Bankruptcy Litigation Committee

ABI Committee News

Buyer Beware - Purchaser’s Liability for Failure to Preserve Seller’s Books and Records Relating to Assumed Liabilities

The Bankruptcy Court for the District of Delaware recently entered an opinion in Quintus Corp. v. Avaya Inc. (In re Quintus), No. 04-53074, 2006 WL 3072982 (Bankr. D. Del. Oct. 27, 2006), which is important for counsel to review both for its discussion of when a duty to preserve records arises before the filing of litigation as well as its determination of the appropriate sanctions for the destruction of records. During the pendency of the bankruptcy cases, the debtors entered into an asset purchase agreement (the “agreement”) under which they agreed to sell substantially all of their assets to Avaya Inc. (the “purchaser”) for $30 million in cash and the purchaser’s agreement to assume certain liabilities in an amount not to exceed $30 million. A chapter 11 trustee (the “trustee”) was appointed in the cases after the sale closed. Almost three years after the closing date, the trustee filed an adversary proceeding against the purchaser seeking to recover approximately $1.9 million based on the purchaser’s failure to pay certain liabilities allegedly assumed under the agreement.

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The E-Discovery Amendments to the Federal Rules of Civil Procedure

The recent amendments to the Federal Rules of Civil Procedure, effective Dec. 1, 2006, will have a significant impact on discovery practices relating to electronically stored information. The amendments will have the practical effect of requiring counsel to (1) become knowledgeable of its client’s electronic data architecture and (2) play a more active role in overseeing the production of such electronic data during discovery.

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Revoking the Debtor’s Discharge under §727(d)(3)

A recent opinion from the U.S. District Court for the Eastern District of Virginia highlights the importance of counseling clients about their duties as debtors and clarifying for them what they can and cannot do with property of the estate, even after the discharge is entered. In Jordan v. Smith (In re Jordan), the District Court of Virginia clarified the standard for revoking a chapter 7 debtor’s discharge due to the debtor’s failure to obey a bankruptcy court order. In re Jordan, 2006 U.S. Dist. LEXIS 71077 (E.D. Va. Sept. 26, 2006) (Smith, J.). The opinion makes two things clear: (1) bankruptcy court orders can form the basis for revocation of a debtor’s discharge, even those that might be considered by many as administrative in nature, and (2) notice of such order and failure to comply is all that a trustee must prove to revoke the debtor’s discharge. Accordingly, trustees and attorneys for debtors and trustees should read and understand the implications of this opinion.

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What Is a “Fair Valuation”?

In order for a trustee or debtor-in-possession (DIP) to recover a fraudulent transfer pursuant to §548 of the Bankruptcy Code (absent an actual intent to hinder, delay or defraud creditors), one key element that must be established is that the debtor was either insolvent on the date that such transfer was made or the obligation was incurred, or became insolvent as a result of such transfer or obligation. This article will examine what is involved in proving that the debtor was insolvent.

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Hiring an Expert Witness in Bankruptcy Preference Actions, Now and Tomorrow

With commercial bankruptcy filings presently at an all-time low and a steady decrease in filings occurring each year going back to 2003, it has become a much longer and drawn-out process to resolve a bankruptcy preference action. In the past, a preference action was something that got a quick resolution between the plaintiff’s and defendant’s counsels, and the possibility of it ever reaching the “daylight” of a courtroom was almost unheard of.

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Agenda for the 2007 Annual Spring Meeting

Bankruptcy Litigation and Ethics Committees Joint Meeting

Ooooooops... I Didn't Really Mean to Send That! Now What Do I Do?
The Ethical Issues and Practical Problems That Arise in Bankruptcy Litigation When E-mail Goes Awry

E-mail enables attorneys to work with efficiency that would have been unimaginable a decade ago. Mistakes, however, can happen with equal efficiency. This joint presentation by the Ethics and Bankruptcy Litigation Committees will analyze the ethical rules implicated by, and appropriate responses to, the accidental disclosure of confidential information by e-mail to opposing counsel, and will also discuss the changes to the Federal Rules of Civil Procedure that deal with this issue. The panel will also propose solutions for, and address common sense practices to resolve, the problems that arise when someone "hits the wrong key."

Hon. Barry Russell – Moderator (U.S. Bankruptcy Court, Los Angeles)
Karl Schaffer (Carter Ledyard & Milburn LLP, New York)
Steven R. Skirvin (Dion-Kindem & Crockett, Woodland Hills, Calif.)
Terri Gardner (Poyner & Spruill LLP, Raleigh, NC)
Rick Meth (Day Pitney LLP, Florham Park, N.J.)
Ted Gavin – (Poyner & Spruill LLP, Raleigh, NC)

2006 Winter Leadership Conference Minutes

On Saturday morning, Dec. 2, 2006, the Bankruptcy Litigation and ADR Committees presented a joint program entitled "Litigation Tactics and Strategic Uses of ADR after the Code Amendments."

The 1.5-hour program was moderated by Tom Salerno and covered the following issues:
1. Dillon Jackson: Strategic points from the lawyer as litigant
2. Hon. Barbara Houser: The judge as mediator
3. Hon. Redfield Baum: Judge's view on mediation - why judges like the process
4. Hon. Barry Russell: Judge's view on mediation - why judges may not like it

The program was very well received and attended.