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By: Jessica E. Stukonis

St. John’s Law Student

American Bankruptcy Institute Law Review Staff 

An attorney who signed a proof of claim on his client’s behalf narrowly avoided disqualification in In re Duke Investments.[1] In Duke, the court refused to disqualify the attorney from representing his creditor-client in the chapter 11 case because the attorney was not a “necessary witness” despite his role in preparing, signing, and filing a creditor’s proof of claim.[2] The creditor’s attorney compiled the proof of claim based on information received from the creditor’s officers.[3]  The court denied the debtor’s motion to disqualify the creditor’s attorney because the debtor failed to demonstrate that the attorney was a necessary witness. The attorney was not a necessary witness because he lacked “exclusive knowledge or understanding of the [proof of claim]. . . . [and the attorney’s] testimony would [not] be the sole source of information pertaining to the [proof of claim]”.[4]  Moreover, even if the attorney was a “necessary witness,” he would not be disqualified because the debtor failed to demonstrate that his testimony would “substantially conflict” with Amergy’s testimony,[5] and Amergy consented to the attorney’s continued representation.[6]

 By: Heather Hili

St. John’s Law Student

American Bankruptcy Institute Law Review Staff

Recently, in In re XMH Corp.,[1] the Seventh Circuit added trademark licenses to the types of intellectual property that cannot be assigned in bankruptcy without the licensor’s permission.[2] In 2009, XMH Corporation (“XMH”) and some of its subsidiaries sought relief under chapter 11 of the Bankruptcy Code (“the Code”).[3] Blue, a debtor subsidiary of XMH, attempted to sell its assets to purchasers, Emerisque Brands and SKNL, including a trademark license agreement with Western Glove Works (“Western”).[4] The bankruptcy court refused to allow Blue to assign its trademark license agreement to the purchasers because Western would not consent to the assignment, and trademark law prohibits the non-consensual assignment of a trademark.[5]

By: Jonathan Abramovitz

St. John’s Law Student

American Bankruptcy Institute Law Review Staff

Recently, in In re Two Gales, Inc.,[1] the United States Bankruptcy Appellate Panel for the Sixth Circuit (the “Panel”) held that 11 U.S.C. § 726(b) is not intended to serve as a basis for denying a claim for attorney’s fees, but rather serves as a priority scheme for dealing with distributions on allowed claims.[2] The law firm of Cupps & Garrison, LLC (“C & G”) represented Two Gales, Inc. (the “Debtor”) as its bankruptcy counsel before the case was converted from chapter 11 to chapter 7.[3] The bankruptcy court ordered C & G to disgorge its $10,000 retainer because the Debtor was administratively insolvent and, under section 726(b), chapter 7 administrative expenses are entitled to priority in proceedings converted from chapter 11 to chapter 7 where the debtor is administratively insolvent.[4] The Panel reversed, holding that before ordering disgorgement of C & G’s retainer, the lower court should have determined whether C & G had a properly perfected lien on its prepetition retainer under state law.[5]

 By: Linda C. Attreed

St. John’s Law Student

American Bankruptcy Institute Law Review Staff

Adopting a narrow view of the section 362(b)(4)[1] “police and regulatory power” exception to the automatic stay, the Bankruptcy Court for the Western District of Texas, in In re Reyes,[2] held that Josie Jones (“Jones”) and her attorney Robert Wilson (“Wilson”) violated the automatic stay provision by reporting the debtors to the Texas Real Estate Commission (“the TREC”).[3]  The court determined that Jones and Wilson had intentionally prosecuted the TREC complaint “to punish the debtor for filing, and to exert pressure on the debtor in order to collect on the judgment.”[4]  The court noted that Jones and Wilson filed the TREC action against the debtors approximately two months after seeking to lift the stay, and held that this was sufficient to support a finding of civil contempt.[5]  

By: Gregory R. Bruno

St. John's Law Student

American Bankruptcy Institute Law Review Staff

In Gold v. Marquette (In re Leonard),[1] the United States Bankruptcy Court for the Eastern District of Michigan held that college tuition payments could be recovered as constructively fraudulent transfers because the debtors did not receive “reasonably equivalent value” for pre-petition payments made to Marquette University (“Marquette”) on their adult son’s behalf.  In 2008, the debtors paid Marquette $21,527 to cover the rest of their son’s tuition and related expenses.[2]  The chapter 7 trustee sought to avoid and recover these payments as fraudulent transfers.[3]  Marquette moved for summary judgment on the ground, inter alia, that the debtors received reasonably equivalent value for these payments because the debtors received two benefits from such payments: (1) peace of mind in knowing that their son was receiving a quality education, and (2) the expectation that their son would become financially independent from them because of such education.[4]