In addition to the cases discussed in "Considerations in Terminating an Insolvent Franchisee" in the June 24, 2010, Franchise Alert (available at www.wileyrein.com/insolvent_franchisee), two recently reported decisions have looked at franchisor attempts to gain relief from bankruptcy stays in order to enforce post-termination provisions.

The United States Bankruptcy Court for the District of Delaware (the "Delaware Bankruptcy Court"), recently in In re Leslie Controls, Inc., Bankr. D. Del., Case No. 10-12199, expounded on whether attorney-client and attorney work-product privileged documents remained protected from discovery under the common interest doctrine. The common interest doctrine permits counsel representing different clients with similar legal interests to share information without having to disclose that information to others.

Ambac Financial Group Inc., parent of the troubled bond insurer Ambac Assurance Corp., said Monday that it is pursuing the restructuring of its debt with a group of debt holders through a pre-packaged bankruptcy filing. The Company added that if it is unable to reach a debt restructuring agreement, it will file for bankruptcy by the end of this year. The Company's statement can be read by clicking here.

There have been a number of stories about how Ambac filed for Chapter 11 on November 8. However, there’s Ambac and then there’s Ambac and then there’s Ambac. If that all sounds the same to you, we are actually referring to three different Ambacs and the purpose of this blog is to help clear up the market confusion. First there is the Ambac that filed for Chapter 11 on November 8, which is Ambac Financial Group Inc. (AFG). This must mean that the bankruptcy trigger events in the contracts of all of Ambac’s insured counterparties were triggered by the bankruptcy filing, right?

In difficult economic times, debtors’ attorneys closely review credit reports looking for potential legal claims against creditors. Long after a debtor has been discharged from bankruptcy, creditors can find themselves defending claims of improper credit reporting. A recent case from the Eastern District of North Carolina illustrates the trouble facing creditors who furnish incorrect reports of discharged debt. See In re Adams (Bankr. E.D.N.C. 2010).

In an October 19, 2010 opinion arising out of the Scotia Pacific bankruptcy cases, the Fifth Circuit ruled that reorganized Scotia and its affiliate Pacific Lumber Company were obliged – nearly 2½ years after Scotia’s reorganization plan was consummated – to pay Scotia’s former secured lenders approximately $30 million on account of a mistake made by the bankruptcy judge in calculating the amount owed to the secured lenders for the use of their collateral during the bankruptcy cases.

On November 10th, the International Swaps and Derivatives Association announced that its Americas Credit Derivatives Determinations Committee resolved that a bankruptcy credit event has occurred in respect of Ambac Financial Group, Inc. An auction will be held for Ambac Financial Group for which ISDA will publish the auction terms. ISDA Press Release.  

Last Thursday, a Delaware Bankruptcy Court disqualified two law firms from representing an Official Committee of Unsecured Creditors based on their conduct in soliciting proxies from creditors who were not existing firm clients. In re Universal Building Products, No. 10-12453 (Bankr. D. Del. Nov. 4, 2010), involved an extreme fact pattern but it may nonetheless have a substantial effect not only on the selection of professionals for future Committees but also on the appointment of creditors to Committees, at least in Delaware.

When selling assets under section 363 of the Bankruptcy Code or pursuant to a plan, debtors typically conduct auctions, selecting the highest or best bidder as the purchaser. Section 363 auctions are intended to enable debtors to maximize the value of their assets, while ensuring "finality and integrity in the process . . . ."1

Section 365(n) of the Bankruptcy Code provides offers substantial protection for licensees when a licensor files for bankruptcy. In a bankruptcy proceeding, a licensor/executor has the option of either accepting and continuing an intellectual property license agreement, or rejecting the license. If an intellectual property license is rejected, a licensee is afforded beneficial options under the Code. The Bankruptcy Code defines “intellectual property” in Section 101 (35A) as a-