Category: Celebrity Bankruptcy

  • Is Elon Musk Trying to Protect Alex Jones’s X Accounts?

    Posted by

    Adam Levitin

    There's a fascinating development in the Alex Jones Chapter 7 case.  Jones ended up in bankruptcy to try to avoid paying on the defamation judgment the Sandy Hook victims' families won against him. His case converted to a Chapter 7, and a trustee has been liquidating his assets. Among the assets the trustee is trying to sell are Jones's social media accounts in X (formerly Twitter). 

    X has since filed an objection to the sale claiming that the X accounts are not the property of Jones, but are instead owned by X, which merely issued Jones a non-transferable license.  Now this "limited" objection is only about the "accounts" proper, not the content Jones posted on X. X claims that it is objecting because of it has an interest in preventing the transfer of accounts because of its concern about making sure that users are who they say they are.

    X's professed concern about fake accounts is risible. X does not generally verify its users when it onboards them. Nor does X appear monitor in any way to determine if an account has in fact been transferred. Instead, X is a platform that is lousy with fake accounts and bots. So what's this really about?

    As far as I can tell, the X objection to the sale is about Elon Musk wanting to ensure that Alex Jones can continue to use his Twitter handles and retain his followers and make it very difficult for anyone to delete or edit Jones's old posts.

    (more…)

  • Alex Jones, Chapter 7, and the Means Test

    Posted by

    Jason Kilborn

    I'm embarrassed to have fallen into an analytical trap that yet again reveals the absurdity of the means test. When I saw that Alex Jones was converting his personal Chapter 11 case to Chapter 7 liquidation, I wondered, "how in the world could Alex Jones pass the means test?!" Well, a quick look at section 707(b) reminded me that some pigs are more equal than others: the means test applies only to debtors "whose debts are primarily consumer debts." The $1.5 billion defamation debt obliterates the means test … because of course Alex Jones's personal bankruptcy case is not an abuse of the system (!). Further evidence in support of the thesis of Melissa's new book, it seems.

  • NIL and Bankruptcy

    Posted by

    Adam Levitin

    Bankruptcy lawyers are familiar enough with issues presented but NOLs. And NILs (name, image, likeness rights) have existed for as long as the modern Bankruptcy Code. But those rights have usually come up in the context of debtors with established, valuable brands (e.g., Mike Tyson). Now college atheletes can enter into NIL deals, and for many of them the value isn't yet established and there might not even be licensing deals yet. That situation poses the question of to what extent unlicensed NIL rights are property of the bankruptcy estate, and not of the debtor?

    (more…)

  • A Trump Bankruptcy:  Further Thoughts

    Posted by

    Adam Levitin

    A lot of the debtor-creditor relationship can be characterized by creditors threatening to push debtors out the window and debtors threatening to jump.  Ted Janger reminded me of this defenestration dynamic today regarding the Trump civil fraud judgment.  In my previous post, my assumption had been that the New York Attorney General’s goal was to foreclose on some of Trump’s marquee properties, but Ted suggested that the goal might simply be to trigger cross-default clauses, compounding Trump’s liquidity problems and forcing him into bankruptcy. In other words, bankruptcy might be the goal of the New York Attorney General, rather than a defensive strategy for Trump.  “I’ll jump,” “No, I’ll push.” 

    (more…)

  • A Trump Bankruptcy?

    Posted by

    Adam Levitin

    Will Donald Trump file for bankruptcy? It's certainly a possibility as Trump struggles to come up with a supersedeas bond for staying the NY Attorney General's civil fraud judgment against him while he takes an appeal.

    I don’t know the strength of Trump’s possible arguments for an appeal, but the legal arguments might be beside the point. If Trump wins the election, the entire dynamic of the litigation changes. Is the New York Attorney General really going to enforce a judgment against the President-elect, particularly one who is likely to be vengeful once in office? Maybe, given that we will likely be facing an period of extended lawfare, but the calculus for enforcement or settlement shifts in Trump’s favor if he wins election. That means that Trump’s best move might be trying to run the clock until Election Day:  7 months and 17 days.  And maybe not even that long. The optics of pursuing the collection on the eve of the bankruptcy will make it look very political and might generate sympathy for Trump. So Trump might only need to run the clock, say, 6 months. That’s where bankruptcy comes in.

    (more…)

  • Unbundling Business Bankruptcy Law

    Posted by

    Melissa Jacoby

    A long-in-process draft article has just become available to be downloaded and read here. Comments remain welcome.  The Weinstein Company bankruptcy features prominently in this draft article. 

    Every contract in America contains an invisible exception: different enforcement rules apply if a party files for bankruptcy. Overriding state contract law, chapter 11 of the federal Bankruptcy Code gives bankrupt companies enormous flexibility to decide what to do with its pending contracts. Congress provided this controversial tool to chapter 11 debtors to increase the odds that a company can reorganize. To promote this objective while also preventing abuse and protecting stakeholders, Congress embedded this tool and others in an integrated package deal, including creditor voting. The tool was not meant as a standalone benefit for solvent private parties to pluck from the process for their own benefit, like an apple from a tree.

    In recent decades, the chapter 11 package deal has been unbundled in practice, typically on grounds of economic urgency. While scholars and policymakers have attended to the quick going-concern sales of companies featured in unbundled bankruptcies, they have not sufficiently explored the challenges associated with a contract-intensive business.

    To help fill that gap, this draft article illustrates how the ad hoc procedures used to manage quick sales of contract-intensive businesses can undercut two major chapter 11 objectives: maximizing economic value and fair distribution. They amount to a wholesale delegation of a substantial federal bankruptcy entitlement to a solvent third party. In addition to the impact on economic value and distribution, this draft article also explores a Constitutional problem with this practice: it arguably exceeds the scope of the federal bankruptcy power.

     

  • Elliott, Apollo, Caesar’s Palace and a Bunch of Bankruptcy Law Professors

    Posted by

    Mitu Gulati

    One of the most dramatic stories in corporate finance and bankruptcy over the past decade has been the Caesar's Palace battle between a bunch of hard nosed distressed debt hedge funds and big bad private equity shops.  A bunch of masters of the universe types fighting it out to the death. (For my part: I'm interested in this because some of the big players from the Argentine pari passu battle are involved and there was a battle over the aggressive use of Exit Consents).

    Turns out that this Caesar's story is going to be front and center at an upcoming bankruptcy conference that three good friends, Bob Rasmussen, Mike Simkovic and Samir Parikh are running, where one of the authors of "The Caesar's Palace Coup", the FT's Sujeet Indap, is going to be on a panel with the heavy hitters, Ken Liang, Bruce Bennett and Richard Davis. I always find it fascinating to hear how financial journalists and law professors, both of whom have dug deep into a set of events, tell the same story. 

    The formal announcement, courtesy of Samir Parikh, is here:

    (more…)

  • Trump’s Personal Guaranties and Liquidity

    Posted by

    Adam Levitin

    The revelations about Donald Trump's taxes might hold in them an explanation for why he didn't divest from his businesses when he became President, despite the obvious political problems that was going to create:  he couldn't afford divesting.  

    Trump seems to have personally guarantied hundreds of millions of dollars of corporate borrowing. That's not uncommon for someone in his position, but I would imagine that at least some of those personal guaranties have key man provisions that require him to remain involved with the business. If he doesn't, the loan (and guaranty) might be in default and callable. And there are surely cross-default clauses in some of the borrowings, so it wouldn't be just one loan that could come due, but a bunch of them. It's pretty clear that in 2016 Trump didn't have the liquidity (and perhaps not even the assets) to deal with that sort of situation. 

    Now let's be clear. There might have been other motivations for Trump to retain control over his businesses. But to that list, we should add the possibility that he had boxed himself in and couldn't divest even if he had wanted to without ending up broke. 

  • The Weinstein Company Bankruptcy: What She Said

    Posted by

    Melissa Jacoby

    Nearly a year has passed since my last Credit Slips post on The Weinstein Company bankruptcy. The case, filed March 2018, remains open. Contract disputes have dominated many if not most bankruptcy court hearings this past year. The issues have been interesting, the amounts at stake substantial, and, in litigated disputes, the buyer of TWC's assets typically has prevailed (some appeals are pending). Other contract disputes have settled, but often with key terms redacted, further complicating efforts to evaluate this bankruptcy on even the most accepted of metrics. In May 2019, parties informed the court they were still negotiating a deal with misconduct survivors, although TWC acknowledged that it had not conducted an investigation that would enable its board to sign off on any such deal, and its existing legal team was neither equipped nor priced to handle that work. That this acknowledgement should be astonishing is the subject for another day. In any event, updates on negotiations have yet to materialize in the form of a court hearing or status conference. In the past few months, the TWC docket has grown mainly with the reliable beat of monthly professional fee applications.

    Tomorrow, Sept. 10, 2019, is the official release date of She Said, by Jodi Kantor and Megan Twohey, on their investigation of Harvey Weinstein leading up to their October 2017 reporting. I doubt She Said will contain new information about TWC's bankruptcy per se. In all likelihood, though, She Said will drive home just how much Harvey Weinstein's alleged predatory acts were intertwined with the operation and management of TWC. 

  • In the Zone: The Weinstein Co. Chapter 11 Hearings #9-13

    Posted by

    Melissa Jacoby

    Since my last Credit Slips post about The Weinstein Co. chapter 11, there have been five public hearings/status conferences (some of which were telephonic). Disparate observations from those hearings below.

    (more…)