"When licensing trademark rights, you need to think about a host of issues at the outset including the impact of a licensor declaring bankruptcy."

Below are summaries of the noteworthy decisions, laws and requirements impacting the commercial lending industry which occurred or took effect in 2018. Please feel free to contact us for additional information or details on any of the items listed below and/or to discuss whether updates to your loan documents may be needed to address the same.

1. New, Improved Rules for High Volatility Real Estate Loans

In In re Argon Credit, LLC, et al., Case No. 16-39654 (Bankr. N.D. Ill. Jan. 10, 2019), the United States Bankruptcy Court for the Northern District of Illinois recently held that a standby clause in a subordination agreement prevented a subordinated lender from conducting discovery on the senior lender’s claim, pursuant to section 510 of the Bankruptcy Code.

Shareholder of a Korean corporation (“Cuzco Korea”), the sole member of a chapter 11 limited liability company debtor (“Cuzco USA” or the “Debtor”), brought an adversary proceeding against the Debtor and others, asserting claims directly, derivatively on behalf of Cuzco Korea and “double derivatively” on behalf of the Debtor. On the defendants’ motion to dismiss, the bankruptcy court for the district of Hawaii was required to consider the impact of Korean law on the derivative claims as well as notions of forum non conveniens.

The Bankruptcy Court for the Northern District of California recently granted a secured lender’s request for relief from the automatic stay, pursuant to sections 362(d)(1) and (d)(2) of the Bankruptcy Code, to allow a trustee’s sale of the debtor’s marina under state law. In re Delta Waterways, LLC, Case No. 18-42076-CN (Bankr. N.D. Cal. December 7, 2018). Several missteps and omissions by the debtor appear to have driven the Court’s decision.

In IDEA Boardwalk, LLC v. Revel Entertainment Group, LLC (In re Revel AC Inc.), Case No. 17-3607, –F.3d–, 2018 WL 6259316 (3rd Cir. Nov. 30, 2018), the Third Circuit Court of Appeals recently enforced a tenant’s right to offset rent under a rejected lease of real property, pursuant to section 365(h) of the Bankruptcy Code and the doctrine of equitable recoupment.

Facts

In IDEA Boardwalk, LLC v. Revel Entertainment Group, LLC (In re Revel AC Inc.), Case No. 17-3607, --F.3d--, 2018 WL 6259316 (3rd Cir. Nov. 30, 2018), the Third Circuit Court of Appeals recently enforced a tenant’s right to offset rent under a rejected lease of real property, pursuant to section 365(h) of the Bankruptcy Code and the doctrine of equitable recoupment.

Facts

Debtor Revel AC, Inc. (“Revel”) owned a casino in Atlantic City, New Jersey. It filed for chapter 11 relief in 2014.

On December 5, 2018, Senior Care Centers, LLC and 120 subsidiaries (collectively, the “Debtors”) filed for chapter 11 relief in the United States Bankruptcy Court for the Northern District of Texas. The Debtors are one of the largest providers of skilled nursing services in the country, providing care on a daily basis to approximately 9,000 patients. The Debtors’ facilities include nursing, living and hospice facilities, which are located throughout Texas and Louisiana.

The United States Supreme Court has agreed to address “[w]hether, under §365 of the Bankruptcy Code, a debtor-licensor’s ‘rejection’ of a license agreement—which ‘constitutes a breach of such contract,’ 11 U.S.C. §365(g)—terminates rights of the licensee that would survive the licensor’s breach under applicable nonbankruptcy law.” The appeal arises from a First Circuit decision, Mission Prod. Holdings, Inc. v.

Piercing the corporate veil (PCV) is a remedy often pursued by a creditor of an insolvent entity against the entity’s parent or principal.  While the corporate veil generally shields a shareholder from the general obligations of his or her corporation, PCV allows a creditor to look beyond the corporate shield and, in certain instances, hold a shareholder liable for the corporation’s debts.