N.C.P. Marketing Group, Inc. v. B G Star Production: The Ninth Circuit Correctly Determined That a Debtor in Possession Cannot Assume a Trademark License in Chapter 11 Bankruptcy Proceedings

Abstract

INTRODUCTION|Chapter 11 of the Bankruptcy Code provides a debtor with the opportunity to continue to operate the debtor's business while going through bankruptcy proceedings, which is often preferable to a total liquidation of the business and its assets. When a debtor files for relief under Chapter 11 of the Bankruptcy Code, all of the business's property, along with the debtor's legal or equitable interest in the property, becomes the property of the bankruptcy estate and the debtor is protected by an automatic stay on any attempts to collect on prepetition claims. The debtor may continue to operate the business in the capacity of a debtor in possession ("DIP"), rather than having the bankruptcy court appoint a trustee to manage the bankruptcy estate. A DIP has the same obligations and duties as a trustee, but has the added benefit of retaining the business's former management who are probably the most knowledgeable about the company and are in the best position to guide the company through financial hardship. The DIP has the right to sell, lease, or use property of the estate, even property that is subject to the interest of another, and may also obtain financing for its business operations. Section 365 of the Bankruptcy Code also permits a DIP to assume or reject executory contracts. Chapter 11 Bankruptcy protects creditors' interests by requiring a DIP to give creditors the opportunity to object to extraordinary transactions...