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U.S. DISTRICT JUDGE LIMITS BANKRUPTCY COURTS' POWERS ON CLAIMS FOR FRAUDULENT TRANSFERS



U.S. District Judge Jed S. Rakoff, ruling yesterday in a case involving the Refco litigation trust, said that bankruptcy judges do not have the power to make final rulings on claims for fraudulent transfers and unjust enrichment, citing a U.S. Supreme Court ruling in the Stern v. Marshall case, Bloomberg News reported today. Bankruptcy judges can only issue reports and recommendations to district judges, Rakoff said in the Refco opinion. In their requests to have cases moved from bankruptcy court to district court, some Madoff defendants have cited Stern, which stopped the former Playboy model Anna Nicole Smith’s heirs from collecting millions of dollars from Texas billionaire J. Howard Marshall's estate and put district judges in control of more bankruptcy issues. Judge Rakoff, who let the New York Mets owners move their dispute with the Madoff liquidator to his court, received more than 400 requests during the week ended April 2 from companies sued by trustee Irving Picard. Those seeking to move cases included HSBC Holdings Plc, UniCredit SpA and Merrill Lynch, as well as former spouses of Madoff's sons. The transfer of cases has undercut Bankruptcy Judge Burton Lifland's power to reverse some fraudulent transfers and limited Picard's ability to collect money to pay victims of Madoff’s $52 billion Ponzi scheme, the largest in U.S. history. This month, Rakoff sent 84 lawsuits against investors back to bankruptcy court, limiting the trustee to trying to take back two years of fake Ponzi profits rather than six years of payouts from the scheme. Read more.

WITNESSES AT HOUSE HEARING SAY ASBESTOS TRUST FUNDS NEED GREATER TRANSPARENCY TO PREVENT FRAUD



The congressionally created system of asbestos trust funds needs greater transparency to prevent potential fraud, a series of witnesses told the House Judiciary Committee's Subcommittee on Courts, Commercial and Administrative Law at a hearing examining H.R. 4369, the "Furthering Asbestos Claim Transparency Act of 2012," BusinessInsurance.com reported today. The bill, which was introduced in April by Rep. Ben Quayle (R-Ariz.), would require federal asbestos bankruptcy trusts under §524(g) to make quarterly public reports about claims, payouts and other activities to bankruptcy courts. S. Todd Brown, an associate professor at SUNY Buffalo Law School, said that fraudulent claims paid out in secret by trust administrators threaten the ability of the trust to handle future claims, and nothing in the bill requires more information than is required in bankruptcies every day. Marc Scarcella, manager at Bates White Economic Consulting, testified that transparency in the operation of the asbestos trusts is "critical" and that the measure would provide a "cost-effective, efficient" way to deal with claims. Charles Siegel, a partner in the Dallas-based law firm of Waters Kraus & Paul L.L.P. who represents claimants in mass tort cases, testified against the bill, saying that H.R. 4369 was "designed to slow down the payment of claims" to people suffering from mesothelioma. Siegel said that if the bill becomes law, it would impose "onerous" administrative burdens on the trusts. Click here to read the prepared witness statements.

NEW CFPB RULES MAY CURTAIL SOME FEES IN MORTGAGES



The Consumer Financial Protection Bureau (CFPB) said that it planned to propose tighter mortgage lending regulations that would limit the ability of banks and mortgage brokers to charge certain transaction fees, the New York Times reported today. Bureau officials said that the rules, which were released yesterday ahead of formal introduction this summer, would ban mortgage companies from charging origination fees that vary with the amount of the loan. The consumer bureau also said that it would require that lenders offer a reduced interest rate when a consumer opted to pay upfront discount points and would require lenders to offer a loan option without points. During the financial crisis, some lenders charged the points without lowering the interest rate. Changing that rule, the bureau believes, will make it easier for consumers to weigh offers from multiple lenders. Click here to read the CFPB's press release.

VOLCKER DEFENDS RULE BARRING BANKS FROM PROPRIETARY TRADING



Paul A. Volcker, the former chairman of the Federal Reserve, defended the regulatory rule that bears his name, telling the Senate Banking Committee yesterday that the Volcker Rule was a "solid step toward reining in" banks that are considered too big to fail, the New York Times’ DealBook blog reported yesterday. Volcker has championed efforts to bar banks from trading with their own money, a practice known as proprietary trading, which is outlawed under the new policy. The Volcker Rule, a crucial component of the Dodd-Frank regulatory overhaul law, was rooted in his belief that banks should not place risky bets while enjoying government deposit insurance and other backing. Volcker argued yesterday that his namesake rule would make a serious dent, not only in outsize risk-taking, but in the likelihood of future Wall Street bailouts. Read more.

REGISTER FOR THE LABOR & EMPLOYMENT COMMITTEE'S "EVOLVING LABOR ISSUES IN CHAPTER 11" WEBINAR



Make sure to mark your calendars for May 23 from 2-3 p.m. ET for the ABI Labor and Employment Committee's "Evolving Labor Issues in Chapter 11" Webinar. A panel of experts will be discussing recent 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.
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.

U.S. TRUSTEE PROGRAM RE-OPENS COMMENT PERIOD ON PROPOSED GUIDELINES FOR ATTORNEY COMPENSATION IN LARGE CHAPTER 11 CASES



The U.S. Trustee Program has re-opened the comment period until May 21, 2012, on proposed guidelines for reviewing applications for attorney compensation in large chapter 11 cases ("fee guidelines"). The USTP also scheduled a public meeting for June 4, 2012, at the U.S. Department of Justice in Washington, D.C. on the proposed fee guidelines. Click here for more information on submitting comments or attending the public hearing.

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 that 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: GORDON V. OFFICIAL COMMITTEE OF UNSECURED CREDITORS (IN RE ROYAL MANOR MANAGEMENT, INC.; 6TH CIR.)



Summarized by Dean Langdon of DelCotto Law Group PLLC

In an opinion not recommended for full-text publication, the Sixth Circuit Court of Appeals affirmed decisions by the District Court and Bankruptcy Court for the Northern District of Ohio that denied creditors' claim and their motion to file a new claim.

Nearly 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: CHAPTER 15 OFFERS SAFE HARBOR BUT NOT COMPLETE REFUGE FROM FOREIGN COURT RULINGS



The Bankruptcy Blog Exchange is a free ABI service that tracks 35 bankruptcy-related blogs. A blog post discusses a recent decision out of the Southern District of Florida regarding a shipping reorganization, SNP Boat Serv. S.A. v. Hotel Le St. James, in which the district court found that the bankruptcy court abused its discretion in not properly granting comity to a foreign reorganization proceeding.

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 debtor-in-possession model has proven too susceptible to abuse; a trustee should be appointed in every chapter 11 case, at least as a check on a DIP with more limited management authority. 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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Join our networks to expand yours.

May

- ABI Labor and Employment Committee's "Evolving Labor Issues in Chapter 11" Webinar

     May 23, 2012



June

- Memphis Consumer Bankruptcy Conference

     June 1, 2012 | Memphis, Tenn.

- ABI'S ""Handling the Administratively Insolvent Estate- What to Do When Your Chapter 11 Goes South?" Webinar

     June 5, 2012

- Central States Bankruptcy Workshop

     June 7-10, 2012 | Traverse City, Mich.

July

- Northeast Bankruptcy Conference and Northeast Consumer Forum

     July 12-15, 2012 | Bretton Woods, N.H.

- Southeast Bankruptcy Workshop

     July 25-28, 2012 | Amelia Island, Fla.

August

- Mid-Atlantic Bankruptcy Workshop

     August 2-4, 2012 | Cambridge, Md.

FOURTH CIRCUIT RULES THAT BORROWER MAY SUE AFTER THREE YEARS TO RESCIND MORTGAGE LOAN



The U.S. Court of Appeals for the Fourth Circuit has held that a lawsuit seeking rescission is timely where the consumer provided notice of rescission to the subservicer within three years of closing but did not file suit until after the three-year deadline had passed, according to a Ballard Spahr Legal Alert today. The May 3, 2012, decision in Gilbert v. Residential Funding LLC is the first by a federal appellate court to hold that a borrower need only send notice of rescission within the three-year period to validly exercise a right to rescind. The majority of courts to consider the question—including the Third and Ninth Circuits—have held that the requirement for the borrower to file suit within the three-year period is consistent with the language of §1635 of the Truth in Lending Act and prior precedent, including the U.S. Supreme Court's decision in Beach v. Ocwen Federal Bank. In its opinion, the Fourth Circuit rejected the subservicer’s reliance on Beach, observing that Beach "did not address the proper method of exercising a right to rescind or the timely exercise of that right" but only addressed whether §1635 was a statute of limitations that operated to extinguish the right after three years. Click here to read the full analysis.

For more on this case, including a full copy of the opinion, make sure to visit ABI’s Volo site.

LAWMAKERS PUSH TO EASE HOME REFINANCING



Senate Democrats today tried to drum up support for a plan that aims to boost the number of struggling homeowners able to refinance by allowing those with government-backed loans to win new loans, Reuters reported. Senator Robert Menendez (D-N.J.) circulated a draft bill outlining proposed changes to the Obama administration's Home Affordable Refinance Program during a Senate Banking Committee hearing today on the topic of home refinancing. The draft bill would provide streamlined financing options for homeowners who are current on their payments and have loans owned or guaranteed by Fannie Mae and Freddie Mac, the two government-controlled companies that have been propped up by more than $150 billion in taxpayer aid. However, it excludes a key piece of the White House plan that would let homeowners refinance into loans backed by the Federal Housing Administration, the U.S. government mortgage-insurer, even if their current loans are not backed by the government. More than 17.5 million borrowers with loans backed by Fannie Mae and Freddie Mac currently pay more than 5 percent interest, according to the draft, while mortgage rates are averaging under 4 percent currently nationwide. Many of those borrowers have been unable to access government initiatives such as HARP. Read more.

LOCKHART: FANNIE MAE REFUSED TO PUNISH COUNTRYWIDE FOR BAD DEBT



James Lockhart, who led the Federal Housing Finance Agency until 2009 and its predecessor, the Office of Federal Housing Enterprise Oversight, said that Fannie Mae refused to seek large amounts of mortgage repurchases from Countrywide Financial Corp. as the housing market began to crash, Bloomberg News reported yesterday. Lockhart said that he spent a lot of time pushing Fannie Mae executives to seek more “putbacks” on Countrywide loans that failed to match their promised quality. "They didn’t want to offend their largest customer," Lockhart, now the vice chairman at investment firm WL Ross & Co., said yesterday. "If people had known how bad the repurchases were going to get, we’d certainly have had a lot more disciplined underwriting," Lockhart said. Read more.

CONSUMER CREDIT INCREASES BY MOST IN 10 YEARS



Consumer borrowing in the U.S. surged in March by the most in more than a decade on growing demand for educational financing and autos, Bloomberg News reported yesterday. Credit rose by $21.4 billion, the biggest gain since November 2001, to $2.54 trillion, according to Federal Reserve figures released yesterday. The advance was paced by a $16.2 billion jump in non-revolving debt, including student and car loans. Read more.

SENATE BALKS AT TAKING UP STUDENT LOAN BILL



With federal student loan interest rates set to double July 1, the Senate failed yesterday to get enough votes to take up a bill to extend low 3.4 percent rates for another year, CNNMoney.com reported. The vote was 52-45 to take up the bill, 8 fewer than the 60 needed to officially start debating the bill. Senate Republicans and Democrats are still negotiating a compromise, and the Senate could vote again this week. Many lawmakers in both parties agree that they would like to extend the current 3.4 percent rates for another year. They disagree, however, on how to offset the $6 billion it would cost to do so. House Republicans passed a measure that would pay for extending the lower student loan rate by cutting from a health care fund that promotes preventive care. President Obama vowed to veto that bill. President Obama and Senate Democrats want to pay for the measure by eliminating some tax benefits for small business owners. Read more.

In related news, a report found that the U.S. Education Department must step up its oversight of private student-loan debt collectors, improving the tracking of borrower complaints and changing its commission system to reward customer service, the San Francisco Chronicle reported today. Contractors hired by the government to chase defaulted borrowers fail to maintain "fair and efficient" systems to track complaints, according to the report, released yesterday by the National Consumer Law Center, a nonprofit advocacy group. The department weighs collection, rather than complaints, too heavily in awarding contracts, it said. With $67 billion of student loans in default, the Education Department has hired 23 private debt-collection companies to chase borrowers. They include Pioneer Credit Recovery, a unit of SLM Corp., the largest student-loan company, also known as Sallie Mae. In the year ended in September, the department received 1,406 complaints against the debt collectors, up 41 percent from the year before. Read more.

REGULATORS SEEK ALTERNATE PLANS ON MONEY MARKET FUNDS



Federal regulators are increasingly worried that the Securities and Exchange Commission could fail to complete more-stringent rules on money-market mutual funds, forcing officials to confront how else to rein in the $2.6 trillion industry, the Wall Street Journal reported today. While financial regulators would prefer the SEC to act on its own, some officials behind the scenes have started to investigate whether the Financial Stability Oversight Council, a special panel created by the 2010 Dodd-Frank financial overhaul, could act if the SEC can't agree on a proposal to shore up funds or reduce risk. Regulators' consideration of alternatives comes as the SEC has met internal and external snags in its efforts to complete a proposal aimed at reducing both money funds' vulnerability to credit shocks and investor incentives to flee the funds at the first sign of trouble. SEC Chairman Mary Schapiro has directed the campaign, which comes on top of an initial round of rule-tightening for the funds in 2010. Her proposals would limit investors' ability to sell all their funds immediately and change how the funds are priced. Read more. (Subscription required.)

REGISTER FOR THE LABOR & EMPLOYMENT COMMITTEE'S "EVOLVING LABOR ISSUES IN CHAPTER 11" WEBINAR



Make sure to mark your calendars for May 23 from 2-3 p.m. ET for the ABI Labor and Employment Committee's "Evolving Labor Issues in Chapter 11" Webinar. A panel of experts will be discussing recent 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.
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.

U.S. TRUSTEE PROGRAM RE-OPENS COMMENT PERIOD ON PROPOSED GUIDELINES FOR ATTORNEY COMPENSATION IN LARGE CHAPTER 11 CASES



The U.S. Trustee Program has re-opened the comment period until May 21, 2012, on proposed guidelines for reviewing applications for attorney compensation in large chapter 11 cases ("fee guidelines"). The USTP also scheduled a public meeting for June 4, 2012, at the U.S. Department of Justice in Washington, D.C. on the proposed fee guidelines. Click here for more information on submitting comments or attending the public hearing.

ABI IN-DEPTH

LATEST CASE SUMMARY ON VOLO: GILBERT V. RESIDENTIAL FUNDING LLC (4TH CIR.)



Summarized by ABI Deputy Executive Director Amy Quackenboss

A lawsuit seeking rescission of a mortgage loan is timely under the Truth in Lending Act where the consumer provided notice of rescission to the subservicer within three years of closing but did not file suit until after the three-year deadline under the TILA had passed. The Fourth Circuit rejected the subservicer's reliance on the U.S. Supreme Court's desicion in Beach v. Ocwen Federal Bank, observing that Beach "did not address the proper method of exercising a right to rescind or the timely exercise of that right" but only addressed whether 15 U.S.C. §1635 was a statute of limitations that operated to extinguish the right after three years.

Nearly 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: CONGRESS ASKING TOO MUCH OF BANK REGULATORS



The Bankruptcy Blog Exchange is a free ABI service that tracks 35 bankruptcy-related blogs. A recent blog post discusses whether Congress is piling on too many rules for regulators to enforce without proportionately increasing the number or competence of examiners in the aftermath of the financial crisis.

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 debtor-in-possession model has proven too susceptible to abuse; a trustee should be appointed in every chapter 11 case, at least as a check on a DIP with more limited management authority. 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.

Have a Twitter, Facebook or LinkedIn Account?

Join our networks to expand yours.

May

- New York City Bankruptcy Conference

     May 9, 2012 | New York, N.Y.

- ABI Labor and Employment Committee's "Evolving Labor Issues in Chapter 11" Webinar

     May 23, 2012



June

- Memphis Consumer Bankruptcy Conference

     June 1, 2012 | Memphis, Tenn.

- Central States Bankruptcy Workshop

     June 7-10, 2012 | Traverse City, Mich.

July

- Northeast Bankruptcy Conference and Northeast Consumer Forum

     July 12-15, 2012 | Bretton Woods, N.H.

- Southeast Bankruptcy Workshop

     July 25-28, 2012 | Amelia Island, Fla.

August

- Mid-Atlantic Bankruptcy Workshop

     August 2-4, 2012 | Cambridge, Md.