In the chapter 1 1 cases of Adelphia Communications Corporation and its subsidiaries, Adelphia sought to assume and assign more than 2,000 franchise agreements in connection with the proposed transfer of its cable operations to affiliates of Comcast Corporation and Time Warner Cable. Numerous local franchising authorities objected, arguing, among other things, that they had a right of first refusal under the agreements, and in some cases also under a local ordinance, to purchase the franchise on substantially the same terms and conditions.

An Illinois appellate court, applying Indiana and federal law, has held that neither a bankruptcy exclusion nor an insured versus insured exclusion applied to bar coverage for claims brought by a bankruptcy trustee.  Yessenow v. Exec. Risk Indem., Inc., 2011 WL 2623307 (Ill. App. Ct. June 30, 2011).

The Appellate Court of Illinois, First District, Third Division, applying Indiana and federal law, has held that neither a bankruptcy nor an insured versus insured exclusion applied to bar coverage for claims brought by a bankruptcy trustee.  According to the court, the bankruptcy exclusion is unenforceable because coverage arises from a policy that is a property interest of the debtors, and that property interest is protected under Section 541 of the Bankruptcy Code.  The insured versus insured exclusion did not apply, the court held, because the policyholder and a court-appointe

The Ninth Circuit Court of Appeals has held that an insured vs. insured exclusion bars coverage for a suit by a debtor-in-possession against former directors and officers of the company. Biltmore Assocs. v. Twin City Fire Ins. Co., No. 06-16417, 2009 WL 1976071 (9th Cir. July 10, 2009). The court rejected the argument that the debtor-in-possession was a different legal entity from the pre-bankruptcy company insured under the policy.

One week after Aegis Mortgage Corp. filed for chapter 11 in Delaware, a group of former employees filed their complaint seeking class certification over allegations that Aegis Mortgage Corporation, Aegis Wholesale Corporation and Cerberus Capital Management, L.P.—all allegedly acting as their employer—violated the Worker Adjustment and Retraining Notification (WARN) Act when they failed to give over 400 employees 60 days' notice prior to a mass termination by Aegis Mortgage on August 7, 2007.

More than a year and a half has passed since the Bankruptcy Code was significantly revised pursuant to the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) which became effective (with some exceptions) on October 17, 2005. While the full impact of BAPCPA will not be fully realized for years to come, it is already apparent that trade creditors stand to benefit significantly as a result of these amendments.

Expanded Administrative Expense and Reclamation Rights

In a case of apparent first impression, U.S. District Court Judge Alan S. Gold recently held in In re Wellington Vision, Inc., No. 06-80446, __ B.R. ___, 2007 WL 762398 (S.D. Fla. Feb. 20, 2007), that a franchisee in chapter 11 cannot assume (i.e., retain) a franchise agreement that grants a nonexclusive trademark license, leaving the franchisor free to terminate the agreement.

When a franchisee files for bankruptcy, a franchisor naturally has concerns over how the process will affect the parties’ relationship. Of particular concern is the possibility that the franchisor will be forced into a relationship with an unacceptable successor as a result of a bankruptcy judge’s decision to authorize assumption and assignment of the franchise agreement over the franchisor’s objection.

Last week’s Chapter 11 filing by NewPage Corporation, a company with assets and liabilities in the billions of dollars, stands as a relative rarity in the current restructuring environment.

Some legal commentators have lamented the extent to which lenders have been able to use debtor in possession (“DIP”) financing arrangements to gain control over an entire Chapter 11 case.