Since filing for Chapter 11 in May 2020, Hertz and its major stakeholders have been in negotiations and, at times, disputes over how best to reduce Hertz’s nearly half-a-million vehicle fleet. These negotiations and disputes have caught the eye of investors in asset-backed securities (“ABS”) and market watchers alike, as the outcome of the case could have rippling effects across the ABS industry and capital markets, generally.
In a case of significant importance to licensees of US intellectual property, the US Court of Appeals for the Fourth Circuit held in Jaffé v. Samsung Electronics Co. (In re Qimonda), Case No. 12-1802, 2003 WL 26478864 (4th Cir. Dec. 3, 2013) (“Jaffé”), that a bankruptcy court did not err by requiring that the protections of section 365(n) of the Bankruptcy Code apply with respect to a foreign debtor’s US intellectual property (“IP”) as a condition of granting the debtor’s foreign representative relief under chapter 15 of the Bankruptcy Code.
The question of what happens to an international arbitration when a party files for bankruptcy in the United States is arising with increasing frequency. In the United States, the public policy interests that underlie both bankruptcy and arbitration legislation sometimes clash on critical points. The federal courts have developed competing approaches to addressing these issues. This fractured caselaw introduces uncertainty at the intersection of arbitration and bankruptcy.
US Bankruptcy Code
The existing jurisdictional conflict1 between US bankruptcy courts under the Federal Bankruptcy Code and the Federal Energy Regulatory Commission (FERC) regarding required approvals for a debtor in bankruptcy to reject an executory Federal Power Act (FPA)-jurisdictional agreement has also been asserted by FERC with respect to Natural Gas Act (NGA)-jurisdictiona
On April 16, 2013, in Morning Mist Holdings Ltd. v. Krys (In re Fairfield Sentry Ltd.),1 the US Court of Appeals for the Second Circuit issued an important decision informing fundamental concepts of cross-border insolvency law as implemented pursuant to Chapter 15 of the Bankruptcy Code.
In the case of In re: Exide Technologies, decided on June 1, 2010, the US Court of Appeals for the Third Circuit reversed two lower court decisions and held that a 1991 agreement between Exide Technologies and EnerSys Delaware Inc., which included a license to EnerSys for use of the “EXIDE” trademark, is not an executory contract that can be rejected by Exide in bankruptcy proceedings.
The Seventh Circuit has reversed the district court’s decision in the Sentinel matter and ruled that the Bankruptcy Court’s allowance of a pre-petition transfer and authorization of a post-petition transfer of assets by Sentinel to its FCM customers was permitted under the Bankruptcy Code. The District Court had previously avoided the $22.5 million pre-petition transfer of funds to FCM customers and the $297 million post-petition transfer of funds authorized by the Bankruptcy Court.
In Re: Katherine Elizabeth Barnet, No. 13-612 (2d Cir. Dec. 11, 2013) [click for opinion]
In re: Qimonda AG, No. 09-14766-SM, Bankr. E.D. Va. (Oct. 28, 2011) [click for opinion]
Official Comm. of Unsecured Creditors of Arcapita, Bank. B.S.C. v. Bahr. Islamic Bank, No. 15-cv-03828 (S.D.N.Y. Mar. 30, 2016) [click for opinion]