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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.

January 25 2017

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.

January 13 2017

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.

January 13 2017

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]

January 12 2017

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.

January 12 2017

By: Courtney Sokol

St. John’s Law Student

American Bankruptcy Institute Law Review Staff

The United States District Court for the Northern District of Alabama concluded that the Bankruptcy Court had jurisdiction and entered a valid termination of retirement benefits pursuant to Section 1114 of the Bankruptcy Code. Moreover, according to the District Court, it lacked jurisdiction to consider the Appellants' challenge to the Bankruptcy Court's ruling under Section 1113. This ruling allows Walter Energy to terminate collective bargaining agreements with retired coal miners, thus allowing the “necessary” reorganization of the debtor. This suit was an effort by the United Mine Workers of America to preserve the retirement plans of covered employees of Walter Energy, a company seeking a protection under Chapter 11 of the Bankruptcy Code. If retiree benefits were not halted the proposed purchaser, Warrior Met Coal, LLC, would not acquire Walter Energy.

January 10 2017

By: Louis Calabro

St. John’s Law Student

American Bankruptcy Institute Law Review Staff

In In re Gunboat International, Ltd., the United States Bankruptcy Court for the Eastern District of North Carolina held that section 363(m) of the Bankruptcy Code, which protects a good faith purchaser from a reversal of an order approving a bankruptcy sale, does not apply to collateral attacks on a sale order under Rule 60(b) of the Federal Rules of Civil Procedure (“FRCP”). In that case, the debtor (“Gunboat”) agreed to sell its interest in the G4—a sailboat model contracted between the debtor and two other parties—to a third party, Mr. Chen. In the months leading up to the sale, The Holland Companies (“Holland”), which held certain exclusive manufacturing and usage rights over the G4, had been negotiating a settlement agreement to buy Gunboat’s interest in the G4. Holland was unaware that Gunboat was attempting to sell Gunboat’s G4 interest to another party and believed that Gunboat should have given Holland an opportunity to make a more attractive offer considering its ongoing attempts to settle. On May 10, 2016, the court entered a final order approving the sale of Gunboat’s assets to Mr. Chen. Thereafter, Holland filed a motion to reconsider with the court under FRCP Rule 60(b); in response, Gunboat opposed.

January 9 2017

By: Sumaya Restagno

St. John’s Law Student

American Bankruptcy Institute Law Review Staff

Under the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (“BAPCPA”), Congress imposed strict limitations on payments made specifically to retain key employees of companies in chapter 11 bankruptcy and narrowed the circumstances under which these payments could be made through the addition of section 503(c). Under section 503(c)(1), chapter 11 debtors may pay a bonus to certain employees under a Key Employee Retention Plan (“KERP”) upon approval of the court and after a showing that certain required factors have been satisfied. Under section 503(c)(3), chapter 11 debtors may pay a bonus under a Key Employee Incentive Plan (“KEIP”) to certain employees after they attain certain measurable, difficult-to-reach milestones. Payments under a KEIP are described as being outside the ordinary course of business and are statutorily prohibited unless justified by the facts and circumstances of the case. Many courts have held this standard to be synonymous with the “business judgment” standard that governed KERPS prior to the BAPCPA which is not as strict as the test under 503(c)(1).

January 9 2017

By: Dylan Coyne

St. John’s Law Student

American Bankruptcy Institute Law Review Staff

In In re Alpha Natural Resources, Inc., a Virginia bankruptcy court allowed a coal mining company to reject its collective bargaining agreements thereby permitting the company to sell its revenue generating assets. Alpha Natural Resources, Inc. (“Alpha”) is the largest coal producing company by volume in the United States and began to sustain severe financial difficulties after the coal industry began to decline in 2011. In an effort to stay afloat, Alpha began to cut costs by freezing wages, laying off employees and reducing benefits for non-union employees in 2013. In its Chapter 11 case, Alpha explored selling its core revenue generating assets to its prepetition lenders (the “Bidders”), who served as a stalking horse for the sale. The Bidders, however, were not willing to assume Alpha’s liabilities to Alpha’s unions as required under the collective bargaining agreement or under the Coal Industry Retiree Health Benefit Act of 1992 (the “Coal Act”). Accordingly, Alpha filed a motion for an order rejecting the collective bargaining agreements. Alpha’s unions objected to the request, arguing that §§ 1113 and 1114 of the Bankruptcy Code do not apply to Alpha since Alpha is liquidating and those sections address reorganization, and further that Alpha had not satisfied the elements of those same statutes.

January 7 2017

By: Lauren Gross

St. John’s Law Student

American Bankruptcy Institute Law Review Staff

In Music Mix Mobile, LLC v. Newman (In re Stage Presence, Inc.), the United States Bankruptcy Court for the Southern District of New York held that the plaintiffs’ alter ego allegations were sufficient to withstand a defendant’s motion to dismiss. Plaintiffs, Music Mix Mobile, LLC, et al., alleged they were not paid by Stage Presence Incorporated (a chapter 11 debtor), One for Each Island Ltd. (“OFEI”) and three individual producers of the benefit program: Newman, Weiner, and Marquette for audio, editing, teleprompter, music mixing and other services they provided in connection with the Childhelp program. Among other theories of contract liability against defendants, the plaintiffs asserted that OFEI, Newman, Weiner, and Marquette should jointly share in the contract liabilities of Stage Presence on “alter ego” grounds.

January 7 2017

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