Entwistle & Cappucci serves as court-appointed co-liaison counsel and member of the Defense Committee for a class consisting of approximately 5,500 former shareholders of Tribune Company named as defendants in a series of cases countrywide (since consolidated into an MDL in S.D.N.Y.) brought by noteholders of the Tribune Company who financed the company’s 2007 LBO (the “Noteholders”) and by a Trustee representing the former unsecured creditors committee (the “Trustee”) seeking to avoid approximately $8 billion in transfers to the Tribune Company’s public shareholders who tendered shares in the LBO.  The advancement of fraudulent conveyance claims against a defendant class of disinterested public minority shareholders who neither negotiated nor structured a going private transaction presents issues of first impression in our District and Circuit Courts and is being watched carefully by industry professionals.

Entwistle & Cappucci, together with members of the Defense Committee, filed initial Phase One Motions to Dismiss certain of the claims and on September 23, 2013, presiding Judge Richard Sullivan issued an order dismissing the Noteholders’ state law constructive fraudulent conveyance claims on grounds that Section 362(a)(1) of the Bankruptcy Code stays fraudulent conveyance claims by creditors for as long as the trustee is exercising its avoidance powers.

On May 23, 2014, Entwistle & Cappucci, together with members of the Defense Committee, filed a motion to dismiss Count One of the Trustee’s Fifth Amended Complaint for intentional fraudulent conveyance on grounds, among other things, that the complaint fails to allege facts from which a strong inference can be drawn that the Tribune Board acted with the actual intent to hinder, delay or defraud creditors when it approved the LBO.

On March 29, 2016, the Second Circuit Court of Appeals issued an opinion on (i) the Noteholders’ appeal of Judge Sullivan’s dismissal of the state law constructive fraudulent conveyance claims in the Noteholder Action for lack of standing, and (ii) the Defense Committee’s cross-appeal of Judge Sullivan’s ruling that the safe-harbor in Section 546(e) of the Bankruptcy Code is inapplicable to the claims.  The Second Circuit affirmed dismissal of the state law constructive fraudulent conveyance claims, holding that such claims are preempted by the safe harbor in Section 546(e) of the Bankruptcy Code.

On July 22, 2016, the Second Circuit Court of Appeals issued an order denying the Noteholders’ petition for panel rehearing, or, in the alternative, for rehearing en banc concerning the Court’s March 29, 2016 opinion affirming dismissal of the state law constructive fraudulent conveyance claims on the ground such claims are preempted by the safe harbor in Section 546(e) of the Bankruptcy Code.  The May 2014 motion to dismiss Count One of the Fifth Amended Complaint (intentional fraudulent conveyance) on grounds, among other things, that the complaint fails to allege facts from which a strong inference can be drawn that the Tribune Board acted with actual intent to hinder, delay or defraud remains pending.