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Earlier this year, the United States Court of Appeals for the Fifth Circuit explored the application of the equitable lien doctrine after a secured equipment lender sought to recover directly from its borrower’s insurance company once the borrower filed a Voluntary Petition under Chapter 11. The court affirmed the district court’s denial of relief to the lender. This reinforces the importance that a secured lender protect itself when entering a transaction with a borrower or lessee to avoid a total loss if the borrower or lessee files a bankruptcy petition or if the leased equipment is damaged, missing or both.
Supreme Court Rules Rejection of Trademark License Does Not Rescind Rights of Licensee
By Mark Page
Mission Product Holdings, Inc. v. Tempnology, LLC
The question is whether a debtor’s rejection of its agreement granting a license “terminates rights of the licensee that would survive the licensor’s breach under applicable nonbankruptcy law.”
Trustee Litigation Trend: Tuition Clawback
By Theresa A. Driscoll
With increasing frequency, Chapter 7 trustees are looking to insolvent parents as well as colleges and universities to avoid and recover for estate creditors payments made by insolvent debtors for the benefit of the debtors’ dependents. These cases are premised on the theory that the tuition payments being made by insolvent parents for the benefit of their children are avoidable as constructively fraudulent transfers because the parents do not receive reasonably equivalent value in exchange for the payment of such tuition. Courts are divided as to whether the payment of a child’s tuition provides reasonably equivalent value to the insolvent parents.
By Stephanie Lieb and Dana Robbins
In its recent opinion in Taggart v. Lorenzen, the Supreme Court decided that “[a] court may hold a creditor in civil contempt for violating a discharge order if there is no fair ground of doubt as to whether the order barred the creditor’s conduct.” Although this standard appears to be new, it is more than a century old and “brings the old soil” from civil contempt with it.
Involuntary Bankruptcy: Limited Remedy and Strong Sanctions for Abuse
By Michael L. Cook
A bankruptcy court decision recently detailed how courts applying Bankruptcy Code §303(i) can sanction creditors who “abuse … the power given to [them] … to file an involuntary bankruptcy petition.” The decision shows why the filing of an involuntary bankruptcy requires careful pre-filing legal judgment.
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