In re: VIRGIN ORBIT, LLC
- Summarized by Michael Myers , Ballard Spahr LLP
- 5 months 1 hour ago
- Case Type:
- Business
- Case Status:
- Affirmed
- Citation:
- 25-1702 (3rd Circuit, Sep 26,2025) Not Published
- Tag(s):
-
- Ruling:
- The Third Circuit Court of Appeals upheld the bankruptcy court and district court's denials of an investor's post-confirmation objection to a plan that provided for the cancellation of equity holders' shares and the transfer of certain intellectual property to the parent/prepetition-DIP lender after the intellectual property was not sold with the debtor's other assets.
- Procedural context:
- The appellant investor filed a "Notice of Objection" five months after the bankruptcy court had confirmed the chapter 11 plan in which the investor asserted that confirmation was obtained by fraud and subject to revocation under 11 U.S.C. § 1144. The bankruptcy court denied the motion after a hearing, finding that the arguments were by res judicata and that the investor had failed to show that the confirmation order was obtained by fraud. The district court and Third Circuit affirmed and denied the investor's motions to consider new evidence.
- Facts:
- Debtor had obtained DIP financing from its parent company/pre-petition lender. Debtor then sought to sell substantially all its assets, which resulted in five separate sales of the debtor's property. However, a portion of the company's intellectual property remained unsold after the sales because the company could not find any buyers willing to pay more than a de minimis value. The asset sales did not generate enough money to repay the DIP, so the parent company agreed to receive significantly less than full repayment of its secured claims as part of a global settlement that allowed a plan that would satisfy administrative expenses and other priority claims and provide a small distribution to holders of unsecured claims. As part of its recovery on its allowed claim under the proposed plan, the parent obtained the remaining intellectual property. Equity holders received nothing and their shares were canceled. The investor did not object to the proposed plan, which the bankruptcy court confirmed, and the investor did not appeal the confirmation order. The investor filed his "Notice of Objection" to the plan five months after confirmation, arguing that the plan was confirmed through fraud but presenting only evidence that the intellectual property was worth more than the de minimis value that debtor received in the sale process. However, investor's evidence, which included a valuation of the company when it went public and an article about the Pentagon's interest in the company, was not relevant to whether there was fraud and it could not overcome the fair and open sale process for the assets.
- Judge(s):
- Hardiman, Matey, and Chung
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