Hollister Construction Services, LLC Files for Bankruptcy

September 24, 2019 | Comments Off on Hollister Construction Services, LLC Files for Bankruptcy
Posted by Donald F. Campbell, Jr.

Co-Authored by Justin S. Baumgartner

On September 11, 2019, Hollister Construction Services, LLC filed for Chapter 11 bankruptcy protection in the District of NJ, Trenton Vicinage. The Parsippany-based construction company deals in general construction work, including ground-up construction services, interior and exterior renovations, and building additions.

When a developer such as Hollister files for bankruptcy the business and financial consequences do not stop with the filing company. Instead, dozens of other businesses and individuals involved in any given construction project become caught in a web of complex laws and regulations that often result in substantial delays and subcontractors not being paid in accordance with their contracts.

Despite these frustrations, it may not be a good idea for a design professional, consultant, or subcontractor working under contract for a corporation that has filed for bankruptcy to pack up their equipment and leave the job site. This is because most construction contracts between general and subcontractors are “executory” in nature.  This generally means they are able to be revived by the bankrupt entity. Read more


THE (NOT SO) SAFE HARBOR DEFENSE

December 12, 2017 | Comments Off on THE (NOT SO) SAFE HARBOR DEFENSE
Posted by Geoffrey E. Lynott

Dealing with a financially distressed customer?  Considering how to avoid a fraudulent transfer a claw-back in the customer were to seek bankruptcy protection?  Some creditors have attempted to shield themselves from such actions by conducting the transfers through a financial institution.  Well, not so fast.

In the case of FTI Consulting, Inc. v. Merit Mgmt. Group, LP, 830 F.3d 690 (7th Cir. 2016), the Seventh Circuit recently determined the “safe harbor” defense of Section 546(e) of the Bankruptcy Code does not protect transfers from  fraudulent transfer liability when the financial institution is used as a “mere conduit” or pass-through entity for the transfer.

The Supreme Court of the United States granted certiorari to hear arguments on the case, and expressed concern over the potential breadth of the safe harbor defense if the Court were to overrule the Seventh Circuit’s decision.  Presumably, overruling the Seventh Circuit risks formation of a slippery slope on which creditors begin structuring transfers from debtors to flow through financial institutions solely for the purpose of circumventing claw-backs if the debtor were to seek bankruptcy protection.  Such a result could subvert the legislative intent behind enacting Section 546(e). Read more


DONALD CAMPBELL APPOINTED SPECIAL MASTER TO CONDUCT FORECLOSURE SALE OF A FARM LOCATED IN TWO COUNTIES

December 5, 2017 | Comments Off on DONALD CAMPBELL APPOINTED SPECIAL MASTER TO CONDUCT FORECLOSURE SALE OF A FARM LOCATED IN TWO COUNTIES
Posted by Donald F. Campbell, Jr.

Co-Authored by Steven W. Ward

The Monmouth County Chancery Court has appointed Donald F. Campbell, Jr., Esq. of Giordano, Halleran & Ciesla, P.C., as a Special Master to conduct the foreclosure sale of a farm located in two counties.

In the matter of HSBC Bank USA v. Concetta Swetits, under Docket No. F-35385-09, the mortgage holder, HSBC Bank USA, obtained a final judgment in foreclosure on a property that is situated in both Monmouth and Middlesex Counties.  Typically, the Court issues a Writ of Execution that orders a county sheriff to conduct the foreclosure sale.  However, when a property is located in two counties, the court cannot issue a writ to one Sheriff or the other.  Instead, the case law directs the court to appoint a “Special Master” who is instructed to conduct the sale. Read more


A BALANCE OF POWER

November 20, 2017 | Comments Off on A BALANCE OF POWER
Posted by Geoffrey E. Lynott

WHICH LEVEL COURT IS BEST POSITIONED TO DECIDE THE QUESTION OF “INSIDER” STATUS UNDER THE BANKRUPTCY CODE?

Determining whether a creditor or interested party to a bankruptcy proceeding is an “insider” is often critical.   In Chapter 11 proceedings, if the Bankruptcy Court determines a creditor to be an insider, then he or she is not entitled to vote in favor of approval of the Chapter 11 Debtor’s proposed plan for reorganization.  On October 31, 2017 the Supreme Court of the United States heard oral arguments on the correct standard of review applied when analyzing a Bankruptcy Court’s determination of whether a creditor is an “insider.”  Some of Justices suggested that determining the correct standard of review on appeal could not be bifurcated from setting out a legal standard for “insider” status.

Section 101(31) of the Bankruptcy Code sets forth a non-exhaustive list of persons or entities considered to be insiders.  These are known as “statutory insiders.”  However, there is also a well-established carve out for persons or entities not listed in Section 101(31) who have a close relationship with the debtor and negotiate transactions at less than an “arm’s-length.”  These are known as “non-statutory insiders.” Read more


REAL PROPERTY MORTGAGES, SECTION 707(b) OF THE BANKRUPTCY CODE, AND THE APPLICABLE APPELLATE STANDARD: HOW THE NINTH CIRCUIT DISTINGUISHED BETWEEN QUESTIONS OF LAW AND FACT

October 24, 2017 | Comments Off on REAL PROPERTY MORTGAGES, SECTION 707(b) OF THE BANKRUPTCY CODE, AND THE APPLICABLE APPELLATE STANDARD: HOW THE NINTH CIRCUIT DISTINGUISHED BETWEEN QUESTIONS OF LAW AND FACT
Posted by Donald F. Campbell, Jr.

Co-Authored by Geoffrey E. Lynott

Determining whether you qualify under Chapter 7 or Chapter 13 of the Bankruptcy Code is critical when seeking bankruptcy protection.  The Bankruptcy Code limits a consumer debtor’s ability to discharge his or her debts as opposed to a debtor that incurs mostly business related debts.

Enter Paul Cherrett.  Mr. Cherrett has been working in the hospitality industry for over twenty-five years.  Cherrett and his family lived in Jackson Hole, Wyoming, where Cherrett worked at the Four Seasons.  Aspen Skiing Company offered Cherrett a position.  But Aspen, Colorado is expensive; and Cherrett’s family did not want to relocate.  So, in order to entice Cherrett to work there, Aspen offered Cherrett a $500,000 housing loan as part of the compensation package.  Cherrett accepted the offer, and moved to Aspen, Colorado, while his wife and high school aged daughter remained in Jackson Hole.

By 2009, Cherrett’s daughter went to college, his wife came to live with him in Aspen, and the Cherretts sold their home in Jackson Hole.  Two years later, Cherrett resigned from his position at Aspen Skiing Company.  And by 2013, Cherrett and his wife filed a voluntary Chapter 7 petition for Bankruptcy. Read more


Fuhu Files for Chapter 11 Just Ahead of this Year’s Holiday Season

December 14, 2015 | Comments Off on Fuhu Files for Chapter 11 Just Ahead of this Year’s Holiday Season
Posted by Donald F. Campbell, Jr.

Fuhu Inc., named the most promising company in America in 2014 by Forbes Magazine, filed for Chapter 11 bankruptcy in Delaware last wwek. The producer of the nabi tablet, an educational technology product created for children, prepared for a $9.5 million asset acquisition by Mattel, Inc. Before the judge approves Mattel’s proposal, other companies may also submit bids. According to Fuhu’s CEO, Jim Mitchell, the company expects to continue serving their customers throughout every step of the sale.

The children’s tablet producer blamed their manufacturer, Foxconn for their recent money troubles. In 2013 Fuhu earned more than $195 million in revenue, but late deliveries during the 2014 holiday season caused a significant decline in both profits and confidence in the company.

This September, Foxconn discontinued supply of the tablets to Fuhu and a month later cut communications completely due to Fuhu’s inability to make payments on time. This, combined with an increase in competition from LeapFrog, VTech, RCA and others may prove to be a challenge for Fuhu during this holiday season as well.


Recent Third Circuit Decision Encourages 363 Sales

September 25, 2015 | Comments Off on Recent Third Circuit Decision Encourages 363 Sales
Posted by Donald F. Campbell, Jr.

A recent opinion from the U.S. Court of Appeals for the Third Circuit could encourage debtors to resolve their Chapter 11 bankruptcies through 363 sales instead of a traditional reorganization plan.

Section 363 of the bankruptcy code allows debtors to create an asset purchase agreement with the first proposed purchaser. A 363 sale, also called a “melting ice cube” sale, sets the initial purchase price and proposes a structure for the asset sale. It is considered a quick close to bankruptcy cases and is utilized when a debtor’s position is seen as getting progressively worse void of a quick sale.

The appellate court published the opinion in the case of in re: ICL Holding Company, which centered on the financial issues of a company that ran long-term acute care hospitals. ICL had previously tried to sell itself to pay off its heavy debts, but opted for a 363 sale when the traditional sale offers were not enough to pay off its secured debt.

In ICL’s case, its secured lender made the only bid, agreeing to forgive the debt for all of the debtor’s assets and offering to credit $320 million or the $355 million owed. The agreement also decreed that the lenders would pay the cost of the case. The day after the agrrement was signed, LifeCare and its 34 subsidiaries filed for Chapter 11 bankruptcy. The IRS objected, fearing ICL would owe capital gains taxes but lack the assets to repay them.

The Delaware bankruptcy court approved the sale over the IRS’ complaint, and the appellate court agreed with their ruling. Judge Thomas L. Ambro, a member of the American College of Bankruptcy who wrote the appellate court’s opinion, said that a 363 sale differs from a “gift plan,” in which a secured creditor allows some of its recovery to flow to other creditors, because the buyer in this case was a secured lender, which is allowed to distribute the debt repayment as it wishes. Whatever the lender doesn’t take for repayment is covered through regular bankruptcy rules.

The ruling suggests that for companies on the verge of bankruptcy, a 363 sale can offer increased flexibility as well as a quicker turnaround.


House Passes “The Financial Institutional Bankruptcy Act of 2014”

December 2, 2014 | Comments Off on House Passes “The Financial Institutional Bankruptcy Act of 2014”
Posted by Donald F. Campbell, Jr.

This week, the House of Representatives passed “The Financial Institutional Bankruptcy Act of 2014,” a bill allowing financial institutions, and in some cases, the Federal Reserve, to voluntarily begin the bankruptcy process.

The bill, co-sponsored by Rep. Spencer Bachus (R-Ala.), House Judiciary Committee Chairman Bob Goodlatte (R-Va.), and Ranking Member John Conyers (D-Mich.), was passed with bipartisan support.

The bill outlines a “single point of entry” approach enabling a holding company to begin the bankruptcy process while allowing subsidiaries to stay out of it. This bill is one of many attempts to prevent taxpayer bailouts of financial institutions and promote confidence in the financial marketplace since the financial crisis in 2008.


Lenders Implement Technology To Encourage Timely Payments

September 29, 2014 | Comments Off on Lenders Implement Technology To Encourage Timely Payments
Posted by Donald F. Campbell, Jr.

A new trend has developed in the subprime auto lender industry, involving lenders installing devices that can remotely disable the ignition of their vehicles at any time. Subprime borrowers are considered those with credit scores of 640 or below. A drastic increase in subprime borrowers can be attributed to the recent financial downturn. Over the last year approximately 25 percent of new auto loans were considered subprime. Read more


FASB Issues New Standard Regarding Disclosures By Corporate Managers

September 4, 2014 | Comments Off on FASB Issues New Standard Regarding Disclosures By Corporate Managers
Posted by Donald F. Campbell, Jr.

The Financial Accounting Standards Board (FASB), responsible for establishing and improving financial accounting standards and reporting by non-governmental entities issued a new standard on Wednesday regarding disclosures by corporate managers. This new standard was issued an in effort to create uniform disclosure procedures by corporate managers upon finding substantial doubt about their organization’s ability to continue as a going concern. Read more


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