October 20, 2020

Volume X, Number 294

October 19, 2020

Subscribe to Latest Legal News and Analysis

Why Unsecured Creditor Committees Matter

  • Committee selects legal counsel to recover debt

  • Legal counsel oversees the day-to-day management of the case

  • All committee expenses, including legal fees, are the responsibility of the bankruptcy estate

One of the many unfortunate realities of the current economic situation is the likelihood of a sharp uptick in bankruptcies in the oil and gas industry. As more mid-size and large businesses begin to file Chapter 11 bankruptcy you will likely hear more about unsecured creditor committees. Guided by experienced legal counsel, these groups are critical for businesses seeking to recover what they are owed from the bankrupt company. 

These committees are assembled by the United States Trustee program, which is overseen by the Department of Justice. The Trustee will reach out to the largest unsecured creditors of the bankrupt company and offer a place on the committee. Typically, the committee is comprised of representatives from the seven companies with the largest unsecured debt claims against the bankrupt company. There must be at least three unsecured creditors willing to serve in order to form a committee. 

If given this opportunity, it is most likely in your best interest to serve. This committee will select the legal counsel to represent all participating unsecured creditors. The committee’s legal counsel will oversee the day-to-day management of the case and committees typically only meet a few times during the course of the bankruptcy and usually by teleconference. It’s important to note that all committee expenses, including legal fees, are the responsibility of the bankruptcy estate. Participating in the committee should cost you nothing. This is your opportunity to advocate for an attorney with experience you trust. That experience is critical for recovering as much of what you are owed as possible. 

For example, in 2014 a secured creditor offered to buy hybrid car manufacturer Fisker Automotive out of bankruptcy. Through the deal, the company’s unsecured creditors would have received a small fraction of what they were owed. The unsecured creditor committee fought the proposal and successfully argued for a competitive bidding process. Wanxiang Group bought the company with a winning bid of nearly $150 million, creating a pool of more than $40 million for the unsecured creditors. 

The Fisker story is just one example but illustrates how important these committees are, particularly now. The experience of being involved in an unsecured creditor committee will prove invaluable when you put it to use on the next committee – a very likely scenario given the number of bankruptcies that are expected. 

Copyright © 2020 Womble Bond Dickinson (US) LLP All Rights Reserved.National Law Review, Volume X, Number 98


About this Author

Tony Guerino II Litigation Attorney WBD

Tony Guerino brings more than 20 years of experience in energy and environmental litigation involving oil exploration and production disputes.  He has served as lead counsel in energy-related matters throughout the United States and major producing areas around the globe. Prior to becoming an attorney, he worked as a petroleum and natural gas engineer, giving him a background in many of the technical aspects of his clients’ industry.  He brings strategic guidance and practical experience to his clients.  In addition to serving as lead counsel in energy exploration and...

Elizabeth Klingensmith litigation attorney WBD

Liz strategically partners with clients throughout the dispute resolution process as a counselor, trusted advisor and advocate from pre-litigation risk assessment all the way through trial. Business-minded and practical, Liz finds cost-effective solutions to achieve clients’ business objectives. Clients trust Liz’s judgment and legal skills, and know they will receive outstanding client service and consistent results. Liz helps clients achieve peace of mind during the litigation process, so they can stay focused on growing their businesses.  

With more than a decade of litigation experience, Liz has tried multiple cases to verdict. She’s arbitrated and mediated disputes with favorable results. Short of an early resolution consistent with your objectives, Liz will be prepared to go to trial whether in front of a judge or jury in state or federal court or a panel of arbitrators in arbitration. She’ll be on your side.

Liz advises clients in Texas, Oklahoma and North Dakota in disputes arising from oil and gas leases and assignments, joint operations, joint accounting, mergers and acquisitions, preferential rights or areas of mutual interests, surface use accommodation and damages, oilfield services and equipment, seismic operations, equipment and pipeline failure, nuisance, quiet title, surface and subsurface trespass, hydraulic fracturing, mineral liens and theft of trade secrets.

Liz helps clients resolve disputes across multiple industries: energy, exploration and production, oilfield services, transportation, construction, banking, real estate, and professional services, involving claims for breach of contract, negligence, fraud, breach of fiduciary duty, post-judgment enforcement, theft of trade secrets, breach of contract, tortious interference, conversion, and declaratory judgment.

Liz enjoys spending time with her husband and local Houston jazz musician, David, with her sons, Burke and Charlie, at gymnastics or swim meets, and her step-daughter, Emma, a reptile enthusiast. Occasionally, she finds time to play the marimba and paint.

Matthew Ward Bankruptcy Attorney Womble Bond

Matthew Ward is the leader of the Bankruptcy, Restructuring, and Creditors’ Rights practice group of Womble Bond Dickinson (US) LLP, and is the Office Managing Partner for the firm's Wilmington, Delaware office, and a member of the Firm Management Committee.

He has extensive experience serving as primary counsel for numerous public and private companies, guiding them through all aspects of complex Chapter 11 and Chapter 7 proceedings, assignments for the benefit of creditors, or reorganizations out of court. Matthew has also regularly...