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It has been a prevailing view in practice under the Bankruptcy Code that a Debtor has an absolute one-time right under Section 706(a) to convert a case from Chapter 7 to another Chapter, the most common scenario involving conversion from Chapter 7 to Chapter 13. However, two recent circuit level cases, reflecting the case law trend, have found that a motion to convert a Chapter 7 to a Chapter 13 may be denied if not made in good faith.
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The latest development in 'critical vendor' litigation occurred in the case where much of it began ' the Kmart Corporation bankruptcy case. On April 12, 2006, United State Bankruptcy Judge Susan Pierson Sonderby denied motions to dismiss lawsuits seeking the return of critical vendor payments, paving the way for the cases to proceed to trial. Although Judge Sonderby's decision was not published, this latest chapter of the Kmart story is worth noting.
two recent decisions by the Bankruptcy Court for the Southern District of New York serve to reemphasize a maxim well known to those regularly involved in the distressed debt industry. Participants in the market for distressed claims must be aware of the inherent risks and uncertainties in dealing with post-petition debtors, and they must protect themselves accordingly.
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Highlights of the latest franchising news from around the country.
Highlights of the latest franchising cases from around the country.
Features
Legal counsel to franchise systems have responsibilities that range from drafting and updating UFOCs, to assisting with purchases of new systems, to monitoring legislative and regulatory activity. Which of these services are most needed by franchisors, and how can in-house or outside counsel maximize their value? A special CEO Roundtable session at the International Franchise Association ('IFA') Legal Symposium in Washington, DC, in May tried to answer some of those questions by bringing together four veteran franchisor CEOs who detailed how they work with inside and outside counsel and where they see legal flashpoints in franchising today.
On April 12, 2006, the Federal Trade Commission ('FTC') published in the Federal Register (Business Opportunity Rule 71 Fed. Reg. 19054 (proposed April 12, 2006) (to be codified at 16 CFR Part 437)) a Notice of Proposed Rulemaking for the FTC's long-awaited business opportunity rule ('Bus Opp Rule'). The Bus Opp Rule will cover business opportunity sellers who now are covered by the FTC's franchise trade regulation rule ('Franchise Rule'), as well as sellers of certain business opportunities who are not now covered by the Franchise Rule. The FTC has long believed that the same regulation was not the best way to regulate both business opportunity sellers and franchisors. More specifically, the FTC has concluded that each group's special characteristics (such as history of consumer protection problems, sophistication of its target purchasers, required investment commitment, and complexity of business system) required a different regulatory approach. The Bus Opp Rule is designed to create a regulatory scheme to focus on the special characteristics of business opportunities. Until the Bus Opp Rule is promulgated, business opportunity sellers must continue to comply with the current and, if and when adopted, amended Franchise Rule.