In an 8-1 decision, the Supreme Court settled a long-standing circuit split regarding the impact of bankruptcy filings on trademark licenses. Until May 20th, brand owners in some jurisdictions could use bankruptcy protections to terminate the rights of third parties to use its licensed trademarks. Now, it is clear that a bankrupt licensor cannot rescind trademark license rights. Licensees can continue to do whatever their trademark licenses authorize, even if the licensor has filed for bankruptcy.

Cash flow is the life blood of the construction industry, goes the mantra. Construction projects often have long supply chains. When cash stops flowing down the chain, businesses can fail. There is all too much recent evidence of this.

Someone in the chain (say, a main contractor) could seek to provide in a contract that it does not have to pay the party below (subcontractor) until it has been paid by the party above (employer). This is a 'pay-when-paid' clause.

In 2017, the Alberta Court of Appeal upheld the lower court’s decision that the BIA prevailed over a conflicting provision in the provincial regulations promulgated by the Alberta Energy Regulator (AER).

On January 17, 2019, the Fifth Circuit held that a creditor is not impaired for the purpose of voting on a plan if it is the Bankruptcy Code (as opposed to plan treatment) that impairs a creditor’s claim. The court further held that a make-whole premium is a claim for unmatured interest which is not an allowable claim under Bankruptcy Code, absent application of the “solvent-debtor” exception which may or not apply—the issue was remanded to the bankruptcy court for decision.

On January 15th, 2019, the U.S. Bankruptcy Court for the Northern District of Ohio held that the end user of an electricity forward contact was not entitled to the benefits of the safe harbor provisions under Section 556 of the Bankruptcy Code. Section 556 allows a “forward contract merchant” to terminate a forward contract post-petition based on an ipso facto clause in the contract and exempts such actions from the automatic stay.

The Eleventh Circuit recently found in favor of Blue Bell Creameries, Inc. by rejecting its own earlier dicta and explicitly expanding the preference payment defense known as “new value.” This provides additional protection for companies doing business with a debtor in the 90 days prior to bankruptcy.

THE SCOOP: BRUNO’S V. BLUE BELL

On May 22, 2018, the United States Court of Appeals for the Fifth Circuit issued its decision in Franchise Services of North America v. United States Trustees (In re Franchise Services of North America), 2018 U.S. App. LEXIS 13332 (5th Cir. May 22, 2018). That decision affirms the lower court’s holding that a “golden share” is valid and necessary to filing when held by a true investor, even if such investor is controlled by a creditor.

If a transaction by a company amounts to an "unlawful distribution", and the company subsequently goes into liquidation, will an action for recovery of the benefits of that distribution, brought against the directors who authorised the transaction, be statute-barred if it is commenced by the liquidator of the company more than 6 years after the distribution was made?

The Circuit Courts of Appeal have split on whether a prepetition transfer made by a debtor is avoidable if the transfer was made through a financial intermediary that was a mere conduit. Today, the Supreme Court unanimously resolved the split by deciding that transfers through “mere conduits” are not protected. This is a major (and adverse) decision for lenders, bondholders and noteholders who receive payments through an intermediary such as a disbursing agent.

DOMESTIC

Research on the impact of repossession risk on mortgage default

Terry O’Malley published an economic letter considering whether reducing the risk of repossession resulted in more Irish borrowers defaulting on their mortgages. The letter considers the impact of the ''Dunne judgment'' in 2011 which temporarily removed a bank's ability to lawfully repossess a home. One of the key findings was that borrowers defaulted on mortgages at a higher rate than if the repossession regime at the time was legally upheld.