The legalization of marijuana and the Bankruptcy Code continue to proceed on a crash course. A majority of states have legalized marijuana for medical use, and a growing number have legalized recreational use as well. As a result, the industry is rapidly expanding – national sales in legal markets have increased 34 percent in 2018 to $10.8 billion.

Should the laws of the United States have effect outside of the United States? For that matter, should the laws of other countries have effect outside of their borders, and inside the United States? These are pretty fundamental questions about what should be the world order. A recent decision of the Second Circuit Court of Appeals, a bankruptcy case with a high likelihood of reaching the U.S. Supreme Court, takes on that issue. It is a case to watch.

In certain states, including Minnesota, a resident may file a bankruptcy case and elect to protect certain assets under the Bankruptcy Code. The Bankruptcy Code provides that these exemption amounts are automatically adjusted for inflation every three years. In short, the adjustments are based on changes to the Consumer Price Index for All Urban Consumers published by the Department of Labor, rounded to the nearest $25.

A bankruptcy trustee was “not entitled to avoid” a secured lender’s “lien under the Bankruptcy Code” (“Code”), held the U.S. Court of Appeals for the Seventh Circuit on Sept. 11, 2019. In re 180 Equipment, LLC, 2019 WL 4296751, *6 (7th Cir. Sept. 11, 2019). The court rejected the trustee’s argument that the lender’s “lien [was] avoidable because the [lender’s] financing statement failed to properly indicate the secured collateral.” Id., at 1.

On February 25, 2019, the United States Court of Appeals for the Second Circuit issued a decision holding that a trustee is not barred by either the presumption against extraterritoriality or by international comity principles from recovering property from a foreign subsequent transferee that received the property from a foreign initial transferee.

Section 363 of the Bankruptcy Code provides a debtor with the power to sell its assets during the bankruptcy case free and clear of all interests. This permits the debtor to maximize the value of its assets and hence the recovery for creditors. But that is not always the end of the story. In Trinity 83 Development, LLC v.

In 2018, approximately 40 companies in the oil and gas industry filed bankruptcy in the United States, including companies engaged in exploration and production, oilfield services, and midstream services.

Oral argument before the Supreme Court was held on February 20 in the much-watched and even more intensely discussed trademark dispute Mission Product Holdings, Inc. v. Tempnology, LLC. The case presents the difficult and multifaceted question: Does bankruptcy law insulate the right of a trademark licensee to continue using the licensed mark despite the bankrupt trademark licensor’s decision to “reject” the remaining term of the trademark license?

Both the First Energy Solutions and PG&E bankruptcies have seen proceedings regarding power purchase and similar agreements (PPAs) that raise this question.

Background

Contracts often contain provisions that enable a party to terminate or modify the contract based on the other party's bankruptcy filing, insolvency or deteriorating financial condition. In general, the Bankruptcy Code renders these types of provisions (sometimes referred to as "ipso facto" clauses) ineffective. Specifically, under section 365(e)(1) of the Bankruptcy Code (emphasis added):

The Supreme Court held oral argument earlier today in the Mission Products v. Tempnology case, on the issue of the effect of rejection by a licensor of a trademark license on the licensee’s rights.