LJN Newsletters

Without disease and illness, there would be no need for life science companies or the products that they develop. Some modern maladies and ailments present more challenges than opportunities for biotech and medical device firms. Severe Acute Respiratory Syndrome (SARS) and comparable pathogens present medical device and life science manufacturers with new and daunting risks. One such peril lies in the realm of product liability.

Recent rulings of importance to you and your practice.

Last month, we explained that when a once steady and reliable customer becomes delinquent in payment and eventually files for bankruptcy protection, your client becomes one of many creditors trying to recover a portion of its investment. We explained how, whenever a creditor receives a benefit from a debtor shortly before the debtor files for bankruptcy, a preferential transfer may occur. And we showed how section 547(b) of the Bankruptcy Code permits a trustee to avoid pre-bankruptcy transfers as "preferences." The first tactic we discussed for defending such preference actions was to dispute plaintiff's prima facie case. In this month's installment, we discuss preference avoidance by statutory exception, and the availability of a jury trial.

In the Chapter 11 context, it is common for interested parties to challenge the characterization of a Chapter 11 debtor's obligations under an agreement styled as a lease. A Bankruptcy Court's determination as to whether a transaction is a "true" lease or a secured financing can have far-reaching consequences on the administration of a debtor's Chapter 11 case and the respective rights of each party to the agreement. As the recent decision by the Third Circuit Court of Appeals in Duke Energy Royal, LLC v. Pillowtex Corp. (In re Pillowtex, Inc.), 349 F.3d 711 (3d Cir. 2003) illustrates, when faced with the question of whether a transaction constitutes a "true" lease or a secured financing, bankruptcy courts will look beyond the form to the substance of the parties' agreement.

Last month, we explained that a bankruptcy court lacks "either the statutory or equitable power to authorize" the debtor's payment of pre-bankruptcy nonpriority unsecured claims, as noted in Capital Factors, Inc. v. Kmart Corp. (In re Kmart Corp.) We explained that the clear, no-nonsense opinions of the district court and the Court of Appeals reversed four bankruptcy court orders, and we explained why the Seventh Circuit's Kmart decision is noteworthy. We went on to discuss the "Doctrine of Necessity" (the Doctrine), a current justification used by some bankrtupcy courts to permit the post-petition payment of certain assertedly "essential" pre-petition claims in Chapter 11 reoganized cases. This month, we discuss Principal Judicial Precedents, Decisions Favorable to the Doctrine, Cases Rejecting the Doctrine, and The Rebirth of the "Doctrine of Necessity."

Dedicated parking spaces appurtenant to office leases, especially covered spaces, are a prized commodity, particularly in suburban markets where virtually all of a tenant's employees drive to work. A tenant may be able to negotiate an arrangement where it receives more parking passes than the actual number of cars it is permitted to park at the premises at any given time under the theory that not all employees with a parking pass will actually show up for work on any given day. The problem presented by this approach is, of course, the one day when every driver with a parking pass shows up for work and there is no room for all of their cars.

Highlights of the latest commercial leasing cases from around the country.

The first part of this article described the contents of the lien waiver and access agreement provision required by asset-based lenders. The conclusion discusses the major issues to be covered in the provision.