Can a senior secured creditor, who credit bid for substantially all of a debtor’s assets, contribute non-estate property to a litigation trust for the benefit of general unsecured creditors without following the absolute priority rule? In the recent Constellation Enterprises case, the Bankruptcy Court for the District of Delaware ruled that, as a result of … Continue Reading
In prior posts, we discussed the perplexing issue of how and whether a trademark licensee is protected when the trademark owner/licensor files a bankruptcy petition and moves to reject the trademark license in accordance with section 365 of the Bankruptcy Code. In January of this year, the First Circuit Court of Appeals issued its ruling … Continue Reading
A recent decision in the In re RMH Franchise Holdings bankruptcy case pending in the District of Delaware, highlights the importance of complying with a contract’s termination provision before the contract counterparty files for bankruptcy. In RMH, Applebee’s Restaurants LLC and Applebee’s Franchisor LLC (collectively, “Applebee’s”) entered into 160 pre-petition franchise agreements (the “Franchise Agreements”) … Continue Reading
We have discussed plan releases in prior posts. Oftentimes, disputes involving plan releases revolve around whether, and in what contexts, third-party releases in plans are appropriate. Recently, the Third Circuit Court of Appeals addressed the relatively unique question of whether releases in a confirmed plan are binding upon post-confirmation purchasers of the debtor’s stock. The … Continue Reading
Last month, the Eleventh Circuit Court of Appeals clarified the circumstances under which a creditor can assert a “new value” defense to a preference action under section 547(c)(4) of the Bankruptcy Code—rejecting as dictum language in a prior decision indicating that the new value provided needed to remain unpaid in order to setoff against preference … Continue Reading
Most observers of the world of chapter 11 bankruptcy cases – and particularly those professionals who practice in that arena – will not be surprised to learn that their individual experiences and anecdotal reports suggesting that the duration of Chapter 11 cases has continued to shrink have been validated by Fitch Ratings, one of the … Continue Reading
In a June 20, 2018 opinion, Judge Carey of the United States Bankruptcy Court for the District of Delaware sustained an objection to a proof of claim that had been traded during the bankruptcy case and filed by the claim purchaser. The opinion highlights the importance of being vigilant in conducting diligence before acquiring a claim … Continue Reading
Municipalities often drive economic development through subsidiaries and affiliated entities. When these “quasi-municipalities” become distressed, however, questions arise as to whether the potential debtor qualifies as a debtor under Chapter 11 or Chapter 9. This uncertainty can lead to litigation over whether the entity may proceed as a Chapter 11 debtor or is a governmental … Continue Reading
The Bankruptcy Code gives special protections to licensees of intellectual property when a debtor, as licensor, seeks to reject the license. However, the Bankruptcy Code does not include trademarks in its definition of “intellectual property.” So, are licensees of trademarks given any protection when debtors reject trademark licenses? If the Supreme Court grants a recent … Continue Reading
The Bankruptcy Code grants special rights to licensees of intellectual property. It is imperative for in-house counsel to have at least a basic understanding of how intellectual property is treated under the Bankruptcy Code, and the rights and obligations of parties to intellectual property licenses. My colleague Grace King and I recently wrote a chapter entitled … Continue Reading
More and more states are legalizing marijuana, whether for medical or recreational purposes. As businesses try to enter this space, competition will “weed out” the weakest competitors. But are marijuana dispensaries and growers, and those providing ancillary services to them, able to seek relief under the Bankruptcy Code? We, along with our colleagues, John Wyand and … Continue Reading
Can an individual debtor make an oral false statement about an asset to a creditor and get away with it by discharging the creditor’s claim in his or her bankruptcy? On June 4, 2018, the Supreme Court issued its opinion in Lamar, Archer & Cofrin, LLP v. Appling in which the Court unanimously answered this … Continue Reading
Special revenues may not be as special as many bondholders have historically expected. Two recent rulings[1] from District Court Judge Laura Taylor Swain in the Puerto Rico PROMESA proceeding have held that bond issuers are not required to make post-petition special revenue bond payments during a pending Puerto Rico Oversight, Management, and Economic Stability Act … Continue Reading
Can the recipient of an actual fraudulent transfer effectively “cleanse” the transfer if the funds are returned to the debtor? In a recent opinion, the United States Bankruptcy Court for the Eastern District of Pennsylvania answered that question in the affirmative. In Holber v. Nikparvar (In re Incare, LLC), the Chapter 7 Trustee (the “Trustee”) … Continue Reading
A recent decision from the Bankruptcy Court for the District of Montana highlights the limits of the term “interests” under section 363(f) of the Bankruptcy Code, and the limits of “good faith” under section 363(m). In In re Mountain Divide, LLC, Case No. 16-61015-11 (Bankr. D. Mont. 2016), the debtor filed a Chapter 11 petition, and shortly … Continue Reading
How real is the threat to the District of Delaware and the Southern District of New York as the prime venue choices for corporate Chapter 11 bankruptcy cases? It appears that both are safe, at least for now. Venue for bankruptcy cases is governed by 28 U.S.C § 1408, which provides that corporations may file … Continue Reading
Each year, millions of parents across America write checks to institutions of higher learning, in payment of tuition and charges for their children to pursue a college degree. Inevitably, some of those parents end up in the bankruptcy courts. In recent years, trustees have found an attractive potential source of estate recovery: pursuing the colleges … Continue Reading
When creditors are left holding the bag after providing valuable goods or services to a company that files for bankruptcy relief, they often feel misused and that an injustice has occurred. After all, they are legitimately owed money for their work or their product, and the debtor has in effect been unjustly enriched because it … Continue Reading
On February 6, 2018, the District Court for the District of Montana refused a debtor’s request to change the venue of a post-petition “related to” police/regulatory action commenced by a federal agency in district court. The decision will have important implications on how “related to” litigation is treated for venue purposes—especially in the context of … Continue Reading
Certain licensees of intellectual property are expressly given expanded rights when their licensors file bankruptcy. But what about trademark licensees? Trademarks are not among the defined categories of “intellectual property” for bankruptcy purposes. Nonetheless, are trademark licensees otherwise protected in a licensor bankruptcy? Unfortunately for these licensees, a recent circuit court decision put the brakes … Continue Reading
This past November, the Bankruptcy Court for the Southern District of Texas sided with the majority of circuit courts when it held (i) that bankruptcy courts may apply Federal Rule of Civil Procedure 23 to class proofs of claim and administrative proofs of claim, and (ii) that a putative representative may file a conditional claim … Continue Reading
Filing an involuntary bankruptcy petition is fraught with risk. If the court dismisses the involuntary petition, the creditors who filed the petition (referred to as the petitioning creditors) may be liable for damages caused by the filing and even punitive damages. A recent opinion from the District Court for the District of Nevada in State … Continue Reading
In a prior post, we examined whether state-licensed marijuana businesses, and those doing business with marijuana businesses, can seek relief under the Bankruptcy Code. As we noted, the Office of the United States Trustee (the “UST”) has taken the position, most recently in Congressional testimony given in June 2017, that a marijuana business cannot seek bankruptcy … Continue Reading
As more and more states pass laws allowing the sale of marijuana, whether for medicinal or recreational purposes, investors will try to claim their share of what is certainly going to be a lucrative market. However, even in a growing market, private enterprises fail or need restructuring. This raises the question of whether distressed marijuana … Continue Reading
