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February 10, 2021

Reorg

In a significant ruling on February 9, 2021, District Court Judge Keith Ellison denied the Calfrac Well Services debtors’ motion to dismiss an appeal brought by Stroock client Wilks Brothers.  The appeal challenges Bankruptcy Judge David Jones’ December 1, 2020 order granting Chapter 15 recognition of Calfrac’s Canadian plan of arrangement. In denying the motion to dismiss the appeal, Judge Ellison rejected Calfrac’s arguments that the appeal was equitably moot.

According to a recent article in Reorg, Wilks Brothers’ appeal focuses on the propriety of injunctions issued by the Canadian court, and recognized by Judge Jones, which, according to Wilks Brothers, improperly bar second lien noteholders from enforcing their rights upon a default triggered by consummation of Calfrac’s  plan of arrangement. Wilks Brothers also asserts that the recognition in the chapter 15 proceeding was contrary to the public policy of the United States because the injunction provided for relief outside the scope of relief available under a chapter 11 plan: allowing for nonconsensual impairment of the second lien note indenture, while purporting to unimpair and reinstate the second lien notes. 

Stroock partner Daniel A. Fliman opposed the motion on behalf of Wilks Brothers, arguing that the appeal, which seeks to reverse recognition of the injunction, would not disturb the plan of arrangement.   

A Stroock team representing Wilks Brothers on the appeal, led by Daniel A. Fliman, includes partner John F. Storz, special counsel Patrick N. Petrocelli, and associate Nathaniel H. Benfield.

Read more in Reorg (subscription required).