When Worlds Collide: Article 2 of the Uniform Commercial Code and Chapter 11
Picture the scene: A vendor has just received word that its customer has filed chapter 11. The vendor put the customer on a cash-before-delivery basis and demanded assurances of performance. The vendor was successful in reducing the accounts receivable owed and avoiding preference liability in doing so.
The customer, now a chapter 11 debtor, calls and demands that the vendor continue to ship and resume credit terms. Upon the advice of counsel, the customer informs the vendor that it is required under provisions of the U.S. Bankruptcy Code to continue to ship goods and to the extend credit terms set forth in the contract.
The problem is that there is still a pre-petition accounts receivable balance, and the vendor is not certain the debtor will survive in chapter 11.
The Power to Disband Committees: A Difference of Opinion
In chapter 11 cases, the U.S. Trustee’s power is prominently showcased throughout the process of appointing official creditors (and equity) committees. The Code instructs that the U.S. Trustee “shall appoint a committee of creditors holding unsecured claims and may appoint additional committees … as the United States trustee deems appropriate.” While the U.S. Trustee controls much of the appointment process, bankruptcy courts do retain some statutory authority over the formation and monitoring of committees. Specifically, § 1102(a) provides that bankruptcy courts may (1) order the appointment of additional committees to ensure adequate representation, (2) order that a committee not be appointed in small business cases and (3) modify the membership of a committee.
To the Members of the ABI Unsecured Trade Creditors’ Committee:
As you may be aware, the Unsecured Trade Creditors’ Committee (the “Committee”) publishes a quarterly newsletter. As the current newsletter editors, Ms. Susan Trent and Mr. Grant Cartwright (the “Newsletter Editors”) have been tasked by Co-Chairs Mark Felger of Cozen O’Connor and Paul Hage of Jaffe Raitt Heuer & Weiss (the “Co-Chairs”), with recruiting authors to publish articles in said newsletter. This correspondence constitutes formal written demand for articles to be submitted by email for the Committee’s next newsletter no later than Wedesnday, August 24, 2016.
With regard to content and style, the articles may relate generally to any issue involving trade creditors. The articles are subject to the general requirements for articles published in an ABI publication. If you have any questions on an article topic or ABI’s style requirements, please contact the Newsletter Editors.
Please note that this demand letter may or may not have been written under threat. The Co-Chairs have a very particular set of skills, skills that they have acquired over long careers. Skills that make it a nightmare for the Newsletter Editors. If you submit articles for publication in the newsletter, that will be the end of it. The Co-Chairs will not look for the Newsletter Editors, they will not pursue the Newsletter Editors. But if you don’t, the Co-Chairs will look for the Newsletter Editors, they will find the Newsletter Editors, and there will be a reckoning. In case you were wondering, the Newsletter Editors are not familiar with the movie, “Taken” and are not Liam Neeson fans!
Please further note that neither the failure nor delay by the Newsletter Editors to exercise any of our rights or remedies, nor the acceptance of articles for the next newsletter or any portion thereof, will (or will be deemed or construed to) amend, modify, supplement, extend, delay, renew, terminate, waive, release, or otherwise limit or prejudice our rights and remedies (including, but not limited to, our right to receive or refuse the articles if done in any manner other than that specifically set forth herein) or any of the obligations owed. Any waiver of any such rights regarding forthcoming articles whatsoever is valid only if in writing signed by the Newsletter Editors, and then only to the extent in such writing specifically set forth.
We look forward to hearing from you.
The Newsletter Editors