Chapter 11 bankruptcy has historically been inaccessible to cannabis and cannabis adjacent businesses. But a Los Angeles bankruptcy court recently denied a motion to dismiss the case of a debtor in the business of wholesale manufacturing and packaging of cannabis products. The decision gives hope that bankruptcy could be a viable path for companies that seek to eliminate risk of future violations of the Controlled Substances Act.

Unsecured creditors may petition the court to initiate a bankruptcy case against a debtor under chapter 7 or 11 through the filing of an involuntary bankruptcy petition.

In this report, Perkins Coie offers an analysis of the past year’s most noteworthy regulatory developments and litigation outcomes in the mortgage lending and servicing industry.

Though it appeared the smoke might blow in a more favorable direction, the hopes of marijuana-adjacent businesses using the Bankruptcy Code were snuffed out once again by the Bankruptcy Court in Colorado.

The latest COVID-19 relief legislation provided some additional aid and clarity for a select group of debtors and left many other questions unanswered.

Retail, restaurant, entertainment, and other industries have been devastated by COVID-19 and the resulting governmental orders either precluding or materially limiting operations. In that regard, retail bankruptcy filings have become common occurrences and bankruptcy courts a favored venue for businesses seeking a proverbial “breathing spell.”

While debates in Congress continue regarding extending or providing additional COVID-19 relief legislation, the Small Business Administration (SBA), U.S. Department of Treasury (Treasury), and lenders under the Paycheck Protection Program (PPP) are preparing for the next wave of activity for PPP loans.

The economic damage attendant to COVID-19 has already resulted in a substantial increase in bankruptcies.

Retailers hit by the economic downturn are considering bankruptcy protections.

This update amends our prior publication on June 5, 2020, and contains new information based on additional guidance provided by the Federal Reserve on June 8, 2020.

This update amends our prior publication on May 4, 2020, titled Federal Reserve Announces Changes to Main Street Lending Program and contains new information based on additional guidance provided by the Federal Reserve on May 27, 2020.

On this episode, we are joined by Perkins Coie Partner David Neff, among the most experienced hotel bankruptcy and restructuring lawyers in the country. We discuss the ways COVID-19 causes financial distress to businesses, the parties involved, and why it may take some time before companies become distressed. We also will address new rules that streamline the bankruptcy process for smaller businesses to help them survive, and insurance coverage issues arising in these distressed situations.

Indemnification obligations are used to allocate risk between a buyer and a seller in nearly all mergers and acquisitions transactions.

Debtors facing regulatory fines and penalties want to shed them in bankruptcy and emerge without paying them.

A junior lienholder that receives a payment to release its “out of the money” lien may not have to repay it if their borrower files for bankruptcy shortly thereafter as decided recently in Lauter v. Wells Fargo Bank (In re Gas-Mart USA, Inc.).

An important improvement aimed at ensuring a faster, less expensive, and more tailored approach to reorganizations involving smaller businesses was embedded in the recent $2 trillion recovery package known as the Coronavirus Aid, Relief and Economic Security Act (CARES Act).

Recognizing the high volume of COVID-19 content being published, Perkins Coie developed a one-stop, integrated resource page that addresses key legal and business considerations for companies across essential business areas, from insurance coverage and labor and employment, to privacy and security, corporate governance, tax, construction, supply chain, and more.

Elderly individuals are among the most vulnerable members of our society. Those who also require acute medical care are even more vulnerable.

Reward Science and Technology Industry Group Co., Ltd. (Reward) joins a growing list of Chinese companies which have chosen to file a case in U.S. Bankruptcy Court in connection with their restructuring efforts under the People’s Republic of China’s Enterprise Bankruptcy Law (EBL).

This update was also published in Harvard Law School Bankruptcy Roundtable, titled "Why Chinese Companies File Chapter 15 Cases in US Bankruptcy Courts," on 02.25.2020.

The London Interbank Offered Rate (LIBOR) is expected to be discontinued on December 31, 2021. The end of LIBOR will likely cause widespread disruption in debt capital markets, particularly with respect to debt securities using LIBOR-based interest rates and with no means to substitute an alternate rate. 

In an August 2019 case argued by Perkins Coie attorneys, the U.S. Bankruptcy Court for the District of Delaware ruled that the automatic stay under section 362(a) of the Bankruptcy Code bars the Centers for Medicare & Medicaid Services (CMS) from withholding Medicare payments to a healthcare provider in bankruptcy notwithstanding a pre-petition suspension due to credible allegations of fraud.

This update outlines the current trends in China’s bankruptcy filings based on surveys and data of bankruptcy court cases released by the Supreme People’s Court (SPC) in the past five years.

The U.S. Supreme Court’s recent decision in Mission Product Holdings, Inc. v. Tempnology, LLC, 139 S. Ct. 1652 (2019) that a trademark licensor’s rejection of a trademark license does not terminate the licensee’s right to use the licensed mark is likely to have a major impact on trademark licensors and licensees.

In a victory for secured creditors and the law firms representing them, the U.S. Supreme Court resolved a circuit split and unanimously held in Obduskey v. McCarthy & Holthus LLP that law firms enforcing non-judicial foreclosure remedies are not subject to the full provisions of the Fair Debt Collection Practices Act (FDCPA), but have only limited liability under Section 1692f(6) as businesses “the principal purpose of which is enforcement of security interests.”

Companies whose primary business purpose is to collect debts—whether or not they actually participate in the debt collection activities—suffered a setback recently.

A recent decision clarified the concept of impairment when a plan of reorganization provides for creditors to receive 100% of their allowed claims.

Funding expensive obligations for retiree health benefits, often an impediment to running a financially stable business or even successfully navigating a Chapter 11 bankruptcy process, may no longer present such a problem—at least in the U.S. Court of Appeals for the Eleventh Circuit.

The U.S. Court of Appeals for the Fifth Circuit recently reminded bankruptcy trustees, creditors and asset buyers that patent licenses have a limited “shelf life” in Chapter 7 liquidations.

A secured lender facing the prospect of having the essential provisions of its loan re-written in a Chapter 11 plan of reorganization will look for options to prevent or minimize the likelihood of such a revision.

The U.S. Court of Appeals for the Ninth Circuit recently reminded litigants that a plaintiff’s bankruptcy can benefit a defendant by providing an alternative settlement path.

Employers and other defendants recently suffered a setback in the Eleventh Circuit, which reversed itself and will now require a “totality of the circumstances analysis” to determine whether a debtor/plaintiff should be precluded from pursuing litigation that was not disclosed in their bankruptcy documents in a timely manner. 

It would be an understatement to say that 2017 has been a difficult year for the retail sector.

This update has been republished in Retail Merchandiser on 10.24.2017, "Holiday Cheer For A Challenging Retail Environment."

Many creditors that provide goods to a debtor before a bankruptcy case begins believe that their recovery will be mere cents on the dollar.

In the case of Pacifica L 51, LLC v. New Investments, Inc. (In re New Investments, Inc.), 9th Cir. November 4, 2016, the U.S. Court of Appeals for the Ninth Circuit held that a Chapter 11 debtor could not avoid paying default interest to an over-secured creditor by retroactively curing the default under a plan of reorganization.

Since the beginning of 2015, at least 77 companies in the oil and gas industry have sought bankruptcy relief in the United States.

Republished in Law360, "Section 363 Is No Magic Bullet For Environmental Liability," on 08.03.2016.

The U.S. Supreme Court ruled that the exception to bankruptcy discharge for debts incurred through actual fraud applies to debts imposed for fraudulent transfer liability.

The Affordable Care Act (ACA) has significantly changed the legal landscape for employer-sponsored health plans by adding reporting obligations, benefit mandates, fees, notices and potential penalties for plans that do not meet specific coverage and cost requirements.

A record number of retail and mall closures and bankruptcies should put retailers and their vendors on alert as the holiday season begins.

In the ramp up to this holiday season, the record number of retail and mall closures and bankruptcies should put retailers and their vendors on alert. Several retail icons have sought or considered bankruptcy protection.

Republished in Law360 on 06.25.2015.

The Supreme Court of Washington has upheld a lender’s right to pursue a deficiency judgment against a guarantor following a nonjudicial foreclosure of collateral under Washington’s Deed of Trust Act.

In 2011, the Supreme Court decided Stern v. Marshall, 564 U.S. ___, 131 S. Ct. 2594 (2011), which gave voice to the Court’s grave concerns about the constitutional limits of bankruptcy court jurisdiction and raised several questions that have confounded courts and lawyers for three years.

Bitcoin exchange Mt. Gox recently filed a civil rehabilitation proceeding under Japanese law, and subsequently filed a companion case in Dallas, Texas, under Chapter 15 of the U.S. Bankruptcy Code. The U.S. Bankruptcy Court issued an initial stay (injunction) to protect Mt. Gox and its U.S. assets from actions by creditors and set a hearing for April 1 and 2 to consider whether Mt. Gox would receive the full protections allowed to foreign companies by Chapter 15. If the U.S. court allows the Chapter 15 case to be maintained, certain provisions of the U.S. Bankruptcy Code will apply to parties in interest. This article discusses what the implications of these cases are for Mt. Gox's creditors.

In a self-described “unexpected” ruling for the defendants in the consolidated LIBOR proceedings, Judge Naomi Reice Buchwald has dismissed the private plaintiffs’ antitrust and Racketeer Influenced and Corrupt Organizations Act (RICO) claims and significantly narrowed the scope of the Commodity and Exchange Act (CEA) claim.

The Illinois Supreme Court has issued new court rules that become effective on May 1, 2013, modifying the evidentiary requirements for obtaining foreclosure judgments, among other things.  The rules are the result of the work of a special committee appointed by the court to study, address and unify the procedures used throughout the state in mortgage foreclosure proceedings.

The U.S. Court of Appeals for the Fifth Circuit recently issued two decisions that affect a borrower’s ability to confirm a bankruptcy plan, Western Real Estate Equities, L.L.C. v. Village at Camp Bowie I, L.P. (In re Village at Camp Bowie I, L.P.) and Wells Fargo Bank National Association v. Texas Grand Prairie Hotel Realty, L.L.C. (In re Texas Grand Prairie Hotel Realty, L.LC.).

A recent appellate decision requires strict adherence to disclosure requirements before third-party releases contained in a Chapter 11 plan may be approved.

In the wake of the recent admissions by Barclays Bank PLC that its traders sought to manipulate the London Interbank Offered Rate ("LIBOR"), corporations and other investors are only now beginning to appreciate the magnitude of the scandal and to consider how it might impact their own investments.

In a much-watched case coming out of Florida, on May 15, 2012, the U.S. Court of Appeals for the Eleventh Circuit reinstated a bankruptcy court judgment (which had been reversed by the district court) avoiding liens on assets of debtor-subsidiaries and providing for the lender-beneficiaries' disgorgement of $421 million that had been paid to the lenders.  As a result of the decision, lenders who make loans to troubled borrowers and accept payoffs of loans from troubled borrowers may bear an increased burden in investigating the sources of funds that are used for the payoff and expected to be used for future loan repayments.

Author of the chapter "Developments With Bankruptcies, Restructurings, Workouts, and Distressed Asset Sales."

The ability to credit bid is a valuable right for secured lenders.  With a credit bid, a secured lender may participate in an auction of assets by bidding up to the amount of its secured claim merely by giving credit against the secured claim – that is, the lender need not come up with any additional cash in order to compete in the sale. 

Author of the chapter "The New Landscape in Chapter 11 Cases: Lots of Liquidations, More Undersecured Creditors, and Less Time for Everyone."

While the downturn in the economy has adversely affected the sellers of directors’ and officers’ liability insurance – much as it has companies in all sectors of the economy – investing in D&O insurance is still a wise course of action.  This Update offers nine suggestions for ensuring that a company’s directors and officers are adequately protected in this environment against potential liabilities that D&O insurance normally would pay.

In addition to running businesses and fulfilling their ordinary fiduciary duties, in recent years, officers and directors of financially troubled companies have had to worry about potential "deepening insolvency" claims.

The Delaware Supreme Court recently issued a long-awaited decision on whether a cause of action asserting deepening insolvency exists under Delaware law.

Perkins Coie Partners Sara Chenetz and Joydeep Dasmunshi and Gordian Group President and Head of Restructuring Peter Kaufman discussed ways funds can address challenges and enhance the value of portfolio companies as well as capitalize on investment opportunities in this market.

CLE Presentation, Firmwide
A presentation for bankruptcy and non-bankruptcy litigators, as well as transactional lawyers, on evaluating and navigating the contours of fraudulent transfer and preference claims.

Perkins Coie proudly announced that Partner Sara L. Chenetz was a featured panelist during the plenary session at the 2018 Bankruptcy Battleground West Conference in Los Angeles on March 6, 2018.