Survey of Bankruptcy Law

By: Davor Rukavina, Joseph J. Wielebinski

Oct 18, 2009

SMU Law Review 

I. INTRODUCTION

An increasing amount of activity involving bankruptcy and related commercial law matters occurred during the Survey period.  Perhaps the most important development was the ruling by the United States Supreme Court in the Florida Department of Revenue v. Piccadilly Cafeterias matter, discussed in Section III.A. infra, which announced the correct application to the stamp tax exemption contained in section 1146(a) of the Bankruptcy Code (the Code). The Fifth Circuit and Texas bankruptcy and district courts issued a wide variety of bankruptcy decisions. Many of those decisions, however, were fact-specific or did not otherwise represent a significant development in bankruptcy law. The authors have attempted to assemble a wide variety of cases whose legal holdings will impact bankruptcy practice and which will therefore have significance beyond the particular opinion. Based on their practice and experience, the authors believe that the cases presented should be relevant to the bankruptcy practitioner and worth remembering.  Many of these cases are interesting even apart from their legal implications.  With the challenging economy and the record number of bankruptcy filings in 2009, the authors anticipate that over the next year there will be substantially more decisions having even broader impact and wider scope.

II. ADMINISTRATIVE CLAIM/EXECUTORY CONTRACTS

A. MEREDITH CORPORATION V. HOME INTERIORS & GIFTS, INC.
(IN RE HOME INTERIORS & GIFTS, INC.)

In In re Home Interiors, the debtor rejected an executory contract for intellectual property rights but continued to use the rejected marks and associated rights after the rejection.1 The court faced the issue of whether the creditor was entitled to an administrative claim even though all conditions necessary for the debtor’s use of the marks were completed pre-petition, meaning that there was no post-petition inducement.2 The court ultimately found: (1) that the creditor was entitled to an administrative claim because of the debtor’s post-petition use of the marks, and (2) an over-emphasis on post-petition inducement was misplaced in the trademark licensing scenario.3 The court also concluded that the measure of the administrative claim would be the contract rate, as the debtor failed to provide sufficient evidence that the contract rate was not the fair market value rate.4

The debtor sold home décor products through a network of design consultants who hosted in-home parties.5 The parties executed a pre-petition, long-term executory license agreement that permitted use of the creditor’s trademarks in connection with the debtor’s products in exchange for royalties payable to the creditor. The debtor rejected the contract approximately six weeks after the petition date. The creditor thereafter sought the allowance of an administrative expense claim for the debtor’s post-petition usage and sale of products bearing the creditor’s marks. The creditor never sought relief from the automatic stay to terminate the license agreement. The creditor sought an administrative claim for two periods: (1) the post-petition, but pre-rejection period, and (2) the post-petition, post-rejection period (prior to the next quarterly catalog).6 The issue before the court was whether the claim in question was simply a contract rejection claim, or if a post-petition component entitled the creditor to an administrative claim.7


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