If you like bankruptcy — and the way it gets the calf and the lion and the yearling to lie down together — the Second Circuit today issued an opinion that’ll hold your interest well into the night. What joy it will bring! Motorola, Inc. v. Official Committee of Unsecured Creditors (In re Iridium Operating LLC), No. 05-2236-bk (2d Cir. Mar. 5, 2007).
Blawgletter hasn’t the time just now to decipher and parse the subtleties of the Bankruptcy Code’s priority scheme or the nuances of Bankruptcy Rule 9019 — even if we could. But, in a big picture, 30,000-feet, thumbnail sketch sort of a way, the following appears to have happened:
The debtor, Iridium, made those crazy-big satellite phones with the dorky antennas that you had to point at a satellite to get a signal (see picture). Motorola spun off Iridium in 1993 but continued to maintain and operate the Iridium system. The technology never got far off the ground, and in 1999 Iridium crashed and burned into bankruptcy.
After whaling on each other in the insolvency proceedings, Iridium’s bank lenders patched up their differences with the committee representing low-priority creditors to go after Motorola. They got bankruptcy court approval of their settlement, including the part that created and funded Iridium Litigation LLC ("ILLLC"), a vehicle for pursuing claims against Motorola. A litigation trust owned 99.9 percent of ILLLC and would distribute proceeds of Motorola lawsuits among creditors in certain ways. Motorola objected as an "administrative creditor" of the Iridium bankruptcy estate, but it lost in the bankruptcy and district courts. All this happened before confirmation of a reorganization plan.
Blawgletter will not deny you the pleasure of discovering the Second Circuit’s legal analysis. So here we end, pointing out only that the lenders and low-priority creditors seem to have largely won — and will lose on remand only if ILLLC fails in its efforts to make Motorola pay.