It is hardly news that the seismic shift in buying habits towards travel and experiences and to internet shopping has dealt a devastating blow to many traditional brick and mortar retailers.  Retailers are going bankrupt at a record pace, and 2017 is on track to post the highest number of retail bankruptcies since the Great Recession. Venerable retailers such as Gymboree, Sports Authority, HH Gregg, Eastern Mountain Sports and RadioShack have all recently sought bankruptcy protection. Compounding this troubling trend is the sobering fact that few of these companies will successfully reorganize. Given the realities of the prevailing retail environment, most of these bankrupt companies will shut their doors, go dark and liquidate their assets. These bankruptcies particularly impact trade vendors who supplied the companies with goods for resale and who typically face the prospects of receiving only pennies on the dollar on their claims in liquidation. However, in what will be welcome news to the beleaguered trade vendor community, the Third Circuit has recently issued a decision refining the definitions of § 503(b)(9) which will enable more vendor claims to be eligible for administrative claim status. Continue Reading Trade Vendor Victory — The Third Circuit Refines Eligibility for Administrative Claims Under § 503(b)(9)

supreme-court-300x199[1]In a decision all but certain to engender future litigation, the Supreme Court recently held in the case of Czyzewski v. Jevic Holding Corp. that structured dismissals providing for distributions that do not follow the normal priority rules and that do not have the consent of affected creditors are impermissible. Reversing the Third Circuit Court of Appeals, which had affirmed the decisions of the courts below, the Supreme Court crafted a narrow ruling that raised but left unanswered questions about the permissible contours of structured dismissals. Continue Reading THE SUPREME COURT DISMISSES STRUCTURED DISMISSALS

In the first installment of this article, we discussed the prevalence of preference litigation and some of the commonly-available defenses to business vendors to limit or even eliminate liability to the bankruptcy estate. While preference actions are by far the most common type of avoidance litigation brought in bankruptcy cases, this is not the end of the story.  Bankruptcy estate representatives can also bring actions to avoid fraudulent transfers and post-petition transactions. We will first discuss the elements of each of these avoidance claims, followed by some tips to avoid being the target of such an action in the first place or, if a defendant, some strategies to limit liability.  Continue Reading Bankruptcy Avoidance Litigation Part II – Do I Really Have to Give That Payment Back?

Bankruptcy Court. Dayton, Ohio. Greek Revival Architecture.The Third Circuit Court of Appeals recently affirmed the decisions of the District and Bankruptcy Court denying, for reasons of inadequate disclosure, the approval of a third-party release provision in the Chapter 11 plan of In re Lower Bucks Hospital, et al., Case No. 10-10239(ELF)(“Lower Bucks”). The offending release purported to prohibit a class of creditors that held corporate bonds in the Debtor, Lower Bucks Hospital, from bringing claims against their Indenture Trustee, The Bank of New York Mellon Trust Company, N.A. The permissibility of third-party releases, where a non-debtor receives a release of the claims of creditors, continues to be a controversial issue in the Third Circuit. While the Third Circuit has yet to issue a definitive opinion on when such third-party releases may be granted, the Court emphatically stated that they may not be granted in the absence of clear and conspicuous disclosure to affected parties. Continue Reading The Third Circuit Affirms the Denial of Third-Party Releases for Lack of Adequate Disclosure