05-20-11 --
Washington Mutual Inc. and its biggest creditors
agreed to settle a fight with shareholders by giving
them equity in the company that will emerge from
bankruptcy, two people familiar with the proposal
said. . . . The outline of the deal includes $25
million for a litigation trust that would bring
lawsuits to collect more money for shareholders. In
return, shareholders would drop allegations that
hedge funds who own $2.54 billion of WaMu’s debt
used confidential information to guide their
investments. . . . Washington Mutual shares rose as
much as 79 percent to 7.4 cents in over-the-counter
trading. . . . How much the deal is worth to
shareholders can’t be easily calculated because the
value of the reinsurance company they will get a
stake in relies in part on future tax breaks, said
one of the people, who declined to be identified
because the discussions are private. . . . “That is
impossible to assess,” one of the people said.
05-13-11 --
A bankruptcy judge has denied a U.S. Trustee's
motion to dismiss a joint petition brought by a
lesbian couple in Fallsburg because it is contrary
to the Federal Defense of Marriage Act, an argument
that the judge said had no bearing on bankruptcy
law. . . . Southern District Bankruptcy Judge
Cecelia G. Morris ruled last week in In re Somers
and Caggiano, 10-38296, that the non-recognition of
the couple's marriage under DOMA did not have
anything to do with whether allowing the bankruptcy
to continue would prejudice their creditors, and
thus was not cause for dismissal. She did not
address the constitutionality of DOMA.
05-12-11 --
A bankruptcy judge found himself the subject of a
recent legal decision that allowed him to retain his
membership in a segregated country club. . . . Judge
George Paine II has worked for 15 years to try to
diversify the Belle Meade Country Club in Nashville,
Tenn.–which has never allowed women or black men as
members with voting powers in the more than a
century it’s been open–to no avail. He also
sponsored an African-American’s membership
application, but the club never acted on it. Despite
these failures, Paine never resigned from the club,
leading some to complain that this wasn’t ethical. .
. . The Associated Press
obtained a memorandum by the Judicial
Council of the Sixth Circuit Court of Appeals in
Cincinnati which, by a narrow 10-8 vote, ruled that
Paine’s membership doesn’t violate federal ethics
guidelines and determined to dismiss the complaint
against him.
05-09-11 --
Bryan Cave and Holland & Knight both face newly
filed suits over their alleged roles advising two
former clients that are now in bankruptcy. . . .
Bankruptcy trustees for mortgage loan broker Estate
Financial Inc. (EFI) and affiliate Estate Financial
Mortgage Fund (EFMF) filed malpractice complaints
against Bryan Cave in U.S. bankruptcy court in Santa
Barbara, Calif., on April 28. . . . The trustees,
who are seeking to recover assets for EFI and EFMF
investors, claim that Bryan Cave and restructuring
counsel Katherine Windler in Los Angeles looked the
other way while their client, the now-defunct
lenders EFI and EFMF, fraudulently sold
mortgage-backed securities to investors, according
to Cal Coast News. Bryan Cave maintains that the
suits, which seek $100 million in damages, have no
merit.
04-27-11 --
A South Florida bankruptcy lawyer has filed a
scathing response to a judge’s threat to sanction
him, accusing the judge of drawing conclusions “from
the ether” and making “half-baked findings.” . . .
Hollywood, Fla., lawyer Kevin Gleason asserts in his
response
that Judge John Olson “misremembered” the facts of a
court hearing, ignored relevant statutes and ruled
against his claim for an exemption with “mere
adverbial analysis.” . . . “It is sad when a man of
your intellectual ability cannot get it right when
your own record does not support your half-baked
findings,” Gleason wrote. . . . The South Florida
Lawyers
blog labels Gleason's response a “doozy” and
suggests the lawyer might have been better off using
the document as a first draft. Legal Blog Watch
agrees, saying a first draft allows a lawyer to vent
anger before shredding the document and tossing it
in the circular file.
04-25-11 --
The state Attorney Registration and Disciplinary
Commission is recommending that a local bankruptcy
lawyer lose his law license for a year because of
multiple instances of wrongdoing. . . . A hearing
board has concluded that John Narmont violated
fiduciary duties, broke conflict-of-interest rules,
made false statements in court documents and got
excessive judgments for legal fees before cases were
finished. . . . “The misconduct charged and proved
in this case was extremely serious,” the board wrote
in its recommendation for a one-year suspension.
04-12-11 --Baker & McKenzie
and former partner Martin Weisberg have been sued
over their alleged roles running a stock scheme that
contributed to the collapse of Pittsburgh-based
Industrial Enterprises of America (IEAM). . . . In a
scathing 22-page
complaint filed
against the firm and Weisberg in U.S. bankruptcy
court in Delaware on Monday, plaintiffs claim both
defendants enabled a massive fraud at IEAM, which
filed for bankruptcy in May 2009. . . . "[Baker &
McKenzie]'s participation in defrauding [IEAM] out
of more than $150 million spanned years and knew
little bounds," states the complaint filed on behalf
of IEAM and its shareholders by Steven Thomas of
Venice, Calif.-based Thomas, Alexander
& Forrester
and Christopher Loizides of Delaware's Loizides.
"IEAM had the right not to have criminals for its
attorneys." . . . According to the complaint, Baker
& McKenzie hired Weisberg as a partner in 2005
solely because of the fees he would bring to the
firm through his relationship to IEAM and its former
CEO John Mazzuto. The complaint states that Weisberg
and his former firm had numerous conflicts of
interest that were not disclosed to the plaintiffs,
and that the defendants violated "ethical rules by
participating in the looting of IEAM--a looting that
could not have occurred without defendants' legal
expertise."
04-06-11 --
Hilton Stein, who literally wrote the book on how to
sue one's lawyer, has not practiced since 2002 but
is still on the hook for an unhappy client's nearly
10-year-old claim against him. . . . U.S. Bankruptcy
Judge Donald Steckroth in Newark on Monday refused
to dismiss an adversary action by Dr. Monica Mehta,
who wants to block the discharge of a $40,000 debt
Stein allegedly owes her. . . . Mehta paid Stein
that amount when she retained him in November 2001
to sue Chatham's Blume Goldfaden Berkowitz Donnelly
Fried & Forte, her lawyers in an insurance dispute.
The retainer capped his fees at $75,000, with a
refundable $40,000 down-payment. . . . About seven
months later, in June 2002, Stein filed a Chapter 11
petition, later converted to Chapter 7, and in July
2002, the state Supreme Court placed him on
disability inactive status from which he has not
returned. A number of clients filed actions against
him, but Mehta's is the only one pending.
By Jim O'Hara / The
Post-Standard The Post-Standard
03-30-11 --
Former bankruptcy lawyer Christopher Chadick's
office manager was sentenced today to time served
for his role in a scheme to defraud dozens of
clients. . . . "You made a deal with the devil and
you're stuck with it," County Judge William Walsh
told Assistant District Attorney Beth Van Doren
after the prosecutor tried to have the original plea
deal negated. . . . Fox, 43, of Valley Drive,
pleaded guilty in January to attempted first-degree
scheme to defraud in a deal calling for him to
cooperate with the prosecution of Chadick. . . .
Chadick, 58, was sentenced Tuesday to serve four to
12 years in state prison after being convicted at
trial. . . . But Van Doren clearly was dissatisfied
with Fox's level of cooperation. . . . In court
today, she asked Walsh to sentence Fox to one year
in the Onondaga County Correctional Facility for his
lack of cooperation with her office. If the judge
was not willing to impose that jail sentence, Van
Doren asked the court to consider negating Fox's
guilty plea.
03-23-11 -- A disbarred Illinois
bankruptcy attorney has been convicted of three
counts of wire fraud as part of a nationwide
mortgage fraud prosecution involving 67 defendants.
. . . Lorie Westerfield allegedly purchased homes
from two clients, misrepresented the purchase prices
and down payments and her income to lenders from
whom she obtained mortgages, and then concealed at
least one of the transactions from the bankruptcy
court and her client's creditors, according to an
Illinois Attorney
Registration and Disciplinary Commission
complaint that is linked to her attorney listing.
03-14-11 --
A Montrose law firm is accused of incompetence,
breach of contract and allowing a conflict of
interest. . . . Tammy M. Stomberg filed a lawsuit
March 11 in Harris County District Court against
Calvin C. Braun, Michael G. Orlando, Monica S.
Orlando and Orlando & Braun LLP. Stromberg claims
members of the law firm failed to adequately
represent her and then overcharged her for its work.
. . . According to the complaint, Stomberg hired
Orlando & Braun to represent her in a bankruptcy.
She says she was quoted a flat fee of $1,900, which
she paid. Stomberg says the bankruptcy was filed;
however, during the process, her mortgage company
allegedly tried to lift the bankruptcy in order to
foreclose on her home.
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Complexity of
overseeing four restructuring plans creates what one
participant calls 'four-ring circus'
By Michael Oneal,
Chicago Tribune reporter
11-29-10 --
The judge in Tribune Co.'s nearly 2-year-old
bankruptcy case struggled openly at a key hearing
Monday as he attempted to referee what one
participant described as a "four-ring circus" and
another called "total chaos." . . . Faced with a
proceeding that has splintered into four competing
restructuring plans brought by sparring creditor
factions, U.S. Bankruptcy Judge Kevin Carey
acknowledged that moving the complex case forward
efficiently is taxing the powers of the bench. . . .
"It's an unwanted meeting with my own limitations,"
he said at one particularly frustrating juncture
during a seven-hour hearing in a bankruptcy
courtroom filled to capacity with lawyers
representing constituents in the Chicago-based media
company's Chapter 11 case.
11-22-10 --
Real estate mogul Tim Blixseth is acting as his own
attorney as he seeks to disqualify a bankruptcy
judge who slapped the former billionaire with a $40
million fraud judgment. . . . Blixseth founded
Montana's Yellowstone Club, a private ski resort
that fell into bankruptcy after Blixseth pocketed
hundreds of millions of dollars. . . . His move to
oust U.S. Bankruptcy Judge Ralph Kirscher comes
after an appeal's court last month faulted the
judge's approval of the club's 2009 sale. That $115
million deal passed control from Blixseth's ex-wife,
Edra Blixseth, to Sam Byrne of Boston-based
CrossHarbor Capital. . . . On Monday, Tim Blixseth
alleged he was cheated in the deal - and that
Kirscher allowed it to happen. Tim Blixseth said he
filed the disqualification motion himself because
his own attorneys and others he had contacted in
Montana feared retaliation if they took the case.
11-22-10 --
Lawyers and other professionals presiding over the
bankruptcy proceedings of Lehman Brothers Holdings
Inc. have now taken in a collective $1 billion in
fees. . . . They crossed the threshold in October,
according to a monthly securities filing. Since the
bankruptcy filing in September 2008, fees paid for
professional services total $1.023 billion. The law
firms, consultants and other advisers took in $40.6
million in fees during October alone. . . . Law firm
Weil Gotshal & Manges, the lead bankruptcy counsel,
had $8.8 million in fees and expenses in October and
a total of $245.8 million in the proceedings.
11-17-10 --
Bank of America Corp was ordered by a U.S. judge to
return $500 million of deposits it seized from
Lehman Brothers Holdings Inc shortly after Lehman's
bankruptcy. . . . U.S. Bankruptcy Judge James Peck
said Bank of America violated federal law when it
"brazenly" seized the deposits after having taken
advantage of Lehman's weakened condition in the
summer of 2008 in obtaining the money. . . . "It is
difficult to understand how Bank of America could
have thought that taking the money was the right
thing to do without first seeking permission from
the court," Peck wrote in a Tuesday opinion filed in
Manhattan bankruptcy court. . . . "The actions taken
were surprising and, quite frankly, disappointing
for a leading financial institution that should care
a great deal about its reputation," he wrote.
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10-21-10 --
When Washington Mutual first declared bankruptcy,
the Democrats were popular, Jay Leno was getting
ready to call time on his career as host of "The
Tonight Show," and Tiger Woods was the most
respected athlete in the world. . . . More than two
years later, WaMu's bankruptcy finally looks to be
winding down (I know we've said that
before)
with Monday's news that Delaware bankruptcy Judge
Mary F. Walrath said she would sign off on an order
approving a disclosure statement filed in connection
with WaMu's proposed reorganization plan. The plan, which
would liquidate $7 billion
with the bulk coming from a $6 billion settlement
between WaMu, its owner JPMorgan Chase, and the FDIC
among various creditors, is set to be voted on by
WaMu's creditors on Nov. 15 -- two weeks after the
independent examiner's report is due. In a
statement, Washington Mutual said that the
settlement "will result in significant recoveries
for the estate's stakeholders and is in the best
interests of the estate." Quinn Emanuel Urquhart &
Sullivan's Susheel Kirpalani, who represents WaMu,
did not return a call for comment.
10-08-10 --
A judge in Camden, N.J., has approved a global
settlement that puts a halt to remaining litigation
in the Trump Entertainment Resorts bankruptcy,
months after the company emerged from Chapter 11. .
. . But in signing off on the deal on Tuesday, Chief
Bankruptcy Judge Judith Wizmur deferred deciding
whether to approve a request for payment of $19.5
million in fees and costs for professional advice to
the bondholders, who obtained a controlling interest
under the reorganization plan. . . . The amount was
mostly incurred for legal services from three law
firms -- Stroock & Stroock & Lavan, Lowenstein
Sandler and Fox Rothschild -- plus a $2.25 million
"success fee" to Houlihan Lokey Zukin & Howard, an
investment bank in Century City, Calif., that
provided financial advice.
10-07-10 --
The attempt of the ex-wife of jailed attorney Marc
S. Dreier to collect $7 million in support from his
bankruptcy estate suffered a setback this week. . .
. Refusing to lift an automatic stay in the case,
Southern District of New York Chief Bankruptcy Judge
Stuart M. Bernstein held that Elisa Dreier was not
entitled to have a state judge decide whether Mr.
Dreier's noncompliance with a separation agreement
accelerated all of the support obligations payable
under the pact. . . . Ms. Dreier has argued that her
$7.1 million support claim should be paid before
other creditors. . . . "[T]he disagreement over the
acceleration issue is between the estate and Elisa,
and not Elisa and Marc. At bottom, it concerns a
question of priority under the Bankruptcy Code
rather than a matrimonial contest between the
Dreiers," the judge wrote in In re Marc S.
Dreier
(pdf), 09-10371.
09-28-10 --
A group of Texas bondholders became the latest group
to make a grab for records of communication between
Washington Mutual and its attorneys, and like most
of those who came before them, the bondholders have
failed to get what they wanted, according to court
records and lawyers involved in the case. . . .
Shareholders of WaMu and other parties in the case,
including JPMorgan Chase, have previously tried to
get their hands on privileged communications,
according to
our prior reporting. The latest party to
do so is a group of bondholders who claim they are
getting squeezed out in WaMu's proposed plan to
re-emerge from Chapter 11 protection and settle
claims with JPMorgan in the process.
09-15-10 --
Trustee Irving H. Picard and the team of lawyers
liquidating Bernard L. Madoff's investment firm have
been awarded another $34.6 million in interim
counsel fees. On Tuesday, Southern District of New
York Bankruptcy Judge Burton Lifland
approved some $601,000 in fees to Picard
and $34 million in fees to Baker & Hostetler for
Feb. 1 through May 31. To date, the judge
has awarded Picard and his attorneys nearly $97
million in fees. . . . Lifland also approved fee
awards for several other law firms assisting Picard
in unraveling the massive Ponzi scheme perpetrated
by Madoff, including an award of $2.2 million to
Windels Marx Lane & Mittendorf, which serves as
special counsel to the trustee.
Lehman's former
in-house lawyers talk about the 2008 collapse,
giving details of what went wrong and what they
learned
David Hechler,
Corporate Counsel
09-14-10 --
It's been two years since
Lehman Bros. Holdings Inc. filed the
largest bankruptcy in U.S. history, and the subject
still provokes passionate debate. . . . Was the
crash of 2008 inevitable? What if the government had
bailed out Lehman the way it did other companies
before and after it let the investment bank go? And,
most recently, would the
Dodd-Frank financial reform law(pdf) have
prevented the excesses that led to Lehman's demise?
. . . The controversy shows no sign of abating. The
books and articles continue apace as writers digest
new information in the Lehman affair provided by,
among other sources, the ongoing trial in a
Manhattan federal bankruptcy court in which the
Lehman estate accuses
Barclays Capital Inc. of improperly
siphoning more than $10 billion when it bought the
investment bank's broker-dealer business; the
congressional testimony last spring that featured
former Lehman executives and regulators; and the
mother lode — the bankruptcy examiner's 2,200-page
report that spells out what happened and why.
09-08-10 --
The bankruptcy trustee for Rothstein Rosenfeldt
Adler is casting a wider net to recover money
distributed by the insolvent Fort Lauderdale, Fla.,
law firm in the final months before it tanked in a
spectacular $1.2 billion fraud. . . .
Berger Singerman attorney David L. Gay, representing
court-appointed trustee Herbert Stettin, filed a
series of eight clawback actions late Friday seeking
$14.2 million that went out the door within 90 days
of the bankruptcy at Scott Rothstein's law firm. . .
. The investment commitments illustrate the success
of Rothstein's Ponzi scheme as he recruited
investors with promises of annual returns as high as
164 percent.
09-08-10 --
Something new is facing New York's bankruptcy bar --
a slowdown in business. . . . Just two years after
the collapse of Lehman Brothers Holdings Inc.,
the number of businesses filing for Chapter 11 is
dropping off. Competition is heating up among law
firms eager to handle newly filed cases as some of
the large bankruptcy matters filed in recent years
are wrapping up. . . . "If you're in restructuring,
you were working around the clock for the last 18
months," said Jay M. Goffman, co-head of the
restructuring group at Skadden, Arps, Slate, Meagher
& Flom. "And now it's much quieter than that." . . .
Business bankruptcy filings nationwide fell 4
percent in the first six months of the year, to
29,059 from the 30,333 filed during the same period
in 2009, according to the
American Bankruptcy Institute. Chapter 11
business filings fell 17 percent to 6,152, while
Chapter 7 liquidations remained nearly flat at
20,385.
That's how one
leading bankruptcy lawyer described the Federal
Deposit Insurance Corp.'s new power to take over and
liquidate nonbank companies whose failure would
jeopardize the financial system. . . . Intended as a
"third way" between bankruptcy and bailout, the
FDIC's expanded authority is part of the 2,300-page
Dodd-Frank Wall Street Reform and Consumer
Protection Act signed into law on July 21. . . . But
the prospect of a new regime for dissolving
megacompanies -- one with almost no judicial
oversight and in which creditors' rights are few --
is sending shockwaves through the bankruptcy bar. .
. . "It's a huge deal," said Michael St. Patrick
Baxter, who heads the American Bar Association's
business bankruptcy committee and is a partner at
Washing ton's
Covington & Burling. "I'm not even sure
what people will be advising clients now. The rules
still need to be made."
09-07-10 --
In a ruling that could have a significant impact on
proceedings involving failed banks, the Federal
Deposit Insurance Corp. was rebuffed in its attempt
to assert a $905 million priority claim against the
holding company of the failed Colonial Bank. On
Sept. 1, federal bankruptcy Judge Dwight Williams
Jr. of the Middle District of Alabama ruled that the
bank's bankrupt holding company, Colonial Bancgroup,
could not be held liable for the shortfall in the
bank's assets. (Here's an article about the ruling
from Law360.) . . . The FDIC, represented
by DLA Piper, had argued that a 2008 memorandum of
understanding between the FDIC and the holding
company, before the bank went under and a subsequent
cease and desist order, created a commitment for the
holding company to maintain the capital of the bank
and to make up any deficiency. Colonial Bank's
deficiency of more than $900 million would exhaust
all of the assets of Colonial Bancgroup, which is in
Chapter 11.
09-07-10 --
The United States needs more bankruptcy lawyers.
Amid a sluggish economic recovery, a wobbly real
estate market and high unemployment, prospects for
professional-level jobs are gradually improving, a
survey says, but in one area things are positively
booming. . . . The U.S. legal field shows the
strongest outlook for professional-level hiring in
the fourth quarter amid an ongoing need for
litigators, and bankruptcy and foreclosure experts,
according to a poll by staffing firm Robert Half
International Inc.
08-31-10 --
In a novel approach to applying the doctrine of
judicial estoppel, a federal judge has ruled that a
plaintiff in a pregnancy discrimination suit who
failed to inform the Bankruptcy Court of her pending
discrimination claims must be barred from seeking
any compensatory damages in that case, but should
still be allowed to pursue declaratory and
injunctive relief. . . . In his 21-page opinion in
Hardee-Guerra v.
Shire Pharmaceuticals,
Senior U.S. District Judge Jan E. DuBois found that
"the purpose of judicial estoppel -- deterrence
against manipulation of the judicial process -- is
served by barring Hardee-Guerra from pursuing her
claims for compensatory damages while allowing her
to seek appropriate equitable relief."
08-30-10 --
A bankruptcy action can be considered
"commenced" even when a debtor has failed to
meet a requirement imposed by Congress that he
first receive credit counseling, the 2nd U.S.
Circuit Court of Appeals ruled Thursday. . . .
Interpreting a "statutory tangle" of bankruptcy
provisions, the circuit said the counseling
requirement under 11 U.S.C.
§109(h)
is not jurisdictional in nature and a case can
still be regarded as begun by the filing of a
bankruptcy petition, which triggers an automatic
stay. . . . Section 109(h), added to the code by
Congress in the Bankruptcy Abuse Prevention and
Consumer Protection Act of 2005, was interpreted
by the 2nd Circuit in three separate pro se
bankruptcy cases that were on appeal. Adams v.
Zarnel,
07-0090-bk, was the lead case.
08-27-10 --
Delaware federal bankruptcy court Judge Mary Walrath
is going to have a doozy of a fall. On Sept. 7,
she's set to receive a report from the recently
appointed examiner in the Washington Mutual Inc.
Chapter 11,
who has a broad mandate to investigate the
circumstances of WMI's September 2008 demise. On the
same day, WMI is scheduled to file its response to
an adversary proceeding brought by holders of $1
billion in WMI trust preferred securities, who
assert that WMI and JPMorgan Chase wrongfully
appropriated $4 billion for WMI's estate. . . . At a
hearing in Wilmington on Tuesday, Walrath said trial
in the adversary case would begin on Nov. 1, as the
first order of business in the confirmation hearing
on WMI's reorganization plan. And according to the
trust preferred investors' counsel at Brown Rudnick,
the outcome of that proceeding may derail the rest
of the confirmation hearing.
08-16-10 --
A packed courtroom of bankruptcy attorneys and a few
investors turned out for the first settlement
hearings in the Rothstein Rosenfeldt Adler
bankruptcy case, and many were there to protest the
agreements. . . . A latecomer to the case, Miami
solo practitioner Paul McMahon, threw a monkey
wrench into the settlements with George Levin and
his Banyon investment funds. Banyon and Levin were
the top source of money for
Scott Rothstein's $1.2 billion Ponzi scheme,
kicking in about $830 million. . . . Thursday,
McMahon filed involuntary bankruptcies against Levin
and Banyon in a move he said was likely to kill the
settlement proposed by RRA bankruptcy trustee
Herbert Stettin. McMahon represents more than 30
Banyon investors who claim they lost about $15
million.
08-13-10 --
U.S. Bankruptcy Judge Raymond Ray agreed to seal a
file released by a web services company that the
Rothstein Rosenfeldt Adler bankruptcy trustee said
contained privileged work product as well as
passwords and logons to the system. . . . Chuck
Lichtman, an attorney for bankruptcy trustee Herbert
Stettin, angrily asked Ray to seal the information
filed with the court late Friday. The information
was posted on PACER,
the federal court's computer document system.
08-12-10 --
In a twist on a theme we've seen in a couple of
prior bankruptcies, the creditors committee in the
Capmark Financial Group case is taking aim at
heavyweight lenders who loaned Capmark money just
before its bankruptcy and the advisers who
negotiated the loans -- including Dewey & LeBoeuf.
The creditors have asked the court to allow them to
sue the key lenders, including Goldman Sachs and
Citigroup, claiming Capmark and Dewey won't file the
suit themselves, according to court papers filed
Wednesday.
Bank holding company
says it needs to know whether shareholders have the
financial ability to wage a proxy war
Randall Chase, The
Associated Press, Law.com
08-11-10 --
A Delaware bankruptcy judge on Tuesday rejected
Washington Mutual Inc.'s attempt to get personal
financial information from shareholders who are
demanding an annual company meeting. . . . Attorneys
for the bank holding company argued that it needs to
know whether the shareholders have the financial
ability to wage a proxy contest before funds from
the bankruptcy estate are spent on an annual
meeting. . . . But attorneys for the shareholders
committee noted that its members have promised not
to wage a proxy contest, and that the company is
just trying to stall.
08-11-10 --
Top bankruptcy lawyers are in a pessimistic mood
about the economy, which could be a positive for
their business. . . . Speaking at a roundtable
discussion last month, the experts warned of
trillions of dollars in debt coming due, according
to the Wall Street Journal blog
Bankruptcy Beat. Businesses that can’t
refinance when debt matures will end up in default,
they said.
08-10-10 --
A federal judge on Monday granted preliminary
approval to a $125 million cash settlement for
shareholders of bankrupt New Century Financial
Corp., one of the largest lenders to collapse during
the subprime mortgage meltdown. . . . The settlement
involves three stipulations: Auditor KPMG LLP will
pay $44.75 million; the underwriter defendants will
pay $15 million; and New Century's former officers
and directors collectively will pay more than $65
million.
08-02-10 --Baker & McKenzie
has agreed to pay $6.65 million to compensate the
bankruptcy estate of Coudert Brothers for profits
Baker earned from unfinished
business
that partners took with them when they left the
defunct Coudert firm. . . . The settlement
resolves a lawsuit brought in April 2009 by the
liquidation plan administrator for Coudert's estate
seeking to recover fees that allegedly should have
gone to Coudert, which dissolved nearly five years
ago. . . . Baker also will forfeit most of its
interest in an estimated $17 million in contingency
fees for litigation former Coudert partners were
handling involving coal export excise taxes. Baker &
McKenzie had already collected roughly $7 million of
those fees, said William Brandt Jr., the president
of Development Specialists Inc., which is
administering the Coudert estate's plan of
liquidation. But three of the coal companies Coudert
and Baker represented have refused to pay the
contingency fee, Brandt said. Litigation against
those companies is now likely, he added.
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07-23-10 --
Just how much are bankruptcy lawyers and advisers
making in the ongoing Lehman Brothers bankruptcy? .
. .
Bloomberg reports that the $873.1 million
in fees billed since the case was filed in September
2008 would quadruple the annual payroll of the New
York Yankees.
According to a Thursday filing by the Securities
and Exchange Commission, 17 law firms
collectively will bring in at least half that
amount, with almost $396.7 million being paid out by
the debtor in the
largest bankruptcy case in U.S. history.
. . . Lehman's lead counsel at
Weil, Gotshal & Manges is by far the
biggest earner on the matter. The firm's Lehman haul
now stands at nearly $200.6 million. Weil isn't
alone on the debtors' side--10 other firms also have
roles advising what remains of Lehman.
Congoleum's insurers,
whose refusal to cover the mounting claims triggered
the corporation's bankruptcy, are to contribute $253
million to the fund
Mary Pat Gallagher,
New Jersey Law Journal
07-21-10 --
After nearly seven years and more than a dozen
failed attempts, a reorganization plan allowing
Congoleum Corp. to emerge from bankruptcy has
finally met with a federal judge's approval. . . .
The Chapter 11 plan, approved June 7 and effective
July 1, establishes a fund to pay an estimated
100,000-plus asbestos claimants. Congoleum's
insurers -- whose refusal to cover the mounting
volume of those claims triggered the bankruptcy --
are to contribute $253 million, and the reorganized
Congoleum has pledged 50.1 percent of its equity. .
. . All asbestos claimants -- even those who agreed
to settle before the bankruptcy case was filed on
Dec. 31, 2003 -- are placed in the same class and
their claims are to be processed through the plan
trust and resolved in the same manner. . . . In an
opinion issued Monday, U.S. District Judge
Joel Pisano in Trenton said the
single-class placement is consistent with In re
Combustion Engineering, 391 F.3d 190 (3d Cir. 2005),
which held that a pre-bankruptcy settlement with
some asbestos claimants violated the Bankruptcy
Code's requirement of equality of distribution among
creditors. That ruling changed the landscape for
resolving mass claims in the bankruptcy context. . .
. The approved Congoleum plan wiped clean a series
of settlements with various groupings of claimants
both before and during the bankruptcy case.
07-21-10 --
The Washington Mutual bankruptcy is going to fly
past the two-year mark after a federal judge granted
shareholders' request to have an independent
examiner investigate whether creditors and the WaMu
estate are leaving billions on the table in a
proposed settlement,
according to Reuters and lawyers who were
in the courtroom Tuesday. . . . Judge Mary Walrath's
ruling means that creditors and the WaMu estate must
wait a little more than six weeks before they can
truly start the process of gathering official
support for the proposed plan to end WaMu's Chapter
11 case. That plan would resolve potential
litigation between WaMu and JPMorgan, which
purchased WaMu at the height of the financial panic
in 2008, and would provide about $6.8 billion in
recovery for creditors. Shareholders would receive
nothing under that plan. But a committee of
shareholders, represented by
Susman Godfrey, believe the proposed plan
might shortchange the value of certain WaMu assets
and of potentially explosive legal claims WaMu might
make against JPMorgan. An examiner, to be appointed
Monday, will look into all of this.
07-21-10 --
A law firm must pay punitive damages, attorney fees
and costs for its bad-faith filing of an involuntary
bankruptcy petition against a former client as a
"tactical maneuver," a U.S. bankruptcy judge in
Trenton, N.J., has ruled. . . .
Scarola Ellis of New York claims Skyworks
Ventures Inc. of Jamesburg, N.J., owes it $200,000
in legal fees, while the former client says in a
related suit in U.S. District Court in the Southern
District of New York that Scarola Ellis engaged in
overbilling and legal malpractice. . . . On July 15,
U.S. Bankruptcy Judge Raymond Lyons ruled in In re:
Skyworks Ventures, Inc., 10-24459, that Scarola
Ellis filed the involuntary bankruptcy petition
against Skyworks Ventures to pressure a settlement
in the district court suit. . . . This "use of the
bankruptcy process for an improper purpose"
constituted bad faith that warranted punitive
damages, and, while the bankruptcy law is intended
to benefit creditors as a group, Scarola Ellis's
actions were intended to benefit only itself, Lyons
wrote.
07-15-10 --
A former Saugus attorney hid almost a million dollars in state
lottery winnings from bankruptcy courts and sold the rights to one
of two winning tickets for $360,000 after filing for protection from
creditors, prosecutors said yesterday. . . . James S. Gregson, 40,
of Andover, was charged in federal court in Boston with two counts
of bankruptcy fraud and filing a false tax return. If convicted, he
faces up to eight years in prison and $600,000 in fines. . . .
Prosecutors said that three years before filing for bankruptcy in
October 2005, Gregson purchased the rights to two $1 million winning
state lottery tickets — “Cash Windfall’’ and “Set for Life’’ — from
an unnamed source. Each paid $35,000 a year for at least 13 years,
according to Assistant US Attorney Mark J. Balthazard. Gregson
failed to disclose the lottery tickets or the annuity payments he
had received to the bankruptcy court, Balthazard said. In May 2006,
his bankruptcy trustee received a tip about the undisclosed assets.
07-14-10 --
At least one defendant being sued by the Rothstein
Rosenfeldt Adler bankruptcy trustee in the collapse
of Scott Rothstein's fraud is seizing on an order by
U.S. District Judge James Cohn to try to stall an
action against him. . . . Cohn ruled the federal
government wins
the fight for control of real estate and
other assets seized in the former law firm
chairman's
$1.2 billion Ponzi scheme. The judge
decided Friday that the law firm's bankruptcy
trustee can claim only monies that can be traced to
RRA bank accounts -- even though the law firm was
the primary vehicle for Rothstein's fraud. . . .
"Because the trustee has failed to adequately plead
his claim to the miscellaneous properties or the
real properties, the court dismisses the portions of
the Chapter 11 trustee's verified claims and
petition that pertain to any property other than the
RRA accounts," ruled Cohn, the judge in Rothstein's
criminal case.
Stop
Throwing Darts at the Phone Book Hoping to Find a
Lawyer!
07-13-10 --
An effort by bankruptcy creditors to obtain the one
valuable asset of a dying website—its database of
information about 1 million subscribers and users—is
raising privacy concerns both in the United States
and abroad. . . . Because the website is for XY
Magazine, whose focus is on young men and teenage
boys who are gay, the user information is
particularly sensitive. And, says a letter sent by
the Federal Trade Commission earlier this month to
counsel involved in the in the New Jersey bankruptcy
case, providing subscriber information to creditors
or even using it to start a similar publication or
website could be considered an unfair or deceptive
practice by the FTC, according to the
BBC and
IDG News.
The lawsuit offers a
glimpse into the developing area of third-party
litigation funding
Nate Raymond, New
York Law Journal
07-13-10 --
A bankrupt outdoor furniture distributor has sued
DLA Piper, claiming the firm failed to properly
advise it in transactions and subsequent litigation
with a Taiwanese company. . . . Joseph DelGreco &
Co. Inc., a privately owned New York corporation
that filed for Chapter 11 in October 2009,
sued DLA Piper (pdf) earlier this month
in Manhattan Supreme Court, claiming the law firm's
negligence resulted in financial losses that
propelled the company into bankruptcy. Among other
things, DelGreco claims DLA failed to advise it of
the consequences of a minor default on a loan and
also pressured DelGreco to let the firm withdraw as
counsel on the eve of a multimillion-dollar
arbitration. . . . DelGreco's lawyer, Hartley T.
Bernstein at Bernstein Cherney, in an interview
called his client's predicament an "unfortunate
situation that was a domino effect from day one that
just kept getting worse until the company was
eventually forced into bankruptcy." . . . DLA Piper
in a statement called the claim "without merit" and
said it would "strongly defend" itself against the
suit. . . . In addition to alleging malpractice and
negligence by DLA, the lawsuit offers a glimpse into
third-party litigation funding, a developing area
where details remain scarce as to what kinds of
cases are financed by the third-party litigation
companies. DLA Piper at one point referred DelGreco
to two litigation funders in order to raise $500,000
in financing, only to see both turn down the pitch,
the complaint said.
07-12-10 --
Bankruptcy filings are soaring locally and across
the nation as unaffordable mortgages, job losses,
the credit squeeze and mounting debt force
individuals and businesses to default on their
obligations and go to the courts for relief. . . .
And bankruptcy attorneys say there's little sign of
relief on the horizon. . . . "People have exhausted
their savings, if any, and are literally living
paycheck to paycheck or, more appropriately, from
unemployment check to unemployment check," said
Scott Kaplan of Malsbury Armenante & Kaplan in
Allentown. "It's going to go a lot higher, based on
what I'm seeing." . . . In New Jersey and
nationally, the number of bankruptcies of all kinds
jumped 27 percent in the 12 months ending in May,
compared to the same period a year earlier,
according to federal court statistics. In Mercer
County they climbed 21 percent.
07-12-10 --
While some bankruptcy filers prefer to go it all
alone, filing bankruptcy online without the services
of a qualified and experienced attorney is not a
desirable proposition. Considering the seriousness
of the situation, it could be foolish to file a
personal bankruptcy on your own without any expert
guidance. Besides, there are other reasons to avoid
filing a bankruptcy petition which such debtors are
completely unaware of. . . . While some bankruptcy
filers prefer to go it all alone, filing bankruptcy
online without the services of a qualified and
experienced attorney is not a desirable proposition.
Considering the seriousness of the situation, it
could be foolish to file a personal bankruptcy on
your own without any expert guidance. Besides, there
are other reasons to avoid filing a bankruptcy
petition which such debtors are completely unaware
of. Here is some critical information pertaining to
the same and which could invariably help probable
individuals who are considering filing chapter 7
bankruptcy protections.
Possible benefits that bankruptcy can
bring:
Allows for
the discharge of most, if not all of
your debts.
07-09-10 --
The thorny question of who will control and divide
tens of millions of dollars in assets that belonged
to
convicted Ponzi crook Scott Rothstein
will likely be decided today. . . . At a hearing
Thursday, federal prosecutors battled attorneys for
bankruptcy trustee Herbert Stettin over which side
would be better suited to dole out funds to victims.
. . . U.S. District Judge James Cohn in Fort
Lauderdale, Fla., had tough questions for both
Assistant U.S. Attorney Evelyn Sheehan and Sharon
Kegerreis of Berger Singerman, who represents
Stettin. The judge said he would likely rule by
today. . . . But Cohn said a main issue of concern
to some victims -- whether the Justice Department
would establish a restitution process for all the
funds -- was resolved by prosecutors at the hearing.
07-08-10 --
As we approach the two-year anniversary of
Washington Mutual's bankruptcy filing, Brown Rudnick
has tossed up a new roadblock to WaMu's plans to
emerge from Chapter 11. The firm, representing a
bundle of securities holders, filed a 97-page
complaint Wednesday accusing WaMu, its buyer
(JPMorgan Chase) and the federal government of
colluding to deceive and then deprive a group of
securities holders who purchased about $4 billion in
WaMu securities years before the bank's demise. . .
. The complaint is ultra-complicated, but
essentially goes like this: The plaintiff investment
firms purchased about $1 billion in so-called trust
preferred securities issued by a trust WaMu created
for the purpose of issuing those securities. They
made the investments, the complaint says, under the
impression that in the event of a WaMu failure,
their securities would be converted into preferred
stock in WaMu's parent company. But when the bank
collapsed, the complaint says, WaMu, JPMorgan and
the federal Office of Thrift Supervision shifted the
investors' holdings from the parent company to the
bank, which JPMorgan then acquired. The parent
company then filed for bankruptcy protection.
Feds, estate battle over who would best administer defunct firm's
assets
John
Pacenti, Daily Business Review
07-02-10 --
With federal prosecutors grabbing for most of the assets left over
from Scott Rothstein's massive Ponzi scheme, it remains to be seen
whether attorneys involved in his former firm's bankruptcy will reap
the millions of dollars in fees originally expected from the case. .
. . Federal prosecutors
are trying to muscle the bankruptcy attorneys out, and so
far they've succeeded. The government holds that it can get more
money to the victims of Rothstein's $1.2 billion fraud faster than
those administering
the remains of Rothstein Rosenfeldt Adler -- without
generating the millions of dollars in fees associated with
bankruptcy cases. . . . U.S. District Judge James I. Cohn,
who sent Rothstein to prison for 50 years, has sided with
the government on the few financial decisions he's made, at one
point ordering court-appointed bankruptcy trustee Herbert Stettin to
turn over $1.6 million in four bank accounts used by Rothstein to
perpetrate his scheme.
07-01-10 --
In August 2008, just a couple of years out of law school, Jorge
Sanchez launched what turned into a thriving Bankruptcy Court
practice with hundreds of mostly Spanish-speaking clients. . . . At
its height in 2009, the Sanchez Law Group, with its 12 employees,
was taking on 42 new clients a month and incurring annual operating
expenses of more than $600,000, Sanchez said in court documents this
week.
HELP KEEP
VICTIMS-OF-LAW ON THE WEB
SHOP OUR ADVERTISERS
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CONTRIBUTE NOW
By Karen
Sloan | The National Law Journal | New York Lawyer
06-30-10 --
It wasn't a legal slam dunk, but a Chicago jury on Monday awarded $2
million to former National Basketball Association star Scottie
Pippen in a malpractice suit against a law firm that represented him
in a business deal that went bad. . . . Pippen sued the Chicago law
firm Pedersen & Houpt for more than $8 million in connection with
his ill-fated 2002 purchase of a Gulfstream jet, alleging that the
firm did not look out for his financial interests. The lawsuit
initially was filed in Cook County, Ill., Circuit Court in 2004, but
was stayed for several years while a co-defendant underwent
bankruptcy proceedings. Pedersen & Houpt has about 30 attorneys and
specializes in counseling start-up companies, real estate developers
and high-net-worth individuals.
06-29-10 --
The Nevada Supreme Court has issued an order temporarily suspending
the license of a Las Vegas bankruptcy lawyer who abruptly shut down
his office, leaving some 400 unresolved cases. . . . The order
prohibits Jorge Sanchez from practicing law in Nevada or accepting
any money from his clients while the State Bar investigates
allegations the attorney misappropriated client funds. .
06-29-10 --
William McGrane has accused yet another firm of conflicted
representation in the troubled SonicBlue bankruptcy. . . . McGrane,
whose firm represents a group that bought claims against SonicBlue,
is now pointing the finger at
Morrison & Foerster, which he claims had a "hidden
agenda" in the case. . . . In his latest filings, McGrane contends
that MoFo sought to protect
Pillsbury Winthrop Shaw Pittman because both MoFo and
Pillsbury are owners and managers of a malpractice carrier
potentially on the hook because of Pillsbury's work for Sonic Blue.
Christie
Smythe is a staff writer at Law360 Forbes (blog)
06-25-10 --
A bankruptcy court judge has approved pigment maker Tronox Inc.'s
request to extend debtor-in-possession financing by three months but
chided a Latham & Watkins LLP lawyer representing the lenders for
failing to disclose a $250,000 fee for his firm's work. . . . Judge
Allan L. Gropper of the U.S. Bankruptcy Court for the Southern
District of New York told Latham attorney Richard A. Levy on
Thursday to "get out of the business or get out of my courtroom" if
he didn't want to reveal the fee in public filings. . . . The desire
to keep this number confidential is extremely counterproductive to
the bankruptcy process as a whole," Judge Gropper added, saying both
creditors and the public have interests in the cost of Chapter 11
proceedings. . . . Along with signing off on the request to extend
the financing, which had been scheduled to mature on Thursday, Judge
Gropper advised Levy to submit fee-related filings to the public
record.
Wines.com, the leading supplier of private label and
personalized wines online!
Polyana da Costa and
John Pacenti, Daily Business Review
05-28-10 --
Another South Florida receiver trusted by judges for
years to oversee bankruptcies resigned from hundreds
of cases after the U.S. Trustee's Office determined
more than $1 million was missing from accounts under
her control, sources told the Daily Business Review.
. . . Marika Tolz, a Hollywood real estate broker,
was confronted by investigators in the trustee's
office after financial discrepancies were discovered
in her trusteeships, sources say. . . . Tolz has not
been charged with a crime. . . . Reached by
telephone at her home, Tolz refused to comment and
hung up. A woman who answered a phone in her office
declined comment and hung up. . . . Tolz is the
second long-time bankruptcy trustee or receiver in
South Florida to come under scrutiny after money
disappeared from court-supervised accounts. Lewis
Freeman, a well-known attorney-accountant from
Miami, is awaiting sentencing
for pilfering $2.6 million from creditors and
victims for more than a decade.
05-28-10 --
A former Billings attorney who was convicted of
stealing money from clients in 1987 was sentenced to
1 1/2 years in federal prison for taking about
$17,000 from two more clients. . . . Marvin E.
"Toby" Alback, 62, was sentenced Wednesday by U.S.
District Judge Richard Cebull for wire fraud and
bankruptcy fraud. Cebull also fined Alback $5,000,
ordered 60 hours of community service and said he
would determine restitution later. . . . "I'm just
very sorry for what I did," Alback told the court. .
. . Alback was charged with taking a mortgage
payment from clients who had filed for bankruptcy in
2008 and not forwarding the payment to the bank. . .
. Alback eventually repaid the money but caused the
couple to pay back payments and late fees to avoid
foreclosure, Assistant U.S. Attorney Ryan Archer
said.
05-27-10 --
Rarely does anyone accuse the litigators at
Quinn, Emanuel, Urquhart & Sullivan of
not being aggressive enough, but that's essentially
what attorneys representing Washington Mutual
shareholders are saying in asking the judge hearing
WaMu's bankruptcy case for permission to investigate
JPMorgan Chase's acquisition of WaMu. . . . The
shareholders, represented by
Susman Godfrey (which replaced
Venable in this role), want to pick up
the investigation after lawyers for WaMu's estate
(Quinn and
Weil, Gotshal & Manges) dropped a similar
investigation last month, court records show. The
investigation, which Quinn and WaMu started in 2009
and pursued aggressively for a time, centers on
allegations that JPMorgan torpedoed WaMu's chances
of finding another buyer in late 2008 by leaking
confidential information and false rumors about
WaMu's finances, court records show.
05-26-10 --
The Washington Mutual Chapter 11 case
has been contentious from the start,
complete with accusations of sabotage. So it's
fitting that a global settlement that would pave the
way for resolving the mess seems to be perpetually
out of reach. . . . The newest twist: A group of
senior bondholders who own debt from WaMu's banking
unit announced Monday that it is opposing
a proposed settlement between the
bankrupt estate, the Federal Deposit Insurance
Corp., other bondholders, and WaMu's new owners at
JPMorgan Chase, according to
Reuters and
this release from
Boies, Schiller & Flexner attorneys
representing the dissident bondholders.
05-26-10 --
The court-appointed receiver for two funds created
by hedge fund operator J. Ezra Merkin filed
court papers (pdf) Monday seeking
authorization to make an interim distribution of
$200 million to the funds' 278 investors. Merkin's
investors lost $1.2 billion because he placed their
funds with Bernard L. Madoff, who is serving a
prison term of 150 years for creating the largest
Ponzi scheme in history, according to a lawsuit
brought by the New York attorney general's office. .
. . Under the $200 million distribution, if approved
by Manhattan Supreme Court Justice Richard B. Lowe
III, who is presiding over
the attorney general's lawsuit, People v.
Merkin, 450879/09, the investors would on average
recoup approximately one-third of the losses they
suffered in connection with funds Merkin turned over
to Madoff, according to claims the receiver, Bart M.
Schwartz, has filed in connection with the Madoff
bankruptcy (See
Schwartz's affirmation).
05-26-10 --
Fights are starting to erupt among bankruptcy
creditors victimized by
swindler Scott Rothstein's Ponzi scheme.
. . . Two weeks after the deadline for victims to
file claims against Rothstein's defunct law firm in
his $1.2 billion fraud, the largest single creditor
-- Ira Sochet Inter Vivos Revocable Trust --
requested an extension Tuesday from U.S. Bankruptcy
Judge Raymond Ray. . . . But the request from Miami
attorney Lawrence Gordich was staunchly opposed by
Jim Silver of
Conrad Scherer, the Fort Lauderdale,
Fla., firm heading the creditors' committee with an
estimated $113 million loss. . . . Sources say the
flare-up reflects long-standing tension on the
committee and foreshadows a major battle brewing
between direct investors and feeder funds. All are
fighting over the same pot of money. Claims totaling
almost $470 million were filed by the May 12
deadline.
05-25-10 --
The estate of the defunct law firm Thelen is seeking
a bankruptcy judge's approval of a
$900,000 settlement of a state court
action by State Street Bank and Trust Company. The
payment would come from Thelen's insurer and resolve
all claims against the law firm in the litigation
pending in Manhattan Supreme Court, according to a
motion filed earlier this month by Yann
Geron, a partner at Fox Rothschild who is the
trustee for Thelen's estate. A hearing is scheduled
for June 2 before Southern District of New York
Bankruptcy Judge Allan Gropper. . . . "If the court
approves the settlement, we believe the Thelen
estate will be glad to have the matter behind it,"
said Michael Feldberg, a partner at Allen & Overy
who represents Thelen in the case, AG Capital
Funding Partners v. State Street Bank and Trust
Company, 601134/2002.
05-12-10 --
A confidential settlement between Scott Rothstein's
former equity partner Stuart Rosenfeldt
and the court-appointed bankruptcy trustee could be
reached by week's end. If not, Rosenfeldt said he
will hire a bankruptcy attorney. . . . He appeared
cheerful in court Tuesday and represented himself at
a hearing before U.S. Bankruptcy Judge Raymond Ray.
Chuck Lichtman, attorney for bankruptcy trustee
Herbert Stettin, said he held off on deposing
Rosenfeldt in the hopes of reaching a settlement. .
. . "We've been engaged in settlements talks ... and
should know in the next couple days whether it
happens," said Lichtman, a partner with Berger
Singerman in Fort Lauderdale. "We've had an extended
discussion in our office." . . . After the hearing,
Rosenfeldt told the Daily Business Review he is
hopeful for a settlement but declined to give any
details on a dollar value. . . . "It's an amount
that I can afford to live with," he said.
05-10-10 --
Ending one of real estate's most protracted takeover
battles, Judge Allan Gropper, in the U.S. Bankruptcy
Court for the Southern District of New York, agreed
Friday to allow Chicago-based
General Growth Properties, a mall real
estate investment trust, to partner with
Brookfield Asset Management of Toronto in
an $8.5 billion reorganization plan. . . . The
decision sets Brookfield as the "stalking horse"
bidder, and ends an aggressive takeover attempt by
GGP's main retail rival,
Simon Property Group of Indianapolis.
Simon announced a last-ditch offer late Thursday
night of $20 a share to take over GGP, even though
General Growth hasn't seen that price since late
2008. GGP's stock closed Friday at $14.13 a share. .
. . Brookfield has pledged to help bring GGP out of
bankruptcy by purchasing GGP stock at $10.50 per
share, resulting in a $6.5 billion equity investment
and $2 billion capital backstop offer, which
includes assistance from Pershing Square Capital
Management and Fairholme Funds. The Brookfield deal
comes with several million dollars in warrant fees
to GGP, though Brookfield has agreed to postpone
some of the costs.
05-10-10 --
A federal judge has awarded trustee Irving H. Picard
and his team of lawyers liquidating Bernard L.
Madoff's investment firm some $24.6 million in
interim counsel fees. Southern District of New York
Bankruptcy Judge Burton Lifland on Thursday awarded
about $672,000 in fees to Picard and $23.9 million
in fees to Baker & Hostetler for Oct. 1 through Jan.
31. All told, the judge has awarded Picard and his
attorneys about $62 million in fees.
05-10-10 --
The 3rd U.S. Circuit Court of Appeals could be
poised to overturn one of its most widely criticized
precedents involving how courts decide whether and
when the discharge of all claims in a corporate
bankruptcy reorganization plan should act as a bar
to future personal injury claims. . . . The 1984
decision in
Matter of M. Frenville Co. was
called into question in a recent appeal, Jeld-Wen
Inc. v. Van Brunt, that could have profound
consequences for asbestos litigation. . . . In
Frenville, the 3rd Circuit held that a "claim" does
not "arise" for bankruptcy court purposes until it
has "accrued" under state law. . . . But as Jeld-Wen
sees it, "Frenville's reliance on state law to
determine when a claim arises runs contrary to the
Bankruptcy Code."
05-04-10 --
Where Scott Rothstein's
$1.2 billion Ponzi scheme ended and his
defunct law firm began is at best a gray area. . . .
Prosecutors asked U.S. District Judge James Cohn last month to
execute a
vast forfeiture plan, seeking all ill-gotten gains
tied to Rothstein in the form of cash, real estate or material
goods. . . . In the other corner, attorneys for bankruptcy
trustee Herbert Stettin, who is overseeing the remains of the
Rothstein Rosenfeldt Adler law firm, repeatedly have said the
government's reach is too broad, and something should be left
over. . . . Stettin's legal team disagrees with observations
from stalwarts of the South Florida legal community, such as Tew
Cardenas co-founder Thomas Tew, who say the firm might be left
with skeletal remains to pay vendors with outstanding bills,
clients with claims against the law firm and even themselves and
other professionals for the work they have performed at
Stettin's behest.
05-03-10 --
Weil, Gotshal & Manges has billed more than $164
million for its work as lead counsel so far on the
Lehman Brothers bankruptcy, including more than $500
a day for limo drivers, billed for services in the
month’s after Lehman’s collapse. . . . But new
limits are now in place due to the efforts of
Kenneth Feinberg, the
New York Times reports. Known as the “pay
czar” who is monitoring banks that received bailout
money, Feinberg also has a role in the Lehman
Brothers bankruptcy as the court-appointed fee
monitor. His counterpart in the General Motors
bankruptcy is Brady Williamson. . . . The Times
detailed the work of Feinberg and Williamson in a
story that also delved into the charges in the
Lehman Brothers and other bankruptcies, including
$2.54 charged by the Huron Consulting Group for “gum
in airport.” . . . Charges by law firms in the two
bankruptcy cases included more than $2,100 for
late-night rides home by one partner at Jones Day,
and $685 a night for one Weil lawyer’s week-long
stay at the Sherry-Netherland hotel in Manhattan,
the story says. Other charges by unnamed consultants
and firms included more than $263,000 for
photocopies in four months and $48 to leave one
message.
05-01-10 --
A disbarred Gig Harbor attorney has been sentenced to prison for
three years for
mail fraud stemming from a fraudulent
debt-elimination promotion. . . . Bruce Hawkins, 50, took money
from more than 1,000 debtors, telling them he could eliminate
their credit-card debt between 2002 and 2005, according to the
U.S Attorney's Office. He told his clients that tax laws
prevented national banks from extending credit and that they
didn't have to repay their debts, and then sent them to "arbitors"
who he paid to issue a meaningless award on the debtor's behalf.
Many of the debtors wound up in bankruptcy after learning the
scheme was useless, the U.S Attorney's Office said.
David Boden gives
testimony in all-day deposition concerning fraud
committed by Scott Rothstein
Julie Kay, Daily
Business Review
04-30-10 --
Scott Rothstein's former law firm general counsel
cried Thursday as he recalled how he discovered his
boss had committed a
fraud of epic proportions. . . . David
Boden, who worked for Rothstein Rosenfeldt Adler for
18 months before it imploded last November,
testified in a deposition about discovering the
$1.2 billion Ponzi scheme. He was the
subject of an all-day deposition by Fort Lauderdale
attorney Chuck Lichtman of
Berger Singerman, which represents
trustee Herbert Stettin in the firm's bankruptcy. .
. . Boden, 48, cried several times -- and stopped
the deposition at one point to compose himself -- as
he recalled finding hundreds of millions of dollars
were missing from the firm's TD Bank accounts. He
said he was told the accounts were frozen Oct. 30,
shortly after receiving notice from Richard Pearson,
RRA's investment broker, that he had not been paid
and would no longer do work for RRA.
04-29-10 --
The government and the trustees charged with
liquidating the estate of disbarred attorney Marc S.
Dreier and his defunct 250-attorney law firm hit a
stumbling block Wednesday when a federal bankruptcy
judge said he could not sign off on two agreements
reached between the parties after months of
negotiation. . . . The first agreement required GSO
Capital Partners, which invested in fake promissory
notes peddled by Dreier, to pay about $9.5 million
to the trustees. In return, the trustees agreed to
release GSO from claims relating to payments it
received as a result of the fraud. The agreement
also barred third-party claims against GSO "releasees"
that related to "Marc Dreier, Dreier LLP, and the
Note Fraud Funds." . . . A second but related pact
provides that the government would release nearly
100 artworks worth as much as $3 million, which have
not been traced to Dreier's crimes, to Chapter 11
trustee Sheila Gowan. In turn, Gowan, of Diamond
McCarthy, had vowed to refrain from contesting
certain forfeited funds, including some $31 million
that GSO will turn over to the government.
04-28-10 --
The Tennessee Supreme Court has suspended the law license of
Dyersburg attorney Thomas H. Strawn Jr. for two years. . . .
Strawn pleaded guilty April 20 to neglecting his clients'
Chapter 13 bankruptcy cases. The Supreme Court's Board of
Professional Responsibility (BPR) announced the suspension
Monday night. . . . The neglect charges surfaced nearly a year
ago. The bankruptcy trustee's office told the BPR that Strawn
failed to competently and adequately represent clients in seven
bankruptcy cases. The trustee's May 15 petition claimed Strawn
did not timely resolve issues that arose in the bankruptcy cases
and failed to appear at scheduled hearings. The bankruptcy
trustee's office said it e-mailed, telephoned and otherwise
attempted to contact Strawn but failed to receive sufficient
response to resolve the matters. Without a resolution, the
bankruptcy court dismissed all seven cases on Jan. 29, 2009.
04-23-10 --
The latest Lehman Brothers bill is in, and the total dollar
amount the bankrupt estate has paid out to financial advisers
and law firms is approaching $750 million and might possibly be
on its way to $1 billion, according to documents Lehman filed
Thursday with the SEC
and this Bloomberg article. .
. . The rate of law firm billing has actually slowed down a bit
since the last time we checked. Through January 2010, law firms
had billed about $311 million of the $649 million total paid out
to advisers since Lehman filed for Chapter 11 protection on
Sept. 15, 2008. Over February and March of this year, the total
bill jumped by about $82 million to $731 million, with law firms
accounting for just $20 million of the increase in those two
months, according to the SEC documents. The total law firm bill
is now up to $331 million. . . . The biggest biller, to no one's
surprise, continues to be Lehman's lead debtor counsel at Weil, Gotshal & Manges,
which has billed the estate just short of $165 million since the
bankruptcy filing. As we reported in February,
Weil's bill breaks down to about $300,000 per day since Lehman's
bankruptcy filing. Weil billed about $15 million in January and
February combined, which breaks down to about $255,000 per day
over those two months.
04-20-10 --
A bankruptcy judge's decision to sanction a prominent real estate
developer who hired Marc S. Dreier in 2004 in a scheme to meddle
with a rival's bankruptcy has been reversed by a federal appeals
court. . . . The 2nd U.S. Circuit Court of Appeals said that
Bankruptcy Court Judge Burton R. Lifland lacked the authority to
order $334,583 in sanctions against developer Sheldon Solow, his
chief operating officer at Solow Realty & Development Co., Dreier
and others in the bankruptcy case of Peter S. Kalikow, a developer
and former head of the Metropolitan Transportation Authority. . . .
The circuit made that ruling in In re Kalikow, 08-5268-bk, an appeal decided by
Judges Roger J. Miner, Reena Raggi and Peter W. Hall.
04-19-10 --
The trustee in the bankruptcy case of Ponzi operator Scott
Rothstein's
defunct law firm has settled disputes with seven attorneys over
future legal fees from cases they handled while employed at
Rothstein Rosenfeldt Adler.
. . . In motions filed late Thursday, trustee Herbert Stettin
seeks approval of settlement agreements with Russell Adler
and six attorneys
who banded together when they left RRA: Gary Farmer, Steven
Jaffe, Matthew Weissing, Brad Edwards, Mark Fistos and Seth
Lehrman. . . . The agreements submitted to U.S. Bankruptcy Judge
Raymond Ray for approval provide for the trustee to get a
percentage of recoveries on unresolved cases the former RRA
attorneys are handling for clients in the door before
Rothstein's $1.2 billion fraud collapsed last Nov. 1. . . . No
dollar amounts are listed, but Farmer said the total uncollected
fees could exceed $10 million. That would include several class
action cases and qui tam actions his new firm is working on,
including cases against NationsRent, a home health care agency
and Palm Beach millionaire Jeffrey Epstein, who has been sued
for allegedly abusing teenage girls.
04-19-10 --
A Fort Lauderdale, Fla., bankruptcy judge on Thursday froze up
to $33 million in assets held at one time by a financial adviser
with ties to convicted Ponzi schemer Scott
Rothstein. . . .
U.S. Judge Raymond Ray approved the request from attorneys for
Herbert Stettin, bankruptcy trustee for Rothstein’s defunct law
firm, for a preliminary injunction
against Michael Szafranski
and his wife, Elana Strum. The Bay Harbor Islands adviser
allegedly acted as the independent verifier for Rothstein’s
phony settlements at the heart of his $1.2 billion fraud. . . .
Szafranski’s attorney, Chris Berga of Lydecker Lee Berga & de Zayas
in Miami, argued against the injunction, saying he had only a
day or so to respond to the trustee’s emergency motion. He also
said he wanted to call Stettin to testify and asked for a
continuance. . . . “We’ve had 24 hours to review the documents,”
Berga said. “That’s not much time for such a drastic remedy.”
04-15-10 --
Simon Property Group, the largest owner of shopping malls in the
U.S., has teamed up with hedge fund Paulson & Co. for a new
offer for bankrupt rival General Growth Properties. And plenty
of Am Law 100 firms are already involved. . . .
Wachtell, Lipton, Rosen & Katz corporate partners
Adam Emmerich and Benjamin Roth led a team from the firm
advising Indianapolis-based Simon when the mall operator made
its $10 billion unsolicited offer in February for GGP, the
second-largest mall owner in the country. . . . But GGP nixed
that offer as too low. The Chicago-based REIT,
which entered Chapter 11 a year ago, embraced a
reorganization plan sponsored by Brookfield Asset Management,
hedge fund Pershing Square Capital Management and fund manager
Fairholme Capital Management.
04-13-10 --
The trustee charged with liquidating the estate of
Bernard L. Madoff's investment firm has recovered
some $1.5 billion in assets and hopes to begin
distributing the money to customers before the end
of the year, according to court papers filed Friday.
. . . In an 83-page interim
report
submitted to Southern District Bankruptcy Judge
Burton R. Lifland, Irving H. Picard of Baker &
Hostetler reported that "notwithstanding the
monumental and unprecedented task faced by the
Trustee, substantial progress" has been made in
"reviewing and determining customer claims." . . .
As of March 31, Picard has allowed 2,011 of 12,249
claims, and committed $668 million in cash advances
from the Securities Investor Protection Corporation,
the "largest amount of SIPC funds in any one SIPA
liquidation proceeding." . . . In addition to
bringing 14 avoidance actions aimed at recouping
more than $14.8 billion from feeder funds, Picard
has uncovered a "complex web of tangled investment
structures that fed money into" Madoff's Ponzi
scheme and has served more than 75 subpoenas in 20
jurisdictions.
04-08-10 --
San Francisco litigation firm McGrane
Greenfield
may be put in charge of one of the most important
pieces of litigation in the Heller Ehrman
bankruptcy. . . . The unsecured creditors' committee
has asked bankruptcy Judge Dennis Montali to approve
the hire of McGrane Greenfield for a pending case
against Bank of America and Citibank. Under the
proposed contract, the 11-lawyer firm would be paid
$1 million up front, plus a contingency fee worth 5
percent of the net benefit to the estate if they
win, Monday court filings show. . . . A hearing on
the motion is scheduled for Tuesday. . . . As
special litigation counsel, McGrane Greenfield,
which specializes in complex business litigation and
bankruptcy matters, would pursue the suit the
committee filed against the banks last April. It
seeks the return of $58 million the dissolved firm
paid the banks in a window of time around its
December 2008 Chapter 11 filing, plus interest.
04-02-10 --
The bankruptcy trustee for defunct law firm
Rothstein Rosenfeldt Adler
contends the government has once again overstepped
its bounds by trying to control additional assets
that belonged to convicted
fraudster Scott Rothstein.
. . . On Monday, the U.S. Attorney's Office filed a
motion seeking a protective order be entered to
preserve new assets, including four Rothstein
Rosenfeldt Adler bank accounts at
TD Bank
containing almost $120,000 and "all property, other
than 'funds'" voluntarily turned over to the
government since news broke in late October that
Rothstein was running a settlement scheme out of his
law firm. . . . But trustee Herbert
Stettin
argued that the government could not lay claim to
assets that don't belong to Rothstein and were not
included for forfeiture in the original information,
calling the motion "particularly egregious."?
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03-31-10 --
Lehman Brothers Holdings Inc.’s lead bankruptcy law
firm, Weil Gotshal & Manges LLP, bills the bankrupt
investment bank as much as $1,000 an hour for its
top lawyers’ time overseas, and $990 an hour for
U.S. lawyers. . . . The rates were set Jan. 1, Weil
Gotshal said in court papers filed yesterday in U.S.
Bankruptcy Court in Manhattan. The New York-based
law firm collected $157.5 million from Lehman during
a 17-month period ending last month, according to a
regulatory filing. . . . Lehman, once the world’s
fourth-biggest investment bank, is liquidating to
pay creditors. Its payments to advisers haven’t
faced major objections such as those in the case of
bankrupt automaker Chrysler LLC, which is using U.S.
Treasury loans to wind itself down.
03-19-10 --
Bankruptcy lawyers will need to remain cautious
about what sort of advice they offer clients,
following a ruling by the
U.S. Supreme Court
last week. . . . The justices ruled the portion of
the 2005 bankruptcy reform act that bars lawyers
from advising clients to take on "any debt" is
constitutional, though it may be less restrictive
than first thought. . . . Still, lawyers are unhappy
at being muzzled in any way by a law that they don't
believe should apply to them. "Most attorneys were
hoping [the Supreme Court] would strike down as
unconstitutional the provision about not counseling
your client to take on any debt, and I found it
disappointing that they didn't do that," said
Matthew K. Beatman, a partner in the Bridgeport,
Conn., bankruptcy boutique firm of Zeisler & Zeisler.
. . . He did, however, call it "helpful" that the
Court explained that the prohibition refers to
abusing the bankruptcy law by running up debt that
can't be collected by creditors, and doesn't apply
to lawful actions.
By Brian Baxter | The
American Lawyer | New York Lawyer
03-19-10 --
The bankruptcy case of Miami developer Cabi Downtown
has been anything but smooth since the company filed
for Chapter 11 last August. . . . Within months of
the filing, Bank of America, which holds a $256
million construction loan on a Cabi condo project
built on the site of the former Everglades Hotel,
moved to end the bankruptcy and foreclose on the
property. . . . While the bank turned to lawyers
from Kaye Scholer and Shutts & Bowen to handle
bankruptcy litigation against Cabi, that work took
an unexpected turn as the two firms agreed to pay
Cabi’s legal fees in connection with an order to
show cause after the firms were criticized for their
conduct in the case.
03-17-10 --
The Tribune Co. bankruptcy keeps producing juicy
legal storylines:
a bench smackdown of Sidley Austin's proposed
$1,100 per hour rates, a
debate over expensive fee examiners, a
cameo from Warren Beatty and, most
central to the case, a possible lawsuit against the
banks that engineered the leveraged buyout that
ruined Tribune. . . . Now, that last issue has
produced a new twist: possible sanctions against a
bondholder after its law firm,
Brown Rudnick, mistakenly included
confidential papers in a public filing, court
records show. Martin Siegel, a Brown Rudnick
partner, says the mistake was "inadvertent," and
that the firm has pulled the offending material from
its filing. But Siegel says his firm will challenge
the motion, filed by JPMorgan Chase and its lawyers
at
Davis Polk & Wardwell, to sanction Brown
Rudnick's client (a bondholder called Wilmington
Trust Co.). Possible sanctions include a ban on
Brown Rudnick's client from accessing a trove of
critical confidential documents, according to a
source familiar with the matter.
03-17-10 --It's not quite Old Carco, but bankruptcy
lawyers for Lehman Brothers have filed a
reorganization plan that calls for the creation of
Lamco, an asset-management subsidiary carved out of
Lehman
that will help put an end to the largest Chapter
11 case in U.S. history. . . . According to
the
93-page plan, filed Monday by Lehman's
lead bankruptcy lawyers at
Weil, Gotshal & Manges, Lamco will manage
real estate, private equity and derivatives assets
held by the defunct investment bank in order to sell
them off at a premium to generate proceeds for
Lehman creditors. . . . More than $830 billion in
claims have been filed against Lehman,
Bloomberg reports; the company says many
of those claims are duplicative. Lehman is still
calculating the assets available that it will pool
to pay creditors while working to resolve various
claims, Bloomberg reports, putting the debt of
Lehman affiliates at roughly $115 billion.
03-15-10 --
Major developments out of federal bankruptcy court
in Delaware: Washington Mutual's estate has reached
a proposed settlement with JPMorgan Chase and
federal regulators that will result in the return of
$4 billion in deposits and nearly $2 billion in
other cash that will be used to pay WaMu creditors,
according to lawyers involved in the matter. . . .
As part of the proposed settlement, which still
requires bondholder approval, the bankrupt WaMu
estate agreed not to pursue claims against JPMorgan
and the Federal Deposit Insurance Corp. over the
bank's collapse. . . . As you'll recall, the FDIC
scooped up the bank in late 2008, placed it in
receivership and sold its assets to JPMorgan for
$1.9 billion. As
we've previously reported, WaMu's estate
and its special litigation team from
Quinn Emanuel Urquhart & Sullivan claimed
JPMorgan and several of its top executives,
including the bank's chief, Jamie Dimon, conspired
to lower WaMu's sale price by leaking false
information about WaMu's finances to federal
regulators and potential rival bidders.
03-15-10 --
Thomas Russo knows a thing or two about shepherding
struggling financial companies through chaotic
times. The former top lawyer for
Lehman Brothers Holdings Inc. took on the
unenviable task of
becoming general counsel for embattled
American International Group Inc. in
February. . . . Now Russo's old life as head lawyer
of the collapsed Lehman Brothers is in the news
again with the release of a 2,200-page bankruptcy
examiners' report. The New York Times called it the
"Wall Street equivalent of a coroner's report"
because it lays out in minute detail how Lehman
Brothers used accounting gimmicks to hide the bad
investments that led to its demise. . . . Russo and
Lehman's legal department weren't blamed for the
accounting chicanery, according to the report. But
it shows that they were involved in negotiations
with other financial institutions as the bank fought
for its survival.
Formerly the
highest-grossing independently run restaurant in the
United States, the restaurant remains mired in
bankruptcy proceedings
Noeleen G. Walder,
New York Law Journal
03-11-10 --
A federal judge ruled Wednesday that New York City
had presented "compelling evidence" that it owned
the right to the name Tavern on the Green. . . . The
decision comes more than two months after the famous
Central Park eatery closed its doors on Dec. 31. It
caps a bitter battle between the city and
descendants of famed restaurateur Warner LeRoy, who
licensed the right to run Tavern on the Green in the
1970s. . . . Tavern on the Green, L.P., and LeRoy
Adventures Inc., claimed a 1981 "incontestible"
trademark registration conclusively established its
right to the name.
03-10-10 --
Lehman Brothers and its lawyers at Weil, Gotshal &
Manges
sent a clear message this week to the judge hearing
Lehman's bankruptcy case: Make public the full
report about Lehman's demise. In a motion filed
Monday by Weil's Harvey Miller, Lehman says it has
cooperated fully with the special examiner
investigating the bank's failure and has turned over
more than 20 million pages of e-mail. (The motion is
available for download below.) . . . The examiner in
the case, Jenner & Block
chairman Anton Valukas, was given full subpoena
power to investigate Lehman's epic fall, as
previously reported in this space. Issues of
particular interest include whether Barclays got a
sweetheart deal when it purchased Lehman's North
American operations days after Lehman filed for
bankruptcy; how Lehman shifted billions from unit to
unit hours before its bankruptcy filing; and whether
JPMorgan Chase acted appropriately as Lehman's main
lender, according to Bloomberg
and our prior
reporting.
03-09-10 --
Consumer bankruptcy lawyers are "debt relief
agencies" under a 2005 federal bankruptcy law and
restrictions on the type of advice they can give
clients are constitutional, the U.S. Supreme Court
ruled on Monday. . . . In a challenge
brought by a Minnesota law
firm,
the justices unanimously held that the plain
language of the Bankruptcy Abuse Prevention and
Consumer Protection Act clearly indicates that
lawyers function as debt relief agencies when they
provide bankruptcy help to consumers covered by the
law. The 2005 law was enacted to combat abuse of the
bankruptcy system. . . . The Supreme Court case,
Milavetz, Gallop & Milavetz v. U.S., actually
raised three issues for the justices: . . . Whether
lawyers are debt relief agencies. . . . Whether a
provision prohibiting lawyers from advising clients
to incur more debt "in contemplation" of filing for
bankruptcy violates First Amendment free speech
guarantees. . . . Whether provisions requiring a
debt relief agency to include the sentence "We are a
debt relief agency," or one substantially similar,
in all advertisements mandate unconstitutional
compelled speech. . . . The 8th U.S. Circuit Court
of Appeals had ruled in favor of the law firm only
on the second issue -- the restriction on lawyers'
advice. That ruling prompted a cross-petition for
Supreme Court review by the government.
03-09-10 --
Lamenting the amount of time wasted in the Chapter
11 case of Tavern on the Green, a federal judge last
week cleared the way for the liquidation of the
famed eatery's remaining assets. In papers filed
last month, the committee of unsecured creditors of
Tavern on the Green Limited Partnership accused New
York City of "materially interfer[ing] with the
Debtors' effort to maximize the value of their
estates" and "caused the estates needlessly to incur
millions of dollars in administrative expenses." . .
. The committee, which said the estate owed some $3
million in "professional" fees, told Southern
District of New York Bankruptcy Judge Allan L.
Gropper that the only way to efficiently administer
the estate was to convert the Chapter 11 proceedings
to a Chapter 7 liquidation. The city countered that
the conversion motion was a "ploy" and accused the
committee of spending "enormous amounts of money in
a very short period of time without producing any
tangible results."
At issue: incurring more
debt before bankruptcy filing
* Law challenged for violating free-speech rights
* Government lawyers say law only targeted abuses
By James
Vicini, Reuter
03-08-10 --
The Supreme Court on Monday unanimously upheld part of the U.S.
bankruptcy law that bars attorneys from advising clients to take on
more debt while considering a bankruptcy filing. . . . The opinion
by Justice Sonia Sotomayor reverses a ruling by a U.S. appeals court
that a provision of the Bankruptcy Abuse Prevention and Consumer
Protection Act of 2005 was unconstitutionally broad and violated
free-speech rights. . . . The provision prohibits bankruptcy
professionals like attorneys from advising their clients to incur
more debt, such as mortgages or student loans, before filing for
creditor protection. . . . The ruling is a victory for the U.S.
Justice Department, which defended the provision. It said Congress
adopted the law fight abuse of the bankruptcy system encouraged by
lawyers.
03-05-10 --
The Chapter 11 cases of copper miner Asarco and
casino operator Station Casinos have been a gold
mine for bankruptcy lawyers. Baker Botts broke the
$100 million billable mark in the five-year-old
Asarco case last August, and the legal bills in the
seven-month-old Station Casinos case are approaching
$20 million for a dozen law firms. But future fees
might not be paid out so easily as the bills have
come under increasing scrutiny. . . . We've taken a
close look at fee filings in both cases. Hourly
billing rates for attorneys, when available, are
listed in parentheses. . . . Station Casinos /
When
we first reported on
the Chapter 11 filing of
Station Casinos last summer, it struck us as one of
the more twisted and
complex bankruptcy cases
around. And not for nothing. Since Station filed for
bankruptcy on July 28, nearly a dozen law firms have
landed some piece of the work for the struggling Las
Vegas-based casino operator. Station has paid out
nearly $20 million in legal bills in less than eight
months.
03-05-10 --
The
bankruptcy case of Thornburg Mortgage has already
involved an anonymous letter, allegedly stolen laptops, lawsuits
against the company's former top executives and law firms bowing
out of the case for various reasons. Thursday brought a new
development: a suit, brought by the U.S. Trustee now handling
matters for the debtor, charging
Orrick, Herrington & Sutcliffe partner Karen Dempsey
with being part of an alleged conspiracy to defraud Thornburg
and divert the company's money to a new entity started by
ex-Thornburg management. . . . The allegations are too numerous
to spell out in full here (the complaint is available for
download below), but the gist is this: The trustee, Joel Sher of
Shapiro, Sher, Guinot & Sandler, charges four former
Thornburg executives with using various means to send millions
of dollars from the debtor company to their new company, SAF
Financial, according to court records. Orrick's Dempsey
allegedly helped the former execs along the way by, among other
things, advising them on how to set up SAF and amend the
Thornburg management agreement in a way that allowed for the
payment of management fees and bonuses from Thornburg to the
executives on a faster timetable -- and outside of bankruptcy
court. The executives are separately charged with stealing
confidential Thornburg property and instructing some Thornburg
employees to do work for SAF, court records show. (Sher did not
respond to two calls seeking comment.)
03-02-10 --
A bankruptcy judge Monday upheld a trustee's method
of adjudicating the claims of investors who fell
prey to Bernard L. Madoff's massive Ponzi scheme. .
. . Under Trustee Irving H. Picard's "cash-in/cash
out" approach, investors who withdrew more money
from their Madoff accounts than they deposited ("net
winners") will not be compensated while investors
who withdrew less than they put in ("net losers")
would be compensated by the Securities Investor
Protection Corp. . . . The method has been hotly
contested by numerous investors, who argue that
payouts should be based on their Nov. 30, 2008,
customer statements from Bernard L. Madoff
Investment Securities LLC, the last statement they
received before Madoff, 71, was arrested for his
multibillion dollar fraud.
02-26-10 --
Since two Lakes Region investment firms abruptly shut their
doors last year, dozens of former investors have claimed the
closures caused them severe financial strain. Add another name
to that list: the law firm handling the companies' bankruptcy
case. . . . Donchess & Notinger, the Nashua law firm appointed
to help the trustee overseeing the bankruptcy of Financial
Resources Mortgage and CL&M, said in court filings yesterday
that the case has "created financial hardship for the firm." So
far, the firm has rung up nearly $250,000 in legal fees and
expenses from the case, according to the court filings. . . .
Donchess & Notinger yesterday asked the judge in the case to
authorize the payment of half that amount. But it could be a
while before that money is forthcoming. Both Financial Resources
Mortgage and CL&M, which officials say managed a massive Ponzi
scheme, closed their doors with virtually no cash in their
accounts. And since the companies closed in early November,
Donchess & Notinger have recovered just $60,000 in loan payments
from some of the companies' borrowers and their former law firm.
. . . The firm "has spent a lot of time working through the
tangled web of transactions and transfers set up by CL&M and
(Financial Resources Mortgage) to further its Ponzi scheme," the
firm's request said.
02-24-10 --
Two former partners at Scott Rothstein's defunct law firm have
refused to turn over access to their off-site computer and e-mail
files and will face a court order to force them to do so. . . . U.S.
Bankruptcy Judge Raymond Ray, who is overseeing
the Rothstein Rosenfeldt Adler bankruptcy and wind-down,
said at a hearing Tuesday that he will compel Russell Adler and
Robert Buschel to surrender their passwords to the RRA firm's e-mail
and computer file system administered by Burbank, Calif.-based Qtask.
The request was made by bankruptcy trustee Herbert Stettin. . . .
Berger Singerman attorney Chuck Lichtman, who represents
Stettin, said he sought the order to look for potential evidence of
Rothstein's $1.2 billion Ponzi scheme and hidden assets.
He guessed federal prosecutors also would be interested in reviewing
the files once he has obtained them.
02-24-10 --
A former Billings attorney who was sentenced to prison for stealing
money from clients in 1987 has admitted doing it again. . . . Marvin
E. “Toby” Alback pleaded guilty Tuesday to wire fraud and bankruptcy
fraud for misappropriating money from clients for his own use. He
appeared before U.S. Magistrate Judge Carolyn Ostby. . . .
Prosecutors say Alback took a mortgage payment from a client in a
bankruptcy case, along with a $557 tax refund check that should have
gone into the bankruptcy estate.
02-23-10 --
Victims of convicted fraudster
Scott Rothstein's $1.2 billion Ponzi scheme are elbowing
each other to get the first crack at seized assets. And now, federal
prosecutors and the bankruptcy trustee are going at it as well.
The U.S. Attorney's Office and
Herbert Stettin, the bankruptcy trustee dismantling defunct law firm
Rothstein Rosenfeldt Adler, are fighting over restitution plans for
an estimated 350 victims of Rothstein's fraud. . . . The two sides met Feb. 12 in hopes
of finding a way to work together. But attempts at behind-the-scenes
collaboration immediately sputtered, according to a government
motion Friday decrying "inflammatory statements" by the trustee's
side.
02-23-10 --
Late Friday, the Lehman Brothers estate submitted an
updated accounting of the fees it has paid to
bankruptcy advisers through the end of January, and
that tab now stands at $641.9 million and could well
reach the $1 billion mark, according to
Bloomberg
and the estate's SEC
filing. .
. . According to our math, a smidgen less than half
of that amount has gone to the various law firms
working for Lehman and its creditors. A total of 15
law firms (not including the estate's fee examiner)
have billed Lehman $310,791,000 since Lehman filed
for bankruptcy on Sept. 15, 2008.
02-18-10 --
Former auto magnate
Denny Hecker won't be getting any relief
from his $80 million debt to Chrysler Financial. . .
. Hecker stood up and cursed in court Wednesday
after U.S. Bankruptcy Judge Robert Kressel refused
to forgive the debt. It means Chrysler can claim any
future earnings by Hecker. . . . Kressel says that
as he reviewed incomplete evidence from Hecker, it
became clear Hecker "just lied."
by
Steven E.F. Brown, San Francisco Business Times
02-17-10 --
Bankruptcies, foreclosures and litigation are likely to keep
providing booming business to law firms, according to a survey by
Robert Half Legal. . . . When asked which area of the law would grow
fastest over the next three months, the 300 lawyers in the survey
put bankruptcy and foreclosure at the top of the list. Litigation
and labor and employment followed.
02-16-10 --
The bankruptcy trustee for jailed attorney Scott Rothstein's defunct
law firm
set his sights Thursday on equity partner Stuart
Rosenfeldt, claiming $8 million in excessive compensation and
linking bonuses to political contributions. . . .
Rothstein has pleaded guilty to racketeering, fraud and
conspiracy in a $1.2 billion Ponzi scheme based on fake structured
settlements sold through the 70-lawyer Rothstein Rosenfeldt Adler. .
. . Federal prosecutors accused Rothstein of funneling some of the
tainted money to employees of the Fort Lauderdale, Fla.-based firm
for political campaign contributions to avoid federal and state
election donation caps. . . . Herbert Stettin, the firm's
court-appointed trustee, is demanding the return of $7.94 million
from Rosenfeldt and his wife, claiming he was entitled to a maximum
$1.15 million in the past four years but received much more.
Rothstein and Rosenfeldt were the firm's only equity partners.
02-12-10 --
A federal judge said Thursday he will try to rule
this month on whether to put jailed Texas financier
R. Allen Stanford's businesses under bankruptcy
protection. . . . Stanford's vast financial empire
was placed in the hands of a court-appointed
attorney last year when the Securities and Exchange
Commission sued Stanford on charges that he was
running a $7 billion Ponzi scheme. . . . Now some of
the allegedly jilted investors are asking U.S.
District Judge David Godbey to turn the case over to
a bankruptcy court, arguing their rights are better
served through U.S. law than the decisions of
receiver Ralph Janvey. . . . Godbey said he needed
time to rule.
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.
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
10-21-09 --
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.
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."
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.
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.
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.
8-18-09 --
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.
8-7-09 --
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.
6-16-09 --
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.
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.
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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.
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.
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.
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.
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.
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.
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, they
sink at once, and drag down into poverty those whom their equipages had
induced to trust them."
--Samuel Johnson:
Rambler #189 (January 7, 1752)--
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Inaugurated on October 20, 2006
Updated 02/04/2012
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