GEYER v. INGERSOLL PUBLICATIONS CO.: INSOLVENCY SHIFTS DIRECTORS' BURDEN FROM SHAREHOLDERS TO CREDITORS

Size: px
Start display at page:

Download "GEYER v. INGERSOLL PUBLICATIONS CO.: INSOLVENCY SHIFTS DIRECTORS' BURDEN FROM SHAREHOLDERS TO CREDITORS"

Transcription

1 GEYER v. INGERSOLL PUBLICATIONS CO.: INSOLVENCY SHIFTS DIRECTORS' BURDEN FROM SHAREHOLDERS TO CREDITORS I. INTRODUCTION As a result of the continued increase in the number of corporations facing bankruptcy,' Geer v. Ingersoll Publications Co. 2 may have a profound impact on the standard of corporate governance in Delaware, America's leading corporate state. In Gejer, the Delaware Court of Chancery held that directors of a corporation owe a fiduciary duty to the corporation's creditors upon "insolvency in fact" or at the moment its liabilities exceed the fair market value 3 of its assets. 4 Ambiguities created by the language applied by the court of chancery in Credit Lyonnaise Bank Nederland, N V. v. Pathe Communications Corp Lewis U. Davis, Jr. et al., Corporate Reorganization in the 1990's: Guiding Directors of Troubled Corporations Through Uncertain Territory, 47 Bus. LAw. 1, 1 (1991). In 1989 the filings of Chapter 11 business reorganizations rose five percent to 16,303. In 1990, the number of Chapter 11 business reorganizations was 18,282, an increase of approximately 12% over In addition, the size of the bankruptcies is also increasing. The total asset size of bankruptcies of publicly-held companies has increased since 1985 as follows ($ in billions): 1985-S5; 1986-$12; 1987-$40; 1988-S43; 1989-$72; 1990-$83; through June 1991-S52. Davis, supra, at 1 n.1 (citations omitted) A.2d 784 (Del. Ch. 1992). This decision by Vice- Chancellor Chandler of the Delaware Court of Chancery considers the defendant Ralph Ingersoll's motion to dismiss for failure to state a claim upon which relief may be granted and for lack of personal jurisdiction. Id. at "Fair market value" is defined as the reasonable cash price for which the property may be sold on the market. BLAcK's LAw DICrIONARY 597 (6th ed. 1990). 4. Ge'er, 621 A.2d at 787, No. 12,150, 1991 WL (Del. Oh. Dec. 30, 1991), reprinted in 17 DEL. J. CORP. L (1992). In Credit Lyonnaise, Chancellor Allen addressed the duties of directors toward creditors and stated that "[a]t least where a corporation is operating in the vicinity of insolvency, a board of directors is not merely the agent of the residue risk bearers, but owes its duty to the corporate enterprise." Id. at *34, reprinted in 17 DEL. J. CORP. L. at In addition, in a now infamous footnote, Chancellor Allen provided an illustration of what he cor~idered to be a situation where a director may be held liable to creditors for failing to adequately consider their interests. Id. at *36 n.55, reprinted in 17 DEL. J. CORP. L. at n.55. The illustration implied that where a corporation's only asset was a favorable judgment against a third party (which is being appealed), the corporation's directors may be held liable for failing to settle the lawsuit for an amount greater or equal to the corporation's liabilities in the event the judgment is overturned. Id.

2 DELAWARE JOURNAL OF CORPORATE LAW [Vol. 19 left nervous directors of financially troubled Delaware corporations anxioutsly awaiting the Geyer decision. 6 In Credit Lyonnaise, the court of chancery implied that a director of a corporation which was in the "vicinity of insolvency" may owe a duty to the corporation's creditors. 7 This implication was ambiguous as to when a director's duty to creditors arises and was also ambiguous as to the standard by which a director's decisions are to be reviewed. The court in Geyer attempted to clarify these ambiguities. Ingersoll Publishing Company evolved out of a partnership between the plaintiff, Thomas P. Geyer, and the defendant, Ralph Ingersoll, II.8 Mr. Ingersoll was the controlling stockholder, president, and chairman of the new corporation; Mr. Geyer was an employee and the only other shareholder. 9 In the fall of 1988, Ingersoll Publishing used a $2 million note to repurchase Mr. Geyer's shares of stock.' 0 Ingersoll Publishing defaulted on the note in June of Mr. Geyer alleged that the default was the result of Mr. Ingersoll's fraudulent conveyance of the company's major assets to a third party in return for personal benefits.' 2 In determining whether it had jurisdiction over the defendant as the director of a Delaware corporation,' 3 the court of chancery 6. Barbara Franklin, Directors' Duties; Insolvency Shifts Burden From Shareholder to Creditor, 208 N.Y. L.J. 5, 5 (1992). 7. Credit Lyonnaise, No. 12,150, 1991 WL , at *34, reprinted in 17 DEL. J. CORP. L. at 1155 (emphasis added). 8. Geyer, 621 A.2d at Id. 10. Id. 11. Id. 12. Geyer, 621 A.2d at Id. at 786. The defendant was served with process in accordance with 3114(a) of the Delaware Code. Id. Section 3114(a) provides for service of process on nonresident directors, trustees, or members of the governing body of a Delaware corporation. Id. at The statute states in pertinent part: (a) Every nonresident of this State who after September 1, 1977, accepts election or appointment as a director, trustee or member of the governing body of a corporation organized under the laws of this State or who after June 30, 1978, serves in such capacity and every resident of this State who so accepts election or appointment or serves in such capacity and thereafter removes his residence from this State shall, by such acceptance or by such service, be deemed thereby to have consented to the appointment of the registered agent of such corporation (or, if there is none, the Secretary of State) as his agent upon whom service of process may be made in all civil actions or proceedings brought in this State, by or on behalf of, or against such corporation, in which such director, trustee or member is a

3 1994] INSOLVENCY SHIFTS DIRECTORS' BURDEN held that upon "insolvency in fact" a director owes a fiduciary' 4 duty to the corporation's creditors." 5 The court rejected the defendant's assertion that statutory proceedings were necessary to invoke the insolvency exception, which would cause a director's fiduciary duty to "shift" from the corporation's shareholders to its creditors.' 6 The court of chancery based its decision upon Delaware case law and also upon its interpretation of the ordinary meaning of the word insolvency. 1 7 The court particularly noted Bovay v. H.M. Byllesby necessary or proper party, or in any action or proceeding against such director, trustee or member for violation of his duty in such capacity, whether or not he continues to serve as such director, trustee or member at the time suit is commenced. Such acceptance or service as such director, trustee or member shall be a signification of the consent of such director, trustee or member that any process when so served shall be of the same legal force and validity as if served upon such director, trustee or member within this State and such appointment of the registered agent (or, if there is none, the Secretary of State) shall be irrevocable. DEL. CODE ANN. tit. 10, 3114(a) (Gum. Supp. 1992). 14. A fiduciary is "[a] person having [a] duty, created by his undertaking, to act primarily for another's benefit in matters connected wilh such undertaking." BLACK'S LAW DICTIONARY 625 (6th ed. 1990). 15. Geyer, 621 A.2d at 787. A prerequisite for obtaining service of process under 3114(a) is a breach of an existing fiduciary duty. Id. Se Pcstolite Inc. v. Cordura Corp., 449 A.2d 263, (Del. Super. Ct. 1982) (finding jurisdiction lacking where claims involved breach of contract and tort relating to affairs of a corporation, but not stemming from breaches of a fiduciary duty); Armstrong v. Pomerance, 423 A.2d 174, n.5 (Del. Super. Ct. 1980) (holding 3114 to be constitutional as applied by the Delaware courts only when "directors, trustees, or members of the governing body of a Delaware corporation are necessary and proper parties or where the cause of action is grounded on such individuals' breach of the fiduciary duties owed to the corporation and its owners"). See also Prudential- Bache Sec. Inc. v. Franz Mfg. Co., 531 A.2d 953, 954 n.2 (Del. Super. Ct. 1987) (determining that in personam jurisdiction over a director did not exist because creditor's cause of action could not be characterized as an action for breach of fiduciary duty). Delaware law recognizes that [i]f the statute permits in personam jurisdiction over a director, it must be because a qualitative rather than a quantitative analysis shows such a relationship between the defendant, the forum, and the litigation.., that the exercise of such jurisdiction does not offend traditional notions of fair play and substantial justice. Pestolite, 449 A.2d at 265 (quoting Shaffer v. Heitner, 433 U.S. 186, 204 (1977)). 16. G er, 621 A.2d at Id. at The court stated that the ordinary meaning of insolvency occurs when an entity "is unable to pay its debts as they fall due to the usual course of business." Id. at 789 (citing WEBsTER's NirNrH NEw CoLLEciATE Dic- TIONARY 626 (1988)).

4 DELAWARE JOURNAL OF CORPORATE LAW [Vol. 19 & Co.,18 in which the Supreme Court of Delaware stated, "'[T]he fact which creates the trust [for the benefit of creditors] is the insolvency, and when that fact is established, the trust arises, and the legality of the acts thereafter performed will be decided by very different principles than in the case of solvency."" ' 9 Vice-Chancellor Chandler interpreted this language as switching a director's fiduciary obligation, imposed for the benefit of the corporation's stockholders during solvency, to the corporation's creditors at the moment the corporation becomes insolvent. 2 0 While the shifting of duties is not a new concept, Geyer appears to be the first modern Delaware decision to specify when the shift occurs. 2 ' This comment will discuss the evolution, development, and application of the insolvency exception. Specifically, this comment addresses the effect of the Geyer decision on a director's business decisions which are made during insolvency, but prior to the declaration of bankruptcy, and also the decision's effect upon future litigation involving creditors' rights. The ambiguities created by the court of chancery may have a negative impact upon Delaware's position as America's leading state of incorporation. 22 Directors of Delaware corporations, fearing the imposition of personal liability, may be hesitant to accept or remain in their positions. This negative impact may only be avoided if Delaware follows other jurisdictions and continues to apply the business judgment rule for informed business decisions made in good faith after the corporation has been deemed insolvent. II. BACKGROUND A. Duties of Directors of Solvent Corporations A basic principle of corporate governance is that a solvent corporation's board of directors has the ultimate responsibility of A.2d 808 (Del. 1944). In Bovay, corporate officers perpetrated fraud by transferring funds of the corporation for their personal benefit, rendering the corporation insolvent from its inception. Id. See Gregory Varallo & Jesse A. Finkelstein, Fiduciary Obligations of Directors of the Financially Troubled Company, 48 Bus. LAw. 239, (1992) (discussing Bovay and the principles upon which the Supreme Court of Delaware based its decision). 19. Geyer, 621 A.2d at 787 (quoting Bovay, 38 A.2d at 813). 20. Id. at Franklin, supra note 6, at As of December 28, 1987, Delaware was the home of approximately 179,000, companies, including 56% of the Fortune 500 companies and 45% of the companies which appeared on the New York Stock Exchange. Delaware Eyes Takeover Laws, CH!. TRIB., Dec. 28, 1987, at 7.

5 1994] INSOLVENCY SHIFTS DIRECTORS' BURDEN managing the business and affairs of the corporation. 2s In discharging this duty, the board owes fiduciary duties of care and loyalty to the corporate shareholders. 24 The duty of care requires the directors to inform themselves of all material information before making a business decision. 25 After reviewing all of the relevant information, the directors must act with "requisite care in the discharge of their duties." 26 The duty of care is imposed to "ensure that the board in fact fulfills its function of monitoring management, or at least to provide legal redress in the event that it fails to do so." 2 ' Thus, a director may not claim ignorance where information which affects his decision is readily available. The duty of loyalty requires that a director not stand on both sides of the transaction or have any financial interest in the transaction other than the "benefit which devolves upon the corporation or all stockholders generally. "28 If a majority of the directors are tainted with self-interest, they may delegate their authority to a committee 23. Aronson v. Lewis, 473 A.2d 805, 811 (Del. 1984). InAronson, the Supreme Court of Delaware addressed the issue of whether a board of directors or committee of independent disinterested directors could properly secure the dismissal of a stockholder's derivative action. Id. at In setting forth its interpretation of the Delaware business judgment rule the court noted the following language of 5 141(a) of the Delaware Code: "The business and affairs of a corporation organized under this chapter shall be managed by or under the direction of a board of directors except as may be otherwise provided in this chapter or in its certificate of incorporation." Id. at 811 (quoting Da.. CODE ANN. tit. 8, 9 141(a) (1983)). 24. See id. at 811 (noting that in discharging their function the directors owe certain "fiduciary" obligations to the corporation and its shareholders). &e also Smith v. Van Gorkom, 488 A.2d 858, (Del. 1985) (holding that fiduciary duties apply with equal force when a board approves a corporate merger). 25. Aronson, 473 A.2d at 812. See Lawrence E. Mitchell, The Fairness Rights of Corporate Bondholders, 65 N.Y.U. L. REV. 1165, 1172 & n.19 (1990) (discussing a director's duty of care in monitoring corporate management). Many state corporation statutes provide a formulation of the directors' duty of care similar to that of Rev. Model Business Corp. Act (1984), which provides that: "[a] director shall discharge his duties as a director... (1) in good faith; (2) with the care an ordinarily prudent person in a like position would exercise under similar circumstances; and (3) in a manner he reasonably believes to be in the best interests of the corporation." Id. at 1172 n.19 (quoting REV. MODEL BusiNEss CORP. AcT (1984)). 26. Aronson, 473 A.2d at Mitchell, supra note 25, at Aronson, 473 A.2d at 812. The independence of a director is directly related to disinterestedness. Id. A director must not be subject to influence from outside sources such as a majority shareholder or corporate officer. Id. at 816.

6 DELAWARE JOURNAL OF CORPORATE LAW [Vol. 19 of independent disinterested directors to determine the issue. 29 The duty of loyalty, which evolved from fiduciary principles, is imposed to prevent any improper use of position by directors for personal benefit. 3 0 In determining whether the directors of a solvent corporation have breached their fiduciary duties, Delaware courts apply the business judgment rule. 3 1 This rule creates a presumption that, absent an abuse of discretion, any action taken by the director of a corporation was made "on an informed basis, in good faith and in the honest belief that the action taken was in the best interests of the company. "32 This presumption includes conscious decisions to refrain from acting. However, the rule will not apply if the directors stood on both sides of the transaction, had a personal financial interest in the transaction, lacked independence, did not inform themselves of all information that was reasonably available, or failed to exercise the requisite level of care Id. at 813. See also Weinberger v. UOP, Inc., 457 A.2d 701, 710 (Del. 1983) (holding that when directors stand "on both sides of a transaction, they are required to demonstrate their utmost good faith' and the most scrupulous inherent fairness of the bargain"). See generally Alison G. Anderson, Conflicts of Interest: Efficiency, Fairness and Corporate Structure, 25 UCLA L. REv. 738, (1978) (discussing legal controls or conflicts of interest between shareholders and corporate management); Harold Marsh, Jr., Are Directors Trustees?: Conflict of Interest and Corporate Morality, 22 Bus. LAW. 35, (1966) (suggesting a fairness standard for evaluating actions of corporate directors where there is a conflict of interest). 30. Mitchell, supra note 25, at See Aronson, 473 A.2d at Id. at 812 (citing Kaplan v. Centex Corp., 284 A.2d 119, 124 (Del. Ch. 1971)). Legal redress for the breach of a director's fiduciary duties is usually in the form of a stockholder derivative action which is two-fold in nature: it is the equivalent of a "suit by the shareholders to compel the corporation to sue"; and it is a suit by the corporation, asserted by the shareholders on [the corporation's] behalf against those liable to it. Id. at 811. Under Delaware law, a shareholder must make a "demand" on the board of directors that the action desired be taken by the directors on behalf of the corporation. Id. at The board's decision to refuse demand is subject to the traditional business judgment rule standard. Id. at 812. See generally Donald E. Pease, Aronson v. Lewis: When Demand is Excused and Delaware's Business Judgment Rule, 9 DEL. J. CORP. L. 39 (1984) (discussing demand requirements under Delaware law). 33. Aronson, 473 A.2d at 812. Delaware applies the standard of gross negligence in determining the validity of a director's decision which falls under the protection of the business judgment rule. Id. See also Van Gorkom, 488 A.2d at 874 (holding that a board of directors was grossly negligent in approving a merger where the facts indicated that the board's decision was made in a hurried manner, without reading all of the reports or considering alternatives).

7 1994] INSOLVENCY SHIFTS DIRECTORS' BURDEN Generally, the fiduciary duty of loyalty and the duty of care do not extend to a corporation's creditors. This is based upon the fact that creditors do not have an existing property right or an equitable interest which supports these duties when a corporation is solvent.4 The basic relationship between a corporation and its creditors is contractual in nature. 3 5 Consequently, the rights of the parties are determined by principles of contract law, not by the. broad concept of fiduciary obligations. 3 6 Modern contract law has recognized that an implied covenant of good faith and fair dealing is inherent in all contracts. 3 7 This implication, however, does not rise to the level of a fiduciary duty. 38 The purpose of the covenant is to ensure that the "reasonable expectations" of the parties are met and that neither party deprives the other of the "fruits of the agreement." 3 The 34. Simons v. Cogan, 549 A.2d 300, 304 (Del. 1988). In determining that directors of a solvent corporation owed no fiduciary duty to holders of convertible debentures, the Supreme Court of Delaware noted that "[b]cfore a fiduciary duty arises, an existing property right or equitable interest supporting such a duty must exist." Id. In Association of Haystack Property Owners, Inc. v. Sprague, the court stated, "It is true... that while corporate directors do owe fiduciary duties, the duties are not owed to the world at large." Association of Haystack Property Owners, Inc. v. Sprague, 494 A.2d 122, 125 (Vt. 1985). 35. Harff v. Kerkorian, 324 A.2d 215, 222 (Del. Ch. 1974). In Harf/, the court noted, "[U]nIess there are special circumstances which affect the rights of the debenture holders as creditors of the corporation, e.g., fraud, insolvency, or a violation of a statute, the rights of the debenture holders are confined to the terms of the Indenture Agreement... " Id. See also Katz v. Oak Indus. Inc., 508 A.2d 873, 879 (Del. Ch. 1986) (holding that bondholders' rights are governed by the terms of the contract). In Katz, bondholders sought an injunction to prevent the consummation of an exchange offer and consent solicitation made by the corporation to holders of its long term debt. Id. at 873. In refusing to grant the injunction, the court noted that the directors generally owed no fiduciary duties to debt holders and the exchange offer did not violate any express contractual provisions. Id. at 879 n.7 & Katz, 508 A.2d at Id. at 880. See RESTATEMENT (SECOND) OF CONTRACT LAW 205 (1981) (imposing "upon each party [to a contract] a duty of good faith and fair dealing in [the contract's] performance and... enforcement"). 38. See Guth v. Loft, 5 A.2d 504, 510 (Del. 1939). The Supreme Court of Delaware has described a director's fiduciary duty toward a corporation's shareholders as a duty not only affirmatively to protect the interests of the corporation committed to his charge, but also to refrain from doing anything that would work injury to the corporation, or to deprive it of profit or advantage which his skill and ability might properly bring to it, or to enable it to make in the reasonable and lawful exercise of its powers. Id. 39. Metropolitan Life Ins. Co. v. RJR Nabisco, Inc., 716 F. Supp. 1504,

8 DELAWARE JOURNAL OF CORPORATE LAW [Vol. 19 covenant may only aid in the interpretation of the contract and will never impose an obligation inconsistent with its terms. 4 0 The "implied covenant of good faith is breached only when one party seeks to prevent the contract's performance or to withhold its benefits." '41 Where a party's contractual rights have not been violated, there can be no breach of an implied covenant. 4 2 While the duties owed by a director to a solvent corporation's creditors are clear, the duties owed to creditors upon insolvency are ambiguous. B. Duties of Directors of Insolvent Corporations A corporation is considered insolvent when either the fair market value of its assets is less than its total liabilities, 43 when it is unable to meet its obligations as they become due, 44 or when the company has instituted statutory bankruptcy proceedings. 45 Upon insolvency, 1517 (S.D.N.Y. 1989). See, e.g., Greenwich Village Assocs. v. Salle, 493 N.Y.S.2d 461, 464 (N.Y. App. Div. 1985). 40. Metropolitan Life Ins. Co., 716 F. Supp. at 1517 (citing Sabetay v. Sterling Drug, Inc., 506 N.E.2d 919, 922 (N.Y. 1987)). 41. Id. See Collard v. Incorporated Village of Flower Hill, 427 N.Y.S.2d 301, 302 (N.Y. App. Div. 1980). 42. Broad v. Rockwell Int'l Corp., 642 F.2d 929, (5th Cir.) (en banc), cert. denied, 454 U.S. 965 (1981). 43. Geyer, 621 A.2d at Under 1302 of the Delaware Code, a "person is insolvent when the present fair salable value of his assets is less than the amount that will be required to pay his probable liability on his existing debts as they become absolute and matured." DEL. CODE ANN. tit. 6, 1302 (1975). 45. Congress has defined "insolvency in 101(32) of the United States Code. Section 101(32) states, in pertinent part: "insolvent" means: (A) with reference to an entity other than a partnership and a municipality, financial condition such that the sum of such entity's debts is greater than all of such entity's property, at a fair valuation, exclusive of- (i) property transferred, concealed, or removed with intent to hinder, delay, or defraud such entity's creditors; and (ii) property that may be exempted from property of the estate under section 522 of this title [11 U.S.C. 522]; (B) with reference to a partnership, financial condition such that the sum of such partnership's debts is greater than the aggregate of, at a fair valuation- (i) all of such partnership's property, exclusive of property of the kind specified in subparagraph (A)(i) of this paragraph; and (ii) the sum of the excess of the value of each general partner's nonpartnership property, exclusive of property of the kind specified in subparagraph (A) of this paragraph, over such partner's nonpartnership debts U.S.C. 101(32) (1988).

9 1994] INSOLVENCY SHIFTS DIRECTORS' BURDEN the "duties" of the directors of the financially troubled corporation shift from the stockholders to the creditors. 46 The rationale for the shift upon insolvency is that creditors become the equitable owners of the corporation because they are the only parties with an interest in the corporation's assets. 47 Therefore, the officers and directors of the corporation which becomes insolvent or in a failing condition no longer represent stockholders, but due to the insolvency become trustees, 4 or quasi- trustees, of the corporation's assets for the benefit of its creditors. 49 The directors are then charged with the fiduciary duty of assuring that creditors of the corporation are either paid in full or pro-rata from the remaining assets.s0 Consequently, directors cannot give preference to themselves or particular creditors by transfer of corporate property or cash payments. 5 ' Notwithstanding the almost universal recognition. of a director's heightened or shifting duty upon insolvency, 52 case law provides little 46. See Clarkson Co. Ltd. v. Shaheen, 660 F.2d 506, 512 (2d Cir. 1981) (quoting New York Credit Men's Adjustment Bureau Inc. v. Weiss, 110 N.E.2d 397, 398 (N.Y. 1953)) (noting that "[i]f the corporation was insolvent at that time it is clear that the defendants, as officers and directors thereof, were to be considered as though trustees of the property for the corporate- beneficiaries"); Davis v. Woolf, 147 F.2d 629, 633 (4th Cir. 1945). "The law by the great weight of authority seems to be settled that when a corporation becomes insolvent, or in a failing condition, the officers and directors no longer represent the stockholder, but by the fact of insolvency, become trustees for the creditors...." Davis, 147 F.2d at 633 (quoting Arnold v. Knapp, 84 S.E. 895, 899 (W. Va. 1915)). 47. Steven R. Gross et al., Shifting Duties: Directors Face Risks in Workout, NAT'L L.J., Apr. 15, 1991, at 19 (citation omitted). 48. Federal Deposit Ins. Corp. v. Sea Pines Co., 692 F.2d 973, 977 (4th Cir. 1982) (quoting Davis, 147 F.2d at 633). "The general standard of conduct for trustees is 'to exercise such care and skill as a man of ordinary prudence would exercise in dealing with his own property."' Margaret A. Brown et al., Fiducaiy Duties of Directors of Financially Troubled Corporations, in FORMULATING REORGANIZATIO PLANS: STRATEGIES FOR SUCCESS 137, 146 (PLI Com. Law & Prac. Course Handbook Series No. 611, 1991) (quoting AusTi W. Scorr, THE LAw OF TRUSTS $174 (3d ed. 1967)). 49. Brown et al., supra note 48, at 146. Se Gross et al., supra note 47, at 16. See generally New York Credit Men's Adjustment Bureau, 110 N.E.2d at 398 (holding that upon insolvency, directors are to be considered trustees for the benefit of the corporation's creditors). 50. In re Mortgage Am. Corp., 714 F.2d 1266, 1271 (5th Cir. 1983) (quoting Waggoner v. Herring-Showers Lumber Co., 40 S.W.2d 1, 5 (Tex. 1931)). 51. Davis, 147 F.2d at 633 (quoting Arnold, 84 S.E. at 899). Cf. Pepper v. Litton, 308 U.S. 295 (1939) (holding that directors may not prefer their salary claims over the claims of outside creditors). 52. Federal Deposit Ins. Co. v. Sea Pines Co., 692 A.2d 973, 977 (4th Cir. 1982) (quoting Davis, 147 F.2d at 633).

10 DELAWARE JOURNAL OF CORPORATE LAW [Vol. 19 guidance about the extent of this duty or when it arises. 5 3 In order to fully understand the impact of Geyer, and its bearing on Delaware law, it is necessary to look at the historical basis of the insolvency exception and the modern trend toward the recognition of a duty or obligation to protect the rights of constituencies other than stockholders. 1. Recognition of the Insolvency Exception In its earliest form, the insolvency exception held that the assets of an insolvent corporation were to be held in "trust" for the benefit of the corporation's creditors. The "trust fund doctrine" was first asserted by Justice Story in Wood v. Dummer. 5 4 In Wood, an action was brought by the holders of a corporation's notes who alleged fraud on the part of the corporation's directors regarding certain distributions made to stockholders. 5 Relying upon principles of trust, Justice Story promulgated a rule of priority giving preference to debt holders once a corporation became insolvent. 5 " In reaching his conclusion, Justice Story noted that "stockholders have no right to anything but the residuum of the capital stock, after payment of all the debts of the bank. The funds in their hands, therefore, have an equity attached to them, in favour of the creditors, which it is against conscience to resist." ' 57 Thus, the court concluded that the assets were to be held in trust for the corporation's creditors. As the trust fund doctrine developed, it was generally applied in cases of director's self-dealings after bankruptcy had been declared or when the corporation was hopelessly insolvent. 58 The Supreme 53. See Pepper, 308 U.S. at (discussing the rigorous standard of review applied to directors' business decisions upon insolvency). 54. Wood v. Dummer, 30 F. Cas. 435 (C.C.D. Me. 1824) (No. 17,944); Varallo & Finkelstein, supra note 18, at 245. See Reif v. Equitable Life Assurance Soc'y of U.S., 197 N.E. 278, 280 (N.Y. 1935). 55. Varallo & Finkelstein, supra note 18, at 245. In Wood, the opinion is unclear about whether the corporation was insolvent prior to the distribution or whether the distribution caused the insolvency. In either case, the corporation was not in a financially healthy condition when the distribution was made. 56. Wood, 30 F. Cas. at Id. at See Wieboldt Stores, Inc. v. Schottenstein, 94 B.R. 488 (Bankr. N.D. Ill. 1988) (involving a creditor's action against corporation's controlling shareholders, officers and directors alleging that a leveraged buyout transaction was fraudulent); In re STN Enterprises, Inc., 73 B.R. 470 (Bankr. D. Vt. 1987) (involving a suit brought by a creditor's committee petitioning the court for leave to sue the estate

FIDUCIARY DUTIES IN CASE OF A TROUBLED START UP COMPANY

FIDUCIARY DUTIES IN CASE OF A TROUBLED START UP COMPANY FIDUCIARY DUTIES IN CASE OF A TROUBLED START UP COMPANY PRESENTATION TO CORONADO VENTURES FORUM March 18, 2004 1. Fiduciary Duty to Creditors. Craig M. Tighe Gray Cary Ware & Freidenrich LLP a. General

More information

INSURANCE POLICIES. by Bankruptcy Code Section 541. That section provides, in pertinent part:

INSURANCE POLICIES. by Bankruptcy Code Section 541. That section provides, in pertinent part: BANKING LAW JOURNAL by Bankruptcy Code Section 541. That section provides, in pertinent part: The commencement of a case under section 301, 302, or 303 of this title creates an estate. Such estate is comprised

More information

FIDUCIARY DUTIES OF THE BOARD UPON THE FINANCIAL DISTRESS OF A COMPANY The dilemma whether to file for bankruptcy

FIDUCIARY DUTIES OF THE BOARD UPON THE FINANCIAL DISTRESS OF A COMPANY The dilemma whether to file for bankruptcy FIDUCIARY DUTIES OF THE BOARD UPON THE FINANCIAL DISTRESS OF A COMPANY The dilemma whether to file for bankruptcy HON. MARTIN GLENN U.S. BANKRUPTCY JUDGE SOUTHERN DISTRICT OF NEW YORK 1 OPERATING WHILE

More information

May 22, 2002 THE ZONE OF INSOLVENCY: WHEN HAS A COMPANY ENTERED INTO IT, AND ONCE THERE, WHAT ARE THE BOARD S DUTIES?

May 22, 2002 THE ZONE OF INSOLVENCY: WHEN HAS A COMPANY ENTERED INTO IT, AND ONCE THERE, WHAT ARE THE BOARD S DUTIES? May 22, 2002 THE ZONE OF INSOLVENCY: WHEN HAS A COMPANY ENTERED INTO IT, AND ONCE THERE, WHAT ARE THE BOARD S DUTIES? KIRKLAND & ELLIS JAMES H.M. SPRAYREGEN, P.C. THEODORE L. FREEDMAN SHIRLEY S. CHO May

More information

Charter Exculpatory Provisions Preclude Bankruptcy Trustee from Suing on Breach of Duty of Care. September/October 2005. Ross S.

Charter Exculpatory Provisions Preclude Bankruptcy Trustee from Suing on Breach of Duty of Care. September/October 2005. Ross S. Charter Exculpatory Provisions Preclude Bankruptcy Trustee from Suing on Breach of Duty of Care September/October 2005 Ross S. Barr Among the powers conferred upon a bankruptcy trustee or chapter 11 debtor-in-possession

More information

JOSEPH M. MCLAUGHLINF*F

JOSEPH M. MCLAUGHLINF*F DIRECTORS AND OFFICERS LIABILITY CONFLICTING REGULATION OF INTERNAL AFFAIRS JOSEPH M. MCLAUGHLINF*F SIMPSON THACHER & BARTLETT LLP AUGUST 10, 2006 Many directors and officers would confidently state that

More information

IN THE UNITED STATES COURT OF APPEALS FOR THE FIFTH CIRCUIT

IN THE UNITED STATES COURT OF APPEALS FOR THE FIFTH CIRCUIT IN THE UNITED STATES COURT OF APPEALS United States Court of Appeals FOR THE FIFTH CIRCUIT Fifth Circuit FILED March 3, 2016 No. 15-11188 In re: AMERICAN LEBANESE SYRIAN ASSOCIATED CHARITIES, INCORPORATED;

More information

Advanced Bankruptcy for Bankers. Candace C. Carlyon, Esq. www.sheacarlyon.com

Advanced Bankruptcy for Bankers. Candace C. Carlyon, Esq. www.sheacarlyon.com Advanced Bankruptcy for Bankers Candace C. Carlyon, Esq. www.sheacarlyon.com 1 Pre Bankruptcy Review loan files, confirm collateral security, obtain as much information as possible Consider timing of remedies

More information

BUYING AND SELLING ASSETS FROM AN ENTITY IN CHAPTER 11

BUYING AND SELLING ASSETS FROM AN ENTITY IN CHAPTER 11 BUYING AND SELLING ASSETS FROM AN ENTITY IN CHAPTER 11 Francis P. Dicello, Esq. I. Sources of Financial Information for Troubled Companies A. Nonbankruptcy Sources 1. Lien Judgment Search 2. Reports to

More information

Bankruptcy Filing and Federal Employment Taxes. Bad investments, too great an assumption of risk, circumstances beyond their control.

Bankruptcy Filing and Federal Employment Taxes. Bad investments, too great an assumption of risk, circumstances beyond their control. I. What causes someone to file for bankruptcy? Bad investments, too great an assumption of risk, circumstances beyond their control. II. The options A. Individuals Chapter 7, Chapter 11, i Chapter 13 B.

More information

ERISA Causes of Action *

ERISA Causes of Action * 1 ERISA Causes of Action * ERISA authorizes a variety of causes of action to remedy violations of the statute, to enforce the terms of a benefit plan, or to provide other relief to a plan, its participants

More information

Shareholder Dispute Litigation Insights. Gary V. Mauney, Esq. Introduction

Shareholder Dispute Litigation Insights. Gary V. Mauney, Esq. Introduction Shareholder Dispute Litigation Insights Directors Duties to Common versus Preferred Shareholders The Aftermath of the Delaware Chancery Court s Decision in the In re Trados Inc. Shareholder Litigation

More information

IN THE UNITED STATES BANKRUPTCY COURT FOR THE NORTHERN DISTRICT OF ILLINOIS EASTERN DIVISION

IN THE UNITED STATES BANKRUPTCY COURT FOR THE NORTHERN DISTRICT OF ILLINOIS EASTERN DIVISION IN THE UNITED STATES BANKRUPTCY COURT FOR THE NORTHERN DISTRICT OF ILLINOIS EASTERN DIVISION In re: ) Chapter 7 Liquidation ) marchfirst, INC., et al., ) CASE NO. 01 B 24742 ) (Substantively Consolidated)

More information

Jurisdiction and Venue in Chapter 15 Selected Issues

Jurisdiction and Venue in Chapter 15 Selected Issues Jurisdiction and Venue in Chapter 15 Selected Issues Prepared by: Jeanne P. Darcey Sullivan & Worcester LLP Boston, MA jdarcey@sandw.com October 8, 2013 Please visit us on our website at www.sandw.com

More information

Directed Trusts: Delaware v. Florida Fiduciary Forum September 16, 2014

Directed Trusts: Delaware v. Florida Fiduciary Forum September 16, 2014 Directed Trusts: Delaware v. Florida Fiduciary Forum September 16, 2014 Thornton Hoelle Managing Director t.hoelle@ftci.com 305.349.2371 Elisa Shevlin Rizzo Managing Director Trust Counsel e.rizzo@ftci.com

More information

MEMORANDUM. Tim Cameron, Kim Chamberlain, Chris Killian Securities Industry and Financial Markets Association

MEMORANDUM. Tim Cameron, Kim Chamberlain, Chris Killian Securities Industry and Financial Markets Association MEMORANDUM TO: FROM: RE: Tim Cameron, Kim Chamberlain, Chris Killian Securities Industry and Financial Markets Association David R. Carpenter, Collin P. Wedel, Lauren A. McCray Liability of Municipal Members

More information

CHAPTER 9 Municipality Bankruptcy

CHAPTER 9 Municipality Bankruptcy U.S. COURTS HTTP://WWW.USCOURTS.GOV/FEDERALCOURTS/BANKRUPTCY/BANKRUPTCY BASICS/CHAPTER9.ASPX CHAPTER 9 Municipality Bankruptcy The chapter of the Bankruptcy Code providing for reorganization of municipalities

More information

DIRECTORS DUTIES: FINANCIAL CRISIS AND THE OBLIGATION TO CONSIDER THE INTERESTS OF CREDITORS INTRODUCTION

DIRECTORS DUTIES: FINANCIAL CRISIS AND THE OBLIGATION TO CONSIDER THE INTERESTS OF CREDITORS INTRODUCTION INTRODUCTION We are all familiar with the principle that directors have a general duty to act in the best interests of the company. In most situations where this is an issue, the company is usually treated

More information

ASSESSING THE RISK OF A MUNICIPALITY S REORGANIZING UNDER CHAPTER 9 OF THE BANKRUPTCY CODE

ASSESSING THE RISK OF A MUNICIPALITY S REORGANIZING UNDER CHAPTER 9 OF THE BANKRUPTCY CODE ASSESSING THE RISK OF A MUNICIPALITY S REORGANIZING UNDER CHAPTER 9 OF THE BANKRUPTCY CODE By John E. Mitchell, Baker & McKenzie, LLP (Dallas) (john.mitchell@bakermckenzie.com) and Angela B. Degeyter,

More information

AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT OF ICE TRADE VAULT, LLC A DELAWARE LIMITED LIABILITY COMPANY

AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT OF ICE TRADE VAULT, LLC A DELAWARE LIMITED LIABILITY COMPANY AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT OF ICE TRADE VAULT, LLC A DELAWARE LIMITED LIABILITY COMPANY Intercontinenta!Exchange, Inc., a Delaware Corporation ("ICE" or the "Member") hereby

More information

UNITED STATES BANKRUPTCY COURT FOR THE NORTHERN DISTRICT OF OHIO

UNITED STATES BANKRUPTCY COURT FOR THE NORTHERN DISTRICT OF OHIO UNITED STATES BANKRUPTCY COURT FOR THE NORTHERN DISTRICT OF OHIO In Re: JUDGE RICHARD L. SPEER Metropolitan Environmental, Inc. Debtor(s (Related Case: 01-35756 Bruce C. French, Trustee Plaintiff(s v.

More information

DISCHARGE. The Discharge in Bankruptcy. From an individual. debtor s standpoint, one. of the primary goals of. filing a bankruptcy case

DISCHARGE. The Discharge in Bankruptcy. From an individual. debtor s standpoint, one. of the primary goals of. filing a bankruptcy case The Discharge in Bankruptcy DISCHARGE The bankruptcy discharge varies depending on the type of case a debtor files: chapter 7, 11, 12, or 13. This Public Information Series pamphlet attempts to answer

More information

Payment System Override Deems Transaction Not Ordinary

Payment System Override Deems Transaction Not Ordinary Payment System Override Deems Transaction Not Ordinary Ames Merchandising Corp. v. Cellmark Paper Inc. (In re Ames Dept. Stores, Inc.), 2011 Bankr. LEXIS 969 (Bankr. S.D.N.Y. Mar. 28, 2011) In Ames Merchandising

More information

Secured Credit Committee ABI Committee News

Secured Credit Committee ABI Committee News Secured Credit Committee ABI Committee News In This Issue: Volume 8, Number 2/ March 2011 Creditors Derivative Standing on Shaky Ground with LLCs Fifth Circuit Reconciles Lenders Adequate Protection Requirement

More information

Title 13-B: MAINE NONPROFIT CORPORATION ACT

Title 13-B: MAINE NONPROFIT CORPORATION ACT Title 13-B: MAINE NONPROFIT CORPORATION ACT Chapter 7: DIRECTORS AND OFFICERS Table of Contents Section 701. BOARD OF DIRECTORS... 3 Section 702. NUMBER AND ELECTION OF DIRECTORS... 3 Section 703. VACANCIES...

More information

THE BASICS OF CHAPTER 11 BANKRUPTCY

THE BASICS OF CHAPTER 11 BANKRUPTCY THE BASICS OF CHAPTER 11 BANKRUPTCY Bankruptcy is a legal proceeding in which a debtor declares an inability to pay consumer or business debts as they become due. Debtors may seek to be excused from continuing

More information

The More Things Change? Delaware Supreme Court Applies Business Judgment Standard of Review in Going-Private Transaction

The More Things Change? Delaware Supreme Court Applies Business Judgment Standard of Review in Going-Private Transaction The More Things Change? Delaware Supreme Court Applies Business Judgment Standard of Review in Going-Private Transaction By Jaculin Aaron 1 Kahn v. M&F Worldwide Corp. On March 14, 2014, the Delaware Supreme

More information

BANKRUPTCY ISSUES RELATED TO MORTGAGE FORECLOSURES

BANKRUPTCY ISSUES RELATED TO MORTGAGE FORECLOSURES TABAS FREEDMAN Attorneys One Flagler Building 14 Northeast First Avenue, Penthouse Miami, Florida 33132 Telephone 305.375.8171 Facsimile 305.381.7708 www.tabasfreedman.com Gary M. Freedman gfreedman@tabasfreedman.com

More information

Bankruptcy 101 A Guide to Personal Bankruptcy. Brought to you by Jon Martin, Esq. Http://www.TheSinCityLawyer.com

Bankruptcy 101 A Guide to Personal Bankruptcy. Brought to you by Jon Martin, Esq. Http://www.TheSinCityLawyer.com Bankruptcy 101 A Guide to Personal Bankruptcy Brought to you by Jon Martin, Esq. Http://www.TheSinCityLawyer.com Bankruptcy laws help people who can no longer pay their creditors get a fresh start by liquidating

More information

AVOIDING FRAUDULENT TRANSFERS

AVOIDING FRAUDULENT TRANSFERS AVOIDING FRAUDULENT TRANSFERS 2002 Vedder, Price, Kaufman & Kammholz. All rights reserved. I. INTRODUCTION The delightful quality of fraud lies in its infinite variety. 1 The concept of a fraudulent transfer

More information

Chapter 7 Liquidation Under the Bankruptcy Code

Chapter 7 Liquidation Under the Bankruptcy Code From Administrative Office of the United States Courts, Bankruptcy Basics, Public Information Series. Chapter 7 Liquidation Under the Bankruptcy Code The chapter of the Bankruptcy Code providing for "liquidation,"

More information

In re Washington Mutual, Inc.: Delaware Bankruptcy Court Limits Debtors Release of Third Parties. March/April 2011. Mark A. Cody

In re Washington Mutual, Inc.: Delaware Bankruptcy Court Limits Debtors Release of Third Parties. March/April 2011. Mark A. Cody In re Washington Mutual, Inc.: Delaware Bankruptcy Court Limits Debtors Release of Third Parties March/April 2011 Mark A. Cody In a recent decision, Judge Mary F. Walrath of the United States Bankruptcy

More information

The Evolution of the Settlement Payment Defense? Tianja Samuel, J.D. Candidate 2013

The Evolution of the Settlement Payment Defense? Tianja Samuel, J.D. Candidate 2013 2012 Volume IV No. 22 The Evolution of the Settlement Payment Defense? Tianja Samuel, J.D. Candidate 2013 Cite as: The Evolution of the Settlement Payment Defense?, 4 ST. JOHN S BANKR. RESEARCH LIBR. NO.

More information

IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF NEBRASKA

IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF NEBRASKA IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF NEBRASKA IN THE MATTER OF: CASE NO. BK09-82741-TLS MICHAEL DAVID ELLIS and CH. 7 PEGGY LINN ELLIS, Debtors. TINY S BOATS & MOTORS, INC., ADV. NO.

More information

DISSOLVING A CORPORATION IN NEW JERSEY. By Gianfranco A. Pietrafesa * There are countless reasons why a corporation may choose to dissolve, from the

DISSOLVING A CORPORATION IN NEW JERSEY. By Gianfranco A. Pietrafesa * There are countless reasons why a corporation may choose to dissolve, from the DISSOLVING A CORPORATION IN NEW JERSEY By Gianfranco A. Pietrafesa * There are countless reasons why a corporation may choose to dissolve, from the unfortunate instance where the corporation s business

More information

The Requirements for Recognition under Chapter 15

The Requirements for Recognition under Chapter 15 One Debtor, Multiple Countries: A Discussion of Recent Developments in Cross-Border Insolvency Proceedings & Chapter 15 of the Bankruptcy Code By: Lawrence C. Gottlieb Michael Klein Robert Winning Abstract

More information

AMENDED AND RESTATED CERTIFICATE OF INCORPORATION OF SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

AMENDED AND RESTATED CERTIFICATE OF INCORPORATION OF SCIENCE APPLICATIONS INTERNATIONAL CORPORATION AMENDED AND RESTATED CERTIFICATE OF INCORPORATION OF SCIENCE APPLICATIONS INTERNATIONAL CORPORATION FIRST: NAME. The name of the Corporation is Science Applications International Corporation. SECOND: ADDRESS.

More information

Case 2:10-cv-02263-JAR Document 98 Filed 05/04/11 Page 1 of 8 IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF KANSAS

Case 2:10-cv-02263-JAR Document 98 Filed 05/04/11 Page 1 of 8 IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF KANSAS Case 2:10-cv-02263-JAR Document 98 Filed 05/04/11 Page 1 of 8 IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF KANSAS SANDRA H. DEYA and EDWIN DEYA, individually and as next friends and natural

More information

TITLE I REDUCTION OF ABUSIVE LITIGATION

TITLE I REDUCTION OF ABUSIVE LITIGATION 109 STAT. 737 Public Law 104 67 104th Congress An Act To reform Federal securities litigation, and for other purposes. Be it enacted by the Senate and House of Representatives of the United States of America

More information

THIRD AMENDED AND RESTATED CERTIFICATE OF INCORPORATION OF DYNEGY INC. Pursuant to Section 303 of the Delaware General Corporation Law

THIRD AMENDED AND RESTATED CERTIFICATE OF INCORPORATION OF DYNEGY INC. Pursuant to Section 303 of the Delaware General Corporation Law THIRD AMENDED AND RESTATED CERTIFICATE OF INCORPORATION OF DYNEGY INC. Pursuant to Section 303 of the Delaware General Corporation Law Dynegy Inc., a corporation duly organized and validly existing under

More information

IN THE UNITED STATES BANKRUPTCY COURT FOR THE NORTHERN DISTRICT OF ALABAMA WESTERN DIVISION. v. AP No. 08-70044 MEMORANDUM OF DECISION

IN THE UNITED STATES BANKRUPTCY COURT FOR THE NORTHERN DISTRICT OF ALABAMA WESTERN DIVISION. v. AP No. 08-70044 MEMORANDUM OF DECISION Document Page 1 of 16 IN THE UNITED STATES BANKRUPTCY COURT FOR THE NORTHERN DISTRICT OF ALABAMA WESTERN DIVISION IN RE: DENISE L. EVANS, Case No. 08-71204-CMS-07 Debtor. PREMIER SELF STORAGE, LLC., Plaintiff,

More information

Determining Tax Liability Under Section 505(a) of the Bankruptcy Code

Determining Tax Liability Under Section 505(a) of the Bankruptcy Code Determining Tax Liability Under Section 505(a) of the Bankruptcy Code Section 505(a) of the Bankruptcy Code (the Code ) provides the means by which a debtor or trustee in bankruptcy may seek a determination

More information

UPDATE ON CALIFORNIA LIMITED LIABILITY COMPANIES TO WHAT EXTENT DO LLCS PROVIDE LIABILITY PROTECTION?

UPDATE ON CALIFORNIA LIMITED LIABILITY COMPANIES TO WHAT EXTENT DO LLCS PROVIDE LIABILITY PROTECTION? UPDATE ON CALIFORNIA LIMITED LIABILITY COMPANIES - TO WHAT EXTENT DO LLCS PROVIDE LIABILITY PROTECTION? William C. Staley Attorney www.staleylaw.com 818 936-3490 SAN FERNANDO VALLEY BAR ASSOCIATION Woodland

More information

Case: 2:04-cv-01110-JLG-NMK Doc #: 33 Filed: 06/13/05 Page: 1 of 7 PAGEID #:

Case: 2:04-cv-01110-JLG-NMK Doc #: 33 Filed: 06/13/05 Page: 1 of 7 PAGEID #: <pageid> Case: 2:04-cv-01110-JLG-NMK Doc #: 33 Filed: 06/13/05 Page: 1 of 7 PAGEID #: IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF OHIO EASTERN DIVISION ALVIN E. WISEMAN, Plaintiff,

More information

Insurance in Bankruptcy

Insurance in Bankruptcy Fear of Losing D&O Insurance in Bankruptcy Is Overblown B y P a t r i c i a J. V i l l a r e a l a n d D o u g l a s R. C o l e he typical D&O insurance policy covers not only a company s directors and

More information

US CORNER. In re French: Extraterritorial Application of the US Bankruptcy Code s Fraudulent Conveyance Provisions

US CORNER. In re French: Extraterritorial Application of the US Bankruptcy Code s Fraudulent Conveyance Provisions US CORNER In re French: Extraterritorial Application of the US Bankruptcy Code s Fraudulent Conveyance Provisions Lynette C. Kelly, Counsel, Bankruptcy & Reorganization Group, Shearman & Sterling LLP,

More information

SOUTH AFRICAN COMPANIES ACT: CHAPTER 5-112-116, 124 Fundamental Transactions, Takeovers And Offers

SOUTH AFRICAN COMPANIES ACT: CHAPTER 5-112-116, 124 Fundamental Transactions, Takeovers And Offers This document contains selected sections of the South African Companies Act and the Delaware General Corporation Law applicable to mergers and acquisitions. It is intended to be used in connection with

More information

U.S. Bankruptcy Basics

U.S. Bankruptcy Basics SHEPPARD MULLIN SHEPPARD MULLIN RICHTER & HAMPTON LLP A T T O R N E Y S A T L A W U.S. Bankruptcy Basics Sheppard, Mullin, Richter & Hampton LLP Edward H. Tillinghast, III etillinghast@sheppardmullin.com

More information

Are State Preference Laws Preempted by the United States Bankruptcy Code? Not Necessarily! By: Bruce S. Nathan & Scott Cargill

Are State Preference Laws Preempted by the United States Bankruptcy Code? Not Necessarily! By: Bruce S. Nathan & Scott Cargill Reprinted from: "The Credit and Financial Management Review, A Journal for Credit and Financial Administrators"; Volume 13, Number 4 Fourth Quarter 2007. All Rights Reserved. Are State Preference Laws

More information

The Law in Texas Regarding Piercing the Corporate Veil. An Overview of the Corporate Veil

The Law in Texas Regarding Piercing the Corporate Veil. An Overview of the Corporate Veil The Law in Texas Regarding Piercing the Corporate Veil Section 1. An Overview of the Corporate Veil The Texas corporation, like the corporation in every other state, is a creature of statute and is legally

More information

RESTATED CERTIFICATE OF INCORPORATION CTC MEDIA, INC. (Pursuant to Section 242 and 245 of the General Corporation Law of the State of Delaware)

RESTATED CERTIFICATE OF INCORPORATION CTC MEDIA, INC. (Pursuant to Section 242 and 245 of the General Corporation Law of the State of Delaware) RESTATED CERTIFICATE OF INCORPORATION OF CTC MEDIA, INC (Pursuant to Section 242 and 245 of the General Corporation Law of the State of Delaware) CTC Media, Inc., a corporation organized and existing under

More information

ASBESTOS CLAIMS AND LITIGATION

ASBESTOS CLAIMS AND LITIGATION ASBESTOS CLAIMS AND LITIGATION PFIZER, INC. V. LAW OFFICES OF PETER G. ANGELOS CASE ANALYSIS: PARENT COMPANYASBESTOS LIABILITY July, 2013 ALRA Group Members http://alragroup.com / I. Introduction (F. Grey

More information

CASE 0:05-cv-00809-DWF Document 16 Filed 09/06/05 Page 1 of 7 UNITED STATES DISTRICT COURT DISTRICT OF MINNESOTA

CASE 0:05-cv-00809-DWF Document 16 Filed 09/06/05 Page 1 of 7 UNITED STATES DISTRICT COURT DISTRICT OF MINNESOTA CASE 0:05-cv-00809-DWF Document 16 Filed 09/06/05 Page 1 of 7 UNITED STATES DISTRICT COURT DISTRICT OF MINNESOTA Timothy D. Moratzka, Civil No. 05-809 (DWF) Appellant, v. Senior Cottages of America, LLC,

More information

DELAWARE SUPREME COURT RULES DIRECTORS OF A CORPORATION IN THE ZONE OF INSOLVENCY OWE NO FIDUCIARY DUTIES TO CREDITORS

DELAWARE SUPREME COURT RULES DIRECTORS OF A CORPORATION IN THE ZONE OF INSOLVENCY OWE NO FIDUCIARY DUTIES TO CREDITORS DELAWARE SUPREME COURT RULES DIRECTORS OF A CORPORATION IN THE ZONE OF INSOLVENCY OWE NO FIDUCIARY DUTIES TO CREDITORS COURT ALSO RULES CREDITORS HAVE NO DIRECT ACTION AGAINST DIRECTORS OF AN INSOLVENT

More information

Reports or Connecticut Appellate Reports, the

Reports or Connecticut Appellate Reports, the ****************************************************** The officially released date that appears near the beginning of each opinion is the date the opinion will be published in the Connecticut Law Journal

More information

Individual Chapter 11 Cases: Case Closing Reconsidered

Individual Chapter 11 Cases: Case Closing Reconsidered Individual Chapter 11 Cases: Case Closing Reconsidered Written by: Walter W. Theus, Jr. Executive Office for U.S. Trustees; Washington, D.C. walter.w.theus@usdoj.gov Individuals have been filing chapter

More information

First Impressions: Shutting Down a Chapter 11 Case Due to Patent Unconfirmability of Plan. September/October 2012. Scott J.

First Impressions: Shutting Down a Chapter 11 Case Due to Patent Unconfirmability of Plan. September/October 2012. Scott J. First Impressions: Shutting Down a Chapter 11 Case Due to Patent Unconfirmability of Plan September/October 2012 Scott J. Friedman Before soliciting votes on its bankruptcy plan, a chapter 11 debtor that

More information

DEBT. Law guide - Debt, bankruptcy & liquidation

DEBT. Law guide - Debt, bankruptcy & liquidation DEBT Law guide - Debt, bankruptcy & liquidation Contents Bankruptcy... 3 Arrangements with debtor... 6 Alternatives to bankruptcy... 8 Liquidation... 10 Distribution of assets... 11 Alternatives to liquidation...

More information

The New Bankruptcy Law Amendments and their Impact on Business Bankruptcy Cases

The New Bankruptcy Law Amendments and their Impact on Business Bankruptcy Cases May 2005 The New Bankruptcy Law Amendments and their Impact on Business Bankruptcy Cases On April 14, 2005, President Bush signed into law the Bankruptcy Abuse Prevention and Consumer Protection Act of

More information

UNITED STATES BANKRUPTCY COURT DISTRICT OF MASSACHUSETTS WESTERN DIVISION

UNITED STATES BANKRUPTCY COURT DISTRICT OF MASSACHUSETTS WESTERN DIVISION Document Page 1 of 9 UNITED STATES BANKRUPTCY COURT DISTRICT OF MASSACHUSETTS WESTERN DIVISION ) In re: ) ) Chapter 7 YARMYN FELIBERTY, ) Case No. 12-31819 ) Debtor ) ) MEMORANDUM OF DECISION Before the

More information

VERIZON COMMUNICATIONS INC. RESTATED CERTIFICATE OF INCORPORATION

VERIZON COMMUNICATIONS INC. RESTATED CERTIFICATE OF INCORPORATION VERIZON COMMUNICATIONS INC. RESTATED CERTIFICATE OF INCORPORATION May 8, 2014 RESTATED CERTIFICATE OF INCORPORATION OF VERIZON COMMUNICATIONS INC. Verizon Communications Inc., a corporation organized and

More information

ACQUISITIONS OF TROUBLED BUSINESSES: A COMPARISON OF THE BANKRUPTCY AND NON-BANKRUPTCY ALTERNATIVES. James P. S. Leshaw 1

ACQUISITIONS OF TROUBLED BUSINESSES: A COMPARISON OF THE BANKRUPTCY AND NON-BANKRUPTCY ALTERNATIVES. James P. S. Leshaw 1 ACQUISITIONS OF TROUBLED BUSINESSES: A COMPARISON OF THE BANKRUPTCY AND NON-BANKRUPTCY ALTERNATIVES By James P. S. Leshaw 1 August 17, 1995 1 James P. S. Leshaw is a member of the Bankruptcy and Reorganization

More information

Camouflaged Collateral: "All Asset" Liens May Not Include Proceeds of D&O Insurance Policies in Bankruptcy

Camouflaged Collateral: All Asset Liens May Not Include Proceeds of D&O Insurance Policies in Bankruptcy Camouflaged Collateral: "All Asset" Liens May Not Include Proceeds of D&O Insurance Policies in Bankruptcy Article contributed by Lawrence V. Gelber and James T. Bentley of Schulte Roth & Zabel LLP As

More information

SIGNED this 31st day of August, 2010.

SIGNED this 31st day of August, 2010. SIGNED this 31st day of August, 2010. CRAIG A. GARGOTTA UNITED STATES BANKRUPTCY JUDGE IN THE UNITED STATES BANKRUPTCY COURT FOR THE WESTERN DISTRICT OF TEXAS AUSTIN DIVISION IN RE: ' CASE NO. 09-12799-CAG

More information

Despite A Very High Income, Chapter 7 Debtor s May Succeed. Pamela Frederick, J.D. Candidate 2016

Despite A Very High Income, Chapter 7 Debtor s May Succeed. Pamela Frederick, J.D. Candidate 2016 Despite A Very High Income, Chapter 7 Debtor s May Succeed 2015 Volume VII No. 9 Despite A Very High Income, Chapter 7 Debtor s May Succeed Pamela Frederick, J.D. Candidate 2016 Cite as: Despite A Very

More information

Delaware Supreme Court s Rulings Regarding Fiduciary Duties in Alternative Entities

Delaware Supreme Court s Rulings Regarding Fiduciary Duties in Alternative Entities 30 REVIEW OF BANKING & FINANCIAL LAW Vol. 33 IV. Delaware Supreme Court s Rulings Regarding Fiduciary Duties in Alternative Entities A. Introduction The Delaware Supreme Court recently decided two cases

More information

FAMILY LAW NEWS & REVIEW

FAMILY LAW NEWS & REVIEW FAMILY LAW NEWS & REVIEW LOS ANGELES COUNTY BAR ASSOCIATION FIRST QUARTER 2010 assist in the making of the child custody decision, and further delay in proceedings would have resulted if a new child custody

More information

United States Court of Appeals

United States Court of Appeals In the United States Court of Appeals For the Seventh Circuit No. 14-2423 IN RE: SWEPORTS, LTD., Debtor-Appellee. APPEAL OF: MUCH SHELIST, P.C., et al., Creditors-Appellants. Appeal from the United States

More information

Liability of Volunteer Directors of Nonprofit Corporations (10/02)

Liability of Volunteer Directors of Nonprofit Corporations (10/02) Liability of Volunteer Directors of Nonprofit Corporations (10/02) This memorandum addresses the California and federal law protections that exist to shield volunteer directors of nonprofit corporations

More information

SAMPLE BANKRUPTCY DISCHARGE FORM Page 1 of 2

SAMPLE BANKRUPTCY DISCHARGE FORM Page 1 of 2 One Division Avenue Room 200 Grand Rapids, MI 49503-3132 Phone : (616) 456-2693 http://www.miwb.uscourts.gov/ WHAT IS CHAPTER 7 BANKRUPTCY? Chapter 7 bankruptcy, sometimes call a straight bankruptcy is

More information

IN THE COMMONWEALTH COURT OF PENNSYLVANIA

IN THE COMMONWEALTH COURT OF PENNSYLVANIA IN THE COMMONWEALTH COURT OF PENNSYLVANIA Easton Condominium Association, : Inc. : : v. : No. 2015 C.D. 2014 : Submitted: August 28, 2015 Kristina A. Nash, : Appellant : BEFORE: HONORABLE DAN PELLEGRINI,

More information

UNITED STATES BANKRUPTCY COURT FOR THE NORTHERN DISTRICT OF ILLINOIS WESTERN DIVISION. Chapter 13

UNITED STATES BANKRUPTCY COURT FOR THE NORTHERN DISTRICT OF ILLINOIS WESTERN DIVISION. Chapter 13 UNITED STATES BANKRUPTCY COURT FOR THE NORTHERN DISTRICT OF ILLINOIS WESTERN DIVISION In re: Ballard Dwight Brannan and Carol Lynn Brannan Debtors. Bankruptcy Case No. 02 B 71411 Chapter 13 MEMORANDUM

More information

Case 2:06-cv-02026-CM Document 114 Filed 03/10/09 Page 1 of 10 IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF KANSAS

Case 2:06-cv-02026-CM Document 114 Filed 03/10/09 Page 1 of 10 IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF KANSAS Case 2:06-cv-02026-CM Document 114 Filed 03/10/09 Page 1 of 10 IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF KANSAS ) METROPOLITAN LIFE INSURANCE ) COMPANY, ) ) Plaintiff, ) ) CIVIL ACTION v.

More information

Duties in Georgia and Delaware LLCs Presented by:

Duties in Georgia and Delaware LLCs Presented by: Duties in Georgia and Delaware LLCs Presented by: Charles R. Beaudrot, Jr. Morris, Manning & Martin, LLP 3343 Peachtree Road, NE Atlanta, GA 30326 cbeaudrot@mmmlaw.com Phone: 404-504-7753 DUTIES IN GEORGIA

More information

UNITED STATES BANKRUPTCY APPELLATE PANEL OF THE TENTH CIRCUIT

UNITED STATES BANKRUPTCY APPELLATE PANEL OF THE TENTH CIRCUIT BAP Appeal No. 05-36 Docket No. 29 Filed: 01/20/2006 Page: 1 of 7 UNITED STATES BANKRUPTCY APPELLATE PANEL OF THE TENTH CIRCUIT IN RE RICHARD A. FORD and TONDA L. FORD, also known as Tonda Yung, Debtors.

More information

11th Circ. Sows Doubt Over Insolvent Bank Tax Refunds

11th Circ. Sows Doubt Over Insolvent Bank Tax Refunds Portfolio Media. Inc. 860 Broadway, 6th Floor New York, NY 10003 www.law360.com Phone: +1 646 783 7100 Fax: +1 646 783 7161 customerservice@law360.com 11th Circ. Sows Doubt Over Insolvent Bank Tax Refunds

More information

Insolvency and. Business Recovery. Procedures. A Brief Guide. Compiled by Compass Financial Recovery and Insolvency Ltd

Insolvency and. Business Recovery. Procedures. A Brief Guide. Compiled by Compass Financial Recovery and Insolvency Ltd Insolvency and Business Recovery Procedures A Brief Guide Compiled by Compass Financial Recovery and Insolvency Ltd I What is Insolvency? Insolvency is legally defined as: A company is insolvent (unable

More information

WRONGFUL CORPORATE CASH DISTRIBUTIONS UNDER DELAWARE AND GEORGIA LAW. Donald A. Loft Morris, Manning & Martin, L.L.P.

WRONGFUL CORPORATE CASH DISTRIBUTIONS UNDER DELAWARE AND GEORGIA LAW. Donald A. Loft Morris, Manning & Martin, L.L.P. WRONGFUL CORPORATE CASH DISTRIBUTIONS UNDER DELAWARE AND GEORGIA LAW Donald A. Loft Morris, Manning & Martin, L.L.P. Atlanta, Georgia TABLE OF CONTENTS I. GENERAL DELAWARE PRINCIPLES APPLICABLE TO STOCK

More information

Why Drafters Should Proceed With Caution When Navigating the Muddy Waters of LLC Fiduciary Duty Law

Why Drafters Should Proceed With Caution When Navigating the Muddy Waters of LLC Fiduciary Duty Law SEPTEMBER 2012 EXECUTIVE SUMMARY BUSINESS LAW AND GOVERNANCE PRACTICE GROUP Why Drafters Should Proceed With Caution When Navigating the Muddy Waters of LLC Fiduciary Duty Law Tara Ellis, Esquire Balch

More information

IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MARYLAND : : : : : : : MEMORANDUM

IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MARYLAND : : : : : : : MEMORANDUM IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MARYLAND CATHERINE HOWELL, et al. Plaintiffs v. STATE FARM INSURANCE COMPANIES, et al. Defendants Civil No. L-04-1494 MEMORANDUM This is a proposed

More information

Law Related to Fraud. Bankruptcy (Insolvency) Fraud. 2015 Association of Certified Fraud Examiners, Inc.

Law Related to Fraud. Bankruptcy (Insolvency) Fraud. 2015 Association of Certified Fraud Examiners, Inc. Law Related to Fraud Bankruptcy (Insolvency) Fraud Bankruptcy Court Filed in a local district of the U.S. Bankruptcy Court Bankruptcy judges hear all cases involving: Debtors and creditors rights Approval

More information

BACKGROUND. On March 22, 1999, Cheryl A. Herald (the Debtor ) filed a. petition initiating a Chapter 7 case. On the Schedules and

BACKGROUND. On March 22, 1999, Cheryl A. Herald (the Debtor ) filed a. petition initiating a Chapter 7 case. On the Schedules and UNITED STATES BANKRUPTCY COURT WESTERN DISTRICT OF NEW YORK In re: CHERYL A. HERALD f/k/a CHERYL A. ROE, Debtor. FOR PUBLICATION CASE NO. 99-20788 DECISION & ORDER David D. MacKnight, Esq. Kenneth W. Gordon,

More information

Commonwealth of Kentucky Court of Appeals

Commonwealth of Kentucky Court of Appeals RENDERED: MARCH 13, 2015; 10:00 A.M. NOT TO BE PUBLISHED Commonwealth of Kentucky Court of Appeals NO. 2014-CA-000056-MR RAMONA SPINKS, EXECUTRIX OF THE WILL OF BENJAMIN SPINKS, DECEASED APPELLANT APPEAL

More information

INTERNAL REVENUE SERVICE NATIONAL OFFICE TECHNICAL ADVICE MEMORANDUM

INTERNAL REVENUE SERVICE NATIONAL OFFICE TECHNICAL ADVICE MEMORANDUM INTERNAL REVENUE SERVICE NATIONAL OFFICE TECHNICAL ADVICE MEMORANDUM Number: 201321019 Release Date: 5/24/2013 Index (UIL) No: 61.22-00 CASE-MIS No: TAM-135686-12 Date: February 12, 2013 Chief, Appeals

More information

BANKRUPTCY TERMINOLOGY

BANKRUPTCY TERMINOLOGY ADVERSARY PROCEEDING BANKRUPTCY TERMINOLOGY A lawsuit arising in or related to a bankruptcy case that is commenced by filing a complaint with the bankruptcy court. ASSUME An agreement to continue performing

More information

11-15463-shl Doc 7138 Filed 03/15/13 Entered 03/15/13 16:09:02 Main Document Pg 1 of 16

11-15463-shl Doc 7138 Filed 03/15/13 Entered 03/15/13 16:09:02 Main Document Pg 1 of 16 Pg 1 of 16 UNITED STATES BANKRUPTCY COURT Hearing Date March 27, 2013 SOUTHERN DISTRICT OF NEW YORK Hearing Time 1000 a.m. ------------------------------------------------------x In re Chapter 11 AMR CORPORATION,

More information

Reports or Connecticut Appellate Reports, the

Reports or Connecticut Appellate Reports, the ****************************************************** The officially released date that appears near the beginning of each opinion is the date the opinion will be published in the Connecticut Law Journal

More information

Thomas M. Gore McCorkle & Johnson, LLP Savannah, Georgia 912-232-6000. Table of Contents. I. Overview of Creditor s Rights...1

Thomas M. Gore McCorkle & Johnson, LLP Savannah, Georgia 912-232-6000. Table of Contents. I. Overview of Creditor s Rights...1 PROTECTING CREDITORS IN BANKRUPTCY Thomas M. Gore McCorkle & Johnson, LLP Savannah, Georgia 912-232-6000 Table of Contents I. Overview of Creditor s Rights...1 A. Overview of Chapters 7, 11, and 13...1

More information

INFORMAL OPINION 2014-06 WHEN CLIENT CONSENT IS NECESSARY IN LIMITED SCOPE REPRESENTATION OF CHAPTER 7 BANKRUPTCY DEBTOR

INFORMAL OPINION 2014-06 WHEN CLIENT CONSENT IS NECESSARY IN LIMITED SCOPE REPRESENTATION OF CHAPTER 7 BANKRUPTCY DEBTOR 30 Bank Street PO Box 350 New Britain CT 06050-0350 06051 for 30 Bank Street Professional Ethics Committee P: (860) 223-4400 F: (860) 223-4488 INFORMAL OPINION 2014-06 WHEN CLIENT CONSENT IS NECESSARY

More information

Case 14-02212-5-DMW Doc 22 Filed 01/07/15 Entered 01/07/15 16:23:58 Page 1 of 9

Case 14-02212-5-DMW Doc 22 Filed 01/07/15 Entered 01/07/15 16:23:58 Page 1 of 9 Case 14-02212-5-DMW Doc 22 Filed 01/07/15 Entered 01/07/15 16:23:58 Page 1 of 9 SO ORDERED. SIGNED this 7 day of January, 2015. David M. Warren United States Bankruptcy Judge UNITED STATES BANKRUPTCY COURT

More information

UNITED STATES COURT OF APPEALS FOR THE TENTH CIRCUIT ORDER AND JUDGMENT * Before KELLY, ANDERSON, and TYMKOVICH, Circuit Judges.

UNITED STATES COURT OF APPEALS FOR THE TENTH CIRCUIT ORDER AND JUDGMENT * Before KELLY, ANDERSON, and TYMKOVICH, Circuit Judges. FILED United States Court of Appeals UNITED STATES COURT OF APPEALS Tenth Circuit WILLIAM MOSHER; LYNN MOSHER, Plaintiffs - Appellants, FOR THE TENTH CIRCUIT November 19, 2014 Elisabeth A. Shumaker Clerk

More information

SUPREME COURT OF THE UNITED STATES

SUPREME COURT OF THE UNITED STATES (Slip Opinion) OCTOBER TERM, 2014 1 Syllabus NOTE: Where it is feasible, a syllabus (headnote) will be released, as is being done in connection with this case, at the time the opinion is issued. The syllabus

More information

Best Practices for Bridge Financing Lenders in California

Best Practices for Bridge Financing Lenders in California April 2012 Best Practices for Bridge Financing Lenders in California BY ROB R. CARLSON, NASYM KORLOO & HEWOT F. SHANKUTE Financing sources providing debt commitments (which we will refer to in this article

More information

So You Don t Know Much About the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005? A Summary of the Significant Business Provisions

So You Don t Know Much About the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005? A Summary of the Significant Business Provisions So You Don t Know Much About the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005? A Summary of the Significant Business Provisions Written by: R. Spencer Clift III Courtney H. Gilmer Eric

More information

COMPOSITE OF AMENDED RESTATED CERTIFICATE OF INCORPORATION AMERICAN ELECTRIC POWER COMPANY, INC. Under Section 807 of the Business Corporation Law

COMPOSITE OF AMENDED RESTATED CERTIFICATE OF INCORPORATION AMERICAN ELECTRIC POWER COMPANY, INC. Under Section 807 of the Business Corporation Law COMPOSITE OF AMENDED RESTATED CERTIFICATE OF INCORPORATION OF AMERICAN ELECTRIC POWER COMPANY, INC. Under Section 807 of the Business Corporation Law As filed with the Department of State of the State

More information

When Is It Appropriate To Disallow An Allowed Claim? By Geraldine E. Ponto and David N. Crapo

When Is It Appropriate To Disallow An Allowed Claim? By Geraldine E. Ponto and David N. Crapo When Is It Appropriate To Disallow An Allowed Claim? By Geraldine E. Ponto and David N. Crapo Time-honored principles concerning the allowance of claims are breached when the strictures of Section 502(d)

More information

The Investment Lawyer

The Investment Lawyer The Investment Lawyer Covering Legal and Regulatory Issues of Asset Management VOL. 22, NO. 7 JULY 2015 REGULATORY MONITOR State Law Developments Squire Patton Boggs (US) LLP By Courtney Nowell, Matthew

More information

The Fiduciary Exception to the Attorney-Client Privilege and Its Application in Litigation. by George O. Peterson

The Fiduciary Exception to the Attorney-Client Privilege and Its Application in Litigation. by George O. Peterson The Fiduciary Exception to the Attorney-Client Privilege and Its Application in Litigation by George O. Peterson I. INTRODUCTION Trusts and estates attorneys who represent fiduciaries may have little occasion

More information

AMENDED AND RESTATED ARTICLES OF INCORPORATION OF BEST BUY CO., INC. ARTICLE I NAME. The name of this corporation shall be Best Buy Co., Inc.

AMENDED AND RESTATED ARTICLES OF INCORPORATION OF BEST BUY CO., INC. ARTICLE I NAME. The name of this corporation shall be Best Buy Co., Inc. AMENDED AND RESTATED ARTICLES OF INCORPORATION OF BEST BUY CO., INC. ARTICLE I NAME The name of this corporation shall be Best Buy Co., Inc. ARTICLE II REGISTERED OFFICE; REGISTERED AGENT The registered

More information

Proper Burial: How to Advise Your Corporate Clients When the End is Near. Bar Association of San Francisco April 27, 2011

Proper Burial: How to Advise Your Corporate Clients When the End is Near. Bar Association of San Francisco April 27, 2011 Proper Burial: How to Advise Your Corporate Clients When the End is Near Bar Association of San Francisco April 27, 2011 GOALS Avoid or minimize director/officer liabilities Appropriate vehicle to bring

More information