Delaware Business Bankruptcy Report: Morris James LLP Lawyers and Attorneys

Brett D. Fallon, a partner in Morris James' Bankruptcy and Creditors' Rights group, will be a panelist at this year's American Bankruptcy Institute 4th Annual Mid-Atlantic Bankruptcy Workshop.  The conference which will take place in Cambridge, Maryland from July 31 through August 2, 2008.

Brett will speak on the "Leveling the Playing Field: Avoidance Issues Update” panel, which will be moderated by the Honorable Mary D. France of the United States Bankruptcy Court for the Middle District of Pennsylvania.  Brett is also a member of the Advisory Board for the conference.

Morris James attorney Thomas M. Horan is the facilitator of the “Swords into Plowshares: Mediation and ADR” panel at the conference.  That panel will be moderated by the Honorable Kevin Gross of the United States Bankruptcy Court for the District of Delaware.

Morris James attorneys Douglas N. Candeub and Ericka F. Johnson also plan to attend the conference.

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On April 1, 2008, Brett D. Fallon, a Partner in Morris James' Bankruptcy and Creditors' Rights group, was appointed as Chair of the Claims and Priorities Subcommittee of the American Bar Association Business Bankruptcy Committee.  Mr. Fallon's three (3) year term will begin at the committee's fall meeting.  The Business Bankruptcy Committee operates through 33 subcommittees and consists of approximately 1,200 members, and is the largest group in the world made up exclusively of bankruptcy lawyers, professors and judges.

The Business Bankruptcy Committee is affiliated with the Business Law Section of the American Bar Association.  It offers educational programs, develops and reviews proposed bankruptcy legislation, and is an important participant in United Nations Commission on International Trade Law's Insolvency and Secured Transactions Working Group.

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Fla. Dept. of Rev. v. Piccadilly Cafeterias, Inc., No. 07-312 (2008)

Today, the United States Supreme Court reversed the decision of the United States Court of Appeals for the Eleventh Circuit in Florida Department of Revenue v. Piccadilly Cafeterias, Inc., holding that the stamp tax exemption of  11 U.S.C. § 1146(a) does not apply to a transfer that is made prior to confirmation of a Chapter 11 plan.  This decision resolves a circuit split that pitted the Third Circuit (In re Hechinger Invs. Co. of Del., 335 F.3d 243 (3d Cir. 2003)) and Fourth Circuit (In re NVR, LP, 189 F.3d 442 (4th Cir. 1999)) against the Eleventh Circuit (In re Piccadilly Cafeterias, Inc., 484 F.3d 1299 (11th Cir. 2007) (per curiam)).

Justice Thomas delivered the opinion, in which Chief Justice Roberts and Justices Scalia, Kennedy, Souter, Ginsburg and Alito joined.  Justice Breyer filed a dissenting opinion, in which Justice Stevens joined.

The opinion is here.

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JELD-WEN, Inc. v. Brunt (In re Grossman’s, Inc.), Nos. 97-00695, Adv. No. 07-51602 (Bankr. D. Del. June 9, 2008) (Judge Peter J. Walsh)

The Bankruptcy Court confirmed Grossman’s chapter 11 plan for reorganization in December 1997 in which all claims against Grossman’s were discharged.  Approximately ten years later, Mary and Gordon Van Brunt sued JELD-WEN, as successor in interest to Grossman’s, for injuries allegedly caused by materials sold by Grossman’s that contained asbestos.  JELD-WEN contended that these state court claims were discharged by the confirmed plan and commenced an adversary proceeding against the Van Brunts seeking (i) a permanent injunction enjoining defendants’ prosecution of claims against JELD-WEN; (ii) a determination that these claims were discharged; and (iii) an award of damages.

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Yesterday, June 9, 2008, Goody’s Family Clothing, Inc. and 19 of its subsidiaries and affiliates sought bankruptcy protection in the United States Bankruptcy Court for the District of Delaware.  The case is being administered under case number 08-11133. 

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Plassein Int’l Corp. v. B.A. Capital Co. LP (In re Plassein Int’l Corp.), No. 03-14489, 2008 WL 2073495 (D. Del. May 15, 2008) (Judge Joseph J. Farnan, Jr.)

The Debtors’ Chapter 7 Trustee (the “Trustee”) commenced an adversary proceeding against B.A. Capital Co. LP alleging that a series of fraudulent transfers rendered the Debtors insolvent or with unreasonably small capital for its businesses. The Bankruptcy Court had dismissed the Complaint because the court concluded (i) the transfers were settlement payments, pursuant to 11 U.S.C. § 546(e) and thus, not subject to avoidance under 11 U.S.C. § 544(b); (ii) the Complaint failed to state a claim upon which relief could be granted because it failed to assert that Plassein or any of the related Debtors made the allegedly fraudulent transfers; and (iii) the allegations within the Complaint could not be collapsed because neither the intent to defraud nor bad faith was alleged. The District Court affirmed.

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Miller v. McCown De Leeuw & Co., Inc. (In re Brown Schools), No. 05-10841, Adv. No. 06-50861 (Bankr. D. Del. April 24, 2008) (Judge Mary F. Walrath)

The Bankruptcy Court reaffirmed that Delaware does not recognize a deepening insolvency cause of action. However, the Court determined that a breach of the duty of loyalty claim could still be asserted. Unlike a breach of the duty of care, a breach of the duty of loyalty is not a disguised deepening insolvency claim. Further, damages based on deepening insolvency could be used in the damages calculations. Finally, a claim for aiding and abetting fraudulent transfers is not a recognized cause of action in Delaware.

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In re Buffets Holdings, Inc., No. 08-10141 (Bankr. D. Del. May 16, 2008) (Judge Mary F. Walrath)

The Bankruptcy Court held that Master Leases were integrated and could not be separately assumed and assigned or rejected based on the terms of the Master Leases and the parties’ course of conduct.

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