557 B.R. 303
Bankr. S.D.N.Y.2016Background
- SunEdison and subsidiary SEV entered an agreement to merge with Vivint Solar; the parties amended the deal before it failed to close and Vivint terminated the transaction in March 2016.
- Vivint sued SunEdison and SEV in the Delaware Court of Chancery the day after termination, alleging breach of the Amended Merger Agreement and seeking unliquidated damages.
- SunEdison and multiple affiliates (including SEV) filed Chapter 11 petitions the day after SunEdison answered the Chancery complaint, triggering the automatic stay and halting the Chancery litigation.
- Vivint moved for relief from the automatic stay under 11 U.S.C. § 362(d)(1) to liquidate its claimed damages (estimated $750M–$1B) in the Delaware Chancery Court or, alternatively, for an expedited trial in the bankruptcy court.
- Debtors opposed, arguing stay relief would divert critical estate resources, prejudice other creditors, risk "floodgate" stay-relief motions, and that the Chancery action was in its infancy and not uniquely suited to resolution outside bankruptcy.
- The bankruptcy court held that Sonnax factors govern stay-relief analysis and denied Vivint's motion, concluding the balance of factors favored maintaining the stay.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether "cause" exists to lift the automatic stay to liquidate Vivint's claim in Delaware Chancery | Vivint: Immediate liquidation is necessary to inform creditors and plan process; Chancery is the efficient forum | Debtors: Litigation now would divert estate resources, prejudice creditors, and encourage other stay motions | Denied — no prima facie showing of need to liquidate now; stay remains |
| Whether the Delaware Chancery is a specialized forum requiring adjudication there | Vivint: Chancery commonly adjudicates merger disputes and is most efficient | Debtors: This is a straightforward breach claim, not requiring a specialized tribunal | Court: Not required; case does not demand specialized tribunal adjudication |
| Whether judicial economy and readiness for trial support lifting the stay | Vivint: Chancery will be faster and more efficient; parties could follow an expedited schedule | Debtors: Case was in early stages at petition; parties are not trial-ready; litigation now would increase costs | Court: Judicial economy does not favor lift; parties not ready for trial and early-stage litigation counsels against relief |
| Whether lifting the stay would prejudice other creditors or open the "floodgates" to similar motions | Vivint: Limited harm; claim liquidation would only fix claim amount | Debtors: Granting relief would force diversion of resources, risk encouraging many similar motions, and prejudice stakeholders | Court: Agrees with Debtors — potential prejudice and floodgate risk weigh against relief |
Key Cases Cited
- Sonnax Indus., Inc. v. Tri Component Prods. Corp., 907 F.2d 1280 (2d Cir. 1990) (enumerates multi-factor test for stay-relief "cause" analysis)
- Mazzeo v. Lenhart, 167 F.3d 139 (2d Cir. 1999) (movant bears initial burden; debtor retains ultimate persuasion on lack of cause)
- In re Keene Corp., 171 B.R. 180 (Bankr. S.D.N.Y. 1994) (court need not give equal weight to Sonnax factors)
- Carrera v. Bally Total Fitness of Greater New York, 411 B.R. 142 (S.D.N.Y. 2009) (automatic stay protects debtor's "breathing spell" and reorganization focus)
- In re Hudgins, 102 B.R. 495 (Bankr. E.D. Va. 1989) (personal injury claims may require state-court liquidation where bankruptcy estimation is inadequate)
- In re Mack, 347 B.R. 911 (Bankr. M.D. Fla. 2006) (lifting stay appropriate where state litigation long-underway or debtor acted with inequitable conduct)
- In re Project Orange Assocs., LLC, 432 B.R. 89 (Bankr. S.D.N.Y. 2010) (stay relief may be proper where state-court proceedings were advanced and essential to reorganization)