Bankruptcy Litigation Blog

RadLAX Oral Argument - Part II: What's Indubitably Bothering the Supreme Court Justices Equivalently

sjakubowski@colemanlawfirm.com (Steve Jakubowski) — Tue, 24 Apr 2012 00:09:22 -0600

[4/24 Update: Part I here]

As I noted three years ago in my "What's Bothering Ruthie?" post on Justice Ginsburg's one-liner that stopped the Chrysler sale dead in its tracks, today's Supreme Court oral argument in RadLAX Gateway Hotel, LLC v. Amalgamated Bank (transcript) left no doubt about what's bothering the Supreme Court Justices in approaching the question of whether a debtor can cram a chapter 11 plan down a secured lender by selling its collateral at auction without allowing it to credit bid in its claim. And while lenders viscerally support the Seventh Circuit's ruling below (as the protest board paraded before the Court leaves no doubt), the final result is no "roll" for them (as one seasoned advocate opined).

So what's bothering the Justices in this case? Here are questions they asked, grouped by category:

Indubitable Equivalence: What is indubitable equivalence? (Ginsburg at 2.) Justice Roberts said that "indubitable equivalent" means "doubtless equivalent." (Roberts at 26.) But what is it measured by? Current market conditions or some premium tacked on based on an assumed increase in value over time? (Id.) Isn't allowing the lender to credit bid the "best way" to give it the indubitable equivalent? (Breyer at 11.) "[O]ne thing is to say that if you fit into (ii), that's it, you don't go to (iii). Another is to say, well you can go to (iii), but it's most unlikely that there would be the indubitable equivalent of allowing credit bidding." (Ginsburg at 41.) But if the judge finds that the purchaser must bridge the gap to provide indubitable equivalence, "that assumes that you can just pull out a wad of cash from your back pocket, but mostly the debtors are not in that position[,] [s]o it just seems like a gigantic waste of time." (Kagan at 54.)

Fear of Judicial Undervaluation: But more fundamentally, isn't the real issue who is going to decide something is really the indubitable equivalent (the bankruptcy judge or the secured creditor via a credit bid)? (Alito at 6.) Isn't the lender's real fear that the bankruptcy judge will not "indubitably provide the indubitable equivalent." (Id.) But to avoid that risk, can't the judge just open every sale to credit bidding and to be sure that the indubitable equivalent is provided in every instance? (Scalia at 8.) Isn't "the heart of [the lender's] argument ... that the real value of this property is greater than the value that you think the Bankruptcy Court would assign to it if this were done under subsection (iii)? ... Why do you have that fear?" (Alito at 30.) "But doesn't clause (i) depend upon a judicial valuation? ... And isn't subsection (iii) "where it talks about substitute collateral ... completely a judicial valuation.?" (Kagan at 30, 32.) "[W]hat is it about the auction process that [the lender] think[s] is likely to produce ... a valuation that is too low?" (Alito at 32.) "Of course, valuing property is what bankruptcy judges do all the time, right?" (Roberts at 51.) "What you just said is so long as they come in with some appraisals that are above what the property sold at for cash, then it's not the indubitable equivalent? Because you've got to have at least one appraiser who says it's worth more. Is that all it takes?" (Scalia at 53.) "What happens if you go to the judge and the judge says: There is one higher bid, so I can't say it's indubitable? Then what happens?" (Scalia at 54.)

Honoring the Secured Creditor's Bargain: Doesn't allowing credit bidding in all instances give the lender "what he bargained for when he insisted upon security before giving the loan" ... and avoid "depriving [it] of the opportunity to hold on to the asset because he thinks it is ... unreasonably devalued?" (Roberts at 7.) Doesn't the Code just "help the debtor a little without mucking up the secured creditor's collateral." (Breyer at 10.) People until now "didn't think they could do [avoid credit bidding] in plan sales. So why should we upset the expectation?" "What's the business value for upsetting the norm?" (Sotomayor at 56.)

Maximizing Value: Doesn't the "maximum value" in an undersecured credit "always ha[ve] to be the value of the credit. (Sotomayor at 8.) "[I]t doesn't take a genius to figure out that if you allow people to bid for cash or for credit, you are going to get more bids and higher bids than if you allow them to bid for cash only." (Scalia at 21.) Won't the lender allow bidders who bid more than the lender thinks it's worth, but not allow them if it thinks it's worth more in its own hands? (Breyer at 21.) What's the purpose of going through the sale at all if you permit credit bidding? "Why don't you just turn over the property under (iii)? Why do you go through the sham of a sale?" (Sotomayor at 36.)

Who Benefits from Denying Credit Bids in Cram Down Auctions?: How would junior creditors receive anything in this cram down situation, anyway? (Kagan at 12.) Is the debtor here just asking for permission to use the property to pay other debts, which is precisely what a secured interest prevented. "[W]hy isn't the secured creditor entitled to all of the proceeds from the property?" (Sotomayor at 14-15.)

Statutory Construction Exercises: How is it a "sensible statute" to allow credit bidding in clause 1129(b)(2)(A)(ii) and then saying in clause (iii) "you can have this sale not subject to credit bidding?" (Scalia at 14.) Is Amalgamated "just kind of elid[ing] the fact that the statute says 'or'?" (Roberts at 27.) "What's wrong with the debtor's reading that clause (ii) is procedural and clause (iii) is substantive?" (Roberts at 29.) "The Petitioner suggests that the usual rule that the specific governs rather than the general provision doesn't apply in this case because the specific is not a subset of the general. What's your view about that?" (Kagan at 42.) "It seems if they are not a subset, then they are alternatives. I don't see how the whole doctrine makes any sense if the specific is not a subset of the general?" (Roberts at 43.) "So when we say our doctrine says the specific controls over the general, the specific is a subset of the general?" (Roberts at 44.)

Protecting Governmental Interests: Doesn't the debtor "feel sorry for the United States [which] is often [a] creditor [and] cannot come up with cash? (Scalia at 18.) Isn't there a "whole cadre of U.S. trustees that presumably can look out for the interests of the poor United States." (Roberts at 46.)

Understanding the Practicalities: If a creditor can't credit bid but thinks the property is worth more than the amount bid at the auction, "what happens" under the debtor's scenario? (Kagan at 19.) "How often does a buyer other than the stalking horse obtain the property?" (Alito at 23.)

Insider Disincentives: Doesn't the debtor's approach encourage insiders to encourage low stalking horse bids to keep the creditor out? (Breyer at 22.)

Significance of Bankruptcy Code Policy: Isn't a good reason to permit cram down without credit bidding, "consistent with the policy of the Bankruptcy Code, ... to look out for other creditors as well. And if the secured creditor is getting indubitably the value of this security, why don't you weigh in the balance at least the interests of the other creditors ... [especially since] we are asked to issue a ruling that is going to apply in every case?" (Roberts at 33.)

So where do all these questions leave us? With anything but a slam dunk for the lenders, to be sure. BAPCPA stripped bankruptcy judges of much discretion and the Justices here will grapple with whether Congress in 1978 also intended to likewise limit judicial discretion in cramdowns of secured creditors.

Notably, there was an empty chair in the Court, with Justice Kennedy having recused himself from the deliberations. Someone suggested that Justice Kennedy recused himself because he or a friend once stayed at the Radisson LAX and so disliked it that he could no longer be objective. As a result, however, I have some concern that we'll witness another Marathon-ish vacuum from a 4-4 split on an opinion of critical importance to the bankruptcy world. Yet I doubt Justice Roberts--who showed the most even hand at oral argument today--will let that happen. He certainly didn't appear to have made his mind up yet, but when he does, I expect a majority of the Court will follow suit.

I also expect the decision will follow through on (i) the Court's reasoning in Ransom where an 8-1 majority looked to the "text, context, and purpose of the statutory provision at issue" to interpret a Bankruptcy Code provision and (ii) the Court's reasoning in Howard Delivery which showed the "plain meaning" doctrine to have its own bankruptcy ocular.

Finally, don't forget to sign up for the first post-RadLAX argument webinar at 12:30 eastern on April 24 to discuss the RadLAX oral argument, sponsored by Wilmer Hale and LSTA, and featuring LSTA's Elliot Ganz and WilmerHale Partners Craig Goldblatt and Danielle Spinelli (all of whom were on an amicus brief filed with the Court for a number of leading financial industry trade associations). Here is the link to the webinar. Here's the SCOTUS Blog page linking to all briefs filed in the case.

Thanks for reading!

[Part I here]

A Chicago Bankruptcy Case Lands at the US Supreme Court: The RadLAX Oral Argument - Part I

sjakubowski@colemanlawfirm.com (Steve Jakubowski) — Mon, 23 Apr 2012 16:40:22 -0600

[4/24 Update: Part II here]

Chicago bankruptcy professionals descended on the US Supreme Court to catch the final chapter in the RadLAX bankruptcy saga, one that had a remarkably swift journey to the highest court of the land. The case started as the neglected stepchild of Amalgamated Bank, the trustee of the deeply undersecured Longview Ultra I Construction Loan Investment Fund (having about $100 million of collateral to support a $300 million original investment).

Following Chief Judge Black's rejection of RadLAX's sister debtor's (River Road) attempt to jam Amalgamated with a plan that sold the hotel while denying the Bank its proclaimed right to credit bid its claim at auction, Amalgamated proposed its own plan (which was confirmed last July with the Bank effectively "buying" the Debtor's assets through credit bid, thus mooting out any appeal of Chief Judge Black's denial of River Road's original cram down plan). For whatever reason, however, the Bank in the RadLAX sister case had no interest in confirming its own credit bid plan, thereby leaving the RadLAX debtor to its own devices, which ultimately meant a trip to the Seventh Circuit. The Seventh Circuit sided with Amalgamated, and the Supreme Court agreed to hear the appeal in order to resolve a split in the federal appellate courts as to whether a debtor can ever propose a cram down plan that offers the lender's collateral for sale at auction without concurrently giving the lender the right to credit bid in its claims at the auction.

Unlike the lender, which had the support in amicus briefs of some of the most notable bankruptcy professors and scholars to grace a classroom (Lieb, Klee, Baird, Sharfman, Kuney, to name a few), the RadLAX debtor had no official support today--other than the down and out debtor hunched on the sidewalk in front of the Supreme Court succinctly imploring the Justices to "Stop Predatory Credit Bidding Now"!

The oral argument, which started at 10:02 am sharp and lasted 59 minutes, had more Chicago bankruptcy professionals in the room than were probably in Chicago bankruptcy court today (given the dearth of active commercial cases these days). These included:

Chicago's Chief Bankruptcy Judge Bruce Black (who, as noted above, started the ball rolling);

Perkins Coie's David Neff (argued) and Brian Audette (second chair) (pictured right), along with partners Dan Zazove and Deborah Gutfeld (representing the Debtor);

Katten's John Sieger (representing US Bank);

US DOJ's newly minted appellate practice lawyer (and former DOJ counsel to the US Trustee in Chicago) Cameron Gulden;

Jones Day's Brad Erens; and

Other bankruptcy professionals in attendance included Craig Goldblatt, Prof. Eric Brunstad, fellow bloggers Peter Friedman and Doug Mintz of Cadwalader, Gary Holzer, and of course, Adam Lewis and Norm Rosenbaum for Amalgamated, and many others.

Part II of this post will focus on what's bothering the Justices (there's always something bothering them!) as gleaned from the key points around which the Justices' questions continually revolved.

Meanwhile, don't forget to sign up for tomorrow's first webinar (April 24) to discuss today's arguments at the Court, sponsored by Wilmer Hale and LSTA, and featuring LSTA's Elliot Ganz and WilmerHale Partners Craig Goldblatt and Danielle Spinelli (all of whom were on an amicus brief filed with the Court for a number of leading financial industry trade associations). Here is the link to the webinar.

Thanks for reading!

[4/24 Update: Part II here]

7th Circuit: Bankruptcy Code Doesn't Override the "In Pari Delicto" Defense

sjakubowski@colemanlawfirm.com (Steve Jakubowski) — Wed, 04 Apr 2012 14:16:22 -0600

Peterson v. McGladry & Pullen, LLP, 2012 WL 1088274 (7th Cir. April 3, 2012) (pdf), is an important new case from the 7th Circuit addressing the ability (or better, inability) of a bankruptcy trustee to overcome the "in pari delicto" defense on policy grounds alone. In it, Judge Easterbrook--writing for the majority--once again grounds his opinion on the bedrock principle laid down by the US Supreme Court in Butner (1979) that "state law defines the 'property' that enters the bankruptcy estate, unless a provision in the Bankruptcy Code displaces state law." Id. at *3. Here are key quotes from the case:

The Trustee asks us to knock out the pari delicto defense altogether, so that the culpability of a corporate manager never would bar recovery against a negligent auditor. Holland v. Arthur Andersen & Co., 127 Ill.App.3d 854, 82 Ill.Dec. 885, 469 N.E.2d 419 (1984), shows that Illinois would allow the defense if a receiver for the Funds were suing under state law, but the Trustee contends that federal law prevents its application once a firm enters bankruptcy and a trustee is appointed. The National Association of Bankruptcy Trustees has filed a brief as amicus curiae supporting this position. Illinois has limited the defense on public-policy grounds in some circumstances as a matter of its domestic law. See McRaith v. BDO Seidman, LLP, 391 Ill.App.3d 565, 330 Ill.Dec. 597, 909 N.E.2d 310 (2009) (in pari delicto does not apply to insurance liquidator's claims against auditors); Albers v. Continental Illinois Bank & Trust Co., 296 Ill.App. 596, 17 N.E.2d 67 (1938) (in pari delicto inapplicable to bank receiver). But the Trustee and the Association pitch their argument on federal bankruptcy law. They use McRaith and Albers to support the proposition that McGladrey can be liable if Bell was negligent but did not commit fraud, but that's different from the question whether federal law supersedes state law when the state would allow a pari delicto defense.

Section 541(a) provides that an estate in bankruptcy includes all of the debtor's “property”, a word that comprises legal claims such as the one against McGladrey. “Property” normally is defined by state law—and in Illinois a claim for damages is limited by defenses such as in pari delicto. The Trustee and the Association want us to hold that a bankruptcy estate includes rights of recovery, stripped of their defenses. If in pari delicto is out, presumably the statute of limitations would be out too, or maybe even the defense of accord and satisfaction. As the Trustee and the Association see things, “public policy” favors greater recoveries for estates in bankruptcy, so that more money is available for distribution and so that wrongdoing by a corporation's “gatekeepers” (the accountants as well as Bell) may be deterred more effectively.

This is not a new argument. It was advanced and rejected in Butner v. United States, 99 S.Ct. 914 (1979). The Court held that state law defines the “property” that enters the bankruptcy estate, unless a provision in the Bankruptcy Code displaces state law. Butner did not deal with § 541 or the pari delicto defense, but its principle is general. See, e.g., Raleigh v. Illinois Department of Revenue, 120 S. Ct. 1951 (2000) (“The ‘basic federal rule’ in bankruptcy is that state law governs the substance of claims, Butner, supra, Congress having ‘generally left the determination of property rights in the assets of a bankrupt's estate to state law.’”). Bankruptcy is a means of administering claims that are defined by tort, contract, and other generally applicable bodies of law. Congress has modified these claims in some respects, and changed some distribution priorities, but unless the Code makes such an alteration the job of the bankruptcy court is to gather all of the debtor's assets, as state law defines those assets, and distribute them according to the creditors' rights under state law. In the main, bankruptcy law is designed to provide a single forum for resolving competing claims to assets defined by other bodies of law.

Neither the Trustee nor the Association identifies any provision of the Code that overrides state-law limits on the legal claims created by state law against the debtor's auditors. “Public policy” is not a ground on which the federal judiciary may create such a limit—not unless the Supreme Court first overrules Butner, Raleigh, and similar decisions. We therefore agree with the conclusion of every other court of appeals that has addressed this subject and hold that a person sued by a trustee in bankruptcy may assert the defense of in pari delicto, if the jurisdiction whose law creates the claim permits such a defense outside of bankruptcy. See Official Committee of Unsecured Creditors of PSA, Inc. v. Edwards, 437 F.3d 1145, 1152 (11th Cir.2006); Official Committee of Unsecured Creditors v. R.F. Lafferty & Co., 267 F.3d 340, 357 (3d Cir.2001); In re Hedged–Investments Associates, Inc., 84 F.3d 1281, 1285 (10th Cir.1996).

According to the Trustee, Scholes v. Lehmann, 56 F.3d 750, 754 (7th Cir.1995), commits this court to a contrary position. Like today's case, Scholes arises from a Ponzi scheme. The Securities and Exchange Commission appointed a receiver to marshal the assets of one participant in the scheme. The receiver sought to recover some payments as fraudulent conveyances—for one aspect of a Ponzi scheme is handsome but unearned payments to early investors, who then drum up pigeons with promises of hefty and risk-free profits. Some recipients of these payments invoked an equitable defense, observing that the principal fault lay with the scheme's mastermind, to which we replied that, although recovery would indeed have been inequitable while the crook was running the show, recovery of fraudulent transfers is entirely appropriate once the crook is gone and the recovery will benefit duped investors. We added: “Put differently, the defense of in pari delicto loses its sting when the person who is in pari delicto is eliminated.”

That sentence is dictum; Scholes did not entail a pari delicto defense. It has nothing to do with § 541 of the Bankruptcy Code, Scholes was not a bankruptcy proceeding. And it does not stand for the proposition that federal law overrides state-law defenses; Scholes was decided under Illinois law, which, as we have observed, puts the pari delicto defense out of bounds in some situations. The state statute involved in Scholes was replaced in 1990 when Illinois enacted the Uniform Fraudulent Transfer Act, 740 ILCS 160. More importantly, the law of fraudulent conveyances—both in Illinois and under the Bankruptcy Code, see 11 U.S.C. §§ 547-50—is one of those bodies that does supersede private-law definitions of legal entitlements. The recipient of a fraudulent or preferential transfer usually has a right to the money as a matter of contract, but when the transfer injures other creditors it can be recouped for their benefit. Scholes should not be generalized beyond the law of fraudulent conveyances and preferential transfers. Scholes did not mention Cenco, which applied Illinois law to block a corporation's action against an auditor when the fraud that the auditor failed to catch had been engineered by the client's managers. By the time suit began in Cenco, the fraudsters were long gone, but that did not clear the way for collection from the deep pockets of an auditor that had been taken in by the client's former managers.

Mama Don't Take My Kodachrome Away!: Kodak's Chapter 11 -- A Bridge Over Troubled Water

sjakubowski@colemanlawfirm.com (Steve Jakubowski) — Tue, 31 Jan 2012 20:50:22 -0600

Eastman Kodak Company’s bankruptcy is another in a string of recent chapter 11 filings by established brand names that lack a clear exit strategy (others are Borders, Hostess, AMR ... Europe!). So much for the "end of bankruptcy"!

As noted in Matt Daneman's article this week in the Rochester Democrat & Chronicle (quoting me, thanks Matt!), a Creditors’ Committee was recently formed, with the U.S. Pension Benefit Guaranty Corp. and trustees of its UK pension plan representing two of its seven members. The Committee appointed Milbank Tweed as its bankruptcy counsel.

Kodak’s CFO, Antoinette McCorvey, submitted a first-day supporting affidavit which is selectively long on history and short on prospects for the future. In the 8 years preceding the bankruptcy filing, Kodak shed 50,000 jobs and closed 13 of 15 film plants and 130 photo labs. It also exercised unilateral rights to reduce or eliminate some retiree benefits to its 65,000 retirees worldwide, resulting in about $100 million of savings annually, but retiree benefits still consumed about $250 million of cash in 2011. Silver commodity prices also are an astounding 200% higher than 2008 (thank you Chairman Bernanke!). Bankruptcy provides Kodak with an opportunity to accomplish many cost cutting objectives, including its behemoth $2.5 billion in legacy costs.

Notably absent from the affidavit is Kodak's staggering losses in the past decade. Buried deep in the affidavit is a balance sheet from which one can derive that Kodak lost about $700 million in the nine months ended September 30, 2011, but nowhere in the affidavit can you find that Kodak lost another $1.5 billion in the 4 preceding years! And the two years before that were anything but banner, too ($1.9 billion loss in 2005 & 2006 - p.60).

Kodak is like a Rubik’s Cube. Its corporate chart shows 120 foreign and domestic subsidiaries. It has three gargantuan business segments, R&D activities averaging $300-500 million per year in expense, 13,000 foreign patents and trademarks and pending registrations in 160 countries, and 8,900 U.S. patent and trademark registrations and applications. This case is about not only whether the sum of the parts are worth more than the whole, but whether some of the parts have any tangible value at all.

Trying to predict the value of nearly 23,000 patent and trademark registrations and applications is a monumental—if not entirely unfeasible—task in a chapter 11, particularly given the right of licensees to compel specific performance (see my IP in Bankruptcy Outline). And given Kodak’s accelerating losses through the past decade, one has to wonder whether a real buyer will ever emerge for Kodak or whether the patent trolls will pick it apart like rabid Orcs. In sum, Kodak’s footing in this chapter 11 seems as unsure as that of a Mississippi lawyer running to a Rochester court on a winter day.

Alas, in the end, we reminisce over Paul Simon's all-too-prescient Kodachrome, but view Kodak’s chapter 11 as a Bridge Over Troubled Water. Time will tell whether those waters will wash out the bridge.

Mark Your Calendar for West LegalEd'sTrilogy of Worthy Webinars on Distressed Business Alternatives

sjakubowski@colemanlawfirm.com (Steve Jakubowski) — Mon, 30 Jan 2012 00:54:22 -0600

West Legal Education Center, in conjunction with Buyouts Magazine, peHub, Venture Capital Journal, Thomson Reuters West, and DailyDAC, deliver a webinar trilogy -- The Restructuring, Insolvency & Distressed Investing For 2012 -- featuring some of this country's finest restructuring professionals (including my partner Jonathan Friedland, who was instrumental in organizing these webinars).

I'm a big fan of West Legal Ed. Center, and listen to its library of webcasts often. Subscribers to West Legal Ed. can watch these webcasts live using their general subscription packages. Daily DAC subscribers get 25% off the program cost.

Here are the program titles, times, links, and participants:

Strategic Alternatives for Distressed Businesses
January 31, 2012 at 11am ET / 10 am CT / 8 am PT
More Information

Everything the General Counsel Should Know about Chapter 11 Bankruptcy
February 29, 2012 at 11am ET / 10 am CT / 8 am PT
More Information

How to Buy a Distressed Business
March 21, 2012 at 11am ET / 10 am CT / 8 am PT
More Information

Panel Speakers Include:

James H.M. Sprayregen, Partner, Kirkland & Ellis (Chicago)
Jonathan Friedland, Partner, Levenfeld Pearlstein (Chicago)
Laura Davis Jones, Partner, Pachulski, Stang, Ziehl & Jones (Delaware)
Melissa Kibler Knoll, Senior Managing Director, Mesirow Financial (Chicago)
Richard E. Mikels, Partner Mintz, Levin, Cohn, Ferris, Glovsky & Popeo (Boston)
Tom Salerno, Partner, Squire, Sanders & Dempsey (Phoenix)
William Henrich, Vice Chairman, Getzler Henrich (NY)
J. Scott Victor - Founding Ptr. & Managing Dir., SSG Capital Advisors (Philadelphia)
Hamid Rafatjoo, Partner, Venable, LLP (Los Angeles)
David Lorry, Principal, Versa Capital Management (Philadelphia)
C.J. Burger, Managing Director, Summit Investment Management (Denver)

Freshness Never Looked So Disheartening: Hostess' Round Trip to Bankruptcy Court Begins

sjakubowski@colemanlawfirm.com (Steve Jakubowski) — Thu, 12 Jan 2012 08:09:22 -0600

As noted in Steve Mufson's excellent summary in today's Washington Post (made all the more excellent by having quoted me!), the iconic Hostess Brands fell into bankruptcy yesterday. As with every bankruptcy case, the best summary is found in the "first day affidavit" of the company's leading executive, in this case Brian Driscoll, Hostess' CEO and board member. From it, we learn that Hostess was founded in 1927 and went on an acquisition spree over the next 60 years to amass 36 bakeries, 565 distribution centers, 5,500 delivery routes, and 570 bakery outlet stores in the US. We also learn, not surprisingly, that it operates in a "mature industry with high levels of competition and related pricing pressures, thin operating margins, and competitors with more sophisticated technology and significant cost advantages."

As most people know, that mature industry with razor-thin margins also led Hostess to file bankruptcy in 2004 under the name Interstate Bakeries Corporation (IBC). That bankruptcy languished for 4 years, with liquidation often considered a real possibility. But the parties eventually worked through the differences in hard-fought negotiations and Hostess emerged in early 2009 with a new name and a new capital structure ("4 tiers of secured debt ... of $860 million"). Unlike the government sponsored bankruptcies of Chrysler and GM that followed in short order, however, the bankruptcy effectuated no changes in Hostess' legacy costs. Mr. Driscoll's first-day affidavit says Hostess won't make that mistake this time around.

Why did Hostess' plan fail? Well, it was losing $150 million a year going into confirmation in 2008 and wasn't projected to start generating real net income until fiscal year 2012. Based on the financial projections, it seems the dream of the reorganization team (which lost a lot of money on this bet) was to turn the company around in five years, generate about $150 million in "EBITDA," and sell the reorganized company at some multiple of EBITDA to the next pipe dreamer at a number that would get debt and equity investors out whole, perhaps even with a modicum of profit.

But, as Robert Burns waxed poetically in 1786--later popularized by John Steinbeck--"the best laid schemes of mice and men gang aft a-gley [often go awry]." Instead of generating sales of $2.9 billion in FY 2011, it only generated $2.5 billion. Instead of losing $34 million and $9 million in FY 2010 and 2011, respectively, it lost $138 and $341 million. Highly leveraged, with interest costs of about $60 million a year, Hostess ended up collapsing like a badly baked cupcake.

Here's the full plan and disclosure statement from Hostess' 2008 reorganization for those wanting to read the gory details of its first extended trip into bankruptcy.

Based on the restructuring plan outlined in Mr. Driscoll's affidavit, Hostess' second trip into bankruptcy won't be as extended, but certainly will be contentious.

Thanks for reading!

Bankruptcy Tweets for October 2010 - Part I

sjakubowski@colemanlawfirm.com (Steve Jakubowski) — Sat, 07 Jan 2012 20:56:43 -0600

www.bankruptcylitigationblog.com/uploads/file/Ortiz-7th-Tinder-12-30-11.pdf

"Going Out of Business" Sales: An Interview with NPR's Planet Money

sjakubowski@colemanlawfirm.com (Steve Jakubowski) — Tue, 27 Dec 2011 22:41:22 -0600

Planet Money's Zoe Chace today aired an excellent story on retail "going out of business" sales. This 6 minute piece is a whirlwind glimpse into these sales from the perspective of the liquidator, the retailer and its staff, the consumer, and the bankruptcy lawyer (me).

Thanks to Planet Money, who last interviewed me back in 2009 as GM was hitting the skids, for the opportunity to share my thoughts and help explain how the frenetic world of retail liquidation works. My wide ranging 30 minute interview with Zoe was left--but for about 30 seconds--on the cutting room floor, but that's show biz! But I think the interview gave Zoe a good frame of reference to assemble her piece, and it showed in the confident style with which she presented the basic dynamics of this unique sale process.

For those wanting some additional reading on the legal agreements behind the Borders' liquidation, which were "state of the art" from a legal perspective, here are some good materials (that are sure to put even the most hardened insomniacs to sleep if read word-for-word):

Motion to Sell Assets and Enter into Agency Agreement with the Liquidators

Order Approving Sale of Assets and Entry into Agency Agreement with Liquidators

Happy holidays to all!

(For those interested, here's my "holiday lights" post from two years ago, which the lights of the season always make me reflect upon and is a fitting reminder of the importance of maintaining dignity and hope in the face of seemingly insurmountable odds.)

Bankruptcy Tweets for September 2011 - Part I

sjakubowski@colemanlawfirm.com (Steve Jakubowski) — Sun, 20 Nov 2011 00:00:22 -0600

Below are my first 46 bankruptcy case tweets of September 2011 and 9 other tweets of general interest. RSS Feeds are also available. All my twitter posts are here (twitter) or here (blog).

Twitter doesn't seem very Google-friendly so it seems the only way to search for these tweets through Google is by posting them on my blog, which is why I'm now catching up on posting my tweets to the blog.

The chart from a post entitled Apple Has 4% Of The Phone Market, And 52% Of Its Profits is the "Money Game Chart of the Day" for 11/7/11.

Bankruptcy Cases and Topics

B-AK: Plan allowing sale of collateral free & clear strips creditor of collateral w/out comp. & can't be crammed down. http://t.co/R0bHshk

D-LA: Per FRBP 8003(a), obtaining leave to appeal interloc order w/out filing sep. motion for leave is fatal to appeal. http://t.co/tsMhfFy

B-PA: Though equities somewhat favor discharged indiv ch 7 debtor, a post-discharge reaffirmation agr is unenforceable. http://t.co/74Ns0X9

SDNY: Guaranties to LBHI had enforceable jury waiver despite allegations that the guaranties were fraudulently induced. http://t.co/fVZkdIR

B-NM reviews scope of §1123(a)(5) and ability to supercede reqts of applicable non-BK law to effectuate plan tsfs. http://t.co/1lfrN9Z

Credit Slips cites to 8/29/11 Bloomberg article: "Revolt Weakens Jones’ Control of Fifth Circuit Law [on] Bankruptcy." http://t.co/qncDAn1

B-NM acknowledges split of authority in holding that §106(a) abrogates the sovereign immunity of Indian Tribes. http://t.co/1lfrN9Z

B-TN reviews the doctrine of quasi-judicial immunity for BK trustees & their counsel as applied thru the circuits. http://t.co/mhgmVmN

B-TX: Settlement agrs.-by definition-settle a debt owed prior to the satisfying transfer & are paid on antecedent debt. http://t.co/F7DlPsK

D-FL: Permissive abstention motions and improper venue motions are interlocutory & not immediately appealable. http://t.co/pKkwVfS

Can Creditors File A Derivative Action Against Limited Liability Company? http://lexne.ws/5ks by Scott Riddle

10th BAP reviews split re Ch 7 ttee's rts to $$ in Dbtr's bank acct on filing date & requires funds turnover by Dbtr. http://t.co/WX6jNny

10th BAP: §542(a) turnover req't applies if one holds estate prop. at any time during case; current psn. not required. http://t.co/WX6jNny

D-IL: Ch 13 dbtr cant bring undisclosed action after BK case closed if it arose after BK filing & during admin of case. http://t.co/6IH33Zf

D-TX: Fr. tsf. claims ag. nondebtor co-defendants stayed, but no other claims, which will be severed & will proceed. http://t.co/6IH33Zf

B-FL rejects "absurd" USA arg. that separate, explicit waiver of sov. imm. per "applicable law" req'd of §544 actions. http://t.co/2ywRV7K

B-AK: EDCanada entitled to fees for subst contrib per §503(b)(3)(D) in getting better terms under plan for unsecureds. http://t.co/sgHA6Z8

D-CA: When a court dismisses a complaint without prejudice & permits amendment to the complaint, it's interlocutory. http://t.co/7ycxMvU

BAP-8: Settlement w/largest creditor in Petters case affirmed on appeal on merits w/good summary of case law standards. http://t.co/7tzzthi

D-TX: Per §362(a), Dbtr cant pursue DJ noninfring ct-claims that are inextricably intertwined w/infring claims ag Dbtr. http://t.co/ENDpu0r

B-IL examines 7th Cir authority re whether conversion of a security deposit is nondischargeable under § 523(a)(4). http://t.co/HrOHjrw

B-IL: No equity in condos of SARE, but proposed plan has reas. prob. of success if mkt improves, so stay not lifted. http://t.co/v3Xz2tb

B-IL adopts 19% discount rate to tenant cash flows to determine value of Chicago-based SARE project of unsold condos. http://t.co/v3Xz2tb

B-NEB post-Stern vacates judgment on debtor's action to collect on matured, undisputed acct. receivable under § 542(b). http://t.co/tagkB8C

B-NE post-Stern vacates order on alleged debt claimed by Debtor that Defendant called a capital contribution by Debtor. http://t.co/tagkB8C

B-PA: For non-consumer secured property, §506(a) valuation must be based on replacement value, as required by Rash. http://t.co/HPChPp1

D-TX reminds of J. Easterbrook's analysis of applicability of stay on a DJ action of noninfringement brought by debtor. http://t.co/ENDpu0r

D-IL wont w/draw ref. of fr. tsf action; Stern didn't strip BK Ct of auth. to hear claims & propose facts/law to D-CT. http://t.co/pFDS1XJ

7th: When LLC mgmt is vested in its members, the members are like a corp. directors & so are insiders per §101(31)(B). http://t.co/SvDFYRA

B-TX: BakerBotts gets lodestar + 4% enhancement (not 20% requested) + $5M (not $8M) for preparing & defending fee apps. http://t.co/HTGMq9T

B-TX provides detailed analysis in ASARCO of all factors of §330(a) plus a host of others in granting BakerBotts fees. http://t.co/HTGMq9T

B-TX relies on SCOTUS 2010 Perdue decision to establish principles for fee enhancement & sets increase at 4%, not 20%. http://t.co/HTGMq9T

B-TX: Lodestar + 10% enhancement appropriate for exceptional results of Asbestos Future Claims Rep & attys in ASARCO. http://t.co/ihGCgo2

B-TX: Asbestos Comm. in ASARCO granted lodestar + 10% of alter ego litigation hours instead of overall 25% enhancement. http://t.co/udKOd3l

B-TX reviews many nuances of Liq Trust's rights arising from dbtr's joint-client rel. w/former parent in suit over LBO. http://t.co/YVxDXPL, but note that @PFcad informs that this B-TX Crescent decision on turnover action reviewing nuances of liq trust priv& jt-client rts. is stayed pending appeal.

B-MT wont let Comm. atty sandbag dbtr by using FRE 408 to deny that preconf. deal deferring fees overrides plan terms. http://t.co/dT6LXmL

B-TX agrees that dismissal of ch 11 warranted & won't substantively consolidate dbtr w/affiliate to avoid dismissal. http://t.co/Aq0aFhy

B-TX addresses the "meaning of and developed law on substantive consolidation," incl. 5th Cir. admonitions. http://t.co/Aq0aFhy

B-NH reviews origin & history of "received by the dbtr" in §503(b)(9) & related concept of "possession" under the UCC. http://t.co/oWy7ehS

B-NH reviews circuit split re whether §503(b)(9) admin claim is subject to disallowance under § 502(d) & says it’s not. http://t.co/oWy7ehS

B-AK: "Dragnet" future advance clauses dont apply to agreements assigned to cover another's previous unsecured advances. http://t.co/jWahLTR

B-AL: "Relatively low threshold of proof will satisfy § 1129(a)(11) so long as adeq. ev. supports a finding of feas." http://t.co/AWQNjOx

B-SDNY: Attys to BK profs that are hired to prepare fee app dont need §327 approval, but Ct must approve fees as reas. http://t.co/9K8PsOM

B-NC dismisses Ch. 11 case for cause bec of 1) obj futility of reorg & 2) petitioner's subj bad faith in filing for BK. http://t.co/Rc7SEFZ

B-NC: Bad faith filing based on "new-dbtr syndrome" (2 unrelated entities merge to stop F/C & force case elsewhere). http://t.co/Rc7SEFZ

Topics of General Interest

Read Goldman Sachs' "State Of the Markets" Powerpoint http://t.co/xRRK88k

Peter Brabeck-Letmathe: Can the World Still Feed Itself? Some excellent insights here. http://on.wsj.com/pErznj

Goodbye, Golden Rose-Vestiges of 420K Jews murdered by Nazis in Lviv being buried under casinos & car parks. guardian.co.uk/commentisfree/…

Angry crowd turns on journalists reporting embassy attack in Egypt. "They were animals!" says CNN rptr. in middle. http://t.co/GeLhb0d

Why I wont read @SunTimes fashion/beauty. RT @Gawker-Woman Injects Beef Fat Into Her Face to Simulate Botox, Then Dies. http://t.co/tWaFNXz

Great article on the middle class squeeze & the new marketing reality of the "hi-end/low-end consumer hourglass." http://on.wsj.com/n5StiX @WSJ

When will this madness stop & Americans/NYers stop killing each other? High-School Basketball Star Slain on 9/11. http://on.wsj.com/pHYPCC @WSJ

About 18,000 homicides each year since 2001 or about 50 per day. That's the equivalent of 9/11 deaths once every 2 months! Our war at home.

SAT Scores Hit a New Low. What happened starting in 2005-06 that all scores start coming down? http://on.wsj.com/pxb7ev via @WSJ

Thanks for reading!

Bankruptcy Tweets for September 2011 - Part II

sjakubowski@colemanlawfirm.com (Steve Jakubowski) — Sat, 19 Nov 2011 23:42:53 -0600

Below are my final -- bankruptcy case tweets of September 2011 and -- other tweets of general interest. RSS Feeds are also available. All my twitter posts are here (twitter) or here (blog).

Twitter doesn't seem very Google-friendly so it appears the only way to search for my twitter posts through Google is by posting them on my blog, which is why I'm now catching up on posting my tweets to the blog.

The chart is entitled The Share of National Income Going to the Top 1% Has Doubled Since 1979 and taken from the series of charts under the topic "23 Mind-Blowing Facts About Income Inequality In America" at The Business Insider web site.

Bankruptcy Cases and Topics

Topics of General Interest

Thanks for reading!

Bankruptcy Tweets for August 2011 - Part III

sjakubowski@colemanlawfirm.com (Steve Jakubowski) — Sat, 19 Nov 2011 22:40:22 -0600

Below are my last 51 bankruptcy case tweets of August 2011 and 6 other tweets of general interest since my last post of August 25. RSS Feeds are also available. All my twitter posts are here (twitter) or here (blog).

The chart from a post entitled The Housing Dip Continues is the "Money Game Chart of the Day" for 8/30/11.

Bankruptcy Cases and Topics

B-DE lacks S-M JD over post-conf. related-to actions vs NYS not reserved in plan; incr. recoveries give insuffic nexus. http://t.co/Z9ovEwn

B-SDNY analogizes Madoff's co-founder to Icarus who flew giddily towards Madoff until his wings of innocence melted. http://t.co/Zx70xtZ

MD-FL: Dbtr's discov. failures mean evid of $200M forfeiture settlement & any "adverse tax conseq" excluded from trial. http://t.co/SDIIJ7U

MD-FL: Atty lien wont attach to plan payments; conf. order is final jdgmt & lien notice must issue bef. jdgmt entered. http://t.co/Gsr8mfw

B-FL: §506(c) overrides state law under which lenders aren't required to pay condo assessments during foreclosure case. http://t.co/SWRi3MU

B-MI allows small bs. plan to proceed w/out required extension under §1129(e) bec debtor was diligent & issues complex. http://t.co/popVH0Nt.co/popVH0N

B-TX: Noncollusive foreclosure complying w/state law avoidable as pref. if cr. gets prop. for less than in hypoth. liq. http://t.co/ev7MqOFt.co/ev7MqOF

B-TX reviews circuit split―& unpalatable resolution―re extent of postpet. pre-rejection rent due under §365(d)(3). http://t.co/N49wR3O

B-TX adopts 4th Cir. Midway that §365(d)(3) allows a landlord to recover an administrative expense under §503(b). http://t.co/N49wR3O

B-TX analyzes landlord right to stub rent, holdover/pre-rejection period & post-rejection/pre-vacancy period. http://t.co/N49wR3O

B-MT holds per Stern ok to decide eq. subord & pref. actions but not fr. tsf ones bec they arent w/in public rts excep. http://t.co/g4NzRl4

B-MI: Deferred payment to 1-time funeral home creditor not pref. bec credit extensions w/in ord course of its business. http://t.co/Sghf59b

8-BAP: Per Stern, removed replevin actions against nondebtor cos. arent core bec they dont arise in or under a BK case. http://t.co/QFyBARZ

SDNY: Sec. Pltfs appeal of 3d party releases equitably moot for failure to object at conf. or seek stay pending appeal. http://t.co/K78eYvf

B-ND wont lift stay or dismiss case on eve of foreclosure sale even where CEO makes seeming low-ball offer for asset. http://t.co/CwYOEqp

D-AZ concluded presumption ag. fraudulent joinder wasn't rebutted, so diversity jurisdiction destroyed & case remanded. http://t.co/1XeUA7b

B-TN: Prior NY law requiring LLC's dissolution upon BK filing of a member is rendered ineffective by § 541(c)(1). http://t.co/JqoYoPJ

B-TX: Dischargeability right & amount nondischargeable is central to public BK scheme, so BK Ct can rule on per Stern. http://t.co/7Z1GU1s

B-MA reviews enforceability of entity's voluntary agreement not to file BK; gen. requires indep. showing of bad faith. http://t.co/XfagZq9

B-MA: BK filing for sole purpose of frustrating imminent foreclosure is not in & of itself bad faith. http://t.co/iTFgsM9

B-MA: State Ct. injunction ag. right to file BK or to convey property to enable BK filing is overbroad & unenforceable. http://t.co/iTFgsM9

B-MI concludes per Stern can enter final orders in 363, 303, 362, 524, claims resolution & (maybe) 1123(b)(6) matters. http://t.co/NBo0Ufq

B-MI asks: Would citing to Murray's have derailed GM 363 sale bec Art. III judges & adjuncts can't enter such an order? http://t.co/NBo0Ufq

Weil Bankruptcy Blog post collects some of the cases interpreting Stern v. Marshall. http://t.co/Jht3buj

B-MD: Whether debtor is a "business trust" per §101(9)(A)(v) is a federal question independent of state law rules. http://t.co/BD1KjrL

B-MD: Debtor is "business trust" per §101(9)(A)(v) if "primary purpose" is to carry on business & not to preserve res. http://t.co/BD1KjrL

B-NJ: §506(b) applies only to postpet. int/fees/costs; prepet. penalties/int/fees/costs governed by §502 not §506(b). http://t.co/E3xAQWS

B&W Creditor Blog: Coudert Brothers LLP Bankruptcy: Development Specialists, Inc. v. Orrick Herrington & Sutcliffe. http://t.co/nc9XIxc

D-IL: Attorney-client privilege wont survive a corp.'s death; Ct reviews factors to determine whether corp. has "died." http://t.co/MhzUwDm

B-MT: Funds sent by 3d parties to indiv ch 11 dbtr's atty as retainer was gift that ch 7 trustee owned upon conversion. http://t.co/TaxNVYe

D-NY: IRS not objecting to liq. trust's claim of liability doesnt deprive BK Ct of post-conf. JD to fix liab. per §505. http://t.co/PaYt3Cx

SDNY: Claims of fraudulent inducement to enter into guaranties not ground for invalidating jury waivers therein. http://t.co/zmwKAeS

D-LA: Per FRBP 8003(a), obtaining leave to appeal interloc order w/out filing sep. motion for leave is fatal to appeal. http://t.co/tsMhfFy

D-NC: No "unusual circumstances" warrant extension of stay to nondebtor's counterclaim against nondbtr co-pltfs w/dbtr. http://t.co/Ob3SX5f

D-DEL dismisses appeal of Spansion confirmation order on equitable mootness grounds under Continental 5-factor test. http://t.co/bgnZhS2

B-VI notes circuit split re if burden of proof for intentional fraudulent tsf is clear & convincing or preponderance. http://t.co/9SbnOVK

B-VI, applying Stern, issues final jdgmt on §548/549 issues, but if―Stern read broadly―only a report on §544(b) issue. http://t.co/9SbnOVK

B-VI: Courts have relied on the word "value" in § 550(a) to authorize a pre-jdgmt interest award in avoidance actions. http://t.co/9SbnOVK

B-VI: §544(b) standing exists only if an unsec. cr. exists who can assert the requisite nonBK cause of action. http://t.co/9SbnOVK

B-VI: Imputation doctrine can attribute officer fraud to corp in fraudulent tsf, subject to rules re adv. int. excep. http://t.co/9SbnOVK

D-AL: Mutual releases in plan between debtor & insiders appropriate where plan funding came from insiders in exchange. http://t.co/pHgBqWu

D-FL reminds about the complications on appeal of a BK judge adopting counsel's proposed order nearly verbatim. http://t.co/1AhIsl4

D-FL: Lease dispute w/dbtr is noncore: involves no subst. BK rt, is governed by state law & can be decided out of BK. http://t.co/1AhIsl4

5th: BK Cts can recharacterize any debt to equity (not just insider claims) as part of inherent authority under §502. http://t.co/URgmFbA

5th: Actual notice of bar date required for known crs., while publication notice in WSJ is sufficient for unknown crs. http://t.co/m4SDNVC

D-OH: Individualized dgs. recoverable under UFTA doesn't mean an indiv. cr. has stdg in a BK to bring a fr. tsf action. http://t.co/q4zVrh8

D-OH cites to cases that once BK filed, cr. loses standing to bring fr. tsf, alter ego, or RICO claims ag 3d parties. http://t.co/q4zVrh8

D-OH denies nondbtr's claims ag dbtr's atty for aiding a fr. tsf bec injury is general & common to dbtr & all crs. http://t.co/q4zVrh8

D-OH: Whether dgs general/specific, not sep./sameness of pool of money, determines nondbtr's rts to sue 3d parties. http://t.co/q4zVrh8

B-PA: Absent express lang. in stip, funds escrowed in adeq prot stip for taxes aren't in trust for sec cr or tax body. http://t.co/6NgDr2P

D-KY: Notice of appeal too late bec BK Ct's deferring issue of post-jdgmt int./fees didnt change final nature of jdgmt. http://t.co/m4SDNVC

Topics of General Interest

Indeed a great read @johnpmcdermott Tony Blair's ostensibly contrarian column on the cause of the riots http://gu.com/p/3xbzx/tw @guardian

Remembering my Mom, A"H, who survived the Holocaust & rebuilt w/ dignity, on the 5th anniv. of her passing. Story here: http://t.co/FpbAMrj

Dow surges 322 points on news that DC hit by large earthquake. @alexjakubowski

Tweaking The Algorithm: Google Gives A Small Peek Behind The Curtains http://tcrn.ch/nEh2mq

Analysis: Solar shakeout will bring more failures, few deals | Reuters http://reut.rs/osAtJ8

Widespread Radiation in Japan-Latest data point to cesium spreading, potentially contaminating rivers, lowland & ocean. http://t.co/FuxQQuQ

Thanks for reading!

Get Your Daily Dose of Daily Deals at THE DAILY DAC!

sjakubowski@colemanlawfirm.com (Steve Jakubowski) — Mon, 29 Aug 2011 00:09:22 -0600

There's an online subscription site, THE DAILY DAC, that is quickly gaining traction among bankruptcy and distressed M&A professionals by carving out for itself a niche in the underserved distressed M&A market for smaller acquisitions. With smaller UCC foreclosure, receivership, creditor assignee, and bankruptcy 363 sales often closing within two weeks to two months from announcement, timely access to the available opportunities is critical for sellers and prospective buyers alike.

For those wondering where to find information on these kinds of deals, THE DAILY DAC is the place to go. The DAILY DAC capitalizes on everyone's need for timely information in this market by obsessively searching daily for opportunities nationwide in distressed M&A and commercial real estate offerings and in public auctions (whether out-of-court or pursuant to court order) and then posting them online in a searchable database for subscribers. Information is also collected and distributed twice weekly by email. The $500 annual subscription, however, is probably the best bargain you'll ever find at that site as it will pay for itself in less than one to two hours of professional or paraprofessional time. A free trial subscription is available (and you don't have to mention you read it here to get it).

With the encouragement and support of a strong advisory board (featuring well-known names in the distressed world), the website launched on May 3 of this year. Here is a Q&A I asked THE DAILY DAC's co-founder, Kristin Weber, to write for those wanting to learn a bit more about the site.

Thanks for reading.

[PS: For the record, I neither received nor was offered a subscription or other rights for promoting THE DAILY DAC. I have met the co-founders, discussed the site with them at length, offered some suggestions for improvement, reviewed the site's content and goals with a Chicago-based advisory board member, and--in the end--believe it provides a valuable service in an underserved niche.]

Bankruptcy Tweets for August 2011 - Part II

sjakubowski@colemanlawfirm.com (Steve Jakubowski) — Thu, 25 Aug 2011 23:18:22 -0600

All caught up... Below are my next 54 bankruptcy case tweets of August 2011 and 8 other tweets of general interest since my last post of August 24. RSS Feeds are also available. All my twitter posts are here (twitter) or here (blog).

The chart from a post entitled The Brand New Scariest Jobs Chart Ever is the "Money Game Chart of the Day" for 8/5/11.

Bankruptcy Cases and Topics

B-SDNY in Dreier case vs. Wachov reviews law re propriety of collapsing transactions in analyzing fraudulent tsf issues. t.co/NwIS0E9

B-SDNY agrees that pltf only req'd to plead fraudulent intent of transferor under NY intentional fraudulent tsf law. t.co/NwIS0E9

B-SDNY: NY Law of "fair consideration" in Ponzi scheme requires tsfee act in good faith & shouldnt have known of Ponzi. t.co/NwIS0E9

B-SDNY: Having reason to question Dreier's honesty/acctg of funds, isn't equiv. to actual or constr knowledge of Ponzi. t.co/NwIS0E9

B-SDNY dismisses fraudulent tsf & preference actions vs Wachovia in Dreier Ponzi under FRCP 12(b)(6) w/leave to replead. t.co/NwIS0E9

B-SDNY: Substantially contemp. for pref. defense is case-by-case, but 3 day perfection delay is virtually simultaneous. t.co/NwIS0E9

B-SDNY-Foreign Rep seeking emails only got ex parte relief in UK, but no ex parte ch 15 relief here as ag. publ. policy. t.co/NgwYn1E

B-CT looks to Black's Dict. & sees no "scheme" here to hinder creditors that justifies lifting stay per §362(d)(4)(A). t.co/4JfQijf

B-FL: Forfeited earnest money deposit for real estate contract subject to the lien of mortgage lender, not UCC lender. t.co/Ok0sEZ6

B-KS: agree w/minority that §1409(b) venue limits dont apply to avoidance actions per plain meaning of "arising under. t.co/kRcvP0o

B-TX: Equitable tolling not apply to §549 claim where applic. depends on conduct of a 3d party and not the defendant's. t.co/FRKCcOy

D-NV: Bank didnt waive right to demand full payment & to immediately foreclose simply bec adeq. prot. order was entered. t.co/gPEfWnA

B-DC: Motions to remand or that Ct lacks subject matter JD are core proceedings that BK Ct can enter final orders on. t.co/f7CacUC

B-SDNY reminds that Cts generally won't modify loan agreements imposing default interest rates, esp for solvent debtor. t.co/Xu9j4j8

B-MD won't approve discl. st. for fatally flawed plan w/improper releases: "to do so would be an exercise in futility." t.co/sJl2Ciu

B-IL strikes $13.9M proof of claim not electronically filed by FL atty, who compounded his error w/several more. Ouch! t.co/lG0aYb5

B-TN reminds that focus of reasonably equivalent value issue is on value received by the debtor not the transferee. t.co/jS6Nh2t

B-IL:Pltf in §523 case precluded by judicial estoppel from bringing fraud claims that weren't part of state ct. jdgmt. t.co/4mfCSsz

BK-MS wont enjoin LA Distr Ct from proceeding w/ nondebtor litigation absent explicit authority empowering Ct to do so. t.co/PHure47

SDNY: §502(d) is pers. disabil. of claimant-not claim attribute; it only attaches to "pure assignment" (vs. sold) claim. t.co/YLF7KYS

B-DE: D&O get defense costs bec. RICO, Avoidance, & "Covered Matters" actions are "Related Claims" under D&O Policy. t.co/NAE8rKN

B-MA: 100% of FMV on a debtor's Schedule C "should be like catnip to a trustee," so failure to timely object is fatal. t.co/LrPUTsl

B-TX agrees that unsec. cr. can't get postpet. fees & costs-even if contract permits them-under ch 11 plan paying 100%. t.co/16ahzKw

11th: Sov. Immun. shields FL DOR & VA DSS from claims for stay violations in trying to collect prepet. interest on DSO. t.co/Dr4uiyq

D-TX: ERISA plan insurer states valid claim for constructive trust on collected premium not turned over & swept by BOA. t.co/h93XpFO

D-KY cuts atty fees award to K&E for contract breach by 2/3; case not difficult and Ashland, KY local rates sufficient. t.co/2H8ej5R

B-SDNY applies 2d Cir Enron op. & holds that cash tsf to fin. inst. as agent for redemption meets §546(e) safe harbor. t.co/VmTMLnW

B-IL doubts §523(a)(2)(A) false pretenses claim can be sustained w/out proof of positive acts to further the deception. t.co/vF8krhw

B-AZ: Litigation dgs. owed to dbtr for atty fees arent limited by what dbtr actually paid attys as unsec cr. of estate. t.co/PIwOL09

B-SDNY extends time to complete defective service on corp (named officer not req'd); doesnt dismiss bec lim. pd had run. t.co/t9XL988

B-MI permits UST's Rule 2004 exam ag. BofA re practice & procedure in filing claims for possible abuse of BK process. http://t.co/3dmkXdg

B-AL: Golf course subject to implied restrictive covenant to operate prohibits 363 sale free & clear of such covenant. t.co/O72CQfq

B-SC: Bona fide dispute exists under §363(f)(4) if there's an obj. basis for disputing validity of asserted interest. t.co/qeKVel0

B-TX: Cplt for turnover of disputed debt per §542 not dismissed per FRCP 12(b)(6) unless recovery not available at all. t.co/AlL61KT

B-TX reviews separate doctrines of abstention/remand/removal & procedural devices of "mand. remand" & "mand. removal." t.co/AlL61KT

B-IL: Filing an Objection to Discharge is a complaint that-while deficient in form-was timely filed & could be amended. http://t.co/c05eW4h

D-CO: LLC member lacks standing to appeal a Court order for relief granting an involuntary petition. t.co/Lp3a7Id

D-CO acknowledges validity of provision in LLC operating agr. prohibiting management from filing a bankruptcy petition. t.co/Lp3a7Id

B-IL acknowledges that Twiqbal standards lessened when individual info of Def.'s role uniquely w/in Def.'s knowledge. http://t.co/ekrxyst

B-IL acknowledges that Twiqbal standards lessened in BK where necessary information is 2d hand & records in disarray. t.co/ekrxyst

B-TX reviews scope/extent of stay applicable to property owners assn dbtr re common area / assessments / rents / dues / fees. t.co/FA0NUIg

B-DE dismisses aiding & abetting breach of duty/conspiracy claims vs ttee's agents for mismanaging value of I/O strips. t.co/iAJZ6fM

B-MD denies all fees to conflicted attys who rep'ed dbtr & simultan. rep'ed largest creditors in unrelated st. ct case. http://t.co/40hf6v4

5th amends remand ruling to permit partial recovery on $29.7 admin claim if nec. to avoid equitable mootness concerns. t.co/40hf6v4

B-TN reviews case split & adopts narrower view that absolute priority rule still applies in individual chapter 11 case. t.co/9XvfJV2

B-SDNY: To get prepet. prejdgmt interest on P/C in BK, NYCPLR requires "sum awarded" by judgment, verdict or decision. t.co/jcdW8lX

2d Cir: Use of the "Net Investment Method" by Madoff Trustee for calculating the "net equity" of customers was proper. t.co/7LmswrU

2d Cir: Madoff Trustee not obligated to step into defrauder's shoes or treat customer statements as reality. t.co/7LmswrU

2d Cir: SIPA doesnt prescribe a single way of viewing "net equity" in the myriad situations types of SIPA liquidations. t.co/7LmswrU

2d Cir, in rejecting "Last Statement Method," doesn't hold that this way of calculating "net equity" is impermissible. t.co/7LmswrU

7th: Unless buyer particip. in alleged fraud, rescinding 363 sale not approp. on alleged SH fraud in joining invol pet. t.co/tk5D9YG

5th compares its "practical," "less stringent" std re "finality" in BK appeals w/ "rigid rule of finality" of 2d Cir. t.co/6aA5cnm

5th Cir distinguishes 3d Cir break-up fee cases requiring proof per §503(b) of necessity to "preserve value of estate." t.co/6aA5cnm

5th affirms break-up fee per §363(b) stds-not §503(b)-where order was issued before bidders incurred due dilig. fees. t.co/6aA5cnm

Topics of General Interest

Good 11 yr old Texas Monthly profile re "It's Rick Perry's Party Now" A profile of the latest GOP pres. candidate. t.co/uLTEQx7

Parsing the latest blow to Obama's health care law http://t.co/dL32MmD by @CBSAndrew

RT @Nouriel: RT @rcwhalen: My summer reading list: Debt, deflation & democracy. t.co/8C5w3rx

Reports from inside #Syria:"there was 'nothing but shooting and sounds of explosions, no water, no electricity.'" t.co/acHNWY8

Great reporting by @ryanlizza @NewYorker: The Transformation of Michele Bachmann from Tea Party Insurgent to Contender. t.co/gI1QplD

Now this is hardball politics! I still prefer the more captivating story, however unlikely, that Mossad poisoned him. t.co/gxKVYlw

Is this Stanley Aronowitz @howclassworks or @nouriel: "Is Capitalism Doomed?" http://t.co/P0i1MCt. Reminds me of days at Columbia U 1980.

Read Judge Posner's quick take on the London riots. RT @UChicagoLaw: Becker-Posner Blog: The English Riots—Posner. t.co/zvJxJse

Thanks for reading!

Bankruptcy Tweets for August 2011 - Part I

sjakubowski@colemanlawfirm.com (Steve Jakubowski) — Wed, 24 Aug 2011 22:55:25 -0600

Still catching up... Below are my first 24 bankruptcy case tweets of August 2011 and one other tweet of general interest since my last post of August 21. RSS Feeds are also available. All my twitter posts are here (twitter) or here (blog).

The chart from a post entitled We Are Japan, Part #054903512 is the "Money Game Chart of the Day" for 8/16/11.

Bankruptcy Cases and Topics

10th says BAP lacked jurisdiction to review appeal of order for relief entered by DE BK Ct AFTER eff. date of venue tsf. t.co/4v4LTHe

5th: Plan adequately preserved Avoidance Actions even though prospective individual defendants not identified therein. t.co/evY24sY

5th: Ct may consult disclosure statement to see if claims retained & post-confirm. debtor has standing to bring them. t.co/evY24sY

D-PA considers but wont decide effect of Anti-Injunction Act on §105 inj. ag. enforcement of state jdgmt vs. nondebtor. t.co/NmqwlYq

D-PA wont hear mot. for stay pending appeal of BK order when stay not 1st sought in BK Ct even if a request was futile. t.co/NmqwlYq

6th: BK trustee liable in official capacity for negligence, but personally only for wilful & delib breach of fiduc duty. t.co/ldOTeQ5

B-DE: Propriety of Highbridge DIP loan to LAD judged under entire fairness std, not bs jdgmt, bec of McCourt conflict. t.co/rmdIZLn

B-DE compares terms of proposed Highbridge & MLB DIP loans to Dodgers & finds MLB's substantially economically superior. t.co/rmdIZLn

B-TN explores law re requirements for seeking BK Ct leave to file suit in state ct v. BK trustee & denies motion to sue. t.co/5AI4RBm

B-PA: For cash coll. mot., income capitalization method preferred over DCF yield capz in valuing hotel in stable market. t.co/hTYqFoI

D-IL: Secured lender is real party in interest who shd be substituted in as Pltf in ch 7 debtor's action to collect A/R. t.co/AlL9puu

B-NE reviews 3 approaches developed re whether Trustee can waive individual's attorney-client privilege (yes/no/maybe). t.co/8TzDp4D

B-OH: Funds in IRS §457 deferred comp plan arent estate property per §541(b)(7)(A)(i)(II), so arent subject to DIP lien. t.co/R3i1197

7th: Trademark license can't be "implied" where agreement doesn't say it is, and so rights can be sold in a 363 sale. t.co/PUOUuPR

7th: Ok to substitute a party into litigation that has succeeded to the interest of the original party, even on appeal. t.co/PUOUuPR

7th: Order not literally final is appealable if only "ministerial" ruling by the lower court is reqd to make it final. t.co/PUOUuPR

7th: Universal rule-Trademark licenses aren't assignable in or out of BK absent expressly authorization in agreement. t.co/PUOUuPR

7th: Service agreement isn't a true trademark sublicense and so is assignable in a 363 sale w/out consent of nondebtor. t.co/PUOUuPR

B-TX reviews §502(j) & FRBP 9024/FRCP 60(b) interplay when cr. doesnt answer claims obj. & order entered w/out hearing. t.co/n2cH530

B-TX reviews interpretations of 5th Cir "specific and unequivocal" lang re if reorg debtor has standing to sue on claim. t.co/8xzecGD

B-TX: Listing causes of action in Plan by code section is "specific & unequivocal" enough for standing to sue on claim. t.co/8xzecGD

B-TX: Reference to Code Ch 5 & §§ 544/547/548/549/550/551 is "specific and unequivocal" to retain §542 turnover claim. t.co/8xzecGD

B-SDNY: Contract exclusion for conseq dgs for lost profits etc too ambig. to bar "gen dgs" claim for lost profits on SJ. http://t.co/spsYrYG

9th: BK dbtr wanting to equitably subordinate claim of another BK dbtr must seek relief from stay in other dbtr's case. t.co/e6C9Qb9

Topics of General Interest

300,000 Israelis protest rising prices (equivalent to about 20 million Americans). Imagine ##s if it wasn't the Sabbath! t.co/DcUSg6Q

Thanks for reading!

Bankruptcy Tweets for July 2011 - Part IV

sjakubowski@colemanlawfirm.com (Steve Jakubowski) — Sun, 21 Aug 2011 22:30:48 -0600

Still catching up... Below are my last 25 bankruptcy case tweets of July 2011 and one other tweet of general interest since my last post of August 20. RSS Feeds are also available. All my twitter posts are here.

The chart of What Stocks Typically Do After a 20% Correction is the "Money Game Chart of the Day" for 8/18/11 from a post entitled What Happens to Stocks If Profits Don't Collapse?

Bankruptcy Cases and Topics

DC Cir: Creditors' tortious intf. cplt v. FDIC for misconduct in thrift sale was outside of FIRREA's jurisdictional bar. t.co/ESizhF2

B-NC dismisses counts ag. lender for equitable subordination bec of meager allegations of control & inequitable conduct. t.co/auBW36Q

D-TX disallows personal injury claim of party that does nothing to comply with ADR procedures in Pilgrims Pride case. t.co/MmtupL0

D-LA: Whether lease allegedly terminated prepet. was sold in 363 sale is core proceeding that shd be heard by the BK Ct. t.co/vlvVPun

D-AZ: Make-whole provision on prepayment that's a reas. forecast of harm for future breach isn't unenforceable penalty. t.co/WDIz9zY

D-CA denies FDIC-R motion for mandatory withdrawal of reference of dispute w/ Indymac BK trustee re rts to tax refund. t.co/He0Uty3

B-NJ reviews Circuit split & differing standards re whether a confirmed plan has extinguished a prepetition lien. t.co/xUH5NOF

B-NEB: Agreement's 10% purchase option (equaling 9% of total lease payments) is nominal, so it isn't a true lease. t.co/m46aqyV

B-PA: Dbtr's active concealment of prepet transfers warrants equitable tolling to allow Ttee to amend cplt to add tsfs. t.co/JTza061

B-PR: Failure to pay postpet. taxes is "cause" for dismissal per 1112(b)(4)(I) & no "unusual circs." warrant otherwise. t.co/5AyASXK

B-DE: Recharacterization cplt .survives Twiqbal; 7 factors favor rechar. as equity, 3 favor debt, and 2 favor neither. t.co/Xuh4Udc

D-FL excludes testimony per Daubert of accounting expert who tries to apply AICPA auditing stds. to non-auditing work. t.co/aoIrzS1

D-MN:Circuits are split re right to jury trial on liability/dgs once debt found nondischargeable, but waiver found here. t.co/mcTuKpP

B-NC: If UCC not found using Sec/State's "standard search logic" then name error fatal to effective financing statement. t.co/s7ngRvn
B-NH: Competitor buying claim for standing to offer competing plan & not just block Dbtr plan isn't acting in bad faith. t.co/8iB85oT

B-NH: Advances of balance sheet neutral debt and waivers of admin/priority claims aren't new value to support a plan. t.co/8iB85oT

MD-AL reminds that a suit for violation of § 524 discharge injunction can be brought only as a contempt action. t.co/xjACL5W

7th-Posner-reviews stds of appellate nonreview of remand of case removed under §1452, incl for lack of supplemental JD. t.co/y0f2ugG

7th assumes w/out deciding that BK Cts can exercise supplemental jurisdiction over state law claims, but why would they? t.co/y0f2ugG

B-MS cites to Collier in reversing order appointing patient care ombudsman bec doc's med care monitored by Medical Ctr. t.co/yiO9Pmg

B-DC: Violation of § 542(b) by failing to pay debt or turnover deposits to Dbtr can't be a basis for a contempt finding. t.co/xazWp1A

9th affirms long Markell op. re subrogation; agrees that partner/co-venturer isn't surety entitled §509(a) subrogation. t.co/GtytNMS

9th disagrees with Markell op. that loan discharged via foreclosure wasn't actually paid by subrogors under §509(a). t.co/GtytNMS

B-NJ reviews 3d-2010 op. re Rooker-Feldman reqts; finds R-F applies to state foreclosure jdgmts even if interlocutory. t.co/gkhoMeM

5th: Injunction ag. Wells F. for filing claim replete with errors improperly aimed at other cases and beyond Ct. reach. t.co/7oupbo2

Topics of General Interest

Wise & witty speech thrown by Justice Ginsburg in Cooperstown on the opening day of the Hall of Fame Induction weekend. t.co/aHGG8Rv

Thanks for reading!