Photo of Kevin J. Walsh

Kevin Walsh is a Member in the firm’s Boston office. His practice encompasses restructurings, workouts, and commercial financing transactions.  He represents parties in bankruptcy cases in courts around the country and handles out-of-court workouts and receivership matters.  Kevin also advises corporate boards on fiduciary duty issues around insolvency.


In the Ultimate Escapes bankruptcy case, the U.S. District Court for the District of Delaware recently held that the “business judgment rule” may protect fiduciaries who negotiate and enter into unconventional financing agreements in an attempt to save the company. In short, a failed business strategy by itself does not lead to liability for breach of fiduciary duty.

Before the Great Recession, Ultimate Escapes was a luxury destination club providing members with access to high-end vacations. Membership involved a high one-time initiation fee and annual membership dues.

Prior to the bankruptcy, James Tousignant served as President, CEO, and a member of the Board. Richard Keith served as Chairman of the Board. Ultimate Escapes owed its senior lender approximately $90 million secured by all assets of the company. Tousignant and Keith had personally guaranteed the loan.


Lending credence to the old adage “if it’s too good to be true, then it probably is,” the Seventh Circuit Court of Appeals recently held that a secured lender was on inquiry notice of possible fraud by its borrower in impermissibly pledging customers’ assets to secure loans. And the penalty was steep—the Court determined the pledge to be a fraudulent transfer to the lender and the lender’s failure to act upon inquiry notice destroyed the lender’s good faith defense. As a result, the lender’s $300 million secured claim was reduced to a near-worthless general unsecured claim.  Continue Reading Turning A Blind Eye Cost Lender Hundreds Of Millions Of Dollars; Inquiry Notice Spoils Lender’s Good Faith Defense In Fraudulent Transfer Case

Many of us have endured the nightmare of a disastrous home renovation or at least enjoyed Tom Hanks in The Money Pit (How long? Two weeks, of course). Well imagine spending half a million dollars, not for a new and improved home, but rather chasing your contractor for paid, but never completed, work.

That is exactly what happened to one homeowner, said the Delaware Chancery Court in Doberstein v. G-P Indus., Inc. In October 2012, Doberstein contracted with a building company on a significant home renovation project. Despite paying over $300,000, the project saw little progress over the next 14 months. When the company promised to complete the project in the next few weeks and asked for additional funds, Doberstein handed over an additional $150,000. Shortly thereafter, the company abandoned the project and ceased doing business, citing an inability to continue because of financial troubles. Continue Reading Piercing The Corporate Veil Takes More Than Just Fraud By The Individual

At first glance, Stanziale v. MILK072011, looks like someone suing over a bad expiration date and conjures up images of Ron Burgundy proclaiming “Milk was a bad choice.” But in actuality Stanziale is much more interesting: it answers whether one can breach their fiduciary duty by exposing an employer to a claim under the aptly-named WARN Act, which requires employers to tip off their workers to a possible job loss.

Continue Reading A WARNing to Directors and Officers — Failure to Give Proper WARN Act Notice May Breach Your Fiduciary Duty

Generally, once a plan of reorganization is confirmed and substantially consummated, an appellate court will not “unscramble the egg” and grant appellate relief if doing so would harm third parties that relied on the confirmation order. Almost 20 years ago, the Third Circuit Court of Appeals articulated the doctrine of equitable mootness to address this scenario. Equitable mootness is “a judge-made abstention doctrine that allows a court to avoid hearing the merits of a bankruptcy appeal of a confirmation order because implementing the requested relief would cause havoc.”  Recently, the Third and Ninth Circuits helped clarify the application and scope of the equitable mootness doctrine and found that not all substantially consummated plans are protected by the equitable mootness doctrine.

The Third Circuit has two recent opinions concerning equitable mootness: Continue Reading When it is Fair: Recent Circuit Court Decisions on Equitable Mootness

In our prior post, we discussed the standard a creditor must meet to sue an insolvent corporation for breach of fiduciary duties, as laid out in the Quadrant Structured Products Co., Ltd. v. Vertin decision.  Another notable takeaway from the Quadrant decision was the Court’s overview of the “landscape for evaluating a creditor’s breach-of-fiduciary-duty claim” in Delaware, highlighted by the following: Continue Reading Overview of the Landscape for Evaluating Creditors’ Breach of Fiduciary Duty Claims in Delaware

The Delaware Court of Chancery recently held that, for a creditor to have standing to bring a derivative breach of fiduciary duty action, the creditor need only establish that the corporation was insolvent at the time the creditor’s action was filed—not that the corporation continued to be insolvent until the date of judgment. Further, the creditor need only establish that the corporation was “balance sheet insolvent,” rather than meeting the more rigorous “irretrievably insolvent” standard.  Finally, the decision provides a useful summary of the current state of Delaware law regarding creditor breach of fiduciary duty claims.


In Quadrant Structured Products Co., Ltd. v. Vertin, Quadrant Structured Products Co., Ltd., a creditor of Athilon Capital Corp., sued Athilon’s directors, its controlling shareholder EBF & Associates, and EBF’s affiliate Athilon Structured Investment Advisors, LLC (ASIA) for alleged breaches of fiduciary duty and preferential transfers. Athilon had been created to sell credit protection to large financial institutions, writing credit default swaps on senior tranches of collateralized debt obligations. Following the 2008 financial crisis, Athilon paid hundreds of millions of dollars to unwind two swaps involving mortgage-backed securities. In the wake of the crisis, financial institutions were unwilling to enter into credit swaps with entities such as Athilon that lacked substantial capital. Athilon could no longer engage in the only business that it was permitted to pursue under its charter and operating guidelines, which had been narrowly limited to meet requirements imposed by the credit rating agencies.

Continue Reading Quadrant Court Further Defines Creditor Derivative Standing for Breach of Duty Claims