Law.com Subscribers SAVE 30%
Call 855-808-4530 or email [email protected] to receive your discount on a new subscription.
What a Post-COVID-19 World: Debtors' Extraordinary Responses to COVID-19
It has been said by many, in many different ways and in many different settings, that "desperate times call for desperate measures." Practically since its enactment more than 40 years ago, that idiom has been the foundation of various business and legal strategies employed by those clinging to the Bankruptcy Code while pressing an argument in court for some form of relief. Indeed, the Bankruptcy Code is, by all accounts, a safe harbor for businesses and people in search of a "fresh start," a venue to liquidate in an orderly fashion or just the opportunity to demonstrate that it is worth saving through a balance sheet and/or operational restructuring. Current times are desperate indeed, as the impact of the pandemic rages on and, in its path leaves many businesses and industries demolished or, at best, severely impaired. Once again, the Bankruptcy Code has been called upon to provide relief to those in dire need, relief that could certainly be called extraordinary in many respects.
|Abstention and Inherent Power: The Suspension of Proceedings
In relevant part, section 305(a)(1) of the Bankruptcy Code provides that "[t]he court, after notice and a hearing, may … suspend all proceedings in a case under … [T]itle [11], at any time if — the interests of creditors and the debtor would be better served by such dismissal or suspension." Traditionally, courts have interpreted section 305(a) to apply to a suspension of all proceedings, rather than to certain proceedings. See, e.g., In re Rookery Bay, No. 95-04781 (Bankr. M.D. Fla. Nov. 17, 1995) (granting the debtor's motion for abstention, holding that it was "appropriate to suspend any further proceeding in the involuntary case" until the debtor's pending appeal of the creditor's judgment was resolved); In re Milestone Educ. Inst., No. 93-20747 (Bankr. D. Mass. May 25, 1994) (finding that a creditor's "motion for relief from stay for cause and concomitant suspension of all activity" would, among other things, permit the state appellate court to "address novel and unsettled issues of receivership law").
Modell's Sporting Goods, Inc. and its affiliated debtors and debtors in possession filed for protection under Chapter 11 on March 11, 2020, the same day that the World Health Organization declared the novel coronavirus outbreak a global pandemic. Less than two weeks following the filing, the debtors emergently sought to avail themselves of the protections afforded by section 305(a). Citing to the "unprecedented, exponential spread of Coronavirus disease … along with the resulting, state-imposed limitations and prohibitions on non-essential retail operations," the debtors requested, pursuant to section 305(a), the imposition of an "Operational Suspension," which, among other things, sought the entry of an order deferring the payment of all expenses other than those essential expenses set forth on a "Modified Budget" for a period of up to sixty days, subject to extension. See, In re Modell's Sporting Goods, Inc., No. 20-14179 (Bankr. D.N.J. Mar. 23, 2020). The modified budget did not include certain post-petition rent obligations, notwithstanding the requirement of section 365(d)(3) of the Bankruptcy Code, which, in relevant part, provides that "[t]he trustee shall timely perform all of the obligations of the debtor, except those specified in section 365(b)(2), arising from and after the order for relief under any unexpired lease of nonresidential real property, until such lease is assumed or rejected, notwithstanding section 503(b)(1) of … title [11]." That is — breaking with tradition — the contours of suspension were fashioned to meet the specific needs of the case.
This premium content is locked for Entertainment Law & Finance subscribers only
ENJOY UNLIMITED ACCESS TO THE SINGLE SOURCE OF OBJECTIVE LEGAL ANALYSIS, PRACTICAL INSIGHTS, AND NEWS IN ENTERTAINMENT LAW.
- Stay current on the latest information, rulings, regulations, and trends
- Includes practical, must-have information on copyrights, royalties, AI, and more
- Tap into expert guidance from top entertainment lawyers and experts
Already a have an account? Sign In Now Log In Now
For enterprise-wide or corporate acess, please contact Customer Service at [email protected] or 877-256-2473
How Secure Is the AI System Your Law Firm Is Using?
In a profession where confidentiality is paramount, failing to address AI security concerns could have disastrous consequences. It is vital that law firms and those in related industries ask the right questions about AI security to protect their clients and their reputation.
COVID-19 and Lease Negotiations: Early Termination Provisions
During the COVID-19 pandemic, some tenants were able to negotiate termination agreements with their landlords. But even though a landlord may agree to terminate a lease to regain control of a defaulting tenant's space without costly and lengthy litigation, typically a defaulting tenant that otherwise has no contractual right to terminate its lease will be in a much weaker bargaining position with respect to the conditions for termination.
Pleading Importation: ITC Decisions Highlight Need for Adequate Evidentiary Support
The International Trade Commission is empowered to block the importation into the United States of products that infringe U.S. intellectual property rights, In the past, the ITC generally instituted investigations without questioning the importation allegations in the complaint, however in several recent cases, the ITC declined to institute an investigation as to certain proposed respondents due to inadequate pleading of importation.
The Power of Your Inner Circle: Turning Friends and Social Contacts Into Business Allies
Practical strategies to explore doing business with friends and social contacts in a way that respects relationships and maximizes opportunities.
Authentic Communications Today Increase Success for Value-Driven Clients
As the relationship between in-house and outside counsel continues to evolve, lawyers must continue to foster a client-first mindset, offer business-focused solutions, and embrace technology that helps deliver work faster and more efficiently.