Buyers of assets through the bankruptcy court process seek comfort and solace in the entry of a sale order providing for the transfer of assets “free and clear” of all liabilities. Except for those liabilities expressly assumed by the buyer and new owner, the bankruptcy court order typically includes exacting and precise language transferring those assets, under the imprimatur of the United States Bankruptcy Court, free and clear of all liabilities.
In April, the Seventh Circuit Court of Appeals split with the Fifth Circuit – and other lower courts – on an issue at the intersection of bankruptcy and trusts and estate law. InIn re Clark, 714 F.3d 559 (7th Cir. 2013), the court held that funds in an individual retirement account inherited from someone other than the bankrupt debtor’s spouse are not “retirement funds” within the meaning of the United States Bankruptcy Code and are, therefore, available to pay creditors of the debtor-heir.
On Command Video Corp. v. Roti, Nos. 12-1351 and 12-1430 (7th Cir., Jan. 14, 2013)
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In re Castleton Plaza, LP,___F.3d__, 2013 WL 537269 (7th Cir. Feb. 14, 2013)
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Sunbeam Products, Inc. v. Chicago American Manufacturing, LLC, 686 F.3d 372 (7th Cir. 2012)
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In a matter of first impression in the Seventh Circuit, the court held that a chapter 7 trustee’s rejection of an executory contract did not terminate the trademark license contained therein.
FACTUAL BACKGROUND
Teed v. Thomas & Betts Power Solutions, LLC, (7th Cir., No. 12-2440, Mar. 26, 2013)
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Conventional wisdom says that it is nearly impossible to obtain a discharge of student loan debt in bankruptcy. Indeed, Section 523(a)(8) expressly excepts student loans from discharge, unless the exception of such indebtedness from discharge would impose an undue hardship upon the debtor.
The Seventh Circuit recently held that a purchaser in an “asset deal” of a business in receivership was found to be a successor employer for the purposes of a $500,000 wage/hour settlement. The liability was imposed on the purchaser even though the contract formalizing the asset deal expressly excluded that liability. Teed v. Thomas & Betts Power Solutions, LLC. Found here.
The U.S. Court of Appeals for the Seventh Circuit became the second federal appellate court to extend successor liability under the FLSA to an asset purchaser. In Teed et al, v.
Until 2013, no circuit court of appeals had weighed in on the implications of the U.S. Supreme Court’s pronouncement in the 203 North LaSalle case that property retained by a junior stakeholder under a cram-down chapter 11 plan in exchange for new value “without benefit of market valuation” violates the “absolute priority rule.” See Bank of Amer. Nat’l Trust & Savings Ass’n v. 203 North LaSalle Street P’ship, 526 U.S. 434 (1999), reversing Matter of 203 North LaSalle Street P’ship, 126 F.3d 955 (7th Cir. 1997).