Earlier today, the Supreme Court finally answered the question of whether a trademark licensee is protected when the trademark owner/licensor files a bankruptcy petition and rejects the trademark license in accordance with section 365 of the Bankruptcy Code. To cut to the chase, trademark licensees won.

Earlier today, the Ninth Circuit Court of Appeals issued its long-awaited ruling in the Garvin v. Cook Investments, NW, SPNYW case This opinion is certain to be of great interest to both companies operating in the cannabis space and those attorneys representing them.

What are the limits of a bankruptcy court’s authority to issue final orders and judgments? Does a bankruptcy court have authority under Article III of the U.S. Constitution to enter final orders in quintessential bankruptcy matters such as fraudulent transfer claims, or are the court’s powers more constrained? While the Supreme Court’s rulings in Stern v. Marshall, 546 U.S. 462 (2011), Executive Benefits Ins. Agency v. Arkison, 573 U.S. 25 (2014) and Wellness International Network, Ltd. v. Sharif, 135 S. Ct.

No. The Court of Appeal upheld the High Court’s original finding, namely that no duty to consider AWA’s creditors had arisen. Whilst AWA’s directors had made provision for the contingent liabilities in question, this did not itself mean AWA was insolvent or close to insolvency. In fact, it was not, and so the duty to consider AWA’s creditors never arose.

Practical implications

Although this decision simply confirms the High Court’s original decision, it emphasises the care and vigilance with which directors of a company need to act when paying dividends.

Court confirms dividends can be transactions at an undervalue

The Court of Appeal has confirmed that a dividend paid by a company to its shareholders can constitute a transaction at an undervalue under insolvency law.

What happened?

At the initial hearing, the High Court found the dividend was caught by section 423 and was therefore invalid. Importantly, it said that a dividend could constitute a transaction at an undervalue. This was an important confirmation, and the High Court has since followed this approach (for example, in Dickinson v NAL Realisations (Staffordshire) Ltd).

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 21, U.S.C.

The recent decision by the Fifth Circuit Court of Appeals in In re Provider Meds, L.L.C. is a stark reminder to chapter 7 trustees that they have an affirmative obligation to examine a debtor’s assets. A trustee’s failure to conduct a sufficient and timely examination may deprive the estate of significant value.

The court has decided to allow a shareholder to pursue a derivative claim on behalf of a company that was placed into a pre-pack administration.

What happened?

Montgold Capital LLP v Ilska and others involved a restaurant company which was placed into a “pre-pack” administration, under which its entire business was sold, in late 2016.

In prior posts, we discussed the perplexing issue of how and whether a trademark licensee is protected when the trademark owner/licensor files a bankruptcy petition and moves to reject the trademark license in accordance with section 365 of the Bankruptcy Code.