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CREDITORS FAIL IN BID TO WIN REIMBURSEMENT NEW YORK — An 11-member committee of unsecured creditors in the WorldCom bankruptcy has lost its bid for reimbursement of legal fees arising out of an investigation by the Securities and Exchange Commission into potential insider trading related to the bankruptcy. Oral arguments on Tuesday did not reveal which companies the SEC is investigating in the matter. Daniel Golden of Akin Gump Strauss Hauer & Feld, arguing on behalf of the committee, asked Bankruptcy Judge Arthur Gonzalez of the Southern District of New York on Tuesday to reimburse committee members for organizing and handing over documents requested by the SEC in accordance with the reorganization plan that brought WorldCom out of bankruptcy. The total costs, Golden said, could reach into the hundreds of thousands of dollars. In July 2002, WorldCom filed for bankruptcy reorganization. The $104 billion bankruptcy was the largest in the nation’s history. The telecommunications giant emerged as MCI this spring, having shed $35 billion in debt. MCI was the long-distance arm that merged with WorldCom in 1998. The reorganization plan, which has the effect of a contract between the debtor and creditors, required MCI to reimburse committee members for legal fees arising out of “threatened or commenced” lawsuits targeting the members for actions they conducted while serving on the committee. After 20 minutes of arguments Tuesday, Judge Gonzalez, who also administers the Enron bankruptcy, agreed with MCI’s lawyer, Marcia Goldstein of Weil, Gotshal & Manges, and ruled that the relevant provisions in the reorganization plan did not cover the SEC investigation. — New York Law Journal KRYPTONITE TRADEMARK SURVIVES CHALLENGE NEW YORK — A federal judge has ruled that the owner of the Superman franchise, DC Comics, owns a valid trademark in “kryptonite” that can be protected from dilution and infringement by a bicycle lock company that adopted the name. Southern District Judge Richard Owen issued several summary judgment rulings favorable to DC Comics in DC Comics v. Kryptonite, 00 CV 5562, including a finding that kryptonite, “Superman’s one fatal flaw,” is a protectable symbol under the Lanham Act. The judge refused to dismiss a claim that DC breached a contract on limited trademark use it reached with Kryptonite Corp., leaving the bulk of that issue for trial. Kryptonite Corp. began using the name in 1972 for bike locks and other security devices. In 1976, it applied to register “Kryptonite bike locks” with the U.S. Patent and Trademark Office. In 1983, DC Comics and the company reached an agreement that allowed the limited use of three marks associated with the kryptonite name as long as they were only for security devices and accessories for two-wheeled vehicles. DC Comics claimed the express limitations in the agreement were breached in the 1990s when the Kryptonite Corp. applied for trademark applications for use of the kryptonite trademark for items other than locks and handlebar grips for bikes. — New York Law Journal PANEL: NO BANKRUPTCY FOR HEALTHY COMPANY PHILADELPHIA — A financially healthy company that is going out of business cannot file for bankruptcy for the sole purpose of taking advantage of a provision of the Bankruptcy Code that sharply limits the amount a landlord may recover for termination of a long-term lease, the Third Circuit U.S. Court of Appeals has ruled. In its 26-page opinion in In re Integrated Telecom Express, a unanimous three-judge panel found that the Delaware Bankruptcy Court had erred by rejecting the landlord’s motion to dismiss the debtor’s Chapter 11 filing on the grounds that it could not have been filed in good faith since the company had plenty of cash. The ruling reverses decisions by both the bankruptcy court and the district court that said Integrated had the right to pursue a Chapter 11 filing because it “was losing a lot of money” and “was experiencing a dramatic downward spiral” in 2001 and, as a result, had gone “out of business.” Those findings were not enough to show that the debtor was in “financial distress,” the Third Circuit found, because Integrated “was highly solvent and cash rich at the time of the bankruptcy filing.” Third Circuit Judge D. Brooks Smith found that the Bankruptcy Code does not allow for the filing of a Chapter 11 petition “by a financially healthy debtor, with no intention of reorganizing or liquidating as a going concern.” Smith, who was joined by Senior Third Circuit Judges Edward Becker and Morton Greenberg, found that Integrated had “no reasonable expectation” that its Chapter 11 proceedings would “maximize the value of the debtor’s estate for creditors.” — The Legal Intelligencer

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