Post-Confirmation Liquidation and Litigation Trusts in Business Bankruptcies: Practical Guide
Unless advised properly, closing a Chapter 11 case on a cost-effective basis can be problematic. Resolving certain claims and interests in a Chapter 11 case is time consuming and will often utilize any funds that are set aside for creditors. To aid this dilemma, and to enable a debtor to emerge from bankruptcy sooner than would be possible, popular tools such as post-confirmation liquidation and litigation trusts are used, as well as a structured dismissal. Such trusts have enabled methods on how and when to handle large-scale litigation matters, claims resolution process, and the liquidation of other assets for the purpose of disposing assets, prosecuting estate claims, resolving claims, and distributions to beneficiaries.
The Knowledge Group has assembled a team of seasoned professionals, thought leaders and administrators who will help the audience understand the most important aspects of Post-Confirmation Liquidation and Litigation Trusts in Business Bankruptcies. The panel will present their findings and best practices and practicalities in a post-confirmation liquidation trust agreements. The panel will also provide the audience with a comprehensive overview of this significant topic. Going beyond the basic mechanics, our speakers will present their thoughts and opinions on how to best utilize the benefits of a post-confirmation trust agreement.
Key topics include:
- Post-Confirmation Liquidation & Litigation Trusts - An Overview
- Scope and Limitations of Trust Agreements
- Structuring Trust Agreements
- Risks and Pitfalls in Liquidation & Litigation Trust
- Claims Resolution
- Common Issues Faced in Liquidation & Litigation Trusts regarding:
- Up-to-the-minute Regulatory Developments
- Structured Dismissal
Schuyler Carroll, Partner,
Perkins Coie LLP
- How to set up the trust?
- What form? Trust, LLC or other entity?
- Who will be the trustee? Individual, Institution?
- Provisions for removal or resignation of trustee
- Determining the purpose of the trust
- To prosecute litigation?
- To hold stock or await recovery from litigation or otherwise?
- To make distributions to creditors or shareholders?
- Who has the authority to make decisions for the trust?
- Sole discretion?
- Is Trustee granted authority only over “non-major” decisions?
- Oversight Committee?
- Court approval?
George Utlik, Attorney,
Arent Fox LLP
- Structured dismissal as a viable and growing exist strategy for chapter 11 cases – a practical cheaper and quicker alternative to (a) conversion to chapter 7, or (b) plan of liquidation after asset sales
- Administrative insolvency and inability to fund a plan process
- Confirmation of a liquidating plan, while possible, may eliminate or reduce limited estate assets and so structured dismissal is in the best interest of creditors
- Reorganization outside bankruptcy is prudent and likely, even if confirmation of a plan may be feasible
- Benefits of structured dismissals for debtors and creditors – allows to streamline claims resolution process and distributions and eliminate confirmation process and related costs and delay associated with: (i) drafting disclosure statement and plan, (ii) preparing notice and obtaining approval of disclosure statement, and (iii) complying with procedures, implementing service, solicitation, and ballots for plan confirmation
- Statutory framework – sections 105, 305(a), and 1112(b) of the Bankruptcy Code
- Motion, notice, conditions and provisions of dismissal orders:
- Motion to dismiss like a mini disclosure statement
- Substantial notice to all parties in interest
- Important provisions in the dismissal orders: (i) release and exculpation provisions; (ii) claims reconciliation and distributions; (iii) carve-outs and gifting of funds; (iv) enforceability of prior orders, notwithstanding section 349; (v) conditions to effectiveness of dismissal; (vi) retention of jurisdiction over certain post-dismissal matters
- U.S. Trustee’s policy and objections to structured dismissals – procedural and Bankruptcy Code considerations:
- Lack of statutory support for structured dismissal
- Checks and balances of a disclosure statement and protections of a confirmation process
- Checks and balances of a chapter 7 process, chapter 7 trustee’s review, final report and its disclosures and findings
- Bankruptcy Court’s limited jurisdiction after dismissal
- In re Jevic Holding Corp., 787 F.3d 173 (3d Cir. 2015)
- In re Petersburg Regency LLC, 540 B.R. 508 (Bankr. D.N.J. 2015)
- In re Naartjie Custom Kids, Inc., 534 B.R. 416 (Bankr. D. Utah 2015)
- In re Buffet Partners, L.P., No. 14-30699, 2014 B.R. 3735804 (Bankr. N.D. Tex. July 28, 2014)
Christopher Ward, Co-Chair Bankruptcy Group, Managing Shareholder Delaware Office,
- Provisions in the Bankruptcy Plan that will govern the Trust
- Document retention and privilege with respect to liquidation and litigation trusts
- Composition of the trust and oversight committees
John Giampolo, Partner,
Wollmuth Maher & Deutsch LLP
- Preserving estate claims and transferring them to a post-confirmation trust for prosecution
- What language is required in the chapter 11 plan and associated trust agreement to preserve estate claims and transfer them to a post-confirmation trust for prosecution?
- What level of specificity is required to identify estate claims being preserved and transferred to the post-confirmation trust?
- Preserving and transferring estate claims that may not have been fully investigated pre-confirmation
- Can a post-confirmation trust assert claims that did not initially belong to the debtor?
- Post-confirmation trust’s standing to assert individual creditor claims and assignment of creditor claims
- Using creditor trusts to circumvent the Bankruptcy Code § 546(e) defense
- Bankruptcy litigation financing and third party financing for post-confirmation litigation trusts
- Uses, scenarios and benefits
- Strategic use and structuring of post-confirmation trusts to maximize value
- Creating multiple post-confirmation trusts for different assets and different purposes
- Structuring post-confirmation trusts and orders governing them to streamline the process for prosecuting and resolving claims and for liquidating and distributing assets
Allan Diamond, Managing Partner,
Diamond McCarthy LLP
LITIGATION AND LIQUIDATION TRUSTS: LITIGATION ISSUES AND PITFALLS
- Know Your Liquidating Plans Thoroughly
- Understand What You Do and Do Not Own
- What Happens When Some of Your Best Claims Are Not Owned by the Litigation Trust, But Instead by the Creditors?
- Issues and Pitfalls in Asserting Various Types of Claims
- Specific Problematic Defenses
- Professional Liability Claims
- Fraudulent Transfer Claims
- Cost/Benefit Considerations
- Other Important Considerations
Who Should Attend:
- Bankruptcy Lawyers and Practitioners
- Bankruptcy Professionals
- Litigation and Liquidation Officers
- Practitioners (representing post-confirmation trusts)
- Legal Counsel
- Legal Advisers
- Other related/interested Professionals and Organizations
Christopher A. Ward is Co-Chair of Polsinelli PC’s Bankruptcy & Financial Restructuring practice and Managing Shareholder of the Wilmington, Del. office. In addition to representing firm clients in Delaware, Chris’ experience includes serving as Delaware legal counsel to out-of-state referring law firms, conflicts counsel, contingency fee/avoidance action counsel, and special counsel in various matters pending both nationally and in Delaware. Chris has represented numerous chapter 11 debtors and official committee of unsecured creditors. His recent representative cases include serving as Delaware bankruptcy counsel and conflicts counsel to the Official Committee of TCEH Unsecured Creditors in Energy Future Holdings, the 7th largest chapter 11 case ever filed, Standard Register, Allied Nevada Gold, and the Student Committee in Corinthian Colleges, as well as counsel to the chapter 11 debtors in Airborne Media Group, Global Aviation and Coach America. He has been recognized by Chambers USA for Bankruptcy/Restructuring (Delaware Band 3), Delaware Super Lawyers, and Best Lawyers in America. Chris is also the American Bankruptcy Institute Mid-Atlantic Endowment Committee, Chair and Education Director of ABI’s Technology & IP Committee.
Christopher A. Ward is Co-Chair of Polsinelli PC’s Bankruptcy & Financial Restructuring practice and Managing Shareholder of the Wilmington, Del. …
Schuyler Carroll focuses his practice on complex restructuring, transactional, litigation and advisory work. Schuyler represents a wide variety of debtors, creditor committees, trade creditors, claims traders, secured and unsecured creditors, bondholders, indenture trustees, trustees, landlords, investors and purchasers in Chapter 11, 15 and 7 bankruptcy proceedings, out of court workouts and non-judicial reorganizations and restructurings. These matters include diverse industries, such as financial services, real estate, health care, manufacturing, e-commerce, technology, telecommunication and hospitality.
Schuyler has represented liquidating and litigation trusts in numerous cases, including Personal Communications Devices, Solstice and eToys Direct. Schuyler also has represented committees, debtors and creditors in major bankruptcy cases including MF Global, American Airlines, Planet Hollywood International Inc., Sabine Oil & Gas, (Steve & Barry's), Right Start Acquisition, American Media Inc., Fairpoint Communications, Nortel Networks and Insilco Technologies Inc.
He is particularly skilled in counseling parties on potential bankruptcy issues related to nonbankruptcy transactions, such as investments, loans and mergers and acquisitions. Schuyler also often represents buyers and sellers of distressed debt and equity and has extensive experience in representing acquirers of assets of insolvent and bankrupt companies.
Schuyler has extensive experience in enforcement of creditors' rights, and creditors' rights state and federal court litigation, including fraud claims, loan recovery and collection actions, fraudulent conveyance actions, foreclosures and replevin actions, enforcement proceedings, reclamation and other actions under the Uniform Commercial Code, loan participation and syndication actions, defense of lender liability, and usury and fraud claims.
In 2011, Schuyler opened Perkins Coie's New York office. The office has grown to include more than 20 attorneys and many of the firm's most important practice areas.
Schuyler Carroll focuses his practice on complex restructuring, transactional, litigation and advisory work. Schuyler represents a wide variety of debtors, …
Allan has thirty-five years of experience in litigating complex business, bankruptcy & cross-border cases before the courts in the U.S. and around the globe. He has been lead trial counsel in some of the most high profile corporate fraud cases in the world arising from business bankruptcies (e.g., Enron, Parmalat, et al.) He has been at the forefront of post-confirmation bankruptcy structures since their creation. He is the court-appointed Chapter 11 bankruptcy trustee and post-confirmation special litigation counsel in the two largest law firm bankruptcies in history, Howrey, LLP and Dewey LeBeouf, LLP, respectively. He has been recognized as a Texas Super Lawyer for the past 15 years and has been profiled in the Wall Street Journal several times. He received his J.D. from Emory Law and clerked with the U.S. Court of Appeals (5th Circuit), Honorable James C. Hill.
Allan has thirty-five years of experience in litigating complex business, bankruptcy & cross-border cases before the courts in the U.S. …
John Giampolo concentrates his practice in bankruptcy and related litigation and transactional matters. He has represented corporate debtors, trustees, secured lenders, hedge funds, buyers, sellers, bondholders, trade creditors and other parties in interest in connection with workouts, distressed debt restructurings, receiverships, assignments for the benefit of creditors, Section 363 asset sales, bankruptcy debtor-in-possession (DIP) financing, Chapter 11 reorganizations, Chapter 7 liquidations, bankruptcy claims trading, claim objections, insolvency proceedings under the Securities Investor Protection Act (SIPA), and related litigation in connection with middle market size bankruptcies and high profile matters such as the Mervyn’s bankruptcy, the Lehman Brothers Holdings Inc. bankruptcy, and the Bernard L. Madoff Investment Securities LLC(BLMIS) SIPA liquidation. John has prosecuted and defended numerous avoidance actions and other clawback actions in bankruptcies, receiverships, Ponzi scheme litigation, and other bankruptcy-related litigation. In addition to his bankruptcy experience, John has a unique combination of experience with other transactional and litigation matters and is significantly involved with the firm’s employment law group in representing clients in connection with negotiating employment, executive compensation and non-compete agreements and litigating employment disputes. John joined WMD in 2010 after having been an associate with the Bankruptcy and Restructuring Group at Otterbourg P.C.
John Giampolo concentrates his practice in bankruptcy and related litigation and transactional matters. He has represented corporate debtors, trustees, secured …
George Utlik practices in the areas of corporate reorganization, financial restructuring, liquidation, insolvency and bankruptcy proceedings. A graduate of Rutgers College and St. John’s University School of Law (where he earned his J.D. and LL.M. in Bankruptcy degrees), George has particular experience representing official committees of unsecured creditor, as well as debtors, indenture trustees, secured and DIP lenders, asset purchasers, investors, foreign creditors and counterparties, and other parties in Chapter 11 bankruptcies, Chapter 15 cases and cross-border insolvencies, and out-of-court restructurings.
George represents clients in a wide array of industries including publishing, manufacturing, e-commerce, telecommunications, retail and apparel, and finance. George has played a central role in many of Arent Fox’s recent major bankruptcy and restructuring matters, including the firm’s representation of the creditors’ committee in the bankruptcy restructuring proceedings of Cengage Learning, Inc., with approximately $7.5 billion in assets, making it the largest Chapter 11 filing of 2013. His recent recognitions include being named a “40 Under 40” Emerging Leader by the M&A Advisor and a Super Lawyers Rising Star in the New York Metro area.
George Utlik practices in the areas of corporate reorganization, financial restructuring, liquidation, insolvency and bankruptcy proceedings. A graduate of Rutgers …
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About Polsinelli PC
Polsinelli PC is a full-service national law firm with over 750 attorneys and 18 offices across the country. Polsinelli’s national bankruptcy practice has both the depth and breadth to handle any bankruptcy matter that may arise. The firm has represented numerous chapter 11 debtors, creditors’ committees, and creditors. Polsinelli’s bankruptcy practice also focuses on bankruptcy litigation, including breach of fiduciary duty, lender liability, fraudulent transfer, preference, and contingency fee litigation, as well as creditors’ rights litigation and contested matters. Representative engagements include Delaware bankruptcy and conflicts counsel to TCEH Creditors’ Committee in Energy Futures Holdings Corp., counsel to chapter 11 debtors in Airborne Media Group, Global Aviation, Coach America, Marinas International, and Indianapolis Downs (special litigation counsel), as well as counsel to the Creditors' Committee in Standard Register, Allied Nevada Gold, Simplexity, Revel Casino, Open Range Communications, Saab Cars North America, Ultimate Escapes, and Crossroads Wireless, as well as the Student Committee in Corinthian Colleges. Polsinelli can be found at www.polsinelli.com.
About Perkins Coie LLP
Perkins Coie maintains a national, full-service bankruptcy and restructuring practice with experience representing virtually all constituencies in a distressed situation. We provide counsel for debtors, creditors and third parties in out-of-court negotiations as well as representation in state and federal court litigation across the country. We have substantial bankruptcy experience, representing business debtors, secured and unsecured creditors, court-appointed trustees, indenture trustees and creditors’ committees. Our experienced bankruptcy team has the flexibility and depth to handle bankruptcy or reorganization projects of any size. Perkins Coie has more than 1,000 lawyers in 19 offices across the United States and Asia.
About Diamond McCarthy LLP
Diamond McCarthy is a national trial and insolvency boutique that cost-effectively resolves business disputes on a domestic and international stage. The Firm also handles all aspects of corporate/financial restructuring and business bankruptcies. The Firm is particularly known for handling high stakes matters, “cutting edge” issues and “legal forensics.” Diamond McCarthy follows a multidisciplinary approach to tackling complex financial and accounting transactions with many of the Firm’s lawyers having M.B.A.’s or accounting backgrounds. The Firm’s reputation for excellence, service to clients and results directly flows from the quality of the people who hail from the top of the class of the nation’s best schools. The Firm has a global reputation and track record in litigating high profile corporate fraud cases in the U.S. and globally. The Firm has offices in Houston, Dallas, New York City, Los Angeles, San Francisco and Denver.
About Wollmuth Maher & Deutsch LLP
For over 17 years, Wollmuth Maher & Deutsch LLP has provided sophisticated and aggressive legal representation in a responsive, efficient, and cost-effective manner. The firm is based in New York and a significant focus of its practice involves bankruptcy, restructuring and insolvency related litigation. The firm’s practice includes attorneys experienced in all phases of complex reorganizations, liquidations, and restructurings representing Chapter 11 debtors, liquidating trustees and other parties in interest in middle market size matters and in connection with some of the nation’s largest and most high profile bankruptcies. The firm also handles large-scale insolvency litigation matters involving hundreds of millions of dollars and, at times, billions of dollars.
About Arent Fox LLP
Founded in 1942, Arent Fox LLP is a full service law firm that is internationally recognized in core practice areas where business and government intersect. With more than 400 lawyers, the firm provides strategic legal counsel and multidisciplinary solutions to clients that range from Fortune 500 corporations and start-ups to trade associations and foreign governments. The firm’s practice breadth, geographical reach, and industry knowledge combine to provide clients with business-oriented legal advice designed to ensure they achieve their commercial goals. The firm has offices in Los Angeles, New York, San Francisco, and Washington, DC.
Arent Fox LLP has an active and versatile national Bankruptcy and Financial Restructuring practice and is recognized as a preeminent leader and is ranked in respected industry publications such as Chambers, Legal 500, US News & World Report, and The Deal's Bankruptcy Insider. The firm’s Bankruptcy and Financial Restructuring group believes that a broad, diverse, and comprehensive practice enhances and improves its ability to represent clients creatively and successfully in both transactional and litigation-oriented matters. The firm’s resources and experience enable the Bankruptcy and Financial Restructuring group to be a leading presence and force in the bankruptcy world and restructuring business and to bring added value to the representation of the firm’s clients.