Tabla de contenidos para April 2023 en ABI Journal

Engelman Berger, PC Phoenix Gray Reed & McGraw LLP; Dallas Cozen O’Connor Chicago Bradley Pack is a shareholder with Engelman Berger, PC in Phoenix. Aaron Kaufman is a partner with Gray Reed & McGraw LLP in Dallas. Christina Sanfelippo is an associate with Cozen O’Connor in Chicago and co-chair of ABI’s Young and New Members Committee. Third Circuit Holds that “Financial Distress” Is Requisite Component of Good Faith in Filing a Petition In a move colloquially known as the “Texas Two-Step,” a highly profitable but litigation-plagued subsidiary of Johnson & Johnson (J&J) engaged in a “divisional merger” that ultimately left two companies standing: one that retained most of the assets of the old company and continued its business operations, and another that was left responsible for the old company’s liabilities…

Sheppard Mullin Richter & Hampton LLP Chicago Sheppard Mullin Richter & Hampton LLP Los Angeles Sheppard Mullin Richter & Hampton LLP San Francisco Justin Bernbrock is a partner in Sheppard Mullin’s Finance and Bankruptcy Practice Group in Chicago. Jennifer Nassiri is a partner in the firm’s Finance and Bankruptcy Practice Group in Los Angeles. Pouneh Almasi is an associate in the firm’s Finance and Bankruptcy Practice Group and a member of the Blockchain & Fintech Team in San Francisco. Since the so-called “crypto winter” hit the industry in May 2022, several major crypto companies have filed for bankruptcy.2 Given the unique nature of digital assets such as cryptocurrencies, bankruptcy courts have been grappling with new legal issues, and the proceedings have garnered the interest and involvement of several states and…

Jones Walker LLP Jackson, Miss. Kristina Johnson is a partner with Jones Walker LLP in Jackson, Miss., and a member of ABI’s Board of Directors. The protection of the automatic stay is one of the most fundamental, universal rights under the Bankruptcy Code for all debtors. Or is it? Certainly, when a creditor ignores the automatic stay in the face of a consumer bankruptcy filing, the outrage is understandable and violations should be remedied promptly. Congress agreed, and in 1984, it enacted the predecessor to § 362(k),1 which provides that the court shall order damages to “an individual” for willful automatic stay violations, including punitive damages in appropriate cases.2 Some have interpreted this section to be limited to a general consumer debtor congressional policy enactment.3 The offensiveness of a brazen…

WilmerHale New York and Boston WilmerHale New York and Boston George Shuster and Benjamin Loveland are partners in WilmerHale’s New York and Boston offices. Chapter 15 of the Bankruptcy Code arguably poses the most demanding requirements for entry of any chapter. Generally speaking, while a qualifying entity can obtain relief under chapter 7 or 11 of the Bankruptcy Code at will, a foreign representative’s chapter 15 filing generally requires the granting of a petition for recognition of a foreign proceeding as a gating condition to chapter 15 relief. Indeed, it is the recognition under chapter 15 that allows the foreign representative to commence a case under chapter 7 or 11 such that, for foreign representatives, chapter 15 recognition layers an additional step on top of the otherwise-applicable requirements for commencing…

Kyle W. Miller Dentons; Louisville, Ky. Kyle Miller is a lawyer in Dentons’s Global Data Privacy and Cybersecurity Group in Louisville, Ky. His practice builds on his previous career as a cybersecurity professional in bringing value to clients with needs related to cybersecurity, data privacy and technology. Bankruptcy professionals have many obligations to protect the operations and data of their clients under state and federal laws, in addition to their professional duties and promises made in their contracts. In the past year, the federal government has added to the growing web of obligations for owners and operators of “critical infrastructure,” including bankrupt organizations deemed critical infrastructure. As a threshold matter, organizations should understand whether they are considered critical infrastructure by the U.S. government. Unfortunately, a uniform definition or test has…

FTI Consulting, Inc. New York John Yozzo is a managing director with FTI Consulting, Inc. in New York. Meme stock trading (MST) began as an investing fad during the shutdown phase of the COVID-19 pandemic among hordes of bored amateur day traders stuck at home, many with “stimmy money” or other COVID-related financial relief burning a hole in their pockets. It has since evolved into a popular trading strategy among retail investors and some institutional investors that arguably has some rationale behind it, despite widespread criticism that it is nothing more than mob rule by underinformed investors. Its enduring popularity, even as financial markets have corrected, has surprised those who thought the fad would fade out as the supply of “Greater Fools” inevitably was exhausted. Not only has MST persisted,…

December (partial list) Milosz Gawlik Focus Management Group USA, Inc. Chicago Michael T. Gilbert Allen Vellone Wolf Helfrich & Factor PC Denver Victoria Giorgio St. John’s University Mahopac, N.Y. Susan Greco-Ericksen U.S. Bankruptcy Court (D. N.J.) Newark, N.J. Stephon S. Grey Caribbean Inst. of Forensic Accounting Port of Spain, Trinidad and Tobago Ilayna Guevrekian St. John’s University Jamaica, N.Y. Ryan Gustafson BankruptcyWatch Fairfield, Calif. Eloise A. Guzman Guzman Law Firm Houston Peter Hayden Mourant Ozannes LLP Grand Cayman, Cayman Islands Kaitlyn A. Hittelman Hogan Lovells US LLP Los Angeles Roya Imani Faegre Drinker Biddle & Reath LLP New York H.C. Jones Cole Schotz PC Baltimore Nicholas F. Kajon Stevens & Lee, PC New York Christine Lazaro St. John’s University School of Law Jamaica, N.Y. Jake A. Leahy University of Illinois,…

Carmody MacDonald PC; St. Louis Carissa Sterling is an attorney with Carmody MacDonald PC in St. Louis, and her practice includes general civil litigation. The Department of Justice (DOJ), in coordination with the Department of Education (DOE), has released new guidance on the process through which DOJ attorneys should evaluate debtors seeking to discharge student loans through bankruptcy. While the undue hardship legal standard still applies, DOJ attorneys, where appropriate, should stipulate to facts indicating undue hardship and more predictably and uniformly recommend discharge. On Nov. 17, 2022, the Office of Public Affairs for the DOJ announced that it and the DOE would be coordinating to create new guidance to aid the process through which DOJ attorneys would evaluate debtors seeking to discharge federal student loans.2 Subsequently, the associate attorneys…

The Brattle Group New York The Brattle Group New York The Brattle Group Boston Paul Hinton and David McKnight are principals with The Brattle Group in New York. Pietro Grandi is an associate in the firm’s Boston office. Litigators routinely value individual cases in settlement negotiations based on the probability of succeeding at trial, the likely size of a verdict and the amount of avoided legal costs. Paradoxically, using past verdicts to value populations of mass tort claims can lead to erroneous valuations. Naively using verdicts in prior cases as benchmarks in mass tort cases fails to account for selection bias, which can grossly distort claim values. Research in law and economics into the selection of cases for trial provides a framework for understanding how choices that litigants make to…

Foran Glennon Palandech Ponzi & Rudloff PC; Denver Andrew Perry is a partner with Foran Glennon Palandech Ponzi & Rudloff PC in Denver and represents insurance companies when the insured files for bankruptcy. The requirement to disclose is essential to a debtor’s right to avail itself of the Bankruptcy Code’s benefits.1 A debtor’s failure to ade-quately disclose information pertaining to financial status may result in the appointment of a trustee, the dismissal or conversion of a case, or the denial of an individual debtor’s discharge.2 However, the Federal Rules of Bankruptcy Procedure also impose disclosure requirements on other parties. Bankruptcy Rule 2019 requires attorneys representing multiple creditors to file specific disclosures when representing groups or committees. Applying Rule 2019 to the representation of claimants in mass tort bankruptcy cases presents…

Hunton Andrews Kurth LLP; Houston Hunton Andrews Kurth LLP; Houston Tad Davidson is a partner with Hunton Andrews Kurth LLP in Houston and co-leader of the firm’s national Bankruptcy and Restructuring Practice Group. Philip Guffy is an associate in the same office. In prepackaged and pre-negotiated large chapter 11 cases, debtors will sometimes propose a “full-pay” plan that leaves general unsecured creditors unimpaired. Doing so often allows for expedited plan confirmation, particularly when the impaired classes have already approved the plan or have committed to doing so. Having a claim “unimpaired,” however, does not mean that one is going to get paid everything one would have gotten outside of bankruptcy. Several courts have held that a claim can still be unimpaired, even if it is not being paid in the…

K&L Gates LLP Newark, N.J. K&L Gates LLP Newark, N.J. Caitlin Conklin is a member of K&L Gates LLP’s Finance/Restructuring and Insolvency Practice Group in Newark, N.J. Daniel Eliades is a member of the firm’s Restructuring and Insolvency Practice Group in the same office. The franchise industry played a large role in the 2021 economic recovery associated with the COVID-19 pandemic by providing “advancement opportunities at all levels of the economic ladder” and “steady growth on business opening and output contributions.”1 In 2021, “the total output generated by franchised establishments improved significantly by 16.3 percent, to $787.7 billion,” and it is predicted that the total output grew to $826.6 billion in 2022.2 Notwithstanding the substantial financial production of franchising in the U.S., even the most successful franchise systems will encounter…

Warren, Porter, Dozens of Democratic Lawmakers Introduce Bill to Repeal 2018 Rollback of Dodd-Frank Protections Sen. Elizabeth Warren (D-Mass.) and U.S. Rep. Katie Porter (D-Calif.) led dozens of Democratic lawmakers on March 14 to introduce the “Secure Viable Banking Act,” legislation that would repeal Title IV of the Economic Growth, Regulatory Relief, and Consumer Protection Act of 2018 following the collapse of Silicon Valley Bank (SVB) and Signature Bank, according to a press release.1 The bill would put banks with at least $50 billion in assets back under strict Federal Reserve oversight and Dodd-Frank Act stress tests. A bipartisan 2018 bill to loosen Dodd-Frank raised that threshold to $250 billion, which exempted Silicon Valley Bank and dozens of other banks from the strictest federal oversight. “In 2018, I rang the…

Davis Polk & Wardwell LLP; New York Davis Polk & Wardwell LLP; New York Adam Shpeen is a partner and Jinhe Hu is an associate with Davis Polk & Wardwell LLP in New York. Chapter 11 debtors often enter into backstop agreements to obtain committed financing to fund an emergence from bankruptcy. Under a typical backstop agreement, one or more parties commit to providing all or a portion of exit debt or equity financing in the event that other parties that are first offered the opportunity to provide such financing (usually members of a class of creditors) elect not to do so. For debtors, a backstop agreement may provide a reasonable degree of certainty that the financing necessary to consummate — and make feasible — a chapter 11 reorganization plan…

Georgetown University Law Center Washington, D.C. David Kuney is an adjunct professor at the Georgetown University Law Center and teaches the Bankruptcy Advocacy Practicum. He is also a past member of ABI’s Board of Directors. On Feb. 22, 2023, the U.S. Supreme Court handed down its unanimous decision in Bartenwerfer v. Buckley.2 For those interested in protecting the core notion that an honest debtor is entitled to a discharge, the decision is disappointing, with far-reaching consequences. For Kate Bartenwerfer, it is devastating. The decision seems to be part of a recent pattern in which the Court adopts a more pro-creditor stance and is less attentive to the financial distress of the individual debtor. The question presented arose under the Bankruptcy Code’s section setting forth an exception to debts that may…

Dechert LLP New York Dechert LLP New York Stephen Zide is a partner and Owen Haney is an associate with Dechert LLP in New York. A party with a trademark license agreement with the debtor generally has enhanced rights under § 365‌(c) of the Bankruptcy Code, which provides that a trademark license may not be assigned by the debtor without the licensor’s consent. Nevertheless, in Armstrong Flooring,1 bidding procedures for the sale of the debtor’s assets provided that if the licensor of certain trademarks to the debtors did not object to notice of the assumption and assignment of its license, it would be deemed to have consented to the assignment. That order gave rise to a dispute as to whether a licensor of a trademark can be deemed to have…

Norton Rose Fulbright US LLP; Houston Norton Rose Fulbright US LLP; Houston Bob Bruner is a financial restructuring and insolvency partner, and Maria Mokrzycka is an associate, with Norton Rose Fulbright US LLP in Houston. We have become accustomed to the deferential business-judgment rule generally being applied to a debtor’s request to administer estate assets. When seeking court approval of a sale of assets under § 363,1 a debtorin-possession (DIP) financing facility under § 364,2 assumption or rejection of contracts and leases under § 365,3 or even abandonment of assets under § 554,4 the business-judgment rule is reflexively argued by lawyers and applied by the courts. However, in the Pipeline Health System case, the U.S. Bankruptcy Court for the Southern District of Texas recently raised the question of whether courts…

Hogan Lovells US LLP Philadelphia Hon. Kevin Carey is senior counsel with Hogan Lovells US LLP in Philadelphia and a retired judge for the U.S. Bankruptcy Court for the District of Delaware. He previously served as ABI’s Vice President-Membership. In December 2022, I received what Past ABI President Bob Feidler calls his “Christmas Distribution,” his third. Its focus was on the remembrance of anniversaries and major events “in liberty and the law.” What especially captivated my interest was a bit of history, included as part of a tribute to Harry D. Dixon, Jr., an ABI founder, that illuminated the circumstances surrounding the birth of ABI 40 years ago, shared below: In 1982, the [U.S.] Supreme Court in the Marathon case found that the jurisdiction provided to bankruptcy judges in the…