InIn Re Lexington Hospitality Group, LLC, the United States Bankruptcy Court for the Eastern District of Kentucky thwarted a lender’s efforts to control whether its borrower could file bankruptcy. As a condition to the loan, the lender mandated that the borrower’s operating agreement have certain provisions that require the affirmative vote of an “Independent Manager” and 75% of the members to authorize a bankruptcy.

The Delaware bankruptcy court recently decided that a debtor could not assign a trademark license absent the consent of the licensor. The court concluded that federal trademark law and the terms of the license precluded assignment without consent. Because the debtor could not assign the license under any circumstances (consent was not forthcoming), the court held that cause existed to annul the automatic stay to permit the licensor to “move on with its trademark and its business.”

Exculpation provisions in operating agreements must be carefully crafted in order to protect members, managers, directors and officers for breaches of fiduciary duties. In In re Simplexity, LLC, the Chapter 7 trustee sued the former officers and directors (who were also members and/or managers) for failing to act to preserve going concern value and exposing the debtors to WARN Act claims. The defendants argued the exculpation language in the operating agreements shielded against breach of fiduciary duty liability.

It is very common for bankruptcy court orders to provide that the court retains jurisdiction to enforce such orders. Similarly, chapter 11 confirmation orders routinely provide that the bankruptcy court retains jurisdiction over all orders previously entered in the case. The enforceability of these “retention of jurisdiction” provisions, however, will not rest on the plain language in the order but on the bankruptcy court’s statutory jurisdiction.

Earlier this month, the Supreme Court announced that it will review the scope of Bankruptcy Code section 546(e)’s safe harbor provision. Section 546(e) protects from avoidance those transfers that are made “by or to (or for the benefit of)” a financial institution, except where there is actual fraud. The safe harbor is intended to ensure the stability of the securities market in the event of corporate restructurings.

As noted in a recent Distressing Matters post, the United States Supreme Court in In re Jevic Holding Corp. held that debtors cannot use structured dismissals to make payments to creditors in violation of ordinary bankruptcy distribution priority rules.

In 2015, Distressing Matters reported on the Third Circuit’s decision in In re Jevic Holding Corp., wherein that panel ruled that, in rare circumstances, bankruptcy courts may approve the distribution of settlement proceeds in a manner that violates the Bankruptcy Code’s statutory priority scheme.

The filing of a bankruptcy case puts in place an automatic injunction, or stay, that halts most actions by creditors against a debtor. But can a creditor violate the automatic stay by not acting? The Tenth Circuit recently addressed the issue in WD Equipment, LLC v. Cowen (In re Cowen), adding to the split of authority on the issue.

In Nortel Networks, Inc., Case No. 09-0138(KG), Doc. No. 18001 (March 8, 2017), the Delaware Bankruptcy Court ruled on the objections of two noteholders who asked the Court to disallow more than $4.4 million of the $8.1 million of the fees sought by counsel to their indenture trustee. Given the detailed rulings announced by the Court, the decision may establish a number of guidelines by which future fee requests made by an indenture trustee’s professionals will be measured.

Matters Handled by the UCC

One of the most powerful and oft used devices in bankruptcy is the sale of assets “free and clear” of liens, claims and interests. One issue a buyer at a bankruptcy sale must consider, however, is whether due process has been met with respect to parties whose liens, claims and/or interests are released through such sale. Indeed, a lack of due process could foil a “free and clear” sale, leaving a buyer with an encumbered purchase and nowhere to turn for recourse.