Stephen Selbst is the co-chair of Herrick's Restructuring & Finance Litigation Group. He has more than 30 years of experience representing debtors, creditors, official committees, distressed investors and asset purchasers in bankruptcies and out-of-court restructurings. Stephen advises clients from a wide range of industries, including financial services, telecommunications, government agencies and real estate. A skilled commercial litigator, Stephen also has significant experience in district and state courts, where he regularly represents clients in separate litigation arising out of bankruptcy.  He also advises clients on structured finance and derivative transactions.

He is a frequent lecturer on bankruptcy and restructuring topics and has published articles and book chapters on bankruptcy-related topics. He has been frequently quoted in newspaper articles on insolvency related topics and has appeared on CNBC.

Introduction

Creditors of an insolvent debtor may avoid certain transfers as fraudulent conveyances under state or federal law. A fraudulent conveyance is a transfer made without the transferor receiving adequate consideration and which satisfies one of three insolvency conditions: 1) the transferor was insolvent when the transfer was made; 2) the transferor was rendered insolvent by the transfer; or 3) the transferor was left with unreasonably small capital to carry on his/her or its business.[1]
Continue Reading S.D.N.Y. Bankruptcy Court Holds that Allegedly Fraudulent Conveyances are Safe Harbored Under Section 546(e) and Provides a New Avenue of Defense

The general rule is that when a corporation or other business entity buys the assets of another entity, it does not assume the liabilities of the seller. But in New Nello Operating Co., LLC v. CompressAir, 19A-CC-603 (Ind. Ct. App. March 2, 2020), the court applied the de facto merger exception and held the buyer company (“New Nello”), which had acquired the assets through a foreclosure under the Uniform Commercial Code (“UCC”), responsible for the seller’s (“Old Nello”) debt. The facts illustrate why the court imposed liability on New Nello and provide guidance on how to avoid this result.
Continue Reading Distress Buyer in UCC Foreclosure Sale Held Liable for Seller’s Debts Under De Facto Merger Doctrine

In Rodriguez v. Federal Deposit Insurance Corp.the United States Supreme Court ruled on February 25, 2020, that a $4.1 million tax refund belonged to the bankruptcy estate of a failed Colorado bank’s parent company, United Western Bancorp, Inc. (“UWBI”), rather than to its subsidiary, United Western Bank (the “Bank”). The Federal Deposit Insurance Corporation (“FDIC”) is the receiver for the Bank.
Continue Reading The Importance of Clear Tax Allocation Agreements

On March 15, 2020, Ample Hills Holdings, Inc. and its affiliates (“Ample Hills”) commenced bankruptcy proceedings, seeking to sell substantially all of the company’s assets under chapter 11 of the Bankruptcy Code. Ample Hills is a beloved Brooklyn-based ice cream company that currently operates 10 stores primarily in the metropolitan New York area and a state-of-the-art factory in Red Hook, Brooklyn. Ample Hills intends to find a purchaser, who will enhance the founders’ vision for the playful brand, preserve jobs, and maximize the value of the company’s assets.
Continue Reading Beloved Home-Grown Ice Cream Company, Ample Hills, Seeks a Buyer

On January 13, 2020, the Supreme Court denied petitions for writ of certiorari on the question of whether payments on municipal bonds secured by special revenues are required during the issuer’s bankruptcy. Special revenue bonds are paid from pledged revenues generated from a specific activity. The case arose because after the Puerto Rico Highway and Transportation Agency (PRHTA) commenced its municipal reorganization case in 2017, it refused to make a July 2017 payment of $219 million, arguing that the automatic stay of the Bankruptcy Code precluded such payments. That dispute followed actions by Puerto Rico’s governor and legislature in 2015 and 2016, in which they had diverted PRHTA’s special revenues, which consisted of tolls, motor fuels, taxes and other transportation-related revenues, for payment of the Commonwealth’s other obligations.
Continue Reading Bond Market Shaken (Not Stirred) As Supreme Court Declines To Hear Puerto Rico Municipal Bonds Dispute

Introduction

The First Circuit recently ruled in Sun Capital Partners III, LP v. New England Teamsters & Trucking Ind. Pension Fund that two investment funds controlled by private equity firm Sun Capital were not part of a “controlled group” with a former portfolio company, Scott Brass, Inc. (“Scott Brass”), and therefore not liable for Scott Brass’s withdrawal liability from a multi-employer pension plan.[1] While this decision ends the decade-long attempt by the New England Teamsters pension fund to hold the Sun Capital funds liable, the opinion is not a repudiation of the principle that private equity funds may constitute a “controlled group” for purposes of pension plan withdrawal liability. Rather, it signals that each case will have to be evaluated on its own facts. So, while the ruling is good news for Sun Capital, the message for investors is that they need to be mindful of pension plan withdrawal liability in structuring private equity acquisitions.
Continue Reading First Circuit Rules that Sun Capital Funds Not Part of “Controlled Group” and Not Liable for Pension Plan Withdrawal Liability