January 9, 2023

A Stroock team, led by Partners Stephan Hornung and Matthew O’Donnell, and assisted by local counsel, Fowler Bell PLLC, secured a victory for its client in three separate appeals in the Commonwealth of Kentucky.  

The appeals arose from an action in which the lender obtained the appointment of a receiver over a failed hemp processor located in Lexington, Kentucky after learning that the borrower was diverting cash to undisclosed bank accounts.  The trial court granted the lender’s pre-discovery summary judgment motion, dismissed the borrower’s counterclaims, and authorized the receiver to market and sell the borrower’s hemp processing equipment and inventory at a public auction. The lender acquired substantially all of the borrower’s assets at a court-confirmed receiver sale, and the trial court subsequently entered a deficiency judgment in favor of the lender in excess of $6 million. 

The borrower and its landlord appealed to the Kentucky Court of Appeals, challenging the summary judgment order, the deficiency judgment, and an order directing the borrower’s landlord to reimburse the lender for expenses advanced to the receiver to pay for the removal of hazardous waste at the borrower’s processing facility. The Court rejected each, concluding:

1. summary judgment had properly been granted without any discovery because the governing loan documents were unambiguous and the borrower had in its possession the information it claimed to need;
2. the receiver sale was per se commercially reasonable because it had been approved in a judicial proceeding, entitling the lender to a deficiency judgment against the borrower; and
3. the trial court properly directed the landlord to reimburse the lender for expenses it incurred during the receivership that benefitted the landlord.

• Bankruptcy Proceedings
• Creditors' Rights Litigation in Bankruptcy and State and Federal Courts
• Cross Border Insolvencies
• Litigation
• Out of Court Workouts
• Restructuring & Bankruptcy
• Trustee, Examiner, and Other Special Representations

• New York