The U.S. Court of Appeals for the First Circuit has held that a debtor’s interest in its liquor license constitutes property of the estate pursuant to section 541 of the Bankruptcy Code.

The First Circuit further held that the debtor’s rejection of its lease ended the debtor’s contractual right to continued use of its liquor license, and left the landlord with ordinary remedies for breach of contract—such as specific performance to obtain recovery of the license. See In re Ground Round, Inc. (Abboud v. Ground Round), 482 F.3d 15 (1st Cir. 2007).

Lenders take note—a state court has held that in some circumstances a refinancing transaction can extinguish an original guarantee.

One week after Aegis Mortgage Corp. filed for chapter 11 in Delaware, a group of former employees filed their complaint seeking class certification over allegations that Aegis Mortgage Corporation, Aegis Wholesale Corporation and Cerberus Capital Management, L.P.—all allegedly acting as their employer—violated the Worker Adjustment and Retraining Notification (WARN) Act when they failed to give over 400 employees 60 days' notice prior to a mass termination by Aegis Mortgage on August 7, 2007.

In Diamond Z Trailer, Inc. v. JZ, LLC (In re JZ, LLC), No. 07-1011 (9th Cir. B.A.P., June 18, 2007), the Ninth Circuit Bankruptcy Appellate Panel affirmed a Bankruptcy Court decision holding that an unscheduled executory contract rides through the bankruptcy if not assumed or rejected during the bankruptcy. Further, a debtor has standing to sue for a breach of that executory contract when the breach occurred after the closure of the bankruptcy case.

The U.S. Court of Appeals for the Second Circuit, on July 9, 2007, decisively affirmed a bankruptcy court's dismissal of an equitable subordination complaint filed by a creditors' committee against eight investment fund lenders. Official Committee of Unsecured Creditors of Applied Theory Corporation v. Halifax Fund, L.P., et al. (In re Applied Theory Corporation), ___ F.3d ___, 2007 U.S. App. LEXIS 16180 (2d Cir. July 9, 2007).

A recent decision out of a North Carolina bankruptcy court has reopened the question of whether a physical supply contract may qualify as a forward contract or swap agreement for purposes of the Bankruptcy Code. Although previous U.S. case law determined that those terms included commodity supply agreements, the U.S. Bankruptcy Court for the Eastern District of North Carolina disagreed.

The United States District Court for the District of Colorado, applying Colorado law, has denied an insurer's motion for summary judgment and granted in part motions for partial summary judgment by the policyholder's former CEO and a bankruptcy trustee as assignee of the policyholder's former directors. Genesis Ins. Co. v. Crowley, 2007 WL 1832039 (D. Colo. June 25, 2007).

The United States District Court for the Southern District of Ohio, applying Ohio law, has held that an insurer could rescind an insurance policy based on an individual's fraudulent statements that the insured company was not facing bankruptcy. Unencumbered Assets Trust v. Great Am. Ins. Co., 2007 WL 2029063 (S.D. Ohio July 10, 2007).

Another court ruling on a missed bar date highlights the importance of ensuring your rights are protected. Failure to comply with a deadline to file a claim can have catastrophic consequences.

Summary: As of July 1, 2007, Tennessee has a "new" statute on mechanics' and materialmen's liens. The new statute is the culmination of several years of effort on the part of a special committee of the Tennessee Bar Association (TBA). While the new statute replaces the old statute in its entirety, the new statute incorporates many of the provisions of the old statute. As a result, the new statute did not result in the drastic change in the law that the TBA committee originally envisioned.1