Law.com Subscribers SAVE 30%
Call 855-808-4530 or email [email protected] to receive your discount on a new subscription.
Debtor v. UST: The Battleground Over Retention of a Chief Restructuring Officer
Nearly two decades ago, a dispute between J. Alix & Associates and the Executive Office of the United States Trustee (EOUST) over J. Alix's proposed role in two turn-of-the-century restructuring cases (Harnischfeger Industries, Inc. and Safety-Kleen Corp.) led to détente, and a procedure that has generally governed the employment of chief restructuring officers (CRO) in bankruptcy cases since that time.
The "J. Alix Protocol," as it is known, does not have the force of law; rather, it is a set of guidelines by which the UST will not object to retention of a CRO under 11 U.S.C. §363(b), which allows the debtor to enter into transactions "outside the ordinary course of business" with court approval. The compromise struck in the Protocol is the incorporation of certain of the Bankruptcy Code's conflicts of interest, disclosure, and compensation guidelines applicable to case professionals (e.g., attorneys and financial advisors). See, 11 U.S.C. §Section 327(a).
Under the J. Alix Protocol:
- The CRO cannot have served on the debtor's board within two years of the bankruptcy case or invested in the debtor during that same period.
- The CRO and firm can serve in only one capacity (e.g., cannot serve as both CRO and financial advisor, also known as the "one hat rule").
- The CRO must disclose its connections with case parties and professionals.
- The CRO must report to an independent board of directors.
- The CRO must file monthly compensation reports subject to court review.
The EOUST takes the position that certain elements, such as the restriction on board service and the existence of an independent board, fix bright-line rules. Courts, however, often take a more practical or nuanced view.
The UST's Bright Line Approach, Increasingly Battle-Scarred
Recently, the local UST earned the ire of the judge overseeing the Nine West bankruptcy case in the Southern District of New York (the Hon. Shelley C. Chapman). In Nine West, lead debtor Nine West Holdings, Inc. sought to retain Alvarez & Marsal NA, LLC (A&M) to provide it with an interim CEO and certain other personnel. The proposed interim CEO had served in a similar capacity for four years prepetition, and had also served on the board of one or more of the subsidiary debtors for a period of time, in what was described as a "ministerial capacity." The proposed CEO never served on the parent holding company's board. The UST lodged the sole objection, arguing that the proposed officer's prepetition role as a director for any subsidiary debtor, no matter how minimal, disqualified A&M from retention under 11 U.S.C. §363(b).
This premium content is locked for Entertainment Law & Finance subscribers only
ENJOY UNLIMITED ACCESS TO THE SINGLE SOURCE OF OBJECTIVE LEGAL ANALYSIS, PRACTICAL INSIGHTS, AND NEWS IN ENTERTAINMENT LAW.
- 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
Already a have an account? Sign In Now Log In Now
For enterprise-wide or corporate acess, please contact Customer Service at [email protected] or 877-256-2473
Major Differences In UK, U.S. Copyright Laws
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.
Strategy vs. Tactics: Two Sides of a Difficult Coin
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.
The Article 8 Opt In
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.
Removing Restrictive Covenants In New York
In Rockwell v. Despart, the New York Supreme Court, Third Department, recently revisited a recurring question: When may a landowner seek judicial removal of a covenant restricting use of her land?