Sua Sponte

Bankruptcy Section Prepares for . . . The Midwest Regional Meeting, Legislative Action and . . . A Very Busy Spring.

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

They say that March comes in like a lion and goes out like a lamb. From the shape of things, thus far, March has certainly come in like a lion, but it seems hard to imagine that the pace at which things have been occurring will transform March into a lamb by the end of the month.

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Case Analysis

NextWave, Hood v. Tennessee, and a Possible Voice for Striking Semionole Tribe in Bankruptcy Cases.

Louis S. Robin
Fitzgerald, O'Brien, Robin & Shapiro
Email: louis.robin@prodigy.net

Although our Bankruptcy Section Chair, Judith Greenstone Miller, wrote a thoughtful and detailed analysis of the recent Supreme Court decision FCC v. NextWave, 537 U.S. ____, 123 S. Ct. 832, 154 L. Ed. 2d 863 (2003), in her Sua Sponte of last month, I wanted to contribute a few introductory words because I believe the NextWave decision might provide some guidance on how the Supreme Court might rule on the issues discussed in the Sixth Circuit’s Hood v. Tennessee Student Assistance Corp. Hood regards the impact of the Supreme Court’s rulings in Seminole Tribe v. Florida in bankruptcy cases. Hood’s support of bankruptcy jurisdiction over state immunity arguments may very well lead to a Supreme Court decision on Seminole’s impact in bankruptcy cases.

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Case Law Update

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

Administrative Expenses under Section 365(d)(3). Language of § 365(d)(3), viewed holistically and in light of legislative history, applies only to debtor lessees; here, debtor was lessor of property and statute was inapplicable to lessee’s claim of administrative priority. Einstein/Noah Bagel Corp. v. Smith (In re BCE West., L.P.), 319 F.3d 1166 (7th Cir. 2003).

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Sua Sponte

Bankruptcy Section Prepares for . . . The Midwest Regional Meeting, Legislative Action and . . . A Very Busy Spring.

They say that March comes in like a lion and goes out like a lamb. From the shape of things, thus far, March has certainly come in like a lion, but it seems hard to imagine that the pace at which things have been occurring will transform March into a lamb by the end of the month.

March began with an invitation to the Commercial Law League of America and its Bankruptcy Section to testify as one of four witnesses before the House Judiciary Committee, Subcommittee on Administrative and Commercial Law at the Oversight Hearing scheduled by Rep. Sensenbrenner (R. Wis.) on March 4, 2003 on the continued need for bankruptcy reform. Unfortunately, on the Thursday before the hearing was to take place, Rep. Sensensbrenner introduced H.R. 975 (‘Bankruptcy Bill”). The Bankruptcy Bill, in essence, was a mirror image of the legislation that came out of the Conference Committee, but failed last term of Congress. The only difference between the Bankruptcy Bill and the prior legislation was the omission of the Rep. Schumer’s (D. N.Y.) abortion/dischargeability provision.

The League and the Section, through the efforts of the National Governmental Affairs Committee, David Goch, Cathy Vance, Jay Welford, Peter Califano, Sarah Jolie and I went into “high gear” to prepare and submit to Congress written testimony and a critical issues position paper. The hearing commenced with introductory remarks by most of the Congressmen in attendance at the hearing. Thereafter, each of the four witnesses was given five minutes to present their written testimony. Following the testimony, each of the Congressmen was given five minutes to direct questions to the witnesses. A second series of questioning ensued thereafter. The hearing finally concluded after much lively, and at times pointed, questions and dialogue.

At the hearing, Lucille Beckwith, the President and C.E.O. of Palmona Credit Union, in South Carolina, was asked by Congressman Watt (D. S.C.) whether there were any provisions in the Bankruptcy Bill that dealt with credit card abuse. In response, Ms. Beckwith indicated that there were provisions contained in the Bankruptcy Bill that were directed toward educating debtors about incurring credit. Thereafter, when I had an opportunity to speak, I advised the Subcommittee that while the Bankruptcy Bill did contain such educational provisions, nevertheless, it did not contain provisions directed toward credit card abuse from unsolicited credit card applications. During the dialogue that resulted from this statement, not only was I able to advise the Committee about the multitude of unsolicited credit availability by financial institutions across the country, but also the character and types of the individuals and others who receive such solicitations. After one of the Section’s members got a new dog and applied and received an identification tag for the dog, the dog received an application for credit. As I rhetorically asked the Subcommittee, what was the dog to do – put its paw print on the application and return it for the advancement of credit! Echo Welford has now become a canine celebrity in Congress!

Even before the hearing was concluded on that Tuesday, the Section issued a special newsletter advising the League membership of the legislative developments “to the minute.” Hats off clearly go to Sarah Jolie and Cathy Vance for this Herculean effort – the League and its members can certainly be proud of the fact that we were the first to go to press on the legislation! After the hearing and formal testimony, pursuant to unanimous consent of the Subcommittee, written questions were submitted to each of the witnesses. Simultaneous with the submission of the questions, mark-up of the Bankruptcy Bill was scheduled. Unfortunately, mark-up was scheduled to begin even before the answers to the written questions were due to be submitted to the Subcommittee, thereby suggesting that the answers would not be given real or significant substantive weight as part of the legislation. Nevertheless, the League and the Section prepared extensive, substantive responses to the questions that were submitted for consideration before mark-up began.

The Bankruptcy Bill went to the House Floor for consideration and voting on March 19, 2003. As expected, it passed, but the fate of the Bankruptcy Bill is still not known. One thing is clear, however, this time, based on the attitude at the hearing,and the votes from the Subcommittee – the Democrats appear to be concerned with the impact of passage of the Bankruptcy Bill, particularly in light of the changed circumstances and fragile economy that we currently face. For the most part, we will have to await the fate of the legislation – however, it does represent an opportunity for you to contact your representative and let your voice be heard!

The Midwest Regional Conference will begin in Chicago on April 10, 2003. Wonderful educational events are planned by the Section. In the first program, entitled “Bankruptcy Ethics,” participants will be able to earn Ethics CLE credits in most states from prominent authorities in the field. The Section is also sponsoring “Current Trends in Turnarounds, Workouts, and Pre-Packs” featuring some of the top experts in turnaround issues. Full program information can be found below under Upcoming Educational Opportunities.

In addition, on Thursday, April 10, in conjunction with the DePaul Law School, the League will be putting on a day long symposium on bankruptcy issues that arise in mega-bankruptcy cases. This program is entitled “Mega Bankruptcies: Representing Creditors and Debtors in Large Bankruptcy Cases.” The symposium will consist of five panel discussions on issues ranging from forum selection, first day orders, fiduciary duties and indemnification, recharacterization of transactions and ethical considerations. Registration for League members to attend this symposium is only $20.00. Panelists for the Symposium include Martin Bienstock, Richard Cieri, David Fisher, Judge Judith Fitzgerald, Profession Douglas Baird and me.

In addition, the Bankruptcy Council will meet twice during the conference. Nominations are currently being accepted for consideration on the Bankruptcy Council. If you are interested in serving on the Executive Council or its Executive Committee, please contact Harry Greenfield, this year’s Chair of the Nominating Committee, in writing prior to the Midwest Regional Conference.

If you haven’t registered for Chicago yet, it’s not too late and if you haven’t been to a League meeting recently, it’s also not too late! Take a chance – the conference will be filled with many opportunities to network, market, become educated and have loads of fun seeing old friends and making new acquaintances. You can download a copy of the full program brochure by clicking here. I look forward to seeing you there! Hopefully, by that time we will be able to look back on March as going out like a lamb!

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

NextWave, Hood v. Tennessee, and a Possible Voice for Striking Semionole Tribe in Bankruptcy Cases.

Although our Bankruptcy Section Chair, Judith Greenstone Miller, wrote a thoughtful and detailed analysis of the recent Supreme Court decision FCC v. NextWave, 537 U.S. ____, 123 S. Ct. 832, 154 L. Ed. 2d 863 (2003), in her Sua Sponte of last month, I wanted to contribute a few introductory words because I believe the NextWave decision might provide some guidance on how the Supreme Court might rule on the issues discussed in the Sixth Circuit’s Hood v. Tennessee Student Assistance Corp. Hood regards the impact of the Supreme Court’s rulings in Seminole Tribe v. Florida in bankruptcy cases. Hood’s support of bankruptcy jurisdiction over state immunity arguments may very well lead to a Supreme Court decision on Seminole’s impact in bankruptcy cases.

FCC v. NextWave

In NextWave, the Supreme Court rejected the Federal Communication Commission’s argument that it was only exercising its regulatory prerogative in terminating a license due to nonpayment. The FCC had argued that this alleged exercise was sufficient to excuse the FCC from the debtor protections in the Bankruptcy Code.

Justice Scalia wrote the majority opinion. Known for his reliance on “plain language,” one might have thought that he could have accepted the FCC’s argument that its enabling statute requires the regulation of FCC licenses, that the FCC chose to sell licenses as a method of regulation (as opposed to other methods chosen in the past), and that such regulation brought the FCC outside the scope of the Bankruptcy Code’s debtor protection. As harsh and absurd such a result might seem to a bankruptcy practitioner, such a result could have been the dictate of one reading statutes strictly. Justice Scalia did not choose such an exacting path. Instead, he understood that nonpayment is nonpayment, not a violation of a regulation. True, he might have selected § 525 as the source of his analysis (rather than § 362), but he displayed a sophistication of the components of bankruptcy that any bankruptcy practitioner would appreciate. He may have a reputation of relying upon language solely, and one might disagree with the ultimate ruling, but, in the variety of bankruptcy decisions he has written, he has displayed a flexibility and understanding that bankruptcy often requires. Indeed, I noted this flexibility last year in the March 2002 Bankruptcy Section Newsletter when I wrote about Justice Scalia’s opinion in Young v. United States, 535 U.S. 43 (2002).

Justices Breyer and Stevens have also demonstrated their finesse in bankruptcy cases. Justice Breyer’s dissent in this case really only suggested that the analysis should be under § 362, and that a creditor should be permitted to argue that it can foreclose on its collateral, results that I believe are not ruled out by Justice Scalia. Justice Stevens’ concurrence seemed to play the peace maker - both Justices were correct, and reached the same conclusion under the facts. In any event, we, as bankruptcy practitioners, should find reassurance in the sophistication that the Court has shown toward bankruptcy issues. One should take the time to read the NextWave decision for a full appreciation of the respective Justices’ comments.

Hood v. Tennessee Student Assistance Corp.

In Hood, 319 F.3d 755 (6th Cir. 2003), the debtor sought to have her student loans discharged under § 523(a)(8)’s undue hardship provisions. The defendant, however, was an agency of the state government and sought dismissal under the grounds of sovereign immunity. The State of Tennessee was relying upon the Supreme Court’s decision in Seminole Tribe of Florida v. Florida, 517 U.S. 44 (1996), which ruled that the Indian Commerce clause, which authorizes Congress to “regulate Commerce . . . with the Indian Tribes,” U.S. Const., Art. I, §§ 8, cl. 3, did not authorize Congress to abrogate state sovereign immunity. See Seminole Tribe, 517 U.S. at 47. The Court based this finding upon its opinion that state sovereign immunity was an essential element of the Constitution, which was confirmed by the Eleventh Amendment’s restriction of federal judicial powers under Article III. Accordingly, the grant of the power to regulate commerce with Indian Tribes did not evade states’ sovereign immunity rights according to the Seminole Court. Id. at 69-73.

Utilizing the preceding rational, five Circuit courts concluded that states continue to enjoy state sovereign immunity in bankruptcy cases. See Nelson v. La Crosse County Dist. Attorney (In re Nelson), 301 F.3d 820, 832 (7th Cir. 2002); Mitchell v. Franchise Tax Bd. (In re Mitchell), 209 F.3d 1111, 1121 (9th Cir. 2000); Sacred Heart Hosp. of Norristown v. Pennsylvania (In re Sacred Heart Hosp. of Norristown), 133 F.3d 237, 243 (3d Cir. 1998); Fernandez v. PNL Asset Mgmt. Co. LLC (In re Fernandez), 123 F.3d 241, 243 (5th Cir.), amended by 130 F.3d 1138, 1139 (5th Cir. 1997); Schlossberg v. Maryland (In re Creative Goldsmiths of Washington, D.C.), 119 F.3d 1140, 1145-46 (4th Cir. 1997), cert. denied, 523 U.S. 1075 (1998). The Sixth Circuit Court in Hood, however, noted that none of these courts addressed the specific language of the Constitution regarding the grant of making bankruptcy laws - - that these laws be “uniform.” The Constitution only grants Congress to make “uniform” laws in two circumstances: bankruptcy laws and naturalization. Based upon this language, the Sixth Circuit cited authority that this “peculiar [term] of the grant certainly deserve[s] notice.” Sturges v. Crowninshield, 17 U.S. (4 Wheat.) 122, 193-94 (1819).

Of greater relevance to the Sixth Circuit were the Federalist Papers, particularly Numbers 81 and 32. In Federalist Paper No. 81, Alexander Hamilton referred to the abrogation of sovereign immunity in three circumstances, the third being where the Constitution “granted an authority to the union, to which a similar authority in the states would be absolutely and totally contradictory and repugnant.” In Federalist Paper No. 32, Alexander Hamilton offered naturalization as an example of this third circumstance noted in number 81. The Sixth Circuit found these references important in its finding that the power to make “uniform” laws abrogates sovereign immunity. Again, this paragraph only briefly describes the Sixth Circuit’s rationale - a reading of the entire opinion is instructive and, at least in my opinion, enjoyable.

Where do we go from here?

Is the Sixth Circuit correct? I, along with countless bankruptcy practitioners, certainly hope so. States are often creditors of bankruptcy cases, either as tax claimants, holders of student loans, regulators, or claimants under a variety of other fashions in a world of commerce greatly different than that of the founding fathers. States make claims for non-payment for liquor creditors (under liquor license regulations), claim exclusion from preference actions after they sweep a bank account, and provide other services that are necessary for debtors to operate. Further, state sovereignty - that the King can do no wrong - is an antiquated concept, one that is often criticized as unsuited for a democracy in today’s commercial world. If states could claim that they are exempt from the bankruptcy forum, this could simply make reorganization or a fresh start impossible.

Still, the bankruptcy scheme has not ground to a halt since the Seminole decision in 1996. Cases progress, often because States recognize that bankruptcy provides a forum from which all can benefit. Yet States can often reverse their position when they recognize a real threat to collection of revenues, one that I often can discern from my perspective.

As a legal matter, is the insertion of the phrase “uniform” definitive? I certainly can’t see a state role in naturalization issues - if a state sets up a procedure where it would naturalize persons excluded from the federal scheme, the federal courts would certainly take jurisdiction over a state inverting the federal naturalization scheme. States are often an integral part of the bankruptcy process, and there is no real reason to provide a separate set of rules for the states. However, the Seminole decision was firm in its insistence that state immunity must be honored, and the same five justices making the majority ruling on Seminole remain as vibrant as ever.

This is where my conjecture concerning NextWave may be relevant. Justice Scalia has displayed a sophistication of how the bankruptcy scheme operates. He has an appreciation of the bankruptcy scheme’s relationship with other statutes and case law, which in some cases regards statutes and case law that dates hundreds of years prior to today. In BFP v. Resolution Trust Corp., 511 U.S. 531 (1994), he recognized a history of “over 400 years of peaceful coexistence in Anglo-American foreclosure and fraudulent transfer law” in discerning the Bankruptcy Code. In his dissent in Dewsnup v. Timms, 502 U.S. 410 (1992), he displayed a flexibility in interpreting § 506, particularly in applying it in Chapter 13 cases to strip mortgages. As stated above, additional practicality was displayed in the NextWave decision. “Practicality,” in contrast to hypothetical conjectures, is an integral part of the bankruptcy scheme because “bankruptcy law has little to do with natural justice.” Dewsnup, 502 U.S. at 410 (Scalia, J. dissenting). These issues of practicalities may dictate the Supreme Court’s eventual review of state sovereign immunity assertions (which is likely given the split in Circuits). Based upon the preceding, perhaps we should not assume that Justice Scalia will side with states’ rights arguments (which one might assume). Instead, perhaps he can be a voice for restricting sovereign immunity in bankruptcy cases. I may be naively optimistic, but I sincerely believe that Justice Scalia can recognize that “uniformity” requires state submission to the full range of the bankruptcy laws for it to operate properly under the scheme proposed by our founding fathers.

Louis S. Robin
Fitzgerald, O’Brien, Robin & Shapiro
1200 Converse St.
Longmeadow, MA 01106
Phone: (413) 567-3131
louis.robin@prodigy.net

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Case Law Update

Administrative Expenses under Section 365(d)(3). Language of § 365(d)(3), viewed holistically and in light of legislative history, applies only to debtor lessees; here, debtor was lessor of property and statute was inapplicable to lessee’s claim of administrative priority. Einstein/Noah Bagel Corp. v. Smith (In re BCE West., L.P.), 319 F.3d 1166 (7th Cir. 2003).

Automatic Stay. Relief from the automatic stay proper where debtor’s petition was filed after foreclosure sale of debtor’s residence but prior to confirmation hearing required under Illinois law. Plain language of § 1322 terminates right of redemption upon sale of property, although state law may extend redemption period. Limited nature of review at state court confirmation hearing under Illinois law does not extend redemption rights beyond sale. Colon v. Option One Mortgage Corp., 319 F.3d 912 (7th Cir. 2003).

Fraudulent Transfers. That transfer of funds in Individual Retirement Account into ERISA qualified profit sharing pension plan occurred on eve of bankruptcy was insufficient to avoid transfer as fraudulent where other badges of fraud could not be established. Gill v. Stern (In re Stern), 317 F.3d 1111 (9th Cir. 2003)

Preclusion of Malpractice Claims against Debtors’ Counsel. Debtor’s allegations of malpractice against his bankruptcy counsel were within the federal court’s “arising in” jurisdiction. Malpractice claim precluded where debtor failed to object to interim and final orders on attorney’s compensation; malpractice claim and fee orders arose out of same core of operative facts, debtor knew or should have known of existence of malpractice claim before fee orders were entered, and bankruptcy court is not an inappropriate forum to litigate malpractice claim. Grausz v. Englander, 2003 U.S. App. LEXIS 3945 (4th Cir. Mar. 6, 2003).

Debtor’s sole shareholder precluded from pursuing malpractice claim against debtor’s counsel where court had determined value of shareholder’s equity to be zero, thus depriving shareholder of standing, as part of confirmation proceeding. Confirmed plan was valid final order and shareholder could not later challenge value determination necessarily made in prior proceeding. Mourad v. Farrell (In re V&M Mgmt), 2003 U.S. App. LEXIS 3325 (1st Cir. Feb. 24, 2003).

Disclaimer of Interest in Estate Property. Debtor’s declaration of interest in trust on numerous loan applications constituted an acceptance of his interest in trust properties, rendering ineffective debtor’s disclaimer of the interest under state law three days prepetition; therefore, interest in trust is property of the estate. Cassel v. Kolb (In re Kolb), 2003 U.S. App. LEXIS 3770 (9th Cir. Mar. 3, 2003).

Judicial Estoppel. Rule in Burnes v. Pemco Aeroplex, Inc., 291 F.3d 1282 (11th Cir. 2002), that judicial estoppel bars a plaintiff from asserting cause of action previously undisclosed in Chapter 7 bankruptcy where plaintiff both knew of undisclosed claim and had motive to conceal claim, applies with equal force in Chapter 13 case. DeLeon v. Comcar Indus., 2003 U.S. App. LEXIS 2927 (11th Cir. Feb. 18, 2003).

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

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Insol Report

I participated in an all day meeting of an INSOL Task force seeking to determine the direction which INSOL should take in the next several years. The agenda items were as follows:

• What should we be?
• What should we try to deliver?
• What can we do for new potential members from emerging markets?
• What new services of funding can we identify?

INSOL has traditionally been viewed as a group focused on international insolvency. As a group we felt that a better definition was that INSOL is an international organization of professionals dealing in insolvency.

This membership in INSOL is the natural result of individuals seeking organizations that can afford them educational benefits, ability to work on projects with other professionals, and provide the member with networking opportunities outside of their own country of origin. In order to inspire people to wish to become members of INSOL, INSOL needs to make itself less elitist and more user friendly. Some of the items, which were discussed, are (i) easier access to committees, (ii) regular regional meetings (in conjunction with already existing meetings) (iii) a regular assembly of all of the member organizations, (iv) regular electronic communications and (v) less burden on the individual member associations.

The proposals presented by this task force will be discussed at INSOL’s next two board meetings. It is hoped that implementation can begin in the next year. Obviously, the long terms aspects of the proposals will require several years of implementation. However, it should be heartening to recognize that the voices of the member associations have been heard, and the Board of Directors is trying to make its individual members recognize the value of membership in INSOL International.

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

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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

March 25, 2003
New Bankruptcy Judgeships Bill Introduced

On March 25th, Rep. Lee (D-CA) introduced HR 1428, a bill to authorize 36 additional bankruptcy judges. The text of the bill is not yet available.

March 21, 2003
Senate gears up for bankruptcy debate.

According to sources on the Senate side, Senator Leahy, ranking minority member on the Judiciary Committee, has called for regular order -- hearing and committee markup, on HR 975, the bankruptcy reform bill, before floor consideration. However, the majority, driven by Sen. Hatch (R-Utah) the committeed chair, has placed the House-passed bill directly on the calendar and bypassed committee referral. It is uncertain whether the majority will try to move it soon (next week or two), or wait on world events.

March 20, 2003
House Passes Mortgage Lenders Fair Debt Collection Practices Act Exemption.

On March 19 the House passed HR 314, 424-0, a bill creating an exemption for mortgage loan originators from federal requirements that lenders inform debtors about attempts to collect a debt and make certain other disclosures. The exemption applies only to first lien federally related mortgages acquired by a mortgage servicer for whom the collection of delinquent debts is incidental to its primary function of servicing current mortgages.

March 20, 2003
Treasury Preparing Privacy Legislation.

On March 19th, a senior Treasury Department representative said the agency is developing a legislative and regulatory proposal to address identity theft, rewrite rules governing financial institutions sharing of customer information, and extending federal preemption of state privacy laws (the last point going hand-in-hand with the expected reauthorization of the Fair Credit Reporting Act).

Financial institutions are supporters of the FCRA extension because they fear the state "patch-work" of privacy laws that would result without it (including possibly more stringent privacy laws than those imposed by the FCRA in 1996). However, most feel that financial institutions will have to give a little, possibly a tightening of the GLB privacy regs, in order to get the extension. No word yet on what the possible trade-offs might be.

March 19, 2003
Collection of tax debt by private parties endorsed by Bush nominee.

President Bush's nomination to head the Internal Revenue Service, Mark Everson, said yesterday before the Senate Finance Committee he endorses the Administration's proposal to turn over to private collection professionals recovery of roughly $13 billion in tax debts (as well as possibly other IRS functions). Everson stated approximately 22,000 IRS jobs could fit the description of being "commercial in nature and [capable of being] done by outsiders."

While the IRS has about 100,000 employees and a budget in excess of $10 billion, according to Everson's predecessor, 60 percent of identified tax debts are not pursued, 75 percent of taxpayers who did not file a return are not pursued, 79 percent of those who used abusive devises such as offshore bank accounts to hide income are not pursued. And the agency's statistics show that the chances of being audited have fallen to around 1 in 200 for individuals. Everson accused accountants and lawyers of contributing to the decline in tax compliance. He also promised to pressure them.

Colleen Kelley, president of the National Treasury Employees Union, representing IRS workers, stated after the hearing that using private parties for collection is bad policy and that IRS employees can do the work more cheaply because contractors would be paid a percentage of collections.

March 19, 2003
House passes bankruptcy reform bill 315-113.

The House passed this afternoon at 5:00 HR 975, the bankruptcy reform bill, by a vote of 315-113-1 (1 voting present). This includes the three amendments accepted earlier in the day.

The bill is expected to move to the Senate where it may be more controversial (including addressing the Schumer abortion amendment).

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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Upcoming Education

The 73rd Annual Meeting and Educational Conference of the Commercial Law League will be held April 10 – 13, 2003 in Chicago. Click here for full registration materials. The program includes 20+ hours of educational materials including the following bankruptcy related programs:

Thursday, April 10, 2003 (9:00 a.m. – 4:00 p.m.)
First Annual Symposium

Jointly Presented by the DePaul Business and Commercial Law Journal & Commercial Law League of America: “Mega-Bankruptcies: Representing Creditors and Debtors in Large Bankruptcy Cases”

Program Description: After the collapse of Enron, we have witnessed the bankruptcies of other record-breaking corporations. These large entities offer goods and services across the consumer and business spectra, but they share one similarity: their economic size. Large bankruptcies offer complex and confusing hurdles for attorneys representing both debtors and creditors. The DePaul University College of Law’s Business and Commercial Law Journal, in conjunction with the Commercial Law League of America, will be hosting its first symposium to address some of the major issues facing today’s bankruptcy professionals. Speakers will include the judges, attorneys, and professors who have had active involvement with some of the largest bankruptcy cases ever filed.

Speakers: Honorable Judith K. Fitzgerald, United States Bankruptcy Court for the Western District of Pennsylvania; Douglas G. Baird, Harry A. Bigelow Distinguished Service Professor of Law, University of Chicago Law School, Chicago, Illinois; Martin J. Bienenstock, Weil, Gotshal & Manges, LLP, New York, New York; Richard M. Cieri, Jones Day, Cleveland, Ohio; David J. Fischer, Wildman Harrold, Chicago, Illinois; and Judith Greenstone Miller, Raymond & Prokop, P.C., Southfield, Michigan.

Friday, April 11, 2003 (8:00 a.m. – 10:00 a.m.)
Bankruptcy Ethics

Program Description: No lengthy disclosures! No issues of disinterestedness! No objections from the U.S. Trustee’s Office, and no hearings before a U.S. Bankruptcy Judge! How difficult can ethical issues be in the collections/insolvency sphere outside of a bankruptcy proceeding? But you may be surprised by the many different ethical issues confronting practitioners in that critical period of time when your client or an adverse party is crossing the financial line into insolvency. Using hypotheticals of all too real, and all too common, situations, our panel of experts will discuss ethical issues in areas such as advance waivers of conflicts of interest, representing multiple creditors in pursuit of a common debtor, positional conflicts, and more.

Speakers: Nancy Rapoport, Dean and Professor of Law at the University of Houston Law Center; Melanie Rovner Cohen, Altheimer & Gray, Chicago, Illinois; William I. Kohn, Schiff, Hardin & Waite, Chicago, Illinois.

Saturday, April 12, 2003 (8:00 a.m. – 10:00 a.m.)
Current Trends in Turnarounds, Workouts, and Pre-packs: What Creditors Ought to Know Before the Filing

Program Description: BBK, Ltd. will present a timely program dealing with current trends in turnarounds, workouts and pre-packs. In this presentation, the panel will be discussing crisis management and turnaround strategy from the creditor’s perspective, including what creditors should expect from a turnaround manager and how to communicate effectively with the turnaround manager and the corporate leadership. A discussion of retention bonuses and compensation packages is also included, as are strategies for guiding a retailer toward sound economic policy on issues such as leases, inventory financing, and payroll issues.

Moderator: Honorable Ray Reynolds Graves, United States Bankruptcy Judge (retired), Principal, BBK, Ltd., Southfield, Michigan.

Speakers: Nick Bubnovich, Deloitte & Touche, Chicago, Illinois; Shaun Donnellan, Glass & Associates, Canton, Ohio; and Timothy G. Skillman, Principal, BBK, Ltd., Southfield, Michigan.

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