Blogs

Civil Contempt Against Debtor Not Stayed by Bankruptcy Petition

By: Colleen E. Spain

St. John’s Law Student

American Bankruptcy Institute Law Review Staff
 
 
Weighing in on a three-way circuit court split, the Sixth Circuit recognized a non-statutory exception to the automatic stay, in Dominic’s Restaurant of Dayton, Inc. v. Mantia, and allowed a civil contempt proceeding to continue against a debtor.[1] In 2007, the Mantia family closed their family-run restaurant, Dominic’s, but continued to market certain food products under the name “Dominic’s Foods of Dayton.”[2] Soon after the restaurant closed, Christie Mantia sold her interest in the original Dominic’s Restaurant and planned with Reece Powers and Harry Lee to open a restaurant, name it Dominic’s Restaurant, Inc., and use the old Dominic’s recipes.[3] The owners of the original Dominic’s Restaurant (“Plaintiffs”) brought trademark infringement and trademark dilution claims against Mantia, Powers, and Lee (“Defendants”).[4] The district court issued a TRO and then a preliminary injunction (the “Injunctions”) directing Defendants to cease using the Dominic’s name and graphics.[5] After Plaintiffs filed a series of contempt motions against Defendants based on Defendants’ violation of the Injunctions, the district court granted a default judgment and the contempt motion against Defendants.[6] Although Powers filed for personal bankruptcy in the midst of this, the district court declined to stay the judgments against him.[7]

Trademark Licensees Rights Survive Rejection of Executory Contract

By: Kathryn Swimm

St. John’s Law Student

American Bankruptcy Institute Law Review Staff
 
 
In a case of first impression, the Seventh Circuit in Sunbeam Products, Inc. v. Chicago American Manufacturing held that a trademark licensee is entitled to the contracted-for rights to that trademark even after a chapter 7 trustee rejects the trademark license as an executory contract.[1]  Lakewood Engineering & Manufacturing Co. (the “Licensor”) entered into a contract with Chicago American Manufacturing (the “Licensee”) giving the Licensee the right to sell fans bearing the Licensor’s trademark.[2]  It also provided that the Licensee could continue to use the trademark for the period of the contract even if the Licensor breached.[3]  Three months later, the Licensor was forced into an involuntary chapter 7 bankruptcy proceeding in which the trustee rejected the licensing agreement as an executory contract.[4]  When Sunbeam Products, Inc. (the “Purchaser”) acquired the Licensor’s assets, including the trademark, it demanded that the Licensee cease using the trademark.[5]  The Licensee refused, and the Purchaser sought an injunction to prevent the Licensee from producing and selling fans bearing the Licensor’s trademark.[6]  The bankruptcy court held for the Licensee on equitable grounds.[7]  On a direct appeal, the Seventh Circuit held for the Licensee, but did so on different grounds.[8]

Third Circuit Phases Out Old Standard For Determining When Claims Arise With Some Exceptions

By: Melanie Spergel

St. John’s Law Student

American Bankruptcy Institute Law Review Staff
 
 
In an interesting twist, the Third Circuit in Wright v. Owens Corning[1] held that the Court’s change in its interpretation of what constitutes a claim meant that the notice given to parties who held claims under the revised interpretation but not under the one applicable at the time of notice would deprive those claimants of due process; therefore their claims were not dischargeable.[2] The debtor, Owens Corning, manufactured the allegedly defective roofing shingles that were installed on the two plaintiffs’ homes.[3]  The debtor twice published notice in several local and national newspapers in an attempt to reach unknown holders of claims against the estate.[4] The debtor’s confirmed chapter 11 reorganization plan (“the Plan”) purported to extinguish all claims that arose prior to the confirmation date, including claims held by parties who only received publication notice.[5] Several years later, the plaintiffs discovered cracks in their roofing shingles, which one plaintiff had installed pre-petition and the other had installed post-petition but pre-confirmation.[6] The plaintiffs sued the reorganized debtor, and claimed that the Plan could not have discharged their claims because the plaintiffs were not claim holders at the time notice of Plan confirmation was published.[7] As such, the plaintiffs claimed that they had not received constitutionally adequate notice.[8]  The Third Circuit agreed that the plaintiffs were deprived of due process but recognized that the deprivation was a result of the Third Circuit’s change in standards for when a claim arises.[9]

Section 108 Relief Automatically Available to Foreign Representatives in Chapter 15 Cases

By: Andrew J. Zapata

St. John’s Law Student

American Bankruptcy Institute Law Review Staff

 

In a matter of first impression, the United States Bankruptcy Court for the Southern District of New York (the “Bankruptcy Court”) in In re Fairfield Sentry Ltd.[1] held that the tolling provisions of section 108 of the Bankruptcy Code (the “Code”) become automatically available to “Foreign Representatives”[2] under section 103(a) in chapter 15 cases.[3]  Fairfield Sentry Ltd. was a feeder fund that invested its assets with Bernard Madoff, and was placed into liquidation proceedings in the British Virgin Islands after Mr. Madoff’s fraudulent activities were uncovered.[4] The Bankruptcy Court recognized the British Virgin Islands proceedings as a foreign main proceeding on July 22, 2010, and held that the joint liquidators were the foreign representatives of the debtor.[5] The foreign representatives sought to have the section 108 tolling provision applied from July 22, 2010 in order to have at least an additional two years to investigate and commence actions.

Section 329 Bankruptcy Courts Have Exclusive Jurisdiction Over Attorneys Fees in Bankruptcy Proceedings


By: Samantha M. Tusa

St. John’s Law Student

American Bankruptcy Institute Law Review Staff

 

The Bankruptcy Court for the Eastern District of Michigan held, in In re Piccinini[1], that bankruptcy courts have exclusive jurisdiction over attorneys’ fees incurred in bankruptcy proceedings because of the “restrictive language” of section 329 of the Bankruptcy Code (the “Code”). [2]  The issue arose after the debtor terminated his original attorney who then filed a suit against the debtor in state court to collect his fees.[3]  The bankruptcy court stayed the state court collection action pending the bankruptcy court’s resolution of the fee dispute. [4]

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