The economic fallout from the COVID-19 pandemic will leave in its wake a significant increase in commercial chapter 11 filings. Many of these cases will feature extensive litigation involving breach of contract claims, business interruption insurance disputes, and common law causes of action based on novel interpretations of long-standing legal doctrines such as force majeure.
In these difficult economic times, companies seeking additional liquidity may turn to alternative sources of financing. Companies with assets that can be monetized (e.g., accounts receivable, intellectual property, real estate, equipment, etc.) may discover a number of options available to them. In particular, accounts receivable financing may be an attractive way for certain companies to obtain working capital relatively quickly.
U.S. Bankruptcy Judge Dennis Montali recently ruled in the Chapter 11 case of Pacific Gas & Electric (“PG&E”) that the Federal Energy Regulatory Commission (“FERC”) has no jurisdiction to interfere with the ability of a bankrupt power utility company to reject power purchase agreements (“PPAs”).
The Supreme Court this week resolved a long-standing open issue regarding the treatment of trademark license rights in bankruptcy proceedings. The Court ruled in favor of Mission Products, a licensee under a trademark license agreement that had been rejected in the chapter 11 case of Tempnology, the debtor-licensor, determining that the rejection constituted a breach of the agreement but did not rescind it.
Last month, a federal district court affirmed a bankruptcy court’s ruling that an ex-NFL player’s potential future recovery from a concussion-related class action settlement agreement was shielded from the reach of creditors in the former player’s Chapter 7 bankruptcy proceeding. The ruling turned on the bankruptcy court’s finding that the potential future settlement payments were more akin to a disability benefit, which is exempt under Florida law, than a standard tort settlement, which is not.
Background
Few issues in bankruptcy create as much contention as disputes regarding the right of setoff. This was recently highlighted by a decision in the chapter 11 case of Orexigen Therapeutics in the District of Delaware.
The United States Court of Appeals for the Sixth Circuit recently examined and then clarified and set forth the test for evaluating the appealability of bankruptcy orders in an opinion released in the case Ritzen Group v. Jackson Masonry. In doing so, the appellate court reaffirmed the “longstanding and textually-compelled rule of [a] looser finality” standard in bankruptcy as compared to general civil litigation, and concluded that a denial of a motion to lift stay was a final appealable order subject to the fourteen-day appeals period established in Bankruptcy Rule 8002(a).
The judicial power of the United States is vested in courts created under Article III of the Constitution. However, Congress created the current bankruptcy court system over 40 years ago pursuant to Article I of the Constitution rather than under Article III.
Recently, in the Advance Watch bankruptcy, the Bankruptcy Court for the Southern District of New York ruled that a bankruptcy judge is authorized to enter a final default judgment in an adversary proceeding against a foreign defendant who failed to respond to a validly-served summons and complaint, in spite of being an Article I judge.[1] Notably, the court found that the recent Supreme Court decision, Wellness International Network, Ltd. v. Sharif, 135 S. Ct. 1932 (2015), a further iteration of the Stern v.
Southeastern Grocers (operator of the Winn-Dixie, Bi Lo and Harvey’s supermarket chains) recently completed a successful restructuring of its balance sheet through a “prepackaged” chapter 11 case in the District of Delaware. As part of the deal with the holders of its unsecured bonds, the company agreed that under the plan of reorganization it would pay in cash the fees and expenses of the trustee for the indenture under which the unsecured bonds were issued.