by: Kyung S. Lee
Diamond McCarthy LLP
Houston
The Tenth Circuit in Southwest Food Distributors, LLC, 561 F.3d 1106 (10th Cir. 2009), affirmed the denial of the proposed retention of “national” counsel by the committee of unsecured creditors. “While the right to select counsel of one’s own choice is an undeniable right afforded to participants in bankruptcy, that right is not without boundaries. We cannot say that the court abused its discretion in deciding that the case did not merit the appointment of two sets of counsel, and that the [local law firm] could adequately perform the job.” Id. at 1113. In so holding, the Tenth Circuit addressed and rejected a series of arguments traditionally made by applicants in seeking Bankruptcy Court approval of counsel and professionals. We review those arguments in this article.
Read the full article.
by: Patricia B. Tomasco
Munsch Hardt Kopf & Harr, P.C.
Austin, Texas
Unsecured trade creditors in mid- to large-sized chapter 11 cases are frequently targets of distressed-debt traders looking to buy unsecured claims. These traders make their money in a variety of ways, principally on the assumption that the claims they buy today will be worth more later either in the distressed-trade market or upon plan distribution. For creditors who are unfamiliar with the jargon and practices of the distressed-debt market, this can sometimes lead to lawsuits. In one such case, the seller of a claim sold the claim on terms agreed to on a phone call. On the phone call, the buyer said the trade was subject to further documentation “on customary terms.” Later the buyer informed the seller that the trade was actually subject to the buyer locating another buyer to buy the claim at the stated price. Needless to say, the market price for the claim went down and the buyer reneged, claiming that it was only acting as a “riskless principal.” A lawsuit ensued.
Read the full article.
