In a short opinion for what it considered an “easy case,” the Supreme Court decided 8-0¹ in RadLAX Gateway Hotel, LLC v. Amalgamated Bank² on May 29, 2012 that if a plan of reorganization proposes a sale of property, secured lenders with liens on that property must be allowed to credit bid, i.e., “pay” using the amount of their allowed secured claim. This is a definite victory for secured lenders who, generally, will now not have to advance additional capital in order to protect their collateral.

Fashion industry licensees invest substantial sums in reliance on their license rights. Bankrupt licensors have been able to convince courts they can “reject” licenses and, when so doing, thereby cause licensees’ trademark rights to vaporize. Here we discuss why and what a licensee can do.

The Effect of Rejection on Trademark License Rights

Last week the Supreme Court refused to decide whether, when a trademark licensor files for bankruptcy relief or is placed in involuntary bankruptcy by its creditors, the licensee can keep the rights to the trademark. The Fourth Circuit had said “no” in a 1985 case so reviled that Congress enacted corrective legislation, and 27 years later, the Seventh Circuit said “yes.” Despite this circuit split, the Supreme Court refused to weigh in on the issue. As a result, trademark licensees in New York (Second Circuit), California (Ninth Circuit), and the rest of the country have no certainty.

Particularly in the current economy, it is not uncommon for purchasers, anywhere along the supply-to-distribution chain, to claim financial distress and file for bankruptcy relief.  How can a person or entity hope to collect on debts owed by a “bankrupt” purchaser?  There follows a basic primer on bankruptcy terms and procedures, as well as steps an unsecured creditor may follow to be in the best position to collect on what is owed without incurring substantial attorneys’ fees.

A Primer

How can a professional ensure payment for services appropriately and professionally performed, even in the face of the client’s bankruptcy filing?  Professionals considering representing a client in potential financial distress, in particular, will be interested in this discussion of the professional retainer, who owns it and when, and how to hold onto it.

Retainers Are Property of the Client