NEWS AND ANALYSIS
FINAL REPORT OF ABI’S ETHICS TASK FORCE PROVIDES GUIDANCE TO BOTH CONSUMER AND BUSINESS BANKRUPTCY PROFESSIONALS
The ABI National Ethics Task Force released its final report at ABI’s 31st Annual Spring Meeting to provide recommendations for both consumer and business practitioners for uniform ethical standards in bankruptcy practice. Funded by ABI’s Anthony H.N. Schnelling Endowment Fund, the Task Force formulated a set of uniform ethical standards on a variety of bankruptcy-related matters, including use of conflicts counsel, employment of counsel and necessary disclosures, competency standards, and fiduciary duties of counsel for the debtor in possession (DIP).
The Ethics Task Force was established in 2011 by then-ABI President Geoffrey L. Berman of Development Specialists Inc. (Los Angeles) to address ethics problems encountered by bankruptcy professionals and judges as state ethics rules do not always fit with the realities of bankruptcy practice. The Task Force formed committees, surveyed bankruptcy professionals, academics and judges, and examined recent case law to focus on seven recommendations:
1. proposed amendments to Bankruptcy Rule 2014 governing the hiring of bankruptcy professionals, including greater disclosure provisions for conflicts and connections;
2. duties of counsel for a debtor in possession as fiduciary and responsibilities to the estate;
3. framework for pre-approval of terms for retention and compensation under 11 U.S.C. § 328 to provide efficiency and clarity to courts in bankruptcy professional employment applications;
4. use of conflicts counsel in business reorganization cases, especially in large or complicated cases that may present significant conflicts;
5. best practices for limited services representation in consumer bankruptcy cases;
6. competency for debtors’ counsel in business and consumer cases; and
7. report on best practices on creditors’ committee solicitation.
Profs. Nancy B. Rapoport of the UNLV William S. Boyd School of Law (Las Vegas) and Lois R. Lupica of the University of Maine School of Law (Portland, Maine) served as reporters and said that while the report provides an ethical guide to all in the bankruptcy profession, new bankruptcy lawyers in particular should make sure they review the final report. "The findings and recommendations within the report are essential for new bankruptcy attorneys to absorb," Lupica said.
To read the ABI Ethics Task Force Final Report, please click here.
REPORT: DISCLOSURE OF INSIDER PAY MURKY IN A FEW CHAPTER 11 CASES
A Wall Street Journal analysis released today found that in 250 chapter 11 cases over the past five years, 19 companies tried to keep the details of insider pay secret, and 17 were successful at doing so. When Reader's Digest first ventured into bankruptcy in the summer of 2009, the multimillion-dollar payouts to top executives that showed up in court filings sparked outrage from employees facing layoffs and retirees staring down benefit cuts. Less than four years later, the publisher is now back in chapter 11, but how much its insiders were paid is not in the public record. RG Steel, whose collapse last year put thousands out of work, identified its top executives only as "Employee A" through "Employee G" when listing what it paid insiders. New York law firm Dewey & LeBoeuf LLP navigated bankruptcy without identifying the firm's top earners. Media giant Tribune Co. didn't reveal the names of insiders who collected $268 million the same year a leveraged buyout put the company on the path to bankruptcy. Read more. (Subscription required.)
DOWN PAYMENT RULES ARE AT THE HEART OF THE MORTGAGE DEBATE
While making home buyers put more money down seemed like an easy fix to prevent the excesses of the housing market, the issue is up for debate as the housing market starts to return and the subprime mess fades from memory, the New York Times DealBook blog reported yesterday. Lenders and consumer advocates — rarely on the same side of the issue — are now cautioning against down payment requirements. They argue that such restrictions could limit lending, and prevent lower-income borrowers from buying homes. They also contend that the new mortgage rules put in place this year will do enough to limit foreclosures, making down payment requirements somewhat superfluous. Regulators want to protect borrowers and promote homeownership. But they also want to encourage lending and insulate the financial system from future shocks. Read more.
ANALYSIS: HOW THE WHEELS CAME OFF FOR FISKER AUTOMOTIVE
The near-collapse of Anaheim, Calif.-based Fisker Automotive Inc.—it missed a loan payment on Monday, earlier dismissed most of its staff and has hired bankruptcy advisors—comes as affluent buyers have turned away from the once-promising startup and falling gasoline prices have chipped away at demand for electric cars, the Wall Street Journal reported yesterday. Barring a last-minute rescue, the company’s dissolution also represents one of the most prominent failures of the government's use of public funds to wean American industry from fossil fuels—and of how that government backing pushed Fisker to reach too far. At its peak, tiny Fisker received one of the largest U.S. venture capital payouts ever. Its founders raised more than $1 billion from highly regarded Silicon Valley venture funds including Kleiner Perkins Caufield & Byers. Its biggest single investor, though, was the U.S. In 2009, the Obama administration's interest in cultivating electric cars got the untested Fisker loans totalling $529 million, more than the company had initially requested, and an amount that encouraged private backers to chip in more funds. But despite its wealthy backers, Fisker had plenty of problems. Troubles with suppliers and regulatory requirements added months to the release of the company's first car, the Karma. Although engineers expressed concerns that the software that ran the Karma's display screens and phone connections was not ready, the Karma was released to customers. The company said that its problems were similar to those that would be expected of any new model. In May 2011, the Obama administration, under pressure from critics of its alternative energy spending and after the high-profile failure of U.S.-backed solar panel maker Solyndra LLC, froze disbursements to Fisker, citing delays in the Karma's rollout. Read more. (Subscription required.)
NEW ABI LIVE WEBINAR ON MAY 29 WILL FOCUS ON CLASS ACTIONS IN BOTH BUSINESS AND CONSUMER CASES
Class action lawsuits in both chapter 11 and 13 cases are becoming more prevalent. Are you wondering whether your clients’ WARN Act claims would be better pursued against a debtor company in a class action adversary proceeding or in a class proof of claim, or both? If your client has been sued in a debtor’s consumer class action adversary proceeding, do you know the best defenses against class certification? ABI's panel of experts will explore the potential benefits and pitfalls of class actions by creditors against debtor companies in chapter 11 cases and by debtors/trustees against creditors in chapter 13 cases by highlighting recent appellate and bankruptcy court decisions on May 29 from 1-2:15 p.m. ET. Special ABI member rate available! Click here to register.
ABI MEMBERS WELCOME TO ATTEND INSOL'S LATIN AMERICAN REGIONAL SEMINAR ON JUNE 13 IN SAO PAULO
ABI members are encouraged to attend INSOL’s Latin American regional seminar in São Paulo, Brazil, on June 13. The one-day seminar has been organized by INSOL in association with TMA Brasil to cover current cross-border insolvency and restructuring topics. The seminar is designed to be interactive and to allow the attendees to discuss and debate about practical issues with speakers who are leading players in the insolvency and restructuring field and with experience in insolvency proceedings involving different countries. The seminar will benefit from simultaneous translation in English, Portuguese and Spanish. For more information and to register, please click here.
ABI IN-DEPTH
LATEST CASE SUMMARY ON VOLO: IN RE RODRIGUEZ (3D CIR.)
Summarized by Thomas Horan of Womble Carlyle Sandridge & Rice LLP
Because a chapter 13 plan confirmation order may be revoked only if such order was procured by fraud, the Third Circuit ruled that absence of such fraud prevents the court from reconsidering the plan confirmation order under Rule 60(b) of the Federal Rules of Civil Procedure, made applicable in a bankruptcy case by Rule 9014 of the Federal Rules of Bankruptcy Procedure.
There are more than 800 appellate opinions summarized on Volo, and summaries typically appear within 24 hours of the ruling. Click here regularly to view the latest case summaries on ABI’s Volo website.
NEW ON ABI’S BANKRUPTCY BLOG EXCHANGE: WILL THE NEXT WAVE OF CHAPTER 9 FILINGS BE FROM PUBLIC HOSPITALS?
The Bankruptcy Blog Exchange is a free ABI service that tracks 35 bankruptcy-related blogs. A new blog post examines the possibility of a wave of chapter 9 filings by public hospitals.
For further analysis on bankruptcy filings and distress by hospitals, be sure to pick up a copy of the ABI Health Care Insolvency Manual, Third Edition, from ABI's Bookstore!
Be sure to check the site several times each day; any time a contributing blog posts a new story, a link to the story will appear on the top. If you have a blog that deals with bankruptcy, or know of a good blog that should be part of the Bankruptcy Exchange, please contact the ABI Web team.
TEE OFF ON THE ABI GOLF TOUR!
ABI now offers conference registrants the option to participate in the ABI Golf Tour. The Tour kicked off at ABI’s Annual Spring Meeting and will take place concurrently with most conference golf tournaments. It is designed to enhance the golfing experience for serious golfers while still offering a fun networking opportunity for players of any ability. As opposed to the format used at ABI’s regular conference events, Tour participants will "play their own ball" in stroke play format. They will be grouped on the golf course separately from other conference golf participants and will typically play ahead of the other participants, expediting Tour play. Tour participants will be randomly grouped in foursomes, unless otherwise requested of the Commissioner in advance of each tournament. Prizes will be awarded for each individual Tour event, which are sponsored by Great American Group. The grand prize is the "Great American Cup," also sponsored by Great American Group, which will be awarded to the top player at the end of the Tour season. Registration is free. Click here for more information and a list of 2013 ABI Golf Tour event venues and early leader board.
ABI Quick Poll
Bankruptcy courts should implement constructive trusts in any case where applicable state law would recognize them.
Click here to vote on this week's Quick Poll. Click here to view the results of previous Quick Polls.
INSOL INTERNATIONAL
INSOL International is a worldwide federation of national associations for accountants and lawyers who specialize in turnaround and insolvency. There are currently 37 member associations worldwide with more than 9,000 professionals participating as members of INSOL International. As a member association of INSOL, ABI's members receive a discounted subscription rate. See ABI's enrollment page for details.
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