Mission Product Holdings, Inc. v. Tempnology, LLC, No. 17-1657

Today, the Supreme Court held in an 8-1 decision that when a debtor, acting under Section 365 of the Bankruptcy Code, rejects a contract licensing its trademarks, the contract is not rescinded and the debtor thus cannot revoke the trademark license.

The American Bankruptcy Institute’s Commission on Consumer Bankruptcy released its Final Report and recommendations on April 12, 2019. The commission was created in 2016 to research

and develop recommendations to improve the consumer bankruptcy system. During its review, the commission focused on new trends regarding how Americans are incurring debt. At the conclusion of its review, the commission created a Final Report which includes recommendations for amendments to the Bankruptcy Code and Rules to make the bankruptcy system more approachable and efficient.

Chicagoans have found a new avenue through which to regain possession of their vehicle after it has been impounded by the City: file a chapter 13 bankruptcy case. In 2018, 17,603 new chapter 13 bankruptcy cases were filed in the Northern District of Illinois. By comparison, in 2018, the Middle District of Florida, one of the busiest bankruptcy courts, saw 6,650 new chapter 13 cases filed, and the Southern District of California, another large bankruptcy district, saw 1,426 new filings.

On April 23, 2019, the United States District Court for the Southern District of New York, in fraudulent transfer litigation arising out of the 2007 leveraged buyout of the Tribune Company,1 ruled on one of the significant issues left unresolved by the US Supreme Court in its Merit Management decision last year.

Practically all commercial transactions, including licenses, services agreements, and supply agreements, contain a provision that triggers termination rights, without notice, to a party whenever the other party files for bankruptcy or experiences other insolvency-related event. In Part 1 of a two-part series, we discuss how the commonly used termination-on-insolvency clauses are generally unenforceable despite their widespread use.

Standard Ipso Facto Provision

Attorneys who advise a distressed company usually work very closely with members of the board of directors. A recent opinion from the United States District Court for the Western District of Texas provides a cautionary reminder to such attorneys not to lose sight of the fact that, notwithstanding that the company acts through its board, the attorneys’ duties are to the company and not to the individual board members. And, losing focus on the source of the attorneys’ duties may result in exposure to significant liability.

On April 23, 2019, Ropes & Gray, representing a large group of shareholder defendants, won a decision in the U.S. District Court for the Southern District of New York that provides potential fraudulent transfer protection for payments made to shareholders in leveraged buyouts, stock redemptions and other securities transactions.

Constructive Fraudulent Transfer Claims and the Securities Safe Harbor

In Popular Auto, Inc. v. Reyes-Colon (In re Reyes-Colon), Nos. 17-1971, 17-1972, 2019 WL 1785039 (1st Cir. April 24, 2019), the First Circuit recently ruled that “special circumstances” does not authorize a bankruptcy court to use its equitable powers to contravene the numerosity requirement for an involuntary petition under section 303(b)(1) of the Code. This twelve year dispute did not end well for the petitioning creditors.

Amendments to the Federal Rules of Bankruptcy Procedure became effective on December 1, 2017, which impose affirmative obligations on secured creditors to protect their rights to distributions in a bankruptcy case. Previously, Bankruptcy Rule 3002(a) required only unsecured creditors and equity security holders to file proofs of claim or proofs of interest in a bankruptcy. Although often recommended, it was not statutorily necessary for a secured creditor to file a proof of claim in order to protect its rights.

Earlier today, the Ninth Circuit Court of Appeals issued its long-awaited ruling in the Garvin v. Cook Investments, NW, SPNYW case This opinion is certain to be of great interest to both companies operating in the cannabis space and those attorneys representing them.