Blogs

 By: Heather Hili

St. John’s Law Student

American Bankruptcy Institute Law Review Staff

Recently, in In re XMH Corp.,[1] the Seventh Circuit added trademark licenses to the types of intellectual property that cannot be assigned in bankruptcy without the licensor’s permission.[2] In 2009, XMH Corporation (“XMH”) and some of its subsidiaries sought relief under chapter 11 of the Bankruptcy Code (“the Code”).[3] Blue, a debtor subsidiary of XMH, attempted to sell its assets to purchasers, Emerisque Brands and SKNL, including a trademark license agreement with Western Glove Works (“Western”).[4] The bankruptcy court refused to allow Blue to assign its trademark license agreement to the purchasers because Western would not consent to the assignment, and trademark law prohibits the non-consensual assignment of a trademark.[5]

By: Jonathan Abramovitz

St. John’s Law Student

American Bankruptcy Institute Law Review Staff

Recently, in In re Two Gales, Inc.,[1] the United States Bankruptcy Appellate Panel for the Sixth Circuit (the “Panel”) held that 11 U.S.C. § 726(b) is not intended to serve as a basis for denying a claim for attorney’s fees, but rather serves as a priority scheme for dealing with distributions on allowed claims.[2] The law firm of Cupps & Garrison, LLC (“C & G”) represented Two Gales, Inc. (the “Debtor”) as its bankruptcy counsel before the case was converted from chapter 11 to chapter 7.[3] The bankruptcy court ordered C & G to disgorge its $10,000 retainer because the Debtor was administratively insolvent and, under section 726(b), chapter 7 administrative expenses are entitled to priority in proceedings converted from chapter 11 to chapter 7 where the debtor is administratively insolvent.[4] The Panel reversed, holding that before ordering disgorgement of C & G’s retainer, the lower court should have determined whether C & G had a properly perfected lien on its prepetition retainer under state law.[5]

 By: Linda C. Attreed

St. John’s Law Student

American Bankruptcy Institute Law Review Staff

Adopting a narrow view of the section 362(b)(4)[1] “police and regulatory power” exception to the automatic stay, the Bankruptcy Court for the Western District of Texas, in In re Reyes,[2] held that Josie Jones (“Jones”) and her attorney Robert Wilson (“Wilson”) violated the automatic stay provision by reporting the debtors to the Texas Real Estate Commission (“the TREC”).[3]  The court determined that Jones and Wilson had intentionally prosecuted the TREC complaint “to punish the debtor for filing, and to exert pressure on the debtor in order to collect on the judgment.”[4]  The court noted that Jones and Wilson filed the TREC action against the debtors approximately two months after seeking to lift the stay, and held that this was sufficient to support a finding of civil contempt.[5]  

By: Gregory R. Bruno

St. John's Law Student

American Bankruptcy Institute Law Review Staff

In Gold v. Marquette (In re Leonard),[1] the United States Bankruptcy Court for the Eastern District of Michigan held that college tuition payments could be recovered as constructively fraudulent transfers because the debtors did not receive “reasonably equivalent value” for pre-petition payments made to Marquette University (“Marquette”) on their adult son’s behalf.  In 2008, the debtors paid Marquette $21,527 to cover the rest of their son’s tuition and related expenses.[2]  The chapter 7 trustee sought to avoid and recover these payments as fraudulent transfers.[3]  Marquette moved for summary judgment on the ground, inter alia, that the debtors received reasonably equivalent value for these payments because the debtors received two benefits from such payments: (1) peace of mind in knowing that their son was receiving a quality education, and (2) the expectation that their son would become financially independent from them because of such education.[4]

By: Eric J. Dostal

St. John's Law Student

American  Bankruptcy Institute Law Review Staff

Recently, in J.J. Re–Bar Corp. v. United States (In re J.J. Re–Bar Corp.)[1] the Ninth Circuit held that the Anti–Injunction Act[2] does not bar the post-confirmation collection of a trust fund recovery penalty (“TFRP”)[3] from the responsible officers of a debtor corporation by the IRS.[4] The Ninth Circuit, relying on Davis v. United States[5] determined that because TFRP liability arises from officers’ willful conduct, such penalties are the obligations of the officers themselves and not the debtor corporation.[6] This case arose after the IRS assessed a TFRP against the Skokans, the corporate officers responsible for the company’s failure to remit certain “trust fund taxes–the tax withholdings from employee paychecks–to the government.”[7] The IRS chose to assess the TFRP against the responsible officers of the debtor after the debtor had confirmed its plan and paid its outstanding payroll taxes.[8] Seeking to halt the IRS’ collection efforts, J.J. Re–Bar “filed a motion to enforce . . . the Plan and to hold the IRS in contempt.”[9] Both the Bankruptcy Court and the Bankruptcy Appellate Panel ruled for the IRS.[10]