Chapter 11 for the Smaller Guys. Until very recently, filing for Chapter 11 reorganization was a tool for larger businesses since the process is expensive and time consuming while the Debtor corporation seeks to negotiate deals with suppliers, utilities, service providers and other creditors. However, on February 19, 2020, the Small Business Reorganization Act
Bankruptcy
Guideline for Companies Responding to the COVID-19 Pandemic
First, do no harm. The shutdown of businesses by government order was sudden. Most companies were unprepared. Decisions made quickly that are not carefully thought through can create liability down the road that make it harder to turn the company around once businesses start operating again. For instance, the Workers Adjustment and Retraining Notification Act…
Bankruptcy Court Finds Committee Member To Have Breached Her Fiduciary Duty To Unsecured Creditors
On November 15, 2019, the U.S. Bankruptcy Court for the Central District of California (the “Court”) issued an opinion in the case of Naylor v. Farrell (In re Farrell), Ch. 7 Case No. 14-11729-MW, Adv. No. 16-01123 (Bankr. C.D. Ca. Nov. 15, 2019), finding, among other things, that Betty Farrell (“Betty”), a member of…
Third Circuit Decision is a Cautionary Tale about the “Security” of Tax Lien – Certificate Holders’ Security in Bankruptcy
Tax lien certificates are a marketable commodity in several jurisdictions, including New Jersey. The Third Circuit’s recent decision in In re Hackler v. Arianna Holdings Company, LLC, No. 18-1650, __ F.3d __, 2019 2019 WL 4309510 (3d Cir. Sept. 12, 2019), however, will leave certificate holders insecure about their tax lien rights in the…
Derivative Standing When Debtors Are Limited Partnerships and Limited Liability Companies
It is well settled that creditors of an insolvent corporation can obtain derivative standing to pursue claims for breach of fiduciary duty against officers and directors. The same principle, however, does not always apply for creditors of limited liability companies (LLCs) and limited partnerships (LPs). The Delaware Bankruptcy Court in Gavin/Solmonese LLC v. Citadel Energy…
Recent SDNY Decision Adds to the Fray: When Do Courts Approve Non-Consensual Releases?
A “third-party release” in bankruptcy refers to a release that is given to a non-debtor party by other non-debtors – like creditors. Third-party release issues typically arise in the context of chapter 11 plan negotiations (which is essentially a contract between a debtor and its creditor constituents setting out the treatment of a…
BREAKING: Rejection under section 365 of the Bankruptcy Code does not rescind trademark license agreement
Last November, we reported on the long-standing circuit split between the First and Seventh Circuits regarding the effect of rejection of a trademark license agreement under section 365 of the Bankruptcy Code.
This morning, in Mission Product Holdings, Inc. v. Tempnology, LLC, 2019 WL 2166392, the Supreme Court affirmed the Seventh Circuit’s reasoning and…
First Circuit Rejects “Special Circumstances” Exception to Numerosity Requirement of Bankruptcy Code Section 303(B)(1)
On April 24, 2019, the U.S. Court of Appeals for the First Circuit (the “First Circuit”) issued an opinion in the case of Popular Auto, Inc. v. Reyes-Colon (In re Reyes-Colon), Nos. 17-1971-72, 2019 WL 1785039 (1st Cir. Apr. 24, 2019), holding that bankruptcy courts cannot utilize their equitable powers to override the explicit…
U.S. Supreme Court to Rule on Rights of Trademark Licensees Upon Rejection of a License Agreement Under Section 365 of the Bankruptcy Code
On October 26, 2018, the U.S. Supreme Court granted a petition for a writ of certiorari in the case of Mission Product Holdings, Inc. v. Tempnology, LLC, to decide the issue of whether a debtor-licensor’s rejection of a trademark license agreement under section 365 of the Bankruptcy Code terminates the rights of the licensee…
Excise Tax or Regulatory Fee? A Warning for Bankruptcy Practitioners and Cannabis Clients
In In re Sandia Tobacco Mfrs, Inc., 2018 WL 4964295 (Bankr. D.N.M. Oct. 12, 2018), the Bankruptcy Court for the District of New Mexico recently held that certain outstanding “assessments” arising under the Fair and Equitable Tobacco Reform Act of 2004, 7 U.S.C. §§ 518-519(a), and its accompanying regulations were excise taxes entitled to…