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.

When it comes to offsets, bankruptcy law provides for two distinct remedies: (1) setoff and (2) recoupment.

Setoff allows a creditor to reduce the amount of prepetition debt it owes a debtor with a corresponding reduction of that creditor’s prepetition claim against the debtor. The remedy of setoff is subject to the automatic stay, as well as various conditions under § 553 of the Bankruptcy Code — including that it does not apply if the debts arise on opposite sides of the date on which the debtor’s case was commenced.

Dill Oil Company, LLC v. Stephens, No. 11-6309 (10th Cir., Jan. 15, 2013)

CASE SNAPSHOT

The Court of Appeals for the Tenth Circuit, in a case of first impression before the court, joined the Fourth Circuit in holding that the absolute priority rule remains applicable in individual chapter 11 cases.

FACTUAL BACKGROUND

In re Burcam Capital II, LLC, Case No. 12-04729-8-JRL (Bankr. E.D.N.C., Feb. 15, 2013)

CASE SNAPSHOT

In re Maharaj, 681 F.3d 558 (4th Cir. 2012)

CASE SNAPSHOT

The Court of Appeals for the Fourth Circuit is the first court of appeals to determine whether the absolute priority rule continues to apply to individual chapter 11 debtors. Taking the "narrow view" adopted by certain courts, the Fourth Circuit held that the rule was not abrogated by the amendments of the Bankruptcy Abuse Prevention and Consumer Protection Act, and therefore affirmed the bankruptcy court’s order denying confirmation of the proposed plan.

In re Premier Golf Properties, L.P., BAP No. SC- 11-1508-HPaJu (9th Cir. BAP, Aug. 13, 2012)

CASE SNAPSHOT

The Ninth Circuit B.A.P. affirmed the bankruptcy court decision that post-petition income from greens fees and driving range fees were not “rents, proceeds, or profits” of the secured lender’s pre-petition blanket security interest on all real and personal property (and “all proceeds thereof”) within the meaning of section 552(b), and thus were not cash collateral.