Introduction
Weiss v. JPMorgan Chase Bank, N.A. (In re Thibault), 518 B.R. 635 (Bankr. D. Mass. 2014) –
A chapter 7 trustee sought to avoid a mortgage using his “strongarm” powers on the basis that it was not properly recorded because the spelling of the debtor’s last name in the mortgage was not the “correct” spelling.
The Bankruptcy Code generally permits intellectual property licensees to continue using licensed property despite a licensor’s bankruptcy filing. However, because the “intellectual property” definition in the Bankruptcy Code does not include “trademarks,” courts have varied on whether trademark licensees receive similar protection. A New Jersey bankruptcy court recently grappled with this issue, concluding that trademark licensees may retain their trademark rights.
Summary of recommended changes to the Bankruptcy Code from the ABI Commission to Study the Reform of Chapter 11
Summary of recommended changes
This chart summarizes the Recommendations in the Commission’s Report that relate to or would have an impact on creditors’ rights.
Background
On November 5, 2014, the United States Bankruptcy Court for the Western District of Virginia issued a noteworthy opinion that runs counter to what many Virginia law practitioners assume to be the common law in Virginia – i.e., that a manager of a Virginia limited liability company owes a fiduciary duty of loyalty to the limited liability company.
It long has been the law that unpaid creditors of an insolvent debtor can complain if the debtor sells or otherwise transfers any of its assets for less than their fair value. Assume, for example, a company in financial distress sells one of its manufacturing plants to an unrelated purchaser for $15 million. If an unpaid creditor of the seller can demonstrate the fair value of the facility at the time of the sale was $20 million, the purchaser may be required to account to the seller, or its creditors, for the $5 million difference.
“Always look out for Number One, but don’t step in Number Two” – Rodney Dangerfield
“What-eva – I’ll do what I want [as long as my company is solvent]” – Eric Cartman, South Park
The Seventh Circuit Court of Appeal’s recent decision in State Bank of Toulon v. Covey (In re Duckworth)Case Nos. 14-1561 and 1650 (7th Cir. November 21, 2014) illustrates how a banker’s seemingly minor mistake in drafting secured loan documents granting a lien to secure a non-existent obligation can lead to avoidance of a lender’s security interest by the borrower’s bankruptcy trustee.
On November 21, 2014, the United States Court of Appeals for the Seventh Circuit issued a very tough opinion for lenders. In this case, a borrower signed a $1,100,000.00 Promissory Note dated December 15 and an Agricultural Security Agreement dated December 13. The Security Agreement said that it granted the bank a security interest in crops and farm equipment. The Promissory Note referred to the Security Agreement. Unfortunately, the Security Agreement stated that it secured a Promissory Note dated December 13, not December 15.
On September 26, 2014, in the Farnum case (Krys v. Farnum Place, LLC (In re Fairfield Sentry Ltd.), 768 F.3d 239 (2d Cir. 2014)) the Court of Appeals for the Second Circuit held that Bankruptcy Code section 363 review applied to a transfer of a Securities Investor Protection Act (“SIPA”) claim held by an off-shore entity in foreign liquidation proceedings recognized in the United States. The decision is significant for two reasons.