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June 92009

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June 9, 2009


size='3'>Supreme Court to Decide Whether
Bankruptcy Law Violates Free Speech 

The U.S. Supreme Court agreed yesterday to decide
whether a provision of the Bankruptcy Abuse Prevention and Consumer
Protection Act of 2005 violates the free-speech rights of lawyers, Dow
Jones

size='3'>Daily Bankruptcy Review reported
today. At issue is a provision of BAPCPA that bars attorneys from
advising clients to take on more debt before they file for bankruptcy
protection. A divided federal appeals court in St. Louis struck down the

provision, saying it could prevent lawyers from giving clients
appropriate and beneficial advice. U.S. Solicitor General Elena Kagan
said in a petition to the court that the lower court ruling 'threatens
to undermine the important reforms that Congress crafted, after years of

study, to reduce the abuse of the bankruptcy system, including abuse
encouraged by lawyers.' Minnesota law firm Milavetz, Gallop &
Milavetz challenged the bankruptcy provision soon after the 2005 law
went into effect. The high court also will consider a related provision
that requires bankruptcy attorneys to include certain disclaimers in
their advertising. The lower court said that provision was
constitutional. The case will be heard during the court's next term,
which begins in October. Additional information on the
case:

Docket: 

href='http://origin.www.supremecourtus.gov/docket/08-1119.htm'
target='_blank'>
size='3'>08-1119 and 
href='http://origin.www.supremecourtus.gov/docket/08-1125.htm'
target='_blank'>
size='3'>08-1225


size='3'>Title:
size='3'>Milavetz, Gallop, & Milavetz, P.A., et al.  v. United
States;
size='3'>United States v. Milavetz, Gallop, & Milavetz, P.A., et

al.

size='3'>Issue: Whether an attorney who
provides bankruptcy assistance to an assisted person in return for
valuable consideration, and who does not fall within one of the five
exceptions, is a “debt relief agency” for purposes of 11
U.S.C. 526 and whether 11 U.S.C. 528 violates the First
Amendment.

Total Bankruptcy Filings
Increase Nearly 35 Percent over First Quarter 2008; Business Filings
Jump over 64 Percent

The total number of U.S. bankruptcies filed during the

first three months of 2009 increased 34.5 percent over the same period
in 2008 nationwide, according to data released yesterday by the
Administrative Office of the U.S. Courts. As total filings
reached 330,477 during the
first calendar year quarter of 2009 (Jan. 1-March 31), the total
surpassed the 245,695 new cases that were filed over the same period in
2008. The total filings in the 2009 first quarter also represent a 9.7
percent increase from the 301,317 bankruptcies filed during the fourth
quarter of 2008 (Oct. 1 – Dec. 31). Business filings for the
three-month period ending March 31, 2009 totaled
size='3'>14,319, representing a 64.3 percent increase over the first
quarter 2008 total of 8,713. The first quarter 2009 business filing
total also represented an 11 percent increase over the fourth quarter
2008 total of 12,901. Consumer filings increased 33.4 percent to
316,158 for the three-month period
ending March 31, 2009, from the 2008 first quarter total of 236,982.
They also represent a 9.6 percent increase from the fourth quarter of
2008, which recorded a total of 288,416 nonbusiness filings. 

href='http://www.abiworld.org/AM/Template.cfm?Section=Home&CONTENTID=57779&TEMPLATE=/CM/ContentDisplay.cfm'>Click

here to read ABI’s press release on the first quarter
2009 bankruptcy filings.

Supreme Court Delays
Chrysler's Sale to Fiat

The U.S. Supreme Court yesterday held up the sale of
Chrysler's assets to Italian automaker Fiat, at least temporarily
interrupting the Obama administration's massive and speedy restructuring

of the U.S. auto industry, the

face='Times










New




Roman' size='3'>Washington
Post reported today. Justice Ruth Bader
Ginsburg's 53-word order did not hint at what she thought of an appeal
led by a group of Indiana pension and construction funds, which stand to

see their investments in Chrysler reduced with no say in the process.
Instead, she instructed simply that the transaction is 'stayed pending
further notice.' The decision buys the court time to consider objections

filed over the weekend, and it comes as the clock is ticking. Fiat can
back out of the deal if it is not finalized by Monday, and the
government has warned that the only alternative would be to force the
nation's third-largest automaker into liquidation, throwing the industry

in turmoil and leaving tens of thousands of people without jobs. 

href='http://www.washingtonpost.com/wp-dyn/content/article/2009/06/08/AR2009060801551_pf.html'>Read

more.

In related news, Chrysler has
secured court approval of a deal with former parent Daimler AG in which
the German automaker will forgive $2 billion in Chrysler debt and inject

$600 million into Chrysler's ailing pension plans over the next two
years,

size='3'>Bankruptcy Law360 reported yesterday.

The terms of the deal — negotiated in April between Daimler,
Chrysler, current Chrysler owner Cerberus Capital Management LP and the
Pension Benefit Guaranty Corp. — were approved by the U.S.
Bankruptcy Court for the Southern District of New York on Friday. The
$200 million pension guaranty, which Daimler would pay in case the PBGC
terminates Chrysler's 10 different employee pension plans covering more
than 105,000 Chrysler retirees in North America, is a substantial
discount from the $1 billion guaranty Daimler agreed to back for a
five-year period as part of a 2007 deal handing over controlling
interest in Chrysler to Cerberus. As part of the deal, Daimler will
remain responsible for the reduced guaranty amount, while agreeing to
give up the 19.9 percent Chrysler stake it still holds. 
href='http://bankruptcy.law360.com/print_article/105313'>Read more.
(Subscription required.)

Financial Services

Finance Reforms Pared
Back

The Obama administration is backing away from seeking
a major reduction in the number of agencies overseeing financial
markets, suggesting that the current mix of regulators will remain
mostly intact, the
face='Times New Roman' size='3'>Wall Street Journal
size='3'>reported today. Administration officials had suggested they
might push for major regulatory consolidation in the wake of the
financial crisis. However, they now expect to call for most existing
agencies to have broader powers to limit risk-taking by financial
institutions. For example, the administration is unlikely to call for
merging the Commodity Futures Trading Commission and the Securities and
Exchange Commission, an idea it had considered. It also isn't expected
to call for the Federal Reserve, Federal Deposit Insurance Corp. or the
Office of the Comptroller of the Currency to cede their primary
authority to supervise banks. 

href='http://online.wsj.com/article/SB124451579977696939.html#mod=testMod'>Read

more. (Subscription required.)

In related news, the House Financial Services
Subcommittee on Capital Markets, Insurance, and Government Sponsored
Enterprises will be holding a hearing today titled “The Effective
Regulation of the Over-the-Counter Derivatives Markets.” The
hearing will take place at 10:30 a.m. ET in Room 2128 of the Rayburn
House Office Building. 

href='http://www.house.gov/apps/list/hearing/financialsvcs_dem/hrcm_0600909.shtml'>Click

here to read the prepared testimony and watch a live Webcast of the
hearing.

SEC Asks Wall Street for
Its Pension Data

The Securities and Exchange Commission has asked more
than two dozen pension fund managers and financial firms for information

concerning pension fund business dealings, the Wall Street Journal
size='3'>reported today. The SEC said that it is interested in finders'
fees and other payments, and the work done in exchange for those
payments and is seeking information from pension fund managers,
placement agents and other intermediaries. As soon as this month, the
SEC is expected to propose banning investment advisers from managing
state pension funds for a certain period of time if they made campaign
contributions to elected officials who oversee the pension program. The
SEC and New York Attorney General Andrew Cuomo have filed
securities-fraud charges against several individuals as part of a
two-year investigation into alleged abuses of the New York state pension

fund. 

href='http://online.wsj.com/article/SB124450604329096199.html#mod=article-outset-box'>Read

more. (Subscription required.)

Nine Banks to Repay TARP
Money

The Treasury Department expects an initial payback
from the nation's largest banks of at least $50 billion in bailout
funds, which is double the amount the government initially expected to
recoup, the

size='3'>Wall Street Journal reported today.
In addition, Treasury officials are expected to announce today that up
to nine of the biggest banks have approval to repay their Troubled Asset

Relief Program funds. The list of large financial firms expected to get
the green light on repayment includes American Express Co., Bank of New
York Mellon Corp., Capital One Financial Corp., Goldman Sachs Group Inc.

and JPMorgan Chase & Co. A handful of community banks are also
expected to soon repay their TARP funds. Already, about 22 banks have
taken steps to repay TARP, returning about $1.8 billion to the
government. 

href='http://online.wsj.com/article/SB124450458046896047.html#mod=testMod'>Read

more. (Subscription required.)

Banks May Need New Stress

Tests, Panel Says

A congressional oversight report to be released today
said that the federal government should repeat its stress tests of the
nation's largest banks if its assumptions about the severity of the
economic downturn prove too rosy, the

face='Times










New




Roman' size='3'>Washington
Post reported today. The Congressional
Oversight Panel, which oversees the $700 billion government bailout of
the financial industry, generally praised the bank evaluations, which
assessed the firms' financial health, and lauded regulators for using a
reasonable model to conduct the tests. However, the panel, headed by
Prof.

face='Times









New




Roman' size='3'>Elizabeth
Warren of Harvard Law School, noted that the
stress tests assumed an average unemployment rate of 8.9 percent this
year under the worst-case scenario. The unemployment rate for last
month, however, climbed to 9.4 percent, meaning that the assumptions by
regulators might have been too optimistic. Stress tests of the nation's
largest 19 banks, released last month, concluded that 10 of them needed
to raise a combined $75 billion in common equity to withstand an even
more severe financial crisis. That figure was much lower than many
analysts had expected, buoying confidence in the banking
industry. 

href='http://www.washingtonpost.com/wp-dyn/content/article/2009/06/08/AR2009060803944_pf.html'>Read

more.

WL Homes Bankruptcy Case
Converted to Liquidation

Bankruptcy Judge

face='Times










New




Roman' size='3'>Brendan
Shannon in Wilmington, Del.,  granted a
creditors’ committee request on June 5 to convert the bankruptcy
case of homebuilder of WL Homes LLC from a reorganization to a
conversion, Bloomberg News reported yesterday. The committee requested
the conversion because the company shut operations and intends to
liquidate assets rather than reorganize. WL Homes blamed its bankruptcy
filing on the collapse of the real estate market, saying its sales last
year had fallen by about half from 2007. The company listed assets of
more than $1 billion and debt of $500 million to $1 billion in Chapter
11 documents filed Feb. 19. The case is In re WL Homes LLC,
09-10571, U.S. Bankruptcy Court, District of Delaware
(Wilmington). 

href='http://www.bloomberg.com/apps/news?pid=20601103&sid=ab7BfBXMO3yE&refer=us'>Read

more.

LandSource Creditors Push
for Chapter 7 Conversion

Creditors of LandSource Communities Development LLC
have asked a bankruptcy court to convert the real estate developer's
chapter 11 case to chapter 7, saying liquidation would leave them far
better off than the reorganization plan proposed by the company's
financier,

size='3'>Bankruptcy Law360 reported yesterday.

In a motion for conversion filed Friday, the company’s unsecured
creditors’ committee said that the administrative agent for
LandSource's debtor-in-possession lenders — Barclays Bank PLC
— was using chapter 11 as a vehicle to ensure a return on the
lenders' investment while leaving little to unsecured creditors. Last
month the creditors' committee secured additional time to review
Barclays' reorganization plan, which, it now says, contains
“serious defects and impermissible provisions” rendering it
unconfirmable. The illiquid and uncertain minority stock units promised
unsecured creditors under the plan are worth far less than the amount to

be realized in a cash distribution in a chapter 7 liquidation, according

to the motion. The plan also improperly allocates $28 million in
professional fees. 
href='http://bankruptcy.law360.com/articles/105326'>Read
more. (Subscription required.)

Lehman Secures $200
Million Mortgage Deal

With approval from the bankruptcy court, a nondebtor
subsidiary of Lehman Brothers Holdings Inc. is set to acquire hundreds
of millions of dollars in mortgages to shore up a foundering Miami Beach

real estate project Lehman largely funded, Bankruptcy Law360
reported yesterday. Bankruptcy Judge James M. Peck

on Friday allowed Lehman to purchase as much as $200
million of mortgages from Americor Mortgage Inc. to facilitate the
successful sale of condominiums in the Canyon Ranch Living Miami Beach
condominium project. Beginning in 2006, Lehman and its subsidiary LB
Carillon Construction LLC loaned more than $522 million to finance the
project, borrowing roughly $240 million in the process. With the
majority of the units unsold and contracted buyers languishing in a
decimated credit market, Lehman sought court approval to help provide
residential loans so that the Canyon Ranch could become
profitable. 
href='http://bankruptcy.law360.com/print_article/105310'>Read
more. (Subscription required.)

Boston
Globe Union Rejects Deal on Pay
Cuts

The members of the Newspaper Guild at
face='Times New Roman'>The
Boston Globe narrowly rejected a proposed
package of wage and compensation cuts, the New York Times
reported today. As a result, the newspaper’s owner,
The New York Times Company, said
it would proceed with its threat to unilaterally impose a 23 percent
salary cut. The package put up for a vote included a wage reduction of
about 8.4 percent, a one-week unpaid furlough equivalent to a pay cut of

1.9 percent, the elimination of company contributions to retirement
plans and an array of other concessions. The Times Company says that it
needs the concessions to stanch severe losses at the paper. Two months
ago, the company threatened to close The Globe
unless unions agreed to $20 million a year in wage and
benefit concessions, and to give up lifetime job guarantees for about
400 employees. Of that savings, the company sought $10 million from the
guild, by far the largest union, representing newsroom staffers as well
as others in advertising and other departments. 

href='http://www.nytimes.com/2009/06/09/business/media/09globe.html?ref=business&pagewanted=print'>Read

more.

Prominent Publishing House

Enters Chapter 11

Arcade Publishing Inc., the publishing house that has
published books by famous foodie James Beard, film director Ingmar
Bergman, Israeli president Shimon Peres and other authors from around
the globe, filed for chapter 11 protection several months after the
death of its owner, the
face='Times New Roman' size='3'>Wall Street Journal
size='3'>reported today. The publisher has struggled since the Jan. 5
death of president Richard Seaver, Jeannette Seaver’s
husband.In court papers, Seaver said that
the challenges that Arcade faces as a small, independent publisher have
been compounded by the economic downturn. 

href='http://blogs.wsj.com/bankruptcy/2009/06/08/prominent-publishing-house-enters-chapter-11/tab/print/'>Read

more. (Subscription required.)

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