Sites Committee
Committees
Bankruptcy Code § 365(n) provides significant protections to licensees under intellectual property licenses that are rejected by debtor-licensors.[1] Section 365(n) permits a licensee to retain its rights in licensed intellectual property post-rejection in exchange for the continued payment of royalties.
Editor’s Note: The Secured Credit Committee recently hosted a webinar titled “Understanding Make-Whole and No-Call Provisions: Key Takeaways From Recent Decisions.” This webinar discussed recent cases such as AMR Corp. (American Airlines), School Specialty, GMX Resources and Chemtura.
In a dispute regarding entitlement to proceeds resulting from an auction of livestock in possession of a dairy farmer/debtor,[1] the U.S. Court of Appeals for the Sixth Circuit issued an order on Aug. 14, 2014, in favor of a dairy cattle lessor, despite the secured creditor’s pre-existing security interest in all livestock that is “currently owned or hereafter acquired.” The court found that the dairy cattle leases were not disguised security agreements, as the bankruptcy and district courts in Kentucky had concluded, but were instead true leases.
Editor's Note: The House Judiciary Committee passed H.R.5421 - Financial Institution Bankruptcy Act of 2014 - on December 1, 2014.
On Sept. 10, 2014, the House Judiciary Committee approved H.R. 5421, the Financial Institution Bankruptcy Act of 2014, by a voice vote.[1] The Act is the product of the Judiciary Committee’s long-standing oversight of the U.S.’s bankruptcy laws, as well as its recent examination into improving such laws for the resolution of bankruptcies of financial institutions.[2]
Section 365 of the Bankruptcy Code authorizes a debtor to assume or reject an executory contract.[1] An executory contract that has expired in accordance with its terms is generally not subject to assumption or rejection under the Code.
In the recent case of Securities Investor Protection Corp. v. Bernard Madoff Inv. Sec. (“Securities”), the Second Circuit ruled that § 550[1] of the Bankruptcy Code does not apply extraterritorially to allow avoidance of fraudulent transfers that occur entirely outside of the United States.[2] Securities involved the efforts of Irving H. Picard, the trustee appointed under the Securities Investor Protection Act (SIPA)[3] to recover funds transferred from Madoff Investment Securities LLC[4] to foreign “feeder funds,” which then transferred those funds to other foreign persons or entities.
Ponzi schemes are increasingly in the news. Recently, the FBI released information about an $18 million Ponzi scheme based out of Nashville, Tenn., in which three men involved in the Hanover Corp. pled guilty to securities fraud, money laundering and conspiracy.[1] In that scheme, the three men offered clients the opportunity to invest in Hanover through promissory notes bearing high interest rates. In this classic Ponzi scheme, Hanover promised that the money would be invested in stock options and startup companies.
Since the enactment of the Fraudulent Conveyances Act of 1571, the law has prohibited transfers designed to hinder, delay, or defraud creditors.[1] Likewise, aiding-and-abetting and conspiracy are well-established bases for civil liability. Business lawyers live and breathe these concepts.
