| May 2006 issue: Washington Hot News House Energy and Commerce Committee Drafting Privacy Bill (May 8) The House Energy and Commerce Committee is currently drafting a privacy bill that it hopes to introduce in June. Committee Chairman, Joe Barton (R-TX) is actively backing the broad privacy legislation (details are unknown and Barton acknowledges - AND THIS IS A SIGNIFICANT POINT - that it could take a "multi-year effort" to get it enacted). 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 SponteCathy Pike, Chair Opportunity Is Knocking - Will You Answer? For those of you who attended the Midwest Region Meeting in Chicago, I don’t need to tell you how much energy and excitement filled the hotel. For those who were unable to attend the meeting, you were missed by your friends and colleagues. You also missed some of the best networking and best educational sessions that I can recall ever attending. Case AnalysisErin VanValkenburg Clearing Up Ambiguities in the Bankruptcy Code’s New Information-Sharing Provision: Bankruptcy Court Orders Establish Guidelines for Compliance with 11 U.S.C. §1102(b)(3)(A) As part of the Bankruptcy Abuse Prevention & Consumer Protection Act of 2005, Pub. L. No. 109-8, 119 Stat. 23 (2005) (“BAPCPA”), Congress added §1102(b)(3)(A) to the Bankruptcy Code. The section states that a creditors’ committee appointed under §1102(a) of the Bankruptcy Code shall “provide access to information for creditors who (i) hold claims of the kind represented by that committee; and (ii) are not appointed to the committee.” Case Law UpdatePaula Lucas Attorneys as “Debt Relief Agencies.” Court lacked jurisdiction to consider motion for determination that attorneys are not “debt relief agencies” because case or controversy requirement was not met. No party had threatened to enforce debt relief agency provisions against movant and movant had not sustained any real, actual or direct harm or injury, or that he was in danger of sustaining any immediately impending harm or injury. In re McCartney, 336 B.R. 588 (Bankr. M.D. Ga. 2006). ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ Sua SponteOpportunity Is Knocking –Will You Answer? For those of you who attended the Midwest Region meeting in Chicago, I don’t need to tell you how much energy and excitement filled the hotel. For those who were unable to attend the meeting, you were missed by your friends and colleagues. You also missed some of the best networking and best educational sessions that I can recall ever attending. The Bankruptcy Section resurrected its General Membership meeting, followed by a cocktail party attended by members of the Section and those with an interest in the Bankruptcy Section. It was great to see so many new faces along with the many familiar faces of our Section members. Mark your calendar now to be sure that you don’t miss any of our future meetings. The DePaul Business and Commercial Law Journal Symposium was excellent and very well attended. Not only were the topics timely, the speakers were some of the leaders in the field and their comments were extremely insightful. Likewise, the Bankruptcy Section-sponsored programs on Assignments for the Benefit of Creditors and Seeking Emergency Relief in Bankruptcy Court were wonderful and provided much food for thought, along with a delicious networking luncheon. Many thanks to Paige Barr and Cathy Vance for their efforts in assisting with the coordination of the Symposium, as well as to Wanda Borges and Frank Buckley, Co-Chairs of the Education Committee, for planning our educational programs. The educational programs which have been planned for our Eastern Region meeting in New York in November 2006 also promise to be exceptional. The Education Committee is not the only Bankruptcy Section committee which has been hard at work. The Legislative Committee, under the direction of Peter Califano, is putting the finishing touches on the Technical Corrections Paper on proposed amendments to the Bankruptcy Rules, which should be submitted soon. The Marketing Committee, under the tutelage of Brian Behar, is working on an improved Online Directory, which will include a profile, practice list, and photo of every current Section member. In addition, it is developing several other online benefits to members, such as an archive of indexed BAPCPA decisions, online access to seminar materials, and online links to pleadings and forms. The Bankruptcy Section is also making plans to promote the Section at several new venues, either by providing speakers to serve on panels, or by setting up a booth to provide information on the CLLA and the Bankruptcy Section. Please let us know if you would like to be involved in these endeavors. The NCBJ Committee, which is chaired by the Hon. Judith Fitzgerald, has finalized plans for the CLLA-sponsored 2006 NCBJ educational program, which promises to equal or surpass the superior caliber of programs which the CLLA historically presents at the NCBJ. Last, but certainly not least, the Nominating Committee, led by Alan Nahmias, has selected its slate of candidates who will run for positions on the Executive Council. The slate of candidates can be found in the Nominating Committee Report, which is included in this May 2006 newsletter. All of the above committees require input from Section members, as well as manpower to accomplish the many projects in the works and to begin brainstorming new ideas and working toward future goals. What better way to get to know other professionals interested in bankruptcy than by writing a case analysis for the Newsletter or working on position papers to be submitted to Congress? Assisting in the planning of our educational programs is a great ice breaker and provides exposure to some of the most well-known professionals in the business. Work on the Marketing Committee and market yourself to other members of the League while you are helping to promote and expand the benefits offered by membership in the Bankruptcy Section. The opportunities are unlimited. We welcome your suggestions, comments, and most importantly, your involvement. To join a committee, or to learn how to get involved in the Bankruptcy Section, you can either contact the Chair of the committee in which you have a specific interest, or you can contact a member of the Bankruptcy Section Executive Council: Cathy Pike, Ivan Reich, Jay Welford, Karen Porter, Gary Weiner, Alan Gordon, Peter Califano, Jeff Schatzman, Hon. Judith Fitzgerald, Brian Behar, Bill Schorling, Deborah Ebner, Alan Ramos, Paige Barr, Cathy Vance, Bill Brandt and Alan Nahmias. We’d love to get to know you better, and believe that becoming active in the Section will enrich you both personally and professionally, as well as benefit the Bankruptcy Section. Cathy Pike, Chair Case AnalysisClearing Up Ambiguities in the Bankruptcy Code’s New Information-Sharing Provision: Bankruptcy Court Orders Establish Guidelines for Compliance with 11 U.S.C. §1102(b)(3)(A) As part of the Bankruptcy Abuse Prevention & Consumer Protection Act of 2005, Pub. L. No. 109-8, 119 Stat. 23 (2005) (“BAPCPA”), Congress added §1102(b)(3)(A) to the Bankruptcy Code. The section states that a creditors’ committee appointed under §1102(a) of the Bankruptcy Code shall “provide access to information for creditors who (i) hold claims of the kind represented by that committee; and (ii) are not appointed to the committee.” Section 1102(b)(3)(A) does not indicate how the committee should deliver the “information” and does not indicate the nature, scope, or extent of information to be provided. The broad language of the section could potentially be interpreted to require that a committee share confidential information or information that is subject to the attorney client or some other state, federal, or other jurisdictional law privilege with any creditor. Creditors’ committees use this information to assess, among other things, a debtor’s capital structure, asset values, opportunities for restructuring, results of revised operations, and the debtor’s overall prospects for reorganization. Committees normally execute confidentiality agreements or make similar arrangements with a debtor. The chief question created by the ambiguity in §1102(b)(3)(A) is how should a committee balance the tension between the need to protect sensitive information (i.e., confidential, privileged, proprietary, and/or material non-public information), protect the attorney-client privilege, and comply with securities laws (e.g., SEC Regulation FD, 17 C.F.R. §243.100) against the right of unsecured creditors to be informed of the material developments in the case (which are oftentimes tied to non-public information). In re Refco Inc., et. al., Case No. 05-60006 (RDD) (Bankr. S.D.N.Y. Dec. 23, 2005). The legislative history provides no guidance regarding this issues, as it merely reiterates the language of the statute. H.R. Rep. No. 109-31, 109th Cong., 1st Sess. 87 (2005). However, Section 1107(b)(1) of the Bankruptcy Code states that “on request of a party in interest, the bankruptcy court shall . . . protect an entity with respect to trade secrets or confidential research, development, or commercial information.” Further, Bankruptcy Rule 9018 provides that “on motion or on its own initiative, with or without notice, the court may make an order which justice requires” to fulfill this obligation. Fed. R. Bankr. P. 9018. Refco is the only opinion specifically addressing this question; however, other courts which have considered this issue have also issued orders, pursuant to Bankruptcy Rule 9018, clarifying that creditors committees are not authorized or required to provide access to confidential or privileged information. See In re Refco, Inc., Case No. 05-60006 (RDD) (Bankr. S.D.N.Y. Dec. 23, 2005) (the “Refco Order”); In re FLYi, Inc., Case No. 05-20011 (MFW) (Bankr. D. Del. Nov. 17, 2005); In re: Amcast Automotive of Indiana, Inc. and Amcast Industrial Corporation, Case No. 05-33322 (FJO) (Bankr. S.D. Ind. March 6, 2006) (the “Amcast Order”); In re: G+G Retail, Inc., Case No. 06-10152 (RDD) (Bankr. S.D.N.Y. March 9, 2006) (the “G+G Order”); In re: Airway Industries, Inc., Case No. 06-20224 (JKF) (Bankr. W.D. Pa. Feb. 22, 2006) (the “Airway Order”). All five orders place the responsibility for the determination of what information is privileged or confidential on the committee (with the assistance of the debtor), but explain that creditors may file a motion with the court if this determination is disputed. The drafters of §1102(b)(3)(A) may have intended that, given the increased ability to share information through the internet and otherwise, a committee’s constituency should have easier access to relevant public information. While the Amcast Order only requires the committee to provide access to non-confidential or public information upon written request, the Airway Order and the Refco Order both seem to acknowledge the use of technology to ease the distribution of information. Both orders require the committee to maintain a website and e-mail account, distribute case updates via e-mail to creditors registered at the website, and to respond to email and telephonic requests for information. They also provide detailed requirements for the information to be posted at the website. The G+G Order states that the committee is permitted but not directed to utilize a website for providing access. Erin VanValkenburg Case Law UpdateAttorneys as “Debt Relief Agencies.” Court lacked jurisdiction to consider motion for determination that attorneys are not “debt relief agencies” because case or controversy requirement was not met. No party had threatened to enforce debt relief agency provisions against movant and movant had not sustained any real, actual or direct harm or injury, or that he was in danger of sustaining any immediately impending harm or injury. In re McCartney, 336 B.R. 588 (Bankr. M.D. Ga. 2006). Section 366(c): Utilities/Adequate Assurance of Payment. Court has no discretion to continue § 366(a) injunction against utilities; such action requires either the utility’s acceptance of the adequate assurance offered by Chapter 11 trustee or debtor in possession, or trustee or DIP’s acceptance of adequate assurance offered by the utility. Debtor may not request court modification of adequate assurance until after it has accepted amount of assurance required by utility. “Utility service” in § 366(c) means only traditional services that debtor consumes, not other services and rights provided by the utility, such as interconnection agreement services. In re Lucre, Inc., 333 B.R. 151 (Bankr. W.D. Mich. 2005). Debtor’s Statement of Intent. The requirement that the debtor file and perform a declaration of intention does not apply in Chapter 13 cases. The stay continues regardless of whether the debtor promises to reaffirm. In re Schlitzer, 332 B.R. 856 (Bankr. W.D.N.Y. 2005). Section 521(e): Tax Returns. Trustee has prosecutorial discretion and may decline to file motion to dismiss debtors’ case for failure timely to provide tax returns where interests of estate are better served if case is not dismissed. Trustee’s motion to dismiss, filed on erroneous belief that estate’s interests could not be considered, is denied. In re Duffus, 339 B.R. 746 (Bankr. D. Ore. 2006). Reaffirmation Agreements/Presumption of Undue Hardship. Section 524(m) does not require the court to rely solely on income and expense information provided in Part D of the reaffirmation agreement, and it does not require a court to approve a reaffirmation agreement if the presumption of undue hardship arises. Requirement that disapproval of agreement be preceded by “notice and a hearing to the debtor and creditor” applies only when presumption of undue hardship arises. In re Payton, 338 B.R. 899 (Bankr. D.N.M. 2006). Section 1112(b): Conversion or Dismissal of Chapter 11 Case. Despite use of conjunctive “and” in the list of factors delineating “cause,” a change Congress purposefully made in BAPCPA, a movant need not establish that all such factors have been met before a case may be dismissed. Requiring that all factors be present would produce absurd results. Corporate debtors would rarely, if ever, face threat of dismissal or conversion because one factor is the failure to pay domestic support obligations, and if all factors are established, the case probably deserves referral to the United States attorney. In re TCR of Denver, LLC, 338 B.R. 494 (Bankr. D. Colo. 2006). No Deficiency Claim for Surrendered Collateral under New Anti-Cramdown Provision. Debtors' chapter 13 plan proposed surrender of motor vehicle to secured creditor in full satisfaction of creditor's claim. Interpreting BAPCPA's anti-cramdown provision (§ 1325(a)(5)(C)), applicable because the motor vehicle was purchased within 910 days of the petition date, the court held that surrender satisfies the creditor's claim in full. By its own terms, the anti-cram down provision prohibits application of § 506(a), which would permit bifurcation of the claim, and, because § 506(a) is entirely removed from the picture, there can be no deficiency balance, either secured or unsecured. In re Ezell, 338 B.R. 330 (Bankr. E.D. Tenn. 2006). Securities Fraud Exception to Discharge: § 523(a)(19). Congress intended that § 523(a)(19) apply to all securities fraud judgments, orders or settlement agreements arising after the enactment of Sarbanes-Oxley Act, whether arising before or after filing of the bankruptcy petition. A judgment, order or settlement agreement need not have arisen prior pre-petition to be excepted from discharge. Effect of amendment is to allow creditor’s counterclaim arising from securities fraud issues in state court action to be excepted from discharge and remain viable in the state court action. In re Weilein, 328 B.R. 553 (Bankr. N.D. Iowa 2005). 28 U.S.C. § 1930(f): Filing Fee Waiver. In applying the second of three criteria established by the Judicial Conference, whether the debtor is able, based on the totality of the circumstances, to pay the filing fee in installments, the IRS expense guidelines are not controlling as to the reasonableness of an applicant’s expenses, they do establish a starting point of analysis. In re Nuttall, 334 B.R. 921 (Bankr. W.D. Mo. 2005). Paula Lucas Washington Hot NewsHouse Energy and Commerce Committee Drafting Privacy Bill (May 8) The House Energy and Commerce Committee is currently drafting a privacy bill that it hopes to introduce in June. Committee Chairman, Joe Barton (R-TX) is actively backing the broad privacy legislation (details are unknown and Barton acknowledges - AND THIS IS A SIGNIFICANT POINT - that it could take a "multi-year effort" to get it enacted). Both the Center for Democracy and Technology and Microsoft Corp. are seeking broad privacy legislation because they feel that the increasing "patchwork" of state and federal laws has created confusion amongst consumers and is placing heavy burdens on businesses. Executive Compensation Bills (April 14) Prior to adjourning for the spring recess, Sen. Bayh (D-IN) introduced S. 2556, a bill that would place some limitations on executive compensation in bankruptcy cases. Rep. Conyers (D-MI) introduced a companion bill, H.R. 5113, in the House. Judiciary Committee Must Examine House Commerce Data Breach Security Bill (April 14) According to the House Commerce Committee, HR 4127, the "Data Accountability and Trust Act" (i.e., breach notification), which unanimously passed the Committee in March, must go to the House Judiciary Committee before moving to the floor. This will further slow the bill's progress. Bankruptcy Rules Committee Approved Proposed Rules and Forms Amendments (April 3) At its Spring 2006 meeting in March, the Advisory Committee on Bankruptcy Rules approved amendments to several Official Bankruptcy Forms and Interim Bankruptcy Rule 1007, which implement the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005. The proposed changes to Interim Rule 1007 and Official Forms 1, 5, 6-Summary, 6D, 6E, 6F, 6I, 6J, 6-Declaration, 9G, 9H, 9I, 22A, 22B, 22C, 23A, and 23B reflect practice under the reform act, comments received since the Interim Rules and Official Forms were issued in 2005, and new statistical reporting requirements which take effect this fall. Nominating Committee ReportThe Nominating Committee for the Bankruptcy Section met to select a slate of candidates for positions on the Section's Executive Council for terms beginning in July 2006. Section bylaws specify that any section member may submit a nominating petition for a position on the Executive Council. Each petition must have signatures of at least ten Section members and be submitted to Alan I. Nahmias, Nominating Committee Chair, with a copy to Erica Henry at the CLLA Office at least five days before the Section's Annual Meeting in July. Elections will be held at the general membership meeting of the Bankruptcy Section during the National Convention at The Grove Park Inn Resort & Spa in Asheville, North Carolina. Members of the Nominating Committee are: Alan I. Nahmias (Plotkin, Rapoport & Nahmias, Encino, CA); Karen J. Porter (Law Office of Karen J. Porter, Ltd., Chicago, IL); Wanda Borges (Borges & Associates, LLC, Syosset, NY); Charles R. Johanson, III (Engel, Hairston & Johanson, PC, Birmingham, AL); and Daniel J. Goldberg (Ross, Banks, May, Cron & Cavin, PC, Houston, TX). Alan I. Nahmias, Nominating Committee Chair, announced the following candidates: Officers (one year term: 2006 - 2007) Chair – Ivan Jac Reich, Becker & Poliakoff, PA, Fort Lauderdale, FL Executive Council (three year terms: 2006 - 2009) Lawrence C. Brown, Law Office of Lawrence C. Brown, Buffalo, NY Executive Council (one year term: 2006 - 2007) to complete unexpired term of Deborah K. Ebner: Karen J. Porter, Law Office of Karen J. Porter, Ltd., Chicago, IL |