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By: Lisa Strejlau

St. John’s Law Student

American Bankruptcy Institute Law Review Staff

In Chapter 11 airline cases, a court will typically balance the interests of debtors and creditors in determining the method, timing and condition of collateral returns and whether or not the parties must comply with the underlying contractual obligations. In In re Republic Airways Holdings, Inc.,[1] the United States Bankruptcy Court for the Southern District of New York held that a debtor is not required to comply with underlying contractual requirements for the return of aircraft and engines as collateral.[2] After filing for Chapter 11, Republic Airways Holdings, Inc. (“Republic”) sought to surrender or abandon certain aircrafts and engines subject to liens of Citibank, pursuant to an agreement to secure Republic’s obligations with respect to a credit and guaranty agreement.[3] Republic moved for an order authorizing them to (i) transfer title to and abandon certain aircrafts and engines and reject a related aircraft lease, and (ii) to fulfill their obligations under a certain engine purchase agreement and directing Citibank to cooperate with the closing of that agreement.[4]

November 20 2016

By: Maria Casamassa

St. John’s Law Student

American Bankruptcy Institute Law Review Staff

Under the Bankruptcy Code, a discharge of student loan debt is not justified “unless excepting such debt from discharge under this paragraph would impose an undue hardship on the debtor and the debtor's dependents . . . .”[1] A finding of undue hardship is difficult to establish; accordingly, student loan debt is rarely discharged.[2] However, in In re Fern,[3] the United States Bankruptcy Court for the Northern District of Iowa applied the totality of the circumstances test and held that the debtor presented sufficient evidence demonstrating that excepting her student loans from discharge would impose an undue hardship on her and her family and, therefore, the debt was dischargeable.[4]

November 20 2016

By: Olivia Cheung


St. John’s Law Student


American Bankruptcy Institute Law Review Staff


In In re Trump Entertainment Resorts, Inc., the United States Bankruptcy Court for the District of Delaware held that trademark licenses are not assignable by a debtor licensee without the consent of the licensor.[1] In interpreting applicable federal trademark law, the court noted that exclusive or non-exclusive trademark licenses are precluded from assignment by a licensee without the licensor’s consent, even if the original license agreement did not expressly prohibit such an assignment.[2] In this instance, the trademark license agreement granted Trump Entertainment Resorts (“TER”) a royalty-free license to use the names and likenesses of Donald and Ivanka Trump in connection with three casinos in Atlantic City, New Jersey.[3] The license was subject to termination if TER failed a quality assurance review and did not cure the deficiencies within a specific period of time.[4] If TER failed the review, the licensor would have the right to start proceedings to terminate the license in New Jersey state court.[5] TER allegedly failed a quality assurance review, and the licensor sued in New Jersey state court seeking to terminate the agreement.[6] The state court action was stayed automatically when TER filed petitions for relief under chapter 11.[7] Pursuant to TER’s proposed plan of reorganization, TER would cure any defaults and assume the license agreement.[8] Subsequently, the licensor filed a motion in the bankruptcy court seeking to have the stay lifted so that the licensor could proceed with the state court termination action.[9]

January 18 2016

By: Zien Halwani

St. John’s Law Student

American Bankruptcy Institute Law Review Staff

The United States District Court for the Southern District New York dismissed an action for breach of fiduciary duty relating to investment in Lehman stock during the 2008 financial crisis.[1] Beneficiaries of Lehman Brothers Savings Plan, an employee stock ownership plan (“ESOP”), sued Lehman’s former directors, which included Richard S. Fuld and the Lehman’s Employee Benefit Plans Committee (“Plan Committee”).[2] This lawsuit was dismissed twice under Rule 12(b)(6) for failing to plead “factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.”[3] The Second Circuit affirmed the second dismissal in Rinehart v. Akers,[4] but the dismissal was vacated and remanded to this district court by the United States Supreme Court in light of its decision in Fifth Third Bancorp v. Dudenhoeffer.[5] Prior to the Supreme Court’s ruling in Dudenhoeffer, several lower courts found that ESOP fiduciaries were entitled to a general presumption of prudence.[6] In Dudenhoeffer, the Supreme Court narrowed this entitlement to a presumption of prudence only when Employee Retirement Income Security Act (“ERISA”) fiduciaries — ESOP or otherwise — rely on publicly available information in making investment decisions.[7] The Supreme Court also held, however, that a company might be an imprudent investment if it was going “out of business.”[8]

January 16 2016

By: Bryant Churbuck

St. John's Law Student

American Bankruptcy Institute Law Review Staff

In In re Motors Liquidation Co., the Bankruptcy Court of the Southern District of New York held that the class of "Pre-Closing Accident" plaintiffs would be unable to proceed with their personal injury claims against the new General Motors (“GM”), rather than the old GM , because they suffered no prejudice to support a procedural due process violation, despite the fact that the notice by publication given to the "Pre-Closing Accident" plaintiffs was insufficient. In Motors Liquidation, several classes of plaintiffs were asserting claims related to an ignition switch defect that was known by GM as far back as 2003. At least 24 GM business and in-house legal personnel employees knew about the ignition switch defect at the time of GM's 2009 chapter 11 bankruptcy case and section 363 Sale Order. On July 10, 2009, the sale of Old GM in accordance with the Section 363 Sale Order closed, forming the new GM. In the Spring of 2014, GM finally recalled the vehicles with the faulty ignition switch issue. Shortly thereafter, GM announced the ignition switch defect, resulting in several class action lawsuits.

January 6 2016

By: Clayton J. Lewis

St. John’s Law Student

American Bankruptcy Institute Law Review Staff

In the case of In re Brown, the Bankruptcy Court for the Middle District of Florida held that a tax debt owed to the IRS was excepted from a hardship discharge, and accordingly was not excused from payment. The debtors in In re Brown filed for Chapter 13 bankruptcy relief and initially implemented a payment plan for 100% of their debts, including a total of $303,229 payable to the IRS. The debtors, however, were unable to meet their payment obligations and had to amend their payment plan twice. With over $155,000 still due to the IRS, the debtors offered to settle theirs debt with the IRS. The debtors and the IRS were unable to reach a settlement. The IRS nonetheless suggested that the debtors file for a hardship discharge under section 1328(b) of the Bankruptcy Code. The debtors followed this suggestion and received a hardship discharge, and their bankruptcy case was closed. The discharge order expressly noted that the debt to the IRS, however, was not discharged and was still due in full. When the IRS attempted to collect the debt, the debtors filed a complaint against the IRS in the bankruptcy court, alleging that the IRS had violated the Discharge Order.

January 6 2016

By: Shane Walsh

St. John’s Law Student

American Bankruptcy Institute Law Review

A person who files for bankruptcy may not simply change his mind and have his bankruptcy case dismissed. In In re Segal , the bankruptcy court denied a debtor’s request to dismiss his voluntary chapter 7 case because the debtor acted in bad faith, dismissal would prejudice his creditors, and the debtor would be unable to “secure a fresh start outside of bankruptcy.”[1] In this instance, the debtor filed a chapter 7 petition to avoid the imminent foreclosure sale of his apartment.[2] Four months after the chapter 7 petition was filed, the debtor filed a motion to dismiss arguing that the lack of his signature on the original petition was a “fatal defect to the filing.”[3] The court, however, denied the request, finding that the debtor filed the motion to dismiss after obtaining the benefit of the automatic stay to the detriment of his creditors.[4]

January 5 2016

By: Nicole Strout

St. John’s Law Student

American Bankruptcy Institute Law Review Staff

In Peterson v. Katten Muchin Rosenman LLP. , the Seventh Circuit held that the allegations in a legal malpractice complaint by the trustee for Lancelot Investors Fund and other entities in bankruptcy (collectively “the Funds”), was plausible on its face.[1] In Peterson , the trustee filed suit against the Funds’ law firm for failing to detect the peril and curtail the risks pertaining to the Funds.[2] The Funds loaned money to and invested in vehicles owned by Thomas Petters, which, in turn, was supposed to finance Costco’s consumer-electronics inventory.[3] The Funds’ advances were to be secured by deposits made by Costco, not Peters, into a lockbox bank account.[4] However, Costco never deposited money into the account.[5] All the money came from a Petters entity.[6] In reality, Petters never had any dealings with Costco, and the whole set up was a Ponzi scheme.[7] Once the scheme collapsed, the Funds also collapsed.[8] Consequently, the Funds filed for relief under chapter 7 of the Bankruptcy Code.[9] The chapter 7 trustee for the Funds brought a cause of action against Katten, the law firm which acted as transactions counsel for the Funds, claiming that the law firm had a duty to inform its clients that the actual arrangement posed a risk because Petters was not actually running a real business.[10] In granting the law firm’s motion to dismiss, the district court held the Funds “knowingly took the risk and cannot blame the firm for failing to give business advice.”[11] After the trustee appealed the motion to dismiss, the court of appeals reversed the district court decision, holding the firm was liable not for failing to provide business advice but for failing to inform its clients of “the different legal forms that are available to carry out the business and how risks differ with different legal forms.”[12] Clients do not have to take the advice of their attorneys, but attorneys need to advise clients.[13]

January 5 2016

By: Maurice W. Sayeh

St. John’s Law Student

American Bankruptcy Institute Law Review Staff

In In re Dobbs , a Mississippi bankruptcy court held that it had the authority, to sanction and to permanently disbar an attorney from practicing in its district.[1] A debtor and his wife filed a joint chapter 13 bankruptcy petition in 2013 and hired an attorney (“First Attorney”) to represent them.[2] Following dismissal of the original 2013 case, the First Attorney filed a subsequent 2015 bankruptcy petition on behalf of the debtor but not the debtor’s wife[3]. The 2015 bankruptcy petition was accompanied with a Certificate of Credit Counseling (“First Certificate”) falsely reflecting that the debtor had attended a credit-counseling course on March 26, 2015,[4] as required by Section 109 of the United States Bankruptcy (“the Code”).[5] The 2015 bankruptcy petition listed the First Attorney as the debtor’s counsel and purportedly included the debtor’s electronic signature.[6] Following the court’s approval of the First Attorney’s request to withdraw as counsel, the debtor hired a new attorney (“Second Attorney”).[7] The Second Attorney filed another Certificate of Credit Counseling (“Second Certificate”) on behalf of the debtor, which indicated the debtor actually completed credit counseling on April 8, 2015.[8]

January 5 2016

By: Matthew Repetto

St. John’s Law Student

American Bankruptcy Institute Law Review Staff

In Franklin v. Puerto Rico , the First Circuit held that Puerto Rico’s effort to restructure the debt of its public utilities through the enactment of its own municipal bankruptcy law, the Puerto Rico Public Corporation Debt Enforcement and Recovery Act (“Recovery Act”), was preempted by Section 903(1) of the United States Bankruptcy Code.[1] Amid the most serious fiscal crisis in its history, Puerto Rico’s public utilities are currently at risk of becoming insolvent.[2] Unlike states, Puerto Rico is a territory and “may not authorize its municipalities . . . to seek federal bankruptcy relief under chapter 9 of the U.S. Bankruptcy Code.”[3] Thus, the Recovery Act was Puerto Rico’s attempt to “fill the gap” by providing relief on its own.[4] The Recovery Act was enacted to mirror chapter 9 and chapter 11 of the United States Bankruptcy Code.[5] Those in favor of the Recovery Act argued that preemption would leave Puerto Rico with no means of relief.[6] However, the First Circuit disagreed, and noted that Puerto Rico could, as it had already, seek relief directly from Congress.[7]

January 5 2016

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