Bankruptcy Litigation

Using Fraudulent Transfer Law in Ponzi Scheme Cases: A Remedy in Search of a Doctrine The presentation has two parts. In Part One, the panelists will use hypotheticals drawn from actual cases, first to discuss common themes and issues that arise in Ponzi Scheme cases, then to illustrate what differentiates Ponzi Scheme cases from other kinds of fraud-based bankruptcies. This includes: the unique role of investors as both victims and tools of the fraud; how, when, and why arguably legitimate businesses might be recognized as Ponzi Schemes; the judge's role as facilitator; and common litigation tools and tactics utilized to ensure equal treatment of creditors. Part Two focuses on the doctrinal challenges and possible misfits involved in utilizing fraudulent transfer law to resolve such cases. Participants will learn the basics of Ponzi Scheme cases, including: how they typically arrive in bankruptcy court; common issues that arise; common litigation tools and strategies; and methods for managing distributions to creditors. From there, participants will be asked to think critically about all of the above, and to focus on whether the means by which attorneys and judges have resolved these cases really have a firm foundation in the law. Business Suggested Speakers Hannah Blumenstiel hannah_blumenstiel@canb.uscourts.gov Bankr. N.D. Cal. San Francisco CA

Discounting the Impact of Motor Vehicle Exemptions Among the States In February 2024, I proposed a motor vehicle exemption for the State of South Dakota, which was ultimately killed in the senate judiciary. Part of my preparation for the proposal to the senate was to justify a $5,000 exemption in our state. This led me to questions of why motor vehicles matter in bankruptcy/levy process, and extensive research on WHY they matter for each and every state to allow debtors to protect at least one vehicle. This is an important topic because of the significant role of vehicles in American culture, as well as agricultural communities like us in the midwest. Stale exemption laws lead to outdated laws, and stagnate bankruptcy reform. The longer a state waits to update these laws, the harder they become to pass through even minimal changes in states like South Dakota. I have attached my recent article discussing some of this information from Nortons Annual Survey of Bankruptcy Law. Participants will learn:
-The history of exemption laws, §522 and the history of the "opt out" provisions.
-Overview on different states' motor vehicle exemption laws, and how those come into play with other relevant exemptions such as tools of the trade exemptions, wildcard exemptions, and agriculture/farming exemptions.
-Gain insight into strategies to keep their state's exemption laws relevant (i.e. are your state's exemption laws current or outdated? How can we stay informed on neighboring states' exemptions?)
-Develop an understanding of why such little information and research exists on motor vehicle exemptions.
-Understand the correlation between home equity and motor vehicle exemptions.
-Participants will learn specific problems with state vs. federal exemption laws (i.e. is the state exemption law better than §522's provisions?). Consumer Suggested Speakers Jenna Riedel jenna.j.weir@gmail.com U.S. Bankruptcy Cort Sioux Falls South Dakota

The Business Judgment Rule - Key Legal Cases, Litigation Insights, and Strategies for Director, Officers, and Litigators This session will provide a comprehensive understanding of the Business Judgment Rule (BJR) as it applies to corporate governance, with a specific focus on how directors and officers can navigate potential litigation. The session will start with a foundational overview of the BJR, followed by an in-depth analysis of the key legal cases that have shaped its application. Additionally, the session will delve into the strategies for advising corporate clients—particularly directors and officers—on how to avoid becoming targets of litigation, including the role of independent board directors in mitigating risk.

Session Structure and Key Topics:
1. Introduction to the Business Judgment Rule (BJR)
Objective: Provide a foundational understanding of the BJR and its role in corporate governance.
- Definition of the BJR and its purpose in protecting directors and officers from liability.
--- The BJR presumption: when courts defer to the decisions of corporate leaders.
--- Key elements required to invoke the BJR: good faith, rationality, and lack of conflicts of interest.
--- Key areas where the BJR applies: financial decisions, strategic direction, and operational oversight.

2. Key Legal Cases Shaping the Business Judgment Rule
Objective: Explore the landmark cases that have defined and evolved the application of the BJR.
- Smith v. Van Gorkom (1985): The duty of care in decision-making and its relation to the BJR.
- Aronson v. Lewis (1984): The standard for judging board decisions and establishing the BJR presumption.
- In re Caremark International Inc. Derivative Litigation (1996): The BJR's application in oversight and monitoring duties.
- Stone v. Ritter (2006): Examining the role of good faith and the implications for directors' oversight responsibilities.
- Directors' duty of loyalty vs. duty of care: Understanding the balance and how courts distinguish between them.

3. Litigating Business Judgment: Defending and Pursuing Claims
Objective: Offer insight into the litigation landscape for D&O claims and how the BJR impacts defense and pursuit of litigation.
- Litigating under the BJR: When the rule can be overcome by plaintiffs and how courts assess the decision-making process of directors.
- Strategies for defending directors and officers in lawsuits, including the use of the BJR as a key defense.
- How plaintiffs attempt to overcome the BJR (e.g., allegations of bad faith, lack of independence, or conflicts of interest).
- Case studies and trends in shareholder derivative suits and class actions.

4. How to Advise Directors and Officers to Avoid Becoming Targets of Litigation
Objective: Discuss proactive strategies for corporate advisors to help directors and officers avoid litigation exposure.
- Best practices for documenting decisions to ensure alignment with the BJR.
- The importance of maintaining a robust conflict-of-interest policy and board independence.
- Key governance practices that mitigate risks: regular board evaluations, clear delegation of authority, and transparency in decision-making.
- Ensuring compliance with statutory and fiduciary duties—particularly in distressed situations.
- The role of internal and external advisors in helping directors navigate complex situations.

5. The Role of Independent Board Directors in Mitigating Risk
Objective: Highlight the importance of independent directors in protecting the organization and its leadership from litigation.
- Defining the role and responsibilities of independent board members.
- How independent directors help reinforce the BJR in decision-making processes.
- The critical role of independent directors in distressed or bankruptcy situations.
- Best practices for selecting, empowering, and working with independent board directors to safeguard against personal liability.

Target Audience:
General Business Bankruptcy Counsel | Corporate Governance Professionals | Directors and Officers (D&O) | Litigators specializing in corporate governance and D&O cases | Financial Advisors specializing in distressed situations and workouts | CROs

Learning Objectives:
- Gain a comprehensive understanding of the Business Judgment Rule and its importance in corporate governance.
- Analyze major legal cases and their impact on the application of the BJR.
- Develop strategies for defending and pursuing litigation involving directors and officers.
- Learn proactive strategies for advising directors and officers to minimize the risk of personal liability and litigation.
- Understand the importance of independent board directors in mitigating risks for directors and officers. Business Suggested Speakers Franklind Lea Franklind.Lea@jsheld JS Held

Real Estate Distress and Bankruptcy: Mitigating Risks and Protecting Investments As rising interest rates, tightening credit conditions, and shifting market dynamics place increasing pressure on real estate assets, bankruptcy and restructuring professionals must be prepared to navigate distressed situations strategically. This session will explore the intersection of real estate, bankruptcy, and litigation, providing insights into effective legal strategies for preserving asset value, resolving disputes, and maximizing recoveries in real estate-related bankruptcies. Attendees will gain a deeper understanding of common distress triggers, key considerations for restructuring agreements, and best practices for handling litigation arising from distressed real estate investments. Experts will also discuss the role of receiverships, workouts, and court-supervised sales in resolving real estate bankruptcies. Analyze Distress Triggers: Identify the key financial and legal factors leading to distress in real estate investments, including debt maturities, covenant breaches, and sponsor disputes.
Understand Restructuring Tools: Explore workout strategies, prepackaged bankruptcies, and other mechanisms for repositioning distressed real estate assets.

Evaluate Litigation Risks: Examine common legal disputes in real estate bankruptcies, including lender liability claims, fraudulent transfer litigation, and lease assumption/rejection battles.

Assess the Role of Receiverships and Sales: Learn how receiverships and 363 sales can be leveraged to maximize asset value and facilitate orderly dispositions.

Develop a Litigation-Resistant Investment Strategy: Gain insights into structuring real estate deals to mitigate risks and protect creditor and investor interests in downturns. Business Suggested Speakers Gaby Suarez Walters gaby@rarepublicrelations.com R[AR]E Public Relations

It is time to amend Bankruptcy Rule 9031 to permit the appointment of special masters in bankruptcy. Discussion of the compelling reasons why Bankruptcy Rule 9031 should be repealed or amended to allow for the appointment of special masters in bankruptcy cases and proceedings. Debtor Suggested Speakers Mark Conlan mconlan@gibbonslaw.com Gibbons P.C.

The Importance of Strategic Communications and Media Relations in High-Profile Restructurings In high profile restructurings, managing public perception and crafting a go-forward narrative matters. This session explores how strategic communications play a critical role in mitigating reputational damage and preserving brand and estate value throughout the restructuring process, including positioning the company for success upon emergence.

We will explore the importance of:
- Developing a comprehensive communication strategy to address various stakeholders (employees, partners, media, etc.) and preserve enterprise value
- Being prepared to implement aspects of the strategy even before filing (given propensity for leaks) and during key moments of the process through emergence
- Communicating effectively to promote business objectives, shape public perception, support legal strategies, and stabilize key stakeholder relationships
- Proactively (and reactively) addressing misinformation, media inquiries and stakeholder concerns to protect the brand and franchise
- Learning from real-world examples of communication efforts in major bankruptcies
Participants will be able to understand:
- The role strategic communications play in preserving value of the brand and business, including keeping internal and external parties apprised and on side
- The importance of crafting clear, forthright, consistent and timely messaging
- The ways in which strategic communications can significantly influence the outcome of a restructuring process

Debtor Suggested Speakers Paul Caminiti paul.caminiti@reevemark.com Reevemark (Strategic Communications)

Digital Assets Are Coming to a Bankruptcy Near You This session will introduce participants to the very hiogh likelihood that digital assets could be a part of a bankruptcy estate given the rapid growth in the use of digital assets to transact business and in the number of people in the United States that own digital assets. Participants will be made aware of the resources, tools, and professional services available to locate, track, quantify, value and recover digital assets for the bankruptcy estate. 1. Participants will gain a working understanding of blockchain technology, cryptocurrencies and other digital assets and their rapid adoption by individuals and businesses.
2. Participants will learn to identify signs that a party may possess digital assets and will be familiar with the resources available to aid in discovering and identifying digital asset ownership.
3. Participants will learn about the techniques and tools available to trace and recover digital asset transactions.
4. Participants will learn the basic issues and challenges in valuing digital assets. Creditor Suggested Speakers Marc Schwartz Mschwartz@schwartzassociates.us Schwartz Associates, LLC

A Tale of Sovereign Restructurings: Venezuela and the CITGO Saga Discussion on the developments of Venezuela's indefinitely postponed external debt restructuring process and the individual execution efforts over the country’s most valuable assets in the US—CITGO’s network of downstream assets—in the context of the Crystallex litigation in Delaware. The session would highlight the tension between “first come / first served” principles guiding the current stream of individual enforcement / execution, and the creditor coordination features of a pure insolvency proceeding. The session will provide clarity on the status of the ongoing melee of court cases going after Venezuela's assets abroad, in the zoom-out context of the prospects for a broad, all-encompassing, debt restructuring process Creditor Suggested Speakers Roland Pettersson rpettersson@dra.com.ve D'Empaire

Class Actions There has not been much written or said about the effect of a class action of creditors. Can a class action obtain a class vote on a chapter 11 plan that supplants the votes of individual creditors? If so, then does class counsel and the class representative supplant the creditors committee and its counsel as the party with whom the debtor must negotiate a consensual plan? Does it matter if the class action was pending prepetition or whether a new class action was commenced as an adversary proceeding under the Bankruptcy Rules? Does it matter if the class is or was certified? What about a defendant class (as the debtor sought to be formed among parties sued by the debtor in the MA Telex Free case), rather than a plaintiff class - does that matter to any of these issues? I was involved in a chapter 11 case representing a putative class. There is very little law on this subject. Academically, there is some analysis fo the similarities between a non-bankruptcy class action case and a bankruptcy case, but very little in the way of case law. Going forward, I always look for opportunities to assert a class action to test some or all of these issues, particularly whether the class can file a class claim. Creditor Suggested Speakers Jeffrey Sternklar jeffrey@sternklarlaw.com Jeffrey D. Sternklar LLC

Lender-on-Lender Violence – A Viable Solution or Delaying the Inevitable? The prevalence of liability management exercises (LMEs) continues to grow as companies seek creative solutions to manage unsustainable capital structures. Majority creditor groups have a long list of options to choose from in order to put themselves in front of minority creditors – priming, uptiering, covenant stripping, drop-down transactions and more. But the track record for so-called lender-on-lender violence has been patchy at best, often serving as a precursor to bankruptcy, rather than a way to avert it.

Potential discussion points:
1) What are some key takeaways from recent litigation, and what could have been done differently?
2) How can minority/nonparticipating lenders best protect themselves via creditor cooperation agreements?
3) What are the implications of these transactions on valuations?
4) How have these transactions evolved, and what does the future of lender-on-lender violence hold?
Attendees will gain an understanding of the current and future state of liability management exercises, including insights on litigation trends and updates on several recent key appeals.

Attendees will also learn about strategic approaches for creditors to effectively navigate these challenges and how lawyers can stay on top of these issues for their clients.

The session will provide projections for the distressed debt landscape in the upcoming year, equipping participants with knowledge to forecast opportunities that may arise.
Debtor Suggested Speakers Suezelle D'Costa s.dcosta@hawthornadvisors.com Hawthorn Advisors