Claim Buyer Doesn’t Acquire Seller’s Insider Status, Ninth Circuit Holds
Debtor-friendly opinion validates strategy for cramming down on secured lender.
Judge Name - Do not use it.
N. Randy Smith
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U.S. Bankruptcy Court Set to Weigh in on Bitcoin's Currency Status
A California bankruptcy court is set to weigh in on whether bitcoin should be considered a currency, CoinDesk.com reported today. The hearing, set for Feb. 19, follows months of legal wrangling between the trustee of bankrupt bitcoin mining firm HashFast and Marc Lowe, a former promoter for the service who operated under the handle “CypherDoc.” Trustee Michael Kasolas filed suit against Lowe in February of last year, seeking to recoup 3,000 bitcoins that had been paid by HashFast to Lowe for promoting the service, including a series of posts on the Bitcoin Talk forum. The trustees alleged that Lowe was an insider who received preferential treatment from the firm, including the awarding of a refund while other customers were awaiting theirs, prior to HashFast’s bankruptcy.
Florida Bankruptcy Judge Splits with Seventh Circuit on Attorney/Client Privilege
Client questionnaires are held to be protected by the attorney/client privilege.
Judge Name - Do not use it.
Paul G. Hyman Jr.
Analysis: Delaware Judge Categorically Bars All Counsel from Compensation for Defense of Fees
Bankruptcy Judge Mary F. Walrath in Delaware categorically barred lawyers from circumventing the Supreme Court’s opinion in Baker Botts LLP v. ASARCO LLC by refusing to approve a retention application requiring the debtor to compensate committee professionals for successfully defending their fees, according to an analysis by Bill Rochelle in ABI’s Rochelle Daily Wire. In June, the Supreme Court held 6-3 in ASARCO that debtors’ counsel in bankruptcy cases cannot be paid for successfully defending their fee requests. In Delaware, the reorganization of Boomerang Tube LLC became a test case to decide whether lawyers could sidestep ASARCO by incorporating the reimbursement of defense costs into a retention agreement approved up front by a bankruptcy judge. In a footnote at the very end of her opinion, Judge Walrath in substance said that no form of artful drafting, even by the debtor’s lawyers, will pass muster because using estate funds to pay fee defense costs “are not reasonable terms of employment of professionals.” To read the full analysis, sign up for complimentary access to ABI’s Rochelle Daily Wire.
A $15,000 Civil Contempt Order Was Interlocutory and Not Appealable
Perhaps a civil contempt order should sometimes be final in bankruptcy.
Judge Name - Do not use it.
Percy Anderson
Bankruptcy Code
Bankruptcy Judge Limits Probe of Bloomberg News Sources
A federal judge on Friday reined in a probe of leaks from the hard-fought bankruptcy of rare-earths producer Molycorp, handing a win to Bloomberg News, the Wall Street Journal reported on Saturday. Bankruptcy Judge Christopher S. Sontchi said the Molycorp disclosure order “is overly broad and needs to be narrowed,” at a hearing on Friday in U.S. Bankruptcy Court in Wilmington, Del. The news organization had challenged a court order issued last week by Judge Sontchi, which required some 123 people to disclose what they had told Bloomberg reporters about Molycorp. The judge reversed his order after urging from Bloomberg to weigh First Amendment interests against the court’s power to control the bankruptcy proceeding. The judge ordered the destruction of the disclosure documents which were filed on Tuesday in bankruptcy court.
January ABI Journal Article Finds Appointment of Patient Care Ombudsman to Be Efficient and Cost Effective in Health Care Bankruptcies
Alexandria, Va. — Established as a requirement 10 years ago in Bankruptcy Code amendments, the patient care ombudsman (PCO) has been shown to be an effective advocate for patients and debtors during health care bankruptcies, according to an article in the January ABI Journal. The article also found that the costs associated with hiring PCOs and related professionals do not negatively impact the debtor. “These costs can certainly be controlled through a carefully planned appointment process and good working relationship between the PCO and all constituents in the case,” Suzanne Koenig SAK Management Services LLC (Northfields, Ill.) and Nancy A. Peterman of Greenberg Traurig, LLP (Chicago) write in their article “PCOs and the Ongoing Debate over Cost: 10 Years Later.”
The Bankruptcy Code amendments in 2005 included a requirement that a PCO be appointed in all chapter 7, 9 or 11 cases filed by a health care business “unless the court finds that the [PCO] appointment is not necessary for the protection of patients under the specific facts of the case,” according to Koenig and Peterman. The PCO plays a critical role in health care business bankruptcy cases by ensuring that the quality of patient care is maintained during the bankruptcy case and that the interests of the bankrupt care facility’s patients are represented. “This is important for the patients and for all constituents, who are counting on ongoing cash flow from the business,” according to the authors. “However, there continues to be significant opposition to the appointment of PCOs due to one of the main criticisms of the bankruptcy process today: cost,” they write.
As 10 years have passed since the requirement was put in place, Koenig and Peterman write that many debtors are finding out that the PCO “can be a valuable ally in the bankruptcy case in helping with a sale process, helping address regulatory issues with governmental agencies or otherwise assisting on key case issues impacting patient care.” The authors point out that the PCO may take a position on plan negotiations, contract terminations (such as service contracts for an emergency room), funding needs or a sale process, all of which impact patient care. “The PCO’s voice can be very powerful in representing the patient’s interests and helping with the debtor’s reorganization, when those interests are aligned,” Koenig and Peterman write.
To obtain a copy of “PCOs and the Ongoing Debate over Cost: 10 Years Later,” published in the January issue of the ABI Journal, please contact John Hartgen at 703-894-5935 or via email at jhartgen@abiworld.org.
ABI will also be holding a webinar on February 3 at 1 p.m. ET, hosted by ABI’s Health Care and Secured Credit Committees, that will examine the restructuring of Continuing Care Retirement Communities. For more information and to register for free, please click here: http://www.abi.org/events/abi-live-webinar-restructuring-of-continuing-care-retirement-communities.
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ABI is the largest multi-disciplinary, nonpartisan organization dedicated to research and education on matters related to insolvency. ABI was founded in 1982 to provide Congress and the public with unbiased analysis of bankruptcy issues. The ABI membership includes more than 12,000 attorneys, accountants, bankers, judges, professors, lenders, turnaround specialists and other bankruptcy professionals, providing a forum for the exchange of ideas and information. For additional information on ABI, visit www.abiworld.org. For additional conference information, visit http://www.abi.org/education-events.