All posts in Chapter 11

December 13, 2013 – FBA-LA 10th Annual Bankruptcy Ethics Symposium and Bias/Substance Abuse MCLE bonus session

By | December 2, 2013 | Bankruptcy Data, Chapter 11, Community | No comments

10TH ANNUAL BANKRUPTCY ETHICS SYMPOSIUM
December 13, 2013 – 9:00 a.m. (Registration at 8:30 a.m.)
Location: Roybal Federal Building, Conference Room 283 (255 E. Temple St, Los Angeles, CA 90017)

TOPICS:
9:00 a.m. – 12:45 p.m.

Pre-Bankruptcy Planning: 20 Shades of Gray
Technology Tips and Trap Doors
An Ethics Conversation with Evan Jenness

1:00 p.m. – 3:00 p.m. – Afternoon Presentation (Optional)
Substance Abuse – Elimination of Bias

SPEAKERS:
Hon. Ernest M. Robles, United States Bankruptcy Court
Hon. Deborah J. Saltzman, United States Bankruptcy Court
Gillian N. Brown, Esq., Pachulski Stang Ziehl & Jones LLP
J. Scott Bovitz, Esq., Bovitz & Spitzer
M. Erik Clark, Esq., Borowitz & Clark, LLP
Christie L. Cronenweth, Esq., Law Offices of Christie Cronenweth
Evan A. Jenness, Esq., Law Offices of Evan A. Jenness
Stella A. Havkin, Esq., Havkin & Shrago
David A. Tilem, Esq., Law Offices of David A Tilem

MCLE: 3.5 Hours General MCLE; 1Hr. Substance Abuse; 1 Hr. Elimination of Bias. This activity has been approved for Minimum Continuing Legal Education Credit by the State Bar of California. The FBA certifies that this activity conforms to the standards of approved education activities prescribed by the rules and regulations of the State Bar of California governing minimum continuing legal education.

Judge Riblet on the Absolute Priority Rule, Again

By | August 22, 2013 | Absolute Priority Rule | No comments

The last time we checked, Judge Riblet in Santa Barbara was firmly on the fence regarding the Absolute Priority Rule (see post here).  Since then, I have had a disclosure statement hearing where she made her views very clear.

First of all, she says that she believes that the Friedman case (466 B.R. 471) is dispositive for her: she must follow it.  The case comes from the 9th Circuit Bankruptcy Appellate Panel, not the 9th Circuit itself, and there is some uncertainty whether a bankruptcy judge must follow BAP precedent the same way that she would follow the circuit court.  Judge Riblet admits no uncertainty here: she follows the BAP.

However, that doesn’t mean she likes it.  She urged my opponent to appeal her order if and when she confirms my client’s plan, because she said she wants to see Friedman overturned and have the Absolute Priority Rule apply to individual debtors as well as business debtors.

The objecting creditor has stated that he has authority to appeal this question to the Supreme Court.  Any debtors’ attorneys out there that want to help me out on this?

US Trustee Announces Settlement with Kaye Scholer

By | April 10, 2013 | Chapter 11 | 1 Comment

The US Trustee went after the mega firm Kaye Scholer for being less than transparent in its disclosures of conflicts in chapter 11 cases.  The announcement can be accessed here.  Kaye Scholer agreed to pay $1.5 million and “establish a special compliance review committee to certify under penalty of perjury the law firm’s continuing compliance.”

Post Confirmation Attorneys Fees in Individual Chapter 11 Case

By | March 23, 2013 | Chapter 11 | 1 Comment

Typically once a chapter 11 plan is confirmed, the assets of the estate are transferred to the “Reorganizaed Debtor” who then proceeds on its merry way.  The Reorganized Debtor may retain and pay counsel without the necessity of court oversight, meaning no expensive and time-consuming fee applications.  Typically the Plan sets forth that the Reorganized Debtor may retain counsel etc.

What about chapter 11 cases for individuals?  Confirmation does not result in a discharge.  According to the Central District Form Plan, Form 2081-1.PLAN, confirmation ressults in a transfer of the assets to the “reorganized debtor’ (small caps).  Does it therefore work the same way?  The question remains, may the debtor retain and pay counsel, after confirmation, without filing an application to employ and fee applications?  The form PLAN does not say.

The easy answer is to include language in the form PLAN that provides that the debtor may retain and pay counsel without court approval after the Plan is confirmed.

Judge Bluebond Rules that Attorneys Fees are Recoverable by Undersecured Credit That Makes 1111(b) Election

By | March 22, 2013 | Chapter 11 | No comments

A undersecured creditor in a chapter 11 is permitted to elect to force the debtor to treat its undersecured claim as fully secured.  Does that mean then that the claim includes postpetition fees and   pursuant 506(b)?  Judge Sheri Bluebond has ruled that attorneys fees are recoverable but not postpetition interest.  Her opinion can be accessed here.   She writes:  “Two decisions bear directly on the answer to this question: Travelers Cas. & Sur. Co. of Am. v. PG&E, 549 U.S. 443, 127 S.Ct. 1199, 167 L.Ed.2d 178 (2007) and Infonet Mgmt. v. Centre Ins. Co. (In re SNTL Corp.), 571 F.3d 826 (9th Cir. 2009).”  Travelers of course is the Supreme Court ruling that the American rule of collecting attorneys fees applies in the bankruptcy world as a general rule.  SNTL holds that “’So long as the right to collect the fees existed prepetition, the fact that the fees were actually incurred during the postpetition period is not relevant to the determination of whether the creditor has an allowable pre-petition claim for the fees.’”  So the claim is allowed unless Section 502 disallows it.  So the claim of the creditor electing 1111(b) includes postpetition attorneys fees per SNTL but not interest because 502(b) says no unmatured interest and 506(b) postpetition interest only to oversecured creditors.

American Suzuki Plan Confirmed

By | March 3, 2013 | Chapter 11 | 1 Comment

How’s that for speed?  American Suzuki should “leave” bankrutpcy by the end of March.  The fact that this case sailed so smoothly through Chapter 11 should bode well for large companies choosing Los Angeles to file bankruptcy cases rather that Delaware or New York.  Kodos to Judge Scott Clarkson.  The Bloomberg Business Week article is here. 

Judge Riblet on the Absolute Priority Rule

By | January 18, 2013 | Absolute Priority Rule, Chapter 11, Judges Corner | 1 Comment

The Absolute Priority Rule is an arcane part of the Bankruptcy Code (see 11 USC § 1129(b)(2)(B)(ii)).  It basically says that in a Chapter 11 plan, lower classes of creditors cannot be paid anything unless higher classes have either been paid in full or consent to their treatment.  As an example, I have a debtor who is trying to confirm a plan that pays $200,000 to his unsecured creditors, but allows him to keep all his properties.  Because one of the unsecured creditors strenuously objects to the $200,000 payment as too little, the plan violates the Absolute Priority Rule – the debtor is a lower class of creditor than the unsecured creditors.

In 2005, Congress passed BAPCPA, which changed some of the language regarding this rule in an ambiguous (and again arcane) way.  Some courts have found that the change abrogates the rule with respect to individual debtors; others have found that it did nothing of the sort.  See here for a discussion of how the language change worked.

I had a hearing on a disclosure statement before Judge Riblet, of Santa Barbara, today.  In the past, she has always talked as if the Absolute Priority Rule applies to debtors – “why on earth wouldn’t it?” she once asked me at a hearing where the rule was not yet at issue.

Today, she came down firmly on the fence.  She said that she had only discovered the Friedman case (In re Friedman, 466 B.R. 471 (9th Cir. BAP 2012) in the last month, and read the Fourth Circuit’s take on the Absolute Priority Rule (In re Maharaj, 681 F.3d 558 (4th Cir. 2012)) even more recently.  She pointed out that neither was precedential for her.  She insisted that, when the issue comes up, counsel be well-versed in both cases.  She did not tip her hand in suggesting which she found more persuasive.

So unfortunately we still do not know which way this judge, one of the last in the Central District to deal with the issue, will rule.

Federal Trade Commission — New Consumer Information

By | January 11, 2013 | Chapter 11, Chapter 13, Chapter 7 | 2 Comments

Hi everyone,

The FTC has made some new consumer informational materials regarding credit reports that may be helpful to you and your clients:

·The FTC has come out with a new video that can help you or your clients with ordering their credit reports for FREE. It tells clients why it’s important to check their credit report, and how they can get a free copy of their reports once a year from each of the three national consumer reporting companies. The information is available in English and Spanish at www.ftc.gov/freereports.
·There is also a 60-second file with audio tips on how you or your clients can their credit reports for free at: http://www.consumer.ftc.gov/media/video-0060-your-source-truly-free-credit-report-annualcreditreportcom.
·Information on a credit report is important because it may affect a consumer’s ability to : 1) get a car loan; 2) rent an apartment, or 3) buy a home. Everyone can get a free copy of your credit reports at www.AnnualCreditReport.com.
·There is a also information about how to build a better credit report. Here is a link to a PDF pamphlet you can download directly from the FTC website at: http://www.consumer.ftc.gov/articles/pdf-0032-building-a-better-credit-report.pdf. Free copies are available from their website. I have also attached a copy.
·Last, there is a pamphlet with information about how to dispute errors or incorrect information from a credit report. Here is a link to a PDF pamphlet you can download directly from the FTC website at: http://www.consumer.ftc.gov/articles/pdf-0038-how-to-dispute-credit-errors.pdf. Free copies are available from their website. I have also attached a copy.

Happy New Year!
Maggie

Magdalena Reyes Bordeaux
Supervising Attorney
Public Counsel

Bankruptcy Law Section Meeting with Judge Russell – Motions to Dismiss

By | January 11, 2013 | Chapter 11, Chapter 13 | 1 Comment

Judge Barry Russell: Motions to Dismiss

Panel: Judge Barry Russell and attorneys Howard Ehrenberg and Stella Havkin

Date: Tuesday, January 22nd
Time: 12:00 p.m. Lunch and Program
Place: SFVBA Conference Room
5567 Reseda Blvd, Ste 200
Tarzana, CA 91356

Cost: $30 Members prepaid; $40 at the door
$40 Non-Members prepaid
$50 Non-Members at the door

 

To Register
FAX (818 )227-0499

Send checks to SFVBA
5567 Reseda Bl., Ste 200

Tarzana, CA 91356

For more information, call (818) 227-0490, ext. 105 or email events@sfvba.org

Name ______________________
State Bar No. ________________
Telephone No.________________
CC No._____________________
Expiration Date_______________
Signature____________________

Please note that no credit will be given unless notice of cancellation is provided 48 hours before scheduled event. Special meal requests must be provided 48 hours in advance to the Bar.

The SFVBA is a State Bar of California approved MCLE provider. By attending this seminar, attorneys earn 1 hour MCLE.

THQ, Large Local Business Files Chapter 11

By | December 21, 2012 | Chapter 11, Current Events | 2 Comments

I often ride my bike past the headquarters for THQ, a large video-game company in Agoura Hills, California.  In fact, it’s the third-largest employer in the city, after Bank of America and the local school district.   Two days ago, it filed for bankruptcy protection under Chapter 11 of the code.  The debtor’s attorneys listed on the filing are Gibson, Dunn, and Crutcher in Los Angeles, and Young Conaway Stargatt & Taylor, a local firm in Wilmington, Delaware, where the corporation filed its case.

Even though world headquarters for this company are down the street, the Delaware filing is a reminder that the venue provisions for bankruptcy courts allow a filing in the debtor’s district of (1) residence, (2) domicile (residence and domicile are not the same thing), (3) principal place of business in the United States, (4) principal site of assets in the United States, or (5) incorporation.  The first four work for people as well as corporations: I once filed a case for a U.S. citizen residing in Switzerland by showing that he owned a bank account and shares in a corporation doing business in Agoura Hills.

THQ’s president spins the chapter 11 filing as an opportunity, and I admire that.  The company faced undeniable problems (which, having almost no interest in video games, I am happily ignorant of) and had lost $2 billion in market capitalization over the last six years.  That’s a lot of mojo down the drain.  If, as the company and the LA Times report, the company found an investor to purchase its assets, bankruptcy will be a great vehicle for it to strip off the liens attaching to those assets and allow it to continue doing business and catering to the tastes of hard-core action gamers.  We’re probably all better off in that case, because those guys will stay off the streets, to blow up zombies on their electronic screens, rather than interact with the rest of society.

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