Bankruptcy Litigation Representations
Some of our significant bankruptcy litigation representations include:
- Eastman Kodak Company: We currently represent an ad hoc group of holders of second lien notes (the “Second Lien Noteholders Group”) and the Second Lien Indenture Trustee in the chapter 11 proceedings of Eastman Kodak Company and its affiliated debtors and debtors in possession (collectively, the “Debtors”). The iconic photography giant filed for bankruptcy protection on January 19, 2012, citing restructuring costs, the recession, and difficulties collecting licensing fees from infringers of Kodak's intellectual property as among the causes of its impaired liquidity.
We have successfully litigated several issues arising in the case, in both the Bankruptcy Court and the District Court, on behalf of the Second Lien Noteholders Group. We commenced litigation in the Bankruptcy Court to compel the production of documents relating to the liabilities and financial condition of the Debtors, and the examination of certain members of the Debtors’ management team. The filing of the motion resulted in a settlement in which the Debtors agreed to provide all of the information that we requested on behalf of the Second Lien Noteholders Group. Akin Gump secured another significant victory for the Second Lien Noteholders Group by convincing the Debtors to withdraw and postpone any attempt to secure an incentive plan for its senior management. We also represented the Second Lien Noteholders Group in an adversary proceeding commenced by Debtors against Apple in the Bankruptcy Court, seeking a ruling that Debtors were the rightful owners of certain disputed patents. Apple filed a motion with the federal district court seeking to have the adversary proceeding immediately removed from the bankruptcy court, and asking the district court to preside over the matter through trial. The Second Lien Noteholders Group intervened in the adversary proceeding and Akin Gump filed a brief and argued before the District Court in opposition to Apple’s motion. After hearing a full day of oral argument, the District Court denied Apple’s motion from the bench, without prejudice.
- Nortel Networks Inc.: We currently represent the Official Committee of Unsecured Creditors in the Nortel Networks bankruptcy cases, a large and complex multinational insolvency proceeding involving debtor entities in the United States, Canada and 19 different countries in Europe, the Middle East and Africa (“EMEA”). During the course of these cases, the administrators of the EMEA debtor entities filed claims against the U.S. debtors for approximately $9 billion, the claims ranging from breaches of fiduciary duties as de facto or shadow directors of the EMEA entities to conspiracy and other secondary liability claims. Akin Gump, on behalf of the committee, along with the debtors, filed motions to dismiss these intercompany claims. On March 20, 2012, the Bankruptcy Court for the District of Delaware issued a decision dismissing all of the primarily liability claims asserted by the EMEA debtors against the U.S. debtors—a notable success for the U.S. estates and their unsecured creditors, in which Akin Gump played an integral role.
- General Growth Properties, Inc.: We represented the Official Committee of Unsecured Creditors of General Growth Properties, Inc. (“GGP”) in the largest real estate bankruptcy in U.S. history. Among the many litigation issues we handled in this case, Akin Gump litigators led the way in opposing the Debtors’ initial request for the approval of DIP financing, which paved the way for a competitive auction and revised DIP terms that ultimately saved the Debtors millions. Akin Gump also led the way in opposing the Debtors’ motion to extend exclusivity. The shortened exclusivity period approved by the court proved critical in triggering a plan sponsorship and exit financing arrangement which ensured that all unsecured creditors would be paid in full with interest. Alongside the Debtors, Akin Gump also opposed a challenge by secured lenders to the validity of the bankruptcy petitions filed by certain property-level debtors. After multiple days of testimony and argument, the court summarily denied the secured lenders’ motions. Had the secured lenders been successful, it likely would have been impossible for GGP to successfully restructure and emerge from bankruptcy.
- Pinnacle Airlines Corporation: We currently represent Pinnacle Airlines Corporation and its subsidiaries (together “Pinnacle”), as co-counsel, in their chapter 11 cases. At the time of Pinnacle’s bankruptcy filing in April 2012, the company provided regional flying services for Delta Connection, United Express and US Airways Express, and operated more than 200 regional jets and turboprops in the United States, Canada, Mexico, and Belize. Akin Gump spearheaded the litigation over Pinnacle’s contested DIP financing and assumption of its prepetition service contracts with Delta Air Lines, Inc. (“Delta”). Following an evidentiary hearing, the Bankruptcy Court in the Southern District of New York approved Pinnacle’s $74.3 million in DIP financing funded by Delta and the assumption of the Delta contracts, both over the objection of certain Pinnacle equity-holders. We were also extensively involved in Pinnacle’s Section 1113 litigation to reject its collective bargaining agreement with the Airline Pilots Association, the labor union representing Pinnacle’s pilot group. Following a multi-day hearing and a court ruling on the Section 1113 motion, Pinnacle successfully reached a new collective bargaining agreement with its pilots. The new collective bargaining agreement was part of a comprehensive set of agreements with various stakeholders, approved by the Bankruptcy Court, that set the framework towards a reorganization plan and included an amendment to Pinnacle’s DIP facility whereby Delta provided additional financing and entered into a restructuring support agreement.
- Washington Mutual, Inc.: We represented the Official Committee of Unsecured Creditors (the “Creditors’ Committee”) in the bankruptcy of Washington Mutual, Inc. (“WMI”), which owned Washington Mutual Bank (“WMB”) until WMB was seized in 2008 and placed in FDIC receivership. The FDIC immediately sold most of WMB’s assets to JPMorgan Chase Bank, N.A. (“JPMC”). The Bankruptcy Court in Delaware confirmed WMI’s plan of reorganization in 2012, allowing more than $7 billion in cash and other value to be distributed to creditors.
- The confirmation followed contentious litigation by WMI and the Creditors’ Committee against JPMC and the FDIC regarding:
- ownership of $4 billion in cash that WMI had on deposit at WMB and an affiliate bank
- a disputed tax sharing agreement between WMI and WMB regarding rights to several billion dollars in prospective tax refunds
- disputed ownership between WMI and WMB regarding dozens of other assets.
- WMI and the Creditors’ Committee fought several litigations against other parties, including:
- holders of mortgage-backed securities who sought to elevate their priority of payout above other securities-fraud claimants
- holders of hybrid “trust preferred” securities, regarding enforceability of a swap event related to WMB’s financial distress and billions of dollars of related property
- holders of “Litigation Tracking Warrants” related to a WMI predecessor, regarding ownership of litigation proceeds from a separate lawsuit
- opponents of confirmation who tried to upset the settlement that WMI and the Creditors’ Committee reached in 2010 with JPMC, the FDIC and WMB’s noteholders
- objectors who alleged insider trading by certain creditors.
- The confirmation followed contentious litigation by WMI and the Creditors’ Committee against JPMC and the FDIC regarding:
- Tribune Co.: In June, 2011, acting on behalf of the indenture trustees for the pre-leveraged buyout notes of Tribune Corporation, we filed 22 suits in state and federal courts across the country against approximately 1,500 named defendants (and absent defendant class members potentially numbering 30,000) seeking to avoid and recover all payments made to or for the benefit of Tribune shareholders in the 2007 leveraged buyout under state constructive fraudulent transfer laws. This litigation involves several billion dollars of damages.
- Lyondell Chemical Company: We represented a private equity firm that was the largest single creditor of Lyondell. Akin Gump litigators were at the forefront in defending a fraudulent conveyance action brought by the Official Committee of Unsecured Creditors to invalidate liens and claims of more than $20 billion of pre-petition bank loans. The case arose from the ultimately unsuccessful leveraged buyout/merger of Lyondell and Basell, the plaintiff alleging that the transaction rendered the resulting company, LyondellBasell (LBI), insolvent and undercapitalized. The position of the financing party defendants was that the merger was not a fraudulent transfer and that subsequent unforeseeable events caused the bankruptcy of LBI. The adversary proceeding was one of the largest fraudulent transfer disputes litigated in any bankruptcy court. After more than one year of extremely contentious litigation—involving novel procedural and substantive legal issues, nine testifying industry and valuation expert witnesses and more than 15 testifying fact witnesses—the Akin Gump team ultimately negotiated a favorable settlement with the Committee on the eve of trial. The settlement not only resulted in the termination of the avoidance action for pennies on the dollar, but also enabled the company to confirm its plan of reorganization and our client to emerge as the largest shareholder of the reorganized enterprise.
- Chemtura Corporation: We represented the Official Committee of Unsecured Creditors of Chemtura Corporation, a chemical manufacturer that had approximately $2.6 billion in debt when it filed for chapter 11. Akin Gump was integrally involved in each aspect of the restructuring and was critical to the negotiation of a global settlement that formed the basis of Chemtura’s plan of reorganization. The settlement and plan were opposed by the Official Equity Committee, which contended that the proposed plan undervalued the debtors and overpaid unsecured creditors. In the resulting week-long valuation trial, involving the testimony of numerous experts and fact witnesses, our litigators were actively involved. The trial resulted in a complete victory for the Committee and its unsecured creditor constituency -- the Bankruptcy Court issued a decision approving the settlement agreement and confirming the plan, over the objections of the Equity Committee. In its ruling, the court adopted the $2.05 billion valuation supported by the debtors and the Creditors’ Committee’s experts.
- Calpine Corporation: We represented the Official Committee of Unsecured Creditors (the “Committee”) in Calpine’s chapter 11 cases. Calpine filed for chapter 11 protection in 2005 with liabilities of approximately $22.5 billion and alleged total assets (book value) of $26.6 billion. Akin Gump was instrumental in a variety of high-profile matters on behalf of the Committee, including litigation regarding make-whole and no-call claims by secured and unsecured noteholders, litigation before the 2nd Circuit with respect to Calpine’s efforts to reject certain contracts and litigation between Calpine and certain of its Canadian affiliates regarding complex intercompany transactions. Additionally, Akin Gump was actively involved in the successful objection before the Bankruptcy Court to claims asserted against the Debtors’ estates by certain convertible noteholders who alleged they were entitled to hundreds of millions of dollars on claims on account of the Debtors’ alleged breach of such holders’ contractual right to convert their notes to stock in Calpine. Akin Gump also took an active role in litigation before the district court on the convertible noteholders’ appeal of the Bankruptcy Court’s ruling.
Akin Gump was also actively involved, on behalf of the Committee, in the development of, negotiation of and settlements regarding, the Debtors’ proposed plan of reorganization and its accompanying disclosure statement. Unlike most plans of reorganization, the plan in Calpine did not contain a firm valuation for the reorganized Debtors but, rather, contemplated a process for the determination of such value and the distribution of the common stock in reorganized Calpine to the holders of unsecured claims and, if applicable, interest holders in accordance with the priorities established by the Bankruptcy Code. The plan specifically provided that the Bankruptcy Court would determine the value of the reorganized Debtors in connection with considering confirmation of the plan. Valuation litigation leading up to the confirmation hearing was one of the most complex and largest valuation contests in history. After extensive discovery including over one dozen depositions, Akin Gump and the Committee’s other professionals negotiated a settlement with the Official Equity Committee of the disputed value of the reorganized Calpine that resulted in unsecured creditors obtaining 100 percent of the equity in the reorganized Calpine. Calpine emerged from chapter 11 in January 2008.
- Philadelphia Newspapers LLC: In the high-profile chapter 11 case of Philadelphia Newspapers—the parent company of The Philadelphia Inquirer, Philadelphia Daily News and philly.com—which involved almost $300 million in secured debt, we led the litigation effort on behalf of a steering group of secured lenders concerning the sale of the debtor’s assets and ultimately prevailed in our client’s bid to own those assets.
- Bear Stearns High-Grade Structured Credit Strategies Funds: We represented the Joint Official Liquidators of these funds with respect to the orderly liquidation of their assets, which consisted primarily of CDOs and other complex mortgage-backed securities and derivatives, as well as with the evaluation of potential causes of action, including avoidance actions, against various parties involved in the collapse of the funds. Among other things, we succeeded in obtaining a lengthy stay from the Bankruptcy Court, which remained in place during the pendency of prolonged cutting-edge litigation of issues arising under the relatively new chapter 15 of the Bankruptcy Code.
- Spansion Inc.: Initially, we represented the Informal Group of Certain Holders of 11.25% Senior Notes due 2016 (the “Senior Noteholders”) in a contested confirmation trial involving Spansion Inc., a debtor company in the NOR flash memory semiconductor industry. Informal groups of junior noteholders and equity holders (the “Plan Opponents”) challenged the proposed plan of reorganization, which our client supported. Despite being retained late in the pre-confirmation case, Akin Gump took a lead role in litigating the valuation of the company. Akin Gump, on behalf of the Senior Noteholders, retained its own expert, conducted its own factual investigation, developed an independent case strategy and proposed its own valuation of the company. As a result, the debtor deferred to Akin Gump’s litigators to depose the valuation expert put forward by the Plan Opponents and cross-examine that expert at trial, as well as on several other trial strategy points. After a five-day trial, the court credited our expert’s testimony and valuation opinion and adopted our valuation of the company over the valuations put forward by the debtor, itself and the Plan Opponents. The court subsequently confirmed an amended plan, which resulted in a full recovery to the Senior Noteholders.
Subsequently, Akin Gump was retained to serve as counsel for the claims agent for the chapter 11 estates of Spansion Inc. and its affiliated debtors. As counsel for the claims agent, Akin Gump investigated and prosecuted numerous preference claims and other chapter 5 causes of action. Of particular note, we commenced an adversary proceeding against non-debtor Spansion Japan Limited, seeking, inter alia, (a) the avoidance of up to $140.2 million of preferential transfers; (b) the turnover of approximately $88.1 million in debt owed by Spansion Japan; (c) the avoidance of approximately $68.3 million of fraudulently incurred obligations; (d) the disallowance of any and all claims asserted by Spansion Japan against the Debtors under section 502(d) of the Bankruptcy Code; and (e) the equitable subordination of any and all claims asserted by Spansion Japan against the Debtors. As a result of the foregoing litigation, we compelled Spansion Japan to settle its approximately $1.0 billion rejection damages claim against the Debtors for only $100 million in cash.