Keep Your Recission Rights Close: The Intersection Between Bankruptcy Law and Copyright Law

Key Takeaways

• Debtors should schedule all their legal interests, including contingent ones. Copyright termination rights, even those that cannot be exercised for decades, are property of a debtor's bankruptcy estate under section 541 of the Bankruptcy Code, and failing to schedule them can have lasting consequences. If a contingent interest is never scheduled, administered, or formally abandoned in a Chapter 7 case, it remains property of the estate indefinitely, even after the case is closed.

• Anti-alienation provisions in copyright law won't save you. The Eleventh Circuit held that section 541(c) of the Bankruptcy Code overrides the Copyright Act's more general restrictions on transferring or limiting an author’s termination rights, sweeping those rights into the estate regardless.

• Multi-author works face heightened risk. Because a majority of authors must join in a copyright termination, even one author's prior bankruptcy case and failure to address his termination rights in that case can defeat the entire group's attempt to reclaim their works.

• Act now if facing similar termination claims. Clients defending against copyright termination claims in the Eleventh Circuit should evaluate whether the claimant previously filed for bankruptcy and whether the claimant’s termination rights were addressed in that bankruptcy, as Lil'Joe provides strong authority that unaddressed termination rights in a prior bankruptcy will preclude assertion of those rights.

The Eleventh Circuit’s recent decision in Lil’Joe Records, Inc. v. Ross et al., Case No. 24-13978 (11th Cir. June 2, 2026), reminds bankruptcy attorneys of the importance of scheduling and dealing with all of a debtor’s interests, even those that may be contingent or something that a debtor never thought it would ever have to use.

In this case, a rap group, 2 Live Crew, recorded a series of albums in the 1980s and assigned the copyrights to its record producer. The record producer later went bankrupt and sold all of its interests to Lil’Joe Records. However, trouble arose when members of 2 Live Crew decided to rescind their copyright assignments in the albums.

Under copyright law, specifically section 203 of the Copyright Act, authors (or a narrowly defined set of their successors-in-interest, such as an author’s close family members, executor, administrator, personal representative, or trustee) can rescind their grants of copyrights to a third party and regain their interests in the copyrighted work by serving a notice of rescission within a designated statutory period—no earlier than thirty-five (35) years after the grant of the copyright. If a work has multiple authors, a majority of them must exercise their rescission rights in order to effectively rescind the grant.

Here, three (3) of the four (4) members of 2 Live Crew timely sent a notice of termination to Lil’Joe Records, alleging that 2 Live Crew had exercised its termination rights and regained the albums. However, one of the three members—Ross—had filed a voluntary petition for Chapter 7 bankruptcy in 2000, more than a decade before he could have attempted to exercise his rescission rights. The parties agreed that Ross’s rescission rights were not scheduled in his bankruptcy case and were never part of any disposition in the bankruptcy case. Lil’Joe Records contended that Ross’s bankruptcy meant he no longer owned his termination rights and thus could not use them to terminate 2 Live Crew’s grant of the copyrights.

The Eleventh Circuit agreed with Lil’Joe Records. The court explained that Section 541 of the Bankruptcy Code defines the property of the debtor’s estate as “all legal and equitable interests” of the debtor, including a debtor’s contingent interests. It also found that federal bankruptcy law sweeps termination interests into a debtor’s estate under Section 541(c) “notwithstanding any provision in...applicable non-bankruptcy law” that “restricts or conditions transfer of such interest by the debtor.” Under federal bankruptcy law, state law—or here, federal copyright law—may determine the nature and extent of a debtor’s interest in property, but the Bankruptcy Code defines to what extent that interest is property of the estate.

While 2 Live Crew argued that Section 203 of the Copyright Act contains anti-alienation language that does not allow a living author to transfer his termination rights—even to a bankruptcy estate—the Eleventh Circuit found that this would not change its analysis. The Copyright Act’s alleged anti-alienation language is a general law, which is superseded by Section 541(c) of the Bankruptcy Code’s specific exception to such general prohibitions against alienation.

Accordingly, the Eleventh Circuit found that Ross’s termination rights—a contingent legal right that Ross held in 2000 even though he could not exercise them yet—were property of his bankruptcy estate. And, according to the Eleventh Circuit, the Bankruptcy Code is clear: if property of the estate in a Chapter 7 bankruptcy case is not scheduled, administered, formally abandoned, or otherwise disposed of by court order, it remains property of the estate, notwithstanding the closure of the case. Because Ross’s termination rights were never scheduled, administered, formally abandoned, or otherwise addressed in his Chapter 7 case, they still remained property of Ross’s estate and did not revert to Ross even after his case was closed.

Therefore, 2 Live Crew’s attempted rescission of their copyright grant was ineffective because Ross could not properly exercise his termination right, and the other two members’ exercise of their termination rights was insufficient to constitute the “majority” of authors needed to terminate the grant of a copyright in a multi-author work.

The Eleventh Circuit explicitly kept this holding narrow, stating that it would not address the proper treatment of termination rights in bankruptcy or what Ross—and his heirs—would need to do to exercise these termination rights.

Takeaways for Practitioners

This decision should give pause to debtors’ attorneys who routinely work with clients in creative fields. While these clients might not immediately think of termination rights or other contingent interests as property, this decision underscores the importance of: (1) reviewing a debtor’s past projects and work history to identify contingent interests; (2) scheduling these interests in the bankruptcy case; and (3) explicitly disposing of them so that the former debtor does not unknowingly forfeit the ability to exercise valuable rights to his or her own works. Creditors and their attorneys can use this decision to push for greater sales or dispositions of these rights as assets of the debtor which can be used to repay creditors or which can be sold to creditors to recover on their claims. 

Takeaways for Clients

Lil'Joe has real-life repercussions for entertainment industry clients. Any client facing copyright termination claims where the claimant previously filed for bankruptcy should take note. In cases where a district court has relied on the initial Lil'Joe decision to allow termination claims to proceed, despite the claimant's prior bankruptcy, the Eleventh Circuit's reversal now provides strong authority to challenge those claims. The Eleventh Circuit's holding that a prior bankruptcy precludes a claimant from asserting termination rights and recapturing copyrights is directly applicable to pending and future cases raising similar issues. Clients in this position should work with counsel to revisit any adverse rulings on this issue with the district court, as Lil'Joe now provides controlling authority in the Eleventh Circuit that termination claims cannot survive where the claimant's bankruptcy estate previously encompassed the relevant copyrights.

Attorney Richard Busch and his team are actively involved in cases where Lil'Joe will have an impact, including a case for Bridgeport Music, Inc., and its related entities (“Bridgeport”). Richard and his team are representing Bridgeport in an action currently pending in federal court in the Northern District of Florida, styled Clinton v. Boladian, et al., Case No. 4:25cv108-MW/MJF.  In that case, George Clinton sued Bridgeport, asserting numerous causes of action. Bridgeport successfully moved to dismiss several of the claims. The district court, however, relying on the initial decision in Lil’Joe, declined to dismiss the termination claims, even though Clinton had filed for bankruptcy in 1984.  Bridgeport cited the very same authorities now relied upon by the Eleventh Circuit in reversing the lower court and finding that the bankruptcy precluded the plaintiff from asserting termination rights and recapturing the copyrights. With Lil'Joe on all fours, and the Northern District being in the Eleventh Circuit, Busch and his team will now revisit the issue with the district court.