On June 20, 2018, the United States Bankruptcy Court for the District of Delaware issued a decision sustaining the debtors’ objection to the proof of claim filed by Contrarian Funds, LLC.

In this tumultuous retail climate, a string of recent conflicting court decisions remind retailers that the potential impact of a licensor bankruptcy on a trademark licensee’s rights may vary dramatically depending on the location of the licensor’s bankruptcy proceedings.

The Bankruptcy Court for the District of Delaware recently held in In re Woodbridge Group of Companies, LLC that while Rule 3001 of the Bankruptcy Code provides a mechanism for transfers of claims, Rule 3001 is not a substantive provision allowing claims trading for notes with legally valid anti-assignment provisions.

Background

An accounting firm in the United States must produce workpapers to a chapter 15 foreign representative even if the law where the foreign main proceeding is pending would not permit such production. CohnReznick LLP v. Foreign Representatives of Platinum Partners Value Arbitrage Fund L.P. (In re Platinum Partners Value Arbitrage Fund L.P.), No. 18-5176 (DLC), 2018 U.S. Dist. LEXIS 109684 (S.D.N.Y June 29, 2018).

On June 20, 2018, Judge Kevin J. Carey of the United States Bankruptcy Court for the District of Delaware sustained an objection to a proof of claim filed by a postpetition debt purchaser premised on anti-assignment clauses contained in transferred promissory notes. In re Woodbridge Group of Companies, LLC, et al., No. 17-12560, at *14 (jointly administered) (Bankr. D. Del. Jun. 20, 2018).

It is not unusual for a creditor of a debtor to cry foul that a non-debtor affiliate has substantial assets, but has not joined the bankruptcy. In some cases, the creditor may assert that even though its claim, on its face, is solely against the debtor, the debtor and the non-debtor conducted business as a single unit, or that the debtor indicated that the assets of the non-debtor were available to satisfy claims. In these circumstances, the creditor would like nothing more than to drag that asset-rich non-debtor into the bankruptcy to satisfy its claims. Is that possible?

The Ninth Circuit reversed and remanded an Oregon bankruptcy court’s order designating recently acquired claims of a secured creditor for bad faith, holding that a bad faith finding requires “something more.” Specifically, the Court found that a bankruptcy court may not designate claims for bad faith simply because (1) a creditor offers to purchase only a subset of available claims in order to block a plan of reorganization, and/or (2) blocking the plan will adversely impact the remaining creditors.Pacific Western Bank, et al. v.

In retail bankruptcies, it is important for suppliers consigning goods to merchants to be aware of the commercial law rules governing consignments. Disputes among consignors, inventory lenders, and bankruptcy debtors have been arising frequently in retail bankruptcy cases. Disputes like these can be avoided if consignors consider the basics of commercial law rules governing consignments, particularly under the Uniform Commercial Code, and take steps to protect their rights and interests.

The Bottom Line

The District Court for the Northern District of Texas recently held in Segner v. Ruthven Oil & Gas, LLC, No. 3:12-CV-1318-B, 2018 WL 3155827 (N.D. Tex. June 28, 2018) that failure to comply with a disclosure law when documenting a transaction does not deprive a defendant in a fraudulent transfer action from asserting a good faith defense.

What Happened?

Our June 28 post discussed the petition for certiorari in the U.S. Supreme Court seeking review of the First Circuit’s January 12 decision in Mission Product Holdings, Inc. v. Tempnology, LLC.[i] We noted that the respondent’s response to the petition was due on July 12.