Bankruptcy & Restructuring

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Are Bankruptcy Blocking Provisions in Corporate Governance Documents Enforceable?

October 24, 2019 | Blog | By Paul J. Ricotta

Many equity sponsors are both shareholders and lenders to their portfolio companies.  In that hybrid case, where the shareholder is also a creditor, can the shareholder enforce corporate governance provisions which restrict the ability of the company to file for bankruptcy?  A recent decision from the Fifth Circuit Court of Appeals has answered that question in the affirmative - with caveats. 
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THE FIFTH CIRCUIT ADOPTS AN EXPANSIVE READING OF SECTION 510(b); SUBORDINATES CLAIM WITH ‘EQUITY CHARACTERISTICS’

October 1, 2019 | Blog | By Andrew B. Levin

In French v. Linn Energy, L.L.C. (In re Linn Energy, L.L.C.), the United States Court of Appeals for the Fifth Circuit addressed the scope of Bankruptcy Code Section 510(b), settling on an expansive reading of the Section, holding that a claim for “deemed dividends” should be subordinated.
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The Risks of Imperfect Perfection, and How to Avoid Them

September 25, 2019 | Blog | By Leonard Weiser-Varon

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Changes to Preference Practices Under New Bankruptcy Law

September 4, 2019 | Blog | By Tim McKeon

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Decade Old Transactions Potentially Subject to Bankruptcy Clawback in Massachusetts

August 15, 2019 | Blog | By Eric Blythe

Transfers and transactions up to ten years old may be scrutinized, unwound and recovered by a trustee, the bankruptcy court sitting in Massachusetts recently held in the NECCO (think chalky wafer candy) bankruptcy case. The ruling, in a case of first impression in Massachusetts, expands the reach back period from the typical four-year period for fraudulent transfer recovery, so long as the IRS is a creditor in the case. 
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Supreme Court Adopts a “Rejection-as-Breach” Rule to Allow Licensee to Continue to Use Trademark Following Debtor’s Rejection of License

May 29, 2019 | Blog | By Tim McKeon

On May 20, 2019, the United States Supreme Court ruled that a debtor-licensor’s ‘rejection’ of a trademark license agreement under section 365 of the Bankruptcy Code does not terminate the licensee’s rights to continue to use the trademark.  The decision, issued in Mission Product Holdings, Inc. v. Tempnology, LLC, resolved a split among the Circuits, but may spawn additional issues regarding non-debtor contractual rights in bankruptcy. 
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Health Care Fraud Investigations and Litigation Offer Unexpected Lessons for Bankruptcy Counsel

April 25, 2019 | Blog | By Samantha Kingsbury

As many of our readers know, we have been closely following the Polukoff False Claims Act (FCA) qui tam case in the Tenth Circuit for the lessons it might offer in defending FCA cases premised on allegations related to lack of medical necessity (among other topics).  Recently, we had the opportunity to consider this case from a different angle: the lessons it might offer to bankruptcy counsel advising clients who are or have been the subject of a health care fraud investigation and/or FCA qui tam case. 
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First Circuit Rules That “Incorporation by Reference” of Collateral Description in UCC Financing Statements May Not Perfect Lien

February 14, 2019 | Blog | By William Kannel, Leonard Weiser-Varon, Eric Blythe

Tolstoy warned that “if you look for perfection, you’ll never be content”; but Tolstoy wasn’t a bankruptcy lawyer.  In the world of secured lending, perfection is paramount. A secured lender that has not properly perfected its lien can lose its collateral and end up with unsecured status if its borrower files bankruptcy. 
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The Delaware Bankruptcy Court Grapples With Section 546(e) Post-Merit Management

January 18, 2019 | Blog | By Andrew B. Levin

In its ruling in FTI Consulting, Inc. v. Sweeney (In re Centaur, LLC), the United States Bankruptcy Court for the District of Delaware addressed the Supreme Court’s recent clarification of the scope of Bankruptcy Code Section 546(e)’s “safe harbor” provision, affirming a more narrow interpretation of Section 546(e).
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Supreme Court to Decide Whether Debtors Can Terminate a Licensee’s Rights to Trademarks under License Agreements

December 7, 2018 | Blog | By Tim McKeon

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Ninth Circuit: No Ulterior Motive, No Bad Faith When Buying Claims to Block Confirmation

July 24, 2018 | Blog | By Kevin Walsh

A recent Ninth Circuit Court of Appeals decision provides insight into “bad faith” claims-buying activity; specifically whether a creditor’s purchase of claims for the express purpose of blocking plan confirmation is permissible.
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Non-Debtor Substantive Consolidation: Do Recent Cases Signal a Judicial Preference for State Law Claims?

July 11, 2018 | Blog | By Charles W. Azano

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.
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Supreme Court Bankruptcy Thoughts: Scope of Safe Harbor and Appellate Review

May 3, 2018 | Blog | By Sarah Ramuta

The Supreme Court recently addressed two bankruptcy issues. In its Merit Management opinion, the Court resolved a circuit split regarding the breadth of the safe harbor provision which protects certain transfers by financial institutions in connection with a securities contract.
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Checking-In: Chapter 9, Chapter 11 or Ineligible?

February 23, 2018 | Blog | By William Kannel, Charles W. Azano

Last week, President Trump unveiled his proposal to fix our nation’s aging infrastructure. While the proposal lauded $1.5 trillion in new spending, it only included $200 billion in federal funding. To bridge this sizable gap, the plan largely relies on public private partnerships (often referred to as P3s) that can use tax-exempt bond financing.
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The First Circuit Casts a Shadow on Sunbeam

February 12, 2018 | Blog | By Amanda M. Blaske

In the recently decided case, Mission Product Holdings, Inc. v. Tempnology, LLC, the United States Court of Appeals for the First Circuit took a hardline position that trademark license rights are not protected in bankruptcy. Bankruptcy Code section 365(n) permits a licensee to continue to use intellectual property even if the debtor rejects the license agreement.
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In Massachusetts, Directors and Investors Acting in their Normal Capacities Do Not Have Personal Liability for Wage Act Violations

February 8, 2018 | Blog | By Kevin Walsh

The Massachusetts Supreme Judicial Court recently held that the Massachusetts Wage Act does not impose personal liability on board members or investors acting in their normal capacities.
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Split Third Circuit Holds Transfer By Non-Debtor Cannot Be Fraudulent Transfer

January 31, 2018 | Blog | By Kevin Walsh

Refusing to rely on “equitable principles” when interpreting the Delaware Uniform Fraudulent Transfer Act (DUFTA), the Third Circuit (2-1 decision) in Crystallex Int’l Corp. v. Petroleos De Venezuela, S.A, et als. held that a transfer by a non-debtor cannot be a fraudulent transfer.
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A Momentive Decision: Second Circuit Splits with Third Circuit on Make Whole Premiums; Adopts Sixth Circuit’s Two-Step Approach in Selecting an Interest Rate in Chapter 11 Cramdowns

October 25, 2017 | Blog | By Kaitlin R. Walsh

Last week the Second Circuit issued its long-awaited opinion on the appeals of plan confirmation taken by the first lien, 1.5 lien and subordinated noteholders in In re MPM Silicones, LLC (“Momentive”). With one exception, the Court determined that the plan confirmed by the bankruptcy court in September 2014 comports with Chapter 11 of the Bankruptcy Code.
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Bankruptcy Restrictions in Operating Agreement Held Unenforceable

October 4, 2017 | Blog | By Kevin Walsh

In In Re Lexington Hospitality Group, LLC, the United States Bankruptcy Court for the Eastern District of Kentucky thwarted a lender’s efforts to control whether its borrower could file bankruptcy.
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Delaware Court Holds that Trademark License Cannot be Assigned Without Consent

August 28, 2017 | Blog | By Kevin Walsh

The Delaware bankruptcy court recently decided that a debtor could not assign a trademark license absent the consent of the licensor. The court concluded that federal trademark law and the terms of the license precluded assignment without consent.
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