In a meticulous, 32-page opinion that reads more like a finance treatise than a stay-relief ruling, Chief Judge G. Michael Halfenger (Bankr. E.D. Wis.) delivered perhaps the most thorough judicial analysis to date of whether Till v. SCS Credit Corp., 541 U.S. 465 (2004), requires bankruptcy courts to use the national prime rate as the starting point for a chapter 11 cramdown interest rate.

Judge Halfenger’s answer: No—at least not when market participants in the relevant lending sector price loans off Treasury note rates and SOFR rather than prime. The opinion also provides significant guidance on the absolute priority rule, credit bidding limits, break-up fees, and the evidentiary burden for risk adjustments under Till’s formula approach.

The Wisconsin & Milwaukee Hotel: A COVID Casualty Fighting to Survive: Wisconsin & Milwaukee Hotel LLC owns and operates an upscale Marriott hotel in Milwaukee. It is the debtor’s sole significant asset. On track to refinance in March 2020, the debtor was derailed by the COVID-19 pandemic and ultimately filed for Chapter 11 in 2024 after failing to meet a required repayment.

The debtor’s secured lenders (Computershare Trust Company, N.A., and Wisconsin & Milwaukee Hotel Funding LLC) grew frustrated with repeated plan amendments and moved for relief from stay, arguing the plan violated the absolute priority rule, failed feasibility, and proposed an unreasonably low cramdown rate. This post focuses on the cramdown interest rate dispute.

Judge Halfenger was sympathetic but declined to lift the stay: “While the end may be near,” he wrote in early January 2026, it is not quite the final curtain.” Since that ruling, the pre-confirmation hearing docket has been very active.

Cramdown Interest Rates and the Treasury Note Alternative: At the heart of the opinion is Judge Halfenger’s analysis of the proper base rate for Till’s formula approach under § 1129(b)(2)(A)(i)(II). With no competitive market for this financing, the court applied Till’s formula: (1) select a base/reference rate; (2) adjust upward for risk.

The debtor proposed the five-year Treasury note rate (3.8% as of August 2025) plus a 2.7-point risk premium (total 6.5%). Lenders argued for the prime rate (7.5%) plus 3.8 points (at least 11.39%).

The Till Plurality and Marks Analysis. Judge Halfenger thoroughly analyzed Till’s fractured Supreme Court opinion in which the plurality endorsed a formula starting with the national prime rate, Justice Thomas favored a risk-free rate, and the dissenters preferred the contract rate. Judge Halfenger noted that under Marks v. United States, 430 U.S. 188, 193 (1977), “[w]hen a fragmented Court decides a case and no single rationale explaining the result enjoys the assent of five Justices, ‘the holding of the Court may be viewed as that position taken by those Members who concurred in the judgments on the narrowest grounds. . . .’ “).

Under Marks, Judge Halfenger noted, the controlling holding is the narrowest grounds shared by those concurring in the judgment, and so Till does not require that the prime rate serve as the base in all contexts. Indeed, the plurality itself noted that chapter 13 and chapter 11 differ materially, and its directive to “follow essentially the same approach” in chapter 11 left room for adaptation.

The Eighth Circuit’s Topp Decision: Judge Halfenger cited to Farm Credit Services of America v. Topp (In re Topp), 75 F.4th 959 (8th Cir. 2023), which he said is “the only appellate opinion to squarely address whether Till requires starting from the prime rate.” In Topp, the Eighth Circuit was emphatic:

We see no legal significance to whether a court starts with a risk-free rate and adds full risk or starts with a some-risk rate and adds some more. If the court properly follows the formula approach, the ultimate discount rate, not the starting point, is what matters.

Simply put, Topp says, “Till did not make the treasury rate obsolete as a matter of law.”

The Market Evidence: Three witnesses— two for the debtor and one for the lender—testified that hotel financing market participants do not use the prime rate as a reference. The debtor’s expert, Deborah Friedland, testified that hospitality lenders use Treasury note rates and SOFR, with luxury hotel loans typically priced 250–425 basis points above the five-year Treasury note. The lender’s analyst, Cynthia Nelson, conceded that prime is not customary for long-term or secured real estate loans and that she had “no factual reason” for preferring prime over Treasury, other than Till’s suggestion. She called the base rate “ultimately a red herring.”

The Court’s Ruling: Judge Halfenger concluded:

The evidence thus persuasively supports use of the five-year Treasury note rate as the reference rate…. The Treasury note rate, like the prime rate, is an easily determined published rate, but it has the advantage in the current context of reflecting the market’s prediction of the inflation risk over the next five years— at the end of which the plan provides for an adjustment to the cramdown rate based on the then-current five-year Treasury note rate—and does not reflect lender compensation components that the Till plurality reasoned are inapplicable in the cramdown context.

Judge Halfenger then addressed risk adjustment, the burden as to which is on the secured creditor to justify. Based on Friedland’s testimony, the Court held, a 120-basis-point upward adjustment was warranted for the default risk faced even by the best hotel borrowers. The Court then agreed that an additional 200-basis-point adjustment was justified because of the debtor’s chapter 11 status, the plan’s 18-year duration, and the 100% loan-to-value ratio. The Court, however, rejected further upward adjustments, finding the lender’s arguments—such as equating creditor risk with equity owner risk—unpersuasive and inconsistent.

Practice Note: Where market evidence shows that Treasury note rates or SOFR are standard reference rates (such as in the commercial real estate and hospitality industries), bankruptcy courts may adopt the Treasury note rate as the base for Till’s formula approach. The Eighth Circuit’s Topp decision provides appellate support, and Chief Judge Halfenger’s detailed opinion offers a practical roadmap for developing the necessary evidentiary record.

In re Wisconsin & Milwaukee Hotel LLC, Case No. 24-21743-gmh (Bankr. E.D. Wis. Jan. 5, 2026) 2026 WL 31366

Plan Confirmation and Appeal: In the Del Monte Foods chapter 11 bankruptcy case, the Ad Hoc Group of Minority Secured Lenders sought an emergency stay pending appeal of Bankruptcy Judge Kaplan’s order confirming the Debtors’ First Amended Joint Chapter 11 Plan of Reorganization. Following an extensive evidentiary hearing, a 30-page bench ruling, and a 66-page confirmation order, Judge Kaplan denied the motion to stay consummation of the plan. The lenders immediately appealed and requested an emergency stay from the district court, which the Debtors opposed.

In its emergency motion (and subsequent reply), the Ad Hoc Group argued that, absent a stay, the Plan would be substantially consummated and their appeal rendered equitably moot, causing irreparable harm.

The Ad Hoc Group’s Emergency Motion Is Denied by the District Court:

District Judge Kirsch denied the stay, holding—consistent with Third Circuit precedent—that the risk of equitable mootness alone does not constitute irreparable injury. As the Court noted, if it did, “a stay would be issued in every case of this nature pending appeal.” (Citing In re W.R. Grace, 475 B.R. 34, 207 (D. Del. 2012)).

Judge Kirsch further found the alleged harm was fundamentally economic, noting that the Ad Hoc Group conceded that distributions could be clawed back if it prevailed on appeal, indicating an adequate remedy at law.

The Court was also “skeptical” of the Ad Hoc Group’s likelihood of success on the merits, observing that the group claimed the law was unsettled while simultaneously arguing that the Plan violated basic settled bankruptcy principles. The Court agreed with Judge Kaplan that the governing law is “well developed” and that mere disagreement with its application does not render it unsettled.

Finally, the Court held that the remaining two Revel factors (see In re Revel AC, Inc., 802 F.3d 558, 568 (3d Cir. 2015)), weighed against a stay because (i) hundreds of creditors awaited distributions under a widely supported plan, and (ii) the public interest favored the orderly administration and conclusion of the chapter 11 cases.

Practice Note: In the Third Circuit, the argument that “equitable mootness equals irreparable harm” carries no weight when seeking a stay of a confirmation order pending appeal. Accordingly, to obtain a stay pending appeal of a confirmation order in that Circuit (and others), parties are advised to identify concrete, non-economic, and non-compensable harms beyond the risk that an appeal will become moot.

Ad Hoc Group of Minority Secured Lenders v. Del Monte Foods Corporation et al., (In re Del Monte Foods Corporation II Inc.), No. 26-6259 (D.N.J. June 11, 2026) 2026 WL 1705928

Joann Inc., the iconic national fabric and hobby retailer, has become the backdrop for a significant post-Whittaker Clark & Daniels decision on the boundary between estate property and individual creditor claims under Section 541 of the Bankruptcy Code. In a recent opinion, Delaware Bankruptcy Judge Craig Goldblatt denied the Wind-Down Debtors’ attempt to classify vendor fraud claims as estate property, holding that because each vendor’s claim required individualized proof of reliance on specific officer misstatements, the claims were direct and personal to the vendors, not derivative of harm to the estate.

Background to the Dispute: Joann emerged from a prepackaged chapter 11 in April 2024 with its operations largely intact. Less than nine months later, it filed again and ultimately sold all its assets to a liquidator. Between these filings, several vendors extended credit to Joann based on alleged misrepresentations about the company’s financial health by the company’s officers. When the second filing wiped out their receivables, these vendors filed suit in the Ohio state court (Summit County), naming various former officers as defendants and asserting claims for common law fraud and negligent misrepresentation.

The Wind-Down Debtors (i.e., the second bankruptcy’s post-confirmation entities) sought a declaratory judgment in the bankruptcy court that the vendors’ fraud claims belonged to the estate and had been transferred to the liquidating buyer. For their part, the officers removed the Ohio action to federal court, which transferred it to Judge Goldblatt.

Whittaker Clark & Daniels and the Reliance Firewall: Naturally, Judge Goldblatt’s opinion centers on the Third Circuit’s recent decision in In re Whittaker Clark & Daniels Inc., 176 F.4th 241 (3d Cir. 2026), which expanded the types of claims considered to be estate property. In Whittaker, the Third Circuit held that “product line” successor liability claims were property of the debtor’s estate under Section 541(a)(1), a holding that Judge Goldblatt said “may have expanded the universe of claims that become property of the estate from prior law.” However, Judge Goldblatt noted, Whittaker does draw a key distinction:

“[C]laims are personal to creditors when the theory of liability is based on a particularized injury directly traceable to the conduct of the defendant,” while they are “property of the debtor’s bankruptcy estate if the theory of liability is instead based on an injury to the debtor corporation that resulted in secondary harm to all creditors.” (Quoting Whittaker, 176 F.4d at 269).

Applying this test to the vendors’ fraud claims, Judge Goldblatt found that under Ohio law, fraud and negligent misrepresentation require individualized proof of reliance. Therefore, he held, these claims are personal, never became estate property, and so were never transferred to the liquidating buyer.

Rejected Arguments: The Wind-Down Debtors offered two counterarguments, both of which were rejected by Judge Goldblatt:

First, citing language in Whittaker itself, they argued that because the vendors’ complaint relied on the Debtor’s press releases and vendor presentations, the underlying facts were “generally available to any creditor” and any creditor could claim reliance. Judge Goldblatt rejected this argument, stating:

[E]ven if it were true that any creditor could allege that it individually relied on the former officers’ representations (and in light of the requirements of Rule 11, it is far from clear that it is), to prevail on a claim for fraud or negligent misrepresentation, the creditor will need to prove that reliance to the satisfaction of the finder of fact.

Second, they argued that the vendors’ required showing of individual reliance was no different from the individual injury requirement that the Third Circuit in In re Emoral, Inc., 740 F.3d 875 (3d Cir. 2014), found insufficient to make claims “personal” to creditors. Judge Goldblatt, however, distinguished Emoral as involving a generalized alter ego theory that applied equally to every creditor whereas here, by contrast, “any creditor who cannot make an individual showing of reliance is unable to establish the former officers’ liability at all.” In other words, without individual reliance, there is no claim at all.

    The Scholarly Debate Lurking in Footnote 47: Be sure to read Footnote 47 of the opinion, where Judge Goldblatt—citing Koch Refining (7th Cir.), Ahcom (9th Cir.), and Icarus Holding (11th Cir.)—notes that Whittaker “at least arguably breaks with decisions of several other courts of appeals” when it “ma[de] clear that ‘a claim may constitute property of the estate notwithstanding whether the debtor corporation was authorized to assert it outside of bankruptcy.’ ”

    Judge Goldblatt further cited to the Third Circuit’s opinion in In re Wilton Armetale, Inc., 968 F.3d 273 (3d Cir. 2020), which “did indeed include language suggesting that a fraudulent conveyance claim was property of the estate under § 541″ (contrary, he notes, to the view of leading scholars like Douglas Baird and Thomas Jackson, who argue that fraudulent conveyance claims are controlled by the trustee under Section 544 (the strong-arm powers), not Section 541”).

    [F]ollow[ing] this language from Wilton Armetale to its logical conclusion, [therefore] means that claims that were held only by creditors outside of bankruptcy can now become property of the estate under § 541.

    However, since this “expansion” made no difference to the outcome here, Judge Goldblatt only addressed it “in the margins” (i.e., in footnote 47).

    Practice Note: Fraud-based claims requiring individualized proof of reliance are likely safe from estate capture, even in jurisdictions following the broader interpretation of Section 541 in Whittaker. But the debate among the Circuits as to whether Whittaker’s expansion of Section 541 to include claims held only by creditors outside of bankruptcy has just begun.

    JoAnn Inc. v. Advantus Corp (In re JoAnn Inc.), Adv. Nos. 25-51022 (CTG) and 25-52463 (CTG) (Bankr. D. Del. June 11, 2026) 2026 WL 1699191

    Aberdeen Developers borrowed $41 million from MUFG Union Bank in 2018, secured by a mixed-use building in Chicago worth roughly $73 million. The loan eventually landed with LNR Partners as special servicer. When one of the building’s largest tenants filed for bankruptcy in January 2021, the servicer determined that a “Cash Sweep Event Period” arose under the Cash Management Agreement (CMA) and redirected all rental income and other building revenue into the Cash Management Account.

    Key Contractual Provisions: As is common in CMBS loan agreements (though the defined terms differ), the CMA allowed the servicer to deposit “Excess Cash Flow” into a “Sweep Account,” which would stand “as additional security” for the loan. The CMA also dictated how LNR should apply the funds in the Cash Management Account during the Cash Sweep Event Period, specifically requiring it to disburse the funds in a certain order of priority by paying taxes, insurance, fees, and expenses before eventually holding the remainder in the Cash Management Account as extra security or giving it back to the borrower.

    The operative language the Court focused on were Sections 3.4(i) and 3.4(j) of the CMA, which provided:

    Section 3.4 Application of Cash Management Account Funds. Provided no Event of Default shall have occurred and is continuing, commencing on the first Business Day of each Collection Period following a Cash Sweep Trigger Event, Lender (or Servicer on behalf of Lender) shall apply all funds on deposit in the Cash Management Account in the following amounts and order of priority, or as otherwise directed:

    (i) Ninth, all amounts then remaining after payments of items (a) though (h) (the “Excess Cash Flow”), shall be deposited into a separate subaccount (the “Sweep Account”) to be held by Lender as additional security for the Loan; and

    (ii) Tenth, all Excess Cash Flow shall be disbursed to, or at the written direction of, Borrower.

    Significantly, this “Tenth” order of priority is slightly different from comparable CMBS loan agreement provisions that preface the borrower’s right to receipt of such Excess Cash Flows during the period following a “Cash Sweep Trigger Event” with a provisio conditioning the borrower’s right to such excess cash upon the cure of that “Cash Sweep Trigger Event” so that the “Cash Trap Period” is no longer in effect.

    As you can see, Section 3.4(j) lacked that condition. Comparable provisos, however, were contained in order sections of the borrower’s loan agreement. For example, Section 6.3(b) contemplated that “all proceeds” transferred to the Cash Management Account will be “held” in the Cash Management Account, which includes the Sweep Account, as “additional Collateral” “during the continuance of a Cash Sweep Trigger Event.”

    The Dispute: LNR argued that Section 3.4(i) authorized retention of the Excess Cash Flow in the Sweep Account indefinitely until a “Cash Sweep Cure” occurred. The Borrower argued that Section 3.4(j) required return of those excess funds monthly. By the time of the litigation, the Sweep Account had grown to $2.3 million, was increasing by $150,000 per month, and was projected to hit an estimated $11.7 million by the time the loan matured in 2029.

    The Seventh Circuit’s Ruling on LNR’s Motion to Dismiss: In reversing the district court’s dismissal of the borrower’s complaint, the Seventh Circuit held that under Illinois’ contract ambiguity doctrine, when two provisions in the same section of a contract point in opposite directions (here, Section 3.4(i) authorized the servicer to hold funds as additional security and Section 3.4(j) directed that the same funds be disbursed monthly to the borrower), with neither provision specifying how long the funds may be held, you have textbook ambiguity.

    In so holding, the Court found plausible the borrower’s argument at the motion to dismiss stage, tied to a principle of law in Illinois that courts should construe contracts to avoid absurd results, that the parties “never intended for the Sweep Account to grow to over $11 million across the lifetime of the loan without speaking more clearly.” The Court found equally plausible LNR’s argument that the excess cash can be held as additional security for the loan until the “Cash Sweep Trigger Event was cured.”

    With both sides’ explanation of a perceived contract ambiguity in the same section of the loan agreement deemed plausible, the Court held that the question was one of fact, not law, and therefore the complaint should not have been dismissed.

    Practice Note: For those drafting CMBS loan agreements, be explicit about when and for how long excess cash can be retained after a cash sweep trigger event. Ambiguity between adjacent priority of payment provisions, even if seemingly reconciled in other sections of the loan agreement can lead to expensive and avoidable litigation. If the lender wants the servicer to hold swept funds indefinitely until a cure event, say so explicitly in the priority of payments section of the loan agreement.

    Aberdeen Developers, LLC v. Wells Fargo Bank, N.A.*, No. 25-1667 (7th Cir. May 28, 2026) 2026 WL 1487434.

    Secured creditor Agrifund filed a § 523 dischargeability complaint against Chapter 12 farm debtors. In response, the debtors brought various third-party cross-claims, which prompted Agrifund to assert its own cross-claims against those third parties for conversion, defalcation, larceny, embezzlement, and vicarious liability.

    One third-party cross-claimant moved to dismiss Agrifund’s cross-claims, arguing that they lacked sufficient connection to the bankruptcy estate to support “related to” jurisdiction. The cross-claimant emphasized that Agrifund’s claim comprised only 11% of the secured debt and just 7% of total claims against the debtors, in effect urging the Court to impose a quantitative threshold on the Pacor “conceivable effect” test.

    The Court rejected this argument, holding that if Agrifund recovers from the third-party claimant, its claim against the estate would decrease, thereby altering the distribution percentages for other creditors, which would have a “conceivable” effect on administration of the debtors’ estate. The Court distinguished this case from those involving more attenuated connections to the estate (such as equity interests in non-debtor affiliates or divested marital property), noting that Agrifund’s cross-claims (i) arose from the same auction transaction that was at issue in the dischargeability dispute and (ii) involved property subject to Agrifund’s security interest.

    Practice Note: Here, Judge Somers (Bankr. D. Kan.) did not require a pro rata impact analysis before exercising “related to” jurisdiction over cross-claims against non-debtors. Rather, he held, because the cross-claims arose from the same transaction as the core dispute and would reduce an allowed proof of claim in the case, the Court had “related to” jurisdiction over claims among non-debtor third parties.

    Agrifund, LLC v. Patmon (In re Patmon), No. 25-7018 (Bankr. D. Kan. June 2, 2026) 2026 WL 1596832

    In this long‑running Chapter 15 case, a foreign representative sought bank records from JPMorgan tied to a debtor’s principal now in the U.S. The principal had already produced those records—selectively redacted—and invoked the Fifth Amendment to justify both the redactions and to block JPMorgan from producing unredacted copies.

    The court rejected both arguments.

    The act‑of‑production privilege protects only the testimonial aspects of producing documents—admissions of existence, possession, and authenticity. It does not allow a party to produce documents with strategic redactions. As such, once the principal voluntarily produced the statements, those testimonial elements were conceded and nothing remained to protect.

    Further, the Court held, the privilege cannot stop a third‑party bank from complying with a subpoena because the privilege is personal to the individual and does not extend to the bank/custodian.

    Practice Note: The Fifth Amendment is a shield, not a scalpel. One can refuse to produce documents entirely, but one can’t produce them in redacted form or block a third party bank or custodian from producing the same records.

    In re B.C.I. Finances Pty Ltd. (In Liquidation), et al., No. 17-11266 (SAB) (Bankr. S.D.N.Y. May 26, 2026) 2026 WL 1480366

    This case highlights key pitfalls in bankruptcy appellate practice, particularly when seeking direct certification of an appeal to the federal circuit court.

    Here, Genesis Healthcare and its affiliates filed for Chapter 11 on July 9, 2025. On October 7, 2025, the debtors moved for approval of mandatory claims procedures to resolve unliquidated personal injury and wrongful death claims through streamlined pre-litigation settlement and mediation procedures. The bankruptcy court granted the motion on November 6, 2025.

    Certain personal injury and wrongful death claimants, including Estate of Alma Brown, filed a notice of appeal on November 20, 2025 and then moved in the district court for direct appeal certification to the Fifth Circuit on December 22, 2025. The debtors opposed and moved to dismiss the appeal.

    District Judge Ada Brown dismissed the appeal for two reasons. First, under Bankruptcy Rule 8006(b), the appeal remained “pending” in the bankruptcy court for 30 days after the notice of appeal became effective. Because the 30th day (December 20, 2025) fell on a Saturday, the deadline extended to Monday, December 22—the same day appellants filed their certification request in the district court. Since the matter was still pending in the bankruptcy court, the district court lacked authority to consider certification. As the court noted:

    Although application of Rule 8006 to the pending appeal may result in a surprising outcome (by requiring Appellants to have filed their certification request before the Bankruptcy Court), it is nevertheless the requirement of Rule 8006’s unambiguous language, and consistent with the legislative intent behind the revision’s enactment. See Fed. R. Bankr. P. 8006, advisory committee notes (noting that the “provision will in appropriate cases give the bankruptcy judge, who will be familiar with the matter being appealed, an opportunity to decide whether certification for direct review is appropriate”). The Court, therefore, finds that Appellants filed their certification request before the wrong court—an infirmity in Appellants’ request that warrants, without more, the denial of the pending Motion for Order Certifying Direct Appeal.

    Second, because the Claims Procedures Order was interlocutory (i.e., it still could be modified by the bankruptcy court and no confirmation order had been entered), the appellants were required to file a motion for leave to appeal under Rule 8004(a)(2) with their notice of appeal. The Court, however, noted that Rule 8004(d) allows it to treat a notice of appeal as a motion for leave to appeal, and so applied the 28 U.S.C. Section 1292(b) standard (requiring a controlling question of law, substantial ground for difference of opinion, and material advancement of litigation) in finding that this was not an exceptional case warranting interlocutory review, thus depriving the Court of jurisdiction to hear the appeal of the interlocutory order.

    Practice Note:

    The 30-day window in Rule 8006(b) is not mere procedural garnish. Filing a certification request in the district court even one day too early—while the matter is still “pending” in the bankruptcy court—is fatal. Further, if appealing an interlocutory bankruptcy order, always file a motion for leave to appeal with the notice of appeal. Omitting this step risks dismissal, and asking the district court to treat your notice as a motion for leave is rarely successful under the demanding Section 1292(b) standard.

    Estate of Alma Brown, et al. v. 1 Glen Hill Road Operations, LLC, et al. (In re Genesis Healthcare, Inc., et al.), No. 3:25-cv-3225-E, (N.D. Tex. May 28, 2026) 2026 WL 1593168

    In music, you can always ask for another take. In bankruptcy, failing to list an asset may mean you’ve lost the right to take it at all. The Eleventh Circuit’s latest decision involving 2 Live Crew and the ownership rights to its music held by Lil’ Joe Records brings that distinction into sharp relief.

    Background: The 11th Circuit’s 2007 Decision: Back in 2007, I wrote this post about a case in which the 11th Circuit Court of Appeals told JT Money, in no uncertain terms, that—to quote the rap group Souls of Mischief—”You got f***ed in the industry!” Though the lyrics were directed in part to the entertainment industry, that case proved that the bankruptcy industry is no great friend of struggling rappers either. There, the 11th Circuit held that the copyrights JT Money had transferred to Luke Records could be sold to Lil’ Joe Records in a bankruptcy 363 sale even though his royalty agreement was rejected as an executory contract. Rejection of that contract, the Court held, didn’t revest ownership in JT; rather, the copyrights remained with the bankruptcy estate of Luke Records and could be sold free and clear of JT Money’s interests.

    The Current Dispute: Effect of Bankruptcy on “Inalienable” Copyright Termination Rights: Nearly two decades later, the Eleventh Circuit revisited the Lil’ Joe Records/2 Live Crew copyright saga. This time, the issue was whether the inalienable statutory termination rights to copyright interests of a 2 Live Crew member (Mark Ross aka Brother Marquis) in five of the group’s albums recorded between 1986 and 1989 became property of his chapter 7 bankruptcy estate.

    By way of background, 2 Live Crew recorded five albums under an agreement with Luke Records, which was owned by one of 2 Live Crew’s members, Luther Campbell (aka “Uncle Luke”). Both Luke Records and Uncle Luke went bankrupt and—as noted above—Luke Records sold all recording copyrights that it had received under the agreement to Lil’ Joe Records in a free and clear bankruptcy 363 sale.

    In 2000, Brother Marquis filed for chapter 7, but he (and his lawyer) failed to list on his bankruptcy disclosure schedule his future termination interests under Section 203 of the Copyright Act, which gives artists a “termination interest” after a certain amount of time to reclaim the copyright in their works despite having granted it to a third party.

    In 2020, Uncle Luke, Brother Marquis, and the heirs of Wong Won (aka Fresh Kid Ice) served a termination notice on Lil’ Joe, seeking to reclaim the copyrights. Lil’ Joe sued, arguing that Brother Marquis’ termination interests were still locked in his now dormant bankruptcy estate (the chapter 7 closed on Feb. 28, 2007). The district court disagreed, holding that such interests are too personal and inalienable to become property of the filer’s chapter 7 bankruptcy estate.

    The 11th Cir. Ruling “at the Intersection of Copyright and Bankruptcy“: Stating that the appeal “presents a question of first impression at the intersection of copyright and bankruptcy,” the Court reversed and held that under Bankruptcy Code section 541(a)(1) and (c)(1)(A) “all legal or equitable interests of the debtor in property” become property of the estate upon the filing of the petition “notwithstanding any provision in applicable nonbankruptcy law” that restricts transfer, including Section 203(a)(5) of the Copyright Act. And because Brother Marquis never disclosed those termination interests in his chapter 7 bankruptcy case, these rights were never administered or abandoned. As such, the Court held, under Bankruptcy Code section 554(c) and (d), these interests remained estate property indefinitely and so Brother Marquis could not exercise his termination rights since they were still property of his bankruptcy estate.

    And alas, once again, a rap star “got f***ed in the [bankruptcy] industry“

    The Door Remains Open for the 2 Live Crew Majority, Though Ever So Slightly: The Court closed with some questions left open by its decision, stating:

    Although we conclude that Ross’s termination interests were property of the bankruptcy estate at the time he purported to exercise them, our decision is limited. We do not address how termination interests should be treated in bankruptcy. And we do not decide today what Ross’s heirs need to do to exercise those interests in the light of his bankruptcy.

    What Happens Next?: I expect Lil’ Joe Records will try to purchase those termination interests from the bankruptcy trustee in a 363 sale and work a deal with the trustee of the Luke Records estate to purchase those termination interests free and clear in a bankruptcy 363 sale. The heirs of Brother Marquis (Ross died on June 3, 2024), Uncle Luke, and the heirs of Fresh Kid Ice could attempt to outbid Lil’ Joe Records at auction, but if that fails, well…you know the rest.

    Practical Lesson: If you’re an artist (or advising one), remember: In bankruptcy, you may well lose what you don’t disclose—even decades later.

    Lil’ Joe Records, Inc. v. Ross, No. 24-13978 (11th Cir. June 2, 2026) 2026 WL 1549151

    In October 2005, LexBlog went live with my Bankruptcy Litigation Blog, then the internet’s first bankruptcy-related blog and only the 16th blog that LexBlog had taken live.

    The blog had a strong run, earning more than 1.5 million substantive hits, including from courts in every federal district as well as the United States Supreme Court. Each year, new friendships developed, many of which have stood the test of time.

    Nine years after my last post, I’ve decided to restart the blog. The impulse is the same one I described when I launched the blog in 2005: a determination to stay current with the law as it develops, inspired by my mentor, Judge Diane Wood, while avoiding the all-too-common temptation to engage in pointless and incessant barking.

    I won’t pretend to know how often I’ll post or how long this experiment will last, but I hope each post proves worthy of a few minutes of your time.

    Here’s an aggregation of 28 of my Twitter posts from the beginning of July 2018, with links to cases, articles, and news briefs that restructuring professionals should find of interest. Thanks for reading!

    LIFE, BUSINESS, AND THE WORLD GENERALLY:

    BK RELATED CASES:

    • 363 Sales – Successor Liability – Statutory Tenants’ Rights (BK-SD-NY):  Debtor’s attempt to cut off Statutory Tenants’ rights under NY Loft Law via a §363(f) sale appears an issue of 1st impression, but cases involving rent-controlled apartments are analogous, and attempts to trump state housing laws via 363 sales have consistently failed, as they do here. In re Bridge Associates of Soho Inc
    • Accountant Malpractice – Statute of Limitations (5thCir.):  The 5th Circuit finds itself rather shocked at “inexplicabl[e]” actions of Firefighters’ Retirement System’s counsel in prosecuting action malpractice against Grant Thornton that resulted in dismissal on limitations grounds, saying: “At the absolute latest, Plaintiffs were aware of these potential claims on January 17, 2014, when they filed this lawsuit in state court. Once they were aware of the claim, they had one year [under Louisiana law] to file a written request for a review panel. Inexplicably, they waited more than three more years before filing their first request for panel review. . . . Because filing a lawsuit in state court does not suspend the peremptive period for accounting malpractice claims, Plaintiffs’ claims . . . were filed outside the peremptive period and are therefore extinguished.” Firefighters Retirement System v Grant Thornton LLP
    • Automatic Stay – Attorney’s Fees (BK-D-NJ):  Fee application for damages on account of a stay violation is found “excessive” and to meet the 3rd Circuit’s parameters and the lodestar analysis. “A fee application seeking three times the amount in controversy doesn’t bear any resemblance to proportionality” & were not reasonable for prosecution of the sanctions motion. In re Manley Toys Limited
    • Debtor’s Counsel – Fee Applications – Obligations to CRO (BK-D-CT):  Debtor’s law firm owed no fiduciary duty to the Debtor’s retained business manager to file a fee application on the business manager’s account. The CRO “could have filed its own fee app but failed to do so [and it] simply fails to allege that [Debtor’s counsel] was in control to the exclusion” of the CRO. In re Jackson
    • D&O Litigation – Indemnities (BK-SD-TX):  “Director’s costs of litigation, which accrued when the UGHS affiliates lost their corporate charters, may only be indemnified if an implied request to defend the affiliates existed which was sufficient to trigger indemnification. . . . The issue of whether a request for services may be implied across affiliates has yet to be directly addressed under Texas law. . . . The broad wording of these indemnification provisions and the lack of prerequisite acts as conditions to indemnification support the idea that Senior Living intended to allow indemnification even absent an explicit request for defense. “Court finds that the statutory requirements for “permissive indemnity” have been satisfied so the director is entitled to indemnification. In re UGHS Senior Living Inc
    • Jurisdiction – Prepetition Accounts Receivable (BK-D-DE):  Court has subject-matter jurisdiction over actions to recover disputed prepetition accounts receivable. Such actions by a Chapter 7 trustee, at least before discharge or close of a debtor’s liquidation, conceivably impacts a debtor’s estate, so non-core ‘related-to’ jurisdiction exists. In re PennySaver USA Publishing LLC
    • Proof of Claim – Affixing Client Signature Without Client Review (BK-D-ME):   Court denies motion for sanctions by the US Trustee against Resurgent for its practice of affixing an employee’s signature to a proof of claim and then filing the proof of claim, all without prior review of the proof of claim by that employee. In re Cushman
    • Retention Applications – Restructuring Managers (BK-D-DE):  A sigh of relief reverberates among restructuring managers after the Court holds that, as for Alvarez & Marsal and its designated interim CEO, Section 327(a) doesn’t apply, so they can be retained under Sec 363(b) to provide Debtors with an interim CEO & other personnel. In re Nine West Holdings Inc
    • Secured Claims – Default Interest – Attorney’s Fees Defending Claims Objection (BK-CD-CA):  Default interest due secured creditor is an unenforceable penalty that can’t be collected per CA Civ Code Sec.1671(b). Further, the Debtors is the prevailing party on claims objections, so not only are attorney’s fees in defending against the objections to claims are denied, but fees incurred in objecting are allowed. In re Altadena Lincoln Crossing LLC
    • Secured Claims – Judgment Liens  – Attorney’s Fees (8th Cir.): We disagree with any notion that the judgment liens are somehow not part of Starion’s secured claim. The judgment liens came about because of the Workout Agreement and confessions of judgment wherein Starion agreed to forebear on various other secured loan defaults…. Even though judgment liens under ND Law aren’t entitled to attorney’s fees, ‘these judgment liens did not simply come out of left field but were always part of the secured claim and arose from a workout, presumably to avoid what now seems was inevitable—bankruptcy.’ ” In re McCormick
    • Settlement Agreements – Breach – BK-D-NM:  Court examines busted settlements and whether the damages for breach are based on the original claim or the settled amount. In re WM Distribution Inc

    BK RELATED NEWS & ARTICLES:

    • 363 Sales – Lease Rejection:  The following article, “Spanish Peaks’ Reinvigoration of the Precision Industries Debate: Rejection in the Context of a § 363 Sale Free and Clear of Commercial Leasehold Interests” won 3d place in the 10th Annual ABI Law Student Writing Competition.” Spanish Peaks: What Happens When Leases Collide with a Bankruptcy Sale?, by Nick Binder, Michigan State Univ. Law School, via ABI
    • Structured Dismissals – Exculpation – Estate Professionals:  “Judge Kevin Carey [BK-D-DE] ruled that a dismissal order in a bankruptcy case could provide for exculpation of the estate fiduciaries and their respective professionals. The ruling is a welcome result for all estate fiduciaries whose [] efforts during a complex bankruptcy case fail to culminate in an approved plan of reorganization.” Court Approves Exculpation in Structured Dismissal, by Raff Ferraioli, Andrew Kissner and Jennifer Marines of Morrison Foerster, via JD Supra
    • Veil-Piercing – Married Couples:  “Pennsylvania’s veil-piercing law recognizes a husband and wife as ‘one person,’ absent death or divorce. Therefore, to hold only one shareholder liable and not the other is ‘legally untenable’ under Pennsylvania law.” Biz Row Veil-Piercing Ignored Pa. Law, 3rd Circ. Says, by Jeannie O’Sullivan via Law360

    LAW RELATED NEWS & ARTICLES:

    • Beats Electronics – Breach of Contract Trial:  Very interesting trial to follow. Law360 did a nice job on this, noting “[t]he thing the Beats parties and Lamar didn’t agree on, and still don’t, is who deserves how much credit for creating the popular line of headphones.” Susman Godfrey’s Brian Melton told Law360: “We decided to … make it clear we weren’t challenging what they had accomplished in their musical careers (and that we were even fans ourselves) but stress that this case was about the contract and whether Beats fulfilled its obligations.” Steve Morrissey of Susman Godfrey partner added: “The contract itself was both poorly drafted and the result of people who didn’t agree on some basic things deciding to punt key ambiguities like this down the road for a jury to decide if necessary.” Susman Says Beating Beats Was All About 3rd-Party Status, by RJ Vogt, via Law360
    • SEC Enforcement Power – Kokesh Impact:  “The rationale behind the Kokesh ruling is filtering down to lower courts as they consider whether other forms of relief that the SEC commonly pursues might also be subject to a five-year statute of limitations, such as injunctions and industry bars.” Kokesh Spread Could Pose Risk To SEC Enforcement Power, by Dunstan Prial via Law360
    • Social Media – Defamation – Unmasking Anonymous Accounts:  “Many high-level people in the industry have told [the plaintiff bringing the defamation action against the anonymous Instagram poster] that he will never work again unless he can publicly clear his name,” Hence the lawsuit. Instagram Account That Sought Harassment Tales May Be Unmasked, by Sapna Maheshwari at The New York Times

    INTERESTING CASES FROM ILLINOIS COURTS:

    • Dog Bites – Landlord Responsibility (IL-AP-2d):   “Trial court did not err in dismissing the plaintiff’s complaint against the landlord because the landlord had not voluntarily assumed a duty to protect the plaintiff from their tenant’s dog.” Seyller v Rose Rakowski Declaration of Trust
    • Remedies – Legal vs. Equitable (IL-AP-1st):  “This case involves the intersection of law and equity and whether a legal remedy was adequate such that equitable relief was inappropriate. . . . [Here, the plaintiff] “obtained an adequate legal remedy on his breach-of-contract action, and thus he was barred, as a matter of law, from pursuing his equitable claim of rescission.” Horwitz v. Sonnenschein Nath and Rosenthal

    ©2018, Steve Jakubowski