The scope of the Bankruptcy Code’s safe harbor for certain financial contracts has been tested again, this time in the United States Bankruptcy Court for the Western District of Louisiana, according to an article written by Maurice Horwitz in the Bankruptcy Blog of Weil, Gotshal & Manges.

The question in the case he described was whether an ipso facto provision continues to be safe harbored if enforcement of that provision is conditioned on other factors – in this case, the debtor’s failure to perform under the contract. 

“Consistent with prior case law, the court held that termination is only safe harbored if it is based solely on a condition specified in 365(e)(1), i.e., the financial condition of the debtor, bankruptcy, or the appointment of a trustee,” Horwitz wrote. “Because the ipso facto provision in this case contained an additional condition to enforcement (the debtor’s breach), it no longer fell within the safe harbor.  Thus, even if both conditions were satisfied (bankruptcy and breach), the automatic stay applied and the termination clause could not be exercised absent relief from the automatic stay.”

Read the article.

A legitimate fear among companies negotiating license agreements exists, and that is the fear of the license counterparty filing for bankruptcy, reports Christopher A. Ward and Cortney E. Mendenhall of Polsinelli PC.

“Given the business interruption that ultimately could occur as a result of a restructuring event, it is vital for practitioners to address bankruptcy or insolvency issues upfront during the negotiation of the license agreement,” they write. “This is especially true for licensees who often rely heavily, if not exclusively, on a licensor for significant aspects of their business.”

They discuss several negotiation and drafting tips that practitioners can utilize to help protect their licensee clients in the event of a bankruptcy filing under chapter 11, of Title 11, of the United States Code (the “Bankruptcy Code”) by the licensor counterparty.

Read the article.

A ruling in the 8th U.S. Circuit Court of Appeals illustrates that at bankruptcy plan confirmation, debtors need to create a record for potential appeals, including those that it may ultimately want to bring, writes Brenda Funk is an Associate at Weil Gotshal & Manges, LLP in Houston.

In her article, published on the firm’s Bankruptcy Blog, describes In re O&S Trucking as a straight-forward map on how to preserve objections as issues for appeal in the Eighth Circuit.

Read the article.

In a case of first impression, the Third U.S. Court of Appeals recently ruled that federal bankruptcy courts may extinguish a Chapter 11 employer’s obligations under an expired collective bargaining agreement pursuant to Section 1113 of the Bankruptcy Code where such relief is necessary to permit reorganization, reports Buchanan Ingersoll & Rooney PC.

The case is In re: Trump Entertainment Resorts, 2016 WL 191926 (3d Cir. 2016).

“The Trump Entertainment case is significant for employers in reorganization, because it eliminates the need for union negotiations to reach an actual impasse before new terms can be implemented and, perhaps more importantly, it avoids the possibility that the NLRB could file a claim during the bankruptcy proceeding that would overturn a change in the employees’ terms and conditions of employment,” the firm writes.

Read the article.

A lawyer for Sam and Dee Wyly said Thursday that the tax evasion and tax fraud case brought by the Internal Revenue Service in the Northern District of Texas is nothing more than “a bunch of sound bites” and allegations that are not based in federal tax law, reports The Dallas Morning News.

“The IRS’ lawyer countered that the evidence presented during the past four weeks of an unprecedented billion-dollar bankruptcy trial shows that the Wylys ‘never intended to pay taxes’ on the hundreds of millions of dollars they kept in offshore trusts on the Isle of Man,” the report continues.

The bankruptcy judge hearing the case is expected to take several weeks to rule in the complex bankruptcy trial in which the IRS accused Sam Wyly and Charles Wyly’s widow, Dee Wyly, of tax evasion and fraud and is seeking $2.2 billion in back taxes, fees and penalties.

Read the story.

As the dreaded packet arrives in the mail from a Bankruptcy Court, many mineral owners are being introduced to the third “B” of the oil business — Boom, Bust, Bankruptcy. Wade Caldwell and Zach Fanucchi of Barton, East & Caldwell in San Antonio offer a quick primer, published on EagleFordForum.com, for mineral owners faced with this situation.

The authors say a mineral owner should usually look at bankruptcy issues in the following order:

• What kind of bankruptcy has been filed?
• What kind of legal relationship do I have with the bankrupt company?
• What can I do in response to the bankruptcy filing?
• How does this affect the royalties I am owed, or that will become due?
• How does this affect my lease?

They explain the different types of bankruptcy, tell mineral owners what they can do in response, describe the complete process, tell how long it can take, and explain how the process can affect a lease and royalties.

Read the article.

In the day-to-day operations of a company, the distinction between owned IP rights and in-licensed IP rights can easily get lost. But what happens if a licensor files for bankruptcy? Will an in-license protect the licensor’s right to continue to use the IP rights? Jason M. Rodriguez and Jessica M. Pelliciotta, associates with Morgan Lewis, discuss those issues in an article published by The National Law Review.

In the article, they lists contract drafting points that can help protect the licensee’s IP rights in the event of a licensor’s bankruptcy.

They also offer a sample provision to use in drafting.

Read the article.

Technology companies can preserve both significant sums of money and valuable intellectual property rights if they take action when a customer or business partner files for bankruptcy protection, according to a report published on the Buchalter Nemer website.

Shawn Christianson, Valerie Bantner Peo and Ivo Keller wrote the article.

“Far less effort is usually required to preserve these rights than what may be involved in a major piece of litigation; but, in almost every case, the company must take timely steps to ensure that its interests are protected,” they write.

They discuss measures that technology companies can take, and the procedures they should be aware of, to protect their rights in this area of law.

Read the article.

A federal district court in New York recently held that a creditor could not be held liable for aggressively protecting its own interests when the plain language of the relevant documents permitted the actions taken by the creditor, according to a legal update from Dechert‘s Business Restructuring and Reorganization Group.

Lehman Brothers Holdings Inc. v. JPMorgan Chase Bank, N.A., No. 11-cv-7670 (RJS) (S.D.N.Y. Sept. 30, 2015) arose out of an adversary proceeding initiated by Lehman Brothers Holdings Inc. and its affiliated against JPM, the update reports.

“The Debtors advanced multiple causes of action and theories against JPM, alleging that JPM improperly and unfairly appropriated value from the Debtors (thus harming their creditors) in the months leading up to LBHI’s bankruptcy filing by allegedly strong-arming the Debtors into providing it with additional collateral and protections,” it continues. “The Court, however, entered summary judgment against LBHI on nearly all counts because it found that the written contracts between JPM and LBHI expressly permitted JPM’s purportedly inequitable actions.”

Read the article.