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State Marijuana Laws vs. Bankruptcy: The Tension Grows

In prior posts, we examined whether state-licensed marijuana businesses, and those doing business with marijuana businesses, can seek relief under the Bankruptcy Code.  As we noted, the Office of the United States Trustee (the “UST”) has taken the position that a marijuana business cannot seek bankruptcy relief because the business itself violates the Controlled Substances Act … Continue Reading

Third Circuit Confirms There’s No Wiggle Room With Jurisdictional Limitations

A precedential decision issued on November 28, 2018 by the U.S. Court of Appeals for the Third Circuit highlights the limits of bankruptcy judges’ authority to transfer non-core proceedings to other courts.  The Third Circuit’s opinion in In re IMMC Corp. f/k/a Immunicon Corp., et al., Case No. 18-1177, also emphasizes the importance of choosing the … Continue Reading

Did Jevic Doom Future Chapter 11 Recovery Efforts By Unsecured Creditors?

Can a senior secured creditor, who credit bid for substantially all of a debtor’s assets, contribute non-estate property to a litigation trust for the benefit of general unsecured creditors without following the absolute priority rule?  In the recent Constellation Enterprises case, the Bankruptcy Court for the District of Delaware ruled that, as a result of … 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”) … 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 … 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 … Continue Reading

The Ever-Shrinking Chapter 11 Case

Most observers of the world of chapter 11 bankruptcy cases – and particularly those professionals who practice in that arena – will not be surprised to learn that their individual experiences and anecdotal reports suggesting that the duration of Chapter 11 cases has continued to shrink have been validated by Fitch Ratings, one of the … Continue Reading

Chapter 11 or Chapter 9: Investors Beware

Municipalities often drive economic development through subsidiaries and affiliated entities. When these “quasi-municipalities” become distressed, however, questions arise as to whether the potential debtor qualifies as a debtor under Chapter 11 or Chapter 9. This uncertainty can lead to litigation over whether the entity may proceed as a Chapter 11 debtor or is a governmental … Continue Reading

Tempting Fate: What Trademark Licensees Stand to Lose (or Win)

The Bankruptcy Code gives special protections to licensees of intellectual property when a debtor, as licensor, seeks to reject the license. However, the Bankruptcy Code does not include trademarks in its definition of “intellectual property.” So, are licensees of trademarks given any protection when debtors reject trademark licenses? If the Supreme Court grants a recent … Continue Reading

Understanding the Special Protections Afforded Intellectual Property Licenses in Bankruptcy

The Bankruptcy Code grants special rights to licensees of intellectual property. It is imperative for in-house counsel to have at least a basic understanding of how intellectual property is treated under the Bankruptcy Code, and the rights and obligations of parties to intellectual property licenses. My colleague Grace King and I recently wrote a chapter entitled … Continue Reading

Marijuana Business And Access to Bankruptcy – As Weak Competitors are “Weeded Out”, Is Bankruptcy A Viable Option?

More and more states are legalizing marijuana, whether for medical or recreational purposes. As businesses try to enter this space, competition will “weed out” the weakest competitors.  But are marijuana dispensaries and growers, and those providing ancillary services to them, able to seek relief under the Bankruptcy Code? We, along with our colleagues, John Wyand and … Continue Reading

Keeping Special Revenues “Special”

Special revenues may not be as special as many bondholders have historically expected.  Two recent rulings[1] from District Court Judge Laura Taylor Swain in the Puerto Rico PROMESA proceeding have held that bond issuers are not required to make post-petition special revenue bond payments during a pending Puerto Rico Oversight, Management, and Economic Stability Act … Continue Reading

Washing Away Actual Fraud? One Court Says You Can.

Can the recipient of an actual fraudulent transfer effectively “cleanse” the transfer if the funds are returned to the debtor?  In a recent opinion, the United States Bankruptcy Court for the Eastern District of Pennsylvania answered that question in the affirmative. In Holber v. Nikparvar (In re Incare, LLC), the Chapter 7 Trustee (the “Trustee”) … Continue Reading

Interests and Good Faith Under Section 363 – A New Decision Explores the Limits of Both

A recent decision from the Bankruptcy Court for the District of Montana highlights the limits of the term “interests” under section 363(f) of the Bankruptcy Code, and the limits of “good faith” under section 363(m). In In re Mountain Divide, LLC, Case No. 16-61015-11 (Bankr. D. Mont. 2016), the debtor filed a Chapter 11 petition, and shortly … Continue Reading

Montana Court Refuses to Shift Venue of “Related to” CFPB Police Action to Texas Bankruptcy Court

On February 6, 2018, the District Court for the District of Montana refused a debtor’s request to change the venue of a post-petition “related to” police/regulatory action commenced by a federal agency in district court.  The decision will have important implications on how “related to” litigation is treated for venue purposes—especially in the context of … Continue Reading

Are Trademark Licenses Protected In A Licensor Bankruptcy? The Circuits Are Split.

Certain licensees of intellectual property are expressly given expanded rights when their licensors file bankruptcy.  But what about trademark licensees?  Trademarks are not among the defined categories of “intellectual property” for bankruptcy purposes.  Nonetheless, are trademark licensees otherwise protected in a licensor bankruptcy?  Unfortunately for these licensees, a recent circuit court decision put the brakes … Continue Reading

Texas Showdown Over Class Claims

This past November, the Bankruptcy Court for the Southern District of Texas sided with the majority of circuit courts when it held (i) that bankruptcy courts may apply Federal Rule of Civil Procedure 23 to class proofs of claim and administrative proofs of claim, and (ii) that a putative representative may file a conditional claim … Continue Reading
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