June 03, 2022

What We’re Reading This Week [June 3, 2022]


Law 360 reports that a ruling by the Chancery Court of Delaware has left the chapter 11 bankruptcy sale of cosmetics company, Stila Styles LLC, at a standstill based on a dispute over the authority of a manger appointed in Stila’s bankruptcy proceedings. The Court found that, as a matter of contract, the company’s 2017 takeover by Lynn Tilton was invalid, and thus Tilton did not have the right to appoint a manager in the company’s bankruptcy. The Chancery Court, however, stopped short of stating who possessed the right to appoint Stila’s manager. [Law 360; May 31, 2022]

Law 360 also reports that certain affiliates of Alex Jones’ Infowars have agreed to drop their bankruptcy cases after defamation claims stemming from Jones’ espousing of conspiracy theories relating to the Sandy Hook school shooting were removed from the Chapter 11 proceedings. The Infowars affiliates at issue had filed under Subchapter V of the U.S. Bankruptcy Code, which is intended to streamline the bankruptcy process for small businesses.  To be eligible to file under Subchapter V, a debtor must have, among other things, an operating business, and several parties challenged the Infowar affiliates’ filing based on that requirement since it was not clear that they actually had operating businesses. Rather than fight those claims, and given that the defamation claims had, in any case, already been removed from the cases, the debtors’ chief restructuring officer determined that it was in the best interests of the debtors’ estates and other creditors to drop the Chapter 11 cases all together. [Law 360; June 2, 2022]

According to Law 360, the Chapter 7 trustee for LeClairRyan PLLC has asked Judge Kevin R. Huennekens of the U.S. Bankruptcy Court for the Eastern District of Virginia to approve an approximately $21 million settlement with legal services provider, UnitedLex, for its alleged part in driving the law firm into liquidation. In July 2021, the Bankruptcy Court rejected UnitedLex’s attempts to dismiss the majority of the trustee’s $128 million in claims. The case was scheduled to go to trial in April 2022 but was postponed because the trustee informed the Court that a deal had been reached. [Law 360; May 31, 2022]

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