Opinion

AIG Financial Products Corp.

Court: United States Bankruptcy Court, D. Delaware
Filed: May 10, 2023
Cited by: 0 cases
Authority: More cited than 30.0%

holding that the bankruptcy court may enter a final order without offending Article III so long as the parties consent and that such consent need not be express

How later courts described this case

holding that the bankruptcy court may enter a final order without offending Article III so long as the parties consent and that such consent need not be express
“[C]onsensual means of plan negotiation and confirmation is among the paramount goals of chapter 11.”
holding that dismissal was proper where the debtors’ bankruptcy petitions served no valid bankruptcy purpose and were used as a litigation tactic to protect the debtor and its parent from liability in pending litigation
stating that the mere creation of a liquidation plan is not sufficient to show that a plan of reorganization serves a valid reorganizational purpose

Written by the judges who cited it.

The opinion

IN THE UNITED STATES BANKRUPTCY COURT

FOR THE DISTRICT OF DELAWARE

In re: ) Chapter 11

)

AIG FINANCIAL PRODUCTS CORP., )

) Case No. 22-11309 (MFW)

Debtor. )

) Rel Docs: 101, 132, 135,

) 161

______________________________ )

OPINION1

Before the Court is a Motion to Dismiss the chapter 11

bankruptcy case of AIG Financial Products Corporation (the

“Debtor”). The Motion was filed by former employees of the

Debtor who sued it in Connecticut state court for deferred

compensation (the “CT Plaintiffs”).2 For the reasons stated

below, the Court will deny the Motion to Dismiss or Abstain.

I. BACKGROUND

The Debtor is a wholly owned subsidiary of American

International Group, Inc. (“AIG”). The Debtor was founded in

1987 as a joint venture between AIG and a group of Drexel Lambert

investment bankers to allow AIG to access the capital markets and

1 This Opinion constitutes the findings of fact and

conclusions of law of the Court pursuant to Rules 7052 and

9013(c) of the Federal Rules of Bankruptcy Procedure.

2 Arthurs v. AIG Financial Products Corp., Case No. X08-FST-

CV-19-6046057-S, 2021 WL 2303051, at *1 (Conn. Super. Ct. May 24,

2021).

generate returns from trading in complex financial derivatives.3

In December 1995, AIG and the Debtor entered into a General

Guarantee Agreement (the “Parent Guarantee”) by which AIG

“generally agreed to guarantee all of [the Debtor’s] monetary

obligations.”4 To the extent AIG paid an obligation of the

Debtor under the Parent Guarantee, AIG held a subrogated claim

against the Debtor.5

In 1995, the Debtor also created a Deferred Compensation

Plan (the “DCP”) and a Special Incentive Plan (the “SIP”)

(collectively the “Compensation Plans”) whereby a portion of the

compensation of its highly compensated executives (the “Plan

Participants”) was deferred.6 The deferred compensation was not

segregated from the Debtor’s general funds nor held in trust for

the Plan Participants, but simply reflected on a ledger of their

accounts.7 Further, the Compensation Plans expressly provided

that the benefits due to the Plan Participants “shall not have

the benefit of any guarantee by AIG of payment obligations of

3 D.I. 2 ¶ 10.

4 D.I. 132 Ex. D.

5 Id. at ¶ 5.

6 D.I. 2 Ex. C at p. 2. Those Plans also provided that

certain amounts due by the Debtor to AIG were also to be

deferred. Id. at ¶ 43 & Ex. C at p. 2.

7 Id. at Ex. C at § 4.01(a).

[the Debtor].”8 The Plan Participants’ accounts were subject to

being reduced by the amount of any losses suffered by the Debtor

in excess of certain reserves, but the Debtor was required to

restore those balances (with interest) from future profits

pursuant to a plan to be proposed by its board of directors.9 In

the event of an insolvency or bankruptcy proceeding, the

Compensation Plans provided that the Plan Participants had an

unsecured claim for any amounts due to them under the Plans.10

In September 2008, as a result of the national financial

crisis, AIG (initially through its subsidiary AIG Funding, Inc.)

entered into a $65 million revolving credit agreement with the

Debtor (the “Revolver”).11 Thereafter, AIG fulfilled its

obligation under the Parent Guarantee by extending loans to the

Debtor under the Revolver.12 Because the Debtor had continuing

losses after 2008, the Debtor was able to reduce the Plan

Participants’ accounts under the Compensation Plans to honor its

commitments on its derivative products.13

8 Id.

9 Id. at ¶¶ 20, 46 & Ex. C at § 4.01(a). If the funds were

not repaid by 2013 (or by a later time set by the board), then

the restoration rights would lapse. Id. at Ex. C at § 4.01(a).

10 Id. at Ex. C at § 4.01(a).

11 Id. at ¶ 35 & Ex. A. The Revolver is governed by New York

state law. D.I. 2 Ex. A at § 4.2.

12 Id. at ¶¶ 46–52.

13 Id. at Ex. C at § 4.01(b).

In October 2014, a group of London-based Plan Participants

(the “English Participants”) sued the Debtor in England seeking

payments of deferred compensation allegedly owed to them under

the Compensation Plans.14 The English Participants asserted that

the Debtor had failed to restore their account balances or adopt

any plan to do so by December 2013, in breach of its obligation

under the Compensation Plans.15 They also brought a separate

tort claim against AIG.16 After a bench trial in November 2018,

the English Court dismissed the tort claim against AIG. However,

the Court found that the Debtor had an “unqualified” obligation

to restore the account balances and had breached the Compensation

Plans when it failed to do so.17 The Debtor appealed and in

January 2020, the English Court of Appeal unanimously reversed

the trial court decision by holding as a matter of Connecticut

law that the Debtor had not breached the Compensation Plans.18

In December 2019, the CT Plaintiffs filed a complaint

against the Debtor in the Connecticut Superior Court, alleging

breach of contract, breach of the implied covenant of good faith,

and bad faith violations of the Connecticut Wage and Hour Act

14 Id. at ¶ 53.

15 Id.

16 Id.

17 Id. at ¶ 40.

18 Id. at ¶ 54.

(the “CT Litigation”).19 In May 2021, the Connecticut Court

denied the Debtor’s motion to dismiss that complaint.20 In

August 2022, the CT Plaintiffs filed a motion to compel the

Debtor to produce certain documents that it had withheld or

redacted as privileged. The Connecticut Court granted that

motion in part, finding that the Debtor had waived the attorney-

client privilege with respect to a potential recapitalization of

the Debtor by AIG and the restoration of the Compensation

Plans.21 The Court ordered the Debtor to produce 14 specific

documents in unredacted form by December 14, 2022.

The Debtor did not produce the Court-ordered documents and

instead filed a voluntary petition under chapter 11 of the

Bankruptcy Code on December 14, 2022.22 On the same day, the

Debtor filed a proposed plan of reorganization and related

disclosure statement.23 The Plan provides for a reorganization

of the Debtor by converting AIG’s claim to equity and, if the CT

Plaintiffs’ class accepts the plan, a pro rata distribution to

them from a $1 million pot.24

19 Id. at ¶¶ 56-57.

20 Id. at ¶ 58.

21 D.I. 162 Ex. V.

22 D.I. 1.

23 D.I. 6 & 7.

24 D.I. 7 at I.A.2.

The CT Plaintiffs filed their motion to dismiss the Debtor’s

case on January 13, 2023.25 The CT Plaintiffs seek dismissal

because they allege that the case: (i) was filed in bad faith,26

(ii) will result in the substantial or continuing loss to or

diminution of the estate without a reasonable likelihood of

rehabilitation,27 and (iii) should be dismissed in the best

interests of creditors and the Debtor.28 The Debtor filed an

objection to the Motion.29 AIG filed a joinder in the Debtor’s

objection.30 The CT Plaintiffs filed a reply on March 20, 2023.31

An evidentiary hearing was held on March 27, 2023. The matter

was held under advisement and is now ripe for decision.

II. JURISDICTION

The Motion is a core proceeding over which the Court has

subject-matter jurisdiction.32 Additionally, the parties have

implicitly consented to the entry of a final order by this

25 D.I. 101.

26 11 U.S.C. § 1112(b)(1).

27 Id. at § 1112(b)(4)(A).

28 Id. at § 305.

29 D.I. 132.

30 D.I. 135.

31 D.I. 161.

32 28 U.S.C. §§ 157(b)(2)(A), 157(b)(2)(O) & 1334(b).

Court.33

III. DISCUSSION

The CT Plaintiffs contend that the Court must dismiss the

Debtor’s case under section 1112(b) or section 305(a). The

Debtor contends that there is no basis to dismiss its case.

A. Dismissal under Section 1112(b)

Section 1112(b)(1) provides that “on request of a party in

interest, and after notice and a hearing, the court shall

convert. . . or dismiss a case for cause . . . .”34 Section

1112(b)(4) provides a non-exhaustive list of what may constitute

cause for dismissal or conversion of a chapter 11 case.35

33 Wellness Int’l Network, Ltd. v. Sharif, 575 U.S. 665, 683-84

(2015) (holding that the bankruptcy court may enter a final order

without offending Article III so long as the parties consent and

that such consent need not be express). See also Del. Bankr.

L.R. 9013-1(f) & (h) (requiring that all motions and objections

“contain a statement that the [filing party] does or does not

consent to the entry of final orders” and that in the absence of

such a statement, the party “shall have waived the right to

contest the authority of the Court to entire final orders or

judgments.”).

34 11 U.S.C. § 1112(b)(1).

35 For purposes of this subsection, the term “cause” includes —

(A) substantial or continuing loss to or

diminution of the estate and the absence of a

reasonable likelihood of rehabilitation;

(B) gross mismanagement of the estate;

that poses a risk to the estate or to the

public;

(D) unauthorized use of cash collateral

substantially harmful to 1 or more creditors;

(E) failure to comply with an order of the

1. Good Faith

The CT Plaintiffs argue that, although it is not expressly

listed in section 1112(b)(4), the Third Circuit has held that a

failure to file a case in good faith is cause to dismiss that

case.36 The CT Plaintiffs contend that it is the Debtor’s burden

court;

(F) unexcused failure to satisfy timely any

filing or reporting requirement established

by this title or by any rule applicable to a

case under this chapter;

(G) failure to attend the meeting of

creditors convened under section 341(a) or an

examination ordered under Rule 2004 of the

Federal Rules of Bankruptcy Procedure without

good cause shown by the debtor;

(H) failure timely to provide information or

attend meetings reasonably requested by the

United States Trustee (or the bankruptcy

administrator, if any);

(I) failure timely to pay taxes owed after

the date of the order for relief or to file

tax returns due after the date of the order

for relief;

(J) failure to file a disclosure statement,

or to file or confirm a plan, within the time

fixed by this title or by order of the court;

(K) failure to pay any fees or charges

required under chapter 123 of title 28;

(L) revocation of an order of confirmation

under section 1144;

(M) inability to effectuate substantial

consummation of a confirmed plan;

(N) material default by the debtor with

respect to a confirmed plan;

(O) termination of a confirmed plan by reason

of the occurrence of a condition specified in

the plan;

(P) failure of a debtor to pay any domestic

support obligation that first becomes payable

after the date of the filing of the petition.

11 U.S.C. § 1112(b)(4)(A)-(P).

36 In re SGL Carbon Corp., 200 F.3d 154, 160 (3d Cir. 1999).

to establish it filed its case in good faith.®’

The Debtor does not contest the requirement of good faith in

filing a petition under the Bankruptcy Code, but asserts that its

petition meets that requirement.

The Court agrees with the parties that a threshold issue in

determining a debtor’s eligibility to file a chapter 11

bankruptcy petition is whether it has been filed in good faith.”

“Whether the good faith requirement has been satisfied is a ‘fact

intensive inquiry’ in which the court must examine ‘the totality

of facts and circumstances’ and determine where a ‘petition falls

along the spectrum ranging from the clearly acceptable to the

patently abusive.’”*

The CT Plaintiffs assert that the Debtor did not file its

case in good faith because (a) it was not experiencing financial

37 Id. at 162 n.10.

38 See, e.g., In re LTL Mgmt., LLC, 64 F.4th 84, 100 (3d Cir.

2023) (holding that chapter 11 bankruptcy petitions are subject

to dismissal unless filed in good faith); In re 15375 Mem’l1

Corp., 589 F.3d 605, 618 (3d Cir. 2009) (same); In re Integrated

Telecom Express, Inc., 384 F.3d 108, 129 (3d Cir. 2008) (same);

In re Rent-A-Wreck of Am., Inc., 580 B.R. 364, 375 (Bankr. D.

Del. 2018) (stating that good faith is a predicate to the right

to file a petition in bankruptcy). Cf. Marrama v. Citizens Bank

of Massachusetts, 549 U.S. 365, 367, 374 (2007) (holding that,

just as federal courts have unanimously held that the original

filing of a bankruptcy case requires good faith, a debtor who

does not act in good faith forfeits the right to convert its

case, because “[t]hat individual . . . is not a member of the

class of ‘honest but unfortunate debtor[s]’ that the bankruptcy

laws were enacted to protect.”) (citation omitted).

38 SGL Carbon, 200 F.3d at 162.

distress of the type required by precedent in the Third Circuit

and (b) the filing does not serve a valid reorganizational

purpose.40

The Debtor asserts that it meets those criteria because it

is indisputably insolvent and filed its petition for a valid

purpose, namely, to conduct an orderly liquidation of its assets

and to distribute the proceeds in accordance with the priorities

of the Code.41

a. Financial Distress

The CT Plaintiffs argue that the facts show that the Debtor

was not in any financial distress. They note that on the eve of

the bankruptcy filing, the Debtor was flush with cash, no

creditor was pressuring it for payment, and its obligations to

counter-parties were guaranteed by AIG which had billions of

40 LTL Mgmt., 64 F.4th at 110 (holding that where a debtor is

not experiencing financial distress, it cannot show its petition

served a valid bankruptcy purpose and was filed in good faith

under section 1112(b) of the Bankruptcy Code); 15375 Mem’l Corp.,

589 F.3d at 618 (holding that dismissal was proper where the

debtors’ bankruptcy petitions served no valid bankruptcy purpose

and were used as a litigation tactic to protect the debtor and

its parent from liability in pending litigation); Integrated

Telecom, 384 F.3d at 129-30 (holding that dismissal was

appropriate where a company was not experiencing financial

distress and the filing did not preserve any value that would

have otherwise been lost outside of bankruptcy).

41 Solow v. PPI Enters. (U.S.), Inc. (In re PPI Enters. (U.S.),

Inc.), 324 F.3d 197, 211 (3d Cir. 2003) (holding that the

Bankruptcy Code “clearly contemplates liquidating plans under 11

U.S.C. § 1123(b)(4), whereby a debtor may develop a [c]hapter 11

plan to sell off its assets.”).

dollars in cash reserves.42

The CT Plaintiffs contend that because the Third Circuit has

held that a debtor who is not experiencing financial distress

cannot demonstrate that its chapter 11 petition serves a valid

bankruptcy purpose, the Debtor’s petition must be dismissed as

having been filed in bad faith.43

The Debtor asserts that it is experiencing financial

distress because it is massively insolvent: it currently owes $37

billion under the Revolver to AIG, risks hundreds of millions of

dollars in losses from its derivative business, and the CT

Plaintiffs have asserted in excess of $640 million is due to

them.44 It contends that its remaining assets are insignificant

in comparison. The Debtor argues that it has a right to file a

petition under chapter 11 to stop its competing unsecured

creditors from racing to the courthouse to get its few remaining

assets.45

42 D.I. 173 at 264:13-22.

43 LTL Mgmt., 64 F.4th at 101 (citing SGL Carbon, 200 F.3d at

165). See also Integrated Telecom, 384 F.3d at 129 (holding that

because the debtor was not experiencing financial distress, its

chapter 11 petition was not filed in good faith since it did not

preserve any value for creditors that would have been lost

outside of bankruptcy) SGL Carbon, 200 F.3d at 167-70 (dismissing

petition after concluding that pending lawsuits were not

sufficient to threaten the debtor’s substantial financial health

or force it out of business).

44 D.I. 173 at 28:2-8, 116:21-23.

45 Id. at 248:8-15.

The CT Plaintiffs respond that to establish financial

distress, the Debtor’s insolvency analysis depends largely on

the amounts it owes AIG under the Parent Guarantee. They contend

that the overwhelming proportion of debt owed to insiders46 in

this case weighs against a finding of good faith because the

Debtor seeks to distribute value directly from non-insider

creditors to its shareholder.47

The Debtor argues that only its financial condition is

determinative, as separateness of legal entities is foundational

to corporate and bankruptcy law.48 It also argues that it is

balance-sheet insolvent by a huge margin establishing that the

46 The Court in Rent-A-Wreck stated:

Courts consider factors such as: solvency; cash

reserves; recent financial performance and

profitability; the proportion of debt owed to insiders;

realistic estimates of actual or likely liability; the

threat of litigation; whether a debt is fixed,

substantial, and imminent; current cash position or

current liquidity; ability to raise capital; and

overdue debts or the ability to pay debts as they come

due.

580 B.R. at 375 (emphasis added).

47 Integrated Telecom, 384 F.3d at 129 (noting that the

requirement of creating or preserving some value that would

otherwise be lost is “particularly sensitive where the petition

seeks to distribute value directly from a creditor to a company’s

shareholders.”). See also SGL Carbon, 200 F.3d at (finding a

lack of good faith where the debtor had only a small amount of

non-insider fixed undisputed liabilities, while the vast majority

of its liabilities were owed to, or guaranteed by, a financially

robust and cash-rich parent.

48 LTL Mgmt., 64 F.4th at 105.

Debtor is experiencing financial distress.49

The Court does not agree with the CT Plaintiffs’ contention

that in determining the Debtor’s solvency, the Court must

consider the financial condition of its parent, AIG. The

financial condition of AIG is irrelevant because it is a separate

legal entity from the Debtor.50 Further, even though AIG

guaranteed certain obligations of the Debtor (those due to the

derivative counter-parties), it did not cover obligations to the

CT Plaintiffs which they assert are in excess of $640 million.

In addition, the Parent Guarantee was in the form of a loan,

which meant that all payments under the Guarantee simply became

debts owed by the Debtor to AIG rather than obligations owed to

the derivative counter-parties. It did not eliminate any debt

from the Debtor’s balance sheet. Finally, AIG is under no

obligation to continue to fund the Debtor indefinitely.51

Accordingly, the Court finds that the Debtor is overwhelmingly

insolvent because its remaining assets are a fraction of the $38

billion in debts allegedly owed to AIG and the CT Plaintiffs.

The Court also rejects the CT Plaintiffs’ argument that an

insolvent debtor cannot file a bankruptcy petition if it is not

49 Id. at 102 (noting that a debtor’s “balance-sheet insolvency

or insufficient cash flows to pay liabilities (or the future

likelihood of these issues occurring) are likely always

relevant.”).

50 Id. at 105.

51 D.I. 132 Ex. E at § 1.1.

facing imminent financial distress in the form of pressure for

immediate payment from creditors. The cases cited by the CT

Plaintiffs for that proposition involved solvent debtors who were

not facing any imminent financial pressure or distress.’ They

do not stand for the proposition that an insolvent debtor is not

eligible for bankruptcy relief. In fact, the Third Circuit has

stated that:

[T]he good-faith gateway asks whether the debtor faces

the kinds of problems that justify Chapter 11 relief.

Though insolvency is not strictly required, and “no

list is exhaustive of all the factors which could be

relevant when analyzing a particular debtor's good

faith,” we cannot ignore that a debtor’s balance-sheet

insolvency or insufficient cash flows to pay

liabilities (or the future likelihood of these issues

occurring) are likely always relevant. This is because

[insolvent debtors] “pose a problem Chapter 11 is

designed to address: ‘that the system of individual

creditor remedies may be bad for the creditors as a

group when there are not enough assets to go

LTL Mgmt., 64 F.4th at 101 (finding dismissal appropriate

where a solvent debtor filed its bankruptcy petition to address

concerns regarding ongoing pending litigation and was not

experiencing any immediate financial distress); 15375 Mem’l

Corp., 589 F.3d at 618 (same); Integrated Telecom, 384 F.3d at

119 (finding dismissal appropriate where a solvent debtor filed

its petition to take advantage of a code provision and had no

intention of reorganizing or liquidating as a going concern and

no reasonable expectation that chapter 11 proceedings would

maximize the value of its estate for creditors) ; SGL Carbon, 200

F.3d at 167-70 (dismissing petition after concluding that pending

lawsuits were not sufficient to threaten the debtor’s substantial

financial health or force it out of business); Rent-A-Wreck, 580

B.R. at 377 (“Because Debtors do not take the position that they

are insolvent, and because they did not provide evidence on the

value of their most significant assets, for purposes of this

analysis, I treat Debtors as solvent.”).

around.’

The Court in Integrated Telecom distinguished that case,

where the debtor was solvent, from the PPI case where the debtor

was insolvent.** The Integrated Telecom Court stated that PPI

“stands for the proposition that an insolvent debtor can file

under Chapter 11 in order to maximize the value of its sole asset

to satisfy its creditors, while at the same time availing itself

of the landlord cap under § 502(b) (6).” Similarly, the Court

in SGL Carbon noted that

It is well established that a debtor need not be

insolvent before filing for bankruptcy protection. It

also is clear that the drafters of the Bankruptcy Code

understood the need for early access to bankruptcy

relief to allow a debtor to rehabilitate its business

before it is faced with a hopeless situation.’®

The conclusion of the Third Circuit in LTL Management, SGL

Carbon, and Integrated Telecom that the solvent debtors in those

cases did not file their petitions in good faith because they

were not facing imminent financial hardship stands in stark

LTL Mgmt., 64 F. 4th at 102 (internal citations omitted).

of PPI, 324 F.3d at 211 (finding debtor’s bankruptcy filing was

in good faith where debtor owed $54 million in obligations and

its only asset was worth less than $12 million in bankruptcy but

a tenth of that outside bankruptcy.)

88 Integrated Telecom, 384 F.3d at 122-23.

56 SGL Carbon, 200 F.3d at 163. See also In re Johns-Manville

Corp., 36 B.R. 727, 736 (Bankr. S.D.N.Y. 1984) (“Accordingly, the

drafters of the Code envisioned that a financially beleaguered

debtor with real debt and real creditors should not be required

to wait until the economic situation is beyond repair in order to

file a reorganization petition.”).

contrast to the facts of this case where a Debtor with minimal

remaining assets faces a debt burden of more than $38 billion.

The Debtor in this case has no prospect of ever realizing

sufficient cash to pay even a fraction of its obligations and is

facing mounting legal bills to defend a suit by a small group of

its creditors. The Debtor need not wait until judgment is

entered against it to file a bankruptcy petition.57 The Court,

therefore, concludes that the Debtor does face sufficient

financial distress to warrant a bankruptcy filing.

b. Valid Reorganizational Purpose

The CT Plaintiffs argue that to establish good faith, the

Debtor must also establish that its chapter 11 filing serves a

valid reorganizational purpose, meaning that it is seeking to

preserve some value in bankruptcy that would otherwise be lost.58

They contend that courts have acknowledged that there are two

recognized objectives under chapter 11, namely “preserving going

concern value and maximizing property available to satisfy

creditors.” The CT Plaintiffs assert that the Debtor’s

bankruptcy filing fails to meet either of these twin goals.

The CT Plaintiffs allege that the Debtor is not seeking to

preserve going-concern value. They assert that the Debtor has no

direct employees and relies on affiliates (including AIG) to

57 SGL Carbon, 200 F.3d at 163.

58 Integrated Telecom, 384 F.3d at 129.

provide it with many services, has been in wind-down mode for

years, and effectively has no business to rehabilitate. While

they concede that liquidating plans are permitted under chapter

11, they assert that the Debtor’s intention not to continue as a

going concern weighs in favor of dismissal.59

The CT Plaintiffs also argue that the totality of the

circumstances, including the presence of several factors cited by

the Primestone60 Court, also supports dismissal of this case.

Specifically, they assert that the case presents a two-party

dispute; the Debtor’s other creditors are mainly insiders and

affiliates who were not pressuring the Debtor for payment; and

there is no reorganization or rehabilitation that would inure to

the benefit of any non-insiders.

The CT Plaintiffs contend that, rather than a valid

reorganizational purpose, the real impetus for filing the

bankruptcy case was to give the Debtor a tactical advantage by

shifting the CT Litigation away from the Connecticut Court. This

is not a legitimate bankruptcy purpose.61 They contend that the

59 15375 Mem’l Corp., 589 F.3d at 624 (stating that the mere

creation of a liquidation plan is not sufficient to show that a

plan of reorganization serves a valid reorganizational purpose).

60 In re Primestone Inv. Partners, L.P., 272 B.R. 554 (D. Del.

2002).

61 See, e.g., SGL Carbon, 200 F.3d at 165-67 (concluding that

debtor filed bankruptcy for an invalid purpose, “to put pressure

on antitrust plaintiffs to accept the company’s settlement terms.

. . . [and] solely to gain tactical litigation advantages”). See

also LTL Mgmt., 64 F. 4th at 110, n.19 (though not deciding the

Debtor’s asserted impetus for the filing (the $37.7 billion claim

of AIG) is a mere pretext as that purported loan is in substance

an equity infusion. The CT Plaintiffs allege that the timing of

the filing supports their contention that the case was filed in

bad faith, because it was commenced on the eve of the deadline

for the Debtor to comply with the Connecticut Court’s discovery

order and after the CT Plaintiffs refused to agree to a

settlement.

The Debtor responds that it is not trying to use the

bankruptcy case to litigate the same issues pending before the

Connecticut Court and that not all the relevant stakeholders

(including specifically AIG) are parties to the CT Litigation.

Instead, the Debtor argues against dismissal and alleges, among

other things, that: (i) it has material unencumbered assets and

competing unsecured creditors; (ii) it has employees and an

ongoing business of winding down its investments; (iii) the

issues in the bankruptcy proceedings are not limited to its

dispute with the CT Plaintiffs and cannot be resolved in the CT

Litigation; (iv) it has cash on hand; (v) it was facing pressure

from other creditors; and (vi) there is a possibility of

reorganization. The Debtor argues that its bankruptcy filing had

a valid reorganizational purpose because it was experiencing

issue, stating that a filing to change the forum of litigation

where there is no financial distress raises the specter of “abuse

which mush be guarded against to protect the integrity of the

bankruptcy system.”) (quoting SGL Carbon, 200 F.3d at 169).

financial distress and the filing preserves material value for

the estate by stopping interest accruing on the Revolver and

preventing the depletion of its assets caused by the ongoing

litigation costs in Connecticut.

The Court agrees that a valid bankruptcy purpose includes

preserving going concern value and maximizing the value of the

estate for the benefit of creditors.62 The Debtor’s bankruptcy

filing serves a valid reorganizational purpose in this case as it

is preserving value that would otherwise be lost outside of

bankruptcy by stopping the accrual of interest on the Revolver

and the costs associated with the Connecticut litigation.

Moreover, the Debtor is operating its current derivative business

in a manner that reduces losses to the estate.63

As noted above, the Third Circuit has held that any

determination of the good faith of a debtor’s bankruptcy filing

is a “fact intensive inquiry” in which the court must examine

“the totality of facts and circumstances.”64 The District Court

in the Primestone case identified several factors that courts

consider in determining whether a case has not been filed for a

62 Integrated Telecom, 384 F.3d at 120.

63 The Debtor transferred its derivative business to a

subsidiary before it filed its petition in order to avoid

hundreds of millions of dollars in losses which would have

occurred as a result of the safe harbor provisions of the

Bankruptcy Code. See 11 U.S.C. §§ 555, 556, 559 & 560.