href='mailto:Headlines@abiworld.org?subject=Subscribe me to the ABI
Headlines Direct'>
February 8, 2006
id='1'>Bankruptcy Rewrite Predicted
to Bring a Flood of Appeals
The country's top
bankruptcy lawyers say the BAPCPA is intellectually and linguistically
insolvent, The
Recorder reported today. 'The problem is the
new law is so poorly crafted and so internally inconsistent that within
a year or a year and a half, you're going to see a lot of appeals,' said
Prof. Kenneth Klee of the UCLA School of Law, who
helped to draft the revisions to bankruptcy law in 1978 early in his
career as a congressional staffer. That's a concern for federal judges,
who are trying to figure out how to deal with the flood of appeals bound
to be unleashed by the substantive, often ambiguous changes. The changes
to the law are likely to set more competition, and litigation, among
creditors. Litigation will be compounded by the cross-referencing and
grammatical shortcomings that the appeals courts will have to resolve.
'The bill was drafted without consultation with bankruptcy judges and
courts,' said Ninth Circuit Chief Judge Mary Schroeder. 'Since they
didn't consult with judges, they didn't use terms of art.' The reason
for that, say opponents and supporters of the bill, is that bankruptcy's
increasingly important role in the economy has raised the stakes for
large creditors. 'Bankruptcy became too important to be left just to a
group of self-appointed experts,' said Philip Corwin,
a
size='3'>lawyer who lobbied in support of the new law for the American
Bankers Association. However, without the expertise -- self-appointed or
otherwise -- of judges and lawyers, there is widespread judicial concern
over how the law will shake out.
href='http://www.law.com/jsp/article.jsp?id=1139306710471'>Read
more.
Firm
Wins Skirmish over
Adelphia's Special Examiner Request
The judge presiding over
the chapter 11 bankruptcy of Adelphia Communications has denied a
request to appoint a special examiner to determine whether Boies,
Schiller & Flexner, which formerly represented the cable television
company, violated the Bankruptcy Code by failing to disclose that some
of its lawyers, including children of senior partner David Boies, were
financially interested in litigation support companies the firm
recommended to Adelphia, the
size='3'>New York Law Journal reported today.
The company, which landed in bankruptcy in 2002 following allegations
that its founding family, the Rigases, looted the company of hundreds of
millions, asked Boies Schiller to resign as its special litigation
counsel last August for failing to disclose those
interests. The
request for a special examiner, supported by the U.S. Trustee, Adelphia
and its creditors' committee, was made in response to Boies Schiller's
final request for fees in the case. The firm is seeking almost $30
million for its work since June 2002, most of which has already been
paid. Adelphia and its creditors are hoping a probe will show that
document management company Amici and copying company Echelon
overcharged the estate, which was billed millions for their services.
Boies Schiller had objected to the appointment of an examiner on the
grounds that Adelphia had previously bargained for a discount on
document services, at which time it had determined fees were
reasonable.
href='http://www.law.com/jsp/article.jsp?id=1139351653042'>Read
more.
Raises Constitutional
Challenge to Sarbanes-Oxley
High-profile,
pro-business conservatives are challenging a law that reshaped the
accounting industry after a wave of corporate scandals challenged on
constitutional grounds, including Kenneth Starr, best known as the
special prosecutor in the Monica Lewinsky affair, the Associated Press
reported today. Bitterly opposed to the sweeping anti-fraud law, they
are challenging the board it established to oversee the accounting
industry, arguing that it violates the Constitution's mandated
separation of powers among the three branches of government. The Free
Enterprise Fund, an anti-tax group that seeks limited government, filed
suit Tuesday in federal court in
w:st='on'>Washington,
D.C.,
accounting board, known as the Public Company Accounting Oversight
Board. The anti-fraud law, known as the Sarbanes-Oxley Act for its
congressional sponsors, could be invalidated if any of its sections is
found unconstitutional. Opponents want it sent back to Congress for a
revision, arguing that the makeup of the accounting board violates the
separation of powers doctrine because its members aren't appointed by
the president and cannot be removed by him, and Congress cannot control
its budget.
href='http://www.law.com/jsp/article.jsp?id=1139351651226'>Read
more.
id='4'>COMMENTARY: Challenge to
Sarbanes-Oxley Well Founded
The Free Enterprise
Fund’s challenge that the Public Company Accounting Oversight
Board, the quasi-private agency that Sarbanes-Oxley established to
oversee the auditing of public companies, violates the Appointments
Clause of the Constitution is compelling and may finally spur Congress
to revisit a law that has arguably done more economic harm than the
scandals that inspired it, according to an editorial in
today’s Wall
Street Journal. The bigger
companies understand that Sarbanes Oxley imposes more of a burden
on their smaller competitors. Some of these companies aren't going
public at all, figuring the new capital isn't worth the extra cost and
regulator harassment. Sarbanes-Oxley lacks a 'severability' clause,
which means the entire law is held unconstitutional if even one part of
it is. And if history is any guide, the courts would give Congress
limited time to 'fix' the Appointments violation. A growing number of
members are concerned about the impact of Sarbanes-Oxley, especially on
smaller business and the capital markets, and a finding of
unconstitutionality would reopen the debate.
href='http://online.wsj.com/article/SB113936823813968017-email.html'>Read
more.
id='5'>Senate Votes to Debate Bill
for Asbestos Victims' Fund
Backers of legislation to
create a $140 billion trust fund for victims of asbestos exposure won an
important victory on Tuesday evening, when the Senate voted to begin
debate on the measure, the
size='3'>New York Times reported today. The
vote was 98-1, and came after critics dropped their opposition when they
realized that they did not have enough votes to block the debate. The
Democratic leader, Sen. Harry Reid of
w:st='on'>
size='3'>Nevada
tar the companies supporting the legislation and their lobbyists by
invoking the specter of Jack Abramoff, the disgraced lobbyist who
pleaded guilty last month to criminal corruption charges. The cloture
vote on Tuesday to proceed to debate was requested by Senator Reid. He
ultimately voted against his own motion to open the debate after
concluding he did not have the votes to stop the legislation. Jim
Manley, a spokesman for Mr. Reid, said the senator would continue to use
every possible procedural maneuver to kill the legislation, including a
filibuster. The sole vote to block debate on Tuesday came from Sen.
James M. Inhofe (R-Okla.).
href='http://www.nytimes.com/2006/02/08/politics/08asbestos.html?_r=1&oref=slogin'>Read
more.
id='6'>Bingham's Loss Is
Orrick's Gain: 10-Lawyer Bankruptcy Group
Asbestos has long been a moneymaker at Swidler
w:st='on'>
size='3'>Berlin
firm's prized practice isn't worth enough to its merger partner Bingham
McCutchen, which has pushed Swidler’s 10-lawyer bankruptcy group
out of the planned union, the
size='3'>Legal Times reported today. More than
a third of the bankruptcy practice involves representing companies on
asbestos claims, which conflicts with Bingham's work for insurance
companies in asbestos cases. Despite pending legislation that would cut
down on asbestos litigation, Orrick bankruptcy co-chair Lorraine McGowen
says the firm is not concerned about the future profitability of the
practice. 'The expertise gained in asbestos will be able to be used in
any other mass tort,' she says.
href='http://www.law.com/jsp/article.jsp?id=1139306709713'>Read
more.
w:st='on'>
size='3'>
id='7'>U.S.
face='Times New Roman' size='3'>Consumer Credit Rose $3.35 Billion in
December, Fed Says
A
Federal Reserve report
indicated that
w:st='on'>
size='3'>U.S.
size='3'>consumer borrowing rose for a second month in December while
finishing 2005 with the smallest annual gain in 13 years, Bloomberg News
reported yesterday. Consumer credit, or non-mortgage loans to
individuals, increased by $3.35 billion to $2.16 trillion after rising a
revised $568 million in November, according to figures released today
in
D.C
percent for all of last year, the slowest pace since a 1 percent gain in
1992. Revolving debt,
such as credit cards, fell $939 million during the month after
increasing $865 million a month earlier, according to the central bank's
figures. Last year's 2.6 percent increase in revolving debt was the
smallest since a 2.5 percent gain in 1980.
size='3'> The credit card delinquency rate,
in turn, fell to 3.7 percent in November after rising as high as 5.52
percent in February 2003, according to statistics from Moody's Investors
href='http://www.bloomberg.com/apps/news?pid=10000103&sid=aDz4wGotcnSk&refer=us#'>Read
more.
Capital Creditors
Argue Against Liquidation
Refco Inc. and various
creditors of the company's unregulated broker-dealer unit argued against
the unit's liquidation, saying it would result in lower and inequitable
payouts, Reuters reported yesterday. The entities, which include Bank of
America Corp. and Wells Fargo & Co.,
filed memoranda opposing the attempt by some customers to convert Refco
Capital Markets Ltd.'s chapter 11 bankruptcy case into a chapter 7
liquidation. These customers argued in a Dec. 12 court filing that they
are entitled to their assets back. Refco has contended that the assets
belong to the company, meaning those customers deserve the same
treatment as other unsecured creditors. U.S. Bankruptcy Judge
Robert Drain is expected to hear arguments on Feb. 14
over whether to turn Refco Capital Markets' bankruptcy into a
'stockbroker liquidation.' 'Recharacterizing Refco Capital Markets as an
inadvertent stockbroker would unfairly and inequitably advance the
interests of a small group of clients to the detriment of clients who
traded in commodities, foreign currency, and even those who traded in
securities but do not meet the stringent definition of 'customer,''
Refco argued.
href='http://today.reuters.com/investing/financeArticle.aspx?type=bondsNews&storyID=URI:urn:newsml:reuters.com:20060207:MTFH06511_2006-02-07_22-44-17_N07274208:1'>Read
more.
id='9'>Winn-Dixie Shareholders
Denied by Bankruptcy Court
The U.S. Middle District
of Florida bankruptcy court denied a motion for re-instatement by the
former committee representing Winn-Dixie Stores Inc.'s stockholders,
the Tampa Bay Business
Journal reported yesterday. The denial comes
on the heels of an emergency hearing on Jan. 30, requested by the former
official equity committee's lawyers who had hoped to reverse a Jan. 11
disbandment order from the case's U.S. Trustee. Lawyers for the
committee hoped to repeal the U.S. Trustee's disbandment, which the
committee felt was improperly done; or if that disbandment was deemed
legal by Judge Jerry Funk, for the court to appoint its own official
equity committee. The order may mark the end for the equity committee's
sometimes contentious involvement in Winn-Dixie's chapter 11
reorganization. Lawyers for the stockholders' committee had been calling
for an independent examination of Winn-Dixie's finances and the actions
of senior company leadership leading up to its chapter 11 filing, while
other parties in the case have consistently stated since late last year
that no funds will be left from the reorganization to distribute to
Winn-Dixie shareholders.
href='http://tampabay.bizjournals.com/tampabay/stories/2006/02/06/daily29.html?jst=b_ln_hl'>Read
more.
id='10'>New Turmoil in
size='3'>Illinois
face='Times New Roman'
size='3'>Church
Scandal
A new allegation was made
by a 34 year old man who said that he was sexually abused by a priest at
the Diocese of Joliet (
w:st='on'>
size='3'>Ill.
eight for about four years, according to Reuters yesterday. Dan
Shanahan, 34, of
size='3'>Phoenix,
w:st='on'>
size='3'>Ariz.
the priest, the Rev. James Burnett, was serving as rector of the
cathedral church in the Diocese of Joliet, southeast of
size='3'>Chicago
he felt the need to talk about it because 'I felt guilty' that by
keeping quiet other children may have become victims. The Diocese of
Joliet (
face='Times New Roman' size='3'>Ill.
size='3'>) issued a statement saying that Burnett denies the allegations
but 'has been placed on administrative leave until the matter is
resolved.' Last week the Diocese of Spokane, Washington, which filed for
bankruptcy because of suits against it by people who said they had been
abused, announced it was offering victims $45.75 million to settle their
claims. In
face='Times New Roman'
size='3'>Kentucky
Diocese of Covington last week settled abuse claims for $85
million.
href='http://news.yahoo.com/s/nm/20060207/us_nm/crime_church_dc_1'>Read
more.
GM
Makes Cuts to Avert
Bankruptcy
General Motors, under
pressure to show its blue-collar workers that investors and executives
are also prepared to give up something in order to help overcome the
company's deepest losses in more than a decade, said that it would
reduce pay for top officials, reduce pension and health care plans for
its retired salaried workers and cut its stock dividend by half,
according to a report in the
size='3'>New York Times today. GM, still
clinging to its status as the world's largest auto company, is
struggling to turn around its operations and avoid a potential
bankruptcy. The executive pay reductions — including 50 percent
for G.M.'s chief executive — affect only a small number of people
and save relatively little compared with the dividend cut and the
reductions in health care contributions. GM did not disclose any
developments in the long-awaited sale of a portion of its GMAC finance
unit. Nor did it disclose an agreement concerning the United Autoworkers
Union and the Delphi Corp., GM's former parts unit, which is operating
under bankruptcy protection. The company did say that it was capping
health care coverage for 100,000 retired salaried workers and 26,000
active employees who joined the company before 1993. GM no longer offers
health care coverage for its salaried retirees.
href='http://www.nytimes.com/2006/02/08/business/08auto.html'>Read
more.
href='http://www.nytimes.com/2006/02/08/business/08auto.html'>
In related news, GM's
move to dilute salaried workers' pensions and make them shoulder more
medical bills in retirement is a milestone in the erosion of a deal big
American companies struck in the prosperous years following World War
II, The Wall Street
Journal reported today. 'Our employer-based
social-welfare system is collapsing,' says Alicia Munnell, director
of
face='Times New Roman' size='3'>Boston
size='3'>College
Center for Retirement Research. 'GM itself is not a big deal. It's GM on
top of Verizon and IBM' -- which both recently froze some of their
pension plans -- 'and then there's everything that's happening in weak
companies like airlines.' Although it offered few details, the auto
maker also said it would 'substantially alter pension benefits' for
salaried workers to 'reduce the financial risks to
GM.'
href='http://online.wsj.com/article/SB113936666969167992-email.html'>Read
more.
International
id='12'>Later British Pension
Age 'Inevitable'
An increase in the state
pension age after 2020 is now inevitable, the work and pensions
secretary, John Hutton, said in the Guardian
size='3'>on Tuesday. Speaking at a conference organized by think tank
the Work Foundation, Hutton said proposals to raise the state retirement
age, as outlined in last year's report from Lord Turner's Pensions
Commission, would have to be adopted if future generations were not to
face an increased pension burden. He said the government would be
looking at ways to make the rules surrounding state pension deferral
easier, including the Pension Commission's suggestion that people be
allowed to defer some of their pension rather than all of it, as is
currently the case.
size='3'>The cost of providing pensions has soared in recent years as
life expectancy has increased, and figures published today by the
Government Actuaries Department (Gad) suggest unless the state
retirement age rises, the bill could become even greater. If life
expectancy increases at the highest possible rate, Gad said the number
of people aged over 65 could triple by 2074 to 15.5 million, and account
for more than 21 percent of the
w:st='on'>
size='3'>U.K.
population.
href='http://politics.guardian.co.uk/economics/story/0,,1704492,00.html'>Read
more.
id='13'>Canadian Pension Reform
Could Lead to Strike
Sid Ryan, president of
Canadian Union of Public Employees (CUPE) Ontario, is so opposed to the
pension reform legislation he's threatening to take 120,000 municipal
and school board employees on a province-wide illegal strike, according
to the Toronto
Star today. The original purpose of Bill 206
— expected to get final reading later this month — was to
put municipalities in charge of their $40 billion pension plan. The
controversy is over amendments that give police, firefighters and, to
some degree, paramedics supplemental plans allowing them to retire
earlier with full benefits. Municipalities say they'll have to raise
property taxes to pay for these extra benefits and that it's unfair for
emergency workers to get the right to negotiate pension benefits the
rest of the workers in OMERS will never get. Premier Dalton McGuinty
defended the legislation, calling it 'reasonable.'
href='http://www.thestar.com/NASApp/cs/ContentServer?pagename=thestar/Layout/Article_Type1&c=Article&cid=1139352619951&call_pageid=968332188774&col=968350116467'>Read
more.
href='http://www.thestar.com/NASApp/cs/ContentServer?pagename=thestar/Layout/Article_Type1&c=Article&cid=1139352619951&call_pageid=968332188774&col=968350116467'>