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- Lenders and Developers Need to Understand How Louisiana's Private Works Act Applies to Their Projects By J. Eric Lockridge A recent opinion from the United States Bankruptcy Court in Baton Rouge, Louisiana shows that even experienced lenders and developers may not always understand how Louisiana’s Private Works Act applies to their project, and how much leverage a properly filed notice of contract can provide to a general contractor. Tuscany Reserve, LLC (“LLC”) was formed by sophisticated developers for the purpose of developing a new apartment complex in Baton Rouge. LLC obtained acquisition and construction financing from a bank (1st Bank), which properly recorded its mortgage on the project before work commenced. LLC hired “Contractor” to build the complex; Contractor recorded its notice of contract in the parish mortgage records. As often happens, a dispute developed between LLC and Contractor regarding the work performed and lack of payment. Contractor stopped work and filed a lien on the property under the Louisiana Private Works ....
- Landlord Entitled to Immediate Possession of Possession of Premises By J. Eric Lockridge Does a tenant’s failure to expressly assume a commercial lease within 120 days of filing bankruptcy give its landlord the right to immediate possession of the leased premises? Yes, according to several recent court decisions. The bankrupt tenant’s landlord is entitled to immediate possession of the leased premises, without going through the time and expense of moving to lift the automatic stay and pursuing an eviction in state court, or commencing an adversary proceeding in the bankruptcy court.For example, “The Deli Den” was leasing commercial space in south Florida when it filed a chapter 11 bankruptcy in October 2009. The Deli Den neither assumed nor rejected its commercial lease within 120 days of filing bankruptcy. The landlord filed an emergency motion seeking an order requiring its bankrupt tenant to immediately surrender the leased premises. The key question was the proper interpretation of the Bankruptcy Code at 11 U.S.C. § ....
- 363 Sales of Assets in Bankruptcy - Chrysler and Beyond By Eric Lockridge The judge overseeing Chrysler LLC’s bankruptcy entered an order on June 1, 2009 approving Chrysler’s motion seeking permission to sell substantially all of its assets to a new company. The procedure by which this sale was accomplished, and by which a similar sale in the GM bankruptcy will likely be accomplished, is known in the bankruptcy and finance worlds as a “363 Sale,” after the relevant provision of the U.S. Bankruptcy Code. (For those well-versed in 363 Sales, see Stephen Sather’s thoughtful post about practical and ethical concerns with the Chrysler sale here. )Section 363(b) of the Bankruptcy Code (11 U.S.C. § 363(b)) allows a company that files for bankruptcy (“the Debtor”) to sell some or all of its assets outside the ordinary course of its business, provided that the Debtor obtains court approval to do so. A 363 Sale can be a particularly attractive option for disposing of assets or business lines ....
- Businesses Seeking Bankruptcy Protection at Highest Level in Two Years By Eric Lockridge The number of businesses seeking bankruptcy protection hit its highest level in more than two years in March, as the recession sends more companies into financial crisis, according to a story today in the Dow Jones Daily Bankruptcy Review. The 7,843 commercial bankruptcy filings in March 2009 represent a 23.2% jump from the 6,365 filings the previous month. It's also the highest monthly total of business filings since at least 2006, according to Automated Access to Court Electronic Records, or AACER. Other data from AACER, a private firm that tracks bankruptcy filings, shows a 52.4% increase in business bankruptcy filings during Q1 of 2009 over the number of filings in Q1 of 2008. One expert predicts a record number of public companies to file bankruptcy this year. Read the entire story here. ....
- "Zone of Insolvency" Claims Against Officers and Directors Still Alive (and Well?) Outside of Delaware By J. Eric Lockridge In the current economy, corporate officers and directors face an increased risk of derivative suits and other litigation against them from frustrated shareholders and other stakeholders in a corporation. Should officers and directors also be concerned about claims brought against them by their company’s creditors? The answer may depend on what state’s law applies to the creditors’ claims.It is well settled that directors and officers of a corporation owe to shareholders three primary fiduciary duties: the duty of care, the duty of loyalty, and the duty of good faith. Language from a 1991 Delaware case, however, caused concern that directors of an insolvent firm, or a firm in the “Zone of Insolvency,” owe fiduciary duties to the corporation’s creditors, also. The controversy concerning the perceived expansion of director duties arose out of a footnote in Credit Lyonnais Bank Nederland, N.V. v. Pathe Communications Corp., No. ....
- Preparing for a Tenant's Bankruptcy - the Landlord's Perspective by J. Eric Lockridge In today’s distressed retail market, the possibility of a tenant’s bankruptcy is a top concern for managers and owners of retail centers. Owners of commercial office buildings in many parts of the country are becoming increasingly concerned about tenant bankruptcies, too. Landlords need to know the options available when a tenant files for bankruptcy and should anticipate a tenant/debtor’s likely maneuvers in bankruptcy. This article provides a summary of relevant law and key strategic considerations to help landlords minimize losses and protect their interests when a tenant files bankruptcy. Leases & “Executory Contracts” Section 365 of the Bankruptcy Code allows a debtor (i.e., an entity that has filed for bankruptcy) to either assume or reject an executory contract or unexpired lease. This way, a debtor may decide to assume any valuable contracts and reject any burdensome ones. If a bankruptcy tenant decides to assume an ....
- How Does Chapter 11 Affect My Business When a Customer, Competitor or Vendor Files for Bankruptcy? By J. Eric Lockridge Chapter 11 bankruptcies are on the rise, and many expect that trend to continue. In the third quarter of 2008 there were 70% more Chapter 11 filings than in the third quarter of 2007, according to Automated Access to Court Electronic Records, a company that tracks bankruptcy statistics. Experts are predicting a record number of corporate bankruptcies – from large public companies to small local-only businesses – in 2009, and possibly beyond. With corporate bankruptcies becoming more common, businesses leaders across all industries are wondering: What exactly is a Chapter 11 bankruptcy, and how does it affect my business when a customer/vendor/competitor files for bankruptcy? This post and future posts on the Louisiana Law Blog are intended to help you understand the Chapter 11 process and answer some of your business bankruptcy questions.Some Fundamentals: In brief, Chapter 11 is a tool that companies facing financial distress may use to hold their ....
