2009 Chapter 11 Recent Developments (Part I)

bankruptcy code] - by way of § 1519 - may be ordered on a provisional basis pending the hearing on recognition. "

Holding:

(1)

Imposition of § 362 as provisional relief under § 1519 is not subject to the requirement of § 1519(e) requiring an adversary proceeding for injunctive relief to be granted.

(2)

Sufficient authority exists under §§ 1519(a), 105(a), (d) to impose the automatic stay provisionally herein to apply to the debtors' U.S. assets.

(3)

Section 363 (by consent of the petitioners) also applies provisionally with respect to the U.S. assets.

Reasoning: Because the debtors are not seeking relief under § 1519(e), the requirements of that section do not apply. Additionally, an analysis of § 1519(e) with § 1521(e) does not support the position that all relief sought under § 1519 requires the imposition of an adversary proceeding. Also, the automatic nature of § 362 (which is a very different type of relief than an injunction or TRO) is such that it does not make sense to require an adversary proceeding. And, because it applies automatically once a foreign proceeding is recognized under § 1520, it does not follow to require an adversary proceeding to impose § 362 under either §§ 1519, 1521. And authority exists in the bankruptcy code - §§ 1519(a), 105(a) and 105(d) - to allow the imposition of § 362 during the 'gap' period between the time a debtor petitions for relief under chapter 15 and the time the court holds the recognition hearing.

c. Sales

25th Street Associated, LLC, et. al. v. In re Union Sq. Associates, LLC, et. al. (In re Union Sq. Associates, LLC), 392 B.R. 474 (Bankr. D. Utah 2008)

Facts: Plaintiffs sued the debtor for equitable relief and asked the court to correct a credit bid that the plaintiffs had made for the purchase of certain property that was part of the debtor's estate.

Issues: Whether, under Utah law, equitable relief is available to the plaintiffs.

Holding: The court granted the plaintiff's request and rescinded the original credit bid and ordered the plaintiffs to make a corrected credit bid. The court imposed costs on the plaintiffs.

Rules: In Utah, "equitable relief is traditionally limited to cases of fraud, misrepresentation, duress, undue influence, mistake or waiver." Reformation of a contract "exists when it can be satisfactory proved (1) that the instrument, as made failed to conform to what both parties intended; or (2) that the claiming party was mistaken as to its actual content and the other party, knowing of this mistake, kept silent; or (3) that the claiming party was mistaken as to actual content because of fraudulent affirmative behavior." Rescission is available for situations in which there is a unilateral mistake if (i) the mistake was so grave that to enforce the contract would make it unconscionable, (ii) the mistake relates to a material part of the contract, (iii) the mistake must have happened despite ordinary diligence, (iii) rescission must not cause serious prejudice to the other party except for the loss of the bargain (return the parties to status quo).

Reasoning: The original - and mistaken - credit bid was only the plaintiff's mistake and not attributable to the defendants, thus, it was a unilateral mistake on the part of the plaintiff. Therefore, reformation is not available to the plaintiffs. However, the mistake meets the four elements for the court to allow rescission of the contract; to meet the fourth element, the court ordered that (a) the plaintiffs to replace the credit bid with a corrected bid, (b) the plaintiffs reimburse the defendants for the costs incurred in litigating this adversary proceeding.

In re TSIC, Inc. (f/k/a Sharper Image Corp.), 393 B.R. 71 (Bankr. D. Del. 2008)