Asset Sales and Acquisitions

Successor liability is often a concern for the acquirer when purchasing substantially all of a seller’s assets.  While this risk is well known, the circumstances under which an acquirer will be found liable under the theory of successor liability are less clear.  The recent decision in Call Center Techs., Inc. v Grand Adventures Tour & Travel Pub. Corp., 2014 U.S. Dist. Lexis 29057, 2014 WL 85934 (D. Conn. 2014), sheds helpful light on this issue by defining the continuity of enterprise theory of successor liability.
Continue Reading Continuity of Enterprise is Enough for Successor Parties to be Liable

Secured lenders often resort to non-judicial foreclosure sales of personal property upon a borrower’s default. Article 9, Part 6 of the Uniform Commercial Code requires that every aspect of such a sale must be commercially reasonable. However, the courts have historically provided little guidance as to what exactly constitutes a commercially reasonable sale. Fortunately, the Delaware Chancery Court recently issued a decision, entitled Edgewater Growth Capital Partners, L.P. v. H.I.G. Capital, Inc., C.A. No. 3601-CS (Del.Ch. Apr. 18, 2013), in which the court analyzed the meaning of this “commercial reasonableness” requirement and provided helpful guidance to borrowers and secured creditors alike.
Continue Reading Delaware Court Provides Critical Guidance as to the Commercial Reasonableness of a UCC Article 9 Foreclosure Sale

Effective as of January 1, 2011, the language prescribed for all notices of default recorded pursuant to Section 2924 et seq. of the California Civil Code has changed. Despite the fact that this change became effective as of the beginning of this year, some foreclosure trustees are still using old forms that do not comply with current California law. Accordingly, lenders should be diligent in reviewing their foreclosure notices to ensure compliance with current requirements.


Continue Reading New Change To Required Language For Foreclosure Notices Under California Civil Code § 2924c

With the increasing numbers of companies which were once thought to be giants of industry filing for bankruptcy, more opportunities to purchase major assets are becoming available to savvy buyers looking to expand their business or asset base. The Bankruptcy Code provides debtors with the ability to liquidate all or a part of their assets through court-supervised sales and buyers with the ability to obtain those assets at more favorable prices than they would pay if the sale were consummated outside of a bankruptcy.


Continue Reading One’s Crisis is Another’s Opportunity: Section 363 Sales

On June 10, 2009, the sale of substantially all of Chrysler’s assets closed, just 42 days after the country’s third largest automaker filed for bankruptcy protection. The closing followed a contentious sale hearing before the Bankruptcy Court, an expedited appeal to the Second Circuit Court of Appeals and a brief stay imposed by the United States Supreme Court. The source of the contention: three Indiana state pension funds, arguing that the sale of Chrysler’s assets constituted a sub rosa plan of reorganization that upended the priority scheme of the Bankruptcy Code. Rejecting the Indiana pension funds’ arguments and approving the sale, a decision upheld on appeal, the Bankruptcy Court avoided mention of the effect of unprecedented the governmental intervention in its analysis, relying on its interpretation of applicable bankruptcy law. As the sale process in the bankruptcy of General Motors nears completion, much has been learned from Chrysler.


Continue Reading The Precedential Value of an Unprecedented Sale – Lessons from Chrysler

In In re World Health Alternatives, Inc., Case No. 06-10166 (July 7, 2006), the Bankruptcy Court for the District of Delaware held that—notwithstanding the Third Circuit’s recent opinion, In re Armstrong World Indus., Inc., 432 F.3d 507 (3d Cir. 2005)—a secured creditor "give-up" or "carve out" that inures solely to the benefit of general unsecured creditors does not violate the Bankruptcy Code.


Continue Reading World Health Alternatives Upholds a Secured Creditor’s Carve-Out Inuring Solely to the Benefit of General Unsecured Creditors

On May 30, 2006, the Internal Revenue Service (IRS) published Internal Revenue Bulletin No. 2006-22, Revenue Procedure 2006-24.  This bulletin sets forth the steps for a bankruptcy trustee or debtor in possession to follow in order to obtain a prompt determination by the IRS of any unpaid tax liability of the estate incurred during the administration of the debtor’s case. The bulletin can be found at: http://www.irs.gov/irb/2006-22_IRB/ar12.html.


Continue Reading Internal Revenue Bulletin No. 2006-22 Sets Forth Procedures for Prompt Determination of Unpaid Tax Liabilities of a Bankruptcy Estate

On May 31, 2006, the California Court of Appeal for the Second Appellate District, in Haberbush v. Charles and Dorothy Cummins Family Ltd. Partnership, Case No. B175947, disagreed with the Ninth Circuit’s majority opinion in Sherwood Partners v. Lycos, 394 F.3d 1198 (9th Cir. 2005) and held that California Code of Civil Procedure section 1800 is not preempted by the federal Bankruptcy Code.


Continue Reading California Court of Appeals Disagrees With Sherwood Partners and Holds That California Preference Laws Are Not Preempted by the Bankruptcy Code

In “In Re: Submicron Systems Corporation,” ___ F.3d ___ (3rd Cir. 1/6/06), the Third Circuit affirmed the approval of a Bankruptcy Code Section 363 asset sale (over the objection of the Plan Administrator (the “Estate”)) to a newly formed company (“Newco”) comprised of (i) a third party (“Sunrise”), and (ii) pre-petition secured lenders (the “Lenders”), where the winning and only bid was part cash and part credit bid. The Third Circuit rejected the Estate’s argument that the sale should not have been approved because the secured debt alleged by the Lenders that formed approximately 73% of the purchase price (the cash component was only approximately 27%) should have been (i) recharacterized as equity, (ii) deemed unsecured, or (iii) equitably subordinated.
Continue Reading “In re Submicron”: Credit Bidding Revisited