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| vol 22, num 1 | march 2024 |
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| Co-Chairs’ Corner: Highlights of 2023 |
| As we near the end of 2023, we are pleased to step back and highlight the work performed by the Young and New Members Committee over the past year. We have loved working with our committee leaders and are truly grateful for their time and commitment to ABI.
Quarterly Newsletters
In 2023, the committee published newsletters in January and October featuring five articles. Our January 2023 newsletter included two articles on cryptocurrency. One of the articles discussed intrinsic value as the proper valuation method of cryptocurrency assets held in the custody of cryptocurrency exchanges, as well as factors to consider when calculating the intrinsic value of custodially held cryptocurrency assets, and risk-mitigation approaches to preserve asset value. Another article drew comparisons between the crashes of major cryptocurrency exchanges in 2022 and the collapse of the savings and loan industry in the 1980s. Our October 2023 newsletter featured an article on the application of the time-computation provisions of FRBP 9006, an article discussing important considerations when conducting international intellectual property valuation, and an article on the
illusions and economic realities that plague the world of digital finance.
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| Landlord and Tenant Clashes in Subchapter V: Unexpired Lease Obligations Affecting Eligibility to Elect Subchapter V Treatment |
| Since its inception, subchapter V of chapter 11 has been lauded for the benefits it offers to smaller chapter 11 debtors — providing a streamlined path through chapter 11 without many of the costs associated with “traditional” chapter 11 cases. But before a debtor can elect subchapter V treatment and take advantage of these benefits, the debtor must have less than $7.5 million in total noncontingent, liquidated debts (both secured and unsecured).
For debtors who are tenants under unexpired leases, understanding what does — and doesn’t — count toward this $7.5 million threshold has become the subject of disagreement between landlords and tenants, and courts are falling on both sides of the issue.
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| Imputation of Fraudulent Intent to Legal Entities: Can One Bad Apple Spoil the Barrel? |
| How do you show that a legal entity acted with intent to defraud its creditors for purposes of an avoidance action asserted under Bankruptcy Code § 548(a)(1)(A)? After all, legal entities themselves cannot form an intent; they can only act through their officers, directors or agents. In an action to avoid a fraudulent transfer, courts determine the transferring legal entity’s intent by imputing the intent of its agents to the legal entity.
Recently, Judge Craig T. Goldblatt examined whether it would be appropriate to impute the fraudulent intent of one officer, the bad apple, to an entity where the entire board, the barrel, authorized a tender offer and all other officers acted innocently in casting their votes. Ultimately, the court held that the fraudulent intent of the chief executive officer (CEO) would be imputed to the legal entity notwithstanding the innocence of the majority of board members who voted to approve the transaction.
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| A Summary of Intellectual Property Infringement and Bankruptcy |
| The Bankruptcy Code, in its current form, anticipates the inclusion of intellectual property (IP) within the property of an estate. Not only is IP defined in the Bankruptcy Code, it is also explicitly considered in terms of executory contracts. While “executory contract” is not specifically defined in the Code, the U.S. Supreme Court has previously stated that the term was intended to mean “a contract ‘on which performance is due to some extent on both sides.’”
Generally, IP agreements are executory contracts, with the exception of trademarks. Section 365 provides functions in which the licensee has several options if the contract with the debtor-licensor is rejected in the course of the bankruptcy proceedings. Section 365(n) was enacted based on previous court decisions that had “interpret[ed] that Section 365 [had] imposed a burden on American technological development that was never intended.” The Code explicitly considers IP issues in the executory contracts capacity, but by the time a bankruptcy petition is filed, there may be outstanding liability from IP infringement.
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