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Keywords

litigationequityappealbankruptcychapter 11 bankruptcycorporation

equityappealbankruptcychapter 11 bankruptcycorporation

Related Cases

In re Franchise Services of North America, Inc., Not Reported in B.R. Rptr., 2018 WL 485959

Facts

Franchise Services of North America, Inc. (Debtor) filed for Chapter 11 bankruptcy on June 26, 2017, without obtaining the necessary consent from its equity holder, Boketo LLC, which held a blocking provision in the Debtor's Certificate of Incorporation. The Debtor's bankruptcy case was complicated by its relationship with Macquarie Capital (USA) Inc. and previous litigation involving the acquisition of Advantage Rent–A–Car. The court found that the Debtor's failure to secure Boketo's consent invalidated the bankruptcy filing, leading to the dismissal of the case.

Issue

Whether the bankruptcy court should certify a direct appeal to the Fifth Circuit regarding the validity of a blocking provision held by an equity holder that prevents a corporation from filing for bankruptcy.

Rule

A direct appeal may be certified if the judgment involves a question of law with no controlling decision from the circuit court or Supreme Court, involves conflicting decisions, or may materially advance the case's progress.

Analysis

The court analyzed the validity of the blocking provision held by Boketo LLC and determined that it was enforceable under Delaware law. The court also considered the implications of the provision on public policy and corporate authority, ultimately concluding that the lack of Boketo's consent rendered the bankruptcy filing invalid. The court found that the questions posed by the Debtor met the criteria for certification of a direct appeal.

The court analyzed the validity of the blocking provision held by Boketo LLC and determined that it was enforceable under Delaware law.

Conclusion

The court granted the Debtor's request for certification of a direct appeal to the Fifth Circuit, as the questions raised were significant and met the statutory requirements for certification.

Who won?

Boketo LLC prevailed in this case as the court upheld its blocking provision, which required its consent for the Debtor to file for bankruptcy, leading to the dismissal of the bankruptcy case.

Boketo LLC prevailed in this case as the court upheld its blocking provision, which required its consent for the Debtor to file for bankruptcy.

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Keywords

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Till v. SCS Credit Corp., 541 U.S. 465, 124 S.Ct. 1951, 158 L.Ed.2d 787, 51 Collier Bankr.Cas.2d 642, 43 Bankr.Ct.Dec. 2, Bankr. L. Rep. P 80,099, 04 Cal. Daily Op. Serv. 4224, 2004 Daily Journal D.A.R. 5841, 17 Fla. L. Weekly Fed. S 282

In re Madison Hotel Associates, 29 B.R. 1003, 8 Collier Bankr.Cas.2d 767, 10 Bankr.Ct.Dec. 770, Bankr. L. Rep. P 69,248

Nobelman v. American Sav. Bank, 506 U.S. 1020, 113 S.Ct. 654 (Mem), 121 L.Ed.2d 580, 61 USLW 3412, 61 USLW 3337, 61 USLW 3418

In re SI Restructuring, Inc., 542 F.3d 131, 60 Collier Bankr.Cas.2d 945, 50 Bankr.Ct.Dec. 133, Bankr. L. Rep. P 81,305

In re Adelphia Communications Corp., Not Reported in F.Supp.2d, 2012 WL 4165641