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July 22, 2005
Bankruptcy Record Sparse for Roberts
The District of Columbia Circuit is not a traditional hotbed for
bankruptcy opinions. Thus it is not surprising that a review of the
cases found no bankruptcy decisions written by Supreme Court nominee
John Roberts. The judge was on the panel in four bankruptcy cases.
However, the cases did not involve substantive issues of bankruptcy
law.
English-Speaking Union v. Johnson, 353 F.3d 1013 (D.C.
Cir. 2004) involved a question of whether the District Court’s
dismissal of a creditor’s appeal from an order of the bankruptcy
court for failure to file its brief on time was proper. The D.C. Circuit
held that the District Court had such power, but reversed because the
court offered the creditor no opportunity to explain the failure to file
and made no findings concerning the circumstances of the failure.
Allen v. Wells Fargo Bank Minnesota, 2004 U.S. App.
LEXIS 14135 (July 7, 2004) was a per curiam order to appellants
to show cause why their appeal of the sale of property was not moot
under Bankruptcy Code §363(m).
In Swinson v. Coates & Lane Inc., 2005 U.S. LEXIS
9048, the court affirmed, without opinion, the order of the District
Court based on the bankruptcy court’s proposed findings of facts
and conclusions of law involving, inter alia, the duty of a
landlord to mitigate damages in the District of Columbia, and the
tenant’s liability for damages under the lease.
Northern California Power Agency v. Nuclear Regulatory
Commission, 393 F. 3d 223 (D.C. Cir. 2004), dealt, inter
alia, with a motion to vacate an order of the commission as moot. In
this connection, the court discussed the Supreme Court’s decision
in U.S. Bancorp Mortgage Co. v. Bonner Mall Partnership,
513 U.S. 18 (which had been argued at the request of the Supreme Court
by former ABI President and chairman, Ford Elsaesser) pointing out that
vacatur would usually not be ordered if the party seeking relief caused
the mootness by voluntary action.
Reporters’ Briefing on Pension Legislation Today
The Senate Finance Committee majority and minority staff will hold a
background briefing for reporters in conjunction with the release of
comprehensive pension funding and reform legislation, “The
National Employee Savings and Trust Equity Guarantee (NESTEG)
Act.” The bill contains a series of worker pension protections
developed after the Enron debacle and reforms to ensure much more
adequate, reliable pension funding. It expands protections for
retirement plan participants and requires companies to allow their
employees to diversify out of company stock, adopts a permanent yield
curve replacement for the 30-year Treasury rate used for pension funding
purposes, expands the portability of retirement plan assets, and
simplifies pension laws and regulation.
Greenspan Concerned about Pension Issues
Further moves by companies to discard troubled pension plans on the
Pension Benefit Guaranty Corp., the financially strapped agency that
insures pensions for working men and women, would be troubling but
shouldn’t threaten the economy, Federal Reserve Chairman Alan
Greenspan said yesterday, according to an Associated Press report.
Greenspan made his remarks to the Senate Banking Committee after he
delivered what may be his final economic outlook to Congress. He plans
to step down early next year after 18 years on the job.
Grassley Pension Proposal to Use Yield Curve, Aid Airlines
The pension bill that Senate Finance Chairman Charles Grassley
(R–Iowa) will introduce tomorrow will include elements of
administration proposals such as the use of a “yield curve”
formula for calculating how much companies must contribute to their
pension plans, CongressDaily reported. Under the
administration proposal, the use of that formula would result in higher
pension payments to the Pension Benefit Guaranty Corp. (PBGC) The bill
also would permit companies to offer their employees investment advice
to help manage their retirement savings, but unlike the House version
approved by the House Education and the Workforce Committee, it would
not allow the same company to offer both investment advice and
investments to workers. The Senate bill also includes a package of
post-Enron changes that Grassley previously introduced aimed at ensuring
that employees can diversify their 401(k) plans. The staff said the bill
will contain provisions aimed at giving relief to struggling airlines,
but details of those provisions were not available.
Stocks fall after UK Blasts; Yuan in Focus
U.S. stocks declined yesterday after news of a second string of
attacks on London’s transportation system in less than a month,
offsetting news that China will allow its currency to appreciate,
Reuters reported.
New Jersey Continues Steps to Diversify Pension Fund
New Jersey officials voted yesterday to let two additional money
management firms invest part of the state’s $70 billion pension
fund in areas other than the traditional mix of stocks and bonds, hoping
that private-sector skills can bolster its public-sector portfolios, the
New York Times reported. At the same time, officials with
the State Investment Council—a group of academics, union
representatives and finance executives who determine how the state
allocates its pension funds—tightened the rules forbidding
campaign contributors from managing those private funds. The two
decisions mark the latest bid by state officials to diversify their
portfolio to include three categories of alternative investments: hedge
funds, real estate and nontraded stocks that are known as private
equities. But two of the state’s most powerful unions, the
Communications Workers of America Local 1033 and the New Jersey
Education Association, have filed lawsuits to block the plan.
Jobless Claims Lowest Since April
First-time claims for state unemployment insurance aid fell to
303,000 in the week ended July 16 from a revised 337,000 the previous
week, the Labor Department said. It was the largest one-week decline
since December 2002 and brought new claims to the lowest level since
April, Reuters reported. A Labor Department analyst said there were no
special factors behind the large drop, but noted that the number of new
claims from the automobile sector was smaller than the previous
week.
Hit with a Surge in Asbestos Claims, States Address the
‘Unsick’
The Pennsylvania General Assembly is the latest state legislature to
address what some consider the “invasion of the
unsick”—a spike in asbestos claims filed by workers alleging
exposure to the product without showing any impairment, the
National Law Journal reported today. Twenty members of the
state legislature have launched a bill that, among other things,
proposes setting medical criteria requiring that claimants show actual
impairment before they bring actions for asbestos exposure, to give
priority to genuinely impaired workers. Legislation similar to
Pennsylvania’s has become law in Ohio, Georgia and Florida within
the last year. A similar Texas law takes effect in September.
Senate Eyes 15-Year Limit on Airline Pension Fix
U.S. Senate legislation to strengthen the private pension system is
unlikely to give financially struggling airlines more than 15 years to
stretch out their pension payments—a decade less than they have
sought, finance committee aides said on Thursday, Reuters reported.
Older carriers, such as Delta Air Lines Inc. and Northwest Airlines
Corp., have asked Congress for 25 years to replenish their pension
plans, warning that without such help, they will tip into bankruptcy.
But the aides told Reuters that while negotiations among lawmakers are
continuing, the airlines were expected to get no more than 15 years to
stagger their pension payments.
United Airlines’ Machinists Union Ratifies Labor Deal
The International Association of Machinists said yesterday that
members of the union representing 20,000 groundworkers at bankrupt
United Airlines have ratified a five-year contract that saves the No. 2
U.S. carrier $176 million a year, Reuters reported. The ratification
moves United, a unit of UAL Corp., a step closer to emerging from
chapter 11.
Delta
Delta Reports Loss, While Other Airlines Post Modest Profits
Delta Air Lines recorded a $382 million second-quarter loss, despite
a seasonally strong summer travel period that helped many of its rivals
eke out at least slim profitability amid near-record fuel prices, the
Wall Street Journal reported today.
The results from Delta, the third-largest U.S. airline in terms of
traffic, contrasted with those from America West Holdings Corp., Alaska
Air Group Inc. and JetBlue Airways, the Nos. 8, 9 and 10 carriers, which
all reported profits yesterday. They joined AMR Corp., parent of
American Airlines and Continental Airlines, which reported profits
Wednesday, though all airlines are suffering a drag from volatile oil
prices.
Shares in Delta Fall amid Bankruptcy Speculation
Shares in the No. 3 U.S. carrier plunged on revived speculation that
it could file for bankruptcy. The airline, widely seen as the weakest
U.S. carrier, also said it had decided to defer delivery of eight Boeing
737-800 aircraft from 2006 to 2008. Delta shares were down 36 cents, or
9 percent, at $3.55 on the New York Stock Exchange on concern that
continued losses could drive the airline into seeking chapter 11
bankruptcy protection from creditors.
In related news, Delta Air Lines named a new chief operating
officer—and possible successor to CEO Gerald Grinstein—and
also replaced its chief financial officer Wednesday, Cox News Service
reported yesterday. Jim Whitehurst, a senior vice president in charge of
Delta’s route and pricing strategies, rises to the COO post, which
had been vacant. Meanwhile, finance chief Michael Palumbo, 58, is
leaving Delta after 15 months in his post; he is being replaced by Ed
Bastian, a six-year Delta veteran who left last winter and now
returns.
Northwest Airlines’ Future May Include Bankruptcy
Mediators released Northwest and its mechanics from talks on
Wednesday, starting a 30-day cooling-off period that could end with a
strike or a lockout on August 20, Fox News Channel reported yesterday.
NWA’s CEO Doug Steenland has said if the airline doesn’t get
the concessions it needs from its workers, it could soon be forced into
bankruptcy.
FAA Proposes Fine for Independence Air
Independence Air could be fined as much as $1.5 million because the
government says it flew thousands of flights last fall without
conducting scheduled maintenance and inspections on some planes, the
Associated Press reported yesterday. The Federal Aviation Administration
said Thursday that it is proposing the penalty because the airline
missed the deadline to perform inspections and tests on a variety of
systems and components. Formerly Atlantic Coast Airline, Independence
Air Inc. is struggling to transform itself into a low-fare carrier.
Industry analysts believe it may have to file for bankruptcy
protection.
Robert Pryce also Sentenced for Corrupt Activities while Bankruptcy
Trustee
An attorney who served as the primary intermediary between corrupt
members of the Carson City Council and waste-hauling companies they were
trying to extort was sentenced yesterday afternoon to 80 months in
federal prison, the Law News Network reported. Robert Dennis Pryce Jr.,
a partner at Pryce Parker Hill LLP, was sentenced for his role in the
Carson corruption case, as well as a separate case in which he admitted
a series of corrupt actions while serving as a trustee in bankruptcy
court. Pryce pleaded guilty on August 14, 2003 to the charges in both
cases.
Enron Attempting to Collect Utility Fees
Bankrupt energy company Enron Corp. is attempting to collect $125
million from Snohomish County public utility customers, the
Star-Telegram reported yesterday. Enron has hired a
lobbyist in hopes of overturning an amendment to the Senate energy bill
that could save customers in Washington and Nevada from paying Enron
contract-termination fees. The provision by Sen. Maria Cantwell,
D–Wash., would give the Federal Energy Regulatory Commission
authority to determine whether a public utility must pay such fees to
end its contract early. Currently the bankruptcy court overseeing
Enron’s case has that authority. If the federal commission
determines that Enron’s contract with Snohomish County was
fraudulent, it likely would rule against such fees.
In other related news, Enron Corp. rejected the city of
Portland’s offer to buy out Portland General Electric Co. for $2
billion in cash and the assumption of $650 million in debt, marking the
second offer for the utility that has failed in recent months, the
Wall Street Journal reported today.
Terabeam Purchases Proxim in Bankruptcy Court
Wi-Fi veteran Proxim, whose assets were to be bought by Moseley
Associates, has gone to a higher bidder at the bankruptcy court,
techworld.com reported yesterday. Wireless broadband company Terabeam
will pay $28 million for the assets of the one-time Wi-Fi leader, adding
$7 million to the $21 million price agreed to by Moseley in June.
Illinois Governor Signs Law to Protect Homebuyers in At-risk
Communities from Predatory Lenders
Illinois Governor Rod R. Blagojevich signed a bill yesterday that
provides borrowers with critical information on home loans and helps
state regulators and law enforcement track and crack down on dishonest
lenders, according to a state-issued news release.
Joined by House Speaker Michael J. Madigan (D–Chicago) and
State Senator Martin A. Sandoval (D–Chicago), Gov. Blagojevich
signed into law House Bill 4050, which will allow the state to develop a
pilot program designed to increase homebuyers’ knowledge about the
loans they are considering and to reduce the number of foreclosures
resulting from overly expensive home loans.
Consortium Completes Toys R Us Acquisition
After more than a quarter-century as a public company, Toys R Us Inc.
is now a privately held corporation. The $6.6 billion acquisition of the
nation’s second-largest toy seller was completed Thursday by two
private equity firms, Kohlberg Kravis Roberts & Co. and Bain Capital
Inc., and a real estate developer, Vornado Realty Trust, the Associated
Press reported today. All have equal stakes. Toys R Us became a public
company in 1978, emerging from the bankruptcy of Interstate Stores.