| April 2008 issue: Your Name Here! The Bankruptcy Section is looking for volunteers to write a Case Analysis for an upcoming addition. The Case Analysis is typically based on Court of Appeals or Supreme Court decisions, although you can use your discretion to discuss relevant BAP, District Court and Bankruptcy Court decisions -- especially those interpreting BAPCPA's amendments to the Code. If you are interested or would like to learn more, please send an email to the Managing Editor. You can view the archive here. Your subscription You have been subscribed to this list as part of your membership in the Bankruptcy Section of the Commercial Law League of America. CLLA 70 East Lake Street, Suite 630 Phone: 312-781-2000 Newsletter design by: |
Education Opportunities and Sponsorships AvailableSponsor the CLLA programming at the NCBJ. Here’s why:
**Firm sponsorships are also available ($250 or more)** Call the CLLA office for more information (800)978.CLLA Sua SponteDeborah K. Ebner My Year in Review I have less than one week to go before my tenure as Chair concludes. It has been a good year for me. On a personal level, I have learned much. In addition to our steadfast regulars
on the Executive Council, I have met and worked with dozens of people who
I never would have known but for my chairmanship. I’ve met Kate Catanese
and Al Hochheiser from Ohio. I have met Judge Jeff Deller
from Pennsylvania. I’ve met Josh Greene from Chicago. I’ve
met David Leigh from Utah. Kate and Al worked on a teleseminar in February.
(Don’t
Close That File)Among other things, Josh writes the case notes
portion of our monthly newsletter and David works tirelessly with Peter Califano
on our legislative Committee.(legislative
committee filing) In addition to his role of NCBJ liaison to
the CLLA, Judge Deller chairs our new teleseminar committee that will have
its kick off program in October of this year. Case AnalysisFaye Feinstein Is a settlement ever really the end of litigation? As often happens in our field, litigation which is resolved by settlement rears its head again when the party which makes a settlement payment files a bankruptcy case within 90 days thereafter. Recently, against this backdrop, the Ninth Circuit BAP addressed two issues: whether a creditor's repayment of an alleged preferential transfer as a result of a settlement reinstated the creditor's claim against the guarantor which had been previously released, and whether attorneys' fees incurred postpetition in the ensuing litigation, arising from a prepetition contract, could be included in the creditor's prepetition unsecured claim. ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ Sua SponteMy Year in Review I have less than one week to go before my tenure as Chair concludes. It has been a good year for me. On a personal level, I have learned much. In addition to our steadfast regulars on the Executive Council, I have met and worked with dozens of people who I never would have known but for my chairmanship. I’ve met Kate Catanese and Al Hochheiser from Ohio. I have met Judge Jeff Deller from Pennsylvania. I’ve met Josh Greene from Chicago. I’ve met David Leigh from Utah. Kate and Al worked on a teleseminar in February. (Don’t Close That File)Among other things, Josh writes the case notes portion of our monthly newsletter and David works tirelessly with Peter Califano on our legislative Committee.(legislative committee filing) In addition to his role of NCBJ liaison to the CLLA, Judge Deller chairs our new teleseminar committee that will have its kick off program in October of this year. On an organizational level, I have also learned tremendous lessons. I now have first hand experience in aligning our organization with other professional organizations in order to make a difference. Projects with NCBJ, NABT and simple dialogues with NACBA and others keep us apprised of issues that demand the attention of seasoned professionals in the field. By virtue of these lines of communication, we become aware of proposed or potential changes in the law that may be harmful or counter productive. We have used our talent and have intervened. (judicial salary letter and the trustee letter and the Milavetz amicus.). By continuing to enlist bright energetic talent into our ranks and by continuing to maintain our current institutional relationships and at the same time build new ones, we are making a difference in our profession. These relationships will continue to bring energy to our section and ensure a never-ending list of problems to be addressed. As I mentioned when I assumed the chair, our section is unique. We are a talented group of bankruptcy professionals who can and do make a difference. I am hopeful that these personal and organizational relationships will prosper under the leadership of Chair-elect Steve Ungerman and everyone to follow. Thank you all for allowing me to serve. But for all of you, I would have accomplished nothing. Debbie Ebner Law Office of Deborah K. Ebner Case AnalysisFaye Feinstein Is a settlement ever really the end of litigation? As often happens in our field, litigation which is resolved by settlement rears its head again when the party which makes a settlement payment files a bankruptcy case within 90 days thereafter. Recently, against this backdrop, the Ninth Circuit BAP addressed two issues: whether a creditor's repayment of an alleged preferential transfer as a result of a settlement reinstated the creditor's claim against the guarantor which had been previously released, and whether attorneys' fees incurred postpetition in the ensuing litigation, arising from a prepetition contract, could be included in the creditor's prepetition unsecured claim. In In re SNTL Corp., 380 B.R. 204 (9th Cir. BAP 2007), the creditor had received approximately $163 million from an affiliate of the Debtor in satisfaction of an obligation in the amount of $180 million which had been guaranteed by the Debtor. Upon receipt of the money, the creditor released the Debtor from its guarantee. Thereafter, the affiliate insurance company filed a state court liquidation proceeding, and the Debtor filed its Chapter 11 case. The creditor was sued by the state court liquidating trustee for return of an alleged preferential transfer in the amount of the $163 million payment. The creditor paid $110 million to settle the preferential transfer claim. After making the settlement payment, the creditor filed a claim against the Debtor/guarantor's bankruptcy estate. The trustee for the liquidating trust appointed following confirmation of the Debtor's plan of reorganization objected to the claim, asserting that the Debtor/guarantor's liability, having been released prepetition, could not be revived. The trustee relied on the language of the settlement agreement which provided that if a court of competent jurisdiction "enters a final order, judgment, or other finding that…the payment …or any part [thereof]…constitutes a voidable or preferential transfer…then [claimant] may…declare this Agreement to be null and void…". The trustee argued, among other things, that the return of a portion of the alleged preference by agreement was not the result of a court order, and, therefore, the creditor could not void its release of the guarantor, and seek recovery from the guarantor's estate. The trustee also argued that the guarantee, having been released prepetition, could not be revived postpetition. The BAP disagreed with the trustee, and found that the state court order approving the settlement of the preference action did, in fact, constitute an order finding that the payment was subject to a preference claim within the meaning of the settlement agreement, allowing the creditor to invoke its remedies and reinstate the guarantee. The court also found that the provision of the settlement agreement allowing the creditor to invoke its other remedies following return of all or a portion of the settlement payment was triggered by settlement of the preference action. Further, separate from whether the agreement provided for reinstatement of the guarantee, the return of a preferential payment revives the liability of a guarantor as a matter of law, since "[a] preferential payment is deemed by law to be no payment at all." The court also held that the creditor held a contingent, prepetition claim against the guarantor as of the petition date, since the guarantee claim was subject to revival as soon as the state court liquidation began, giving rise to a possible claim by the state court liquidator for return of the preference, with a corresponding potential claim against the guarantor; therefore, the claim against the guarantor was an allowable prepetition claim, despite the fact that removal of the contingency occurred postpetition. Finally, the court addressed the issue which remained unresolved by the Supreme Court in Travelers Cas. & Sur. Co. of Am. V. Pacific Gas & Elec. Co., 127 S. Ct. 1199 (2007): can a creditor include attorneys' fees incurred postpetition as part of its prepetition unsecured claim? The court answered that claims for postpetition attorneys' fees "cannot be disallowed simply because the claim of the creditor is unsecured", and remanded to the Bankruptcy Court for a determination as to whether the creditor had satisfied the pre-requisites for allowance under its contract and under state law. The court found that fee provisions contained in prepetition contracts give rise to contingent claims for fees incurred postpetition in protecting a party's rights thereunder, and that such fees are within the contemplation of the parties. The court also found that Timbers does not apply to the allowance of fees and costs to unsecured creditors, and that the Bankruptcy Code does not expressly disallow postpetition fees as part of a prepetition, unsecured claim. Practice Points: The BAP gives us some clear tips on protecting our client's interests: (i) be careful when drafting claw-back provisions which would revive the underlying obligation and the obligations of guarantors. Many agreements provide for reinstatement of the debt only upon entry of a final order requiring return of the payment. The provision should be broader, providing for reinstatement upon settlement of even a threatened cause of action; (ii) include postpetition fees in your client's prepetition unsecured claim if the underlying agreement, or applicable non-bankruptcy law, support it. Although the BAP decision will not be binding in other circuits, its decision, and that of the Supreme Court in Travelers, pave the way for allowance of such fees. Faye Feinstein Upcoming Education Programs:
The Commercial Law League of America and it's Bankruptcy Section offers you the opportunity to catch up on everything from...Ethical considerations involved in fee setting to considerations to be made when mergers and other firm movement occurs, to ethics and professionalism in general.
How forensic accounting can assist you with issues surrounding asset valuation, misuse of funds or issues involving the employment of investigative accounting.
Bankruptcy Bootcamp with tips, updates and thoughts from all sides of the case (Debtors and creditors counsel and a Panel Trustee) a program geared specifically towards those in need of a brief of the basics and those in need of a refresher or even tips from trustees.
These programs are offered in conjunction with the CLLA's Annual Chicago Meeting but can be purchased individually ($85 each) as well. On behalf of the Bankruptcy Section you are cordially invited. Get CLE credits and a taste of what we are all about. We are actively involved in issues pertaining to the field of bankruptcy; we author and submit position papers, letters of support and call for attention to issues critical to the field. This is all in addition to our amicus filings. Your voice, your opinion counts and can be powerful. If you are interested in taking part and being heard consider joining the CLLA and its Bankruptcy Section at our May programs and as a member ($375.).
May 1st – 4th The 78th Chicago Meeting Thursday
Friday
Saturday
Bankruptcy Section MembersThe Section is again calling for member pledges to be applied towards the CLLA programming at the National Conference of Bankruptcy Judges - to be held this year on September 25th in Scottsdale, AZ. This is a great way for you as a section member to make a contribution towards this outstanding programming while at the same time highlighting your firm. Sponsorships begin at a base commitment level of thirty-five ($50.00.) which includes a listing on the morning presentation screensaver.
Copyright © 2008 Commercial Law League Bankruptcy Section Except as otherwise provided, the CLLA Bankruptcy Section newsletter permits any individual or organization to photocopy any article, comment, note, or other piece in this publication, provided that: (1) copies are distributed at or below cost; (2) the author and the CLLA Bankruptcy Section seal are prominently identified on the first page; (3) proper notice of copyright is affixed to each copy; and (4) all other applicable laws and regulations are followed. The CLLA Bankruptcy Section reserves all other rights. |
