The Metamorphosis of Assignment Clauses in Bankruptcy
How is this scenario for a debtor's nightmare? You negotiate a license agreement that provides for the assignment of the agreement to successors in interest so long as they agree to be bound by the terms of the agreement. You then file a Chapter 11 bankruptcy and as a debtor in possession, seek to assume that license agreement. The other party to the contract objects to such assumption and the Bankruptcy Court says that in light of such objection you cannot assume the license agreement. You cannot reorganize without the license. You are dead.
Final IRS Regulations Hurt Consolidated Groups
Just when you thought you had finally mastered the complex temporary regulations issued last March regarding the reduction of tax attributes of members of an affiliated group of corporations filing consolidated income tax returns ("consolidated group" or "group") following a cancellation of the debt, the IRS has served up another dose of "March Madness." The IRS has now issued those regulations in final form and has made some significant "revisions" to the provisions of the temporary regulations that focus on how tax attributes are to be reduced when a subsidiary either ceases to be, or becomes, a member of the consolidated group. This article briefly discusses how these significant "revisions" will impact financially troubled consolidated groups.
Custody Evaluations
New York has recently been exposed to a resurgence of doubt regarding the usefulness of evaluations performed by mental health professionals (MHPs) in custody matters. In debates certain to affect the national family law community, the criticism questions the scientific validity of recommendations and observations that these professionals are called upon to make, asking whether the experts, in fact, have the expertise to participate meaningfully in the process. This article responds to some of the criticism by seeking to clarify the role that MHPs play.
'Practice By Ambush'
In their desire to zealously represent clients, practitioners may often attempt to rewrite the Bankruptcy Code or Rules in motions or reorganization plans. However, recent opinions have taken umbrage with these efforts to conduct "practice by ambush" that either propose provisions inconsistent with the Bankruptcy Code or seek to deprive parties in interest of due process, or both. After all, fundamental due process " ... is the cornerstone underpinning bankruptcy procedure...A creditor has the right to rely on the Bankruptcy Code and Rules and to expect to be accorded due process of law in accordance with the Bankruptcy Code and Rules, and the United States Constitution." <i>In re Whelton</i>, 299 B.R. 306, 318 (D. Vt. 2004).
Must New Value Remain Unpaid to Serve As a Defense to a Preference Action?
Does subsequent new value need to be unpaid to constitute a defense to a preferential transfer under section 547(c)(4)? The issue arises when a creditor asserts the subsequent new value defense to a preference action, on the basis that additional credit (goods or services) was extended after the preferential transfer occurred, even if the subsequent new value was paid for by the debtor. With every decade comes a new wrinkle in the discussion on whether the subsequent new value provided must remain unpaid. The issue has been resurrected recently due to the frequency of critical vendor orders authorizing the post-petition payment of pre-petition debt and debtors-in-possession agreeing to pay reclamation claims in exchange for keeping the goods.
A Model for Canadian Cross-Border Insolvency
The trend toward commercial globalization has led to an increase in the number and complexity of cross-border bankruptcy cases. The ability to overcome differences in legal systems, often through the cooperation and coordination of courts in different countries, can be a key factor in the success or failure of a restructuring.
Chapter 11 Transfer Tax Exemption Expanded by the Eleventh Circuit
The ability to sell assets during the course of a Chapter 11 case without incurring transfer taxes customarily levied on such transactions outside of bankruptcy often figures prominently in a potential debtor's strategic bankruptcy planning. However, the circumstances under which a sale or related transaction qualifies for the tax exemption has been a focal point of dispute for many courts, including no less than four circuit courts of appeal. A ruling recently handed down by the Court of Appeals for the Eleventh Circuit fuels this growing controversy in a way that may encourage Chapter 11 debtors to rethink the way that they structure plans of reorganization.
Production Resources Decision
In the current environment of increasing scrutiny of corporate behavior after corporate scandals such as Enron and WorldCom, lawsuits brought by creditors for breach of the fiduciary duties owed to them by officers and directors have increased significantly. The suits are taking center stage on the dockets of bankruptcy courts and state courts alike, and receive much public attention across the country. Against this backdrop, the Delaware Court of Chancery's November opinion in <i>Production Resources Group, L.L.C. v. NCT Group, Inc.</i>, __ A.2d __ (Del. Ch. 2004); C.A. No. 114-N, 2004 Del. Ch. LEXIS 174 (Del. Ch. Nov.) is likely the most important pronouncement on the nature of fiduciary duty claims brought by creditors since the Court of Chancery's 1991 opinion in <i>Credit Lyonnais Bank Nederland, N.V. v. Pathe Communications Corp.</i>, C.A. No. 12150, 1991 WL 277613 (Del. Ch. Dec. 30, 1991).
