Shale Boom Brings Challenges to the Banking Industry
Residential mortgage lenders used to pay little attention to oil and gas
leases. Then came the drilling boom in
the Marcellus and Utica shales and a spate of negative publicity about the
potential adverse effects of fracking. Our firm has been engaged in an ongoing
project to review oil and gas leases in connection with loans secured by
mortgages on residential properties. We
advise our lender client regarding whether the lease contains sufficient
protections for the borrower and the bank that the loan can or should be made.
We also review requests from oil company lessees that the bank’s existing mortgage
be subordinated to their leases.
Representation of Community Bank Using Personal Property as Collateral
Not every borrower has real estate to put up as collateral for a loan, but many have personal property that will provide adequate security to a lender. Personal property comprises just about everything other than real property, including goods, inventory, equipment, accounts, documents and instruments. Stock is also personal property, as are interests in partnerships and limited liability companies. Our firm provides ongoing assistance to a local community banking client in documenting secured transactions, including both the promissory note and the relevant security documents, and in perfecting the security interests to establish the bank’s priority vis-à-vis other creditors of the borrower. And we help levy on the collateral if the loan goes bad.
Defense of First Lien Position for a Community Bank
Our firm successfully prosecuted a CF Bank's first lien position by obtaining a state court receiver. We defeated the borrower’s attempt to stop foreclosure by filing personal business bankruptcy and restored operation of property in the bank’s receiver and helped stabilize cash flows. Our lawyers also developed and prosecuted follow-up actions against the borrower’s spouse and a closely held limited liability company (LLC). Additionally, we enhanced our client’s recovery through actions against title insurer for its negligence.
Cognovit Judgment on 100 Residential Properties Across Several States
On behalf of Advantage Bank, we successfully obtained cognovit judgment against a borrower on loans collateralized by nearly 100 residential properties across several states. This involved the appointment of receiver, which stabilized the cash flow from operations. We also successfully defended the borrower’s attack on the validity of our client's mortgages in bankruptcy proceedings and subsequently handled the receiver’s sale of all real property collateral.
The Nicole Energy Services Bankruptcy
On behalf of the debtor, we prosecuted an action for breach of contract
and negligence against a large mid-western pipeline transportation company; the
negotiated settlement valued more than $3.5 million for benefit of the
creditors. Our attorneys overcame the opposition of the debtor’s management and
obtained court approval of compromise. We successfully defended the outcome
through appeals up to the United States Supreme Court.
$6 Million Credit Facility Default Workout
We successfully guided an out-of-court workout of a borrower’s default on a $6 million credit facility secured by real estate and heavy construction equipment. Our attorneys assisted in the asset liquidation and resolved priority disputes with other secured creditors. We also negotiated an asset surrender agreement and secured party sale of collateral.
$1.5 Million Liquidation of Shoe Retailer
Our lawyers represented the bankruptcy trustee in the liquidation of a multi-state fashion shoe retailer with inventory valued at more than $1.5 million. Our work included assisting in the closure of four stores in urban retail malls across three states. We also litigated and resolved contested claims of landlords for unpaid rent and charges due under defaulted leases and secured approval of the court for the Trustee’s bulk sale of inventory to a nationally known liquidator. Ultimately, Kegler Brown lawyers prosecuted the actions to recover preferential transfers.
Liquidation of Mid-Sized Residential Apartment Project
Kegler Brown served as counsel to the liquidating trustee for a mid-sized residential apartment project. Through the course of the representation, we discovered errors in the secured creditor’s mortgage and successfully avoided the lender’s lien on the project. We also worked through local zoning authorities to complete platting of the project and negotiated a contract with the property manager while assisting the trustee in supervising operations. Our lawyers also handled the trustee’s sale of property to a unsecured creditor under an innovative “credit bid” procedure and won court approval of the trustee’s sale proposal.
Settlement of Alleged Automatic Stay Violation
We successfully settled an alleged violation of the automatic stay in debtor's closed bankruptcy case after an initial "show cause" hearing demanded by the debtor against our national telecommunications client.
Defense of Multiple Preferential Demands in Graceway Bankruptcy
Kegler Brown handled the defense of multiple preferential demands from the debtor, filing and defending of proofs of claims, and applications for allowance of administrative expense claims in the Graceway Chapter 11 bankruptcy case for multiple related entities. Our firm provided advice related to the continuation of business with the debtor and guidance regarding how the debtor’s proposed plan would affect such business.
Multi-Million-Dollar Collection Action Against “Closed-Door” Pharmacy
We represented Cardinal Health, a publicly traded Fortune 20 company, in a multi-million-dollar collection action against a “closed-door” pharmacy and four guarantors in three separate lawsuits filed in North Carolina, South Carolina and Oklahoma. Our attorneys assisted in the pre-suit liquidation of the debtor’s assets, including providing client advice on regulatory issues in connection with seizing prescription drug inventory.
Pharmacy Receivership and Related Chapter 11 Bankruptcy in Nebraska
We successfully prosecuted a multi-million-dollar collection action against an operating pharmacy and sought to place the pharmacy in receivership, prompting the debtor to file Chapter 11 bankruptcy in Nebraska. We continued our representation of a public company through those Chapter 11 proceedings, culminating in the sale of the debtor's assets under Section 363, resulting in substantial recovery for our client.
Workout and Friendly Foreclosure of Failing Pipeline Company’s Assets
In this case, the pipeline company failed during completion of a major
project for a mid-stream transporter during the rainy winter season; the
mid-stream transporter alleged faulty construction and the pipeline company
defaulted on its loan. Attorneys at Kegler Brown negotiated a loan workout between
the lender, the mid-stream transporter and the pipeline construction company,
as well as other creditors, to complete construction, release liens, sell
assets and pay debts.
Advising on Repossession Processes for a National Credit Union
Kegler Brown advised United Federal Credit Union on revising its notices of repossession to be compliant with Ohio laws. This included guidance on the differences between the credit union’s Retail Installment Sales Contracts and regular financing it had on its books. It also included variations based on whether or not the borrower was currently in bankruptcy or had been through a previous bankruptcy and whether or not the repossession was done voluntarily. Our team worked with the credit union to create forms for use by its associates that could be easily (and lawfully) completed during the proper handling of a vehicle repossession in Ohio. In addition, the credit union now uses our firm for subsequent questions on specific repossession matters.
$1.5M+ Loan Collection Through Property Liquidation
Our client loaned approximately $2 million to the operators of a chain of tobacco stores, with the stores and other real property located in three counties serving as collateral. Kegler Brown filed a foreclosure suit in one county, but extended jurisdiction over the real properties in the other two. One of the borrowers filed bankruptcy, but our lawyers obtained a relief from stay and were able to proceed with the suit. An auctioneer was appointed to liquidate the properties after the foreclosure judgment was granted in mid-2016.
$2M+ Creditor Representation During Energy Affiliate Bankruptcy
When SandRidge Energy filed for Chapter 11 bankruptcy in the Southern District of Texas, listing billions in debt, we assisted our client, PowerSecure International, Inc., one of its major creditors, in serving on the Official Committee of Unsecured Creditors. At least 24 affiliates joined SandRidge in the bankruptcy filing in Houston, which lasted from May to October of 2016.
$105,000 Foreclosure on Properties in 3 Ohio Counties
In 2016, Kegler Brown represented a loan servicer for a debt secured by four parcels of real property located in three separate counties in Ohio. The work of our lawyers enabled our client to file a single action, rather than three lawsuits in three separate counties, by filing a single foreclosure action in Franklin County, which also attached jurisdiction to the properties located outside the county.
Another defendant to the foreclosure disputed the client’s lien priority based on the borrower’s fraudulent loan application. Kegler Brown also bifurcated the lien priority dispute from the sale of the properties, allowing a faster sale to prevent the accrual of property taxes pending resolution of the lien priority dispute.
$300,000+ Medical Machinery Seizure and Lien Invalidation
In early 2015, our client, a second secured creditor behind a lien filed by the debtor, filed suit against a large medical company in Phoenix. In conjunction with local counsel, Kegler Brown orchestrated the successful seizure of a 15,000-pound medical imaging device and, in an effort to liquidate the machine, obtained a declaratory judgment action against the debtor, seeking a declaration that the lien was invalid. By early 2016, the machine was successfully liquidated and our client received in excess of the principal amount owed, allowing them to fully recover interest charges and other fees.
$100,000+ of Collateral Protected for Automotive Parts Distributor
Our team assisted one of the most respected manufacturers in the automotive parts aftermarket with a Writ of Execution to obtain possession of collateral of a shop where the owner passed away and the company was liquidating the collateral. Our lawyers assisted the manufacturer in shutting until we were able to reach an agreement to the satisfaction of our client and resolve the matter in early 2016.
Eviction Cases and Bankruptcy Dismissals for Ohio Real Estate Company
Our client, a local real estate company, needed assistance with removing a nonpaying business tenant, which had multiple pending bankruptcy cases, from its premises. Kegler Brown handled both the eviction cases and the bankruptcies, first obtaining a dismissal of the tenant’s first bankruptcy case and then resolving the second in January 2017.