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On May 11, 2021, U.S. Bankruptcy Judge Harlin Hale of the U.S. Bankruptcy Court for the Northern District of Texas issued a decision dismissing the Chapter 11 case of the National Rifle Association and certain of its affiliates. The high-profile New York-based non-profit sought bankruptcy protection in Texas on Jan. 15, 2021 and immediately faced a bevy of motions seeking dismissal of its Chapter 11 case pursuant to Section 1112(b) of the Bankruptcy Code filed by: 1) a former vendor-turned-litigation adversary, Ackerman McQueen, Inc.; 2) the New York Attorney General (NYAG); and 3) the District of Columbia Attorney General. A separate motion seeking the appointment of an examiner pursuant to section 1104(c) of the Bankruptcy Code was also filed. This article explores the competing factors the Bankruptcy Court considered and the rationale underlying its decision to grant the drastic relief of dismissing the NRA’s bankruptcy case.
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By Adam Shpeen, Aryeh Ethan Falk and Stephen Ford
Two Recent Cases Shed Light on Potential Risks to Preferred Equity Holders in Chapter 11
Preferred equity is a varied and flexible instrument, but, in practice, it typically has a limited number of common features. One feature is that it is entitled to a “liquidation preference” ahead of common stock. Whether the liquidation preference of preferred equity entitles preferred shareholders to priority over common shareholders in a Chapter 11 reorganization is a question that figured prominently in two recent high profile cases.
Seventh Circuit Bars Bad Faith Asset Buyer Protection
By Michael L. Cook
“Good-faith purchasers enjoy strong protection under [Bankruptcy Code] §363(m),” but the silent asset buyer (“B”) with “actual and constructive knowledge of a competing interest” lacks “good faith,” held the U.S. Court of Appeals for the Seventh Circuit.
With Federal Bankruptcy Courts Unavailable, Marijuana Businesses Turn to State Options
By David E. Sklar and Cheryl A. Santaniello
Federal bankruptcy courts have been unavailable to marijuana businesses due to the Schedule I status of marijuana. The United States Trustee’s policy is to move to dismiss or object in each case involving marijuana assets, because they cannot be administered under the Bankruptcy Code.
Why Subchapter V Is More Appealing Than Chapter 11 for Small Businesses
By By Stuart B. Newman and Steven H. Newman
The Small Business Reorganization Act created a new pathway for small businesses to remain in control of running their businesses, which is the usual reason for choosing to seek relief under Chapter 11, while eliminating many of the reasons that typical Chapter 11 proceedings exhausted the patience, and wallets, of both debtors and creditors.
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