Sua Sponte
Judith Greenstone Miller
Raymond & Prokop, P.C.
jmiller@raypro.com

A Wintry Mix. . . . New Orleans, NextWave and Other Musings.

After much pondering over a single topic of interest to present for this month’s Sua Sponte, I finally decided that a potpourri of subjects would be much more in keeping with, and reflective of, the wintry mix that has descended upon many of us. So, grab something warm and get cozy as you peruse through my musings for the month!

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Case Analysis
In Appropriate Circumstances, a Settlement Agreement Can Also Act as an Informal Proof of Claim in a Chapter 11 Bankruptcy Case

Brian S. Behar
Behar, Gutt & Glazer, P.A.
bsb@bgglaw.net

Summary: Creditors should always be mindful of the requirement to file a formal proof of claim in any bankruptcy proceeding, or face the likelihood that the creditor’s claim will be disallowed. Within the context of a Chapter 11 proceeding, however, courts continue to develop the concept of an “informal” proof of claim, whereby certain facts and circumstances may rise to the level sufficient to put the debtor on notice of the claim, thereby allowing the creditor to hold a valid claim notwithstanding the creditor’s failure to file a formal proof of claim. In In re First American Healthcare of Georgia, Inc., 2002 WL 31938723 (Bankr. S.D. Ga. Aug. 2, 2002), the Bankruptcy Court considered whether a settlement agreement entered in the bankruptcy case and approved by the Bankruptcy Court can constitute an informal proof of claim.

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Case Law Update
Catherine E. Vance, Esq.
Email: vance76@earthlink.net
(614) 336-3861

Bankruptcy Professionals/Indemnification. Retention agreement may provide for indemnification of financial advisor for its negligence; because proper analytical process of determining negligence focuses on process that led to questionable result, rather than result itself, estate is sufficiently protected. Court cautioned, however, that indemnification from grossly negligent acts that contribute only in part to damage, or with respect to debtor’s allegations of financial advisor’s breach of contract, would be unreasonable. United Artists Theatre Co. v. Walton (In re United Artists Theatre Co.), 315 F.3d 217 (3d Cir. 2003).

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Sua Sponte

A Wintry Mix. . . . New Orleans, NextWave and Other Musings.

After much pondering over a single topic of interest to present for this month’s Sua Sponte, I finally decided that a potpourri of subjects would be much more in keeping with, and reflective of, the wintry mix that has descended upon many of us. So, grab something warm and get cozy as you peruse through my musings for the month!

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Those who recently attended the Commercial Law League of America’s Winter Conference in New Orleans were treated to good Cajun food, great company and terrific educational and networking opportunities. The Bankruptcy Section sponsored two programs at the Winter Conference: a program on “hot and emerging” topics that was geared to bringing the most current state of the bankruptcy law to the audience, and a program jointly sponsored with the Creditors Rights Section on Revised Article 9 of the Uniform Commercial Code, presented by Professor J.J. White from the University of Michigan Law School and a renowned expert and legal scholar in this area. From all accounts, the programs were well attended and well received. Many of the national committees also met in conjunction with the Winter Conference. It was a time of analysis, discussion and planning for the future.

* * * * *

The Nominating Committee for the Bankruptcy Section was also announced at the Section’s Executive Council Meeting at the Winter Conference. This year the Nominating Committee will be chaired by Harry Greenfield; the members of the committee will also include Elizabeth Doucet, Joseph Braunstein, Brian Behar and Milton Goldfarb. The Nominating Committee will conduct its first meeting at the Midwest Regional Conference in Chicago, Illinois, beginning on April 10, 2003. If you are interested in becoming a member of the Executive Council or being considered for an executive position, please advise Harry Greenfield of your interest in writing, consistent with the requirements of the Section’s by-laws, prior to the Midwest Regional Meeting.

* * * * *

Unfortunately, despite all hopes that the major bankruptcy legislation was dead and gone “forever,” it still appears that Congress will seek to introduce similar legislation again this session even though it failed during the last three terms of Congress (see Washington Hot News). There is a small glimmer of hope, however, that the bankruptcy community may be able to persuade Congress that such legislation is simply not needed at this time. On March 4, 2003, at the urging of Representative Sensenbrenner (R. Wis.), the House Judiciary Committee on Commercial and Administrative Law is conducting hearings on the continued need for bankruptcy reform. In view of the fragile condition of the economy and the tremendous increase in bankruptcy filings nationally, it is hoped that these hearings will convince Congress that an overhauling of the bankruptcy system is not needed and is likely to create many negative consequences. As we were recently encouraged by Bill Brandt in his keynote speech at the League’s breakfast at the National Conference of Bankruptcy Judges last fall in Chicago, if you have an opinion on the need for such legislation, this would be a good time to let your voice be heard by your congressional representative.

* * * * *

On January 27, 2003, the United States Supreme Court issued an 8-1 decision in Federal Trade Commission v. NextWave Personal Communications., Inc., 537 U.S. ___, 123 S.Ct. 832, 154 L. Ed. 2d 863 (2003), ruling that the filing of a bankruptcy petition by NextWave prevented the FCC from terminating and taking back valuable wireless spectrum licenses that NextWave had purchased in an auction, but for which it had failed to pay the balance owed to the government under promissory notes. NextWave had bid $4.7 billion for the licenses in 1996 under a program aimed at providing opportunities for smaller companies to enter the telecommunications industry. NextWave had executed agreements giving the FCC a first lien on, and security interest in, all of its rights and interest in the licenses. The sale of the licenses was also conditioned on the FCC receiving full and timely payment of all monies due under the licenses, and failure to comply with this condition would result in their automatic cancellation.

After NextWave made its initial down payment for the licenses, the bottom fell out of the telecom industry and NextWave filed bankruptcy. NextWave suspended its payments to the FCC and its other creditors upon the filing of the bankruptcy. NextWave filed its chapter 11 plan of reorganization providing for a single lump-sum payment to the FCC to satisfy the entire remaining $4.3 billion obligation for the purchase of the licenses, including interest and late fees. The FCC objected to the plan contending that the licenses had been automatically canceled when the company missed its first payment deadline in October 1998. Simultaneously with the filing of this objection, the FCC revoked the licenses and announced they were “available for auction under the automatic cancellation provisions” of the FCC’s regulations. Public Notice, Auction of C and F Block Broadband PCS Licenses, 15 FCC Red. 693 (2000). Thereafter, the FCC re-auctioned them, receiving bids approximating $16 billion from other companies.

NextWave petitioned the bankruptcy court on an emergency basis to declare the FCC’s cancellation of the licenses “null and void” under various provisions of the Bankruptcy Code (“Code”). The Bankruptcy Court granted relief to the company, declaring the action of the FCC to be arbitrary. In re NextWave Personal Communications, Inc., 244 B.R. 253, 257-258 (Bankr. S.D.N.Y. 2000). The FCC appealed to the Second Circuit Court of Appeals on a petition for writ of mandamus. The Second Circuit reversed the decision of the Bankruptcy Court and “held that ‘[e]xclusive jurisdiction to review the FCC’s regulatory action lies in the courts of appeals’ under 47 U.S.C. § 402, and that since the re-auction decision was regulatory, proclaiming it to be arbitrary was ‘outside the jurisdiction of the bankruptcy court.’” FCC v. NextWave Pers. Commun., Inc., 537 U.S. ___, citing In re Federal Communications Commission, 217 F.3d 125, 139, 136 (2d Cir. 2000). The Second Circuit also noted that “NextWave remains free to pursue its challenge to the FCC’s regulatory acts.” Id. at 140.

NextWave subsequently filed a petition with the FCC seeking reconsideration of the license cancellation. In the Matter of Public Notice DA 00-49 Auction of C and F Block Broadband PCS Licenses, Order on Reconsideration, 15 FCC Red. 17500 (2000). After denial of this petition, NextWave appealed to the Court of Appeals for the D.C. Circuit pursuant to 47 U.S.C. § 402(b), asserting that the cancellation of the licenses by the FCC was arbitrary and capricious, contrary to law, and in violation of the Administrative Procedures Act, 5 U.S.C. § 706 and the Code. The Court of Appeals agreed and granted NextWave’s appeal, holding that the FCC’s cancellation of the licenses violated Section 525 of the Code, and stating:

Applying the fundamental principle that federal agencies must obey all federal laws, not just those they administer, we conclude that the Commission violated the provision of the Bankruptcy Code that prohibits governmental entities from revoking debtors’ licenses solely for failure to pay debts dischargeable in bankruptcy.

254 F.3d 130, 133 (D.C. Cir. 2001). The FCC thereafter appealed to the Supreme Court, and certiorari was granted. 535 U.S. 904 (2002).

Justice Scalia, writing for the majority of the Court, relied on Section 525 of the Code in rendering the opinion, by focusing on the specific words of this section that bar governmental agencies from canceling licenses of debtors in bankruptcy “solely because” they have not made their payments. Section 525(a) of the Code provides, in relevant part:

[A] governmental unit may not . . . revoke . . . a license . . . to . . . a person that is . . . a debtor under this title . . . solely because such . . . debtor . . . has not paid a debt that is dischargeable in the case under this title . . . .

11 U.S.C. § 525(a) (emphasis added).

The FCC argued that termination should be permitted in this case on the basis of there being a “valid regulatory purpose,” and not solely because of nonpayment by the debtor. In addition, the FCC asserted that NextWave’s obligations were not “dischargeable” debts within the meaning of the Code because it is beyond the jurisdictional authority of bankruptcy courts to alter or modify regulatory obligations. Finally, the FCC contended that a contrary interpretation would make Section 525 conflict unnecessarily with the Communications Act. The Supreme Court rejected and dismissed all of these arguments.

First, the Court found the motive of the FCC in revoking the licenses to be “irrelevant,” and simply held that the government could not trump the provisions of the Code, and further that the Code did not contain any exceptions to the express prohibitions contained in Section 525. Justice Scalia wrote:

Some may think . . . that there ought to be an exception for cancellations that have a valid regulatory purpose. . . . Besides the fact that such an exception would consume the rule, it flies in the face of the fact that, where Congress has intended to provide regulatory exceptions to provisions of the Bankruptcy Code, it has done so clearly and expressly, rather than by a device so subtle as denominating a motive a cause.

Id.

Second, Justice Scalia dismissed the government’s argument regarding dischargeabilty. In reaching this conclusion, the Court stated that (i) the issue of dischargeability is not tied to jurisdictional authority; (ii) a preconfirmation debt is dischargeable unless it falls within an express exception to discharge, which did not apply in this instance; (iii) Section 1141(d) of the Code provides that confirmation of a plan discharges the debtor from any debt that arose prior to confirmation unless it is excepted under Section 523 (not applicable in this case); and (iv) the lower court did not seek to modify or discharge the debt of the FCC, but merely to prevent the government from violating Section 525 through the cancellation of the licenses for the debtor’s failure to pay dischargeable debts.

Finally, Justice Scalia analyzed the provisions of the Communications Act and concluded that they did not unnecessarily conflict with Section 525 of the Code. The FCC had argued that prohibiting the cancellation of the licenses obstructed the functioning of the auction provisions of the Communications Act. See 47 U.S.C. § 309(j). In dismissing this argument, the Court held that “administrative preferences” of the FCC, not otherwise expressly contained in the Act, could not serve as a basis for denying the debtor rights that were expressly provided for by the plain terms of a law, in this case being those rights set forth in Section 525 of the Code.

An opinion, concurring in part and in the judgment, was filed by Justice Stevens. Like the majority of the Court, Justice Stevens concluded that the language setting forth the general rule in Section 525(a) of the Code “gives priority to the debtor’s interest in preserving control of an important asset of the estate pending the completion of the bankruptcy proceedings.” Justice Stevens did not believe, however, that such an application in this case created an unfair result to the FCC, either as a regulator or as a creditor. In contrast to the majority, however, Justice Stevens seemed to suggest that there may be “some circumstances” where the government “may” cancel such a license for reasons not covered by Section 525(a) of the Code. To support this position, Justice Stevens cited and relied on the legislative history contained in the Senate Report that indicated that this section “does not prohibit consideration of other factors, such as future financial responsibility or ability, and does not prohibit imposition of requirements such as net capital rules, if applied nondiscriminatorily.” S. Rep. No. 95-989, p. 81 (1978).

Justice Breyer filed a dissenting opinion. He criticized the majority’s exclusive reliance on the literal meaning of the statutory words without consideration of the purpose behind the statute. In essence, he believed that the interpretation adopted by the majority would prohibit the government from ever enforcing a lien on a license that it has sold on an installment plan to a buyer who has gone bankrupt and failed to pay for it. Rhetorically, the justice queries why the government should be treated any differently from the private commercial seller under similar circumstances. According to Justice Breyer, looking at the title, language, history and purpose of the statute, one must conclude that it does not create an absolute prohibition on such action, but only that which is discriminatory. Because the majority found the language of Section 525(a) to be clear and unambiguous, general rules of statutory construction and the posture of this court, as evidenced in numerous decisions issued over the last decade, foreshadowed the result of the majority of the Court, that preclude any analysis of the underlying purposes or history behind the legislation.

The decision has been hailed as a victory for the integrity of the bankruptcy system, according to NextWave’s co-counsel, G. Eric Brunstad, Jr., a partner in the Hartford, Connecticut office of Bingham McCutchen. According to Mr. Brunstad: “The Court is saying we are not going to be creating policy exceptions from bankruptcy protection for government agencies. If the FCC could have done this here, then the [Internal Revenue Service] could also in other cases.” Tony Mauro, American Lawyer Media (01-28-2003), quoting G. Eric Brunstad, Jr. Mr. Brunstad will be addressing the NextWave case and other regulatory issues confronting debtors at the League’s educational program at the National Conference of Bankruptcy Judges to be held in San Diego, California on October 16, 2003 from 2:00 p.m. to 5:00 p.m. We look forward to you joining us for this wonderful educational opportunity.

* * * * *

The success of an organization depends not only on its leadership, but also on the commitment and participation of its members. The Executive Council and its Executive Committee are committed to providing strong leadership and direction for the future of the Bankruptcy Section. To continue the vitality and success of the League and the Section, it is important that the members participate, support and become involved in the activities and functions of the organization. Please let us know if you want to get involved – there are loads of opportunities to get active – you can write for the newsletter, you can assist in analyzing and taking positions on legislation, you can help plan educational programs, you can help with a membership drive – the opportunities are endless! Please consider taking the challenge to get involved – it’s certain to broaden your horizons, provide networking and business connections, keep you at the cutting edge of your career, and provide a great diversion from the “wintry mix.” I look forward to seeing you in Chicago at the Midwest Regional Conference.

Judith Greenstone Miller
Raymond & Prokop, P.C.
26300 Northwestern Highway
4th Floor - P.O. Box 5058
Southfield, MI 48086-5058
Phone: 248-357-3010
Fax: 248-357-2720
jmiller@raypro.com
www.raypro.com

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Case Analysis

In Appropriate Circumstances, a Settlement Agreement Can Also Act as an Informal Proof of Claim in a Chapter 11 Bankruptcy Case

Summary: Creditors should always be mindful of the requirement to file a formal proof of claim in any bankruptcy proceeding, or face the likelihood that the creditor’s claim will be disallowed. Within the context of a Chapter 11 proceeding, however, courts continue to develop the concept of an “informal” proof of claim, whereby certain facts and circumstances may rise to the level sufficient to put the debtor on notice of the claim, thereby allowing the creditor to hold a valid claim notwithstanding the creditor’s failure to file a formal proof of claim. In In re First American Healthcare of Georgia, Inc., 2002 WL 31938723 (Bankr. S.D. Ga. Aug. 2, 2002), the Bankruptcy Court considered whether a settlement agreement entered in the bankruptcy case and approved by the Bankruptcy Court can constitute an informal proof of claim.

Facts: In First American Healthcare, the Debtor had filed a Chapter 11 bankruptcy case in February 1996, and its Plan of Reorganization was confirmed in October 1996. Prior to confirmation, the Debtor filed a moved for approval of a settlement agreement between the Debtor and its CEO. The Motion indicated that the settlement was in the best interest of creditors because the settlement resolved real and potential litigation between the CEO and the Debtor, and that among the numerous claims being settled were unspecified indemnification claims. The Court approved the settlement agreement one day prior to confirmation.

The CEO’s claims arose out of two separate pre-petition lawsuits. Both suits asserted breach of contract, fraud, and other types of causes of action. Both the Debtor and the CEO were named as defendants in both suits.

Pursuant to the Debtor’s bylaws, the Debtor was obligated to indemnify its officers in the event that they were sued for acts committed in the course of their employment. As a result of the bylaws, the Debtor initially undertook its own defense, as well as to pay for the CEO’s defense.

The Plan of Reorganization provided for a “Creditor Payment Fund” to satisfy allowed claims of Class IV unsecured creditors. The Class IV creditors were broadly defined to include, but not limited to, claims for indemnification reimbursement or contribution by any officers or directors. The Plan stated that a Class IV creditor was required to file a proof of claim prior to the bar date.

The Plan also incorporated a certain paragraph of the settlement agreement that provided for future indemnification of the Debtor’s officers for any legal fees and expenses, or settlement amounts and damages.

Shortly after confirmation, the Debtor merged with another company, and subsequent mergers of the successor company transpired thereafter. As a result of these subsequent mergers, the continual defense in the two lawsuits of the CEO ceased.

One of these lawsuits was ultimately settled by a payment out of the Creditor Payment Fund. The other lawsuit was settled by the CEO making the payment out of his personal funds. In both instances, the CEO sought indemnification for legal fees and for payment of the settlement of the second lawsuit. The CEO failed to file a proof of claim.

Discussion: The initial question addressed by the Bankruptcy Court was whether the CEO’s failure to file a formal proof of claim by the bar date precluded him from receiving any distribution under his indemnification and/or contribution claims. Indeed, the Court noted that the Plan expressly required that Class IV creditors file formal proofs of claim.

The Bankruptcy Court recognized the general rule that a failure to file a proof of claim by the bar date is fatal to a creditor’s right of recovery. However, Courts have developed the concept of an “informal” proof of claim, where a creditor takes action that apprises the Court and parties in interest of the existence, nature, and amount of the claim (if ascertainable), and makes clear the claimant’s intention to hold the Debtor liable for such claim.

In finding that an informal proof of claim existed here, by virtue of the settlement agreement, the Court noted that the settlement agreement was specifically contemplated in the Chapter 11 Plan. In addition, the Court found that this settlement agreement was a critical lynchpin in bringing the Plan to confirmation, and likewise put the Debtor on actual notice of the CEO’s claim.

The Bankruptcy Court found that the settlement agreement served as adequate notice to the Debtor of the CEO’s indemnification and/or contribution claims, and the CEO’s intention to receive payment on those claim. Under these circumstances, the Court found that the filing of a formal proof of claim would be superfluous.

In addition, the Court bound the Debtor to its representation in the Motion to approve the settlement agreement, that approval of the settlement agreement would facilitate confirmation and ensure a higher dividend to creditors. As a result, the Bankruptcy Court found that the settlement agreement served as an adequate informal proof of claim.

Finally, the Bankruptcy Court found that even if there was some ambiguity as to whether the Debtor intended to waive any requirement of the CEO to file a proof of claim, the Plan of Reorganization and the Motion to approve the settlement, having been drafted by the Debtor, would be construed against the Debtor and in favor of the CEO.

As a result, the Bankruptcy Court allowed the CEO full recovery and reimbursement of his legal fees and the settlement amount that he had paid out of personal funds.

Brian S. Behar
Behar, Gutt & Glazer, P.A.
Aventura, FL 33180
(305) 931-3771
bsb@bgglaw.net

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Case Law Update

Bankruptcy Professionals/Indemnification. Retention agreement may provide for indemnification of financial advisor for its negligence; because proper analytical process of determining negligence focuses on process that led to questionable result, rather than result itself, estate is sufficiently protected. Court cautioned, however, that indemnification from grossly negligent acts that contribute only in part to damage, or with respect to debtor’s allegations of financial advisor’s breach of contract, would be unreasonable. United Artists Theatre Co. v. Walton (In re United Artists Theatre Co.), 315 F.3d 217 (3d Cir. 2003).

Conversion. Deed of trust provided assignment to lender of causes of action relating to property. Debtors discovered construction defects and sued contractor. Law firm settled the litigation and distributed proceeds to debtors after deducting fees and costs. Debtors subsequently defaulted on mortgage and sought bankruptcy protection. Lender sued law firm for conversion of funds law firm retained. Held, language of assignment stating lender “may, at its option” pursue rights under assignment did not preclude debtors from pursuing damage claims, and language of assignment limited Lender’s recovery to amount, which was zero because debtors were not in default at the time. Kasdan, Simonds, McIntyre, Epstein & Martin v. World Savings & Loan Ass’n. (In re Emery), 2003 U.S. App. LEXIS 1334 (9th Cir. Jan. 28, 2003).

Reopening Time for Appeal. Although Federal Rule of Appellate Procedure 4(a)(6) is not mandatory and court can deny motion to reopen time for appeal even where rule’s enumerated conditions are met, lower court errs where denial is premised upon determination that appeal is meritless. Arai v. Am. Bryce Ranches, Inc., 2003 U.S. App. LEXIS 852 (9th Cir. Jan. 21, 2003).

Nondischargeability. Bankruptcy court erred by premising dischargeability on length of time before creditor took action, prior to which creditor “should have known” debtor’s statements that he would pay rent due were unreliable. Such a determination reads a reasonable reliance requirement into § 523(a)(2)(A) notwithstanding Supreme Court precedent requiring showing of only justifiable reliance. Lentz v. Spadoni (In re Spadoni), 2003 U.S. App. LEXIS 465 (1st Cir. Jan. 14, 2003).

Perfection of Interest in Mobile Home Affixed to Real Property. Specific provisions of state Mobile Home Commission Act prevail over more general provisions for perfecting interests in real property; where creditor recorded its interest in accordance with latter statute, avoidance by trustee is proper. Boyd v. Chase Manhattan Mort. Corp. (In re Kroskie), 2003 U.S. App. LEXIS 463 (6th Cir. Jan. 14, 2003).

Attorney Misconduct. So long as court is specific in finding sanctionable conduct, its order of reprimand may be immediately appealed even if no monetary or other sanctions are imposed; judicial criticisms of attorney’s conduct unaccompanied by findings or sanction are not directly appealable. Reprimand proper where attorney omitted statements from quoted precedent, and failed to cite a relevant case, so as to give court misleading judicial construction of meaning of disputed term. Precision Specialty Metals, Inc. v. United States, 2003 U.S. App. LEXIS 448 (Fed. Cir. Jan. 13, 2003).

Priority of Security Interests. Debtor entered blanket security agreement with lender which extended to after-acquired equipment. Subsequently, debtor purchased additional equipment for which it could not pay. Seller arranged for debtor’s financed purchase and financer perfected its security interest within 15 days from date of agreement. Held, debtor became a “debtor” for purposes of Article 9 at the time seller’s first invoice was issued, not when debtor entered into financing arrangement. Financer’s purchase money security interest was, therefore, not timely perfected and not accorded priority over blanket security interest. Textron Financial Corp. v. United Financial Group, Inc. (In re Alphatech Systems, Inc.), 2003 U.S. App. LEXIS 295 (11th Cir. Jan. 9, 2003).

Appeal of Self-Executing Order. Plaintiff not required to appeal court’s “self-executing” order imposing discovery deadlines, and providing for automatic dismissal of adversary proceeding on specified date for failure to comply, within ten days of such specified date because no separate document had ever been entered pursuant to Federal Rule of Bankruptcy Procedure 9021. Bogaerts v. Shapiro (In re Litas Int’l, Inc.), 2003 U.S. App. LEXIS 32 (2d Cir. Jan. 2, 2003).

Catherine E. Vance, Esq.
Columbus, Ohio
614-336-3861
Email: vance76@earthlink.net

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Member News

Bankruptcy Court Goes High-Tech
Bernstein Law Firm Completes First Electronic Filing Under Court's New Paperless System

Pittsburgh (February 5, 2003)- With the click of a mouse and a tap on the keyboard, Pittsburgh-based Bernstein Law Firm successfully completed the first electronic filing in the Bankruptcy Court for the Western District of Pennsylvania.

The Court's electronic filing system went "live" on Monday, February 3, 2003. By 8:39 a.m., Bernstein Law Firm Managing Partner Bob Bernstein (Bankruptcy Section Council Member and Past CLLA President) had made high-tech Court history by transmitting paperless documentation to the Court.

"The judicious and appropriate use of technology can benefit clients and lawyers alike," says Bernstein, a long-time advocate for the use of technology to enhance efficiencies both in his own law practice and Pennsylvania's State and Federal Courts. "Speed, accuracy and the elimination of wasteful travel are immediate benefits, as is the ability to log on and view filed documents any hour of the day."

Bernstein has been actively involved in improving technology in the courts and his law practice for many years. Along with chairing a special committee designed by Chief Bankruptcy Judge Judith K. Fitzgerald to develop procedures for the electronic filing system in the Western District Bankruptcy Court, he as served as Chair of the Technology Committee of the Allegheny County Bar Association. Bernstein has also incorporated technology into the day-to-day operations of his firm by use of electronic data management and reporting systems in order to streamline internal efficiencies and improve client communications.

Under the Court's electronic filing procedures, parties will file all court documents, including pleadings and (eventually) proofs of claim, in electronic format in the Pittsburgh, Johnstown and Erie Bankruptcy courts. Registered users will receive copies of pleadings by email, further reducing the costs associated with bankruptcy cases. For now, only attorneys admitted to practice before the Bankruptcy Court are eligible to register for the system.

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Nominating Committee to Select Council Candidates

The Bankruptcy Section Nominating Committee will meet in April, 2003 to select a slate of candidates for the July election. Candidates must be willing to commit themselves to a three-year term of active involvement in Council and Section Affairs and be able to attend four Council meetings. Section members interested in being considered for an Executive Council position should submit a letter immediately stating their interest and indicating their qualifications. All letters/emails must be received by April 2, 2003.

Please send letters to:

Harry W. Greenfield
Buckley King
1400 Bank One Building
600 Superior Avenue E. Cleveland, OH 44114
Phone: 216-363-1400
Fax: 216-579-7156
Email: greenfield@bucklaw.com

Please send a copy to:

Sarah A. Jolie, Staff Liaison
Commercial Law League of America
150 North Michigan Avenue, Suite 600
Chicago, IL 60601
Fax: 312-781-2010
Email: sjoli@aol.com

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Washington Hot News

February 26, 2003
House bankruptcy reform bill introduction likely soon

It is likely that the House Judiciary Committee Chairman Sensenbrenner (R-WI) will introduce the House version of bankruptcy reform for the 108th Congress tomorrow (Thursday). The bill is expected to be last year's conference report minus the Shumer abortion language.

This step is in anticipation of the Subcommittee bankruptcy oversight hearing on Tuesday.

February 24, 2003
Federal/state privacy update.

As a follow up to one of the Gramm-Leach-Bliley educational programs as the Commercial Law League of America's event in New Orleans this past weekend, Rep. Biggert (R) recently introduced HR 781, a bill to amend the GLB to exempt attorneys from the privacy provisions of that law.

In other privacy news, the California bill that would create more restrictive state financial privacy laws than the GLB (requiring an "opt-in" in certain circumstances), cleared its first hurdle February 18th when the bill, S.B. 1, passed the Senate Judiciary Committee on a 5-2 party line vote. The bill's sponsor, Sen. Speier, in her 4th attempt to pass the bill, feels this years version is more "moderate" than past versions. However, representatives from the financial services industry have indicated they oppose this version (partially due to its mandating the notice form to be used, as opposed to merely setting standards).
The bill will next be heard in the Senate Appropriations Committee.

February 24, 2003
Bankruptcy filings up, House gears up for bankruptcy debate.

In what will be interpreted by some as confirmation of the need for bankruptcy reform legislation, the Administrative Office of the US Courts recently announced that personal bankruptcy filings continue to increase.

There was a 5.7% increase from calendar year 2001 last year with 1,577,651 total filings (of these 1,539,111 non-business filings were made during calendar year 2002).

Business filings, Chapter 11 filings, fell 1.3 percent from the previous year to 11,270.
Interestingly, BOTH business and non-business filings were down for the last quarter of 2002 in comparison to the last quarter of 2001. No possible explanation was offered.

On a related note, Rep. Sensenbrenner (R-Wis.) may now introduce his bankruptcy reform package prior to the March 4th scheduled hearing before the Judiciary Committee's Subcommittee on Commercial and Administrative Law. Support for the legislation has been derived from the statistics cited above as well as President Bush's indicating he would not oppose a universal $125,000 homestead cap (no word on whether "universal" will include opt-out language).

February 21, 2003
Bankruptcy reform...officially begins!

Pursuant to the direction of the Chair, Rep. Sensenbrenner, the House SUBCOMMITTEE ON COMMERCIAL AND ADMINISTRATIVE LAW has announced an Oversight Hearing on the Need for Bankruptcy Reform Legislation. The hearing will take place Tuesday, March 4, 2003 2:00 p.m.

David Goch
Washington Legislative Counsel, CLLA
Webster, Chamberlain & Bean
150 North Michigan Avenue, Suite 600
Chicago, IL 60601
dgoch@wc-b.com

More Washington Hot News: click here

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