02-08-10 --
Bernard Madoff's brother, sons and a niece, accused
in a lawsuit of using the family finance business
like a "piggy bank," have agreed to an asset freeze,
according to a document filed in court Friday. . . .
The deal with court-appointed trustee Irving Picard
was described in a document filed in U.S. Bankruptcy
Court in Manhattan. . . . Picard sued the family
members in November seeking nearly $200 million that
he said had enabled the family members to live
lavishly at the expense of Madoff investors. . . .
The asset freeze affects Madoff's brother, Peter;
his sons, Mark and Andrew; and a niece, Shana Madoff.
The consent order requires them to seek permission
from Picard to spend more than $1,000 unless the
expense results from a list of exemptions such as
legal or medical fees. It also requires them to
provide a monthly listing of all expenses.
02-08-10 --
A federal judge has approved several settlement
agreements between the government, the trustees
charged with liquidating the estate of disbarred
attorney Marc S. Dreier and his defunct 250-attorney
law firm, and various other parties affected by his
massive fraud. . . . Noting that "an
under-appreciated evil of substantial frauds like
those of Marc Dreier is how they pit their victims
against one another," Southern District Judge Jed S.
Rakoff ruled Friday that a coordination agreement,
which prevents the federal government from going
after the proceeds of avoidance actions brought by
Sheila Gowan, the trustee for Dreier LLP, was
"reasonable and in the best interests of the victims
collectively." . . . The coordination agreement
authorizes the government to release to Gowan 97
artworks that have not been traced to Dreier's
crimes.
02-03-10 --
The attorney for the bankruptcy trustee recovering
the assets of Bernard L. Madoff argued before a
packed courtroom Tuesday that "no one in their right
mind" would use the financial statements concocted
by Madoff as a basis for distributing the funds. . .
. During a nearly four-hour hearing, David J.
Sheehan, an attorney for trustee Irving H. Picard,
urged Bankruptcy Judge Burton Lifland to accept
Picard's "cash-in/ cash-out" method of compensating
investors. . . . Under that approach, investors who
withdrew less cash from their Madoff accounts than
they deposited ("net losers") would share in
whatever Picard recovers, now about $1.5 billion. .
. . On the other hand, investors who withdrew funds
over and above what they invested ("net winners")
would get nothing.
02-02-10 --
A federal judge is set to give the green light to a
number of proposed settlements involving the estates
of disbarred attorney Marc S. Dreier and his defunct
250-lawyer firm. Last month, prosecutors and
trustees charged with liquidating the Dreier estates
asked Southern District Judge Jed S. Rakoff to
approve the agreements, including one with
investment manager GSO Capital Partners.
Under the
agreements, Sheila Gowan of Diamond McCarthy, the
trustee for Dreier LLP, would refrain from
challenging the government's attempt to collect
certain forfeited funds. In turn, prosecutors would
transfer certain property to Gowan, including nearly
100 artworks that have not been traced to Dreier's
crimes. The government would also agree not to go
after proceeds from avoidance actions brought by the
Chapter 11 trustee.
01-26-10 --
A former Franklin lawyer pleaded guilty in federal court this
morning to falsifying bankruptcy papers involving nearly $4 million
he loaned to himself from an elderly client. . . . James Edward
Moyler Jr., 79, who now lives in Williamsburg, is scheduled to be
sentenced April 30. He faces up to five years in prison. . . .
Moyler was a longtime, respected lawyer in Franklin who was forced
into bankruptcy in 2008. He and his wife declared $4.2 million in
debts, but he failed to disclose that he had “borrowed” just under
$4 million from a client, according to court records.
01-19-10 --
In a ruling of interest to mortgage lenders, a
bankruptcy judge has ruled that even a grossly
negligent lender is entitled to the benefit of
equitable subrogation in determining priority. . . .
The Jan. 11 decision is good news for Countrywide
Homes Loans Inc., which is trying to recover on a
$691,000 loan made to Richard Spair in 2004 for a
refinance of his Wall Township, N.J., home.
Countrywide acquired the mortgage from Quicken Loans
in 2006. . . . The house was sold for $1.025 million
after Spair filed for bankruptcy, and Countrywide is
vying with another mortgagee for more than $900,000
in net proceeds held by the Chapter 13 trustee.
01-15-10 --
Lehman Brothers Holdings Inc. has paid its lawyers
and other bankruptcy advisers $588.4 million in the
15 months since it started liquidating, according to
a regulatory filing. . . . The restructuring firm
Alvarez & Marsal LLC, which provided Lehman with its
current chief executive officer, Bryan Marsal, led
the payments with $218.3 million in fees for
“interim management” through December, according to
the filing yesterday with the U.S. Securities and
Exchange Commission. . . . Weil Gotshal & Manges LLP
of New York was reported by Lehman to have collected
$127.1 million through December for acting as the
investment bank’s lead bankruptcy law firm, the same
amount as Lehman said it had paid through November.
Harvey Miller, Lehman’s lead lawyer at Weil Gotshal,
didn’t immediately respond to an e-mail seeking
comment yesterday.
01-15-10 --
After months of negotiations, prosecutors have told
a federal judge they have hammered out an agreement
with the trustees charged with liquidating the
estates of
disbarred attorney Marc S. Dreier and his
defunct 250-lawyer firm. . . . Representatives of
the Southern District U.S. Attorney's Office and
lawyers for Sheila Gowan of
Diamond McCarthy, the trustee for Dreier
LLP, and Chapter 7 trustee Salvatore LaMonica of
LaMonica Herbst & Maniscalco urged
Southern District Judge Jed S. Rakoff on Tuesday to
approve three agreements, including one with
investment manager GSO Capital Partners LP.
Posted by Robert J.
Ambrogi, Law.com Legal Blog Watch
01-14-10 –
In an unusual example of judicial defiance, an
on-his-way-out bankruptcy judge is siding with an
out-of-work and deep-in-debt law grad and issuing a
rebuke to the federal district judge who overruled
him. . . . "An irascible Massachusetts bankruptcy
judge known for 'whacking lenders' has turned his
acid pen upon the chief of the U.S. District Court
of Massachusetts who overruled his decision to
release a penniless bar-failer from her law school
debts," reports Julia Reischel has the story at
The Docket, the blog of
Massachusetts Lawyers Weekly newspaper. .
. . The case involves Denise M. Bronsdon, now 65,
who graduated in 2005 in the top half of her class
at the unaccredited
Southern New England School of Law but
then failed the Massachusetts bar exam three times.
She is now unemployed and lives on Social Security
in a room at her father's house.
01-12-10 --
The law firms and financial advisers retained in the Thornburg
Mortgage bankruptcy
have had it pretty good for a while. Shortly after the
jumbo loan issuer went belly up last May, the federal bankruptcy
court in Baltimore established a compensation plan that allowed
professionals to submit bills every month, rather than every 120
days as directed in the bankruptcy code. Among the top beneficiaries
have been debtor's counsel Venable ($1,160,693) and Quinn Emanuel
Urquhart Oliver & Hedges, which is counsel to the unsecured
creditors' committee ($858,198). But the days of quick payouts may
be numbered. Last week, the trustee in the case
filed a motion (pdf) asking the court to terminate the
monthly compensation order. . . . The trustee argued that the bills
are too numerous to analyze and that their preparation is costing
the estate a small fortune. Special criticism was reserved for Quinn
Emanuel, which the trustee noted has billed the estate nearly
$75,000 simply for the preparation of its monthly fee statements.
01-08-10 --
A creditors committee in the bankruptcy case of
defunct law firm Rothstein Rosenfeldt Adler
unsuccessfully tried Thursday to block salary
payments to three employees in the wake of founder
Scott Rothstein's alleged $1.2 billion fraud. . . .
The committee's attorney opposed paying a total of
$7,220 to firm CFO Irene Stay, assistant managing
shareholder Grant Smith and billing agent Aimee
Villegas because of their possible involvement in
the alleged Ponzi scheme. . . . "I know Stay has
committed fraudulent activity, likely one far in
excess" of the $2,000 she is owed, creditor attorney
Eyal Berger, an associate at Akerman Senterfitt in
Fort Lauderdale, Fla., told U.S. Bankruptcy Judge
Raymond Ray.
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Chapter 11 results in
huge payouts for SemGroup case players.
By Rod Walton Tulsa
World Staff Writer
12-30-09 --
A bankruptcy filing may usher in a blue morning for
financially troubled companies, but it's a
red-letter day for the attorneys, consultants and
other professionals who make a living guiding firms
through reorganization or liquidation. . . . Tulsa's
most recent example — the rise, fall and ultimate
re-emergence of midstream oil giant SemGroup —
illustrates how dozens of companies, employing
hundreds of people, make millions in fees throughout
a Chapter 11 case, records show. . . . Now called
SemGroup Corp., the company emerged Dec. 1 after 16
months in bankruptcy. . . . SemGroup so far has paid
out $137.52 million to 41 firms doing a variety of
Chapter 11 work. The payout doesn't end there, as
the company's last monthly operating report only
details fees paid through Oct. 31. . . . Future
applications for fees, including those filed this
week by law firm Bifferato LLC or asset evaluator
Valuation Research Corp. earlier this month, likely
will push that total beyond $140 million. Whether
that's money well spent depends on one's view of
bankruptcy consultants.
12-21-09 --
Lawyers for Washington Mutual filed papers Friday in
the bank's Chapter 11 case claiming Sullivan &
Cromwell,
on behalf of WaMu's new owners at JPMorgan Chase,
has been sending out letters asking WaMu's old law
firms to turn over their client files on WaMu --
files that include privileged material. . . . The
letters, which WaMu's lawyers at Quinn, Emanuel,
Urquhart, Oliver & Hedges
have attached as exhibits, claim JPMorgan should
have access to the privileged documents because
JPMorgan and WaMu are essentially the same entity
now. Those entities have "joint privilege," the
letters claim. . . . Firms that have received the
letters include Weil, Gotshal &
Manges,
Simpson Thacher &
Bartlett,
Perkins Coie
and others.
12-18-09 --
Bankruptcy rates are a
popular topic in the world we cover and
always command great interest. Today's news on the
subject is no different. The latest fee requests in
the bankruptcies of Bernard L. Madoff Investment
Securities and Nortel Networks are boosting the
bottom lines of two
Am Law 100 firms. It might be good news
for the lawyers, but not everyone is happy about it.
. . . A federal judge on Thursday awarded trustee
Irving H. Picard and his team of lawyers liquidating
Madoff's investment firm roughly $22 million in
interim counsel fees. Southern District of New York
Bankruptcy Judge Burton Lifland granted Picard and
Baker & Hostetler's respective requests for
approximately $836,000 and $21.3 million in fees for
May 1 through Sept. 30. In August, Lifland
approved about $15 million in interim fees
for Picard and his attorneys.
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12-17-09 --
A Manhattan bankruptcy judge approved General Growth
Properties Inc.'s plans to restructure more than $10
billion in mortgages Tuesday,
Bloomberg reports. The restructuring will
allow 103 mall properties holding those loans to
exit bankruptcy by the end of the year. . . . As we
previously
reported, GGP, the nation's
fourth-largest real estate investment trust, filed
restructuring plans for the mortgages Dec. 2. The
unusual deal to modify the terms of its plethora of
securities has been viewed as a possible model for
other investors facing foreclosure on similarly
troubled real estate; it stands as the largest
restructuring of commercial mortgage-backed
securities debt ever.
12-16-09 --
A review of bankruptcy rates in Delaware and the
Southern District of New York shows that a handful
of U.S.-based partners at
Am Law 200 firms have inched above the
$1,000 rate barrier, making bankruptcy work as
lucrative as it was plentiful in 2008 and 2009. Over
a 12-month period ending August 2009, there were
more than 13,000 billing rate entries submitted by
law firms in the nation's two busiest bankruptcy
courts, according to a new database compiled by ALM
Media. . . . Among U.S.-based lawyers at Am Law 200
firms,
Shearman & Sterling tax partner Bernie
Pistillo topped the rate chart with an hourly fee of
$1,065 for his work on the bankruptcy of Stock
Building Supply Holdings LLC, a building products
supplier, in Delaware. (One solo practitioner in
Pleasantville, N.Y., Alan Harris, surpassed
Pistillo's rate, charging $1,200 an hour for his
work as special real estate litigation counsel on
the bankruptcy of Digital Printing Systems in the
Southern District of New York.) Eleven other
U.S.-based Am Law 200 partners were in the
$1,000-plus club, according to the database.
12-16-09 --
U.S. authorities prosecuted the fewest number of
people and companies for criminal bankruptcy fraud
this year since at least 1986, even as filings rose
amid the worst economic crisis since the Great
Depression. . . . The FBI, which is the primary
agency that probes such cases, says it is putting
more emphasis on other white-collar crimes,
including securities and mortgage fraud. The bureau
had reassigned agents handling white-collar crimes
to national security after the Sept. 11 attacks. . .
. Fewer prosecutions have emboldened criminals, said
Juval Aviv, the president and chief executive
officer of
Interfor Inc., a New York-based
investigation and security firm that helps find
money hidden from creditors, in an interview.
12-15-09 --
The future of Philadelphia's two major newspapers
could turn on a pair of commas in the bankruptcy
code. . . . The newspapers' creditors seized on the
commas to argue in a federal appeals court Tuesday
for the right to use the $300 million owed them to
bid for The Philadelphia Inquirer and Philadelphia
Daily News. . . . The company that owns both
newspapers, Philadelphia Newspapers, interprets the
statute to mean it can bar such credit bids at its
proposed auction. The company hopes a new group -
comprised of two current and one new investor - will
win with a bid of $67 million in cash and real
estate.
12-15-09 --
A monthly operating report filed in Manhattan
bankruptcy court on Monday shows that
Weil, Gotshal & Manges has billed Lehman
Brothers $127.1 million in fees and expenses for its
role as lead debtors' counsel. . . . The latest fee
disclosure,
first reported by Bloomberg, was part of
a report on Lehman's professional fees and expense
disbursements through November 30. The
26-page report (pdf) filed by Weil
bankruptcy partner Shai Waisman shows that Lehman
has paid legal counsel and financial advisers nearly
$533.5 million since entering Chapter 11 in
September 2008. . . . Weil began serving as
lead debtors' counsel that month as the
Lehman bankruptcy became the largest Chapter 11 case
in U.S. history. The firm
broke the $100 million billable mark this
past August.
12-14-09 --
When the creditors of bankrupt companies draw up
lists of litigation targets, auditing firms are
often right there at the top. So it was for the
creditors trust of the bankrupt insurer, Frontier
Insurance Group. The trust, represented by John
McKetta III of
Graves Dougherty Hearon & Moody, alleged
that Ernst & Young underestimated the reserves
Frontier needed to hold, making the company look
healthy when it was actually insolvent. It claimed
$140 million in damages, plus interest. . . . But
E&Y decided to make a stand. It refused to chip up,
and instead headed for a jury trial before White
Plains, N.Y., federal district court Judge Cathy
Seibel. On Wednesday, after 12 days of trial, jurors
needed only two hours to exonerate the auditor.
12-14-09 --
A federal bankruptcy judge is fed up with lawyers
who use superfluous words and too much
capitalization, and he has directed them to stop it.
. . . U.S. Bankruptcy Judge Robert Kressel of
Minnesota took a stand against legalese in new
guidelines (PDF) for lawyers preparing
proposed orders in his court,
Legal Blog Watch reports, citing a story
by
Lawyerist.com. . . . Kressel says lawyers
should eliminate superfluous words such as “hereby,”
“herein” and “heretofore entered in this case.” The
phrases “serve no purpose other than to make the
document sound more legal, which is exactly the
opposite of the goal that I am trying to
accomplish,” he writes. “Compare the meaning of
‘Now, therefore, it may be and is hereby ordered
that' with ‘It is ordered.’ ” . . . Kressel also
observes that “lawyers love to capitalize words.
Pleadings, including proposed orders, are commonly
full of words that are capitalized, not quite
randomly, but certainly with great abandon.
12-11-09 --
In what the U.S. Department of Justice is touting as
the largest environmental bankruptcy in U.S.
history, mining giant Asarco has paid $1.79 billion
to fund environmental cleanup efforts at more than
80 sites in 19 states. . . . Asarco has spent the
past 110 years extracting lead, zinc and copper at
sites around the country, leaving in its wake a lot
of hazardous material. But with the company mired in
debt during the past decade, it seemed unlikely that
it would be held liable for the cost of cleaning up
contaminated sites. . . . In 2002, the Justice
Department accused Asarco's parent company, Grupo
Mexico, of trying to strip the company of all its
assets to avoid paying its bills.
12-11-09 --
Attention all lawyers who practice before United
States Bankruptcy Judge Robert Kressel, D. Minn.: He
has just about had it with your crappy "legalese"
and he has a 19-point plan to get you writing like a
real person again. . . . In
this post,
The Lawyerist alerts us to the new "guidelines"
issued this week by Judge Kressel. As the Lawyerist
observes, "it is a catalog of and prohibition
against every bad legal writing practice. And it
makes sense, since he eventually has to sign those
badly-drafted orders."
12-10-09 --
Heller Ehrman's leaders discussed the firm's
"mortality" while assuring partners it was sound,
and recruited more than five merger candidates by
early 2008, including Mintz Levin, according to
confidential creditors' exhibits in bankruptcy
mediation talks. . . . The documents provide details
never before available that give clues to the inner
workings of a failing law firm and expose
embarrassing ironies. . . . For instance, the firm
in 2007 began a campaign to drive out up to 50
partners who weren't sufficiently profitable, but it
had to ultimately close its doors because too many
partners left, triggering a loan default.
The
need for the legal help offered by volunteer attorneys at the
walk-in clinic is strong in this economy.
By Kara
McGuire, Minneapolis Star Tribune
12-06-09 --
No one wants to be sitting across from Mary Hoben on a Thursday
morning, but they are awfully glad she's there. . . . Hoben is one
of 16 attorneys who donate their time and expertise to low-income
Minnesotans at a free bankruptcy advice clinic. The new clinic, held
at the U.S. Courthouses in Minneapolis or St. Paul, was set up on a
trial basis this spring to assist people tackling the painful and
mind-boggling task of filing for bankruptcy without an attorney's
help. The walk-in clinic was made permanent this fall because demand
is strong. In the worst recession since the Great Depression, is
that surprising? . . . Bankruptcy filings in the state have
surpassed levels last seen in 2004, the year before the law was
overhauled in an attempt to reduce bankruptcy numbers.
12-3-09 --
General Growth Properties Inc., the fourth-largest
real estate investment trust in the United States,
filed a set of restructuring plans Tuesday night
that would collectively restructure billions of
dollars in mortgages that it holds. . . . The
proposed plans cover the lion's share of GGP
subsidiaries, and, if approved, would represent a
significant step toward solving the parent company's
problems by taking a substantial proportion of those
subsidiaries' debt out bankruptcy. The remainder of
GGP's property-related debt, including $7 billion in
trade and unsecured parent company debt, $6 billion
in other property-related debt, and several billions
of dollars more connected to joint ventures, must
still be reconciled in bankruptcy court.
By: Barbara
Hollingsworth, Washington Examiner (blog)
Re: “SEC IG looks
into United Airlines bankruptcy,” Nov. 24
12-3-09 --
For three years, the Federal Bureau of Investigation
and the Department of Justice have refused to
investigate material evidence of a nationwide
criminal racket that has allegedly infiltrated state
and federal courts and is unlawfully manipulating
and exploiting litigants in bankruptcy, family and
probate courts. . . . According to court documents
filed in Chicago, the FBI and DOJ turned a blind eye
to retaliation against citizens who attempted to
expose the corruption, including “kidnapping of
children, false incarceration after being ‘framed’
by criminal elements in civil and criminal
authorities, impoverishment, coercion under duress,
and serious physical injury up to and including
death.” . . . The 2006 affidavit claims that
“multiple judges and lawyers are aware of and/or
involved in alleged criminal acts,” but have not
reported wrongdoing to authorities in violation of
the Rules of Professional Conduct. It specifically
mentions four federal judges, including Eugene R.
Wedoff, who was appointed chief bankruptcy judge of
the Northern District of Illinois in 1986. . . .
Judge Wedoff presided over the 2005 bankruptcy of
United Airlines, in which 20 large unsecured
creditors lost nearly $18 million. The airline also
defaulted on $3.2 billion worth of pension
obligations for over 134,000 United employees –the
largest pension default in three decades – while its
top executives walked off with millions in exit
bonuses.
12-2-09 --
In a constitutional challenge involving a Minnesota
law firm, the U.S. Supreme Court on Tuesday seemed
troubled by a federal restriction on legal advice to
potential bankruptcy clients, but less concerned
about the requirement that lawyers advertise as a
"debt relief agency" if they give bankruptcy advice.
. . . The justices heard arguments in Milavetz,
Gallop & Milavetz v. U.S., one of three bankruptcy
cases on the Court's docket this term. . . . Milavetz,
a general-practice law firm in Edina, Minn., is
challenging
several provisions
of the 2005 Bankruptcy Abuse Prevention and Consumer
Protection Act. The firm contends that, if those
provisions are applied to lawyers, they would
violate the First Amendment, put lawyers in conflict
with state ethics regulations and compel lawyers to
make misleading disclosures in their advertising.
12-1-09 --
When she graduated four years ago with a law degree
at the age of 61, Denise Megan Bronsdon likely did
not foresee bankruptcy court in her future. But
that's where she ended up -- as a debtor. . . . The
former farmer's wife who operated a tractor before
going to Southern New
England School of Law
in 2002, convinced a Massachusetts bankruptcy court
in January that repaying the more than $82,000 she
owed in student debt would create an undue hardship.
However, the U.S. District Court in Massachusetts,
considering an appeal by the lender, Educational
Credit Management Corp.,
found on Nov. 20 that Bronsdon's decision not to
participate in a loan repayment assistance program
should be part of the bankruptcy court's undue
hardship analysis.
11-30-09 -- Alan Milavetz remembers how his
mother, "in typical Jewish-mother fashion," always urged him to be a
doctor, lawyer or engineer when he grew up. "She didn't say doctor,
debt relief agency or engineer," recalled the personal injury
lawyer. . . . For Milavetz and a number of lawyers across the
country, a 2005 federal law requiring them to advertise as a debt
relief agency -- regardless of whether they offer sporadic or
regular bankruptcy advice to clients -- irritates like a pair of
ill-fitting shoes. . . . That requirement is in the Bankruptcy Abuse
Prevention and Consumer Protection Act, a comprehensive package of
reform measures. However, it is not the only reason Milavetz, Gallop & Milavetz, a small general practice
firm in Edina, Minn., has fought the inclusion of lawyers in the
law's debt relief agency provisions all the way to the U.S. Supreme
Court.
11-26-09 --
A White Plains lawyer wrongly submitted bankruptcy documents without
the signature of his client, a federal bankruptcy judge ruled
Wednesday. . . . But Judge Robert Drain did not address whether
lawyer Christopher Cabanillas had filed for bankruptcy without
proper authorization from his client, Domingo Hernandez, who said he
hired Cabanillas to fight foreclosure on his Yonkers property and
never discussed bankruptcy with the lawyer. . . . That issue, the
judge said in White Plains, would be a matter that would require
further hearings in the case. . . . Drain sanctioned Cabanillas,
ordering that he return whatever portion of the $1,250 retainer fee
he was paid that went to the bankruptcy filing and that he pay for
Hernandez’s legal fees fighting the bankruptcy filing.
11-25-09 --
The number of federal bankruptcy cases is up more
than 34 percent for the 12 months ending Sept.
30—the end of the federal judiciary's fiscal
year—than it was for the prior 12 months, according
to statistics released today. . . . Business filings
are up 52 percent over 2008 (58,271 from 38,651)
while nonbusiness filings are 34 percent higher
(1,344,095 from 1,004,342), according to an
Administrative Office of the U.S. Courts news release.
. . . Meanwhile, the New York Times
reported today about a "general sense among
bankruptcy lawyers and court officials ... that the
share of personal bankruptcies caused by illness is
growing."
11-25-09 --
You know it's been a rough year when casinos are
going bankrupt. And that's exactly what's happening.
. . . On Tuesday, Kirkland & Ellis
landed work as the lead debtor's counsel for
Majestic Star Casino, which filed for bankruptcy
related to its two casinos in Gary, Ind., and other
facilities in Tunica, Miss., and Black Hawk, Colo. .
. . James Sprayregen, the lead Kirkland partner on
the case, says he began working with Majestic owner
Don Barden during the two years he spent at Goldman
Sachs before returning to his perch as co-head of
Kirkland's prestigious bankruptcy group last
November. The Delaware bankruptcy boutique Pachulski Stang
Ziehl & Jones
will serve as Majestic's local counsel.
11-24-09 --
A federal judge has approved CIT Group's motion to
hire Sullivan &
Cromwell
as special counsel for the duration of its
bankruptcy case. Sullivan & Cromwell, which does not
have a traditional bankruptcy practice, will join
Skadden, Arps,
Slate, Meagher & Flom
(CIT's lead counsel) and Curtis,
Mallet-Prevost, Colt & Mosle
(conflicts counsel) as one of the lead firms on the
lending giant's mega-bankruptcy. . . . As we reported
earlier this month,
S&C has been advising CIT Group's board of directors
since August, when the company was trying everything
possible to restructure its massive debt load
outside of bankruptcy court. But CIT Group's initial
bankruptcy petition said S&C would "act as special
legal counsel to CIT going forward on certain
corporate matters."
11-24-09 --
The trustee and his team of lawyers liquidating
Bernard L. Madoff's investment firm have asked a
bankruptcy judge for $22 million in interim counsel
fees. In papers filed Monday in Southern District of
New York Bankruptcy Court, Baker & Hostetler and
Irving H. Picard, respectively, requested some $21.3
million and $836,000 in fees for May 1 through Sept.
30, a 10 percent discount off of their customary
billable rates. Picard was appointed trustee of
Bernard L. Madoff Investment Securities in the wake
of Madoff's arrest last December.
11-20-09 --
The liquidation plan administrator for the Coudert
Brothers estate is claiming that Baker & McKenzie
has breached an agreement with the defunct law firm
by failing to hand over a portion of a contingency
fee earned from work for former Coudert clients. . .
. By not handing over the fees, Baker & McKenzie
breached an agreement signed with Coudert in 2005
that gave Coudert rights to part of the fee,
according to an amended complaint filed last week in
bankruptcy court by the administrator. Baker &
McKenzie last year resolved a series of cases
involving taxes on coal exports for clients brought
to the firm by former Coudert attorneys. . . . In a
statement this week, Baker & McKenzie said, "We deny
any wrongful conduct in this matter, and because it
is pending, we will offer no further comment on the
matter at this time." . . . The Southern District
Bankruptcy Court approved its plan of liquidation in
August 2008 in In re Coudert Brothers LLP, 06-12226.
11-19-09 --
A Massachusetts federal judge has upheld a
bankruptcy court ruling allowing a trustee to treat
a mortgage as an unsecured claim, which strips the
mortgage holder of foreclosure rights, because of
defective mortgage paperwork. . . . In
a Nov. 17 order, District Court Judge
Patti Saris affirmed a bankruptcy court order
denying the plaintiffs' request to send a question
of law to the Supreme Judicial Court of
Massachusetts. The case is Mortgage Electronic
Registration Systems Inc. (MERS) v. Warren E. Agin,
trustee. . . . The plaintiffs wanted the state
high court's take on whether the omission of a
borrower's name on an acknowledgement form, which a
notary public uses to confirm the identity of the
borrower, is a "material defect" that voids the
mortgage.
11-18-09 --
Donald Trump will not be taking over the bankrupt
casino and entertainment company that bears his
name, but he and his daughter will retain a stake in
the entity under the terms of a deal Trump struck
with the bondholders who will take the company out
of bankruptcy, according to court records. . . .
Kasowitz, Benson, Torres & Friedman
bankruptcy head David Friedman represented Trump, a
longtime firm client. (Friedman, who represented
Trump when Trump Entertainment went bankrupt in
2004, is one of the few lawyers Trump has ever said
anything nice about, according to
this 2004 story from The American Lawyer.)
Friedman says he has been representing Trump for
about 10 years after a mutual friend introduced
them.
11-18-09 --
The U.S. trustee in LandAmerica Financial Group Inc.'s
Chapter 11 bankruptcy proceeding is objecting to the
company's reorganization plan because it releases
nearly everyone involved, including lawyers, from
liability for negligent actions. . . . In the
Nov. 12 objection, filed in In re
LandAmerica Financial Group Inc. in the Eastern
District of Virginia, U.S. Trustee W. Clarkson McDow
Jr. stated that the releases do not comply with the
bankruptcy code or case law. . . . LandAmerica filed
for protection in November 2008 after its Section
1031 exchange business collapsed due to its
auction-rate securities investments. Pursuant to
Section 1031 of the Internal Revenue Code, the IRS
allows taxpayers to defer capital gains on certain
kinds of property sales if the seller uses the
proceeds to buy other property within a set time
frame. In February 2008, the market for auction-rate
securities—bonds with interest rates set at periodic
auctions—stalled when major brokerage houses stopped
propping up the market by buying securities when
demand waned.
11-18-09 --
Lehman Brothers and its counsel at
Jones Day have filed suit against
Barclays, claiming the bank got an undeserved
windfall of at least $5 billion when it purchased
much of Lehman's North American operations after
Lehman went bankrupt last September. . . . The suit
was expected. As
we've reported before, Lehman and Jones
Day asked a bankruptcy judge in September to modify
the terms of the Barclays sale and alleged that a
small number of executives on both sides conspired
to give Barclays the so-called windfall.
11-18-09 -- A
Connecticut-licensed attorney ensnared by a
nationwide ethics complaint moved to dismiss his
case last week after a six-and-a-half hour hearing
before a three-member ethics commission in Hartford.
. . . The decision on the motion could have an
impact on more than 550 lawyers in 47 states who
have done or are doing business with
Total Attorneys, a Chicago-based company
that helps connect consumers to lawyers through web
sites such as
www.totalbankruptcy.com. . . . Norwich,
Conn., bankruptcy attorney
Zenas Zelotes filed grievances against
all of those lawyers, arguing that Total Attorneys'
method of connecting the parties is an example of
lawyers paying for referrals, which is a felony in
Connecticut and a violation of the Rules of
Professional Conduct.
11-17-09 --
The U.S. trustee in LandAmerica Financial Group
Inc.'s Chapter 11 bankruptcy proceeding is objecting
to the company's reorganization plan because it
releases nearly everyone involved, including
lawyers, from liability for negligent actions. . . .
In the Nov. 12 objection, filed in
In re LandAmerica Financial Group Inc.
in the Eastern District of Virginia, U.S. Trustee W.
Clarkson McDow Jr. stated that the releases do not
comply with the bankruptcy code or case law. . . .
LandAmerica filed for protection in November 2008
after its Section 1031 exchange business collapsed
due to its auction-rate securities investments.
Pursuant to Section 1031 of the Internal Revenue
Code, the IRS allows taxpayers to defer capital
gains on certain kinds of property sales if the
seller uses the proceeds to buy other property
within a set time frame. In February 2008, the
market for auction-rate securities -- bonds with
interest rates set at periodic auctions -- stalled
when major brokerage houses stopped propping up the
market by buying securities when demand waned.
11-9-09 --
We've spent a lot of time dissecting Bank of
America's decision to partially waive
attorney-client privilege under pressure from
federal authorities investigating the bank's
frenzied merger with Merrill Lynch. But might there
be another privilege issue brewing in the Lehman
Brothers bankruptcy case? . . . It appears there may
be: Weil, Gotshal & Manges, Lehman's lead bankruptcy
counsel, is in the process of turning over documents
related to the controversial sale of some of
Lehman's prime assets to Barclays in the days after
Lehman's Sept. 15, 2008, bankruptcy filing. Many of
those documents were formerly protected by
attorney-client privilege, though it is unclear
whether any of them will ever make it to the public
eye, according to a source familiar with the matter.
11-9-09 --
The declining economy is good news for boutique law
firms handling business bankruptcies. . . .
“Bankruptcy boutiques across the country have been
quietly booming in this economy as bankruptcies and
workouts soar,” according to
Portfolio.com. “Unlike large law firms
which have been pummeled by the recession, forcing
them to fire lawyers and entirely rethink
established business practices, these smaller
bankruptcy shops say the current economy is actually
an opportunity to shine.” . . . While most large law
firms have bankruptcy practices, they are unable to
handle some cases because they also represent large
financial institutions, creating a conflict of
interest, the story says
11-5-09 --
Judge Dennis Montali has canceled the first hearing
on a liquidation plan in the Heller bankruptcy,
pending the outcome of mediation talks between
former shareholders and creditors. . . . Heller's
creditors and at least four groups of shareholders
appeared for their first mediation conference on
Friday before Judge Randall Newsome for the U.S.
Bankruptcy Court for the Northern District of
California. . . . J. Scott Bovitz at Bovitz &
Spitzer, a mediator in the bankruptcy mediation
program in the Central District of California, said
Montali is essentially telling everyone to stand
down and cease fire. . . . Reinstatement: How
Valuable Is Below-Market Secured Debt?
11-5-09 --
This is a story as old as borrowers, lenders and the
Bankruptcy Code, but with a new twist. . . . On Oct.
15, Southern District of New York Bankruptcy Judge
James Peck stated that he would confirm the joint
plan of reorganization of Charter Communications
Inc. over the hard-fought objection of a group of
its secured lenders lead by JP Morgan Chase Bank as
administrative agent. Charter holds itself out as
the fourth largest cable operator in the United
States, providing high-speed Internet, telephone and
video service to approximately 5.5 million customers[FOOTNOTE
1],
maintaining a 27-state footprint and employing more
than 16,000 people.[FOOTNOTE
2] .
. . More impressive than the size of its operations
was Charter's ability to lose money. Even one of the
wealthiest people on earth found Charter's losses
unsustainable. "After investing and losing more than
$8 billion in the Charter enterprise," Paul Allen
said "enough."[FOOTNOTE
3]
11-3-09 --
Big creditor banks would love to forget about last
month's ruling in the Tousa Chapter 11. But
bondholders in other bankruptcies are making sure
they don't. (Hat tip:
Chicago Tribune) . . . As we told you in
October, the federal bankruptcy court judge
overseeing Tousa's Chapter 11
ruled in favor of a group of unsecured creditors
who claimed that several major financial
institutions, including Bank of America and
Citigroup, engaged in a fraudulent conveyance when
they lent the homebuilder Tousa $500 million before
it filed for bankruptcy. (The decision followed a
trial at which the bondholders were represented by
Robbins, Russell, Englert, Orseck, Untereiner &
Sauber.) . . . Now, according to The Chicago
Tribune, a group of bondholders in the Tribune
bankruptcy are waving
the Tousa decision in the face of the
banks that financed Sam Zell's $8.2 billion
leveraged buyout of the media company. The Tribune
bondholders haven't yet filed suit. But
a motion filed by Kasowitz Benson Torres &
Friedman, which represents the bondholders'
trustee, suggests that litigation may be coming. "As
recently determined in the Tousa bankruptcy cases on
similar facts, the LBO lenders' claims are subject
to dispute and likely avoidance as fraudulent
conveyances," the Kasowitz attorneys wrote in the
motion, which seeks to stop Tribune affiliates from
making payments to lenders.
11-2-09 --
A suspended lawyer and a financier who once promised to employ
4,000 people building electric cars in Kentucky have both been
slapped with a $3.2 million judgment by a bankruptcy court judge
who called their fraud one of the most blatant she’d ever seen.
. . . U.S. Bankruptcy Judge Joan Lloyd ruled Friday that
attorney Bruce Atherton and Randall Scott Waldman “blatantly
breached” their duty to the owner of a Louisville tool machinery
company by forcing him out of business and seizing his assets. .
. . In a scathing opinion, she awarded Ronald B. Stone
$1,191,374 in compensatory damages and $2 million in punitive
damages, saying the conduct of Atherton and Waldman was
“inexcusable.” . . . Finding Atherton’s actions “nothing less
than reprehensible,” she permanently disbarred him from
practicing in bankruptcy court in the Western District of
Kentucky.
10-29-09 --
The stakes have gone up. . . . Heller Ehrman's
creditors now want $150 million from former
partners, contending in a confidential mediation
brief that the firm fraudulently conveyed that much
to partners after it had become insolvent.
Meanwhile, a group of 89 former Heller partners said
in their own confidential brief that they've hired
John Keker of Keker & Van Nest to represent them if
creditors pursue a fraudulent conveyance suit. . . .
The documents come to light as Heller's creditors
and former partners prepare for their first
mediation conference on Friday with Judge Randall
Newsome of the U.S. Bankruptcy Court for the
Northern District of California. . . . The
creditors' brief, dated Sept. 22, contends that
former Chairman Matthew Larrabee sent an e-mail
describing a $9.3 million payout to partners late in
2007 as an "overdistribution." The creditors say the
firm was already insolvent then, and that firm
managers were trying to prop up the firm's
profits-per-partner rankings to attract a merger
partner.
10-28-09 -- Ann Marie Miller, a Roanoke
bankruptcy lawyer, lost her license to practice law Oct. 20, as
the Virginia State Bar sorts out claims that she used clients'
trust accounts improperly. . . . The bar disciplinary board
action comes about a month into the investigation of Miller's
misconduct. Miller consented to the revocation. . . . Miller
said that in her cases, disciplinary rules she had broken
regarding diligence, communication, safekeeping of property and
misconduct reflected adversely on her ability to practice law,
according to the Virginia State Bar's news release distributed
Tuesday.
10-26-09 --
Judge Dennis Montali is already asking the two main
lawyers on the Heller Ehrman bankruptcy to file a
revised liquidation plan before the first hearing on
it Nov. 9. . . . In a seven-page letter
(pdf) to John Fiero, who represents the estate, and
Thomas Willoughby, who represents the creditors
committee, the judge pointed out dozens of issues,
some of them technical and even grammatical, but
many of them substantive. . . . For instance,
Montali mentioned the creditors'
$58 million suit against Bank of America
several times, wanting to know how the plan would
work if the bank wins: / "How are the secured
creditors' attorneys fees and costs protected if
they prevail?" the letter asks.
10-26-09 --
In a new filing, the Justice Department says today
that the federal government is entitled to $478,153
in forfeitures from former Rep.
William Jefferson
despite his August bankruptcy filing three weeks
after a jury found him guilty
of 11 corruption charges.
. . . In such criminal cases, the prosecutors said,
courts have ruled that the government is "entitled
to every penny" a court determines should be
forfeited as ill-gotten gains from illegal acts. . .
. Jefferson and his wife, Andrea, have recently
filed documents saying that the couple had monthly
income of $30,967 in August, including Andrea's
earnings of $6,134 through her administrative job at
Southern University, pension benefits of $3,791;
$5,152 from sales of books and gaming earnings of
$14,600.
10-22-09 --
A federal grand jury has indicted a Putnam County attorney on
charges of bankruptcy fraud, the U.S. Attorney's Office
announced. Patrick B. Anderson, 54, of Winfield, allegedly
instructed two clients to hide assets by transferring ownership
of their Harmon's Creek Road home to their daughter.
10-21-09 --
U.S. Bankruptcy
Judge Alan Jaroslovsky in California is
leveling some harsh words at lawyers who are in over
their heads in Chapter 11 cases. . . . In a
letter posted on his Web site,
Jaroslovsky, who is based in Santa Rosa, complains
there has been a “spate” of individual Chapter 11s
filed by attorneys “who have neither the experience
nor the education nor the competence to venture into
Chapter 11.” . . . The judge cited “rampant errors”
and “frequent malpractice” in such cases, often used
by wealthy individuals and small business owners,
and said the failure by attorneys to understand the
difference between Chapter 13, also used by
individuals, and Chapter 11 is creating “serious
liability exposure” for lawyers. . . . Then this
choice line: “Forget about trying to fix your
compensation. You will be paid what I allow,
period.”
Ann Marie Miller
avoids any additional jail time while her former
bankruptcy law practice is closed down.
By Mike Gangloff,
Roanoke Times
10-21
10-21-09 --
Criminal charges against former Roanoke bankruptcy
attorney Ann Marie Miller were resolved today in a
plea agreement that left her convicted of a
misdemeanor charge of disorderly conduct and
sentenced to 90 days in jail – with all of it
suspended except for the weekend behind bars that
she served after being arrested in August. . . .
Besides the disorderly conduct charge, Miller
entered a no contest plea to a misdemeanor charge of
assault. Under the plea agreement, the charge will
be dropped in a year if Miller stays clear of
trouble. Misdemeanor charges of stalking and using
profane language, and a felony charge of entering a
home to commit assault and battery were dropped
under the agreement. . . . The charges stem from the
breakdown of Miller's working and romantic
relationship with Vinton attorney Jeffrey Kessler,
whom Miller had dated and who had assisted Miller
with bankruptcy cases before marrying a paralegal
who worked with both attorneys.
10-19-09 --
After a 19-day trial before Manhattan Federal
Bankruptcy Court Judge James Peck,
Charter Communications won the right to
maintain favorable terms on $11 billion in secured
debt that its lenders had sought to refinance. Judge
Peck's Oct. 15 ruling should clear the way for the
cable company to emerge from Chapter 11 in the next
several weeks. . . .
JPMorgan Chase & Co. and other holders of
Charter's debt filed suit on March 27, claiming
Charter defaulted on its loan agreement when it
misrepresented its ability to repay $250 million it
withdrew from its credit facility in the fall of
2008. The lenders sought to refinance Charter's debt
at higher rates than the rock-bottom terms Charter
received in 2007. . . . Judge Peck, however, agreed
with Charter's interpretation of the language of the
loan agreement. He also rejected the lenders'
argument that Charter's proposed reorganization plan
would result in a change of ownership that voided
the loan agreement.
10-19-09 --
A bankruptcy judge has ruled that
O'Melveny & Myers will have to forgo
$750,000 in fees for its role in the SonicBlue
bankruptcy. . . . Judge Marilyn Morgan of the U.S.
Bankruptcy Court for the Northern District of
California in San Jose ruled from the bench late
Thursday after a two-day evidentiary hearing into
O'Melveny partner Suzzanne Uhland's role in a
controversial settlement between the estate, VIA
Technologies Inc. and Intel Corp. involving a patent
cross-licensing agreement. . . . Uhland, who chairs
the firm's restructuring practice, will not have to
pay back about $1 million in fees she has already
collected, although creditors had demanded that.
10-19-09 --
Starting next month in New York, bankrupt law firm
Heller Ehrman will sell off hundreds of
artworks to repay a small portion of its debt. . . .
The largely contemporary collection is expected to
fetch between $610,000 and $1 million in a slow art
market, according to bankruptcy papers and the
auctioneer hired to conduct the sale. . . . The
first of the pieces will go on sale at 1 p.m. on
Nov. 10 at the 580 Madison Ave. offices of
auctioneer
Bonhams & Butterfields. That will be
followed one week later by a sale in San Francisco
and another in Los Angeles. Still more pieces will
go on sale next year on the West Coast.
10-19-09 --
In a speedy downfall, South Florida attorney and
receiver Lewis Freeman went to court Friday to put
his firm out of business amid a federal
investigation trying
to trace $3.6 million from accounts overseen by
the firm. . . . iami-Dade Circuit Judge
Victoria Sigler signed an order appointing another
veteran South Florida receiver, Kenneth A. Welt of
Hollywood, as receiver for
Lewis B. Freeman & Partners. Freeman, a
lawyer and forensic accountant, filed a request to
liquidate his firm. . . . Freeman has often been
selected by federal and state judges in the past two
decades as a receiver or trustee whenever companies
went bust or were plagued by fraud. He did not
return a call for comment. . . . Warren Trazenfeld,
a Miami attorney who represented Freeman in
receiverships, said he was "in a state of shock and
disbelief" when he heard Freeman placed himself in
receivership.
10-15-09 --
Bankruptcy is front-page news in these difficult
economic times. The once invincible GM slipped into
bankruptcy. The Undisputed Master of Bankruptcy,
Donald Trump, filed yet again earlier this year. And
the government bailed out financial services
powerhouses – like AIG, called "too big to fail" –
to keep them out of bankruptcy. . . . No such luck
for individuals, of course. They're allowed to fail.
And not surprisingly, as unemployment rises, so are
personal bankruptcies. . . . If you're considering
filing, you should take some comfort in knowing
you're not alone. But it's still a big decision:
There are financial consequences. People feel like
they failed. And filers can be judged by others. . .
. But according to personal financial advisers, most
people want to repay their debts; they don't want to
declare bankruptcy. Instead, it's often a
last-resort option for people who may be dealing
with out-of-control health care bills or the loss of
a job. . . . If you're thinking about filing, this
Leagle EyeView provides the info you need to know.
10-15-09 --
The lawyers at the Washington, D.C., boutique of
Robbins, Russell, Englert, Orseck, Untereiner &
Sauber have long been known for their
strength in appellate work, but in recent
years they've proven more than capable at trial as
well. The most recent example came Tuesday, when the
Fort Lauderdale federal bankruptcy court judge
overseeing Chapter 11 proceedings for one of the
country's largest homebuilders ruled in favor of the
unsecured creditors committee Robbins Russell
represents. The
182-page opinion against a bevy of
financial institutions
could cost the bank defendants as much as $688
million, according to Bloomberg. . . . The
case centered on a 2007 decision by the homebuilder,
a company called Tousa, to borrow $500 million to
settle litigation arising from a botched joint
venture acquisition. As part of the loan agreements,
Tousa granted its lenders -- including Bank of
America, Wells Fargo and Citigroup -- liens on
assets of its subsidiaries.
Lewis Freeman's
supporters say the probe is retribution for a
lawsuit he filed against the IRS
John Pacenti, Daily
Business Review
10-13-09 --
The FBI is seeking to trace the whereabouts of $3.6
million from accounts overseen by prominent Miami
lawyer and forensic accountant Lewis Freeman, who
judges have often appointed to help recover money
for victims of fraud, according to sources. . . .
FBI agents earlier this month executed search
warrants at the Miami and Plantation, Fla., offices
of Lewis B. Freeman & Partners,
confiscating documents and computer files. No
charges have been filed. . . . Neither Freeman nor
his criminal defense attorney, Robert Josefsberg of
Podhurst Orseck in Miami, would comment on the
matter Monday. . . . As a court-appointed receiver,
Freeman is responsible for millions of dollars
flowing in and out of companies in bankruptcy and
other troubled businesses.
10-12-09 --
Heller's creditors may sue accounting firm Ernst &
Young for failing to raise red flags on its audit of
the firm's 2007 financials, according to a
bankruptcy liquidation plan and disclosure filed on
Thursday just before a midnight deadline. . . .
Financial irregularities derailed at least one
merger for Heller, according to sources. They are
also being used by creditors to build a
fraudulent-transfer case against former
shareholders. . . . The plan, a road map to
resolving the bankruptcy, also shows that the
defunct firm has settled with its hundreds of former
employees for about $19 million -- $7 million of
which, however, they'd only see if the estate
manages to pay every other creditor off first.
Employees may get some of that money by year's end
if the plan is confirmed by a majority of creditors.
. . . The plan lays out classes of creditors and in
what priority they will receive money. An
accompanying disclosure lays out litigation the
creditors plan to pursue, most of which has been
previously reported, including suits against Bank of
America, Greenberg Traurig and Covington &
Burling.
10-9-09 --
Robert Milavetz, the founder of an 11-lawyer
bankruptcy firm in the suburbs of Minneapolis,
wasn't pleased when Congress started telling
bankruptcy lawyers what they could and could not say
to clients. . . . Specifically, he -- along with
attorneys from Connecticut and elsewhere -- didn't
like a 2005 law that seemed to forbid lawyers from
advising bankruptcy clients to incur any more debt.
Another part of the new law apparently required
bankruptcy lawyers to include in their
advertisements that "we are a debt relief agency. We
help people file for bankruptcy relief under the
Bankruptcy Code." . . . Milavetz made a federal case
of it, seeking declaratory relief in a Minnesota
federal court. . . . The U.S. government argued that
Congress' orders were not a violation of the First
Amendment right to free speech, or commercial free
speech law.
10-7-09 --
A group of about 90 former Heller Ehrman partners has logged a
defense against creditors' claims that the firm was insolvent in
2007, a key point the creditors need to prove to build a fraudulent
transfer suit. . . .
The brief (.pdf) is the first peep out of any of Heller's
former partners in the 10-month-old bankruptcy. . . . It asserts
that creditors cannot possibly prove that Heller was
undercapitalized by the end of 2007, or that funds were fraudulently
transferred thereafter. It blames the recession for the firm's
demise. . . . "In fact, the evidence will demonstrate that the firm
failed in September 2008 as a result of the most precipitous and
severe economic downturn since the Great Depression," says the
filing in the U.S. Bankruptcy Court for the Northern District of
California.
10-1-09 --
Take it back. That's what general counsel Jeffrey Zimmerman, of
Hertz Global Holdings Inc., has demanded from a research firm
that put Hertz on a list of companies "likely to go bankrupt or
suffer severe financial distress." . . . First Zimmerman wrote a
letter to the chief executive of Audit Integrity, the New York
research firm, accusing the firm of reaching "incomplete and
misleading conclusions" in a Sept. 15 report that listed Hertz
and 19 other large companies it considers at risk of bankruptcy.
. . . Zimmerman copied the letter to the GCs of the other 19
companies, including Louis Briskman at CBS Corp., Jennifer Vogel
at Continental Airlines Inc., Thomas Cody at Macy's Inc.,
Patrick Donnelly at Sirius XM Radio Inc., and Charles Wunsch at
Sprint Nextel Corp. He encouraged the other 19 to join Hertz "in
protecting the investing public." (Also copied were Richard
Parker and Irv Gornstein at
O'Melveny & Myers.)
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9-30-09 --
Delaware bankruptcy court judge Mary Walrath appears
determined to continue presiding over JPMorgan
Chase's ongoing battle with Washington Mutual Inc.
According to a transcript of a hearing last Friday,
available here, Judge Walrath called
efforts by JPMorgan's lawyers at
Sullivan & Cromwell to challenge her
jurisdiction "frivolous." . . . . The dispute
between the two companies mainly concerns $4 billion
in deposits that Washington Mutual Inc. had with
Washington Mutual Bank, which was taken over by
JPMorgan last September. Washington Mutual Inc.,
which is in bankruptcy, claims JPMorgan has
wrongfully withheld the money.
As we reported in June, Judge Walrath has
already denied a request by JPMorgan to stay or
transfer the proceedings. JPMorgan subsequently
appealed that decision but continued to participate
in the case, including by moving unsucessfully to
dismiss WaMu's counterclaims.
9-30-09 --
An Oklahoma City attorney who was sentenced to a
federal prison for filing a false bankruptcy report
will be allowed to practice law again. . . . In an
opinion filed Tuesday, the state Supreme Court voted
7-2 to allow Kwame T. Mumina to return to practicing
law. He must pay costs of $2,797. Mumina, resigned
from the Oklahoma Bar Association in 1997 facing
disciplinary action. . . . In 2001, he was sentenced
to 21 months in a federal prison after pleading
guilty to filing a false report. Initially, Mumina
was indicted on 20 counts that included embezzling
money while acting as a trustee for a bankrupt
nursing home. . . . Prosecutors said Mumina opened
accounts for the estate and used about $115,000 of
nursing home funds and filed a false report to cover
it up. Mumina agreed to plead guilty to filing a
false bankruptcy report in exchange for the U.S.
attorney’s office dismissing 19 other counts of
bankruptcy fraud, according to published reports.
9-28-09 --
A bankruptcy court judge on Thursday approved a $24
million settlement by Chrysler in the death of a man
who was run over by a Dodge pickup truck in 2004. .
. . The plaintiffs' lawyers said Friday that their
demand that Chrysler post an appeal bond after they
won a $55.2 million verdict proved to be key once
the automaker filed for bankruptcy in April. . . .
"In hindsight, it was the right decision given what
ultimately transpired," said Robert Nelson, senior
partner at Lieff Cabraser
Heimann & Bernstein
and lead trial and appellate counsel. "Had we not
gotten the judgment bonded, we would have been in
line behind all the other creditors." . . . Judge
Arthur Gonzalez of the U.S. Bankruptcy Court,
Southern District of New York, approved the
settlement, which had been facilitated by mediator
Randall Wulff.
9-22-09 --
Philadelphia Judge Mark I. Bernstein's opinion was
short, but it said plenty. . . . The commerce
program judge was clearly irked by a request from
several large financial institutions to dispense
with a jury trial in the case against them by the
trustee of the bankrupt American Business Financial
Services. . . . Bernstein said the financial
companies that are defendants in the case are
represented by some of the best and largest law
firms in the country with more than ample resources
to have filed the motion in a more timely fashion. .
. . "The financial institution defendants are
represented by some of the largest, most
distinguished, and thorough law firms in the
country," Bernstein said, adding later, "These firms
can assign however many partners, senior associates,
junior associates and exceptional newly hired law
school graduates to handle matters of any
complexity.
9-21-09 --Thelen LLP filed
for Chapter 7 bankruptcy (pdf)
in the Southern District of New York on Thursday
night, almost a year after the firm voted to
dissolve. . . . The move was the only way to be fair
to all unsecured creditors, said David Graybeal, a
member of Thelen's dissolution committee. . . . "The
trendline on the collections efforts was declining
month to month, as you'd expect, and the ability to
assure fair treatment of all the unsecured creditors
becomes increasingly difficult in that circumstance
when judgments have been entered against the firm,"
Graybeal said. "We really feel there was no
alternative." . . . Thelen was facing
a $25 million judgment
granted to a New York landlord in Los Angeles County
Superior Court in June.
9-17-09 --
We in the media have been finding all kinds of ways
to commemorate the one year anniversary of the
collapse of
Lehman Brothers Holdings Inc.
But for the Litigation Daily's money, Lehman's
bankruptcy lawyers at Jones Day
found a much more exciting way to mark the occasion.
They filed an 87-page motion
Tuesday asking Manhattan federal bankruptcy court
judge James Peck to modify the order approving last
September's sale of Lehman's crown-jewel investment
arm to Barclays Capital Inc. Specifically, Jones Day
argues that Peck approved the deal based on "an
inaccurate record due to mistake, inadvertence, or
misrepresentations to the court." Those are pretty
strong words, folks. . . . At the time he approved
the asset sale, Jones Day's team (led by Robert
Gaffey) asserts, the judge was not told that certain
Lehman executives brokered a behind-the-scenes
discount of several billion dollars for Barclays.
"The fact is that the deal was actually structured
to give Barclays an immediate and enormous windfall
profit," the Jones Day lawyers write. "Certain
Lehman executives agreed to give Barclays an
undisclosed $5 billion discount off the book value
of the securities." The Lehman estate is also asking
the judge to clear the way for Lehman to pursue
breach of fiduciary duty and breach of contract
claims.
9-9-09 --
You have to hand it to the auditors from Stuart Maue,
the company serving as the court-appointed fee
examiner in the Tribune Co. bankruptcy case: They
are unbelievably thorough. They chastised an
employee at AlixPartners, the financial adviser to
the Tribune creditors committee, for spending
$902.52 for a night and two meals at the Gramercy
Park Hotel in New York -- and got Alix to shell out
$487.52 from its own pockets to cover the bill. They
discovered that Jones Day
billed the Tribune estate 20 cents per photocopy
instead of 10 cents, a finding that saved the estate
$8.10. They forced AlixPartners to explain why some
of its employees were often spending more than $50
on work-related dinners, and asked that Alvarez &
Marshal (Tribune's restructuring adviser) retract a
request for Tribune to pay $22.68 for stamps,
envelopes and tape.
By Brian Baxter | The
American Lawyer | New York Lawyer
8-31-09 --
As Tucson, Ariz.-based mining company Asarco nears
the end of its four-year bankruptcy odyssey, lead
debtors counsel Baker Botts submitted its 12th
application for fees on Friday. . . . The filing put
the firm past the $100 million mark in billable
hours since Asarco filed for bankruptcy in August
2005 after getting hit with a series of asbestos and
environmental pollution suits. . . . It pales in
comparison to the $100 million in fees that Weil,
Gotshal & Manges has racked up in just a year's
worth of bankruptcy work for Lehman Brothers, but
Baker Botts may have more work ahead.
8-27-09 -- Federal
bankruptcy court attorneys filed a fraud complaint
against attorney Robert “Grigger” Jones, as well as
Chris Molina, Daniel Phillips, and the group’s
Pejihota LLC for allegedly hiding assets of bankrupt
North County developer Kelly Gearhart. . . .
Gearhart linked up with Jones, Molina and Phillips
to sign a contract with the Salinan Tribe of San
Luis Obispo County to develop an Indian casino in
either Monterey or San Luis Obispo County through
the Pejihota LLC. . . . In 2007 and 2008, Gearhart
transferred between $1 million and $1.5 million into
the group’s LLC at a time he “was insolvent and was
made with the intent to hinder, delay, or defraud
creditors,” according to the accusations. . . . In
an apparent attempt to keep their venture cloaked in
secrecy, the group has transferred their LLC filing
at least four times during the past two decades.
CalCoastNews discovered the transfers during a
multi-state search of LLC filings. . . . In 2003,
Pejihota Consultants LLC, at that time managed by
Molina, filed a complaint against the Salinan Tribe
claiming fraud, breach of contract, and intentional
misrepresentation for not following through on an
agreement to become federally recognized for the
purpose of developing an Indian gaming casino. It is
unclear how it was resolved because of issues of
confidentiality.
8-19-09 --
After 12 failed attempts at a Chapter 11
reorganization plan that would set up a trust for
tens of thousands of asbestos claims against
Congoleum, a U.S. judge has reinstated
the case and, in an unusual step, has withdrawn it
from the bankruptcy court so he can handle the
confirmation process himself. . . . A bankruptcy
judge dismissed the Chapter 11 case earlier this
year, fed up over the proponents' repeated failure
to address concerns about unequal treatment of
claimants and $2 million in "facilitation fees" for
claimants' lawyers. . . . But U.S. District Judge
Joel Pisano in Trenton, N.J., held Monday that the
favored treatment of claimants who settled before
the Dec. 31, 2003, bankruptcy filing did not
preclude the plan's confirmation. He also required
submission of a new plan that does not try to block
judicial review of the facilitation fees.
8-19-09 --
Loan agreements aren't our thing at The Am Law
Litigation Daily, so we're not going to beat
ourselves up for not knowing about so-called "bad
boy" guaranty provisions. We're told that they were
commonplace in most complex finance transactions
between 2005 and 2007. In such agreements, borrowers
can be held liable for certain "bad boy" acts like
fraud or intentional waste. . . . Apparently another
accused bad boy act is filing for bankruptcy. Just
ask David Lichtenstein. As chairman of the hotel
company Extended Stay, he approved a Chapter 11
filing on June 15, 2009. A day later, he and one of
his affiliated entities were sued in New York state
court by lenders seeking $100 million. Here's a
copy of an affidavit filed by plaintiffs in
support of summary judgment(pdf).
Lichtenstein's lawyers at Kasowitz, Benson, Torres &
Friedman argue that Lichtenstein was merely
fulfilling his fiduciary duties by attempting to
stabilize Extended Stay's assets for the benefit of
its creditors, including the plaintiffs now suing
him. The Kasowitz team suspects that the plaintiffs
-- junior mezzanine lenders in a transaction that
allowed Lichtenstein and others to buy Extended Stay
two years ago ---have other motives for filing the
suit.
8-19-09 --Greenberg Traurig is likely to lose $2.6
million in fees for its work on a long-running
bankruptcy case. . . . From July 2007 to April 2009,
the firm represented the unsecured creditors
committee in the bankruptcy of tax shelter outfit
The 1031 Tax Group LLC. Early on, the firm submitted
two bills totaling more than $3.2 million. The
bankruptcy trustee objected, and a federal judge
awarded the firm just $323,000. . . . In a
settlement approved in the Southern District of New
York late last week, the firm agreed to forgo its
multimillion dollar fee request until all other
creditors had been paid.
8-19-09 --
The judge hearing the bankruptcy case involving
Philadelphia newspapers has slammed a lawyer for
failing to investigate publisher Brian Tierney's
complaint that a pivotal meeting was secretly taped.
. . . Judge Stephen Raslavich looked at a lawyer for
the creditors, Robert Graci, and said "you've made a
fine mess of things." The judge added, to "imbue the
process with transparency," Graci should have done
more than just interview witnesses. . . . The
company says he got neither sworn depositions nor
documents, and it wants the judge to let it hire
special counsel to investigate that unauthorized
taping by a key lender. . . . It happened three
months before the chapter before the chapter
11 filing, and both parties acknowledge it was a
tipping point, when negotiations to get a consensual
agreement on financing went south.
8-18-09 --
We may have to scan the dockets of the largest
bankruptcies in recent U.S. history to see if any of
them produced so much legal work as quickly as
the Lehman Brothers Chapter 11 has since
the bank filed for bankruptcy almost exactly 11
months ago. . . . To wit:
Weil, Gotshal & Manges filed its second
application for legal fees and expenses late Monday,
and, if approved, the firm will have crossed the
$100 million mark in total billings if one includes
so-called hold back payments the court will
distribute at a later date. . . . The second
application covers four months -- Feb. 1 through May
31 -- and it comes just a few days after Judge James
Peck of federal bankruptcy court in Manhattan
approved Weil's
initial request for about $55 million in fees and
expenses for the period of Sept. 15, 2008
through January of this year. As the
Wall Street Journal reported Monday, that
application got the approval of not only Peck, but
also a special fee committee headed up by Kenneth
Feinberg (the Obama administration's pay czar).
8-18-09 --
In a federal class action suit filed on Aug. 6, the
plaintiffs allege two Texas lawyers conspired with
others to defraud debtors who sought help because of
credit card and unsecured debt and to "evade" Texas
laws that regulate consumer debt management
services, attorney-client solicitation and lawyer
advertising. . . . "By masquerading as attorney
referral services, unregulated debt negotiators and
exempt attorneys, the defendants collaborate to
evade strict state consumer protection regulations
enacted to protect unknowing debtors," the
plaintiffs allege in James R. Wall, et al. v. Debt
Relief Group LLC, et al., filed in the U.S. District
Court for the Western District of Texas. . . .
Plaintiffs' attorney Charles E. Ames of Carrollton,
Texas, says the plaintiffs did not get the debt
relief they expected. . . . "They did not get debt
relief, and they've been harmed because these people
did not follow the requirements of the Texas
statute" that regulates the debt-relief business, he
says.
8-14-09 -- Individuals
and businesses filed 1.3 million bankruptcy cases in
the year ended June 30, an increase of 35 percent
over the previous year, the Administrative Office of
the U.S. Courts said Thursday. . . . It is the third
consecutive annual increase, as the recession has
forced thousands of businesses to close shop and as
job losses and rising debt have caused individuals
to seek protection from creditors. Business filings
increased 63 percent, while individual filings were
up 34 percent. . . . "This is reflective of the
overall state of the economy," said Carey Ebert,
president of the National
Association of Consumer Bankruptcy Attorneys.
. . . Ebert, name partner at Ebert Law Offices in
Hurst, Texas, said she's seen the increase
accelerate locally just in the last few months, as
unemployment and home foreclosures hit areas of the
country that previously fared better. "I don't see
it getting better any time soon," she said.
8-11-09 -In
a growing body of legal cases, judges and the
Justice Department are breaking from legal jargon to
starkly chastise mortgage companies. . . . As
mortgage delinquencies rise, more and more
homeowners are learning the central role that
mortgage servicers play in their lives. The legal
cases show that role can be distressing. Judges have
found that major mortgages servicers regularly mess
up basic accounting, improperly credit payments and
charge unwarranted fees. They’ve “not done a very
good job of keeping the records,” said Judge Samuel
Bufford of California. . . . Mortgage servicers —
typically either bank subsidiaries or independent
companies — handle the day-to-day work with
homeowners, ranging from collecting monthly payments
to determining when to modify or foreclose. Problems
with servicing often, but not always, occur once
homeowners start having trouble making payments. . .
. Complaints to the government about mortgage
servicers have soared in recent years. They’ve risen
from 31 percent of the complaints that the
Department of Housing and Urban Development received
in 2006 to 78 percent in 2008, according to HUD
spokesman Lemar Wooley.
8-10-09 --
Blank Rome has entered into a $20 million agreement
with the trustee of a former client that is now in
bankruptcy to settle a complaint that alleged breach
of fiduciary duty, professional malpractice and
breach of contract claims against the firm. . . .
The settlement, reached in the Philadelphia Common
Pleas Court case Miller v. Blank Rome, was
approved by U.S. Bankruptcy Judge Mary F. Walrath
for the District of Delaware on July 28. . . .
Walrath is overseeing the bankruptcy of American
Business Financial Services, which is involved in a
string of litigation in both state and federal court
stemming from its bankruptcy and business dealings.
. . . Blank Rome does not admit any liability or
wrongdoing in agreeing to the settlement, according
to the agreement.
8-7-09 --
A bankruptcy judge has approved a
request by the trustee liquidating Bernard L.
Madoff's investment firm and his team of lawyers for
roughly $15 million in interim counsel fees.
At a hearing Thursday, David J. Sheehan of Baker &
Hostetler, who is counsel for trustee Irving H.
Picard, told Southern District of New York
Bankruptcy Judge Burton R. Lifland that tracing the
trail of money in the complex fraud required a
full-service team of attorneys. Moreover, Sheehan
said, the case has generated a "vast array of
international litigation," an onion that "has yet to
be peeled to its core."
8-7-09 --
Another week, another major retail company turns to
Weil, Gotshal & Manges to guide it
through bankruptcy. This time it's
Finlay Enterprises, a jewelry retailer
with 200 stores nationwide, including 77 in major
department stores like Macy's. . . . Weil began
representing Finlay in March 2008, and has billed
the company about $1.3 million since then for advice
on various restructuring efforts. Those efforts
apparently failed, and now Finlay hopes to sell all
or most of its assets through the Chapter 11
process. . . . (Finlay also has stand-alone stores
that operate under the names Bailey Banks & Biddle,
Carlyle & Co. Jewelers and L Congress, if that helps
jog the memories of any readers who aren't exactly
on the cutting edge of the fine jewelry market).
8-6-09 --
Like a gambler on a losing streak, Trump
Entertainment Resorts is no stranger in bankruptcy
court -- the company entered
Chapter 11 for a third time this past
February. . . . Now Donald Trump and a team of
lawyers led by
Weil, Gotshal & Manges face a fight from
a bondholder group represented by
Stroock & Stroock & Lavan that's opposing
The Donald's
rescue of his Atlantic City gaming empire.
(Hourly billing rates for lawyers in this story
appear parenthetically, when available.) . . .
Trump, who resigned from TER's board shortly before the company filed for bankruptcy almost six
months ago,
announced on Tuesday that he would
partner with an affiliate of Beal Bank Nevada to
reacquire TER for $100 million out of bankruptcy court. . . . The casino operator
owns the
Trump Taj Mahal,
Trump Plaza and
Trump Marina casinos, all of which Trump
has vowed to make "great again" and restore to their
glory days in the '80s. Helping Trump in that effort
is a team of lawyers from Weil led by restructuring
co-chair Ted Waksman ($925), restructuring partner
Michael Walsh ($950), and tax partner Mark Hoenig
($900).
8-5-09 --
As the recession continues, more businesses are
being forced to file for Chapter 11 bankruptcy
protection. In many cases, the bankruptcies are
liquidations, not reorganizations, said Robbin Itkin,
the head of the West Coast business and financial
restructuring group of Washington's
Steptoe & Johnson. Itkin is the co-author
of the book, "A Comparison Shopping Guide for 363
Sales," which focuses on the sales of assets in a
bankruptcy. The book was recently released by the
American Bankruptcy Institute. . . . Itkin, a
partner in the Los Angeles office, talked to The
National Law Journal about how 363 sales are
structured and what thorny legal issues buyers and
sellers might face when dealing with assets in a
bankruptcy.
8-4-09 --
Citing what they called the "pathetic track record"
of the court-appointed trustee in charge of
liquidating Bernard L. Madoff's investment
securities firm, three Pennsylvania residents who
invested with Madoff urged a bankruptcy court to
reject the request of Irving H. Picard and his
counsel for more than $15 million in interim fees. .
. . In
papers filed Monday with the U.S. Southern
District Bankruptcy Court, Diane and Roger
Peskin and Maureen Ebel, who claim the support of
more than 100 customers of Bernard L. Madoff
Investment Securities LLC, accused Picard and his
legal team at Baker & Hostetler of causing "needless
devastation" to Madoff's customers by "ignoring" the
mandate of the Securities Investor Protection
Corporation (SIPC) to pay claims promptly based upon
their "statutory balances."
8-4-09 --
Heller Ehrman's former employees are demanding
better representation on the bankrupt estate's
unsecured creditors committee because of what they
call a lack of aggressiveness in pursuing former
shareholders and collecting accounts receivable. . .
. The employees say they "lack an adequate voice on
the committee" and are demanding that the U.S.
Trustee appoint a former Heller employee to the
committee who is not a former shareholder "nor
aligned with former shareholder interests." . . .
The current employee representative on the
five-person committee is Wondie Russell, who was
once a partner at Heller. She was a contract
attorney when the firm collapsed and has the largest
employee claim, for about $92,000.
7-10-09 --
He garnered some sympathy from two lower courts, but
a three-judge appeals panel isn't letting a
Minnesota lawyer off the hook from repaying his
massive student loan debt. . . . The 8th U.S.
Circuit Court of Appeals reversed a bankruptcy court
and a district court and found that attorney Mark
Allen Jesperson could not discharge more than
$360,000 in student loan debt in a Chapter 7
proceeding. . . . The two lower courts had found
that repaying the "shockingly immense" debt would
create an undue hardship for Jesperson. But the
appeals court on Wednesday determined that his
"self-imposed limitations," which resulted in a
gross income of $48,000, were no excuse for
nonpayment.
7-9-09 --
Almost every bankruptcy expert The Am Law Daily
talks to agrees that the super-fast General Motors
and Chrysler bankruptcies diverted from traditional
bankruptcy law because of the government's huge role
in each case and the danger that liquidation might
have posed to the broader economy. . . . What they
don't agree on is whether the cases set a meaningful
precedent for future judges. "What happened in GM
and Chrysler is so outrageous and so illegal that
until March of this year, nobody even conceptualized
it," says
Lynn LoPucki, a bankruptcy expert at UCLALaw School. "Wouldn't almost
every company like to get out [of bankruptcy] in 30
or 60 days? Is there any reason they cannot all
propose to do what GM and Chrysler have now done?" .
. . Others are less worried: "These cases are huge
outliers," says
Kenneth Klee, name partner at the
bankruptcy boutique Klee, Tuchin, Bogdanoff & Stern
and LoPucki's colleague at UCLA. "They involve such
major political elements and companies of such
importance to the economy that the legal principles
involved will not carry over to other cases." . . .
Several other experts and Am Law 100 partners echoed
LoPucki's concerns, though no one else directly
labeled the sale illegal. But their basic views are
the same: The courts stretched
§363 of the Bankruptcy Code -- which
allows a company to sell its best assets to a new
buyer rather than go through a complete
reorganization -- beyond the code's intentions.
6-19-09 --
The U.S. Supreme Court has spoken in
the case of "the worst advice any lawyer ever
gave a client." In
Thursday's 7-to-2 ruling (pdf) in
Travelers Indemnity v. Bailey, the justices didn't
pick sides in
the kerfuffle between Travelers' counsel
Barry Ostrager of
Simpson, Thacher & Bartlett and the firm
that he accused of offering that "worst advice" (Cozen
O'Connor). But the Court gave Ostrager the
win that really mattered, finding that Travelers is
protected from asbetos-related suits by an order of
the bankruptcy judge who approved the 1986
Johns-Manville asbestos trust . . . . The
Supreme Court ruled that the 2nd U.S. Circuit Court
of Appeals erred when it found that the Manville
bankruptcy judge, Burton Lifland, had exceeded his
jurisdiction when he enjoined asbestos related suits
against Manville's insurers, including
Travelers. Thursday's ruling, however,
was narrowly tailored. The Court said such
jurisdictional concerns might have been raised
before Lifland's 1986 order became final, but since
they weren't (at least not by the parties in the
Bailey case), res judicata barred a subsequent
collateral attack.
6-18-09 --
With
the economy down and bankruptcy filings
up to near-record levels, the federal
judiciary is asking Congress to approve additional
bankruptcy judgeships to handle the workload. . . .
U.S. District Judge Barbara Lynn of the Northern
District of Texas, head of the Judicial Conference
Committee on the Administration of the Bankruptcy
System, told a House Judiciary subcommittee
recently, "Our judicial resources are strained, and
the cost to society of an overburdened bankruptcy
system, especially in this economic climate, is
enormous." . . . The Judicial Conference, the
policymaking arm of the federal courts, is seeking
13 new, permanent bankruptcy judgeships in 10
judicial districts; the conversion of 22 existing
temporary bankruptcy judgeships to permanent in 15
judicial districts, and the extension of two
existing temporary bankruptcy judgeships for five
years.
6-16-09 --
An upstate New York Bankruptcy Court judge has
dismissed an attorney's claims that an adversary --
a lawyer for a former congressional staffer who
described her sexual activities in a notorious blog
-- improperly used "metadata" to trace the
authorship of an electronic filing. . . . Attorney
Robert Steinbuch is being "disingenuous" by
suggesting that Matthew Billips violated New York's
Lawyer's Code of Professional Responsibility by
using technology to surreptitiously trace a motion
to compel that Steinbuch filed in the U.S. District
Court in the District of Columbia, said Bankruptcy
Court Judge Margaret Cangilos-Ruiz of the Northern
District of New York. . . . Steinbuch is seeking in
the bankruptcy court a determination that claims
underlying his previous district court filings in
the District of Columbia and in Arkansas against
debtor Jessica L. Cutler are nondischargeable due to
her "willful and malicious injury" of Steinbuch
under
11 U.S.C. §523(a)(6) of the U.S.
Bankruptcy Code.
6-15-09 --
Things just got a little more complicated in the
Heller bankruptcy. Namely, it's now the Heller
bankruptcies. . . . In a move that may do nothing
more than add a layer of complication and delay, a
former Heller shareholder has forced nine
corporations that made up Heller Ehrman LLP into
bankruptcy, including Heller Ehrman Hong Kong,
Heller Ehrman Europe and corporations in various
states like California which technically employed
Heller's partners. . . . These corporations were
also the target of the class action brought by
Heller's former employees that was winding through
civil court before being dismissed Wednesday. The
request to dismiss was submitted before the
corporations were forced into bankruptcy, according
to Steve Blum with litigation boutique Blum Collins,
which is representing the employees. The employee
suit will be folded into one that's already under
the jurisdiction of the bankruptcy court, he said. .
. . Heller's corporations were basically the
business entity through which its shareholders were
paid.
6-15-09 --Weil, Gotshal & Manges,
Jenner & Block and
Honigman Miller Schwartz and Cohn have
filed their applications for employment as counsel
to General Motors in the troubled automaker's
Chapter 11 case. The filings show that GM has paid
more than $80 million in fees to the three firms
over the past six months. . . . As lead bankruptcy
counsel to GM, Weil has the lion's share of the
billings at more than
$54 million accrued in that period.
That's roughly equivalent to the
$55 million that Weil billed bankrupt Lehman
Brothers between September 2008 and January
2009. . . . Weil bankruptcy partners Stephen
Karotkin, Harvey Miller and Joseph Smolinsky appear
on the filing. The firm states that partners
advising GM will bill between $650 and $950 per hour
with associates billing at hourly rates between $355
and $640. Weil was paid a $5.9 million retainer,
part of which it intends to apply to "any
outstanding amounts" that were "not processed
through [Weil's] billing system" prior to the firm
being retained as bankruptcy counsel.
6-15-09 --
A federal appeals court
has upheld a $372,000 sanction against a Crowell
& Moring partner and affirmed his five-year
suspension from practice in bankruptcy court
in a big swath of Florida. . . .
Peter R. Ginsberg, a white-collar defense
attorney in Washington, D.C.-based Crowell &
Moring's New York office and a former Assistant U.S.
Attorney, lost his appeal of the sanctions on
Thursday in the 11th U.S. Circuit Court of Appeals.
A three-judge panel found that Ginsberg's attempts
to have a bankruptcy judge recuse himself from a
Chapter 11 case were in bad faith. . . . The appeals
court affirmed the $371,517 monetary sanction
imposed by the judge whom Ginsberg attempted to oust
and upheld the judge's suspension of Ginsberg's
license to practice for five years in the U.S.
Bankruptcy Court for the Middle District of Florida.
The district extends from the Georgia border to
Florida's southwest coast and includes Jacksonville,
Orlando and Tampa, Fla.
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6-12-09 --
We would have loved to have been in
Cooley Godward Kronish's Manhattan office last Friday,
when lawyers from six firms involved in the Filene's
Basement auction were sniping at each other over the
rules for the proceeding. . . . Men's Wearhouse, who
emerged as the winning bidder, has dropped its
$67 million offer after the previous
stalking horse bidder, a consortium led by Crown
Acquisitions, filed a blistering motion Tuesday
accusing Men's Wearhouse (and its lawyers at
K&L Gates) of violating the rules a
bankruptcy judge had set for the auction, according
to court papers and
The Boston Globe. . . . Calling the
auction "a travesty," Crown's lawyers at
King & Spalding argued in the filing that
Filene's and its lawyers (Pachulski
Stang Ziehl & Jones) and the creditors
committee counsel (Cooley) looked the other way when
Crown brought up the violations because they
believed Men's Wearhouse had presented the best bid.
6-11-09 --
Although the U.S. Supreme Court
refused to halt the Chrysler LLC sale on
Tuesday night, the justices' traditionally quiet
summer may be interrupted when the same opponents to
that sale raise similar challenges to the pending
General Motors Corp. bankruptcy. . . . "We would not
rule out going to the Supreme Court again," said
Barry Bressler, a partner at Philadelphia's
Schnader Harrison Segal & Lewis and
counsel to the Ad Hoc Committee of Consumer Victims
of Chrysler and the Committee of Consumer Victims of
General Motors. . . . Bressler said there are a
number of different issues in the GM bankruptcy
which may not be "four-square" with what happened in
Chrysler. The new Chrysler that has emerged from the
sale to Fiat SpA is free and clear of all pending
and future claims of liability against the old
Chrysler.
6-11-09 --
For the second time in a week, investors who fell
prey to Bernard L. Madoff's massive Ponzi scheme are
claiming they have been victimized not once, but
twice: this time by the trustee charged with
overseeing the liquidation of Madoff's investment
securities firm. . . . In a suit filed Wednesday in
bankruptcy court in the Southern District of New
York, three Pennsylvania residents accused Irving H.
Picard, who was appointed to the trustee post under
the Securities Investor Protection Act of 1970 and
oversees claims filed by Madoff investors, of
favoring the brokerage industry and "enrich[ing]"
Wall Street at the expense of innocent investors. .
. . By "disregarding all appreciation" in investors'
accounts, which were collectively valued at roughly
$9.6 million on the last account statement they
received prior to Madoff's arrest last December,
Picard has created his own definition of "net
equity" and "intends to avoid paying [Securities
Investor Protection Corporation] insurance to the
thousands of elderly Madoff investors" who depended
on these investments for their "daily living
expenses," states the complaint in Peskin v. Picard, 08-01789. . . . The
suit comes on the heels of a class action filed June
5 on behalf of a group of six elderly investors who
had accounts with Bernard L. Madoff Investment
Securities LLC and have filed roughly $9 million in
claims to recoup the "market value" of their
securities.
5-11-09 --
Lawyers representing directors and officers of
IndyMac Bancorp Inc. are attempting to
remove a cap on their billing rates, the latest
example of how judges are scrutinizing hourly fees
in large bankruptcies. . . . IndyMac, one of the
nation's largest mortgage lenders, filed for Chapter
7 protection on July 31, 2008. Six law firms
representing more than a dozen directors and
officers recently appealed to the bankruptcy judge
in the case to overturn a court-appointed monitor's
decision to cap their fees at $600 per hour. . . .
Four of the firms — Washington's
Covington & Burling and
Williams & Connolly; Los Angeles-based
Munger, Tolles & Olson; and New York's
Willkie Farr & Gallagher — charge top
rates of between $750 and $995 per hour, according
to court documents. . . . The judge has declined to
intervene.
5-7-09 --
In the past few weeks, we've all marveled at the
huge amounts
Jones Day,
Schulte Roth & Zabel and
Weil, Gotshal & Manges have billed in the
country's two most-watched Chapter 11 cases
(Chrysler for Jones and Schulte, Lehman Brothers for
Weil). But we have to admit we haven't stopped to
ponder: Are those fees illegal? . . . According to a
new study co-authored by UCLA bankruptcy law
professor Lynn LoPucki (hat tip:
the Wall Street Journal's Law Blog), the
answer might be yes. LoPucki and his co-author,
fellow UCLA prof Joseph Doherty, essentially argue
that bankruptcy judges allow lawyers to bill their
debtor clients for months at a time before
submitting those billing statements to the judge for
approval,
according to Bloomberg. That
goes against the federal bankruptcy code, the
study argues, and it has allowed legal fees
to increase faster than inflation rates. Judges in
theory have the option of objecting to those bills
and demanding law firms pay back some of the money,
but "payments are harder to reverse than to
prevent," the study says.
By Linda Sandler and
Christopher Scinta, Bloomberg
5-6-09 --
Bankruptcy lawyers who stand to make as much as $372
million in the reorganization of
Chrysler LLC will be doing so illegally,
according to a California law professor. . . .
Attorneys are billing bankrupt companies for about
80 percent of their fees without first submitting
the charges to the court, as required under the U.S.
Bankruptcy Code, according to a study on the issue
by the University of California at Los Angeles, “Routine
Illegality in Bankruptcy Court Fee Practices,” which
was released today. . . . In practice, judges often
review the monthly fee payments later, because it’s
time-consuming to scrutinize them every month, the
report said. Such a lack of oversight has permitted
bankruptcy attorneys and other professionals to
raise their fees by more than twice the rate of
inflation from 1998 to 2007, according to Lynn
LoPucki, a bankruptcy law professor who co- wrote
the report.
5-4-09 --
We've spent Friday morning digging into some of the
filings already crowding the Chrysler bankruptcy
docket, but it's going to be a while before we find
one more interesting than
Jones Day's application to be Chrysler's
lead counsel. . . . The firm already has billed
Chrysler a smidgen more than $18.5 million since
Chrysler paid the firm $1 million in late November
to establish a retainer, according to the Jones Day
filing, About $5.8 million remains in the retainer,
meaning Jones Day has drawn down just over $13
million so far, the filing says. . . . Also of
interest: the firm is staying below the magic $1,000
per hour mark that a few firms have jumped over in
bankruptcies this year. Corrine Ball, the lead
bankruptcy partner in the Chrysler case, is billing
at $900 per hour. She's actually not the top-billing
partner, though. That distinction goes to John
Cornell, who will be advising Chrysler on employee
benefits and executive compensation to the tune of
$950 per hour.
4-27-09 --
As the economy tanks and
bankruptcy filings soar, bankruptcy
lawyers challenging a 2005 law's restrictions on how
they can assist debtors contend that there is an
urgent need for guidance from the nation's highest
court. . . . For the past four years, consumer
bankruptcy attorneys and lawyers representing the
credit industry, along with their national
associations, have filed lawsuits around the country
attacking attorney-related provisions in the
2005 Bankruptcy Abuse Prevention and Consumer
Protection Act. . . . Their challenges are
generally two-pronged: Licensed attorneys are not
"debt relief agencies" within the meaning of the
statute even if they provide bankruptcy-related
advice to debtors, and, to the extent that the
statute does apply to them, certain provisions
restricting the advice they can give clients violate
the First Amendment.
by Andrew M. Grossman
and David C. John, Heritage.org / WebMemo #2409
4-27-09 --
According to several reports, negotiators in the
Senate may be on the verge of finalizing a
compromise version of legislation that would give
bankruptcy judges the power to modify home
mortgages, a practice known as "cramdown" or
"strip-down." This potential compromise, unlike the
House's version of the legislation (H.R. 1102),
would limit a judge's discretion in reducing the
portion of a mortgage that must be repaid and
otherwise altering the terms of the loan. . . .
However, no matter how strict those limits seem,
they do not alter the fundamental problems caused by
mortgage cramdowns. Even with these limits, this
proposal would still increase the cost of
homeownership and especially hurt both first-time
homebuyers and families with low to moderate
incomes. It would also deal a blow to banks and
other lenders at a time when many are faltering.
Worst of all, allowing bankruptcy judges to rewrite
mortgages would prevent few foreclosures while
imposing high costs on many who tried this approach.
4-27-09 --
When a woman recently came into attorney James W.
McNeilly’s office to explore the possibility of
filing for bankruptcy, there was little he could do
for her. . . . The woman had gotten divorced in
November and received a 50 percent interest in her
ex-husband’s pension, but also about $40,000 in
credit card debt the couple accumulated during the
marriage. McNeilly said the woman planned to
withdraw the pension money to pay down the credit
card debt, but then she lost her job. . . . “She
asked if she should use the money from the pension
to settle with the creditors or use it to live on,”
McNeilly said. “I couldn’t answer that.” . . . All
he could tell her was that Chapter 7 would have
proven useless because creditors could have still
tried to get the money from her ex-husband and
Chapter 13 was not an option because she had no
source of income.
4-22-09 -- Updated: The
worsening economy may bring more malpractice
lawsuits against law firms by bankruptcy trustees
who consider them potential cash cows. . . . David
Parker of Parker Mills in Los Angeles told the
Daily Journal (sub. req.) that the
burgeoning area of litigation is attracting some
plaintiffs lawyers who are actively searching for
bankruptcy trustees to represent. . . . A number of
recent cases illustrate the trend according to the
story. The publication lists these examples: . . . •
Pillsbury Winthrop Shaw Pittman
paid $10 million to settle a suit over
the firm’s failure to disclose an alleged conflict
of interest in a bankruptcy case. Another firm,
Levene, Neale, Bender, Rankin & Brill,
paid $2.5 million to settle the trustee’s
claim in the same case.
By Mike Baker/The
Associated Press, Lincoln Journal Star
4-18-09 --
The number of U.S. businesses and individuals
declaring bankruptcy is rising with a vengeance amid
the recession, despite a three-year-old federal law
that made it much tougher for Americans to escape
their debts, an Associated Press analysis found. . .
. “There’s no end in sight,” said bankruptcy lawyer
Bryan Elliott of Hickory, N.C., who is working seven days
a week and scheduling prospective clients a month in
advance. “To be doing this well and having this much
business, it is depressing. It’s not a
laugh-a-minute job.” . . . Nearly 1.2 million
debtors filed for bankruptcy in the past 12 months,
according to federal court records collected and
analyzed by the AP. Last month, 130,831 sought
bankruptcy protection — an increase of 46 percent
over March 2008 and 81 percent over the same month
in 2007.
4-17-09 --
A bankruptcy judge sorting out the issues
surrounding the dissolution of Heller Ehrman is
refusing to allow a malpractice suit by an identity
theft company to proceed against the former law
firm. . . . The identity theft company Lifelock Inc.
accuses Heller and former partner Mary Azcuenaga of
overbilling, the
Recorder reports. Judge Dennis Montali of
the Northern District of California refused to lift
an automatic stay that prevented the case from going
forward because of the risk of draining assets from
the estate so early in the bankruptcy, the
Daily Journal reports. . . . Heller’s
bankruptcy trustee has estimated that only $8.25
million will be available by the end of May to pay
the law firm’s debts.
October 2008
Bankruptcy is a legal proceeding in which you put
your money in your pants pocket and give your coat
to your creditors”
-–
Joey Adams
(1911-1999)--
9-15-08 --
Lawyer Central is pleased to announce the release of
its newly updated Bankruptcy Law Resource Center,
which provides free informational legal resources
for individuals and business that are considering
the option of filing for bankruptcy. The Bankruptcy
Resource Center provides a means for concerned
parties to explore their options while gaining an
understanding of the legal issues surrounding
bankruptcy and foreclosure. . . . An overview of
Chapter 7 bankruptcy, Chapter 11 bankruptcy, Chapter
12 bankruptcy, and Chapter 13 bankruptcy, and
answers to frequently asked questions about
commercial bankruptcy and consumer bankruptcy, an
explanation of what happens to an individual’s home
and property in the case of consumer bankruptcy, and
a guide to understanding the New Bankruptcy Law are
among Lawyer Central’s featured bankruptcy
resources. The Bankruptcy Resource Center
foreclosure page features a brief introduction to
foreclosure, frequently asked questions about
foreclosure, and a link to tips on how to avoid a
foreclosure from the U.S. Department of Housing and
Urban Development. A national bankruptcy news center
features up-to-date news stories about commercial
bankruptcy, consumer bankruptcy, and foreclosure
from around the country. . . . To learn more about
bankruptcy law and view Lawyer Central’s bankruptcy
law resources, visit
http://bankruptcy.lawyercentral.com/.
9-15-08 --
U.S. Bankruptcy Judge Bruce Markell is a tough
hombre with demanding standards. . . . He expects
attorneys who practice before him to be ethical and
competent. And he's using the persuasive power of
the pen to get that message out. . . . Instead of
just slapping a few hands in court, Markell authored
three take-no-prisoners published opinions
reprimanding attorneys and even sanctioning a bank.
. . . He has a reputation as a know-it-all, but a
know-it-all who knows his stuff. Attorneys describe
him as "undeniably brilliant" but also arrogant and
rigid. . . . He spent 10 years practicing bankruptcy
law in Los Angeles before moving into the academic
world in 1990. He still teaches at UNLV's Boyd
School of Law and became a bankruptcy judge in 2004.
. . . In August, Markell publicly reprimanded
attorney Neil Beller and said the State Bar of
Nevada should look at Beller's dual representation
of two clients in the same case. (More about Beller
later.) . . . Also in August, Markell publicly
reprimanded the Cooper Castle law firm, privately
reprimanded one of its junior attorneys and
sanctioned Wells Fargo Bank for bad faith conduct,
ordering it to pay certain legal fees.
9-8-08 --
A 5th U.S. Circuit Court of Appeals opinion that one
former bankruptcy judge calls "scary" for lawyers
requires Dallas-based Winstead to disgorge up to
$500,000 in attorney fees the firm received for its
work on the restructuring of a restaurant chain that
filed for bankruptcy. . . . In an Aug. 28 decision
in Wooley v. Faulkner,
a three-judge panel of the 5th Circuit concluded
that the doctrine of equitable mootness did not
apply to attorneys representing clients in a Chapter
11 bankruptcy. . . . R. Glen Ayers, a former judge
on the U.S. Bankruptcy Court for the Western
District of Texas in San Antonio, says the 5th
Circuit's opinion is worrisome for debtors' counsel
and other lawyers whose fees are subject to court
approval in a Chapter 11 case, because it says the
doctrine of equitable mootness may not protect them.
. . . Under the equitable mootness doctrine, appeals
courts typically recognize that there is a point at
which they cannot order fundamental changes in a
debtor's reorganization plan approved by a
bankruptcy court once that plan has been
consummated.
Provision That Bans
Advice to Add Debt Gets Struck Down
By Brent Kendall
9-5-08 --
A federal appeals court in St. Louis ruled Thursday
that a provision of a sweeping 2005 federal
bankruptcy-overhaul law violates the free-speech
rights of lawyers. . . . The 8th U.S. Circuit Court
of Appeals struck down a provision of the Bankruptcy
Abuse Prevention and Consumer Protection Act that
barred attorneys from advising clients to take on
more debt before they filed for bankruptcy
protection. . . . The appeals court, in a 2-1
ruling, said the provision "prevents attorneys from
fulfilling their duty to clients to give them
appropriate and beneficial advice." . . . "There are
certain situations where it would likely be in the
assisted person's, and even the creditors', best
interest for the assisted person to incur additional
debt in contemplation of bankruptcy," the court
said.
8-27-08 --
Nearly 1 million individuals and businesses filed
bankruptcy in the 12 months ended June 30, according
to U.S. Court data released Wednesday. . . . . There
were 967,831 bankruptcy cases filed since July 1,
2007, up 28.9 percent from the prior 12 months, when
cases totaled 751,056. . . . . Nonbusiness filings
made up 96.5 percent of those cases, totaling
934,009. Of those cases, which represent
individuals, 592,376 were Chapter 7 filings, which
involve liquidation of nonprotected assets, like
family homes. The total also included 340,852
filings for Chapter 13 protection, which allows an
individual to reorganize their finances and pay down
their debt. An additional 780 individuals filed for
Chapter 11, which is normally used for businesses
but can apply to individuals who are reorganizing
but have more debt than allowed under Chapter 13. .
. . . On the business side, a total of 33,822 cases
were filed in the 12-month period, including 23,372
under Chapter 7, which allows for an orderly shut
down of the business. There were 6,513 Chapter 11
filings; 314 Chapter 12 filings for family farm
bankruptcy; and 3,569 Chapter 13 filings for
small-debt reorganization.
6-2-08
--When U.S. Bankruptcy Court Judge Robert Somma resigned after his arrest
on a drunken driving charge in February, he had some second thoughts
and ultimately decided to rescind the resignation. Recently, though,
he’s apparently had more second thoughts. . . . In a
statement, a spokesperson for the First Circuit has
announced that Judge Somma, who in February pleaded no contest to a
first-degree misdemeanor charge of drunk driving while wearing a
dress (though the dress part wasn’t a part of the charge; that’s
still legal), will not be coming back to work.
Here’s a story from the Boston Globe, and
here’s past LB coverage.
5-31-08 --
US Bankruptcy Court Judge Robert Somma, who resigned after his
arrest on a drunken driving charge in February and then tried to
rescind it, will not be coming back to work, federal court officials
said yesterday. . . . The US Courts for the First Circuit released a
one-paragraph statement saying that the Court of Appeals and Somma
"have agreed that he will not resume service on the United States
Bankruptcy Court for Massachusetts but is leaving to pursue other
endeavors. The court appreciates the service that Judge Somma has
rendered." . . . Somma, whose arrest in Manchester, N.H., on Feb. 6
made headlines because he was wearing a dress, was originally
supposed to leave by April 1. But the resignation was delayed until
May 15 after he expressed second thoughts in a letter to
Massachusetts Lawyers Weekly posted online April 1 and after more
than 200 bankruptcy lawyers signed a letter urging the court to let
him return. . . . Over the past two weeks, the circuit executive's
office and Somma's lawyer have been silent about whether he was
still employed as a judge. . . . Asked about the terms of the
agreement disclosed by her office yesterday afternoon, Susan
Goldberg, deputy circuit executive, said there was no
confidentiality provision but that it was the court's practice to
"not discuss what are essentially personnel matters."
A material
misstatement indicates the audit found information
that challenged the accuracy or veracity of the
debtor's petition
Pamela A. MacLean,
The National Law Journal
5-1-08 --
Among the 3,582 random audits of individual Chapter
7 and Chapter 13 bankruptcy cases, 30 percent had at
least one material misstatement, according to the
report released Wednesday by the
U.S. Trustees Office. . . . The random
audits, required under the 2005 bankruptcy law
reforms, are part of the oversight of private
trustees and enforcement of bankruptcy laws assigned
to the U.S. Trustee program. . . . The federal
judicial districts with the 10 or more audits had
reports of material misstatements that ranged from 9
percent to 55 percent, according to the report. . .
. The top districts in the country include:
Oklahoma's Eastern District with 55 percent of 11
audits; Louisiana's Middle District with half its 12
audits; Western Louisiana with 45 percent of 40
audits; Western Tennessee with 41 percent of 61
audits; Northern Georgia with 41 percent of 128
audits; Arizona with 40 percent of 47 audits;
Northern California with 40 percent of 55 audits and
Nevada with 39 percent of 41 audits. . . . A
material misstatement indicates the audit found
information that challenged the accuracy or veracity
of the debtor's petition or other bankruptcy
documentation.
02-16-08 --
A 63-year-old Massachusetts federal bankruptcy judge
has resigned a week after he was arrested for
driving under the influence in New Hampshire while
reportedly wearing a woman’s dress, heels and
stockings, and carrying a purse. . .. Judge Robert
Somma, a Newbury resident, pleaded no contest to the
drunken driving charge in New Hampshire and agreed
to have his license suspended for 12 months, the
Manchester Union Leader reported. . . . “He decided
with the media coverage the way it had been, it was
best to put this behind him,” Gary Wenta, circuit
executive for Boston’s First Federal Circuit, told
the Herald. . .. Wenta said Somma worked in private
practice for years in Boston before he was appointed
to the bench by President Bush in December 2004. He
will remain on leave until he resigns on April 1,
after roughly three years on the job. . .. “He’s a
highly respected member of the bar and remains so,”
Wenta said. “He was serving a 14-year appointment.
This will leave him without a pension.”
02-08-08 --
A U.S.
Bankruptcy Court judge allowed the insurer for the law
firm of Bowditch & Dewey LLP to make a $2.1 million settlement
payment to the bankruptcy estate of former Lunenburg plastics
company Gitto/Global Corp. . . . Mark G. DeGiacomo, bankruptcy
estate trustee for Gitto/Global, filed a motion in December for
Liberty Insurance Underwriters Inc. to pay $2.1 million to the
estate for “recovery of damages relating to various possible causes
of action” stemming from Bowditch & Dewey’s representation of Gitto/Global
prior to its filing for bankruptcy in September 2004. . . . Mr.
DeGiacomo told the court yesterday that the law firm had a conflict
of interest in continuing to represent the company and its
principals individually after they allegedly began engaging in
fraudulent activities.
02-06-08 --
Nearly
$75,000 in legal fees have been blocked by a federal judge who
complained that a Long Island, N.Y., law firm was "purposefully vague"
in disclosing that its lead attorney in a bankruptcy case was the
son-in-law of the executive of one of several unsecured creditors it
was representing. . . . Had the court known in 2002 about the
relationship, it might have been "reluctant" to appoint Berkman,
Henoch, Peterson & Peddy of Garden City to represent a committee of
creditors in the Chapter 11 case, wrote Stephen D. Gerling, chief
judge of the Northern District Bankruptcy Court. . . . In a 2002
affidavit, Berkman Henoch attorney Ronald M. Terenzi stated that an
unnamed partner in the firm who would be primarily responsible for
representing the creditors "is related to and [sic] officer and
shareholder of one of the general unsecured creditors of the
Debtors." . . . In fact, Gerling wrote in
In Re: Matco Electronics Group Inc.,
02-bk-60835, Berkman Henoch attorney Douglas Spelfogel was the
son-in-law of Joel Girsky, the chief executive officer of Jaco
Electronics Inc., one of the creditors in the action. The judge said
it also appears that Spelfogel's wife, Wendy, later became in-house
counsel at Jaco.
01-30-08
-- Stressing
that the case raised "important issues concerning
the integrity of the bankruptcy process," a federal
bankruptcy judge in Manhattan has declined to
dismiss claims by a trustee against a Westchester
County, N.Y.-based law firm. . . . In In re Food
Management Group (Grubin v. Rattet),
04-22880, Judge Martin Glenn ruled that allegations
of fraudulent concealment, breach of fiduciary duty,
negligence and fraud on the court could proceed
against attorneys Robert L. Rattet and Jonathan S.
Pasternak, as well as the law firm Rattet, Pasternak
& Gordon Oliver. . . . The lawyers and the firm are
accused of failing to disclose that an "insider" of
debtor Food Management Group had violated a court
order by submitting a bid in the auction of the
company's assets. . . . The trustee also alleged
that the lawyers improperly failed to disclose that
they had represented one of the insiders before the
auction.
01-16-08 --
Delaware's Bankruptcy Court is once again the
preferred emergency room for big businesses in
serious financial health, particularly subprime home
mortgage lenders. . . . In 2007, nearly 80 percent
of major companies that sought bankruptcy protection
in the federal court chose Wilmington, according to
bankruptcy data compiled by Lynn LoPucki, a
professor at UCLA School of Law. . .. High-profile
cases filed in Delaware by public companies with
assets of more than $250 million include the two
largest subprime lenders in bankruptcy, American
Home Mortgage Investment Corp. and New Century
Financial Corp. Electronics retailer Tweeter Home
Entertainment Group Inc. also filed in Wilmington.
Questions About
Practices Arise in Bankruptcy Cases; Possible
Liabilities for BofA
By Amir Efrati & Kara
Scannell
01-14-08 --
More federal bankruptcy judges are calling into
question the business practices of Countrywide
Financial Corp., as Bank of America Corp. prepares
to buy the ailing mortgage lender. . . . According
to court documents in a bankruptcy case in Houston,
Countrywide didn't properly credit a borrower's
payments made during bankruptcy but instead applied
them to prebankruptcy debt, which isn't allowed. In
the same case, involving a debtor named William
Allen Parsley, Countrywide represented to the court
that Mr. Parsley owed fees that turned out to be
unsubstantiated and in error. These included an
improper $450 fee and a $65 unsubstantiated fee. . .
. During a hearing last month, U.S. Bankruptcy Judge
Jeff Bohm chastised Countrywide and its lawyers
after the company admitted making numerous errors in
the case. "How many times do I have to listen to
that before I conclude, 'You know, there's got to be
some kind of reckoning' when I keep hearing time
after time, 'we made a mistake, we made a mistake,
we made a mistake, we made a mistake?'" Judge Bohm
said. He is considering sanctions against the
company.
By Jacqueline
Palank, Daily Bankruptcy Review, WSJ Blog
4-28-09 --
In the hundreds of pages of court documents that we here at Bankruptcy Beat
peruse every day, we’re sometimes lucky to find a few gems. When creditors
or investors are angry, they don’t hold back – especially when they don’t
have a lawyer’s guidance. But one creditor’s letters in the bankruptcy case
of USA Capital take the cake. . . . To say Curtis Clark, who lost his
$200,000 investment in
USA Commercial Mortgage Co., isn’t a fan of the officials
involved in the mortgage lender’s bankruptcy proceedings would be putting it
lightly. In a letter filed last month, Clark
called the U.S. Bankruptcy Court in Las Vegas “a brothel” whose
“madam” is none other than bankruptcy Judge Linda B. Riegle. Nor does Clark
show any love for the buyer of the right to service USA Commercial
Mortgage’s loans, Compass Partners LLC, which Clark deems the “john” in this
“all-nighter” of an orgy. . . . Clark, a 70-year-old retired petroleum
engineer,
told the Las Vegas Review-Journal that “you have a right to
express an opinion.” Judge Riegle recused herself from the matter, and
another judge scheduled a May 13 hearing to consider whether Clark should be
sent to a federal district court for criminal contempt proceedings.
4-28-09 --
Lawyers at the biggest firms in the country probably don’t need to be
reminded to show up to court when their clients need them, but
WilmerHale may need a refresher. . . .
Andrew Goldman, a WilmerHale partner and the vice chairman of the
firm’s bankruptcy practice, skipped a hearing Monday at the U.S. Bankruptcy
Court in Manhattan that was pretty important to his client –
PricewaterhouseCoopers. . . . Needless to say Judge Robert Gerber was not
pleased, calling Goldman’s absence “unacceptable” (three times) and then
topping off the hearing by
ruling against the accounting giant. . . . Here’s the background:
Consulting firm BearingPoint Inc., which is in bankruptcy, was in court to
ask the judge to approve an auction for one of its business unit.
PricewaterhouseCoopers had agreed to act as the lead bidder at the auction
with a $25 million offer and had set strict requirements on the bidding
rules. These hearings are routine in bankruptcy, and while the company in
bankruptcy takes the lead in presenting the motion to the court, the buyer
(known as the stalking horse bidder) shows up just in case things go awry.
Bankruptcy
is a legally declared inability or impairment of ability of an
individual or organization to pay their
creditors. A declared state of
bankruptcy can be requested by creditors in an effort to recoup a
portion of what they are owed; however in the overwhelming majority
of cases the bankruptcy is initiated by the bankrupt individual or
organization.
The United States Trustee Program is
the component of the Department of Justice responsible for
overseeing the administration of bankruptcy cases and
private trustees under 28 U.S.C. § 586 and 11 U.S.C. § 101,
et seq.
Detecting
and combating Bankruptcy Fraud is a U.S. Trustee Program
priority. For information on how to report suspected
bankruptcy fraud, click
here.
"The commercial world is very frequently
put into confusion by the bankruptcy of merchants, that assumed the
splendour of wealth only to obtain the privilege of trading with the
stock of other men, and of contracting debts which nothing but lucky
casualties could enable them to pay; till after having supported their
appearance a while by tumultuary magnificence of boundless traffic, the
Complete
coverage: 
