Debtor’s principal sought a declaratory judgment determining that a three-year noncompete obligation, which arose upon the Debtor’s default under closing documents executed in connection with the purchase of a business, had expired by its own terms. Seller opposed the motion, asserting that 1) § 108(c) applied to suspend the term of the non-compete obligation; 2) under a savings clause, the Court, in its discretion, could reform the agreement to extend the term of the noncompete obligations; or 3) equitable tolling applies. The Court determined that § 108(c) is inapplicable. The Court also concluded that it lacked authority to reform the non-compete agreement; however, the Court found that equitable tolling may apply, since seller diligently sought to pursue its rights to enforce the noncompete provision while the Debtor, through its principals, continued to operate the business. The automatic stay allowed Debtor to continue business operations in violation of the noncompete agreement while it attempted to confirm a chapter 11 plan, while holding seller at bay from enforcing its rights. Under these circumstances, the Court concluded that equitable tolling may apply, provided the seller has resumed competing business operations and depending on other factors. The Court set an evidentiary hearing to take evidence regarding seller’s current and intended business operations before making a final ruling.

Plaintiff moved for partial summary judgment on validity, existence, and amount of debt owed by Debtor-Defendants relating to stock purchases and a loan, as established by a state court judgment, as well as non-dischargeability of the debt on the basis of fraud under § 523(a)(2) and securities violations under § 523(a)(19). The Court granted summary judgment with respect to the validity, existence, and amount of debt because the state court judgment had claim preclusive effect on such matters. However, the Court denied summary judgment on Plaintiff’s non-dischargeability claims. Regarding the fraud dischargeability claim, the state court judgment did not have (ii) claim preclusive effect because that claim is unique to bankruptcy or (ii) issue preclusive effect because the issue was not actually litigated, and the state court’s amended judgment removed the finding of fraud. Regarding the securities violation dischargeability claim, the Court ruled that § 523(a)(19) overrides the traditional “actually litigated” requirement for issue preclusion. The Court then found that the state court judgment was silent on whether it was based on a securities violation and a review of the complaint did not clarify the basis for the judgment. Resolving a split in the case law, the Court found that it has authority under § 523(a)(19) to determine with there is a securities violation but denied summary judgment on the § 523(a)(19) claim because material facts are in genuine dispute.

In a subchapter V case, after denial of confirmation of Debtor’s plan of reorganization and while a creditor’s motion to convert or dismiss the bankruptcy case was under advisement, Debtor filed another plan and a motion to establish confirmation procedures. In the alternative, Debtor asked the Court to approve a structured dismissal. First, the Court observed that Debtor had the right to file preconfirmation plan modifications and treated its preconfirmation amended plans as plan modifications. Second, the Court rejected Debtor’s contention that subchapter V imposes no time limit after denial of confirmation to file a new plan. Third, the Court observed that although a subchapter V debtor may need an extension of time under the stricter standard set forth in § 1189(b) to file another plan following denial of confirmation, the Court did not need to decide the issue. Instead, the Court applied the more liberal standard adopted by courts in chapter 12 cases for granting additional time to file another plan following denial of confirmation and ruled that Debtor would not be given time to file another plan. The Court explained that Debtor had a full and fair opportunity to seek confirmation of its plan, the case had been pending for almost two years, the parties had incurred enormous legal fees, and the new plan was basically an attempt to correct evidentiary gaps in the confirmation hearing already held. Fourth, the Court found that “cause” existed to convert or dismiss the chapter 11 case. Fifth, the Court denied Debtor’s request that the Court approve a structured dismissal because it was not feasible. Debtor intended to continue operating the business, but Debtor’s secured creditor could foreclose its lien on any accounts receivable that Debtor generated. The Court found that Debtor could not protect the receivables by granting a purchase money lien. Finally, the Court found that it was in the best interests of creditors and the estate to convert the case to chapter 7 instead of dismissing the case. The Court relied in making that decision on the secured creditor’s agreement to a chapter 7 carve-out.

Liquidating trustee moved the court to reconsider it ruling that former counsel for the debtor in possession could be retained by a creditor asserting a claim against the liquidating trust. The court analyzed each argument in support of the motion to reconsider and rejected each.reco