||NEWS AND ANALYSIS
BANKRUPTCY RULES ADVISORY COMMITTEE HOLDS HEARING ON MANDATORY NATIONAL CHAPTER 13 PLAN FORM
by ABI Resident Scholar Prof. Anne Lawton
The Committee on Rules of Practice and Procedure of the U.S. Judicial Conference held
a public forum on Friday to hear testimony on proposed changes to the Bankruptcy Rules and the adoption of Official Form 113 for all chapter 13 plans. The witnesses disagreed about the wisdom of adopting a single national plan for chapter 13 cases. Nonetheless, there was consensus that the proposed changes to the Bankruptcy Rules and Official Form 113 are a package and that the Committee should not recommend adoption of one without the other. To read Prof. Lawton’s full recap of the hearing, please click here.
Submissions on the proposal are being accepted until Feb. 17. To submit a comment on the proposal, please find instructions here.
To view testimony and comments already submitted to the docket, please click here.
SUPREME COURT RULES AGAINST RETIREES IN UNION HEALTH BENEFITS CASE
The Supreme Court yesterday ruled that a chemical company may be able to cut the health benefits of its retired workers, unanimously reversing an appeals court ruling that said the benefits had vested for life, the New York Times reported today. "Courts should not construe ambiguous writings to create lifetime promises," Justice Clarence Thomas wrote for the court, adding that "retiree health care benefits are not a form of deferred compensation." The Supreme Court returned the case to the appeals court, telling it to use ordinary principles of contract interpretation to determine whether the collective bargaining agreement at issue had granted free lifetime health care. The case concerned a union contract at the Point Pleasant Polyester Plant in Apple Grove, W.Va. Like many other collective bargaining agreements, it did not directly say whether health benefits for retirees would vest for life. M&G Polymers USA bought the plant in 2000. A few years later, it announced that it would require retirees to contribute to the cost of their health care benefits. Several retirees sued, saying that they had been promised free health care for life. When the case, M&G Polymers USA v. Tackett, No. 13-1010, was argued before the Supreme Court in November, several justices seemed puzzled that the contract had not nailed down such an important point. Read more.
ANALYSIS: INVESTMENT RICHES BUILT ON SUBPRIME AUTO LOANS TO POOR CONSUMERS
Across the country, there is a booming business in subprime auto loans, but this market is as much about Wall Street’s perpetual demand for high returns as it is about used cars, according to a New York Times analysis today. An influx of investor money is making more loans possible, but all that money may also be enabling excessive risk-taking that could have repercussions throughout the financial system, analysts and regulators caution. In a kind of alchemy that Wall Street has previously performed with mortgages, thousands of subprime auto loans are bundled together and sold as securities to investors, including mutual funds, insurance companies and hedge funds. By slicing and dicing the securities, any losses if borrowers default can be contained, in theory. Led by companies like Santander Consumer, GM Financial (General Motors' lending unit) and Exeter Finance, an arm of the Blackstone Group, such securitizations have grown 302 percent, to $20.2 billion since 2010, according to Thomson Reuters IFR Markets. And even as rising delinquencies and other signs of stress in the market emerged last year, subprime securitizations increased 28 percent from 2013. The returns are substantial in a time of low interest rates. In the case of the Santander Consumer bond offering in September, which is backed by loans on more than 84,000 vehicles, some of the highest-rated notes yield more than twice as much as certain Treasury securities, but are just as safe, according to ratings firms. Now questions are being raised about whether this hot Wall Street market is contributing to a broad loosening of credit standards across the subprime auto industry. Read more.
IN PUSH FOR CHANGE, FINRA IS OPPOSED BY THE WALL ST FIRMS IT REGULATES
Wall Street has pulled out all the stops in opposing a plan by its own self-regulator to require brokers to share extensive information about their clients' accounts, the New York Times DealBook blog reported today. The proposal by the Financial Industry Regulatory Authority (FINRA) is "a troubling and serious threat to investors' civil liberties and constitutional rights," Carrie L. Chelko, chief counsel of the Philadelphia financial firm Lincoln Financial Network, wrote in one of hundreds of letters to the agency criticizing the plan. FINRA argues that regular, monthly reports from brokers detailing purchases, sales, margin calls and risk profiles will give it a chance to stop abusive practices before further harm is done. FINRA is considering the feedback on its plan, called the Comprehensive Automated Risk Data System (CARDS), and making changes in advance of seeking approval from its board of governors and forwarding a proposal to the Securities and Exchange Commission, said FINRA's chief executive, Richard G. Ketchum. Read more.
THURSDAY: BLOOMBERG BNA PROGRAM IN NEW YORK TO FOCUS ON FINAL REPORT OF ABI’S CHAPTER 11 REFORM COMMISSION
Two programs, one sponsored by Bloomberg BNA in January and the other by the American College of Bankruptcy (ACB) Fourth Circuit in February, will focus on the Final Report of the ABI Commission to Study the Reform of Chapter 11. Both programs will feature an overview of the Report, and members of the Commission will address their recommendations aimed at modernizing chapter 11 of the Bankruptcy Code.
Bloomberg BNA 2015 Outlook: "What's Ahead for Chapter 11 Reform?"
Bloomberg Headquarters, New York. January 29, 2015.
This free half-day program will take place at Bloomberg's headquarters in New York on Jan. 29 from 8:45 a.m. to 12:30 p.m. ET. Bloomberg's Bill Rochelle and members of ABI's Commission to Study the Reform of Chapter 11, including the official reporter, will present three panel discussions analyzing the key recommendations of the 400-page Report. Attendees have the opportunity to earn 3.25 hours of CLE credit. For more information on the free program, including speakers and registration, please click here.
ACB Fourth Circuit Program: "Considering ABI's Report on Chapter 11 Reform"
Rayburn House Office Building, Washington, D.C. February 13, 2015.
The American College of Bankruptcy Fourth Circuit program, "Considering ABI's Report on Chapter 11 Reform," will be held on Feb. 13 from 9:30 a.m. to 1:00 p.m. ET on Capitol Hill. The free event will take place in Room 226 of the Rayburn House Office Building (House Judiciary Committee) and will feature discussion by ABI commissioners and bankruptcy experts on the Final Report's treatment of small and medium-sized enterprises (SMEs), 363 sales, valuation and more. For more information and to register, please click here.
ORDER YOUR PRINTED COPY OF THE FINAL REPORT OF ABI'S COMMISSION TO STUDY THE REFORM OF CHAPTER 11!
Order your printed copy of the Final Report of ABI's Commission to Study the Reform of Chapter 11! The 402-page Final Report contains more than 200 discrete recommendations of chapter 11 policy reforms. ABI's Commission to Study the Reform of Chapter 11 was established in 2012 with a mission to study and propose reforms to Chapter 11 of the Bankruptcy Code and related statutory provisions. After months of deliberations, the Commission unanimously adopted this report to provide to Congress. For the special price of $40, you will have all the testimony, studies and figures that went into compiling the recommendations at your fingertips! Click here to order.
NEW CASE SUMMARY ON VOLO: IBERIABANK V. GEISEN (IN RE FFS DATA INC.; 11TH CIR.)
Summarized by Paul Avron of Berger Singerman, LLP
The Eleventh Circuit ruled that a general release provision in a confirmed chapter 11 plan that explicitly identified the 100 percent stockholder of the debtor by name applied to the lender's state court claim on the stockholder's guaranty (and not solely in the stockholder's capacity as an officer or director of the debtor as urged by the lender as those terms were descriptive only). The confirmation order, final for purposes of appeal, was entitled to res judicata effect given that the confirmation order and the lender's guaranty claim arose out of the same transaction or transactions. Finally, the court declined to adopt a series of Fifth Circuit cases imposing the requirement that a confirmation order is only entitled to res judicata effect if the release of the guarantor is "sufficiently specific," noting that these cases predated controlling case law from the Supreme Court (Travelers Indemnity Co. v. Bailey), and in any event the plan provisions met that standard.
There are more than 1,500 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: ABI CHAPTER 11 REFORM COMMISSION SERIES: AVOIDANCE ACTIONS AND OTHER LITIGATION ISSUES
The latest installment of blog posts examining the Final Report of the ABI Chapter 11 Reform Commission takes a look at the recommendations concerning avoidance actions and other litigation issues in chapter 11.
To read the Final Report, please click here.
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.
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BLOOMBERG BNA 2015 OUTLOOK: "WHAT'S AHEAD FOR CHAPTER 11 REFORM?"
Bloomberg Headquarters, New York, January 29, 2015.
ACB 4th Cir. Program on ABI Chapter 11 Reform Report
Feb. 13, 2015 Washington, D.C.