims

Co-Chairs Corner

Daniel B. Besikof
Loeb & Loeb, LLP
New York

Shane G. Ramsey
Nelson Mullins Riley & Scarborough, LLP
Nashville, Tenn.

This has been another great year for ABI’s Business Reorganization Committee. First, as co-chairs we thank our committee members and leadership for their support and continued participation over the last year. Our committee would not be able to accomplish what it accomplishes without your support and contributions. Our committee is always looking for contributions to the newsletter, suggestions for presentation topics and help producing webinar content. If you are interested in contributing to the committee, please reach out to any of the committee leaders. Their contact information can be found on the Business Reorganization Committee web page.

Here are a few highlights from the committee’s activities over the last year.

Newsletter
With contributions from our committee members, we published 11 original newsletter articles in 2018. These articles were helpful to, and well received by, our members, and we thank everyone who submitted articles. We are always looking for articles that provide up-to-date analysis of the emerging hot topics in the restructuring world, and we welcome your submissions. The committee’s newsletters can be found on the Business Reorganization Committee web page.

Committee Educational Sessions
At the 2018 Annual Spring Meeting, we paired with the Real Estate Committee to present “Key Issues and Emerging Trends in Hospitality Defaults.” Our panelists were Scott Underwood (Buchanan Ingersoll & Rooney PC; Tampa, Fla.), Allison R. Day (Genovese Joblove & Battista, PA; Miami), Elise S. Frejka (Frejka PLLC; New York), and Eric E. Walker (Perkins Coie LLP; Chicago).

For the 2018 Winter Leadership Conference, we paired with the Health Care and Secured Credit Committees to present “Keeping the Patient Alive: Avoiding Administrative Insolvency in Health Care Cases.” Our panelists were Richard T. Arrowsmith (Alvarez & Marsal; Washington, D.C.), Hon. Daniel P. Collins (U.S. Bankruptcy Court (D. Ariz.); Phoenix), John J. Cruciani (Husch Blackwell LLP; Kansas City, Mo.), and Nancy A. Peterman (Greenberg Traurig, LLP; Chicago).

Both panels provided insightful discussions, and we thank all of our panelists for their time and contributions to successful committee education sessions.

Planning for 2019
The committee is already at work planning for 2019. The committee will be pairing with the Emerging Industries and Technology Committee at the 2019 Annual Spring Meeting for a discussion regarding the increased use of technology in chapter 11 cases.

Over the course of the coming year, we will continue to identify ways for our committee members to get involved. Newsletter articles are a great way to become involved, so please contact our Newsletter Editor, Patrick Mohan, with your ideas and submissions. We also invite you to share with us any other questions or thoughts that you may have regarding the Business Reorganization Committee or ABI in general.

We look forward to meeting and working with more of you in the future. If we can be of help to you, please do not hesitate to reach out to us.

3d Cir. EFH Decision Affirms Disallowance of $275M Break-Up Fee

Salene Mazur, CTA
Mazur Kraemer Business Law
Pittsburgh and Weirton, W.Va

Anthony Malky
Mazur Kraemer Business Law
Pittsburgh and Weirton, W.Va

As transactional business attorneys, we strive to craft documents that are bullet-proof, covering every what-if scenario should a deal fall apart. We hope that the agreements we draft will result in a fair and just consequence for all parties to the bargain.

On Sept. 13, 2018, the U.S. Court of Appeals for the Third Circuit issued its opinion in Energy Future Holdings Corp., et al. (Appellee) v. NextEra Energy Inc. (NextEra) (Appellant), affirming the U.S. Bankruptcy Court for the District of Delaware’s decision in the In re Energy Future Holdings Corp., et al., (EFH) (debtors) chapter 11 bankruptcy cases, striking a $275 million break-up fee (termination fee). What practical tips can we learn from this case?

The debtors owned an 88 percent economic interest in the rate-regulated business of Oncor Electric Delivery Co. LLC (Oncor), the largest electricity transmission and distribution system in Texas.

Debtor in Possession May Modify Executory Contract Without Court Approval

Samuel R. Henninger
University of Tennessee College of Law
Knoxville, Tenn.

Imagine that Hal Steinbrenner agreed to purchase the Boston Red Sox from John Henry, Tom Werner and Larry Lucchino. All three signed non-compete agreements promising to buy no interest in an MLB team for the next five years. Steinbrenner made a $1 billion down payment, and MLB Commissioner Rob Manfred signed off on everything. But shortly after all the parties signed the final contract, Steinbrenner filed a bankruptcy petition.

Now you have an executory contract. Many courts follow Prof. Vern Countryman’s definition of an executory contract: “a contract under which the obligation of both the bankrupt and the other party to the contract are so far unperformed that the failure of either to complete performance would constitute a material breach excusing the performance of the other.”

District Court Confirms Bankruptcy Jurisdiction to Grant Third-Party Releases: In re Millennium Labs Holdings, II LLC

Isaac Rothschild
Mesch Clark Rothschild PC
Tuscon, Ariz.

Third-party releases can be an integral part of a chapter 11 bankruptcy case. These releases can have the effect of a nonconsensual resolution of state law claims, and a question exists as to how they are implicated in a Stern v. Marshall analysis. In the fourth opinion issued by the district court in the Millenium Labs Holdings II LLC bankruptcy, Judge Leonard P. Stark for the District of Delaware affirmed the jurisdiction for and the grant of nonconsensual third-party releases for equityholders as part of a confirmed bankruptcy plan by the bankruptcy court.

Beware When Buying Claims

Angela L. Baglanzis
Obermayer Rebmann Maxwell & Hippel LLP
Philadelphia, PA

In the multi-billion-dollar claims-trading market, your offer and acceptance might not be what you thought it was. While the bankruptcy court in its recent decision In re Westinghouse Electric Company LLC et al. would not establish terms of custom in the industry of claims trading, especially when dealing with nonindustry players, the bankruptcy court did provide guidance as to what would not constitute a binding agreement or a Type II contract.

Before the bankruptcy court was an objection to the notice of transfer of claims for three proofs of claim filed in the Westinghouse bankruptcy. The proofs of claim were filed by Landstar Global Logistics Inc., Landstar Inway Inc. and Landstar Express American Inc. (collectively, Landstar).