Not a Lexis+ subscriber? Try it out for free.
LexisNexis® CLE On-Demand features premium content from partners like American Law Institute Continuing Legal Education and Pozner & Dodd. Choose from a broad listing of topics suited for law firms, corporate legal departments, and government entities. Individual courses and subscriptions available.
In Roseton OL, LLC v. Dynegy Holdings Inc., C.A. No. 6689-VCP (Del. Ch. July 29, 2011), read opinion here, the Delaware Court of Chancery refused to grant injunctive relief requested by PSEG to block a restructuring by Dynegy that transferred assets to "bankruptcy remote" entities. The business press has written three articles about this decision since it was issued yesterday and those reports by Reuters, Bloomberg and The Wall Street Journal are available here, here and here.
Practice Pointers: Many practical guidelines for those who make their living practicing corporate and business litigation in Delaware are contained in this 57-page opinion that was written within 4 days of an expedited hearing on a TRO request. For example, there are nuanced differences between the standard for a TRO and the prerequisites that must be satisfied for a preliminary injunction ("PI"), and this opinion gingerly glides between them-and explains why the Court applied the PI standard even though it was a TRO that was sought by the plaintiffs.
Background
As is common in opinions from the Court of Chancery, the beginning of the decision devotes many pages to an exhaustive description of the many factual details that form the complex context and background of this matter, before the legal issues are "teed up" for analysis. However, in a short blog post, we focus on the legal principles and refer the reader to the link above for the whole decision to satisfy one's appetite for minutiae that are not generally applicable in future cases.
The named plaintiffs, Roseton OL, LLC and Danskammer OL, LLC, are Delaware LLCs that are indirect subsidiaries of Public Service Enterprise Group Incorporated ("PSEG"), a company engaged in various aspects of the electric power business. In a "bare bones" summary of the facts, a subsidiary of Dynegy sold two power plants to PSEG and then entered into a leaseback transaction which included a guarantee agreement executed by Dynegy's subsidiary, DHI. PSEG argued that the guaranty provisions were designed to protect against the risk that the cash flow from the two plants did not create sufficient cash to cover the lease payments payable to PSEG. A related provision prohibited the transfer of assets that would make the guarantee less valuable.
Procedural Setting
This action was filed on Friday, July 22, along with an opening brief in support of a TRO to enjoin the closing of a restructuring transaction in which assets related to the above-referenced sale-leaseback would be transferred to "bankruptcy remote" entities. The TRO was sought based on the argument that the restructuring would violate "successor-obligor" and related provisions of the guarantees, and would also constitute a fraudulent transfer. On Monday morning, July 25, an Answering Brief was filed, and on Monday afternoon, July 25, the Court held a hearing on the TRO that lasted about two hours. Supplemental briefing by each side was submitted the following day and this 57-page opinion followed a few short days later.
Issues Addressed
Whether the criteria for either a TRO or a Preliminary Injunction were satisfied based on the arguments and evidence presented on a very expedited schedule, claiming that the challenged transaction was: (i) a breach of the guarantee provisions; and (ii) a fraudulent transfer.
Bullet Points on Court's Analysis of the Law
Read more Delaware business litigation case summaries and commentary on Delaware Corporate and Commercial Litigation Blog, a blog hosted by Francis G.X. Pileggi, of Eckert Seamans.
For more information about LexisNexis products and solutions connect with us through our corporate site.