| March 2007 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: |
Sua SponteIvan J. Reich It has been a busy term for the United States Supreme Court in the bankruptcy arena. Last month the Court issued, and I commented on, Marrama v. Citizens Bank of Massachusetts, __ S. Ct. __, 2007 WL 517340 (Feb. 21, 2007). This past week, the Supreme Court issued another very important ruling in an area of interest to attorneys represented unsecured creditors in bankruptcy cases. Case Law UpdatePaula Lucas Competing claims of secured creditors resolved. Decisions resolving competing claims of two secured creditors to proceeds resulting from an auction of nontitled movables formerly owned by a bankrupt corporation are affirmed over multiple claims of error, essentially for the reasons assigned by the bankruptcy court. In the Matter of: Ark-La-Tex Timber Co., Inc., 2007 U.S. App. LEXIS 6055 (5th Cir. Mar. 15, 2007) CLLA Annual Breakfast and Education Programming Preview - NCBJ 2007We are delighted to feature Dave Barry as our breakfast speaker at the 2007 19th Annual CLLA Breakfast Dave Barry is a humor columnist. For 25 years he was a syndicated columnist whose work appeared in more than 500 newspapers, including the Miami Herald (since 1983) in the United States and abroad. In 1988 he won the Pulitzer Prize for Commentary specifically for his columns in the category of Distinguished Social Commentary. Many people are still trying to figure out how this happened. He writes about issues ranging from the international economy to exploding toilets. ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ Sua SponteIvan J. Reich, Esq. February 2007 It has been a busy term for the United States Supreme Court in the bankruptcy arena. Last month the Court issued, and I commented on, Marrama v. Citizens Bank of Massachusetts, __ S. Ct. __, 2007 WL 517340 (Feb. 21, 2007). This past week, the Supreme Court issued another very important ruling in an area of interest to attorneys represented unsecured creditors in bankruptcy cases. In Travelers Cas. and Sur. Co. of America v. Pacific Gas and Elec. Co., 2007 WL 816795 (U.S. March 20, 2007), Justice Alito, writing for an unanimous court, resolved an issue of much uncertainty, and wrote that post-petition attorneys fees, if allowed by contract or statute, are recoverable in bankruptcy. The Court rejected what was known as the Fobian Rule, for a prior Ninth Circuit ruling which had held that where the litigated issues involve not basic contract enforcement questions, but issues peculiar to federal bankruptcy law, attorney's fees generally will not be awarded. Judge Alito wrote that federal bankruptcy law does not disallow contract-based claims for attorney's fees based solely on the fact that the fees were incurred litigating bankruptcy law issues, and as such the Fobian rule finds no support in federal bankruptcy law. The Court, in this author’s opinion correctly ruled that a contract allocating attorney's fees that is enforceable under substantive, nonbankruptcy law is allowable in bankruptcy except where the Bankruptcy Code provides otherwise, and in these circumstances the Code did not do so because it did not fall into one of the nine exceptions set forth in 11 U.S.C. § 502(b) . Creditors' entitlements in bankruptcy arise in the first instance from the underlying substantive law creating the debtor's obligation, subject to any qualifying or contrary provisions of the Bankruptcy Code, which requires bankruptcy courts to consult state law in determining the validity of most claims, unless some federal interest requires a different result. So the good news for those seeking to recover attorneys fees incurred post petition in enforcing your client’s rights is that they are now recoverable in bankruptcy. The unanswered question, and potential pitfall to this ruling is whether this ruling will now saddle Chapter 11 cases with inflated claims so as to make plans neither feasible nor confirmable, thereby negatively impacting the reorganization process. As a result of this decision, the unsecured creditors pool of claims will naturally go up in all bankruptcies, thereby diluting the relative return to all, and especially those creditors who did not choose to hire a lawyer to try and collect their claims, and enforce their rights in bankruptcy. Such a ruling now will make the bankruptcy court the forum for resolving the entitlement to and reasonableness of attorneys fees, which challenges will naturally have an unintended administrative cost in every bankruptcy case, no matter what chapter it is brought under. What had heretofore been a liquidated claim will now become unliquidated, and may make it more difficult for US Trustee’s to place creditors on unsecured creditors committees, and if appointed may put those creditors in conflict on their claims with the interests of al unsecured creditors. It remains too early to tell what the impact of this decision will be and whether any of these concerns will ever come to fruition, but at least for now the uncertainty on this issue has been laid to rest, and in this author’s opinion the correct ruling under the law was made since it upholds and respects the validity, and usefulness, of attorneys fees provision under contract law. As you know, our section has an excellent partnership with the National Conference of Bankruptcy Judges, and this year on Thursday, October 11, 2007 at the Marriott World Center in Orlando, Florida, the Bankruptcy Section of the CLLA will be hosting its annual breakfast program and an annual afternoon education program on Thursday October 11th. Both of these programs are always well attended. Our breakfast speaker this year is Dave Barry, a bestselling American author and Pulitzer Prize-winning humorist who wrote a nationally syndicated column for The Miami Herald from 1983 to 2005. The afternoon session on Hot and Emerging Issues will focus on issues surrounding Preemption and Federalism Issues in Bankruptcy, Statutory Construction and Section 105 Uses (and Misuses) and Constitutional Issues Posed by BAPCPAfeaturing three panels of distinguished speakers selected largely by our section of the League. We presently have available various sponsorship opportunities for both the breakfast and the educational program. Our print deadline is September 19, 2007. We would love to be able to promote you and your firm as a sponsor of one or both of these CLLA events to be held at the NCBJ. I hope you will seriously consider having your organization as a sponsor this year. This is an opportunity to obtain excellent publicity at the NCBJ while at the same time assisting the Bankruptcy Section of the CLLA in covering the expenses of its programs and enabling it to host future events. If you have any questions concerning these sponsorship options, please do not hesitate to give Paul Lucas a call at the CLLA office at 312-781-2000. I hope each of you, our section members, will make it a point to attend the League’s Chicago conference from April 19, through 22, 2007. I am honored to have been asked to speak this year as part of a panel titled “In the Zone: Fiduciary Duties and the Slide Toward Insolvency” at the 5th Annual DePaul Business and Commercial Law Journal Symposium to be held in conjunction with our conference on April 19, 2007 at the Westin Michigan Avenue from 10 a.m. to 6 p.m. I urge each of you to take advantage of the other high quality bankruptcy education programs presented by our exceptional panelists scheduled for Friday, April 20, 2007 from 10 a.m. to noon, on “Venue: One Person’s Trash is Another’s Treasure”, and from 1:30 p.m. to 3:30 p.m. on “Banana Peels, Bear Traps and other Traps of the Secured Lender”, and on Saturday from 8 a.m. to 9:30 a.m. on “Involuntary Bankruptcy Proceedings: A Fresh Look at an Old Weapon in a Creditors Arsenal”. We will not only be having our annual meeting that Friday, April 20, 2007, but we will have our legislative committee meeting to discuss our legislative agenda for the upcoming year, and all members are invited to attend our council meetings on both Friday the 20th and Sunday, April 22, 2007. We follow our Friday meetings with a cocktail party for the section beginning at 5:30 p.m. This is my last sua sponte article as Chair of the Bankruptcy Section. Because of changes in the corporate governance of the League implemented this past year, I have had a shorter term than usual. It has been a great honor and pleasure serving as Chair of this section. I know the section is in great hands under the leadership of Deborah Ebner, and the rest of the slate of officers and council members that are set to take office in April during our annual meeting in Chicago. I want to thank each of the officers, chairs and executive council members of the Bankruptcy Section who served with me this past term, and commend them for their hard work, enthusiasm, creativity and commitment to the section, the league and our members. It has been truly a great year and we accomplished far more this year then we had ever thought we could accomplish, and you each have really set the bar for excellence for all future executive councils. Thank you for a wonderful year. Ivan J. Reich Case Law UpdateCompeting claims of secured creditors resolved. Decisions resolving competing claims of two secured creditors to proceeds resulting from an auction of nontitled movables formerly owned by a bankrupt corporation are affirmed over multiple claims of error, essentially for the reasons assigned by the bankruptcy court. In the Matter of: Ark-La-Tex Timber Co., Inc., 2007 U.S. App. LEXIS 6055 (5th Cir. Mar. 15, 2007) Language of 15 U.S.C. governs FCRA suit. Summary judgment for defendant is affirmed in a suit under the Fair Credit Reporting Act where the language of 15 U.S.C. section 1681g(a)(1), the FTC's interpretive guideline, and a Senate Committee Report all support defendant's argument that "file" means information included in a consumer report issued to third parties, not every bit of data in a consumer file. Gillespie v. Trans Union Corp., 2007 U.S. App. LEXIS 6081 (7th Cir. March 16, 2007) Settlement agreement prevents trustee proof of claim In an appeal arising out of the claim allowance process in a Chapter 11 bankruptcy liquidation, an order dismissing a liquidating trustee's objections to a proof of claim is affirmed where a settlement agreement prevented the trustee from bringing recharacterization and equitable subordination actions against the lenders at issue. In re: Insilco Technologies, Inc. 2007 U.S. App. LEXIS 6409 (3rd Cir. Mar. 20, 2007) A debtor may modify an equipment lease under section 365(d)(5), after notice and hearing, "based upon the equities." However, unless and until a debtor obtains a lease modification order, it is required to comply with all obligations of an equipment lease after 60 days from the petition date until the lease is rejected. If a lease provides for rent due on the first day of the month, the debtor must pay the full months rent, even if the lease is rejected part way through the month. In re Federal Mogul Global, Inc. 2002 U.S. App. LEXIS 15331 (3rd. Cir. Mar. 20, 2007) Characterization of debt as “ordinary” based upon party relationship. Determination as to whether debt was "ordinary" could be made by referring to parties' practice with others where transaction at issue was parties' first. In re Ahaza Systems 2007 U.S. App. LEXIS 7607 (9th Cir. Apr. 4, 2007) Paula Lucas CLLA Annual Breakfast and Education Programming Preview - NCBJ 2007CLLA Annual Breakfast and Education
Dave Barry is a humor columnist. For 25 years he was a syndicated columnist whose work appeared in more than 500 newspapers, including the Miami Herald (since 1983) in the United States and abroad. In 1988 he won the Pulitzer Prize for Commentary specifically for his columns in the category of Distinguished Social Commentary. Many people are still trying to figure out how this happened. He writes about issues ranging from the international economy to exploding toilets. Taking prosaic ideas to incongruous extremes, he writes things like: "With the federal deficit running at several hundred billion dollars per year, Congress passed a transportation bill that, according to news reports, includes $30 million for a 'hightech' moving sidewalk in Altoona, which happens to be in the district of Rep. 'Bud' Shuster, the ranking Republican on the surface transportation subcommittee. The Pulitzer Prize judges gave Barry the award for commentary in 1988 "for his consistently effective use of humor as a device for presenting fresh insights into serious concerns." 22nd Annual Educational Program Preemption and Federalism Issues in Bankruptcy Panelists:
Statutory Construction and Section 105 Uses (and Misuses) Panelists:
Constitutional Issues Posed by BAPCPA Panelists:
Click here for Sponsorship Opportunities Brochure - Education Click here for Sponsorship Opportunities Brochure - Breakfast |
We are delighted
to feature Dave
Barry as our breakfast speaker at the 2007
19th Annual CLLA Breakfast.