February 16, 2000
Disagreement Over Multidisciplinary Practice of Law Evident
at ABA Meeting
The jury is still out on multidisciplinary practice (MDP) of
law. Texas Lawyer reported yesterday that at the American Bar
Association's (ABA) midyear meeting in Dallas, many attorneys and other
professionals asked bar leaders to embrace MDP firms. They pointed out
that accounting firms, banks and insurance companies are employing
attorneys in increasing numbers. Many others, however, warned caution.
In August, the ABA's MDP Commission issued a report recommending that
the Model Rules of Professional Conduct be amended to permit lawyers and
non-lawyers to partner in the practice of law and share fees. The
current rule against fee-sharing is the largest obstacle to MDPs. At the
conference, the commission sought input about its report (available
online at
href='http://www.abanet.org/'>http://www.abanet.org), in
anticipation of preparing a final draft in April. ABA President WIlliam
G. Paul said the House of Delegates may vote on whether to approve the
report as early as July, but probably no later than the ABA's February
2001 midyear meeting.
While there is widespread support for making the change, some state
bars are recommending that the House of Delegates delay changing the
Model Rules until studies show that MDPs would further the public
interest without sacrificing lawyers' independence and the tradition of
loyalty to clients. Commission member Paul L. Friedman, a district judge
in Washington, D.C., tried to determine from the state bars when they
would be ready to vote and suggested that there may not be funding for
further MDP studies. He said, 'Let's assume we won't know
conclusively....what segment of the population wants one-stop shopping.
At some point, we have to fish or cut bait.' Cheryl Niro, president of
the Illinois Bar Association, said that most state bars will not vote in
favor of MDPs without further evidence that attorneys' core values can
survive in the MDP world. ABA President Paul said after the meeting that
he feels a sense of urgency to fashion MDP regulations, but he also
recognizes that the bar cannot be forced to act before it is ready.
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Texfi Industries Seeks Bankruptcy Protection
Texfi Industries Inc., New York, announced that it has filed
for chapter 11 protection in the Southern District of New York,
according to a newswire report, and it has retained the services of
Ernst & Young Restructuring LLP and McDermott, Will & Emery to
assist in the reorganization. Texfi CEO and President Andrew Parisi said
imports have negatively affected the domestic textile and apparel
industry during the past two years, causing Texfi to suffer a
significant reduction in volume. He also said the chapter 11 filing will
enable the company to reduce its debt provide a firm financial
framework. Texfi is a diversified manufacturer and marketer of various
textiles.
Financial Corp. Recovers $8.7 Million from FDIC
Financial Corp., Santa Barbara, Calif., announced it has
reached a settlement agreement with the Federal Deposit Insurance Corp.
(FDIC) under which the FDIC will pay Financial $8.7 million, according
to a newswire report. This is a full settlement of Financial Corp.'s
claims to residual value from the receivership estate of Santa Barbara
Savings and Loan Association, the former subsidiary of Financial Corp.
Financial President David L. Tilton said, 'This 10-year battle, since
the seizure of Santa Barbara Savings, has been a long and bump road.
Today's settlement validates our efforts and vindicates our belief that
Santa Barbara Savings should not have been seized by the government in
1990.' The FDIC has agreed to pay an $8.7 million cash settlement by
March 31. Under Financial's bankruptcy plan, this will enable a
subsequent payout to holders of preferred stock equal to their full
liquidation preference. The company estimates that about $5 million will
be available for payment to holders of common stock.
Santa Barbara Savings, a century-old savings association with $4
billion in assets, was seized by the Resolution Trust Corp. in 1990 for
failure to comply with new government-mandated requirements. About 800
workers lost their jobs. Financial Corp., the second largest public
company in the United States to emerge from bankruptcy in 1995, has been
marshaling assets and has paid off all creditors under a liquidation
plan. Its final responsibility has been to recover any residual value
from the Santa Barbara Savings receivership and distribute this amount
to shareholders.
Creditors Seek Bankruptcy for Perelman's Marvel III
Holdings
Three law firms are seeking to place financier Ronald
Perelman's Marvel III Holdings Corp. into involuntary chapter 7
bankruptcy; they claim they are owed $2 million in unpaid fees,
according to a newswire report. According to papers filed yesterday in
the Bankruptcy Court for the District of Delaware, the firms (Kasowitz,
Benson, Torres & Friedman LLP, the Bayard Firm and White & Case
LLP) represented the official committee of Marvel Holdings bondholders,
led by investor Carl Icahn, during the 1996 chapter 11 bankruptcy of
Marvel Entertainment Group Inc. Kasowitz attorney David Rosner said that
Marvel III's only asset is its right to sue Perelman for alleged
fraudulent conveyance of $125 million in dividends he 'upstreamed' to
his holdings companies from bond sales in 1993 and 1994. Rosner said the
bankruptcy filing is a mechanism for preserving that right, because it
allows for the appointment of a trustee with the authority to sue
Perelman on behalf of the Marvel III estate. Any money recovered would
be used to pay lawyers' and bondholders' claims. Last week, a second and
related suit against Perelman was dismissed; the judge rejected the
legal claim of breach of fiduciary duty. Marvel Entertainment emerged
from chapter 11 in July 1998 after it merged with Toy Biz Inc.
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PHS to Phase Out Mt. Sinai Medical Center
Primary Health Systems Inc. (PHS), Cleveland, said that in
response to pressures that continue to impact the health care industry
locally and nationally, it will be forced to phase out the operations of
Mt. Sinai Medical Center--University Circle, according to a newswire
report. As a result, the facility will cease accepting new admissions
immediately, and the emergency room department will shut down within 48
hours. The closing process will proceed in an orderly manner until all
current patients either complete their treatments or have been
transferred to other facilities. PHS said the closing will not affect
operations at its four other area facilities, PHS filed for chapter 11
protection last March; the closing of the center is subject to the
bankruptcy court's approval. Crossroads LLC managing principal Dennis I.
Simon, who has been managing the PHS system since the middle of 1998,
said that '...teaching hospitals have been particularly vulnerable to
industry-wide financial pressures.'
Debt Counselors of America Warns Consumers About Paying Taxes
with Credit Card
Debt Counselors of America® Vice President Mike Kidwell
said yesterday, 'Using a credit card to pay your taxes could double your
tax bill. People should do the math before charging their taxes.'
According to a newswire report, Kidwell said that 'for the one-third of
Americans who have a balance due on their taxes, credit cards could turn
out to be an expensive option' because of interest charges. Debt
Counselors of America offers 'How to Deal with the IRS If You Can't Pay
Your Taxes,' a five-page self-help publication; copies can be ordered at
href='http://www.getoutofdebt.org/'>http://www.GetOutOfDebt.org.
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The Havana Group Agrees to Purchase Phillips & King
The Havana Group Inc., North Canton, Ohio, announced that it
has entered into a Letter of Intent to purchase Phillips & King
International Inc. (P&K); terms of the transaction were not
disclosed pending resolution of P&K's chapter 11 proceedings,
according to a newswire report. P&K is a California-based wholesale
distributor of smoking products. The Havana Group's acquisition is
subject to the successful reorganization of the company and completion
of adequate financing. The Havana Group is a direct marketer of tobacco
products.
Klett Lieber Rooney & Schorling Announces Delaware
Expansion
As part of its continued growth in the Mid-Atlantic region,
Pittsburgh-based Klett Lieber Rooney & Schorling announced the
expansion of its Wilmington, Del., office with a primary focus on
regulatory law, including land use, bankruptcy practice and litigation.
'Given the explosion of corporate bankruptcy filings in Wilmington, the
expansion of this office allows us to better serve our clients, which
include creditors and lending institutions from all parts of the
country,' said Bob Simons, co-chair of the firm's
Creditors' Rights and Bankruptcy Practice. The firm maintains a
Pittsburgh headquarters and offices in Philadelphia and Harrisburg, Pa.;
Wilmington, Del. and Cherry Hill, N.J.
Mexican Airline Virtually Bankrupt
Grounded Mexican airline Taesa said yesterday that it is
virtually bankrupt and is not able to pay a debt six times greater than
the value of its assets, according to Reuters. The airline, the third
largest in Mexico, has been grounded since November following a fatal
crash. The company said its liabilities are about $380 million and
assets are about $60 million. Today a judge is set to rule on Taesa's
petition to temporarily suspend payments of an estimated $400 million in
debts. The largest creditor is the government's IPAB bank deposit
guarantee fund. Taesa is also facing a labor dispute with more than
3,500 employees owed back pay since Jan. 30, who have threatened to go
on strike on Friday. Analysts agree the airline can only avoid
bankruptcy by finding a partner willing to invest about $130 million
into the company.
Japan's January Bankruptcies Rise 43.7 Percent
Japanese corporate bankruptcies climbed 43.7 percent in January
on year to 1,441, Teikoku Databank, a credit research firm, reported
this week. Credit analysts forecast business failures will continue to
increase in the coming months. The firm said, 'Business conditions at
medium- to small-sized companies remain harsh. With banks and clients
becoming more selective in doing business, corporate bankruptcies are
set to resume rapid growth.' On Sunday, mid-sized Japanese supermarket
Nagasakiya Co. Ltd. became the largest ever bankruptcy in the nation's
distribution sector by filing for protection from creditors.
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