A recent Bankruptcy Court decision in New Jersey took an unusual approach in determining the rights of the debtors’ trademark licensees following the debtors’ rejection of the licenses as executory contracts. In In re Crumbs Bake Shop, Inc., Case No.
In In re Crumbs Bake Shop, Inc., No. 14-24287 (Bankr. D.N.J., Oct. 31, 2014), Judge Michael B. Kaplan of the U.S. Bankruptcy Court for the District of New Jersey held that trademark licenses may be entitled, under a bankruptcy court's equitable powers, to the protections of Section 365(n) of the United States Bankruptcy Code, 11 U.S.C. § 101 et seq.
"Free and Clear" Sale of a Trademark or Intellectual Property License Under Section 363 Does Not Trump Rights of Third Party Licensees under Section 365
HIGHLIGHTS:
If you doubted it before, you can stop now. The trend of courts finding ways to protect trademark licensees from the harsh effects of losing their trademark license rights in bankruptcy is in full swing.
In a novel decision, the United States Court of Appeals for the Third Circuit held, in its ruling In re Emoral, Inc., 740 F.3d 875 (3d Cir. 2014), that personal injury claims of individuals allegedly harmed by a bankrupt debtor’s products cannot be asserted against a pre-petition purchaser of the debtor’s assets, as they are “generalized claims” which belong to the debtor’s bankruptcy estate rather than to the individuals who suffered the harm.
Background
What recourse is there for a plaintiff seeking to recover a debt when the defendant goes bankrupt during suit, and its owner commences operating essentially the same business through another legal entity? Can successor liability be asserted and, if so, how? Those issues played out in the recent case of Marange Printing, Inc. v. Finish Line NJ, Inc., et al., Superior Court of New Jersey, Docket No. A-2735-12T2 (decided March 7, 2014).
On February 4, 2014, the United States Bankruptcy Court for the District of New Jersey in In re Surma, 2014 WL 413572 (Bankr. D.N.J. Feb. 4, 2014), held that rents were not property of the debtor’s bankruptcy estate because they were subject to an absolute and unconditional assignment of rents in favor of the secured lender. As a result, the court concluded that the debtor may not, through his Chapter 11 plan of reorganization, use or allocate rents.
Background
InLewis v. Eberle & BCI Services, LLC, 2013 WL 4483529 (D.N.J. Aug. 19, 2013), a New Jersey district court dismissed the plaintiff’s claims brought under the Americans with Disabilities Act and the Family and Medical Leave Act because she failed to disclose them as “assets” in a simultaneous bankruptcy proceeding. The plaintiff was engaged in Chapter 7 bankruptcy proceedings when she filed suit against her former employer, but she did not revise her bankruptcy petition to identify those claims.
On September 24, 2013, in Farmers Mut. Fire Ins. Co. v. NJPLIGA, N.J. , 2013 WL5311272 (2013), the New Jersey Supreme Court ruled that policy limits of solvent insurers must be exhausted before the New Jersey Property‐ Liability Insurance Guaranty Association ("NJPLIGA") could be responsible for long‐tail claims under policies issued by insolvent insurers. NJPLIGA is a statutory entity created to provide New Jersey policyholders with protection when insurers become insolvent.