A recent bankruptcy court decision out of the United States Bankruptcy Court for the Central District of California, In re Verity Health Sys. of Cal., Inc., Case No. 2:18-bk-20151 (ER) (Bankr. C.D. Cal. Nov. 27, 2019), is a good reminder of how difficult it is for a purchaser under an asset purchase agreement to get out of the deal by invoking a Material Adverse Effect clause (also known as a Material Adverse Change clause) (an “MAE”).
Executive Summary
In a highly anticipated decision issued last Thursday (on December 19, 2019), the United States Court of Appeals for the Third Circuit held in In re Millennium Lab Holdings II, LLC that a bankruptcy court may constitutionally confirm a chapter 11 plan of reorganization that contains nonconsensual third-party releases. The court considered whether, pursuant to the United States Supreme Court’s decision in Stern v. Marshall, 564 U.S. 462 (2011), Article III of the United States Constitution prohibits a bankruptcy court from granting such releases.
Executive Summary
The Supreme Court issued its much-anticipated ruling yesterday in the First Circuit case of Mission Product Holdings, Inc. v. Tempnology, LLC, resolving a circuit split that had developed on “whether [a] debtor‑licensor’s rejection of an [executory trademark licensing agreement] deprives the licensee of its rights to use the trademark.” And it answered that question in the negative; i.e., in favor of licensees.
Introduction
In a recent decision, In re Orexigen Therapeutics, Inc., No. 18-10518 (KG) (Bankr. D. Del. Nov. 13, 2018), Judge Kevin Gross of the United States Bankruptcy Court for the District of Delaware held that the mutuality requirement of section 553 of the Bankruptcy Code must be strictly construed, declining to find mutuality in a triangular setoff between the debtor, a parent entity that owed the debtor money, and that entity’s subsidiary, which was a creditor.
Executive Summary
On March 15, 2021, the Third Circuit Court of Appeals (the “Third Circuit”) held that a stalking horse bidder may assert an administrative expense claim pursuant to section 503(b)(1)(A) of the Bankruptcy Code for costs incurred in attempting to close on an unsuccessful transaction, even when the stalking horse bidder is not entitled to a breakup or termination fee.
During this mostly quiet week in restructuring, most of us are either away on vacation (think beach or ski) or home for the holidays, maybe back in our hometowns. For me, it’s always the latter, and home for the holidays is Virginia Beach, Virginia, where I sit while I write this blog post (alas, not the beach vacation some of you may be enjoying; my relatives live about 20 minutes from the beach and the high temperature this time of year is usually in the 40s).
While there has been much fuss over the recent ruling by the United States District Court for the Southern District of New York in In re Nine West LBO Securities Litigation1 due to its potential ramifications for director liability, as we explored in Part I of our series on this case here, court watchers have paid less attention to the court’s treatment of officer liability and the interes