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
Herrick Restructuring Review
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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…
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…
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.…
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…
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…
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…
Smile, You’re on Camera! Considerations for Remote Depositions
If work-from-home dress codes are any indication, remote arrangements require us to walk the line between flexibility and abuse. Pajamas from the waist down? Why not! Joining a video conference in your robe? Only if you’re the judge.
Similar issues arise from the pandemic-driven pivot to remote depositions. To prevent cases from stagnating, many courts,…
Car Club Seeks Chapter 11 Protection Despite Growing Membership in “Defensive Move”
Despite a relatively strong 2020, New York Classic Motors, LLC, a unit of Classic Car Club Manhattan, filed for chapter 11 protection on April 9, 2021. Classic Car Club Manhattan is a private club where members can drive an impressive fleet of luxury vehicles both new and restored classics. Members are also entitled to attend…
Prospective Loss of Equity Is No Basis to Enjoin a UCC Foreclosure, Appellate Division Holds
A First Department decision from last month makes it harder for mezzanine borrowers to enjoin UCC foreclosure sales.
When there is a default under mezzanine loan documents, the lenders can retake their collateral by noticing and conducting foreclosure sales under the UCC. But mezzanine borrowers can seek relief from a court to enjoin UCC foreclosure…