When the commercial stakes are highest, clients rely on Paul, Weiss to handle their most challenging and fast-moving bankruptcy and insolvency-related disputes. Combining the capabilities of our market-leading Restructuring Department and our renowned Litigation Department, we work to achieve the most favorable results for our restructuring clients, whether in the courtroom or in settlement negotiations.
Apollo Investment Corporation Wins Summary Judgment
- Client News
- December 2, 2020
Practices
Paul, Weiss won summary judgment on behalf of Apollo Investment Corporation (AIC) in a dispute in U.S. Bankruptcy Court for the District of Delaware arising from a 2010 restructuring of a dialysis company. In a decision that significantly limits AIC’s potential exposure, U.S. Bankruptcy Judge Karen Owens granted summary judgment in favor of AIC and certain co-defendants on a claim of aiding and abetting a breach of fiduciary duty. Claims of actual and constructive fraudulent transfer under the federal Bankruptcy Code and Delaware state law remain pending against AIC and its co-defendants.
The trustee for the debtor estate filed suit in 2013 against the controlling shareholder, directors, officers and certain entities that held non-controlling equity and debt in the debtor, claiming that the restructuring had allegedly stripped the debtor of all of its valuable assets for inadequate consideration. The plaintiff largely relied on the fact that the restructured entity was sold around one year later for an amount that exceeded the company’s valuation at the time of the restructuring. In addition to asserting claims for fraudulent transfer and breach of fiduciary duty against the controlling shareholder and director and officer defendants, the trustee claimed that AIC and other non-controlling equity and debt holders had aided and abetted the alleged fiduciary breach by consenting to the restructuring. The trustee sought over $425 million in damages. On February 4, Judge Owens issued an order capping the trustee’s recovery with respect to his fraudulent transfer claims to the amount of allowed creditor claims, but declining to impose such a cap with respect to the aiding and abetting breach of fiduciary duty claim.
In dismissing the aiding and abetting claims, Judge Owens found that there was no evidence suggesting that AIC substantially assisted in any breach of fiduciary duty by consenting to the restructuring, and therefore the aiding and abetting claim must fail. The court did not reach AIC and certain co-defendants’ separate summary judgment motion on the basis of the in pari delicto doctrine, which she held was moot in light of her decision.
The Paul, Weiss team included litigation partners Andrew Ehrlich, who argued the in pari delicto motion, and Gregory Laufer, who argued the aiding and abetting motion.