September 32009

 

ABA Challenges Ban on
Attorney Debt Advice

The American Bar Association has joined in on the
upcoming U.S. Supreme Court showdown over whether attorneys can be
considered “debt relief agencies” under consumer bankruptcy
law, arguing that such a construction would erode lawyers' First
Amendment rights and attorney-client privilege,

face='Times New Roman' size='3'>Bankruptcy Law360
size='3'>reported yesterday. The ABA's Sept. 1
face='Times New Roman'>

size='3'>amicus curiae brief in

size='3'>Milavetz Gallop &Milavetz PA v. United States
sides with the U.S. Court of Appeals for the Eighth
Circuit's ruling that certain restrictions on debt-relief agencies under

the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 are
unconstitutional when applied to attorneys. Categorizing an attorney
offering debt-related advice to clients as a debt-relief agency could
prohibit attorneys from giving clients suitable legal counsel, force
them to open privileged client communication to trustee examination, and

create untenable conflicts regarding their professional roles,
liabilities and responsibilities, the ABA argues in its brief. 
href='http://bankruptcy.law360.com/print_article/120267'>Read
more. (Subscription required.)

href='http://www.jdsupra.com/post/fileServer.aspx?fName=d0c963ba-4f67-4cf9-9fb7-26874aac1383.pdf'>Click

here to read the ABA’s

face='Times
















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size='3'>amicus brief.

Judge Rejects Union Deal
with Bankrupt California Town

Bankruptcy Judge

face='Times New Roman' size='3'>Michael McManus
size='3'>on Tuesday ruled in favor of a motion to reject a collective
bargaining agreement between the International Brotherhood of Electrical

Workers union and the city of Vallejo, Calif.,
face='Times New Roman'>

size='3'>Bankruptcy Law360 reported yesterday.

The city was able to prove that the labor contract was
“burdensome” on its abilities to meet chapter 9 bankruptcy
requirements for solvency, according to Judge McManus’ order.
“Unfortunately, in the months following the filing of the
petition, the city’s finances have not improved such that it can
achieve solvency without concessions from the unions,” the ruling
said. Judge McManus said that under the U.S. Supreme Court
decision

face='Times


















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size='3'>NLRB v. Bildisco (1984), the city of
Vallejo cannot meet contract requirements with IBEW. 
href='http://bankruptcy.law360.com/print_article/120151'>Read more.
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Report Details the
SEC’s Missteps in Recognizing Madoff’s Ponzi
Scheme

Unseasoned investigators from the Securities and
Exchange Commission were alternately intimidated and enthralled by
Bernard L. Madoff as he dodged questions about his financial house of
cards, according to a new report on the agency’s repeated failure
to uncover the huge investment fraud, the

face='Times New Roman' size='3'>New York Times
size='3'>reported today. “Madoff carefully controlled to whom they

spoke at the firm,” the SEC’s independent watchdog said in
the report released yesterday. The report details six substantive
complaints against Madoff received by the agency, which were followed by

three investigations and two examinations. Yet the agency never verified

Madoff’s trading through a third party. Time and again, it was
noted that the volume of his purported options trades were implausible.
When the enforcement staff received a report showing that Madoff indeed
had no options positions on a certain date, the agency simply did not
take any further steps. 

href='http://www.nytimes.com/2009/09/03/business/03madoff.html?_r=1&ref=business&pagewanted=print'>Read

more.

US Airways Pilots Union Sues

PBGC

The pilots union for US Airways filed suit yesterday
against the Pension Benefit Guaranty Corp., claiming it is not doing
enough to investigate charges that the airline's pension plan was
mismanaged, the Associated Press reported yesterday. The U.S. Airline
Pilots Association wants the PBGC removed as trustee for the plan and
replaced with someone who will actively pursue charges of misconduct. A
complaint filed in U.S. District Court says the pension plan was almost
fully funded in 2000. However, the plan lost about $2.1 billion over the

next two years, and the airline sought bankruptcy protection in which a
bankruptcy court later terminated the plan. Union officials say the
massive losses were unusually high and claim they have uncovered
'questionable circumstances' showing the assets may have been improperly

invested. 

href='http://www.washingtonpost.com/wp-dyn/content/article/2009/09/02/AR2009090202830_pf.html'>Read

more.

Samsonite Stores File for
Chapter 11

Samsonite Co. Stores, the U.S. retail division of
luggage-maker Samsonite Corp., has sought chapter 11 protection from
creditors citing a decline in demand for travel gear, Bloomberg News
reported yesterday. The Mansfield, Mass.-based company listed $233
million in assets and $1.5 billion in debts as of July 31 in its
bankruptcy filing yesterday. Samsonite Corp. reported $1.07 billion in
revenue for fiscal 2007 and did not file for bankruptcy yesterday. The
unit under chapter 11 protection has 173 leased retail stores in 38
states and employs about 650 people. The company was acquired by
London-based CVC Capital Partners Ltd. for about $1.7 billion in October

2007, according to court filings. The case is

face='Times New Roman' size='3'>In re Samsonite Co. Stores
LLC, 09-13102, U.S. Bankruptcy Court, District

of Delaware (Wilmington). 

href='http://www.bloomberg.com/apps/news?pid=20601103&sid=aBFxoX63qVSQ'>Read

more.

KB Toys Receives Approval
for $2 Million Sale of IP

Bankruptcy Judge

face='Times New Roman' size='3'>Kevin J. Carey
size='3'>yesterday approved KB Toys Inc. to sell certain intellectual
property, including trademarks and Web domain names, to CE Stores LLC
for $2.1 million,
face='Times New Roman' size='3'>Bankruptcy Law360
size='3'>reported yesterday. CE Stores' offer was the highest and best
that KB Toys received, and will provide a greater recovery for the
debtors' creditors and other interested parties than any practically
viable alternative, the order said. The assets at issue include several
U.S. trademark registrations; one Canadian trademark registration; and a

slew of domain names, including kbkids.com and kbtoys.com. An auction
was held Aug. 6, and Judge Carey's order noted that the auction was
noncollusive and fair to all parties. 
href='http://bankruptcy.law360.com/print_article/120353'>Read
more. (Subscription required.)

Circuit City Wins $60
Million in Warranty Settlements

Several warranty providers have agreed to pay bankrupt

electronics retailer Circuit City Stores Inc. over $60 million to settle

their disputes over outstanding warranty claims,
face='Times New Roman'>
size='3'>Bankruptcy Law360 reported yesterday.

Service Plan Inc. and several affiliates have agreed to pay Circuit City

$23.25 million, while Assurant and several affiliates have agreed to pay

over $37 million, of which $3.5 million will be held in escrow. Assurant

will also be granted a $6 million unsecured claim. Additionally, General

Electric Co., which was also party to warranty agreements with Circuit
City, has agreed to waive all claims against the debtor. The bankruptcy
case is

size='3'>In re Circuit City Stores Inc., case
number 08-35653, in the U.S. Bankruptcy Court for the Eastern District
of Virginia. 
href='http://bankruptcy.law360.com/print_article/120194'>Read
more. (Subscription required.)

Capmark May Look to
Bankruptcy after Quarterly Loss

Capmark Financial Group Inc., the lender owned by
firms including Goldman Sachs Group Inc. and KKR & Co., said
yesterday that it may file for bankruptcy after posting a second-quarter

loss of about $1.6 billion, Bloomberg News reported yesterday. The
Federal Deposit Insurance Corp. intends to order the company to create a

plan to bolster capital and liquidity, Capmark. The Horsham, Pa.-based
company struck a deal yesterday with Warren Buffett’s Berkshire
Hathaway Inc. and Leucadia National Corp. to sell its loan servicing and

mortgage business to the companies for as much as $490 million. Capmark
is one of the largest U.S. commercial real estate finance companies,
with more than $10 billion in originations, according to Moody’s
Investors Service. The company services more than $360 billion of
debt. 

href='http://www.bloomberg.com/apps/news?pid=20601087&sid=aCAtbfSHeUp4'>Read

more.

Palm Energy, Pisces Energy
File for Chapter 11

U.S. oil and gas company Palm Energy Partners LLC and
its unit Pisces Energy LLC have filed for chapter 11 protection, Reuters

reported today. The companies, which develop and operate offshore oil
and gas properties in the Gulf of Mexico, plan to continue to operate
their business and assets during the proceedings. In a filing on Sept. 1

with the U.S. Bankruptcy Court for the Southern District of Texas, Palm
Energy listed both estimated assets and estimated liabilities in the
range of $100 million to $500 million. The case is
face='Times New Roman'>In re
Palm Energy Partners LLC, U.S. Bankruptcy
Court, Southern District of Texas, No. 09-36593. 

href='http://www.reuters.com/article/bondsNews/idUSBNG38338420090903'>Read

more.

Treasury Retreats from
Standoff with TARP Watchdog

The Treasury Department backed away from a standoff
over the independence of the special government watchdog appointed to
scrutinize how last year's $700 billion financial-industry bailout is
being spent, the
face='Times New Roman' size='3'>Wall Street Journal
size='3'>reported today.Neil Barofsky, special inspector general for the

Troubled Asset Relief Program, declared victory yesterday in his effort
to clarify that he doesn't answer to Treasury Secretary Timothy
Geithner. In establishing the office, Congress set strict directives
that give Barofsky broad access to executive-branch documents and
require Geithner to explain whether he declines to follow any of
Barofsky's recommendations. That led to constitutional questions over
whether Congress violated the separation of powers and invaded the
executive branch's turf. 
href='http://online.wsj.com/article/SB125193355469281319.html'>Read
more. (Subscription required.)

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