Neil E. Herman is a partner in Morgan Lewis's
Bankruptcy and Financial Restructuring Practice. For
more than 25 years, Herman has represented debtors,
as well as financial institutions, official creditors’
committees, trustees, and creditors in out-of-court
restructurings and in bankruptcy matters. In addition,
he has extensive experience in representing landlords,
real estate developers, and shopping center owners
in bankruptcy matters. A substantial portion of his
practice involves representing buyers of assets out
of bankruptcy. Herman is also the author of the
extensive chapter on “Retail Bankruptcies” in the
most recent edition of Collier on Bankruptcy.
defined as “[t]he sale of goods or commodities
to ultimate consumers, as opposed to the
sale for further distribution or processing.”
3 Many retailers do not experience a substantial
loss of revenue or foot traffic immediately
following a Chapter 11 filing with two glaring
exceptions: (i) where fresh food is involved
(restaurant chains and supermarkets) or
(ii) where safety of products is a concern.
Since consumers need clear and repeated
reassurance that corners are not being cut
on the freshness of foods and the safety
of products, counsel to retailers with these
issues should recommend an extra level of
press releases, postings at stores, and notices
on the web page to respond directly to these
commonly perceived customer concerns.
4 See 3 Collier on Bankruptcy, ¶ 365.15
for a detailed summary.
5 7 U.S.C. §§ 499(a) et seq.
6 But see In re Kmart Corp., 359 F.3d 866
(7th Cir) (2004) (holding that court has no
power or discretion to approve a critical
vendor motion absent proof that remaining
creditors would also be paid in full).
7 7 U.S.C. §§ 499(a), et seq.
8 3 Collier on Bankruptcy, ch 366.
9 B.R. 2002(a)( 2) allows the court, for cause,
to shorten the 21 day notice period. B.R.
6003(h), which prohibits motions to “assume
or assign” leases within 21 days after the
petition is silent on rejections and thus
implicitly permits first day rejections.
10 See 11 U.S.C. §§ 361, 363(a) and (c)( 2) and
364; see also Collier on Bankruptcy,
ch 361, ¶ 363.03[ 3]-[ 4] and ch 364.
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11 See e.g., 11 U.S.C. § 365(e)( 1) prohibiting
enforcement of ipso facto clauses triggered
by bankruptcy, and § 365(f)( 1) rendering
unenforceable lease clauses which prohibit,
restrict, or condition the assignment of a lease.
12 See Fed. R. Bankr. P. 4001(B)(v) and (vi),
which provides that the “nature and extent”
of any deadlines imposed on a debtor for
filing a plan or disclosure statement must
be described in the DIP loan motion.
13 11 U.S.C. §§ 365(d)( 4)(B)(i) and (ii) grant a debtor
one initial period of 120 days to assume or
reject leases plus one 90-day extension.
Thereafter, the time period to assume or
reject unexpired leases of nonresidential
real property can only be obtained with
prior written consent of the landlord.
14 See Bankruptcy Rules 2002(a)( 2),
6003(c), 6004(h) and 6006(a) and (d).
15 Unless the 45 days expires post-petition, in which case the seller has
20 days after the petition to demand
reclamation. 11 U.S.C. § 546(c)( 1).
16 11 U.S.C. § 503(b)( 9) requires a vendor to show
(i) it sold “goods” (not services) to the debtor,
(ii) the debtor received the goods within 20
days prior to the petition, (iii) goods were
sold in the “ordinary course” of the debtor’s
business, and (iv) “value” of the goods sold.
17 4 Collier on Bankruptcy § 503.16.
18 11 U.S.C. § 363(b)( 1); see also 3
Collier on Bankruptcy, ch 332.