The Supreme Court May Finally Give Guidance On Trademark Protections In Bankruptcy

In prior posts, we discussed the perplexing issue of how and whether a trademark licensee is protected when the trademark owner/licensor files a bankruptcy petition and moves to reject the trademark license in accordance with section 365 of the Bankruptcy Code.

In January of this year, the First Circuit Court of Appeals issued its ruling in Mission Product Holdings, Inc. v. Tempnology, LLC, 879 F.3d 389 (2018), holding that a trademark licensee was not permitted to continue to utilize the trademark after the rejection of the license agreement. In so holding, the First Circuit disagreed with the Seventh Circuit Court of Appeals’ decision in Sunbeam Prods. v. Chicago Am. Mfg., LLC, 686 F.3d 372 (2012), where the Seventh Circuit held that a non-debtor’s right to continue to use a trademark license is based upon section 365(g) of the Bankruptcy Code which provides that a rejection of an executory contract (such as a trademark license agreement) simply constitutes a prepetition breach of that contract — it neither acts as a contract rescission nor termination.  Instead, the court held that rejection leaves in place the licensee’s right to continue to use the licensed trademark notwithstanding the contract’s rejection.

In what could only be considered as good news for trademark licensees and licensors, as well as bankruptcy professionals advising them, on October 26, 2018, the U.S. Supreme Court granted certiorari in the Mission Product Holdings, Inc. v. Tempnology, LLC case.  This means that parties may finally get guidance as to what happens to a trademark license when the trademark licensor rejects the trademark license agreement. Do trademark licensees have any protections like those afforded licensees of intellectual property under section 365(n)?  Is the Seventh Circuit’s approach in Sunbeam appropriate, or, as held by the First Circuit, is it up to Congress to clarify the status of trademark rights post-rejection? Only time will tell. 

We will keep our readers informed as to all developments in this incredibly important case.

HMRC, Insolvency and Post-Budget Preferential Status

Following the Enterprise Act 2002, the preferential status which HMRC had enjoyed in an insolvency was abolished, rendering HMRC the same as any other unsecured creditor. The effect of this was to swell the pot of assets available to be applied to all unsecured creditor claims.U Turn Sign

Philip Hammond announced in Monday’s budget that HMRC’s preferential status is to be restored. What does this mean for HMRC and unsecured creditors? Continue Reading

What Value is Cryptocurrency to a Bankruptcy Estate?

In their article published by the IBA Insolvency and Restructuring International Magazine titled “Russia: Cryptocurrency and Bankruptcy Estate”, Sergey Treshchev and Elena Malevich of Squire Patton Boggs, Moscow analyse recent decisions in the Russian courts considering whether cryptocurrencies are an asset which form part of the bankruptcy estate.

Given the speed at which cryptocurrency has grown as a concept, it is of no surprise that bankruptcy and insolvency legislation has yet to catch up and define just what cryptocurrency is and therefore how it should be treated in a debtor’s bankruptcy or corporate insolvency. Not just in Russia but internationally.

As courts worldwide grapple with the concept of whether cryptocurrency should be treated as an asset or currency, there is no uniform view. In the U.S., for example, some bankruptcy courts concluded that they should be treated as currency: HashFast Technologies, LLC v. Lowe (In re HashFast Technologoes, LLC), Bankr. Case No. 14–30725DM, Adv. Pro. No. 15-3011DM (Bankr. N.D. Cal. Feb 19, 2016).  In the EU, Member States are split on the position.

Sergey and Elena discuss their thoughts on the findings of the Russian courts.  If you would like to read the full article, please click here.

Squire Patton Boggs: offering certainty to restructuring and insolvency in the face of an uncertain future post-Brexit

No one knows for certain what the future will hold for the UK and the remaining EU countries post 29 March 2019 but in the context of cross-border insolvency we do know that if there is a no-deal Brexit, that the Recast Regulation on Insolvency Regulation (EU) 2015/848 will be repealed.

So, what does this mean for UK insolvencies with a cross-border element?

In simple terms a UK appointment taker will have to apply to the EU local Court for recognition of their appointment and cannot rely on the mutual recognition which currently exists under the EU Regulation.   They may also have to seek the assistance of the EU local courts to enforce judgments and orders and negotiate with foreign office holders. The UNCITRAL Model Law on Cross-Border Insolvency may plug some of the gaps on mutual recognition, but not all.

What is clear is that the support and assistance of local lawyers is key to ensuring cross-border insolvencies are managed without additional cost, frustrations and delays and that assets are recovered and value maintained for creditors.

Where can we help?

Squire Patton Boggs has one of the largest, most experienced and respected global restructuring and insolvency practices of any law firm, with more than 130 experienced lawyers in 36 offices in 15 countries collaborating on domestic and cross-border restructuring matters.

Cross-border restructuring and insolvency cases require a diverse set of skills and for our lawyers it is second nature to operate across different markets and boundaries blending our understanding of the potential risks, with a strategic approach, efficient project management, local insigt and the ability to see the bigger picture.

If the UK exits the EU without agreement, Squire Patton Boggs through its network of European offices will continue to provide office holders with the skill, support and assistance required to manage cross-border insolvencies efficiently and effortlessly whether the appointment taker is a UK insolvency practitioner seeking assistance in the EU or an office holder based in the EU seeking assistance in the UK.

We have 14 offices throughout Europe and our partners are recognised leaders in their field, competing at the top level in their markets and representing the very best clients. We boast broad sector experience in diverse industries, regularly advising on the most complex and challenging restructuring assignments. We bring you deep industry knowledge, with proven strength in diverse sectors such as automotive, manufacturing, energy and utilities, chemicals, retail and leisure. Our client base spans every type of business, both private and public, worldwide, from Fortune 100 and FTSE 100 corporations to emerging companies.

Please get in touch with your usual contact at Squire Patton Boggs for any enquiries or contact our Cross Border Restructuring Practice European Co-Chair Susan Kelly on +44 774 092 4773 or by email to susan.kelly@squirepb.com.

Spotlight on conflicts of interest for insolvency practitioners

Andrew Tate & Paul MuscuttPaul Muscutt, London restructuring partner at law firm Squire Patton Boggs, talks to Andrew Tate, former R3 President, Chair of R3’s Policy Group and Partner at accountancy firm Kreston Reeves LLP, about conflicts of interest in the restructuring and insolvency profession*. Continue Reading

Can’t Prove it? You’ll lose it.

Can you prove it?Summary

The High Court has issued a judgment dismissing the entirety of the Claimants’ claim in a long-running dispute commenced by a pair of property developers against a Judicial Factor to the estate of a Scottish businessman (the “Deceased”). Squire Patton Boggs represented the successful Defendant, who was awarded the majority of his costs on the indemnity basis.

The judgment emphasises the importance of litigants ensuring that there are no obvious evidential holes in their case prior to trial. Whilst this should go without saying, the judgment demonstrates that the Court is highly unlikely to permit the parties to adduce key evidence at a very late stage (especially items with a long lead-in time, such as expert evidence) to try to paper over those evidential cracks at trial. The case is also a further reminder that if parties fail to call a witness of obvious relevance to their pleaded case, then they do so at their peril.

Continue Reading

“I’ll Be Back . . . Probably”: The Terminator’s Conundrum

A recent decision in the In re RMH Franchise Holdings bankruptcy case pending in the District of Delaware, highlights the importance of complying with a contract’s termination provision before the contract counterparty files for bankruptcy.

In RMH, Applebee’s Restaurants LLC and Applebee’s Franchisor LLC (collectively, “Applebee’s”) entered into 160 pre-petition franchise agreements (the “Franchise Agreements”) with the Debtors.  The Franchise Agreements, among other things, granted the Debtors the right to use the Applebee’s name, food recipes, operating methods, and restaurant style, in exchange for a monthly royalty fee and a percentage of gross sales.  The Franchise Agreements were governed by Kansas law. Continue Reading

BHS CVA: landlords win on penalties

Closed down BHS department store

Background

BHS agreed a CVA with its creditors in March 2016. As with so many large, high-profile CVAs the key issues for BHS were the rental burdens arising out of their store network- they are known as “landlord CVAs”.

The CVA followed a now common format where landlords were placed into different categories according to the viability (or otherwise) of the specific premises , the top category benefitting from the least interference with lower categories taking increasingly substantial reductions in rent. There was a provision (clause 25) which stated that on termination under that clause “the compromises and releases effected under the terms of the CVA shall be deemed never to have happened”. Furthermore, a landlord creditor was entitled to send a notice demanding payment within 14 days of sums due and if payment were not made, a further notice could bring about the termination of the CVA on receipt by BHS. One of BHS’ landlords served the relevant notices on BHS and the CVA accordingly terminated with effect from 16 December 2016. It should also be noted that BHS has gone into administration in April 2016, and liquidators were appointed in October 2016. The formal procedures had run concurrently with the CVA until it was terminated.

Prudential was a landlord in respect of two leases. It contended that it should be paid certain additional sums following the termination of the CVA, provable in BHS’ liquidation and that, in so far as its claims related to periods in which the BHS administrators were using its properties for the purposes of its administration, they were payable in full as expenses of the administration.  In SHB Realisations Limited in liquidation [2018] EWHC 402 (Ch) the liquidators sought directions from the court:

Continue Reading

Third Circuit Makes Clear That Plan Releases Can Extend To Post-Confirmation Acts

We have discussed plan releases in prior posts.  Oftentimes, disputes involving plan releases revolve around whether, and in what contexts, third-party releases in plans are appropriate.  Recently, the Third Circuit Court of Appeals addressed the relatively unique question of whether releases in a confirmed plan are binding upon post-confirmation purchasers of the debtor’s stock. The Court’s decision in Arctic Glacier Int’l, Inc. puts buyers of a debtor’s claims and shares on notice that they are bound by the terms of the plan, including third-party release provisions.

Factual Background

In Arctic Glacier, the debtors, including Arctic Glacier Income Fund (“Arctic Glacier”), filed for protection under Canada’s Companies Creditors’ Arrangement Act. The debtors also filed for and received recognition under Chapter 15 of the Bankruptcy Code. Under the debtors’ plan of arrangement (the “Plan”), Arctic Glacier was to liquidate and distribute the proceeds to its creditors, giving lowest priority to shareholders. A Monitor appointed under the Plan was empowered to sell and distribute assets with few limitations on when or how much he could distribute as long as he gave 21 days’ notice of any distribution. Continue Reading

I’ll Gladly Pay You Tuesday for an Ice Cream Cone Today: 11th Circuit Clarifies Availability of “New Value” Defense in Bankruptcy Preference

Last month, the Eleventh Circuit Court of Appeals clarified the circumstances under which a creditor can assert a “new value” defense to a preference action under section 547(c)(4) of the Bankruptcy Code—rejecting as dictum language in a prior decision indicating that the new value provided needed to remain unpaid in order to setoff against preference payments.  The Eleventh Circuit’s decision also had the effect of narrowing a split among the circuits.

The Background

In Kaye v. Blue Bell Creameries, Inc. (BFW Liquidation, LLC), Bruno’s Supermarkets filed a chapter 11 bankruptcy.  Blue Bell was one of Bruno’s pre-bankruptcy vendors, making regular deliveries of ice cream to Bruno’s on short-term credit.  Historically, Bruno’s paid twice per week for Blue Bell’s daily deliveries.  Eventually, due to cash flow problems, Bruno’s began paying only once per-week, and occasionally delayed payments even further.  In other words, Blue Bell received payments at irregular intervals, particularly during the 90 days preceding Bruno’s bankruptcy filing, all the while continuing to make its deliveries to Bruno’s.  Continue Reading

LexBlog