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February 11, 2025
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February 11, 2025
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BED BATH & BEYOND FILES FOR CHAPTER 11 BANKRUPTCY IN THE UNITED STATES BANKRUPTCY COURT DISTRICT OF NEW JERSEY
April 25, 2023
Posted by Donald F. Campbell, Jr.
Co-Authored by Courtney Schroeder
On April 23, 2023, Bed Bath & Beyond Inc., et al., filed a voluntary petition for Chapter 11 bankruptcy under the United States Bankruptcy Code. The company was compelled to file after failing to secure funds to maintain operations. The home goods retailer based in Union, New Jersey filed for protection in New Jersey Bankruptcy Court estimating assets between $1 and $10 Billion. Last year the company reported losses of $393 million after sales dropped 33%.
Part of its “first-day” motions, the company requests entry of orders authorizing the Debtors to assume the consulting agreements, authorizing, and approving the conduct of store closing sales, with such sales to be free and clear of all liens, claims, and encumbrances, authorizing customary bonuses to employees of closing stores, and other relief. Furthermore, the Debtors seek authorizations and approval to close 472 stores located across the country. The company estimates that the aggregate net sale proceeds from the remaining brick-and-mortar stores will estimate $718 million dollars. Read more
Debts for a Partner’s Fraud Are Confirmed to be a Nondischargeable Debt According to the Supreme Court’s Opinion
March 16, 2023
Posted by Courtney Schroeder
In a unanimous opinion by the Supreme Court, the Court held an innocent partner liable for the fraud of another partner. Should the innocent party declare bankruptcy, the bankruptcy code would bar a discharge of the debt because it was obtained by false pretenses, a false representation or actual fraud.
In Bartenwerfer v. Buckley, prior to their marriage, a couple entered into a partnership to remodel and sell a home. Although the wife was largely uninvolved, there were multiple defects in which the husband failed to disclose to the buyer. The buyer sued in state court and won. The couple was held jointly responsible for damages in excess of $200,000.00. The couple filed for Chapter 7 Bankruptcy shortly thereafter. The buyer filed an adversary complaint in the bankruptcy court, alleging that the state court judgment constituted a nondischargeable debt. Under the Bankruptcy Code, fraud is an exception to discharge. Pursuant to 11 U.S.C. § 523(a)(2)(A), a discharge under this title does not discharge an individual debtor from any debt “for money… to the extent obtained by false pretenses, a false representation, or actual fraud.” Read more
Hollister Construction Services, LLC Files for Bankruptcy
September 24, 2019
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
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
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
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
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
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.