Editor's Note: ABI's latest video podcast features ABI Deputy Executive Director Amy Quackenboss talking with David R. Kuney of Whiteford Taylor Preston (Washington, D.C.). Kuney, author of ABI's Retail and Office Bankruptcy: Landlord/Tenant Rights, talks about the rapidly shifting landscape of the retail world and issues for practitioners to be aware of in handling landlord or tenant rights. Listen to the podcast here. 

Retail bankruptcies are at an all-time high, and many familiar names are among the filers. As major tenants like Toys “R” Us or Sears leave hundreds of square miles of commercial real estate unoccupied across the country, landlords are bound to struggle to replace them. For unlucky fee-holders unable to replace these tenants and remain profitable, following sinking anchor-tenants to the bankruptcy courts may be the best solution. Once a landlord files for bankruptcy protection, what options will the trustee have in dealing with their remaining tenants? In turn, what options will these remaining tenants have after the petition date?

In Franchise Servs. of N. Am. v. U.S. Trs. (In re Franchise Servs. of N. Am.), the Fifth Circuit Court of Appeals, on direct appeal from the U.S. Bankruptcy Court for the Southern District of Mississippi, affirmed the dismissal of a bankruptcy case where the debtor company failed to obtain the requisite consent from shareholders as required under its corporate charter. The opinion, which may have significant impact upon pre-filing negotiations with equity constituencies, is perhaps more notable for the issues that the Court of Appeals declined to address, including (1) whether the lack of consent deprives the bankruptcy court of jurisdiction and (2) whether “blocking rights” or “golden shares” are prohibited under federal law.

When a firm files for bankruptcy, someone loses a financial investment. Whether the filing is chapter 7 or chapter 11, creditors may get only a portion of a return (or none) of their investment, and investors may well lose their entire investment. However, filing for bankruptcy does not mean that a firm goes out of business.

For example, Bridgetech Holdings filed for chapter 11 on July 6, 2011, with zero assets on the balance sheet and $10 million of liabilities (all current). It had a $58 million total retained deficit on zero revenues over its existence. Bridgetech continued operations, eventually changing its name to Global Seafood Holdings, and on its Dec. 31, 2014, 10-K had $52 million in retained deficit. Bridgetech still had earned no revenues but continued operations through private financing. Predicting bankruptcy is difficult, if the track record of certified public accountant (CPA) firms is an indicator: