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Debt Collection ‘versus’ Consumer Protection: The FDCPA’s Prohibition on False Representations of the Legal Status of Debt

By: Sara Brenner

St. John’s Law Student

American Bankruptcy Institute Law Review Staff

In In re Murray, chapter 13 debtor Mr. Murray (the “Debtor”), sued Revenue Management Corporation and Donald Aucoin (“Defendants”), alleging that the Defendants violated the Fair Debt Collection Practices Act (“FDCPA”). According to the Debtor, the Defendants violated the FDCPA by including a reference to purported litigation as reflected by inserting a “vs” between the Defendants’ names and the Debtor in the top right corner of a collection letter.

Delaware Bankruptcy Court Creates Vendor-Friendly Forum by Preserving Reclamation Rights in the Face of DIP Lenders’ Liens

By: Dean Katsionis

St. John’s Law Student

American Bankruptcy Institute Law Review Staff

Section 546(c) of the Bankruptcy Code preserves a vendor’s right to reclaim goods sold to an insolvent debtor within forty-five days of the debtor’s bankruptcy filing.[1] Courts have had to address whether a post-petition lender’s subsequently perfected security interest defeats the vendor’s reclamation rights when a post-petition loan is used to repay the debtor’s prepetition secured loan, which are generally subject to reclamation rights.[2] In In re Reichold Holdings US, Inc., the United States Bankruptcy Court for the District of Delaware overruled a liquidating trustee’s objection to a vendor’s reclamation claim, holding that the vendor’s reclamation rights arose before a post-petition DIP lender’s liens attached, and as such, those liens were subject to the prior reclamation rights of the vendor.[3]

New Developments of Federal Preemption under Section 303 of the Bankruptcy Code

By: J. Tyler Mills

St. John’s Law Student

American Bankruptcy Institute Law Review Staff

In Rosenberg v. DVI Receivables XVII, LLC,[1] the Third Circuit held that an award of damages after the dismissal of an involuntary bankruptcy petition does not preempt a claim for tortious interference with contracts and business relationships brought against the petitioning creditors by injured parties who were not alleged debtors.[2] There, an involuntary bankruptcy was brought against a medical imaging company to collect on leases for various medical equipment.[3] After the involuntary petition was dismissed, the alleged debtor sued the petitioning creditors to recover costs, attorney’s fees, and damages for the bad faith filing of the involuntary petition.[4] The jury awarded the alleged debtor $1.1 million in compensatory damages and $5 million in punitive damages.[5]

All Talk, but no Action Leads to the Loss of Ground Breaking Cancer Research

By: Nicholas Marcello

St. John’s Law Student

American Bankruptcy Institute Law Review Staff

In In re Genesys Research Institute, the United States Bankruptcy Court for the District of Massachusetts denied motions for reconsideration holding there was no error in approving the sale and disposition of research equipment and biological samples free and clear of liens, claims, and interests.[1] In support of its motion to sell research equipment by public auction and destroy experimental cancers cells, the Trustee of Genesys Research Institute, a debtor, argued that the costs and burdens of maintaining the biological materials warranted the prompt disposition of them.[2] The Trustee noted that no party appeared to take custody and control of the biological materials despite all marketing efforts.[3] The Trustee also represented that he had no ability to reorganize the research lab and that he was required to liquidate the debtor’s assets in furtherance of his duties as a chapter 11 trustee.[4] The Court approved the disposition of the cells and the sale of the equipment free and clear of all interest and liens over the objection of, among others, the Department of Energy (“DOE”).[5] The disposition of the research led to the incineration of (hundreds) of biological samples, backed by thousands of dollars in grants, which were part of vital cancer research.[6] The researcher’s work was considered to be “groundbreaking and paradigm-shifting in the field of cancer biology” because they were able to turn normal human cells into cancer cells.[7]

Innocent Transferees Involved in Ponzi Scheme Must Return Transfers in Excess of Principal Deposits

By: Allison N. Smalley

St. John’s Law Student

American Bankruptcy Institute Law Review Staff

In Securities Investor Protection Corporation v. Bernie L. Madoff Investment Securities, LLC,[1] the Bankruptcy Court for the Southern District of New York concluded that a recipient should return fictitious profits he gained through the Ponzi scheme operated by Bernard L. Madoff Investment Securities (“BLMIS”).[2] Andrew Cohen withdrew approximately $4 million from his account at BLMIS between January 18, 1996 and December 11, 2008.[3] Of that withdrawal, approximately $1.1 million was fictitious profit.[4] Irving Picard, as the trustee of BLMIS,[5] sought to recover the fictitious profits from several recipients, including Cohen, under Section 548 of the Bankruptcy Code.[6] As a defense, Cohen asserted that he gave “value” to BLMIS when he received the fictitious profits.[7] The bankruptcy court, however, rejected this defense and concluded that the District Court should find in favor of Picard.[8]

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