Analysis Plain Meaning Collides with Equity in Arguments before the Supreme Court in Law v. Siegel

ABI Bankruptcy Brief | January 14, 2014

January 14, 2014

NEWS AND ANALYSIS

ANALYSIS: PLAIN MEANING COLLIDES WITH EQUITY IN ARGUMENTS BEFORE THE SUPREME COURT IN LAW V. SIEGEL

by Alexander M. Laughlin and Dylan G. Trache of Wiley Rein LLP

The Supreme Court yesterday heard oral arguments in Law v. Seigel to address the question of whether a bankruptcy court may exercise its equitable powers to surcharge exempt property to pay for administrative expenses incurred as a result of a debtor's bad acts. At issue is the scope of the bankruptcy court's equitable powers and how those powers intersect with a debtor's constitutionally protected exemptions. Based on the tenor of the questions and the focus of the justices during the oral arguments, the statutory provisions in § 522, which provides authority to sanction a debtor and surcharge exempt assets in certain instances, may act to the exclusion of the bankruptcy court's ability to utilize § 105's equitable powers. For the full analysis, please click here.

For more bankruptcy cases being considered by the Supreme Court, including Law v. Seigel and Executive Benefits Insurance Agency v. Arkison (In re Bellingham Insurance Agency), about which the Court is hearing oral argument today, be sure to visit ABI's Newsroom.

STUDY EXAMINES BAILOUT RISK BEYOND THE BANKS

A paper published last week by the Financial Stability Board and the International Organization of Securities Commissioners laid out how regulators are planning to identify financial entities that are not banks or insurance companies but are nonetheless systemically significant and whose failure could pose a threat, the New York Times reported on Saturday. Among the paper's main suggestions: Investment funds with more than $100 billion in assets should be designated as systemically important and subject to closer oversight. Many of these funds currently fall outside of a strict regulatory regime or are subject to only a light touch by financial overseers. Many -- think hedge funds -- are also shrouded in secrecy. Nevertheless, the report said, such funds should be analyzed by regulators interested in determining the impact that a failure might have on the global financial system. Read more.

Click here to read the Financial Stability Board's paper.

CONSUMER SPENDING INCREASES SOLIDLY IN DECEMBER

The Commerce Department said today that retail sales, excluding automobiles, gasoline, building materials and food services, increased 0.7 percent last month after a 0.2 percent rise in November, Reuters reported. Fourth-quarter growth prospects were further boosted by a second report from the Commerce Department showing that retail inventories, excluding autos, increased 0.6 percent in November after increasing 0.3 percent in October. The economy grew at a 4.1 percent rate in the third quarter. Read more.

For more on U.S. retail sales, be sure to check out ABI's "Chart of the Day."

ANALYSIS: SCRANTON PONDERS BANKRUPTCY OPTIONS AMID CONTINUED FINANCIAL DISTRESS

Faced with a $20 million deficit, Scranton, Pa., has had to do some tricky maneuvering to balance its budget and avoid defaulting on loans, the Los Angeles Times reported on Saturday. Most of this maneuvering has involved increasing taxes and fees paid by the people who still live in the town, which has seen its population drop by half since the 1930s. In its 2014 budget, the city raised property taxes and trash fees nearly 60 percent and tripled rental registration fees. The city's school district, which faced a $4 million deficit, raised taxes 2.4 percent. The City Council, which in 2012 passed a 5 percent amusement tax on live entertainment, is now discussing a 10 percent drink tax. The city's parking authority is in receivership, and it recently privatized its parking meters: The company in charge upped rates and extended meter hours to 6 p.m. The taxes are especially egregious to some because so many of the city's residents are elderly and living on fixed incomes. The median household income in Scranton is $37,000, and nearly one-fifth of residents live below the poverty line. Scranton has been a "distressed city" under Pennsylvania law for more than 20 years. The city's financial problems were accelerated by a 2011 Pennsylvania Supreme Court decision that found that the city owed its police and firefighters unions back pay of about $21 million. The settlement money became due in 2013, but the city bickered over how to come up with the funds for so long that Moody's warned in November that Scranton faced the threat of default. Read more.

MAKE SURE TO COMPLETE YOUR ABI MEMBER SURVEY BY TOMORROW TO BE ELIGIBLE FOR GREAT PRIZES!

Be sure to complete your ABI member survey by tomorrow, Jan. 15, to be eligible for the drawing of a 1-year ABI membership, Kindle Fire HDX or Kindle Fire HD. The survey arrived via your e-mail and takes just five minutes to complete, so be sure to help us improve your services as an ABI member -- and you could win a great prize!

NEXT WEEK! ABILIVE "BACK TO BASICS" WEBINAR EXAMINES USING FINANCIAL DOCUMENTS AS EVIDENCE

Send your associates to ABI's "Back To Basics" webinar series, hosted by the Young and New Members Committee. Next Tuesday's webinar will cover using financial documents as evidence, while the Jan. 28 webinar will look at issues surrounding bankruptcy and hedge funds. The first webinar in the series examining financial statements and operating reports was held today and will be posted to ABI's e-Learning website. Let a trusted CLE provider help get your associates up to speed.

ABI LAUNCHES SIXTH ANNUAL WRITING COMPETITION FOR LAW STUDENTS

Law school students are invited to submit a paper between now and March 4, 2014 for ABI's Sixth Annual Bankruptcy Law Student Writing Competition. ABI will extend a complimentary one-year membership to all students who participate in this year's competition. Eligible submissions should focus on current issues regarding bankruptcy jurisdiction, bankruptcy litigation, or evidence issues in bankruptcy cases or proceedings. The first-place winner, sponsored by Invotex Group, Inc., will receive a cash prize of $2,000 and publication of his or her paper in the ABI Journal. The second-place winner, sponsored by Jenner & Block LLP, will receive a cash prize of $1,250 and publication of his or her paper in an ABI committee newsletter. The third-place winner, sponsored by Thompson & Knight LLP, will receive a cash prize of $750 plus publication of his or her paper in an ABI committee newsletter. For competition participation and submission guidelines, please visit http://papers.abi.org.

DETROIT EMERGENCY MANAGER KEVYN ORR TO KEYNOTE ABI'S 32ND ANNUAL SPRING MEETING ON APRIL 25

Kevyn Orr, emergency manager to the city of Detroit, will provide the keynote at the Friday Luncheon at ABI's 32nd Annual Spring Meeting at the JW Marriott in downtown Washington, D.C. The conference, taking place April 24-27, 2014, features a roster of the best national speakers, while the depth and scope of topics offer something for everyone. Specifically, four concurrent workshops will cover various "tracks," including programs for attorneys in commercial cases, a track for restructuring professionals, a track of professional development programming and a track dealing solely with consumer issues. The Annual Spring Meeting offers 18.25/22 hours of CLE/CPE credit, along with ethics credit totaling 3.25/4 hours. In addition, committee sessions will drill down on topics covered in the larger sessions to provide you with the most practical and varied CLE/CPE experience ever. Also featured will be a special half-day optional event sponsored by ABI and the FCBA titled "The Intersection of the FCC and Bankruptcy Law."

Sessions at the 2014 Annual Spring Meeting include:

- 18th Annual Great Debates
- Where the Work Is (and Isn't)
- The Ever-Changing Role of Committees
- Large Complex Trusts: A General Motors Case Study
- Municipal Bankruptcies
- Use of Governmental Assistance Programs in Chapter 13
- The Financial Professional’s Role in Out-of-Court Restructurings and Dissolutions
- Civility in the Restructuring Profession
- Union Contracts
- Student Loan Update
- Social Media: What You Don't Know Can Hurt You
- The § 363 Sale Process from a Transactional Perspective

The conference kicks off with an Opening Reception at the Smithsonian's National Museum of the American Indian, offering a truly D.C. experience. Optional events include a golf tournament at Westfields Golf Club, a Washington Nationals vs. San Diego Padres baseball game and an evening at the Kennedy Center with the National Symphony Orchestra.

ABI IN-DEPTH

NEW CASE SUMMARY ON VOLO: BAYER BUSINESS AND TECHNOLOGY SERVICES V. AGR PREMIER CONSULTING INC. (3D CIR.)

Summarized by Michael Nestor of Young Conaway Stargatt & Taylor LLP

The Third Circuit reversed the decisions of the district court and the bankruptcy court in holding that the bankruptcy court abused its discretion in finding the appellant in contempt for violating a stipulated order.

There are nearly 1,200 appellate opinions summarized on Volo, and summaries typically appear within 24 hours of the ruling. Click here regularly to view the latest case summaries on ABI’s Volo website.

NEW ON ABI’S BANKRUPTCY BLOG EXCHANGE: SUPREME COURT REVISITS SOME STERN QUESTIONS AS IT HEARS ORAL ARGUMENT IN IN RE BELLINGHAM TODAY

The Bankruptcy Blog Exchange is a free ABI service that tracks more than 80 bankruptcy-related blogs. A recent post looks at Executive Benefits Insurance Agency v. Arkison (In re Bellingham), on which the Supreme Court is hearing oral argument today. The case revisits at least some of the questions that bankruptcy courts have been grappling with in the wake of the Supreme Court's Stern v. Marshall decision.

Be sure to check the site several times each day; any time a contributing blog posts a new story, a link to the story will appear on the top. If you have a blog that deals with bankruptcy, or know of a good blog that should be part of the Bankruptcy Exchange, please contact the ABI Web team.

ABI Quick Poll

A debtor may strip liens in a "chapter 20" case.

Click here to vote on this week's Quick Poll. Click here to view the results of previous Quick Polls.

INSOL INTERNATIONAL

INSOL International is a worldwide federation of national associations for accountants and lawyers who specialize in turnaround and insolvency. There are currently 43 member associations worldwide with more than 9,000 professionals participating as members of INSOL International. As a member association of INSOL, ABI's members receive a discounted subscription rate. See ABI's enrollment page for details.

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