NEWS AND ANALYSIS
SPECIAL ABI PODCAST EXAMINES SUPREME COURT'S DECISION IN U.S. V. HALL
The U.S. Supreme Court ruled (5-4) on May 14 in the case of U.S. v. Hall that farmers who sold farm assets during a bankruptcy reorganization under chapter 12 of the Bankruptcy Code were liable for the full amount of the capital gains tax that resulted from the sale. In this special podcast, ABI has assembled three experts involved in the case to discuss the Court's decision and potential ramifications of U.S. v. Hall.
• Susan M. Freeman of Lewis and Roca LLP (Phoenix, Ariz.) represented the petitioners before the Supreme Court and presented the oral arguments in the case.
• Joseph A. Peiffer of Day Rettig Peiffer, PC (Cedar Rapids, Iowa) is the counsel of record for the amicus brief filed by Profs. Neil Harl, Jack Williams and Robert Himschoot in support of the petitioners.
• Prof. Jack F. Williams of Georgia State University / Mesirow Financial Consulting, LLC (Atlanta) filed an amicus brief with Profs. Neil Harl and Robert Himschoot in support of the petitioners.
The moderator of the podcast is ABI Resident Scholar Prof. David Epstein.
Click here to listen to the podcast.
CFTC TO RELEASE CLEARING RULE FOR SWAPS
U.S. lawmakers and regulators are seizing on the more than $2 billion in losses disclosed by JPMorgan Chase & Co. to bolster their positions in the nearly two-year-old debate over Wall Street’s rules, Bloomberg News reported today. The Senate Banking Committee was the flash point for the debate today, as Democrats and Gary Gensler, the chairman of the Commodity Futures Trading Commission, used the losses to argue for the 2010 Dodd- Frank Act rules, including a ban on proprietary trading by banks. The types of derivative swaps said to have led to a loss of at least $2 billion at JPMorgan Chase & Co. may be the first for which the CFTC would require guarantees by clearinghouses under the Dodd-Frank Act, Gensler testified. The commission, the main U.S. derivatives regulator, will seek comments this summer on the requirement for swaps of interest rates and credit-default indexes, according to Gensler. Read more.
Click here to read the prepared witness testimony.
COMMENTARY: REINSTATING GLASS-STEAGALL IS NOT A CURE FOR PREVENTING THE NEXT FINANCIAL CRISIS
Since JPMorgan Chase announced its surprise $2 billion and growing trading loss there have been renewed calls from economists, pundits and politicians to reinstate the Glass-Steagall Act, a Depression-era law that prevented commercial banks from participating in investment banking activities, according to a commentary today on the New York Times' DealBook Blog. Elizabeth Warren, the Democratic candidate for Senate in Massachusetts, sent an e-mail to thousands of her constituents, pressing to bring back the law, which she said, "stopped investment banks from gambling away people's life savings for decades — until Wall Street successfully lobbied to have it repealed in 1999." However, Glass-Steagall would not have prevented the last financial crisis, according to the commentary, and it probably would not have prevented JPMorgan's $2 billion-plus trading loss. Read the full commentary.
CONSUMERS MAY SEE NEW LIMITS ON MANDATORY ARBITRATION
The Consumer Financial Protection Bureau and the Securities and Exchange Commission are studying whether to take steps to limit or ban mandatory arbitration clauses from financial contracts with consumers, Bloomberg News reported yesterday. Alan Kaplinsky, head of the consumer finance practice at Ballard Spahr LLC, said that a regulatory rollback of mandatory arbitration has the potential to impose new litigation risks and costs on providers of checking accounts, credit cards and payday loans. They can also be found in contracts for employment, mobile phones and rental equipment. The regulator push-back has been evident in at least two recent actions. In February, the SEC forced The Carlyle Group LP to remove from its proposed public offering documents a clause that would have required its new shareholders to use arbitration. The consumer bureau, established by the same Dodd-Frank Act that gave it the power to regulate the clauses, has started a study to determine whether arbitration does consumers more harm than good. Read more.
REPORT: RECORD NUMBER OF CALIFORNIA SCHOOL DISTRICTS FACE BANKRUPTCY
Pummeled by relentless budget cuts, a record number of California school districts are facing bankruptcy, state Superintendent of Public Instruction Tom Torlakson announced yesterday, the Los Angeles Times reported. The Inglewood Unified School District and 11 others -– most in northern California -- are currently not able to pay their bills this school year or next, according to a biannual report on the financial health of the state's 1,037 school systems compiled by the state Department of Education. An additional 176 school districts may not be able to meet their financial obligations. All told, the financially troubled districts serve 2.6 million children. Education officials blame much of the crisis on a double blow by the state: budget cuts amounting to 20 percent over the last three years and the deferment of millions of dollars owed to schools but not dispersed until months later. Read more.
ANALYSIS: GRADUATE SCHOOL DEBT ACCOUNTS FOR NEARLY A THIRD OF STUDENT LOAN DEBT
Lost in the debate over the nation's student loan debt topping the $1 trillion mark is that graduate students account for a third of that sum -- and that their indebtedness is likely about to grow much worse, according to a SmartMoney.com analysis last week. Beginning in July, subsidized Stafford loans will no longer be available to graduate students, a shift that experts say will force student borrowers into more expensive loans to cover tuition, according to the analysis. Mark Kantrowitz, publisher of FinAid.org, which tracks student debt, estimates their debt load at graduation will increase by about 6 percent on average. Read the full analysis.
LAST CHANCE TO REGISTER FOR TOMORROW’S LABOR & EMPLOYMENT COMMITTEE "EVOLVING LABOR ISSUES IN CHAPTER 11" WEBINAR
Don’t miss the ABI Labor and Employment Committee's "Evolving Labor Issues in Chapter 11" Webinar scheduled for tomorrow from 2-3:30 p.m. ET. A panel of experts will be discussing timely developments in several large complex bankruptcy cases, including Hostess, Kodak, Nortel and American Airlines. The expert panel includes Babette A. Ceccotti of Cohen, Weiss & Simon LLP (New York), former chief counsel of the PBGC Jeffrey B. Cohen of Bailey & Ehrenberg PLLC (Washington, D.C.), Marc Kieselstein of Kirkland & Ellis LLP (New York) and Ron E. Meisler of Skadden, Arps, Slate, Meagher & Flom LLP.
Sam Alberts of SNR Denton (Washington, D.C.) will be the moderator for the program. Issues to be discussed include:
• Hostess' efforts to eliminate their multi-employer pension plan contribution liability through motions to reject their labor agreements under Section 1113.
• Kodak's attempt to terminate retiree health benefits.
• The effect of the automatic stay upon efforts by the U.K. Pension Protection Fund and the U.K. Nortel Pension Plan to enforce its powers under the U.K. Pensions Act.
• American Airlines' efforts to reduce legacy costs in bankruptcy.
Click here to register.
ABI IN-DEPTH
JUNE 5 WEBINAR WILL EXAMINE HOW TO HANDLE AN ADMINISTRATIVELY INSOLVENT ESTATE
Panelists from one of the top-rated sessions at the 2011 Winter Leadership Conference are going to reconvene for an ABI and West LegalEd Center webinar on June 5 titled, "Handling the Administratively Insolvent Estate- What to Do When Your Chapter 11 Goes South." CLE credit will be available for the webinar, which will last from 11 a.m. - 12:30 p.m. ET.
Speakers include:
• Robert J. Feinstein of Pachulski Stang Ziehl & Jones LLP (New York)
• Cathy Rae Hershcopf of Cooley LLP (New York)
• Robert L. LeHane of Kelley Drye & Warren LLP (New York)
Robert J. Keach of Bernstein Shur (Portland, Maine) will be the moderator for the webinar.
The webinar costs $115, and purchase provides online access for 180 days. If you are purchasing a live webcast, you will receive complimentary access to the on-demand version for 180 days once it becomes available. Click here for more information.
LATEST CASE SUMMARY ON VOLO: WRIGHT V. OWENS CORNING (3D CIR.)
Summarized by Kevin Larner of Riker Danzig Scherer Hyland & Perretti LLP
The Third Circuit Court of Appeals confirmed its test for defining a claim in JELD-WEN, Inc. v. Van Brunt (In re Grossman’s Inc.), 607 F.3d 114 (3d Cir. 2010), but held that those claims that arise under Grossman’s, related to bankruptcy cases with plans confirmed prior to the Grossman’s decision, are not subject to discharge because a retroactive application of Grossman’s violates procedural due process. The court also extended Grossman’s test for determining whether there is a claim to include post-petition, pre-confirmation injuries, but also held that this portion of its holding would not be applied retroactively.
More than 500 appellate opinions are summarized on Volo typically 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: SECOND CIRCUIT UPHOLDS DISMISSAL OF CLAIMS AGAINST AUDITOR IN MADOFF PONZI SCHEME
The Bankruptcy Blog Exchange is a free ABI service that tracks 35 bankruptcy-related blogs. A recent post looks at a recent decision by the Second Circuit to uphold dismissal of claims against the auditor in the Madoff ponzi scheme.
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.
ABI Quick Poll
The Constitutional scheme of uniform federal bankruptcy is a bad idea; the states should have more leeway to adopt their own different approaches to financial distress, at least for their own individual citizens and companies with purely intra-state operations. 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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