Author: Brett S. Theisen

Case Law Alert: Third Circuit Finds No Fraudulent Transfer Liability in Connection With Revocation of Pennsylvania Gaming License

In a June 29, 2021 decision concerning an alleged $50 million fraudulent transfer to the Commonwealth of Pennsylvania, the United States Court of Appeals for the Third Circuit affirmed the dismissal of an action by the liquidating trustee of Philadelphia Entertainment and Development Partners (d/b/a Foxwoods Casino Philadelphia) (the “Debtor”) under Bankruptcy Code Sections 544(b), 548, 550, and 551 to recover the value of a gaming license that had been revoked by the Commonwealth. The Third Circuit determined that, because the license was not a property right under Pennsylvania state law, sovereign immunity barred the trustee’s action against the Commonwealth. The decision turned on the distinction between transferable ownership rights in property versus mere “privileges.” Although the Third Circuit’s opinion in this matter is non-precedential, it nevertheless underscores the importance that state law plays in determining “property of the estate,” and the resulting consequences for debtors and their creditors. By way of example, we would expect to see the same result under New York law with respect to liquor licenses, which – unlike in New Jersey and certain other states – are non-transferable licenses and thus not estate property under Bankruptcy Code Section 541 and state law.

Breaking Bankruptcy News: Subchapter V Debt Limit Extension

On February 25, 2021, Sen. Richard Durbin (D-IL) and Sen. Charles Grassley (R-IA), the Chair and Ranking Member of the U.S. Senate Judiciary Committee, respectively, announced the introduction of a bipartisan bill that will provide continued relief to businesses impacted by the ongoing COVID-19 pandemic. The bill, referred to as the COVID-19 Bankruptcy Relief Extension Act, would extend for an additional year—to March 27, 2022—certain bankruptcy-related provisions originally enacted into law in March 2020 as part of the Coronavirus Aid, Relief, and Economic Stabilization Act (“CARES Act”). Under the CARES Act passed on March 27, 2020, Congress increased to $7.5 million the debt limits for debtors seeking relief under the recently-enacted Subchapter V of chapter 11 of the Bankruptcy Code. 11 U.S.C. §§ 1181-1195 (Subchapter V, enacted in 2019 through the Small Business Reorganization Act, streamlined chapter 11 cases for businesses with non-contingent, secured, and unsecured debts totaling less than $2,725,625. By proceeding under Subchapter V of the Bankruptcy Code, a debtor may, among other things, solicit disclosure and confirmation in a single-step confirmation process, make use of expedited filing deadlines, and retain equity ownership without those equity holders satisfying the “new value” exception to the absolute priority rule under 11 U.S.C. § 1129(b)). If passed, the COVID-19 Bankruptcy Relief Extension Act will ensure that...

Untapped Potential in New Jersey’s Nascent Craft Beer Industry

Two years ago, New Jersey lawmakers revised an archaic law that had been a major obstacle to anyone who wanted to launch a start-up brewery in the state. New Jersey’s old law severely restricted craft brewers’ ability to actually sell their beer to visitors of the brewery, thus undermining the economics of on-site bars or tap rooms, which most small operations in other states rely on as an important revenue source, especially in the early stages. The old law even limited how many free samples a brewer could hand out, which proved particularly troublesome for entrepreneurs trying to gain brand recognition and market share, and appeal to consumers’ varied tastes. The new law was intended to put brewpubs, microbreweries and so-called “nanobreweries” on an equal footing with competitors in neighboring states. While this legislation was a welcome step for the craft beer industry, more can be done.

“Operation Swill”: New Jersey ABC and Division of Criminal Justice Raid 29 Bars and Restaurants That Allegedly Served Cheap Alcohol as “Premium” Brands

On May 23, 2013, New Jersey’s Attorney General Jeffrey Chiesa and Division of Alcoholic Beverage Control (“ABC”) Director Michael Halfacre announced the details of “Operation Swill,” a year-long investigation involving more than 100 investigators throughout New Jersey. Operation Swill reached its climax one day earlier when ABC and Division of Criminal Justice personnel executed raids on 29 establishments throughout New Jersey suspected of substituting premium alcoholic beverage brands with “well brand spirits,” i.e., non-premium brands. N.J.A.C. § 13:2-23.19 prohibits a licensee from substituting another brand other than ordered by a customer unless agreed to by the customer. Approximately 1,000 bottles were seized during the raids, which will be held for further testing by the ABC and manufacturers.

New Law Generates Buzz Among South Jersey’s Wine Growers

On May 1, 2012, a law took effect that will allow New Jersey farmers and wineries to skip wholesalers and sell directly to retailers and consumers. The new law grants similar rights to out-of-state wineries and finally cleared the way for the Garden State to begin issuing new winery licenses to growers. While local business and political leaders are hoping the relaxed regulations will encourage further investment in the state’s wine industry, producers, retailers, and wine lovers alike are cheering the increased access to locally-grown wines ahead of the summer tourism season.

The Southern District of New York and the District of Delaware Restore Order to a Chaotic Post-Stern Landscape

Recently, the Southern District of New York and the District of Delaware have issued Amended Standing Orders resolving some of the uncertainty arising from the Supreme Court’s ruling in Stern v. Marshall last term by expressly permitting bankruptcy courts to hear and issue proposed findings of fact and conclusions of law in those matters where they lack the constitutional authority to issue final judgments.

New Jersey Grants Out-of-State Wineries Direct Access to Consumers & Retailers

On January 17, 2012, Governor Chris Christie signed into law a bill allowing out-of-state winemakers to sell directly to New Jersey consumers and retailers. The bill was in response to the Third Court’s decision in Freeman v. Corzine, which we reviewed on this blog a year ago. The decision invalidated a New Jersey law allowing certain New Jersey farmers and wineries to skip wholesalers and sell directly to retailers and consumers. The Court determined that the law ran afoul of the Constitution’s Dormant Commerce Clause because it imposed restrictions benefiting in-state wineries and farmers at the expense of their out-of-state competitors. This new law is intended to balance the competing rights of in-state and out-of-state wineries.

Pennsylvania’s Alcohol Sale Privatization Debate: What Does It Mean for Retail Beer and Wine Sellers?

Pennsylvania’s state-run stores could be on the verge of losing their decades-old monopoly on wine and liquor sales. On December 13, 2011, the Pennsylvania House of Representatives’ Liquor Control Committee voted 15-10 to approve an amended version of Pennsylvania House Bill 11, (“Pa. H.B. 11”), which would allow the state’s 1,200 beer retailers to sell wine to the public, in competition with the Pennsylvania Liquor Control Board’s (“PLCB”) 620 state-run stores. Notably, large supermarket chains within the state stand to gain an enormous benefit from the proposed law, which would allow for the first time in-store wine sales, as well as limited in-store tasting events. The proposed legislation now sits before the full House, awaiting floor debate, additional amendments, and a possible vote. The process could begin as early as this month.

NJDEP to Issue Draft Remedial Priority Scores for Contaminated Sites

In the next few weeks, responsible parties for some 12,000 known contaminated sites in New Jersey will be receiving a letter with a draft Remedial Priority Score (RPS) for their particular site compliments of the New Jersey Department of Environmental Protection (NJDEP). The NJDEP has not specified how the rankings will be used, although the RPS system has been described by the NJDEP as “a triage tool to sort sites for further consideration.”