Vol 13 (2016) - Issue 5

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'Lawyers, Guns and Money':1 Post-confirmation Homeland Security Issues and the Iconic American Firearms Maker Colt Defense

The iconic American firearms maker, Colt Defense
There is a saying 'Abe Lincoln may have freed all men, but Sam Colt made them equal'. This is a reference to Samuel Colt’s patenting and mass production of a weapon capable of firing without reloading. Colt opened a plant in Patterson, New Jersey in 1836, at age 22. Colt’s business flourished for over a century, with the brand being so popular that Colt’s guns were presented as gifts to heads of state, including Czar Nicholas I of Russia, King Frederick VII of Denmark and King Charles XV of Sweden.
M16 rifles and M4 carbines designed by Colt Defense have served as the principal battle rifles of the U.S. Armed Forces for the last 50 years and are currently in military and law enforcement service in more than 80 countries around the world. Colt Defense is uniquely dependent on its relationships with foreign and domestic military customers. For example, during 2014, 8% of the Colt Defense’s consolidated revenues were attributable to the U.S. Government, with 32% of revenues attributable to sales to international customers and 59% of revenues attributable to domestic commercial and law enforcement customers.
On 14 June 2015, domestic and international Colt Defense entities sought bankruptcy protection in Delaware, due to overleveraging. This may have caused Samuel Colt to turn over in his grave, as at the time of his death at age 47, he was estimated to have a net worth of USD 15 million, and his company was a great success. By year end 2015 Colt Defense’s chapter 11 bankruptcy plan was confirmed. The plan’s effective date occurred on 13 January 2016.

Jurisdiction of American bankruptcy courts
American bankruptcy courts have broad powers over companies that have achieved confirmation of chapter 11 plans, and remain in open bankruptcy proceedings. As the United States Court of Appeals for the Second Circuit has explained, bankruptcy court jurisdiction stems from 11 U.S.C. §§ 157 and 1334, and includes proceedings 'arising under' and 'arising in' title 11, and also proceedings 'related to cases under title 11'. Proceedings 'arising under' are those 'that clearly invoke substantive rights created by federal law'.