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In a recent Sixth Circuit Decision, Waldman v. Stone, decided October 26, 2012, the Court may have significantly expanded the intended reach of a 2011 Supreme Court decision, Stern v. Marshall, 131 S.C.T. 2594 (2011). In Stern v. Marshall, the Supreme Court held that Bankruptcy Court Judges, as Article I Judges and not Article III Judges under the United States Constitution, could not exercise Article III judicial power to decide state law cause of action even where such state cause of action was arguably a core proceeding under 28 U.S.C. §157.  Under 28 U.S.C. §157 bankruptcy judges can enter final judgments in core proceedings but can only make recommendations to the District Court in non-core proceedings unless the parties consent.Following Stern, most courts and commentators assumed that a party could waive the limitations on the Bankruptcy Court’s jurisdiction imposed by Stern and consent to an adjudication in the Bankruptcy Court.  However, in the Waldman decision, the Sixth Circuit held that not only did the Bankruptcy Court lack constitutional authority to enter a judgment against Waldman but that Waldman could raise the issue for the first time on appeal.

Read More from: SCG Bankruptcy Blog

5 years 6 months ago
The United States Bankruptcy Court for the District of Puerto Rico, in a case of first impression in this district, on November 9, 2012, issued an opinion and order, concluding that the absolute priority rule applies to individual Chapter 11 debtors.   In re Lee Min Ho Chen, Case No. 11-08170 (BKT), Docket No. 211.The absolute priority rule of Section 1129(b) of the Bankruptcy Code is a fundamental creditor protection in a Chapter 11 bankruptcy case. In general terms, the rule provides that if a class of unsecured creditors rejects a debtor’s reorganization plan and is not paid in full, junior creditors and equity interestholders may not receive or retain any property under the plan. The rule thus implements the general state-law principle that creditors are entitled to payment before shareholders, unless creditors agree to a different result. Recent litigation in the federal courts nationwide has raised the issue and created a split among courts as to whether the absolute priority rule still applies in Chapter 11 cases filed by individuals. The absolute priority rule has been prominent in bankruptcy disputes, including a number of Supreme Court decisions.

Read More from: SCG Bankruptcy Blog

5 years 6 months ago
The U.S. Court of Appeals for the Seventh Circuit in Chicago has issued a decision with significant implications for licensees of trademarks whose licensors become debtors in bankruptcy.  In Sunbeam Products, Inc. v. Chicago American Manufacturing, LLC, the Court considered whether rejection of a trademark license in bankruptcy deprives the licensee of the right to use the licensed mark.[1]   Disagreeing with the holding of the Court of Appeals for the Fourth Circuit in Lubrizol Enterprises, Inc. v. Richmond Metal Finishers, Inc.,[2]  the Court concluded that a licensee could continue to use the licensed mark notwithstanding the rejection of the license agreement.  The decision may have important implications also for other types of intellectual property licenses and, indeed, all other kinds of contracts, licenses and leases as well.Lubrizol and Congressional ResponseLubrizol held that, when an IP license is rejected in the bankruptcy case of the licensor, the licensee “could not seek to retain its contract rights in the [IP] by specific performance.” 746 F.2d at 1048.  Lubrizol was universally understood to mean that the licensee loses the right to use any licensed IP following rejection of the license agreement.

Read More from: SCG Bankruptcy Blog

5 years 6 months ago
The much discussed fiscal cliff about which will fall over (or not based on Congress) is probably misunderstood more than any other jargonistic word in politics today. What is it? Please read further.About a year ago, or so it seems, Congress and the President couldn't agree on the issue of the national debt - should it be allowed to increase again. Actually, not even the House of Representatives and the Senate could agree (Thank you Tea Party!). A deal was made that allowed the Debt Ceiling to increase by $1-2Trillion. Had it not increased, so goes the theory, we would have defaulted on international and domestic debt. (I guess Bain Capital would have bought the Country for 5 cents on the dollar).The agreement was simple: "Everyone" agreed to reduce the debt by $1Trillion by a mix of spending cuts and increased revenues (called Taxes). Whether any of the parties would have actually done what they promised is still unknown. IN EXCHANGE for the "put the decision off until after the election" scenario, each "side" accepted the concept that if nothing is done, then Sequestration would come into play - putting everything on hold but with HUGE penalties.This basically means that budget cuts and revenues generation (taxes) would be forced into being. No turning back. Congress passed the law and the President signed it.
5 years 6 months ago
Today ISS issued policy updates applicable to the 2013 proxy season, for meetings held on or after February 1, 2012. We'll be distributing a client memo with details, and we understand that ISS plans to host a webcast on these updates on December 6th.  Below are a summary of the key highlights: Governance.
5 years 6 months ago
3,001 whistleblower tips from all 50 states and 49 countries were provided to the SEC in the 2012 fiscal year, according to its annual report on the whistleblower program. The annual report is required to be issued to Congress by the Office of the Whistleblower under Dodd-Frank. 
5 years 6 months ago
The SEC has announced the issuance of an exemptive order granting regulatory relief for SEC filers (public companies, investment companies, accountants, transfer agents and others) affected by Hurricane Sandy and its aftermath. Among other things, the order exempts:
5 years 6 months ago
In early October, the American Petroleum Institute, Chamber of Commerce, Independent Petroleum Association of America and National Foreign Trade Counsel had filed a complaint and a petition for review in the D.C. Circuit Court of Section 13(q) of the Exchange Act, which under Dodd-Frank required the Commission to issue rules mandating reports by resource extraction issuers relating to payments made to a foreign government or the U.S. federal government in order to further the commercial development of oil, natural gas or minerals.
5 years 6 months ago
National Fuel Gas Company has sent a letter to the SEC regarding a common shareholder proposal that authorizes the Harvard Shareholder Rights Project (HSRP) to ask the company’s board to declassify. The proposal was submitted on behalf of the Massachusetts Pension Reserves Investment Trust Fund (PRIT) by its trustee, the Pension Reserves Investment Management Board (PRIM).
5 years 6 months ago
ISS has extended the comment period to provide feedback on its 2013 draft policies to November 9, 2012.  Please see our comment letter to ISS here, with comments on the ISS proposed changes to Board Response to Majority-Supported Shareholder Proposals and Management Say-On-Pay Proposals.
5 years 6 months ago
The coming election coincides with increased efforts by the Center for Political Accountability (CPA), through letters and shareholder proposal campaigns, to cause companies to provide reports on corporate political spending. Companies targeted by CPA that are considering either providing initial reports or seeking ways to bolster their existing reports, should be aware of the 2012 CPA-Zicklin Index. The Index ranks and scores the top 200 companies in the S&P 500.
5 years 7 months ago

Here’s more in the continuing "Year in Review" series.  The inset photo is of the Senator Thad Cochran United States Bankruptcy Court in Aberdeen, Mississippi (pictures and story here), a 47,000 square foot complex that is home to the Bankruptcy Court for the Northern District of Mississippi, where Bankruptcy Judges Houston and Olack sit.  Last year there were 6,101 total bankruptcy filings in the Northern District of Mississippi.  By way of comparison, the Bankruptcy Court for the Northern District of Illinois–which could probably fit in the lobby of this mammoth structure–had the most filings at 59,093.  Talk about influence! 

5 years 7 months ago

Here’s more in the continuing "Year in Review" series.  Catching up after the long Jewish holiday season.  The inset photo is of the Garmatz Federal Courthouse (story here), home to the Bankruptcy Court for the District of Maryland in Baltimore, where Bankruptcy Judges Alquist, Derby, Gordon, Rice, and Schneider sit.

5 years 7 months ago
A Summary of Governance Resources Our memos on two governance events last week – the release of Staff Legal Bulletin 14G giving additional guidance on citing procedural deficiencies for shareholder proposals and a summary of the ISS draft policy survey – can be found here. It seems that proxy season is clearly getting underway, so this may be the last chance to find time to catch up on a trove of recent studies and research:
5 years 7 months ago
Given say-on-pay votes, companies are interested in understanding how their shareholders view executive compensation. At the always informative NASPP conference, Michelle Edkins from BlackRock and Ann Chapman from Capital Research both mentioned a recent paper from Charles Elson of the Weinberg Center for Corporate Governance, titled "Executive Superstars, Peer Groups and Over-Compensation – Cause, Effect and Solution."
5 years 7 months ago
ISS has issued the results of its recent survey on corporate governance.  The responses will form the basis for policy changes affecting the 2013 proxy season.  Perhaps reflecting concerns about the influence of ISS policies, the bulk of the responses came from corporate issuers (74%) while only 26% of the respondents were institutional investors.  The survey questions asked respondents to rank matters in terms of importance.  It is unclear how the responses will translate in
5 years 7 months ago
The NYSE has published an updated rule filing submitted to the SEC on the recent proposed listing standards related to compensation committees. The rule filing notes that “Amendment No. 1 corrects a single error in the rule text in Exhibit 5 as originally filed. The error was in Section 303A.00 under the heading ‘Transition Periods for Compensation Committee Requirements.’”
5 years 7 months ago
We just discussed the NYSE's proposed standards applicable to compensation committee members and their advisers, which closely follow the SEC final rules. Nasdaq has posted its proposed version, which contains some differences worth mentioning. Details will follow in a client memorandum, but headline items include:
5 years 8 months ago
The NYSE has posted its proposed filing with the SEC to implement the SEC rules for compensation committees and advisers. We are preparing a client memorandum to describe the standards in more detail shortly, but headline items include:
5 years 8 months ago
Under New York bankruptcy law (In re Boodrow) a debtor does not have to sign a Reaffirmation Agreement for a mortgage on real estate. This is a good thing (especially when dealing with second or third mortgages), since a signed Reaffirmation Agreement causes you to remain personally liable for the mortgage debt after bankruptcy, and... Read More »
5 years 8 months ago