BANKRUPTCY DEPARTMENT UPDATE – FEBRUARY 2023

Posted on January 25th, 2023

Led by Department Chair James G. Aaron, in coordination with partners Joshua S. Bauchner and Anthony J. D’Artiglio, Ansell’s attorneys are well versed in the intricacies of bankruptcy practice. Our bankruptcy attorneys are here to offer the knowledge and advice about the benefits and detriments of the different types of bankruptcy; Chapter 11, Chapter 13, and Chapter 7 proceedings, all of which should be considered prior to any individual or business filing for bankruptcy. Before filing, our attorneys will provide a complete analysis of our client’s assets and guide them through the establishment of an asset protection plan.

The Firm represents numerous national and state banking institutions, Fortune 500 companies, and many local corporate entities in restructuring corporate debt, and represents both creditors and debtors in all proceedings.

In particular, the Firm represents commercial landlords whose tenants file for bankruptcy. The landlord becomes an estate creditor and has numerous, defined rights under the U.S. Bankruptcy Code. As set forth below, Ansell recently experienced significant success on behalf of our landlord/creditor clients protecting their interest in realty and securing against abuse of the bankruptcy process by recalcitrant debtors.

The firm also handles state court insolvency matters, an alternative to federal bankruptcy, known as an assignment for the benefit of creditors (“ABC”). Similar to a Chapter 7 liquidation proceeding, an ABC permits a debtor to assign its claims to an assignee — here, an attorney with the Firm appointed by the Court — to pursue preferential and fraudulent claims under state law.

By example, here are some of the Firm’s recent successes in this practice area:

Recovery for Landlord in Debtor’s Attempt to Escape Obligations 

Partner Anthony J. D’Artiglio and Shareholder and department co-chair Joshua S. Bauchner recently secured a favorable decision from the Bankruptcy Court in the Southern District of New York in the Fairway Group Holdings Corp. matter. Our client, Debtor’s property owner, filed a multi-million-dollar cure objection asserting that Debtor had failed to repair and maintain the property in accord with its lease obligations, and thus needed to make the necessary repairs or pay for the repairs as part of the lease assumption and assignment. Debtor sought to dismiss the cure objection, arguing that the new tenant was responsible for all pre-assignment defects as part of the lease’s ongoing repair and maintenance obligations and that, because property owner did not issue a default notice pre-petition pursuant to a lease provision, property owner could not claim that a “default” existed requiring cure pursuant to the Bankruptcy Code. The Court resoundingly rejected Debtor’s arguments, holding that (i) Debtor is responsible for all necessary pre-assignment repairs pursuant to the lease because the buyer took the property “free and clear” of any and all defaults by Debtor at the time of the assignment, and (ii) landlord was not required to formally notice a “default” under the lease to seek the cost of repairs from Debtor for any pre-assignment condition in need of repair particular where, as here, Debtor was on notice upon the filing of the cure objection.  As a result of this favorable ruling, our client can recover millions of dollars in repair costs.

Conversion to a Chapter 7 and Vacature of Extension of Automatic Stay

The Firm successfully compelled conversion of a meritless Chapter 11 to a Chapter 7 proceeding and convinced the Court to vacate an extension of the automatic stay to the principal’s of the Debtor company. Debtor filed a Chapter 11 petition in the District of New Jersey just before it and its principals were scheduled to face trial in the Western District of Missouri on multi-million dollar fraudulent scheme related to the sale of a business. Led by Joshua S Bauchner and Anthony J. D’Artiglio, the firm successfully convinced the Court to vacate an extension of the automatic stay to the principals of Debtor who sought to utilize the Bankruptcy to shield themselves from liability. Furthermore, we vigorously opposed confirmation of a meritless Plan of Reorganization, culminating in Debtor voluntarily converting its Chapter 11 reorganization to a Chapter 7 liquidation requiring the appointment of a Trustee to pursue our client’s and other creditors’ interests. As a result, the adversary complaint and related Bankruptcy matters were dismissed in New Jersey permitting the action to proceed to trial in Missouri.

Protection for Landlord from Tenant Bankruptcy  

Partner Anthony J. D’Artiglio and Shareholder Joshua S. Bauchner secured an extremely favorable settlement on behalf of a property owner whose tenant filed for bankruptcy after failing to make any rent payments over a prolonged period. Following our filing of an application to compel lease rejection or for relief from the automatic stay, the tenant agreed to pay outstanding rent and additional rent, our client’s attorneys’ fees and costs, and to increase the security deposit as a condition of assumption of the lease, ensuring the property owner was not harmed by the tenant’s bankruptcy filing.

Relief for Landlord from Automatic Bankruptcy Stay 

Partner Anthony J. D’Artiglio and Shareholder Joshua S. Bauchner successfully secured relief from the automatic bankruptcy stay for a landlord whose tenant had sublet the property without authorization, failed to pay substantial rent, and additional rent due and owing. We successfully convinced the Court to order the tenant to make post-petition payments on an ongoing basis and to lift the automatic stay to permit the property owner to pursue the tenant for damages and eviction in State Court while the bankruptcy remained pending.

For additional information concerning Ansell’s Bankruptcy Department, please contact us at (973) 247-9000, or email James G. Aaron (jga@ansellgrimm.com), Joshua S. Bauchner (jb@ansellgrimm.com), or Anthony J. D’Artiglio (ajd@ansellgrimm.com).

 

About Ansell Grimm & Aaron, PC
Ansell Grimm & Aaron, PC was founded in 1929 and has a long history of delivering for clients who come to us to resolve legal matters that are often urgent, stressful, and of great importance. A general practice law firm, Ansell Grimm & Aaron is powered by experienced attorneys who understand that the best outcome is the one that serves the needs of each client.

The above is for informational purposes only and does not constitute legal advice. Transmission of the materials and information contained herein is not intended to create, and receipt thereof does not constitute the formation of, an attorney-client relationship. Attorney advertising.