Labor Day weekend is generally anticipated as offering some final, end-of-summer respite. For the transportation community, however, this past Labor Day weekend (September 35, 2016) was anything but restful. Just before the start of the holiday weekend, Hanjin, Korea's largest containership company, commenced rehabilitation proceedings in South Korea. That proceeding essentially halted Hanjin's vessels bound for the U.S., thereby stranding millions of dollars of goods at sea, until Hanjin's bankruptcy was recognized by a U.S. court in a Chapter 15 bankruptcy proceeding. Thus, instead of enjoying a peaceful holiday weekend, cargo owners and transportation companies alike were scrambling to find a way to offload their goods without violating the automatic bankruptcy stay.

The days following the bankruptcy filing were fast-paced and eventful. At the first hearing on the day after Labor Day itself, lawyers packed a Newark, New Jersey, courtroom trying to develop a creative way to get their clients' goods offloaded before the window on the allimportant Christmas season passed. Ultimately, and notwithstanding the competing interests of many parties (such as cargo owners, terminal operators, equipment providers, and third-party logistics operators), the parties were able to develop a protocol, which the Court approved, to allow Hanjin's vessels to berth and the goods to be offloaded and delivered. While that protocol was a start, it was far from smooth sailing, and parties returned to that Newark courtroom many times in the weeks and months that followed. Last month, the Court granted final recognition of the Korean proceeding in the U.S., thus essentially concluding the proceedings in the U.S., although various issues continue to smolder.

Rather than recount the occurrences at each hearing, which have been widely reported, this article provides a look back at a few of the lessons learned from both a bankruptcy and transportation perspective. While certainly not exclusive, these tips demonstrate the importance of careful planning and on-theground legal representation in the event of a bankruptcy of another international transportation conglomerate.

Bankruptcy considerations:

  • Get There. It is imperative to have boots on the ground in the bankruptcy forum. In the case of Hanjin, at virtually every hearing, something was discussed or decided that was not originally anticipated to go forward. Having counsel in the courtroom is imperative in these fast-paced cases.
  • Get Foreign Bankruptcy Representation. In the case of international bankruptcies, having counsel in foreign forums is just as important as having local counsel in the United States. The particular rules and procedures of the foreign court are, for lack of a better word, often "foreign" to U.S. practitioners. In addition, there is value added in avoiding the delay caused by waiting for legal developments to filter through to the U.S.
  • Get Organized. In foreign bankruptcies, claims are submitted to the foreign court. That process, especially in Hanjin, is much more cumbersome than the typical U.S. proof of claim process. Among other things, the claim documents had to be translated into Korean and submitted with untraditional supporting documents, thereby taking significant time and expense to complete.
  • Get Involved. It is critical that you talk with others in your industry, as there is power in numbers. The protocol developed in the Hanjin case is a vivid illustration of parties coming together to establish a procedure that was in all of their best commercial interests.

Transportation considerations:

  • Get Critical. It is increasingly important to scrutinize the solvency of the carrier who is carrying your goods or with whom you contracted to carry another's goods. Both public and private means of obtaining information about a carrier's solvency are available. Of course, at the first sign of payment delay or operational instability, you should take action.
  • Get Diversified. Conventional wisdom holds that Hanjin will not be the last international containership bankruptcy. It is therefore important that you diversify your ocean carrier providers so that, in the event of bankruptcy, your goods are not stuck with one party.
  • Get Contractual Safeguards. Insist on contractual language that protects you in the case of bankruptcy. For example, many shipping contracts contain "minimum quantity commitments" (MQCs). It would be wise to demand that such MQCs are excused if the shipper ceases operations or terminates its shipping contracts. Similarly, in light of alliances and slot sharing agreements, shippers and ocean transportation intermediaries should require ocean carriers to transport a certain percentage of loads on the carrier's own vessels.
  • Get Involved. Join a trade group that will advocate on your behalf in a bankruptcy proceeding. For example, Benesch represented the Intermodal Association of North America in order to obtain a court order preventing Hanjin from assessing per diem while it was unable or unwilling to accept the return of empty containers.

We hope that these lessons will allow the transportation community to enjoy the next Labor Day (and all other holidays) should another international transportation conglomerate file bankruptcy at an inopportune time.