VIEWPOINT: U.S. Energy Ruling Could Invite Further Shareholder Litigation, By Michael P. Richman and Michael Nestor


It is hard to conceive of an event more distracting and potentially damaging to a chapter 11 debtor than scheduling and conducting a shareholder meeting that threatens to unseat the company's board and management. Such an event could alter not only the corporate structure and governance of a debtor, but could undermine the confidence of employees, vendors and customers at an especially tenuous time in the company's corporate life.

In light of these facts, is the scheduling of a shareholder meeting a "process...against the debtor that was or could have been commenced before the commencement of the case" or an " exercise control over property of the estate," either of which would represent violations of the automatic stay? Probably not, at least according to a recent decision by the Court of Chancery of the State of Delaware (See Asher E. Fogel v. U.S. Energy Systems, Inc. et al.).

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