The Tempnology Trademark Saga. When it comes to decisions on bankruptcy and trademark licenses, the In re Tempnology LLC bankruptcy case is the gift that keeps on giving.
Just about every year amendments are made to the rules that govern how bankruptcy cases are managed — the Federal Rules of Bankruptcy Procedure. The amendments address issues identified by an Advisory Committee made up of federal judges, bankruptcy attorneys, and others. As the photo above reminds us, the rule amendments are ultimately adopted by the U.S. Supreme Court (and technically subject to Congressional disapproval).
InIn Re Lexington Hospitality Group, LLC, the United States Bankruptcy Court for the Eastern District of Kentucky thwarted a lender’s efforts to control whether its borrower could file bankruptcy. As a condition to the loan, the lender mandated that the borrower’s operating agreement have certain provisions that require the affirmative vote of an “Independent Manager” and 75% of the members to authorize a bankruptcy.
The Delaware bankruptcy court recently decided that a debtor could not assign a trademark license absent the consent of the licensor. The court concluded that federal trademark law and the terms of the license precluded assignment without consent. Because the debtor could not assign the license under any circumstances (consent was not forthcoming), the court held that cause existed to annul the automatic stay to permit the licensor to “move on with its trademark and its business.”
Exculpation provisions in operating agreements must be carefully crafted in order to protect members, managers, directors and officers for breaches of fiduciary duties. In In re Simplexity, LLC, the Chapter 7 trustee sued the former officers and directors (who were also members and/or managers) for failing to act to preserve going concern value and exposing the debtors to WARN Act claims. The defendants argued the exculpation language in the operating agreements shielded against breach of fiduciary duty liability.
The Supreme Court recently agreed to review the applicability of the safe harbor provision in section 546(e) of the Bankruptcy Code after differing interpretations of the statute created a split among the circuit courts. The ultimate outcome on the issue currently before the Supreme Court will undoubtedly impact how parties choose to structure their debt and asset transactions going forward.
It is very common for bankruptcy court orders to provide that the court retains jurisdiction to enforce such orders. Similarly, chapter 11 confirmation orders routinely provide that the bankruptcy court retains jurisdiction over all orders previously entered in the case. The enforceability of these “retention of jurisdiction” provisions, however, will not rest on the plain language in the order but on the bankruptcy court’s statutory jurisdiction.
Earlier this month, the Supreme Court announced that it will review the scope of Bankruptcy Code section 546(e)’s safe harbor provision. Section 546(e) protects from avoidance those transfers that are made “by or to (or for the benefit of)” a financial institution, except where there is actual fraud. The safe harbor is intended to ensure the stability of the securities market in the event of corporate restructurings.
As noted in a recent Distressing Matters post, the United States Supreme Court in In re Jevic Holding Corp. held that debtors cannot use structured dismissals to make payments to creditors in violation of ordinary bankruptcy distribution priority rules.
In 2015, Distressing Matters reported on the Third Circuit’s decision in In re Jevic Holding Corp., wherein that panel ruled that, in rare circumstances, bankruptcy courts may approve the distribution of settlement proceeds in a manner that violates the Bankruptcy Code’s statutory priority scheme.