Commentary: The Struggle to Prevent Equitable Mootness and to Avoid Silencing Through Litigation: The Boy Scouts of America Bankruptcy Case*​​​

by David R. Kuney
Georgetown University Law Center (Washington, D.C.)

On Oct. 3, 2023, Hon. Richard G. Andrews of the U.S. District Court for the District of New Jersey entered a memorandum decision denying three renewed stay motions filed by various claimants in the bankruptcy case of Boy Scouts of America and Delaware BSA, LLC. The stay request had been sought by various sexual abuse claimants and “certain insurers” (the claimants) on the grounds that the BSA plan contained unlawful third-party releases, and that the Supreme Court had recently granted certiorari to determine whether such third-party releases were permitted by the Bankruptcy Code. This was the very issue that was at the center of the BSA plan. The stay request argued that the parties and court should defer further action until the Supreme Court rules on the central issue of the validity of third-party releases, and to diffuse any issue of equitable mootness based on the alleged plan consummation. The district court denied the stay request despite expressly acknowledging that the Supreme Court’s recent granting of certiorari in Purdue “signals at least a reasonable chance that Claimants may succeed on their challenge [to the third-party releases].” The BSA case illustrates the problematic intersection of equitable mootness with the potential invalidity of nonconsensual third-party releases. The question it raises is key: Is it appropriate for a bankruptcy court to permit continued implementation of a plan that is premised largely on third-party releases, but where the lawfulness or constitutional infirmity of third-party releases has been called into question by the U.S. Solicitor General and where the U.S. Supreme Court has granted certiorari and ordered expedited briefing and oral argument? Click here to read the full commentary.

ABI Announces 2023 "40 Under 40" Emerging Leaders in Insolvency Practice​​​

ABI today announced the honorees of its 2023 “40 Under 40” award program, which identifies 40 top industry professionals under age 40. The honorees will be recognized at a special ceremony on Dec. 1 during ABI’s 2023 Winter Leadership Conference at the Fairmont Scottsdale Princess in Scottsdale, Ariz. To view the full list of ABI’s 2023 “40 Under 40” honorees, please click here. 
 

U.S. Consumer Prices Rise on Surge in Rents; Underlying Inflation Cools​​​

U.S. consumer prices rose in September as rental costs surged, but a steady moderation in underlying inflation pressures supported financial market expectations that the Federal Reserve would not raise interest rates next month, Reuters reported. The report from the Labor Department on Thursday showed that the annual increase in consumer prices last month, excluding the volatile food and energy components, was the smallest in two years. With the labor market remaining tight, however, reaching the Fed's 2% inflation target could take some time, making it likely that the U.S. central bank could keep rates elevated for longer. Higher U.S. Treasury yields and conflict in the Middle East are also seen discouraging the Fed from tightening monetary policy further. The consumer price index increased 0.4% last month. A 0.6% jump in the cost of shelter accounted for more than half of the rise in the CPI. There were increases in the costs of rent and hotel and motel accommodations. Read more.

Financial Institutions Refunding $140M in ‘Junk Fees,’ Consumer Watchdog Says​​​

Financial institutions are refunding $140 million to consumers for so-called junk fees, the Consumer Financial Protection Bureau (CFPB) said yesterday, The Hill reported. The consumer watchdog said $98 million is being refunded for surprise overdraft fees, while another $22 million is being refunded for multiple insufficient fund fees levied on a single transaction. The CFPB also accused companies of taking in “millions in fake revenue” by charging monthly fees for paper bank statements that they never attempted to deliver, which will be refunded to customers. Other junk fees levied on bank account deposits, auto loan servicing and international money transfers will also be refunded, according to the agency. “The CFPB continues to uncover junk fee scams that violate the law and undermine consumer trust,” CFPB Director Rohit Chopra said in a press release. “We will continue to combat the illegal fees cropping up in consumer finance markets." Read more.

State and Local Governments Have Billions Left to Spend in Pandemic Aid​​​

A year after the COVID-19 pandemic’s onset, the federal government approved $350 billion for state, local and tribal governments to maintain vital services and provide aid to families and businesses. Even after the public health emergency has officially ended, much of the funds have yet to be spent, the New York Times reported. State and local governments had spent less than half of the funds as of March 31, the most recent data available, according to a Government Accountability Office report released on Wednesday. States had spent 45 percent, or $88.2 billion, and made commitments for 60 percent, or $118.3 billion, of the money, according to the report. Local governments had spent 38 percent and committed 54 percent. Some local governments have also failed to report their spending to the Treasury Department, which oversees the funding. About 14 percent of localities, which collectively received $3 billion, did not submit mandatory reports on how they have used the funds as of the end of March, the Government Accountability Office found. In August, Treasury officials sent notices of noncompliance to most of those localities. The $350 billion was included in the Biden administration’s American Rescue Plan, a $1.9 trillion stimulus package that also provided direct aid to households and small businesses struggling to recover during the pandemic. The money was meant to prevent painful budget cuts, which state and local governments had to make after revenues plunged and costs spiked in the Great Recession more than a decade ago. That prolonged the nation’s recovery and constrained some local economies for years. States and local governments were given wide latitude to use the funds. Some recipients have funded infrastructure upgrades, COVID-19 testing efforts and programs to provide shelter for homeless people. Others have approved plans to spend millions on stadium renovations and sports complexes. Read more.

Commercial Real Estate Debt Universe Grows 5.9% Annually in Q2 2023​​​

The universe of commercial mortgages increased by $320.5 billion year-over-year, or 5.9%, from Q2 2022 to $5.8 trillion in Q2 2023, according to the Federal Reserve's flow of funds compiled by Trepp. The amount of multifamily mortgages outstanding increased 7.1%, or $141.6 billion, from just under $2 trillion one year ago to over $2.1 trillion in Q2 2023. Pension plans saw a 23.3% rise in multifamily loans on their books to $3.8 billion. Other lending sources that contributed to the increase in the inventory of multifamily mortgages were banks and thrifts, which had an increase of 8.8% to $682.2 billion; insurance companies, which saw an increase of 6.3% to $219.0 billion; and government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac, which increased 5.7% to $970.6 billion. The outstanding amount of nonresidential commercial mortgages increased 5.2%, or $179.0 billion, from $3.5 trillion in Q2 2022 to $3.6 trillion in Q2 2023. Pension plans saw an 8.0% rise to $30.8 billion in commercial loans on their books. Other lending sources that contributed to the increase in the inventory of commercial mortgages were banks and thrifts, which saw an increase of 6.6% to $2.2 trillion, and insurance companies, which saw an increase of 6.2% to $473.1 billion. Read more.

Weekly U.S. Jobless Claims Remain at Historically Low 209,000​​​

The number of Americans applying for unemployment benefits was unchanged last week, remaining at historically low levels in another sign that the U.S. job market remains strong in the face of higher interest rates, the Associated Press reported. Unemployment claims stayed at 209,000 for the week ending Oct. 7, the Labor Department reported Thursday. The four-week moving average of claims, which strips out week-to-week volatility, fell by 3,000 to 206,250. Overall, 1.7 million people were collecting unemployment checks the week that ended Sept. 30, up by 30,000 from the week before. Read more.

ABI's Latest TechBytes Podcast Examines Cryptocurrency Basics​​​

In this first in a series of TechBytes podcasts looking at cryptocurrency and bankruptcy, Patricia K. Burgess of Frost Brown Todd LLC (Nashville, Tenn.), the Special Projects Leader of ABI's Emerging Industries and Technology Committee, talks with John Wagster, who leads Frost Brown Todd's Technology Industry Team. With a focus on technology-related commercial agreements with a particular interest in blockchain technology and cryptocurrencies, Wagster provides a brief primer on cryptocurrency and discusses some of the issues that arise in bankruptcy proceedings. Listen today! 

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