Almost 12 years after the commencement of the Lehman Brothers bankruptcy case, we now know the answer to one of that case’s most interesting questions—namely, whether so-called “flip clauses” are protected settlement payments or void as ipso facto bankruptcy provisions.

On August 11, 2020, the US Court of Appeals for the Second Circuit (Court) issued a decision in the closely followed case of Lehman Brothers Special Financing Inc. v. Bank of America N.A., 18-1079, which raised this question in the context of synthetic collateralized debt obligations (SCDOs).


Continue Reading Second Circuit: Lehman Brothers “Flip Clause” Payments Are Protected Settlement Payments and Not Void as Ipso Facto Bankruptcy Provisions

Supply chain finance products have a well-deserved reputation of being fairly low risk propositions.  The majority of facilities are uncommitted, exposures are typically short-term and many counterparties are highly rated and well capitalized.  However, even in this product segment, as the COVID-19 pandemic continues to spread and most developed economies face the real prospect of

On May 20, 2019, the Supreme Court decided Mission Product Holdings, Inc. v. Tempnology, LLC, No. 17-1657.  In an 8-1 decision, and in a majority opinion authored by Justice Kagan, the Court held that  the debtor-licensor’s rejection of a trademark license under Section 365 of the Bankruptcy Code “has the same effect as a breach outside bankruptcy” and, as such,  the debtor, through such a rejection, could not rescind the non-debtor’s licensee’s right to continue to use the trademarks; in short, the debtor-licensor’s rejection of the license “cannot revoke the license.”  Slip Op. at 16-17.   Tempnology, of course, has immediate ramifications for structured finance vehicles involving trademarks licenses.  While Section 365(n) of the Bankruptcy Code gives the non-debtor licensee the option to retain the benefits of a rejected lease of intellectual property in return for continued royalty payments and the waiver of setoff and other rights, the Bankruptcy Code does not include trademarks within its definition of intellectual property;  until today, there has been a circuit split as to whether non-debtor licensees of trademarks had a similar option or whether the debtor effectively could rescind the license through rejection.  In Tempnology, the Court clearly holds that a debtor licensor cannot revoke a trademark license through rejection.

Continue Reading Not so distant ripples in the pond: The Supreme Court’s Tempnology decision and equipment leasing