TABLE OF CONTENTS

LICENSE AS EXECUTORY CONTRACT VS. PROPERTY OF THE ESTATE ...................................................................2 TERMINATING A CONTRACT (INCLUDING A LICENSE/LEASE)..................................................................................2 LICENSES .......................................................................................................................................................................................3 LICENSOR WANTS TO REJECT ....................................................................................................................................................................... 3 WE WANT TO REJECT A LICENSE .................................................................................................................................................................. 3 INTELLECTUAL PROPERTY ............................................................................................................................................................................ 3 EXECUTORY CONTRACT ..........................................................................................................................................................5 REJECTION OF AN EXECUTORY CONTRACT ................................................................................................................................................. 5 ASSUMPTION.................................................................................................................................................................................................... 6 ASSIGNABILITY ................................................................................................................................................................................................ 6 CURING DEFAULTS ......................................................................................................................................................................................... 6 COVENANTS NOT TO COMPETE .................................................................................................................................................................... 6 PERSONAL SERVICE CONTRACTS .........................................................................................................................................8 COVENANT NOT TO COMPETE ...................................................................................................................................................................... 8 FRAUDULENT CONVEYANCES ...............................................................................................................................................9 STATUTE OF LIMITATIONS ............................................................................................................................................................................ 9 544(B) AND STATE LAW .............................................................................................................................................................................. 9 GOLDEN CREDITOR.......................................................................................................................................................................................10 PONZI SCHEME ..............................................................................................................................................................................................10 AVOIDABLE PREFERENCES ................................................................................................................................................. 11 EARMARKING .................................................................................................................................................................................................11 INVENTORY ....................................................................................................................................................................................................12 REGULATIONS (ENVIRONMENTAL) AND THE AUTOMATIC STAY ........................................................................ 13 CASH FINES ....................................................................................................................................................................................................13 EQUITABLE REMEDY ....................................................................................................................................................................................13 FORUM ............................................................................................................................................................................................................14 LAWSUITS .................................................................................................................................................................................. 15 INDIVIDUAL BANKRUPTCY ................................................................................................................................................. 16 FROM THE CREDITORS PERSPECTIVE ........................................................................................................................................................16 IPSO FACTO ............................................................................................................................................................................... 17 CRITICAL VENDOR.................................................................................................................................................................. 18 AS APPLIED TO PREPETITION PREFERENCE PAYMENT .........................................................................................................................18 DEBTOR IN POSSESSION AS TRUSTEE............................................................................................................................. 19 CHAPTER 11 GENERALLY .................................................................................................................................................... 20 REORGANIZATION PLAN ...................................................................................................................................................... 20 ABSOLUTE PRIORITY ....................................................................................................................................................................................20 GIVING EQUITY TO AN EMPLOYEE IN THE RESTRUCTURING .................................................................................................................20 DEATH TRAP..................................................................................................................................................................................................21 IMPAIRMENT AND CRAMDOWN ..................................................................................................................................................................21 CONTINGENT CLAIMS ............................................................................................................................................................ 23 ORDINARY COURSE GOODS WITHIN 20 DAYS ............................................................................................................. 24

License as Executory Contract vs. Property of the Estate

If it lacks obligations to us substantial enough such that its failure to meet them would give us a right to terminate our obligations, which includes paying royalties, then the license in our hands is just a form of property. The license becomes part of the bankruptcy estate automatically under 541. We take the license subject to all its limitations under nonbankruptcy law, but our ability to use the license is not in any compromised by virtue of the bankruptcy petition [Chicago Board of Trade v. Johnson].

If the license is an executory contract, we must be able to assume the license to continue to take advantage of it. This could prove problematic. Some federal courts, particularly the Ninth Circuit, have held explicitly that patent licenses are not assumable under 365(c). We might argue that 365(f) allows us to assign any executory contract that we can assume. but, the language of 365(c), read literally, seems to say that a debtor can enjoy in bankruptcy only those contracts it could assign outside of bankruptcy. The circular phrasing of 365(c) and 365(f) that allow us to assume seems circular and incompatible with the idea that we can also assign. As a practical matter, we will need to get the consent of _____________________ in order to assume the license.

Terminating a Contract (including a license/lease)

If the companys decision to terminate has nothing to do with our filing a bankruptcy petition it may be possible to terminate the contract. Bankruptcy appears to be the only circumstance that would limit the companys ability to cancel [Cahokia]. If it were going to cancel, the company would have to go to court first to ask to have the stay lifted, to avoid the cancellation from being seen as the exercise of control over the debtors property. However, the motion should be granted as a matter of course [M.J. & K Co.].

Licenses
Licensor Wants to Reject
The rule found in Chicago Board of Trade ensures that debtors in bankruptcy enjoy the license on the same terms and subject to the same conditions as they did outside of bankruptcy. We bargained for the exclusive right to _____________________________ and as of filing for bankruptcy, this is a right we already have and it no longer belongs to _______________________. We are a licensee who is in possession and rejection under 365 does not give the licensor the right to disposes us. The strong-arm powers wont help either. Our rights are paramount. No matter how broadly we define the trustees strong-arm powers under 544(a), they would not enable the trustee to defeat our right in the license. Outside of bankruptcy, the licensor would not have the ability to stop us from using the license and they cant inside of bankruptcy

We want to reject a license

Congress specifically addressed this issue with respect to technology licenses in 365(n). Because of this, it is possible that a court might apply that maxim of expression unius. Congresses express denial of the debtors ability to recapture rights they have already transferred might be used to justify allowing the debtor to recapture the right in cases not explicitly addressed by Congress. However, this is a pretty weak argument and it seems to rest on the poor principle that we are trying to rehabilitate the debtor.

Intellectual Property
Intellectual property presents an equitable rights question. The right to enjoin the use of ones intellectual property is not a claim under 101(5) and thus should not be dischargeable in bankruptcy. Assuming that the contract is an executory contract, ________________ can reject it in bankruptcy. However, section 365(n) provides explicitly that licensees can continue to use intellectual property after rejection. Intellectual property is defined in section 101(35A).

________________ will undoubtedly argue that, once he rejects, we are no longer free to use his name and likeness. By enacting a section like 365(n) and including trade secret and patent protection, Congress implicitly is providing that other rights disappear when an executory contract is rejected. A modern bankruptcy judge, however, is likely to read the code differently respecting all transfers of IP to the extent they were already made.

Executory Contract
Our relationship with ______________________ is an executory contract. Section 365 allows us to reject executory contracts. The effect of rejection is not to extinguish our relationship with ________________________. The ability to reject a contract in bankruptcy merely empowers the trustee to breach a contract inside of bankruptcy that the debtor could have breached outside. The ability to reject an executory contract is not an avoiding power. The corporation does not have the ability to extricate itself from any covenants that would bind it if it broke the contract outside of bankruptcy. The estate enjoys all of the benefits of the contract but all of its burdens too.

Rejection of an Executory Contract

First we must establish that the contract between ______________ and ________________ is an executory contract. Although this is not defined in the code, a contract is executory if the obligations of both parties are so far unperformed that the failure of either party to perform would be a meaningful breach [Countryman Definition]. In this case. Thus, section 365 allows the debtor to reject the executory contract the effective which however, is not toe extinguish the relationship between the debtor and the creditor. The corporation does not have the ability to extricate itself from any covenants that would bind it if it broke the contract outside of bankruptcy. The estate enjoys all of the benefits of the contract but all of its burdens too. The ability to reject a contact in bankruptcy merely empowers the trustee to breach a contract in bankruptcy that the debtor could breach outside. The rejected contract is considered breached and is treated by 365(g)(1) as a prepetition breach. ___________________ is therefore a n unsecured creditor under 502(g).

Some cases have deemed the rejection of an executory contract the as extinguishing the relationship between the debtor and creditor, those dealt with the individual debtor, their fresh start, and liens on their future income.

Assumption
Our relationship with ______________________ is an executory contract. Section 365 allows us to assume executory contracts. However, 365(c) limits our ability to assume contracts which are not assignable absent consent from the other party. Whether or not you can assign or transfer a contract or license should turn on whether or not you can transfer your interest outside of bankruptcy [Chicago Board of Trade], but it should not control over whether or not you can assume the contract take advantage of the interest yourself. In this sense, 365(c) seems to be at odds with 541 and the Chicago Board of Trade principle. Nonetheless, the code is clear.

Assignability
365(f)(1) expands the trustees ability to assign whatever contracts the trustee can assume. Thus, since __________________ we were able to assume the contract we can assign it.

Curing Defaults
The defaults wont keep us from assuming the contract but we will need to cure them, compensate ___________________ for its losses and provide adequate assurance of future performance [365(b)]. Assurance consists of showing that the debtor will be able to meet its obligations going forward. Sometime defaults may not be curable. 365(b)(1) excuses the curing of all nonmonetary defaults with respect to real estate leases.

Covenants Not to Compete

The covenant not to compete that we have signed with ___________________ gives us some bargaining power, but it may not in fact limit our ability to stop him from competing with us. The covenants enforceability turns on whether it is enforceable as a matter of nonbankruptcy law. Unfortunately nonbankruptcy law generally treats these clauses with suspicion. Even if the covenant is enforceable outside of bankruptcy, enforcing it inside of bankruptcy will not be easy.

Our deal with _____________________ is an executory contract, because we are obligated to pay him and he is obliged to work for us and not for anyone else. Thus, in order to enforce the covenant, we need to be able to assume the contract. The literal language of 362(c) prohibits personal services contracts from being assumed in bankruptcy. However, this provision seems aimed at situations in which the person providing the service is filing for bankruptcy, not the employer, but if a court reads the Code literally it might rule against us.

Personal Service Contracts

In that event, the relationship is an executory contract for personal services. Personal services contracts are the classic example of contracts that cannot be assigned outside of bankruptcy. Under 365(c), debtors in bankruptcy are unable to assume such contracts.

In the typical case, the debtor is the person providing the personal services, rather than the person receiving them, but it is not obvious why this should make any difference.

Covenant Not to Compete

If we cannot assume the contract, we may not be able to enforce the covenant not to compete. The possibility that _______________________ might file for bankruptcy makes matters worse. __________________________ fresh start may well include his ability to rid himself of such covenants as they encumber his ability to enjoy his future earnings freed of the bad decisions he made in the past. In re Register located this question inside of 365, but the issue exists regardless of whether there is an executory contract. Assuming we can assume the contract over his objection, cases such as Ortiz suggest that a bankruptcy does not give an individual the ability get rid of covenants not to compete. However, as a matter of first principle, a covenant not to compete works a lot like a lien on human capital that should be extinguished as part of the fresh start.

Fraudulent Conveyances
The avoiding powers allow the trustee (or DIP) to set aside fraudulent conveyances, a power normally enjoyed by creditors outside of bankruptcy. A fraudulent conveyance is simply a transfer made or an obligation incurred for less than equivalent value while the debtor was insolvent or those done with the intent to hinder, delay, or defraud creditors [544(b) or 548]. Such transactions include not only instances of outright fraud but also those that bear badges of fraud which indicate that the transaction had no legitimate business purpose. In a fraudulent conveyance attack, all that matters from the creditors point of you is that cash has left the corporation and nothing has come back in return, and thus a transfer not for reasonably equivalent value has been made. Unlike a preference action under 547 that's made on the eve of bankruptcy, there is no presumption of insolvency under 548. Thus, we will need to show insolvency under the asset test or the like. Dividends, like gifts, are the quintessential example of transactions without reasonably equivalent value.

Statute of Limitations
548, the fraudulent conveyance section of the bankruptcy code has a two year statute of limitations. This puts the transaction between ________________ and _______________ outside the boundary of 548. The trustee, however, under 544(b) can use state fraudulent conveyance law, which has a longer reachback window, to attack the transaction. In this jurisdiction, we have a four-year statute of limitations [UFTA 9]. To use 544(b) the trustee will need to find a Golden Creditor - a creditor who was owed and thus defrauded at the time of the buyout.

544(b) and State Law

To bring the fraudulent conveyance attack successfully, the trustee needs to find a debt now owing to an actual unsecured creditor that was owed at the time of the buyout. UFTA 5, the provision that allows for a transfer to be set aside if the debtor makes a transfer while insolvent for less than reasonably equivalent value, gives the avoidance action only to creditors who were around at the time of the transaction. UFTA 4 applies to present and

future creditors and has a provision that allows transfers for less than reasonably equivalent value to be set aside if the business is left with unreasonably small capital, but __________________________________.

Golden Creditor
If a fraudulent conveyance, brought under 544, has the effect of hindering, delaying, or defrauding, even a trivial creditor that action is voidable. As long as we can find that creditor now as to whom the transaction is voidable, we can argue that Moore v. Bay allows us to avoid the transaction in its entirety not just to the extent of the interest of the token creditor. (In Boyer, Judge Posner allowed the transaction to be void in its entirety, however other courts have suggested that the avoidance is capped at the total amount owed to the creditors.)

Ponzi Scheme
Cases like Manhattan Investment suggest that the benchmark for establishing inquiry notice is whether the party asserting good faith acted in a fashion that conformed to the norms of those similarly situated. We no longer follow the clear heart and an empty head test. Hence, the question of _______________________s good faith is likely to turn on whether it indeed followed its own customary practices and whether these conform to the norms of others similarly situated. If they do, _________________ will be found to have acted in good faith.

Avoidable Preferences
_____________________ is going to attack the transfer to ___________________ as an avoidable preference. Preferences are governed by 547. The six requirements under 547(b) that must be met for a preference to be voidable are that: (1) a transfer is made; (2) on account of an antecedent debt; (3) to or for the benefit of a creditor; (4) while the debtor was insolvent; (5) within ninety days of the filing of the petition; (6) that left the creditor better off than it would have been if the transfer had not been made and it had asserted its claim in a Chapter 7 liquidation. If a transfer is preferential, the trustee can recover the amount from either the initial transferee or the party for whose benefit the transfer was made [550].

There are exceptions in 547(c) to the general preference rule of 547(b). The net result rule protects lenders who make a new loan after an old one is paid off [547(c)(4)]. We only look at the net result; the extent to which the lender was preferred, taking into account the new value extended to us after we made payments on old loans. Routine payments to creditors are exempt from preference attacks [547(c)(2)]. These are payments that are made in the ordinary course on debts incurred in the ordinary course or according to ordinary business terms. A substantially contemporaneous exchange for new value is exempt from a preference attack [547(c)(1)]. Secured creditors who take a PMSI in newly acquired collateral are exempt from a preference attack [547(c)(3)]. A creditor with a floating lien is exempt from a preference attack to the extent that it did not improve its position during the preference period [547(c)(5)].

Earmarking
It appears that there is not a preference action against ___________________. The earmarking doctrine allows a debtor to replace one creditor with another without creating a voidable preference. This transaction did not leave the other creditors any worse off. ________________ simply replaced _______________________________ as a (general) creditor.

Inventory
___________________________ security interest is in inventory, which turns over regularly. ________________________ does not acquire its security interest in the new inventory until the debtor acquires it [547(e)]. Hence, its interest in any inventory acquired within the 90-day preference period is presumptively preferential and subject to avoidance unless it satisfies the two-point net improvement test of 547(c)(5). Its security interest in the inventory will be reduced to the extent it has increased in value during the preference period.

Regulations (Environmental) and the Automatic Stay

Cash Fines
__________________ can enforce the _______________________ against us notwithstanding the automatic stay. The fines that accrued prepetition, however, seem to be prepetition claims. They are unsecured claims and the only issue with respect to them is whether they are subordinated under 726(a)(4). The fines that accrue postpetition, arise because of actions taken prepetition, but they also arise currently. If are being levied consistently and would have applied outside of bankruptcy then the estate is obliged to pay them, just as it would be obliged to meet ongoing tort obligations as administrative expenses.

Equitable Remedy
To the extent that the regulation affects the companys postpetition conduct, 362(b)(4) tells us that the automatic stay simply does not apply. _____________________ has an ongoing obligation to comply with whatever regulations are in place. Thus, 362(b)(4) guarantees that the government retains its regulatory and police powers notwithstanding the automatic stay. The pivotal question is whether the regulator is pursing an equitable remedy or whether the creditor is attempting to vindicate its rights as a creditor. The automatic stay only prevents the state from collecting a judgment, not establishing liability in the first instance. A court might take the view that, the agency seeks to impose sanctions for prepetition conduct. In that case, the matter should be resolved in the bankruptcy forum. However, this is unlikely. _______________________ will argue that all regulatory violations can be monetized and that they are merely prepetition claims that can be paid out with all the others at cents on the dollar and then discharged [Kovacs]. On the other hand, the state will argue that ____________________________ is not a claim within the meaning of the Bankruptcy Code under 101(5), and thus the state is free to pursue the debtor outside and after bankruptcy. 525 prevents the government from canceling a license in response to a bankruptcy proceeding.

Forum
When the government acts as a postpetition regulator, it is not engaging in any of the acts prohibited by the automatic stay in 362(a), at least so long as it does not assert control over the debtors property. One can argue that the exceptions carved out for actions of the government in 362(b) go beyond simply those actions that the government takes as a postpetition regulator. Under this view, the purpose that 362(b) serves is largely jurisdictional. The government is not obligated to resolve its prepetition disputes against the debtor in the bankruptcy forum when the disputes arise by virtue of the governments exercise of its police or regulatory power. The government, acting in this capacity, is presumptively entitled to pursue the debtor in the forum of its choosing. In the absence of any order issued under 105, the government can pursue its claim in the nonbankruptcy forum [Nicolet, MCorp, not read in class but found in Bairds Elements of Bankruptcy].

Lawsuits
Lawsuits are perfectly ordinary claims within the meaning of the Bankruptcy Code under 101(5). The automatic stay prevents the suit by _____________________________ from going forward. The bankruptcy judge can either fix the amount of the claims or estimate them and allow the litigation to proceed in the nonbankruptcy forum [Bittner]. We can view the estimation of claims as a forced settlement. If these were ordinary contract claims, the bankruptcy judge could handle them summarily. But because these are tort claims, they will be somewhat trickier than the unfair competition dispute in Bittner. Section 1411 of Title 28 provides that nothing in the Bankruptcy Code affects the right to trial by jury that an individual has under applicable nonbankruptcy law with regard to a personal or death tort claim. We may be able to navigate around this problem if we can muster sufficient evidence to persuade the judge that there is not a genuine issue of material fact that would allow the case to survive a summary judgment motion, there is no need to have a jury trial.

Individual Bankruptcy
An individual who is hopelessly in debt should be able to file Chapter 7 bankruptcy. In an individual Chapter 7, the debtor should be able to simply give up nonexempt property and walk away from his pre-bankruptcy obligations. If a person can pay his debts, he should not get the benefit of discharging his obligations. 707(b) provides a means test to distinguish between the hopelessly insolvent and the individual who has the ability to pay his creditors. Section 727 gives the honest but unfortunate debtor a discharge. Because future income of the individual is not apart of the estate under 541, the effect of 727, is to give the individual debtor the right to enjoy future income free of creditors claims [541(a)(6)]. It might also be important to distinguish the revenues that flow from the individuals prepetition business, and those that flow from the debtors post petition contribution of labor. It is generally considered to be bad faith to incur a debt at the same time one intends to file for bankruptcy. Chicago Board of Trade and 541(c)(1) tell us that such ipso facto clauses are unenforceable.

From the Creditors Perspective

From the individuals creditors perspective, having a debt owed to them discharged in bankruptcy is relatively unimportant. If there was almost no chance the creditor was going to be repaid anyway, they are better off having the debtors affairs scrutinized by the trustee and then walking away.

(Personal Service Contracts)

Ipso Facto
Although we generally respect contract provisions and restrictions that apply both inside and outside of bankruptcy, those that apply only in bankruptcy are ignored. This ipso facto principle is reflected in 541(c)(1). The debtor may be willing to grant such a clause because shareholders and by extension managers have little incentive to resist clauses that take effect when they have been wiped out. And in 365 with respect to executory contracts. Thus, _______________________ will get nowhere with the clause that provides for termination upon the filing of bankruptcy.

Critical Vendor
____________________________ is a standard critical vendor, which means we are allowed to treat it differently under 363, but we need to do more than show that our contract with _________________________ is necessary for us to continue as a going concern. We also have to show that such a course makes improves the position of all of the creditors.

As Applied to Prepetition Preference Payment

If we would be able to pay ______________________ postpetition as a critical vendor, then we should be able to pay him prepetition and refrain from a preference attack. Not bringing a preference action should be easier to justify than a postpetition preferential transfer of cash. The preference is even easier is easier to justify if our agreement with ___________________ is an executory contract. To assume the contract in bankruptcy, we shall be obliged to cure any defaults and pay in full anyway.

Debtor in Possession as Trustee

The debtor in possession takes on the duties and responsibilities of the trustee under 1107. Sometimes creditors or the creditors committee asks the court to take certain actions normally reserved for the trustee because there is a fear that the debtor in possession lacks the proper incentives to pursue such actions. Although the bankruptcy code does not explicitly address this issue, most courts have concluded that the bankruptcy court has the power to authorize such actions in appropriate cases. That being said, section 1104 allows the court to appoint examiners who are given the power of the trustee. Examiners are often used to investigate whether the debtor should bring a cause of action, such as a fraudulent conveyance action, that the debtor might not pursue as vigorously because of some other conflicting interest.

Chapter 11 Generally
Chapter 11 cannot remedy the problems of an unsound business.

Reorganization Plan
Absolute Priority
Absolute priority, under section 1129(b), comes into effect when a plan fails to meet the acceptance requirements of section 1129(a)(8). 1129(b) doesnt use the language absolute priority, but rather it requires that each class that rejects the plan be treated in a way that is fair and equitable. Fair and equitable treatment is a term of art. It requires that one of 3 tests be met. 1) each holder of a secured claim must receive a stream of payments with a discounted present value equal to the value of the collateral [1129(b)(2)(A)]. 2) If the collateral is sold, the creditors lien attaches to the proceeds and the sale is one in which the secured creditor is entitled to bid and offset its claim against the proceeds. 3) Or the plan can call for the realization of the indubitable equivalent of the secured claim.

Giving Equity to an Employee in the Restructuring

In order to give him equity, we need to figure out a way to do so notwithstanding the absolute priority rule of 1129. (see absolute priority above) Unfortunately, if a class of creditors objects, this may not be possible. Generally, giving equity to old shareholders in a restructuring is not allowed. Usually retaining equity requires the old shareholder to inject new capital into the company. It may be possible to write a new employment contract that includes stock and stock options. If the equity interest comes by way of an employment contract, they may not be on account of his old equity interest within the meaning of 1129(b) and thus it may circumvent the absolute priority rule.

Death Trap
A death trap is term for a negotiating tactic that threatens to give nothing to any of the creditors in the class of general creditors if the class as a whole votes against the plan. Death traps are allowed because everybody in the class is getting the same treatment, the treatment merely turns on what the class as a whole decides to do. We would have a far different case if the amount a particular creditor was paid turned on whether that creditor voted in favor of the plan. If the creditors reject the plan and thereby obtain for themselves a cramdown hearing, the debtor still has to show that their treatment conditional on having rejected the plan still passes muster. The death trap works only because the more favorable payment gives the class more than their entitlement, not that the less favorable gives them less.

Impairment and Cramdown

______________________ like the debtor in Figter, are only too happy to roll the dice because they get nearly all of the upside if it succeeds and they bear none of the downside if it fails. I n Figter, the creditor thwarted this dynamic by buying up a small number of claims and blocking the debtors plan by ensuring that no impaired class voted in favor of it. Confirmation of the plan under 1129(a) requires, in addition to other things, that all classes accept the plan. In the absence of uniform acceptance, confirmation requires a cramdown hearing. In cramdown, for there to be confirmation, at least one impaired class must accept the plan, it must meet all of the requirements of 1129(a) except 1129(a)(8), and it must satisfy the two additional requirement of 1129(b) - no unfair discrimination and the fair and equitable. In this case.. Somebody who is either unimpaired or is being cramdown upon, is entitled to a stream of payments with a present value of the current claim. The interest rate has to be large enough so that it is compensated for the risk that the collateral will be worth less in the future. Sometimes the most sensible course in any plan of reorganization is to simply cure any defaults on the certain secured loans and reinstate it according to its original terms. In this case the creditor would have no voice in the reorganization plan, it would still require a cramdown hearing as the creditor, even though left whole, is impaired within the meaning of 1124. Secured creditors are in a class of their own if they have different priority rights in the same collateral. Hence, Hedge Fund and First Bank must be in separate classes.

------------ From Practice Test -----------This is a big problem for Marsellus. If Hedge Fund is the fulcrum security, Jules can vote against the plan and this will prevent Marsellus from retaining equity in the company without putting in new value. There are two ways of dealing with the Jules problem. First, Marsellus can try to have Juless vote designated. It is true that Jules is entitled to look after his own economic interest. Moreover, notwithstanding cases such as Allegheny, vulture investors are allowed to come in and strategically buy up fulcrum securities and gain control of a corporation in this fashion. But to the extent that Jules is a competitor of Marsellus and is acting to teach him a lesson for embarrassing him by outbidding him, then he is not acting in good faith and his vote can be designated. Second, Marsellus can try to show that the Hedge Fund tranche is out of the money. This will require a cramdown and a valuation of the firm, but it is a way of leaving Jules out in the cold. The downside to this second method, of course, is that it eliminates the possibility of a plan the keeps Marsellus as the holder of new equity without putting in new value. Some of you thought that this problem could be navigated by Marsellus entering into an employment contract with South Shore that would give him an equity position in return for his future services. We would still have to worry about whether this was not struck down as an evasion of the absolute priority rule and was the sort of class-skipping that Boyd forbids, but a number of you thought that this could be handled successfully.

Contingent Claims
_________________________ claim falls under the category of contingent and unliquidated claims and is thus under the gambit of 502(c), Piper, and Grossman. The Piper court modified the prepetition relationship test, thus expanding the scope of the term claim under 101(5), to include events occurring postpetition but pre-confirmation that create a relationship between the claimant and the debtor, and the basis for liability is the debtor's prepetition conduct. The next question is once we determine that ___________________________________ has a claim we need to address how the court will treat the claim in bankruptcy. As the likelihood of liability is high and the payout to unsecured creditors as a group may be low, the court would not want to follow Bittner. Allowing ________________________ to proceed against the reorganized entity outside of bankruptcy to enforce its claim against it if it ultimately prevails, would give it an advantage over the other unsecured creditors similarly situated.

Ordinary Course Goods Within 20 Days

The Bankruptcy Code that treats as administrative expenses obligations for goods delivered in the ordinary course in the 20 days before the filing of the petition [503(b)(9)]. This section is awkward because a prepetition liability is not by nature an expense of administering the estate postpetition, but that is not our concern.