Law.com Subscribers SAVE 30%

Call 855-808-4530 or email [email protected] to receive your discount on a new subscription.

Bankruptcy Court Demolishes Baseless Lender Liability Complaint

By Michael L. Cook and Lawrence V. Gelber
January 30, 2007

Now, what I want is, facts ' Facts alone are wanted in life.' Charles Dickens, Hard Times (1854)

A Delaware bankruptcy court held on Nov. 16 that a secured lender with a $128 million claim could credit bid at a judicial sale of a Chapter 11 debtor's assets, after dismissing the expansive complaint filed against the lender by the creditors' committee in the debtor's case (claims for recharacterization of debt as equity; equitable subordination; breach of fiduciary duty; invalid loans; voidable liens; and preference liability). Creditors' Committee of Radnor Holdings Corp. v. Tennenbaum Capital Partners, LLC, et al. (In re Radnor Holdings Corp.), 2006 WL 3346191 (Bankr. D. Del. 11/16/06). In his no-nonsense opinion, which relied heavily on the Third Circuit's Jan. 6, 2006, decision in Cohen v. KB Mezzanine Fund II, L.P. (In re SubMicron Systems Corp.), 432 F.3d 448 (3d Cir. 2006) (held, creditor's debt recharacterization and equitable subordination claims against lender failed because documents were debt instruments and because creditors had not been injured), bankruptcy judge Peter J. Walsh provided a road map that should sharply curtail the baseless, extortionate demands too often made by some creditors in large reorganization cases.

Significant here was the lack of evidence to support any of the committee's claims. As shown below, there were no startling legal conclusions in the court's ruling.

This premium content is locked for Entertainment Law & Finance subscribers only

  • Stay current on the latest information, rulings, regulations, and trends
  • Includes practical, must-have information on copyrights, royalties, AI, and more
  • Tap into expert guidance from top entertainment lawyers and experts

For enterprise-wide or corporate acess, please contact Customer Service at [email protected] or 877-256-2473

Read These Next
Major Differences In UK, U.S. Copyright Laws Image

This article highlights how copyright law in the United Kingdom differs from U.S. copyright law, and points out differences that may be crucial to entertainment and media businesses familiar with U.S law that are interested in operating in the United Kingdom or under UK law. The article also briefly addresses contrasts in UK and U.S. trademark law.

The Article 8 Opt In Image

The Article 8 opt-in election adds an additional layer of complexity to the already labyrinthine rules governing perfection of security interests under the UCC. A lender that is unaware of the nuances created by the opt in (may find its security interest vulnerable to being primed by another party that has taken steps to perfect in a superior manner under the circumstances.

Strategy vs. Tactics: Two Sides of a Difficult Coin Image

With each successive large-scale cyber attack, it is slowly becoming clear that ransomware attacks are targeting the critical infrastructure of the most powerful country on the planet. Understanding the strategy, and tactics of our opponents, as well as the strategy and the tactics we implement as a response are vital to victory.

Legal Possession: What Does It Mean? Image

Possession of real property is a matter of physical fact. Having the right or legal entitlement to possession is not "possession," possession is "the fact of having or holding property in one's power." That power means having physical dominion and control over the property.

The Anti-Assignment Override Provisions Image

UCC Sections 9406(d) and 9408(a) are one of the most powerful, yet least understood, sections of the Uniform Commercial Code. On their face, they appear to override anti-assignment provisions in agreements that would limit the grant of a security interest. But do these sections really work?