Some legal malpractice defendants are content to litigate claims asserted by debtors in the bankruptcy court. But many others, fearing that the debtor’s creditors may view them as a deep-pocketed resource to augment their own recoveries, would prefer to defend malpractice claims in what they view as a more neutral forum.

A bankruptcy case in Illinois highlights the need for the amendments to Uniform Commercial Code Article 9 which will be effective in Indiana and many other states.

The Delaware bankruptcy court recently decided that a debtor could not assign a trademark license absent the consent of the licensor. The court concluded that federal trademark law and the terms of the license precluded assignment without consent. Because the debtor could not assign the license under any circumstances (consent was not forthcoming), the court held that cause existed to annul the automatic stay to permit the licensor to “move on with its trademark and its business.”

(Bankr. W.D. Ky. Aug. 16, 2017)

Is a personal guaranty a separate agreement from the underlying contract it guarantees? The North Carolina Court of Appeals recently considered this issue inFriday Investments, LLC v. Bally Total Fitness of the Mid-Atlantic, Inc., 2017 WL 3254773 (N.C. Ct. App., Aug. 1, 2017). The case was decided by a 2-1 decision, with Judge Tyson delivering the opinion of the Court and Judge Elmore dissenting by a separate opinion.

Two 3rd Circuit courts issue recent decisions that significantly impact trade creditor claims in bankruptcy

(Bankr. W.D. Ky. Aug. 10, 2017)

The bankruptcy court denies the U.S. Trustee’s motion to enter an order for sanctions and requiring disgorgement of fees. The attorney had provided advice to the debtor about the petition and schedules that the debtor had drafted. The attorney was not aware that a bankruptcy was filed until he received the U.S. Trustee’s motion. The court declines to grant the relief requested under these circumstances. Opinion below.

Judge: Lloyd

The U.S. Court of Appeals for the Fifth Circuit recently held that debts arising from a scheme to deprive mortgagees of surplus foreclosure sale proceeds were non-dischargeable, affirming the bankruptcy court’s judgment against the debtor in consolidated adversary proceedings filed by various lenders that held first mortgage liens.

A copy of the opinion is available at:  Link to Opinion.

The Bottom Line

Summary