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Netflix’s Rights to Stream Limited by Plan Feasibility

By: Gabriella Labita

St. John’s Law Student

American Bankruptcy Institute Law Review Staff

In In Re Relativity Fashion, LLC, the United States Bankruptcy Court for the Southern District of New York held that Netflix was not permitted to stream certain films before they were theatrically released. RML Distribution Domestic, LLC, DR Productions, and Armored Car Productions, LLC (collectively, the “Debtors”) filed for bankruptcy in July 2015 and proposed a Chapter 11 plan of reorganization (the “Plan”), which contemplated the theatrical release of certain movies before Netflix streams them. The Debtors’ release of the films yielded specific financial projections and was a critical factor in the court’s determination that the Plan was feasible as required by the United States Bankruptcy Code. The Debtors petitioned the court to compel Netflix to comply with proposed amendments to Notices of Assignment that were issued under a license agreement between Netflix and the Debtors. The judge’s confirmation order of the Plan approved these amendments, dictating that the payments owed by Netflix under the license agreement were to be assigned to the lenders. Netflix conceded the amendments because the license agreement required compliance as long as the terms did not change Netflix’s rights. Netflix asserted, however, that accordingly to the license agreement it had the right to distribute the films prior to theatrical release.

Not My Client, Not My Problem. The Duty of Attorney’s to Non-Clients

By: Daniel Quinn

St. John’s Law Student

American Bankruptcy Institute Law Review Staff

In 2015, the United States Court of Appeals for the Second Circuit found that attorneys at May-er Brown, LLP had inadvertently terminated certain liens granted by General Motors (“GM”) in favor of J.P. Morgan Chase (“JPM”). GM repaid the Term Loan agreement in full in accordance with the bankruptcy court order and therefore made the retirement plaintiffs and Term Loan members subject to clawback provisions under the Bankruptcy Code. The members of the Term Loan agreement and retirement plaintiffs filed a lawsuit against Mayer Brown, the law firm responsible for the erroneous termination of liens, for negligent mis-representation and legal malpractice in the United States District Court of Northern District of Illinois.

Debtor’s Bankruptcy Filing Serves to Limit Creditor’s Liability to Third Parties

By: Ryan Dolan

St. John’s Law Student

American Bankruptcy Institute Law Review Staff

In Ritchie Capital Structure Management Trading, LTD., v. General Electric Capital Corporation, the United States Court of Appeals for the Second Circuit held that investors in a debtor’s Ponzi scheme did not have standing to sue the debtor’s lender.

Actual Knowledge Bars Section 546(e) Safe Harbor Defense

By: Amanda Tersigni

St. John’s Law Student

American Bankruptcy Institute Law Review, Staff

Section 546(e) of the Bankruptcy Code generally provides that a trustee may not avoid a “settlement payment” as a preference or a fraudulent transfer.[1] This so-called “safe harbor,” a defense to a trustee’s avoidance power, is designed to avoid uncertainty in security trading and to prevent an ultimate instability in the financial markets.[2] The United States Bankruptcy Court for the Southern District of New York in Picard v. Avellino (In re Bernard L. Madoff Inv. Sec. LLC),[3] held that having actual knowledge of fraudulent nature of a security trading precluded a defendant from using the safe harbor defense under Section 546(e).[4]

A Lender’s Knowledge of Alleged Breaches of Fiduciary Duties Shall Not Be Imputed Upon Debtors in a Statute of Limitations Analysis

By: Michael DeRosa

St. John’s Law Student

American Bankruptcy Institute Law Review Staff

In In re AMC Investors, the Delaware district court reversed the bankruptcy court’s decision granting summary judgment in favor of the officers and directors (“Defendants”) of AMC (the “Company”) because[1] Eugenia, as the sole creditor, was granted derivative standing to file suit on behalf of the debtors of the Company.[2] Prior to being granted derivative standing, Eugenia filed involuntary Chapter 7 bankruptcy petitions against the debtors in 2009.[3] The bankruptcy court granted summary judgment in favor of the Defendants, which was based on Defendants’ statute of limitation defense.[4] Eugenia and the debtors (collectively “Plaintiffs”) appealed summary judgment.

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