Table of contents for March 2023 in ABI Journal

Christina Sanfelippo is an associate with Cozen O’Connor in Chicago and co-chair of ABI’s Young and New Members Committee. Aaron Kaufman is a partner with Gray Reed & McGraw LLP in Dallas. Bradley Pack is a shareholder with Engelman Berger, PC in Phoenix. Recognition Denied for Proceeding Akin to Corporate Governance and Fraud-Remediation Effort Hon. David S. Jones of the U.S. Bankruptcy Court for the Southern District of New York recently denied foreign recognition of a proceeding under § 1517 that did not involve insolvency or the identification, classification or satisfaction of debts, but rather the investigation and potential recovery of allegedly misappropriated corporate funds. In re Global Cord Blood Corp.1 concerned proceedings (the “Cayman proceeding”) pending in the Grand Court of the Cayman Islands (the “Grand Court”). The Cayman…

Bob LeHane is a partner and Philip Weintraub is a senior associate with Kelley Drye & Warren LLP in New York. The good news for party-goers and tenants: Thanks to a recent decision from the Ninth Circuit Court of Appeals, a popular nightclub in historic downtown Los Angeles will remain open notwithstanding the concerted multi-year effort by a stubborn landlord to reject the nightclub’s lease. The silver lining for stubborn landlords: The Ninth Circuit overturned a troubling Central District of California ruling that if existing defaults are not “material,” your debtor/tenant does not have to cure them or provide adequate assurance to assume your lease in their bankruptcy. The district court in In re Hawkeye Entertainment LLC, affirming a bankruptcy court ruling, held that the cure and adequate assurance protections…

Anthony Sexton is a tax partner with Kirkland & Ellis LLP in Chicago, where his primary focus is on tax issues relevant to distressed companies and their stakeholders. Before becoming a restructuring tax lawyer, I was a restructuring lawyer, and before that, I was a musician. Like any musician, I found gigs where I could find them, and they weren’t always music gigs; my size gave me options, and one of those options was being a bouncer, where I broke up my fair share of fights. Occasionally, someone would break out a set of brass knuckles, and things would take a turn for the worse, then a lot of people would end up with bloody noses. Discussions of liability-management transactions involving “lender-on-lender violence” are all the rage these days. This…

Mark Bogdanowicz is a partner with Spencer Fane LLP in Nashvillle, Tenn. Andrea Chase is a partner and Lindsay Doman is an associate in the firm’s Kansas City, Mo., office. Ms. Chase is also education director of ABI’s Secured Credit Committee and a 2021 ABI “40 Under 40” honoree. Over the past few years, the quantity and variety of substantive omnibus claims objections in complex chapter 11 cases have increased. In commercial retail cases, omnibus objections to landlords’ claims based on the alleged “failure to mitigate damages” — objections that had long fallen out of vogue — have recently come back with a vengeance. With the prospect of obtaining de minimis recoveries on their general unsecured claims, creditors often have little economic incentive to vigorously contest objections that arguably would…

Joao Magalhaes is counsel with Inglesino, Webster, Wyciskala & Taylor LLC in Parsippany, N.J. Bankruptcy law practitioners are familiar with cases requiring the application of principles or statutory frameworks from within other areas of law. A particularly noteworthy intersection of laws arises when the Bankruptcy Code, as codified in title 11,1 must take into account the Employee Retirement Income Security Act of 1974 (ERISA) and its related employee-benefits laws.2 While federal bankruptcy law is complex in its own right, the employee-benefits practice area is also known to present a steep learning curve.3 To hopefully assist with navigating the Code/ERISA crossover, this article surveys recent post-2020 case law to illustrate a few central issues, beginning with principles governing the treatment of employee plan contributions and whether such funds may be deemed…

Ben Waller and Rebecca Redwine are attorneys with Hendren, Redwine & Malone, PLLC in Raleigh, N.C. Ms. Redwine is also a 2018 ABI “40 Under 40” honoree. Approximately 13,000 business-related chapter 7 and chapter 11 cases were filed in 2021.1 Many of these cases involved individuals with primarily business debts. Given the predominance of the limited liability company (LLC) as a business form, many individuals (as well as businesses) filing for bankruptcy frequently hold membership interests in one or more LLCs. When an LLC member files for bankruptcy in their individual capacity, problems often arise regarding the liquidation of the member’s LLC interest. One particularly confounding issue involves the liquidation of LLC interests when the LLC’s operating agreement includes transfer restrictions, such as a right of first refusal (ROFR).2 For…

Mac VerStandig is the managing partner of The VerStandig Law Firm, LLC in Washington, D.C., and represents debtors and private lenders in chapter 11 cases. As the 118th Congress begins its work, a blend of campaign promises1 and previous legislative introductions2 offer every reason to believe that the dischargeability of student loans in bankruptcy will again be up for congressional debate. Regardless of whether any bills ultimately find their way to presidential endorsement and enactment, this will not be the first time the treatment of higher education debts in bankruptcy has been considered by the legislative branch. This Congress may, however, prove to be the first to meaningfully consider genuinely impactful legislation in 18 years (or, in educational parlance, since most of this year’s college freshmen were born). While the…

Boris Steffen, CPA, ASA, ABV, CDBV, CGMA, is a managing director with the Corporate Restructuring Group of Province, LLC. He is based in Miramar, Fla. Liquidity can be an important factor in the valuation of a business ownership interest. Conceptually, it can be thought of as an investor’s ability to buy or sell an asset quickly with little premium or discount compared to its equilibrium price. The benchmark for liquidity is that of an instant sale with cash received within three days.1 Thus, an asset is more liquid if there is an organized market for its shares where an investor can quickly exchange their holdings for cash, frequently with minimal transaction costs. In such a market, security prices may tend to reflect the intrinsic value of the company (i.e., the…

Sidney Levinson is a partner and co-chair of Debevoise & Plimpton LLP’s Restructuring Group. Elie Worenklein is corporate counsel and Mitchell Carlson is a corporate associate. They are based in New York. Not surprisingly, lenders generally view a borrower’s ability to file for bankruptcy as an unwelcome intrusion on their exercise of remedies in the event of default. Most lenders would, if able, require borrowers to waive their right to seek bankruptcy relief entirely. That said, it is well settled that a contractual waiver of an entity’s right to file for bankruptcy is invalid as a matter of public policy.1 Lenders have sought to circumvent this prohibition in a variety of ways, including by limiting the debtor’s authority to file for bankruptcy under its governing organization documents. Two common devices…

Hon. Elizabeth Gunn is a bankruptcy judge in the District of Columbia, a 2017 ABI “40 Under 40” honoree and an associate editor for the ABI Journal. Don Mago is the term law clerk for Judge Gunn. The appearance and disappearance just over two years later of § 1329‌(d) of the Bankruptcy Code may rival many of the most prolific Hogwarts spells.1 As a reaction to — and reflection of — the financial stress created by the COVID-19 pandemic, the Coronavirus Aid, Relief and Economic Security (CARES) Act enacted § 1329‌(d), which permitted chapter 13 debtors with confirmed plans to modify their plans to include a payment period of up to 84 months. Section 1329‌(d) was the first time that the Code had authorized bankruptcy courts to approve plans that…

Steven Boyajian is a partner with Robinson & Cole LLP’s Bankruptcy + Reorganizations Group in Providence, R.I. Andrew DePeau is an attorney in the firm’s Bankruptcy + Reorganizations and Business Litigation Groups in Hartford, Conn. The Equal Access to Justice Act (EAJA) provides litigants with the right to recover attorneys’ fees and costs after prevailing on claims brought by or against the federal government.1 Specifically, the EAJA authorizes fee awards to “prevailing parties” in “any civil action” unless the court finds that the position of the U.S. was substantially justified or that special circumstances would render an award unjust.2 The U.S. Supreme Court has recognized that Congress intended the EAJA to operate as a partial waiver of the doctrine of sovereign immunity, which would otherwise prevent recovery against the government.3…

Amy J. Swedberg of Maslon LLP (Minneapolis) received the 2022 Raeder Larson Public Service Award from the Bankruptcy Section of the Minnesota State Bar Association. She has been an ABI member since 2011. Fifty-six ABI members from across the U.S. have been recognized among the “Top Restructuring Professionals” by the Global M&A Network for 2022. Derek C. Abbott of Morris, Nichols, Arsht & Tunnell LLP has been an ABI member since 1998. Omar J. Alaniz of Reed Smith LLP has been an ABI member since 2014. George P. Angelich of ArentFox Schiff LLP has been an ABI member since 2003. David M. Baker of Aurora Management Partners, Inc. has been an ABI member since 2003. Justin R. Bernbrock of Sheppard, Mullin, Richter & Hampton LLP has been an ABI member…

An Overview of Key Committees for the 118th Congress As the 118th Congress convened in January with Republicans in control of the House of Representatives and Democrats adding to their majority in the Senate, committee assignments were shaken up in one chamber while remaining similar to previous sessions in the other. The month’s Legislative Highlights lists the rosters of the committees and subcommittees that are charged with the oversight and review of key bankruptcy, debt and economic legislation. All members within the rosters are listed in order of congressional seniority. House Judiciary Committee The new chair of the House Judiciary Committee for the 118th Congress is Rep. Jim Jordan (R-Ohio), with former chair Rep. Jerrold Nadler (D-N.Y.) slotting to the position of Ranking Member. Republican members on the committee include…

Brandon Wood is a law clerk for Hon. Sage M. Sigler in the U.S. Bankruptcy Court for the Northern District of Georgia in Atlanta. Philosopher George Santayana once said, “Those who cannot remember the past are condemned to repeat it.”1 This quote is apt when describing modern financial markets surrounding cryptocurrency. In 1933 and 1934, the Securities Act and the Securities Exchange Act were passed, respectively, to prevent high-risk investment strategies and low-to-no regulatory environments from creating financial chaos. Despite these regulations, cryptocurrency exchanges arose, avoided major regulatory hurdles, and offered high-risk investments to consumers with little to no oversight. Unsurprisingly, when cryptocurrency values began to crash, it exposed many of the same schemes, scams and sorely mismanaged businesses that the 1933 and 1934 Acts were designed to prevent. Major…

Lynne Xerras is a partner with Holland & Knight LLP’s Bankruptcy, Restructuring and Creditors’ Rights Practice Group in Boston. Barbra Parlin is a partner in the firm’s New York office. Chapter 11 of the U.S. Bankruptcy Code1 is viewed as a leading cross-border restructuring statute, offering the eligible company tools not available in other jurisdictions. As a corollary, representatives of foreign debtors frequently seek recognition under chapter 15 of the Bankruptcy Code2 to access “additional relief” in aid of a foreign proceeding, such as to conduct discovery in the U.S. As these cross-border cases increase in volume, so do the challenges to the U.S. bankruptcy court’s jurisdiction over foreign parties and transactions and to the putative debtor’s eligibility for relief. Consistently, though, the court’s analysis starts and ends with a…

COVID-19 entered the chapter 13 consumer debtor community like a “wrecking ball.”2 Soon after COVID-19 began spreading across the U.S., the unemployment rate jumped from 3.5 percent in February 2020 to 14.7 percent just two months later, and the initial economic fallout would prove to linger long after the onset of the coronavirus.3 This compelled Congress to act. Congress Amends Chapter 13 Plan-Modification Provisions Seeing the disruption and chaos that the pandemic would rain upon debtors, Congress reacted with unprecedented speed, passing the Coronavirus Aid, Relief and Economic Security (CARES) Act in March 2020, which added to § 1329 of the Bankruptcy Code a new subsection (d).4 Under new § 1329‌(d), debtors who were in plans confirmed by March 27, 2020, and who were materially affected by the COVID-19 pandemic…

Leslie Berkoff is a partner with Moritt Hock & Hamroff LLP and chairs the firm’s Dispute Resolution Practice Group. Ed Schnitzer is a partner with Montgomery Walker & Rhoads LLP and chairs the firm’s Bankruptcy and Financial Restructuring Department. He is also a co-education director of ABI’s Mediation Committee. They are both based in New York. This article addresses some of the issues that can arise when parties at a mediation are codefendants but are not fully aligned because some or all of their interests conflict with one another. These competing interests can include (1) a potential settlement where one defendant would be required to cooperate with the plaintiff in pursuing claims against the other defendant, and/or (2) the exhaustion of an insurance policy through a settlement that could adversely…

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. It seems appropriate that, in ABI’s 40th year, it has returned fully to in-person conferences. I, along with many other ABI members and attendees, have relished the full calendar of top-flight educational programs and networking at locations not to be missed. You can learn more and register at abi.org/events. Following my installation as ABI President at last April’s Annual Spring Meeting in Washington, D.C., I attended and often spoke at many ABI conferences, including the Complex Financial Restructuring Program (held in tandem with VALCON, as AIRA’s partner), New York City Bankruptcy Conference, Southeast Bankruptcy Workshop, Mid-Atlantic…

NYU Law’s Kenji Yoshino to Keynote ABI’s Annual Spring Meeting in D.C., Discuss Diversity The keynote address at ABI’s Annual Spring Meeting, set for April 20-22 at the JW Marriott in Washington, D.C., will be delivered by Prof. Kenji Yoshino, the Chief Justice Earl Warren Professor of Constitutional Law at NYU School of Law and the director of the Meltzer Center for Diversity, Inclusion and Belonging. A graduate of Harvard (A.B. summa cum laude), Oxford (M.Sc. as a Rhodes Scholar) and Yale (J.D.), he specializes in constitutional law, antidiscrimination law, and law and literature. He received tenure at Yale Law School, where he served as deputy dean before moving to NYU. Prof. Yoshino has published in major academic journals, including the Harvard Law Review, the Stanford Law Review and…