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Federal Trademark Law Trumps A Licensee’s Right to Assume in Bankruptcy

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]

Lehman Stock was not an Excessively Risky Investment for ESOP Fiduciaries in 2008

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]