Haskell v. Goldman, Sachs & Co. (In re Genesis Health Ventures, Inc.) (Genesis I)

324 B.R. 510 (2005)

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Haskell v. Goldman, Sachs & Co. (In re Genesis Health Ventures, Inc.) (Genesis I)

United States Bankruptcy Court for the District of Delaware
324 B.R. 510 (2005)

SS

Facts

Multicare AMC, Inc. (debtor) and Genesis Health Ventures, Inc. (Genesis) (debtor) filed a joint Chapter 11 bankruptcy reorganization plan in July 2001. The plan was confirmed in September 2001. In January 2004, 275 of Genesis’s investors (subordinated investors) (creditors), who held about $205 million in debentures issued by Genesis, sued Genesis, Goldman, Sachs & Company (Goldman) (creditor), and other firms (creditors), alleging fraud. The debentures were subordinated to roughly $1.3 billion in senior debt, about half of which was held by Goldman. The subordinated investors alleged that the senior lenders paid Genesis’s management to understate Genesis’s earnings before interest, taxes, depreciation, and amortization (EBITDA) were based. The understated EBITDA was used to depress assessments of Genesis’s enterprise value. The subordinated investors asserted that if Genesis’s value had been calculated accurately, the subordinated investors would have received the full value of their notes. The subordinated investors sought $200 million in monetary damages from Genesis and the senior lenders. Under United States Bankruptcy Code (code) § 1144, a party could ask a court to revoke confirmation of a reorganization plan for fraud provided the request was made within six months.

Rule of Law

Issue

Holding and Reasoning (Wizmur, J.)

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