William L. Siegel

A bankruptcy filing can preempt state law, permitting termination of a General Partner’s management right. Generally speaking, partnership agreements provide and state laws provide for the removal of a General Partner’s management rights when a General Partner files bankruptcy.

A look at the ordinary course of business defense to a preference action. The subjective prong protects a transfer if made in the ordinary course of business or financial affairs of the debtor and transferee, while the objective prong regards a transfer made according to ordinary business terms within the industry.

In 2024, in a 5-4 decision, the Supreme Court rejected the notion that bankruptcy courts may confirm a plan of reorganization that discharges claims against third parties — without the consent of affected claimants.

Prior to filing bankruptcy, a debtor settled an assault claim by agreeing to pay the victim/creditor in installments — up to a point. Bill Siegel looks at Hilgartner v. Yagi (In re Hilgartner) and whether collection costs and interest are dischargeable.

There are times when a creditor will make a strategic decision not to file a proof of claim in a bankruptcy. If a creditor does file a proof of claim, the creditor consents to the jurisdiction of the bankruptcy court.  The Fifth Circuit Court of Appeals holding in Raymond James & Associates, Inc. v. Jalbert (In re German Pellets Louisiana, LLC), 91 F.4th 802 (5th Cir. 2024), shows that sitting on the sidelines amidst a bankruptcy does not always pay off.

Failure to investigate the solvency of a company after a leveraged buyout may place a director in breach of their Fiduciary Duty. In suits alleging a corporation’s director violated his duty of care to the company, courts will evaluate the case based on the business judgment rule.

Insurance policy exclusions eliminate coverage for certain acts, property, types of damage, or locations. The Insured vs. Insured Exclusion excludes coverage for claims brought against Directors and Officers by other Directors & Officers for the same company.

Here, a majority of the Board of Directors had approved a tender offer based on fabricated financials prepared by a director who for all practical purposes exercised control (the “Controlling Director”) over the remaining directors (“Innocent Directors”).

Friday, January 30th, a US judge dismissed a lawsuit against pharmaceutical company Johnson & Johnson (J&J), wherein plaintiffs claimed J&J relied on the “Texas Two-Step” as part of its bankruptcy plan. Plaintiffs believe this strategy resulted in fraud related to bankruptcy in the J&J talc division and the judge disagreed.

Remember the Texas Two-Step? Well, it is alive and well, but lessons can be learned from the dismissal of the LTL Management, LLC bankruptcy.

In Texas, the “Two-Step” allows companies facing mass tort litigation to protect vital assets and transfer the liabilities to a newly-created entity, all of which is permitted in the divisive merger statute in the Texas Business Organizations Code.

In a 2024 bankruptcy proceeding (Holliday v. Credit Suisse Sec. LLC (In re Bos. Generating, LLC)), the Second Circuit Court of Appeals ruled that a properly structured leveraged buyout invoking the “Safe Harbor Rule” under Section 546(b) of the Bankruptcy Code cannot be set aside as a fraudulent conveyance.

When a commercial landlord files bankruptcy, what are the rights of a tenant? Bill Siegel explains where the tenant must continue to perform, the choices a tenant may have, and what happens when the lease is assumed and/or assigned to a third party.

Landlords are not always entitled to an Administrative Claim for non-payment of rent in a bankruptcy. When a debtor in bankruptcy rejects a contract…it ends the contractual relationship with the non-debtor counterparty – who is then left with a claim for damages.

For some background, a lease is considered an executory contract. An executory contract is a contract between a debtor and another party in which each party still has important performance obligations remaining. Thus, if either side ceased performing under the contract, such action would constitute a breach of contract.

“Adequate assurance of future performance” can be anything, but generally speaking, it may require a security deposit or increase of the security deposit to protect the landlord from defaults, guarantees, or such other security such as a letter of credit or certificate of deposit.

Critical vendor treatment in bankruptcy is a process that allows a debtor to pay a vendor its pre-petition claim based on the idea that the vendor is so important to the debtor’s business, that ending the relationship would make it very difficult if not impossible for the debtor to reorganize.

Bankruptcy and Creditor’s Rights attorney Bill Siegel explains two Bankruptcy Code provisions that incentivize creditors to continue to work with financially distressed debtors.  These sections apply to creditors who remain unpaid at the time of bankruptcy, and also give them options to take certain actions to increase their likelihood to be paid.