MHH Prevails On Motion To Dismiss Complaint Against Board Of Directors
Plaintiff is a duly appointed Chapter 7 Trustee for the bankruptcy estates of a debtor and six affiliated debtors (the “Debtors”), which were founded by three private equity firms through the acquisition of 14 amusement parks, resorts and family entertainment centers across the United States. After pursuing an aggressive growth strategy, including the acquisition of four additional amusement parks, the Debtors experienced significant financial difficulties in subsequent years due to increased industry competition, heavy operational expenditures, seasonable business challenges, litigation, management turnover, and the unexpected death of the CEO. Then, during Covid, the Debtors filed for bankruptcy under Chapter 11, the Debtors’ assets were sold, the Court converted the Debtors’ Chapter 11 cases to cases under Chapter 7, and the Chapter 7 Trustee commenced an adversary proceeding against each of the eight directors of the Debtors for acts they undertook prior to the Debtors’ bankruptcy filing.
MHH, led by Stephen Ginsberg and Alex Widell, represented two of the eight directors. In response to the Complaint, all of the Defendants filed a motion to dismiss under Federal Rule 12(b)(6), arguing that the Complaint lacked sufficient detail to support any inference that the Debtors’ financial woes resulted from any of the Defendant’s purposeful acts or that Defendants failed in their oversight of the Debtors. In granting Defendants’ motion to dismiss, the Court held that the Complaint lacked sufficiently specific allegations regarding each Defendant and instead “repeatedly alleged that the ‘Defendants’ took various actions (or failed to act) without identifying which transactions each Defendant may have authorized or the nature of each Defendant’s authority to approve such transactions, when such action or inaction may have occurred, and specifically which Debtor was affected.”
This was a great win for MHH, and an even bigger win for our clients.