Ninth Circuit BAP Holds Lease Payment Streams Are Not Chattel Paper
In August 2006 the U.S. Bankruptcy Appellate Panel of the Ninth Circuit rendered a decision in a case titled <i>In Re: Commercial Money Center, Inc.</i> (<i>Netbank, FSB v. Kipperman</i>), U.S. Bankruptcy Appellate Panel of the Ninth Circuit, BAP No. SC-05-1238-MoTB; Bk.No. 02-09721-H7; Adv. No. 03-90331-H7, holding that payment streams stripped from equipment leases are payment intangibles, not chattel paper, and thereby overturning the bankruptcy court decision. Accordingly, the assignment of the payment streams could be automatically perfected under '9-309(3) of Revised Article 9. Additionally, the court agreed with the bankruptcy court and held that the transactions in this case were loans, not sales, so there was no automatic perfection. Finally, the court held that there were unresolved factual and legal issues as to whether the lender had perfected its security interest in the leases by taking possession through a third-party agent, and therefore remanded the case for further proceedings.
Understanding and Utilizing Percentage Rent Provisions
As retailers like to say, 'The three most important factors in retailing are location, location, location.' The real value of a retail lease, however, resides in the volume of sales produced at the location; therefore, the provider of the location — namely, the landlord — is a key player in the retailer's success. That is why percentage rent has developed in retail leases as a way by which the landlord that provides a successful location might share to some degree in that success.
Considerations in Drafting and Negotiating Early Lease Terminations
The first impression one may have when preparing to draft an early termination agreement is that such a document should be a simple matter. It is true that simplicity and brevity in drafting are, in most circumstances, admirable qualities, and it is equally true that we frequently draft and negotiate documents that are much more complex than most lease termination agreements. Nevertheless, as with any effort to document a transaction, care must be taken in the preparation and negotiation of such an agreement to avoid overlooking potential risks and to protect the client's interests. This article explores some considerations in documenting the early termination of a lease, though not necessarily in order of importance. Although some specific suggestions are made and some sample provisions are included, the primary intent of this discussion is to alert the leasing practitioner to various issues and pitfalls that may be encountered.
Bankruptcy Code Amendments Alter Franchise Case Strategies
The substantial amendments made by the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA) to the Bankruptcy Code have had a significant impact on the dynamics of franchisee bankruptcies. The BAPCPA was generally intended to accelerate Chapter 11 'reorganizations' and provide relief to certain constituencies in the bankruptcy process (eg, landlords). This article focuses on the nuances of the BAPCPA's impact in franchisee bankruptcy cases.
U.D. Registry, Inc. Topples California Security Freeze Act
In a decision that may have repercussions throughout the United States, a California Court of Appeal has ruled that California's Security Freeze Act violates the First Amendment because it precludes the reporting of information contained in public records. The challenge to the Freeze Act was brought by U.D. Registry, Inc. ('UDR'), a company that maintains information on tens of millions of people in California and elsewhere, providing landlords and property managers with reports about prospective tenants. UDR had challenged California's freeze law, Cal. Civil Code §1785.11.2, as unconstitutional. The appellate court, however, also reversed an injunction that had completely barred the state from enforcing the law, and directed a new injunction be issued barring enforcement against UDR only.