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Commercial Leasing Law & Strategy
Lessor Repossession of Property on Eve of Lessee Bankruptcy: Voluntary Turnover or Face Contempt
Theresa A. Driscoll
Lessors who repossess property immediately prior to a lessee bankruptcy filing may be required to return such property or face sanctions by the bankruptcy court. Federal courts are currently split on the issue of whether the lessor must voluntary surrender property seized pre-petition or may hold such property until the debtor obtains an order of turnover.
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The Bankruptcy Strategist
Supreme Court Rules Rejection of Trademark License Does Not Rescind Rights of Licensee
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.”
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The Bankruptcy Strategist
Trustee Litigation Trend: Tuition Clawback
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.
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The Intellectual Property Strategist
Case on ‘Coolcore’ Marks Settles a 34 Year Debate Regarding Bankruptcy and IP Law
Charles A. Cartagena-Ortiz
The U.S. Supreme Court issued its long-awaited decision in Mission Product Holdings, Inc. v. Tempnology , ruling that a trademark licensee can retain its rights under a trademark license agreement that is rejected by the licensor as an executory contract in bankruptcy.
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The Bankruptcy Strategist
Civil Contempt for Discharge Injunction Violations: A New Standard That Brings the ‘Old Soil’ with It
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.
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The Bankruptcy Strategist
Involuntary Bankruptcy: Limited Remedy and Strong Sanctions for Abuse
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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The Bankruptcy Strategist
The Curious Case of Extraterritoriality and Fraudulent Transfer Under the Bankruptcy Code
Rick Antonoff
Courts Are Divided on the Issue of Whether the Fraudulent Transfer Recovery Provision Applies Extraterritorially
The U.S. Court of Appeals for the Second Circuit recently issued an opinion concluding that trustees can pursue recovery from foreign subsequent transferees who received property in transactions that occurred entirely outside the United States. The opinion reversed two lower court rulings and arguably conflicts with Supreme Court precedent on extraterritoriality of U.S. legislation.
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The Bankruptcy Strategist
Navigating the Attorney-Client Privilege and Work Product Doctrine in Bankruptcy
Rena Andoh and Kate Ross
When a company declares bankruptcy, avoidance actions under Chapter 5 of the Bankruptcy Code can assist in securing extra cash for the debtor’s dwindling estate. When a debtor-in-possession does not pursue these claims, creditors’ committees often seek the bankruptcy court’s authorization to pursue them on behalf of the estate. Once granted such authorization through a “standing order,” a creditors’ committee is said to “stand in the debtor’s shoes” because it has permission to litigate certain claims belonging to the debtor that arose before bankruptcy. However, for parties whose cases advance to discovery, such a standing order may cause issues by leaving undecided the allocation of attorney-client privilege and work product protection between the debtor and committee.
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The Bankruptcy Strategist
New York District Court Rules that Chapter 15 Recognition Is Not Prerequisite to Enforcement of Foreign Bankruptcy Judgment under Principles of Comity
Dan T. Moss and Mark G. Douglas
It has been generally understood that recognition of a foreign bankruptcy proceeding under Chapter 15 is a prerequisite to the enforcement by a U.S. court of an order or judgment entered in such a foreign bankruptcy proceeding under the doctrine of "comity." A ruling recently handed down by the U.S. District Court for the Southern District of New York directly challenges that principle.
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The Bankruptcy Strategist
Safe Harbor Shields Shareholders In Tribune Fraudulent Transfer Litigation
Michael L. Cook
The U.S. District Court for the Southern District of New York denied a litigation trustee’s motion for leave to file a sixth amended complaint that would have asserted constructive fraudulent transfer claims against 5,000 Tribune Company shareholders. The safe harbor of Bankruptcy Code §546(e) barred the trustee’s proposed claims.
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The Bankruptcy Strategist
‘Fresh Start’ Leads To Bankruptcy Discharge of Environmental Contamination Claims
Andrew C. Kassner and Joseph N. Argentina Jr.
One of the powerful benefits of bankruptcy is the ability to obtain a “fresh” start by obtaining a discharge of most, but not all claims that arose prior to the filing of the bankruptcy case. But when does a claim arise? This issue is especially complex when environmental contamination claims are involved.
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The Bankruptcy Strategist
Fifth Circuit Blocks Fraudulent Transferee’s Good Faith Defense
Michael L. Cook
“A … transferee [who] received fraudulent transfers with actual knowledge or inquiry notice of fraud or insolvency” loses any “good faith” defense available under the Texas version of the Uniform Fraudulent Transfer Act (TUFTA), held the Fifth Circuit in Janvey v. GMAG, LLC
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The Bankruptcy Strategist
What Has Merit Management Changed?
Matthew Gold
It has been nearly two years since the Supreme Court upended the world of the Bankruptcy Code securities safe harbor with its decision in Merit Management Group, LP v. FTI Consulting, Inc.. For all of the speculation regarding its consequences, there have been few subsequent lower court decisions applying Merit Management, however those cases provide valuable guidance to practitioners facing safe harbor litigation as well as transactional lawyers looking to take advantage of safe harbor protections.
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The Bankruptcy Strategist
A Clash Between ‘Free and Clear’ and Tenants’ Rights Under Bankruptcy Code Section 365(h)
Albena Petrakov
With the recent carnage in the retail industry, a lot of attention goes to the fate of landlords when their tenants seek bankruptcy protection. A recent case that brings balance is Revel AC Inc. v. IDEA Boardwalk, LLC.
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The Bankruptcy Strategist
Preference Attacks To Recover Prepetition Compensation Paid to Consultants of Troubled Companies
Paul A. Rubin and Hanh V. Huynh
Employees of a troubled company who stay on as consultants to assist in liquidating its assets or preparing the company for a bankruptcy filing may later be disappointed to face claims to claw back their prepetition compensation.
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The Bankruptcy Strategist
Quasi-Bankruptcy Quagmires
Howard C. Rubin and Deirdre M. Richards
When Entities May Not Have a Filing Choice and How Creditors Are Impacted
This article explores the difficulties some entities have encountered in filing bankruptcies and how one organization used extraordinary civil remedies in an attempt to accomplish what reorganization under Chapter 11 of the United States Bankruptcy Code would have provided.
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Commercial Leasing Law & Strategy
A Clash Between ‘Free and Clear’ and Tenants’ Rights Under the Bankruptcy Code’s Section 365(h)
Albena Petrakov
With the recent carnage in the retail industry, including Sears and many other retailers of all shapes and sizes, a lot of attention goes to the fate of landlords when their tenants seek bankruptcy protection.
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The Bankruptcy Strategist
Take-Aways from the Sears Sale Process
Adam L. Rosen
As widely reported, the downfall of Sears was a slow-motion train wreck. Despite its unique size and complexity, however, some of the strategies and techniques used by the stakeholders in Sears can be applied in cases of any size.
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Business Crimes Bulletin
Eighth Circuit Rejects Ponzi Scheme Presumption to Protect Legitimate Loan Repayments
Michael L. Cook
In Stoebner v. Opportunity Finance, LLC, the U.S. Court of Appeals for the Eighth Circuit held that “… Ponzi scheme payments to satisfy legitimate antecedent debts to defendant banks could not be avoided” by a bankruptcy trustee “absent transaction-specific proof of actual intent to defraud or the statutory elements of constructive fraud — transfer by an insolvent debtor who did not receive reasonably equivalent value in exchange.”
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The Bankruptcy Strategist
Don’t Set Me Off: No Triangular Setoff Among Affiliated Entities and a Debtor Counterparty
Adam C. Rogoff
In today’s global economy, companies often have multiple business lines operating through separate entities. Outside of bankruptcy, these affiliated operations sometimes transact in a holistic — albeit legally distinct — debtor-creditor relationship with their counterparty. But, as this article discusses, the legal separateness of affiliates can hinder economic protections that a creditor might have otherwise when its counterparty files for bankruptcy.
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The Bankruptcy Strategist
Caveat Intercreditor: Bankruptcy May Be Coming
Joel H. Levitin, Richard A. Stieglitz Jr. and Stephen J. Gordon
Bankruptcy Provisions in First Lien/Second Lien Intercreditor Agreements
While intercreditor agreements (ICAs) are not necessarily the most attention-grabbing of the various loan documents common to large financing transactions, they are nevertheless important, and lack of attention to detail with respect to their provisions could lead to unintended results in any future bankruptcy case.
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The Bankruptcy Strategist
Case Study: Delaware Bankruptcy Court Denies Trustee’s Breach of Fiduciary Duty Suit
Earl M. Forte
In January, a bench trial occurred in In re Covenant Partners, L.P., in which the Trustee of Debtor, Covenant Partners, L.P., sued for breach of fiduciary duty.
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The Bankruptcy Strategist
How Bankruptcy Courts Will Treat Cases Involving Cryptocurrency Exchanges
Richard J. Mason
This article looks at some of the issues that may arise if a cryptocurrency exchange becomes a debtor in a case under the Bankruptcy Code.
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The Bankruptcy Strategist
The How, What and Why of a Potential PG&E Bankruptcy
John J. Rapisardi and Daniel Shamah
PG&E Corporation and its subsidiary, Pacific Gas & Electric Company announced that it expects to file for Chapter 11 bankruptcy protection on or around Jan. 29, 2019, right around the conclusion of a mandatory 15-day notice requirement under California law. Such a filing would represent the second time PG&E resorted to protection under the U.S. Bankruptcy Code.
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The Bankruptcy Strategist
Junior Noteholders Successfully Petition for Dismissal of Involuntary Filing
H. Peter Haveles, Jr. and Eric Winston
The bankruptcy court’s ruling is a seminal decision that meaningfully circumscribes the ability of a secured noteholder under an indenture, particularly for structured debt, to force the debtor (i.e., issuer of the debt) into an involuntary bankruptcy.
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The Bankruptcy Strategist
Reports of the Demise of ‘Gifting’ Chapter 11 Plans Are An Exaggeration
Timothy W. Hoffmann and Mark G. Douglas
In Nuverra Environmental Solutions,, the U.S. District Court for the District of Delaware affirmed a bankruptcy court order confirming a non-consensual Chapter 11 plan that included “gifted” consideration from a senior secured creditor to fund unequal distributions to two separate classes of unsecured creditors.
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Commercial Leasing Law & Strategy
The Bankruptcy Code’s Inherent Limitations for Struggling Golf Courses
Daniel A. Lev
Part One of a Two-Part Article
This article describes conflicts with zoning boards and neighbors as it relates to distressed golf course properties and the methods sometimes available in the bankruptcy realm for working around the problem of restrictive covenants that run with the land.
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The Bankruptcy Strategist
Eighth Circuit Rejects Ponzi Scheme Presumption to Protect Legitimate Loan Repayments
Michael L. Cook
The Eighth Circuit affirmed the lower courts’ dismissal of a bankruptcy trustee’s $250 million fraudulent transfer suit against two banks (the Banks), rejecting the so called “Ponzi scheme presumption” that “allows a creditor to by-pass the proof requirements of a fraudulent-transfer claim by showing that the debtor operated a Ponzi scheme and transferred assets ‘in furtherance of the scheme.’”
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The Bankruptcy Strategist
Fifth Circuit Holds Asset Purchaser Unable to Acquire Rejected License Agreement
Michael L. Cook
A license agreement “deemed rejected by operation of law” could not be acquired under a court-approved asset purchase agreement, held the U.S. Court of Appeals for the Fifth Circuit
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The Bankruptcy Strategist
Secured Creditors Beware of Your Descriptions, Nomenclature and Terminations
Deirdre M. Richards and Howard C. Rubin
Secured creditors can learn a great deal from a few recent bankruptcy cases involving the Uniform Commercial Code that remind us that the “devil is in the details.” These cases show that it is unrealistic to expect forgiveness by a court after a misstep involving Article 9 of the UCC.
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The Bankruptcy Strategist
Strawberry Fields For Sale
Barry A. Chatz and Kevin H. Morse
On Oct. 3, 2018, the Chapter 11 Liquidating Plan of Eclipse Berry Farms, LLC was confirmed, concluding a two-year journey from one of the largest strawberry growers in the country to the cessation of operations and eventual liquidation.
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The Bankruptcy Strategist
Debtor v. UST: The Battleground Over Retention of a Chief Restructuring Officer
Mark S. Melickian and Jack O’Connor
The battle over retaining a chief restructuring officer, which the United States Trustee has traditionally not objected to, is heating up.
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The Bankruptcy Strategist
Second Circuit Rejects Use of Involuntary Bankruptcy Petition As Collection Tool
Michael L. Cook
A bankruptcy court properly dismissed a creditor’s involuntary bankruptcy petition “for cause” when it “would serve none of the Bankruptcy Code’s goals or purposes … and [when] the sole [petitioning] creditor is not substantially prejudiced by remedies available under state law,” held the U.S. Court of Appeals for the Second Circuit in In re Murray.
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The Bankruptcy Strategist
Which Financial Representations Will Justify a Discharge Objection after Lamar, Archer?
John A. Thomson, Jr.
The Supreme Court’s decision in Lamar, Archer & Cofrin, LLP v. Appling has significantly constricted the range and nature of statements that will support a successful objection by a creditor to the discharge of a debt that was obtained by the statements in question. This constriction could have a very real impact on how entities that loan money or provide services on credit review and collect information regarding a borrower’s creditworthiness.
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The Bankruptcy Strategist
Defusing the UST Tax Bomb
Jacob H. Marshall
How Lenders and Debtors can Minimize UST Fees and Maximize Creditor Recoveries
As predicted in the first part of this article (May, 2018), the new United States Trustee (UST) fee has had a disproportionate effect on middle-market, high-velocity cash flow companies. The best solution is for Congress to revisit the fee structure and refine it to reflect the realities of particular cases and the actual burden on the UST.
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The Bankruptcy Strategist
Eleventh Circuit Strengthens Creditor’s Defense to Preference Claim
Michael L. Cook
A defendant creditor in a preference suit may offset 1) the amount of later “new value” it sold to the Chapter 11 debtor against 2) the debtor’s earlier preferential payment to the creditor, the U.S. Court of Appeals for the Eleventh Circuit recently held.
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The Bankruptcy Strategist
The Bankruptcy Code’s Inherent Limitations for Struggling Golf Courses
Daniel A. Lev
Part Two of a Two-Part Article
The ability of a debtor to reject a restrictive covenant under Section 365 or to sell free and clear of a covenant under Section 363(f) is limited and the obstacles are difficult to surmount. A possible solution, however, may surface if a debtor can demonstrate a change of circumstances under state law.
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The Bankruptcy Strategist
Third Circuit Affirms Reversal of $275M Break-Up Fee in Del. Bankruptcy Case
Tom McParland
The U.S. Court of Appeals for the Third Circuit on Sept. 13 upheld a Delaware Bankruptcy Court’s decision to block a Florida-based energy company from collecting a $275 million merger termination fee against the bankruptcy estates of Energy Future Holdings Corp. and a subsidiary.
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The Bankruptcy Strategist
Acquisition of Claims for Plan Control
Jeff J. Friedman
The United States Court of Appeals for the Ninth Circuit recently provided additional guidance to creditors seeking to block confirmation of a plan by…
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The Bankruptcy Strategist
'Secured Lender's Corner:' Protecting the Secured Lender Before a Mortgagor or Lessee Files Bankruptcy
Deirdre M. Richards and Howard C. Rubin
It is important for a secured lender to 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.
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The Bankruptcy Strategist
The Bankruptcy Code’s Inherent Limitations for Struggling Golf Courses
Daniel A. Lev
Part One of a Two-Part Article
A simple Web search will unearth countless privately-owned golf courses that have closed, are for sale, or have sought bankruptcy protection as an avenue toward a financial restructuring or redevelopment. However, there are limitations on what the owner of a golf course can accomplish in Chapter 11 when the property is burdened with restrictive covenants limiting the use of the property.
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The Bankruptcy Strategist
On the Move
Attorney and law firm moves in bankruptcy law.
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The Bankruptcy Strategist
The Domesticity Barrier to Recognition of a Foreign Proceeding Under Chapter 15
Brian L. Shaw and Christina M. Sanfelippo
How Low Can You Go?
In In re B.C.I. Finances Pty Limited, Judge Sean Lane reiterated the low domestic presence threshold (Domesticity) that a foreign representative must meet when it is petitioning for recognition of a foreign proceeding under Chapter 15.
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The Bankruptcy Strategist
Lease Rejection in Shiekh Shoes
David Kupetz and Asa Hami
Store closing or liquidation sales are a routine part of Chapter 11 cases involving retail debtors. These sales are consistently authorized by bankruptcy…
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The Bankruptcy Strategist
Due Diligence in Distressed Community Hospitals
Deborah Williamson, Mark Andrews and Richard Y. Cheng
Many community hospitals are in distress. The causes are varied but have a constant theme — the cost to adapt to a rapidly changing environment.
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The Bankruptcy Strategist
Fifth Circuit Affirms Shareholder Veto of Chapter 11 Petition
Michael L. Cook
“Federal law does not prevent a bona fide shareholder from exercising its right to vote against a bankruptcy petition just because it is also an unsecured creditor,” held the U.S. Court of Appeals for the Fifth Circuit in In re Franchise Services of North America, Inc. According to the court, applicable Delaware law would not “nullify the shareholder’s right to vote against the bankruptcy petition.”
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The Bankruptcy Strategist
State Attorney-Client Privilege Rule Incorporated into Federal Law
Robert J. Stearn, Jr., Cory D. Kandestin and Christopher M. De Lillo
Delaware Bankruptcy Court Protects Communications with Financial Professionals Originating In Delaware
Because state law applies at the time the transaction is negotiated, the parties might assume — reasonably so — that state privilege law will govern communications with their attorneys and financial professionals. But what happens if, years later, a fraudulent transfer plaintiff files suit in federal court and brings claims under federal law? Does state privilege law still apply?
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The Bankruptcy Strategist
Chapter 11 Plan Proponents: Getting Service Right
Tinamarie Feil
This article reviews the detailed service basics of Rule 3017 of the Federal Rules of Bankruptcy Procedure and relevant portions of Rule 2002. In addition, it provides some tips on how to save time and money when executing service.
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The Bankruptcy Strategist
New Bill Would Protect Law Licenses of Student Loan Defaulters
Nineteen states currently allow government agencies to revoke the professional licenses — including law licenses — of student loan defaulters. But that may change.
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Entertainment Law & Finance
Impact on Accusers of Court-Approved Weinstein Co. Sale
Tom McParland
A Delaware federal bankruptcy judge’s ruling in May approved the $310 million sale of The Weinstein Co.’s television and film assets to Dallas-based Lantern Capital Partners. The development was the latest blow to women who had hoped to recover against the company for abuses suffered at the hands of company co-founder Harvey Weinstein.
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