In a recent decision authored by Chief Judge Easterbrook, the United States Court of Appeals for the Seventh Circuit (Sunbeam Products, Inc. v. Chicago American Manufacturing, LLC, Docket No. 11-3920 (7th Cir. July 9, 2012)) held that the licensee of a trademark does not necessarily lose the right to use the licensed marks when a debtor-licensor rejects the underlying license agreement in its bankruptcy case.  In so holding, the Court rejected a contrary decision reached by the United States Court of Appeals for the Fourth Circuit in Lubrizol Enterprises, Inc. v.

On August 2, 2012, in the case ofIn re MBS Management Services, Inc.,¹ the Court of Appeals for the Fifth Circuit ruled that a retail electricity agreement with a real estate management company constituted a forward contract protected by the “safe harbor” provisions of the U.S. Bankruptcy Code (“Bankruptcy Code”).

In 2009, the owners and management of The Philadelphia Inquirer, one of the nation's largest daily circulation newspapers, proposed a bankruptcy plan that attacked secured creditors' rights to bid their loans. When the District Court and the Third Circuit both approved the tactic, the plan gained national attention.

Baker Hostetler serves as court-appointed counsel to Irving H. Picard, SIPA Trustee for the liquidation of Bernard L. Madoff Securities LLC (“BLMIS”). In January of 2011, the SIPA Trustee obtained approval from the United States Bankruptcy Court for a $5 billion settlement for BLMIS customers with allowed claims. At the same time, the Bankruptcy Court also issued a permanent injunction with respect to claims that were duplicative or derivative of the SIPA Trustee’s claims. After an appeal, the District Court affirmed the settlement and the injunction in March of 2012.

In a decision further defining when US public policy restricts the relief a court may grant in aid of a foreign restructuring or insolvency proceeding, the Bankruptcy Court in the Chapter 15 case of Vitro, S.A.B. de C.V. v. ACP Master, Ltd. (In re Vitro, S.A.B. de C.V.), Ch. 15 Case No. 11-33335-HDH-15, 2012 WL 2138112 (Bankr. N.D. Tex. Jun. 13, 2012) refused to a enforce a Mexican restructuring plan that novated and extinguished the guaranty obligations of the Mexican debtor’s non-debtor subsidiary guarantors.

Whether a secured creditor has an absolute right to credit bid at a sale under a chapter 11 plan has been the subject of conflicting decisions rendered by the Third, Fifth and Seventh Circuits.¹ The United States Supreme Court has resolved these inconsistent rulings with its decision in RadLAX Gateway Hotel, LLC, et al., v. Amalgamated Bank, ² which affirmed the Seventh Circuit’s holding that a secured creditor has an absolute right to credit bid in a sale under a chapter 11 plan.

Section 541(a) of the Bankruptcy Code creates a worldwide estate comprising all of the legal or equitable interests of the debtor, “wherever located,” held by the debtor as of the filing date.¹ The Bankruptcy Code’s automatic stay, in turn, applies “to all entities” and protects the debtor’s property and the bankruptcy court’s jurisdiction by barring “any act to obtain possession of property of the estate . . .

Bankruptcy cases can be expensive affairs not only for the debtor, but also for creditors trying to obtain payment on their claims. A Bankruptcy Court in the Middle District of Florida recently approved a provision in a chapter 11 plan allowing for certain unsecured creditors to be reimbursed for their legal fees if their participation in the case helped maximize recoveries for other creditors, even though the Bankruptcy Code does not explicitly allow for this kind of reimbursement.

Oftentimes in bankruptcy, when one entity files for bankruptcy relief, the subsidiaries or affiliates also file. Sometimes these entities are "substantively consolidated" for bankruptcy purposes, thus combining the assets and liabilities into a single pool and attributing them to a single entity. Substantive consolidation has been permitted when, for example, debtors have abused corporate formalities or creditors have treated the separate entities as a single economic unit and their affairs were hopelessly entangled.

In December 2010, the Trustee obtained a $5 billion settlement for BLMIS customers with allowed claims.  Plaintiffs in putative class actions challenged the settlement and the Bankruptcy Court’s decision holding that the class actions violated the automatic stay of the Bankruptcy Code and were otherwise enjoined.  Yesterday, the United States District Court for the Southern District of New York upheld the settlement and the Bankruptcy Court’s decision finding that the class actions were duplicative or derivative of the Trustee’s action and thus were void ab initio un