On September 12, 2013, in the American Airlines case, the US Court of Appeals for the Second Circuit affirmed an order of the United States Bankruptcy Court for the Southern District of New York (a) authorizing the debtor to use proceeds of postpetition financing to repay prepetition debt without payment of amake-whole amount, and (b) denying a creditor’s request for relief fromthe automatic stay.  

Background Facts

Chapter 15 of the Bankruptcy Code provides a procedure to obtain recognition in the United States of a "foreign proceeding," which includes a foreign bankruptcy, insolvency, liquidation, or

On June 26, 2013, US Bankruptcy Judge Martin Glenn, overseeing the chapter 11 case of Residential Capital, LLC (ResCap), unsealed a 1,900-page report produced by court-appointed examiner, Arthur J. Gonzalez, and his professionals, Chadbourne & Parke LLP and Mesirow Financial Consulting, LLC. The Examiner Report was the culmination of a ten-month investigation that identified amyriad of causes of action, potentially worth billions of dollars, arising fromdozens of transactions involving ResCap's parent, Ally Financial Inc., its subsidiary Ally Bank, and Cerberus.

Over the last several years, the number of Chapter 15 filings has continued to grow. One of the most prominent of these bankruptcy filings is the Vitro S.A.B. de C.V. case. When last we reported on theVitro case, the Texas bankruptcy court administering the Chapter 15 case had denied recognition to the Mexican restructuring plan of Vitro because the plan provided third party releases to non-debtors. See Vitro, S.A.B.: Bankruptcy Court Refuses to Recognize Mexican Concurso That Releases Claims Against Non-Debtors” (November 2012).

Last Fall, the United States Court of Appeals for the Second Circuit issued a decision in the Charter Communications bankruptcy case which will create additional significant challenges for those seeking to appeal confirmation of plans of reorganization that have been implemented. See 691 F.3d 476. Upon implementation (or “substantial consummation”) of the plan, the Second Circuit presumes that the appeal of such plan is equitably moot. Appellants bear the burden of overcoming that presumption.

When does the selection of a technically correct venue become “unjust”? This was the core question Judge Shelley Chapman was required to grapple with when Patriot Coal and almost 100 of its affiliates filed for bankruptcy in New York this past summer. Should it matter that Patriot Coal created the New York subsidiaries, that permitted a New York court filing, about a month prior to the actual bankruptcy filing?

In Sunbeam Products, Inc. v. Chicago American Manufacturing, LLC, 686 F.3d 372, the United States Court of Appeals for the Seventh Circuit held that a debtor-licensor’s rejection of an executory trademark license does not terminate the licensee’s right to use the trademark. The decision creates a circuit-level split that may invite Supreme Court review. However, no final resolution is likely soon. The Supreme Court declined to hear the case, denying a petition for a writ of certiorari in December of 2012.

Generally, license agreements are “executory contracts” in bankruptcy. Executory means performance is due from both sides. When a party to an executory contract becomes a debtor in bankruptcy, it may either reject or assume the contract. However, non-debtor parties (or “counterparties”) enjoy some protections, especially when the contract is a license agreement for intellectual property.

The basics.

Chapter 15 of the Bankruptcy Code provides a procedure to obtain recognition of a foreign bankruptcy, insolvency or debt adjustment proceeding (a “foreign proceeding”) in the United States. Chapter 15 draws a distinction between a “foreign main proceeding” (i.e., a foreign proceeding pending in a country where the debtor has the center of its main interests) and a “foreign nonmain proceeding” (i.e., a foreign proceeding pending where the debtor has “an establishment”).

Section 546(e) of the Bankruptcy Code is a “safe harbor” provision which restricts a debtor’s ability to recover or “clawback” what would otherwise be “avoidable” payments made to creditors. In the recent case of Lightfoot v. MXEnergy Elec., Inc., 690 F.3d 352 (5th Cir. 2012), the Fifth U.S.