Bankruptcy Judge George Hodges continues to take bold steps against asbestos litigation fraud in the Garlock bankruptcy case, according to an editorial in yesterday's Wall Street Journal. Asbestos claims drove gasket-maker Garlock Sealing Technologies into bankruptcy in 2010, and the tort bar demanded the company hand over $1.3 billion. Judge Hodges allowed for discovery into some of the claims and issued an opinion skewering the plaintiffs' lawyers for a "startling pattern of misrepresentation." He detailed how the tort bar was essentially double-dipping filing claims with outside asbestos trusts in which they blamed non-Garlock products for their diseases, even as they blamed Garlock in court. On Oct. 16 the judge announced that he will now make public all the evidence in the proceedings. Judge Hodges said that he shouldn't have agreed to a trial bar demand that he seal the courtroom at times when Garlock presented evidence. "The hearings should have been opened to the public," he explained, since it would have enabled "the public to evaluate the Court's decision based on all of the evidence rather than on simply part of it." Read more. (Subscription required.)
H.R. 982, the "Furthering Asbestos Claim Transparency (FACT) Act of 2013," passed the House of Representatives last year and currently resides in the Senate Judiciary Committee. The FACT Act aims to amend title 11 of the United States Code to require the public disclosure by trusts established under section 524(g) of such title, of quarterly reports that contain detailed information regarding the receipt and disposition of claims for injuries based on exposure to asbestos, and for other purposes. Click here to view the bill text.
REPORT: FOREIGN COMPANIES INCREASINGLY TURNING TO U.S. BANKRUPTCY COURTS
A new report from scholars Oscar Couwenberg of University of Groningen Faculty of Law in the Netherlands and Stephen J. Lubben of Seton Hall University School of Law in New Jersey identified 49 corporate bankruptcy filings between 2005 and 2012 that included foreign debtors, and of those, 15 had no U.S. parent company, the Wall Street Journal reported today. The U.S. Bankruptcy Code has been interpreted to qualify companies with as little as a U.S. bank account and will reorganize assets anywhere in the world. With the explosion of high-yield debt in Europe, European companies burdened with bond debt are expected to come to the U.S. to reorganize with increasing frequency, according to the report. The only European country with a bankruptcy law to rival the U.S. the United Kingdom with its "scheme of arrangement" isn't good at dealing with bond debt, Lubben said. Additionally, the U.K. is trying to discourage forum shopping to its country, which will almost certainly send distressed European companies to U.S. courts, according to Lubben. Read the full report.
ANALYSIS: RISING U.S. LIFE SPANS SPELL LIKELY PAIN FOR PENSION FUNDS
Longer life spans in the U.S. don't bode well for the corporate pension plans that are supposed to support workers into old age, the Wall Street Journal reported yesterday. New mortality estimates released on Monday by the nonprofit Society of Actuaries show the average 65-year-old U.S. woman is expected to live to age 88.8, up from 86.4 in 2000. Men aged 65 are expected to live to age 86.6 years, up from 84.6 in 2000. Longer lives for retirees may add to a squeeze at many pension funds already struggling to plug funding gaps and force companies to contribute more to cover future obligations. The estimates also are expected to accelerate a shift away from defined-benefit pension plans that offer guaranteed payouts, said Rick Jones, senior partner at consultant Aon Hewitt. More companies are moving workers into defined-contribution plans, such as a 401(k), where employees are largely responsible for saving and investment choices. The new estimates released Monday based on data from corporate pension plans could eventually increase retirement liabilities by roughly 7 percent for most corporate plans, according to Aon Hewitt. Read more. (Subscription required.)
BANKS, TAKING HINT FROM REGULATORS, OVERHAUL OVERDRAFTS
Regulators are turning up the heat on overdraft fees and, increasingly, so are banks, Credit&CollectionsRisk.com reported yesterday. Long a staple of banks' noninterest income, overdraft fees are more controversial than ever. The Consumer Financial Protection Bureau on Monday gave strong indications that it views overdraft fees as a form of short-term credit, and thus will place tough restrictions on overdrafts in upcoming new rules. Banks are taking the hint. The $119 billion-asset Regions Financial, in Birmingham, Ala., last week announced that it is voluntarily making changes to its overdraft program that will cut its yearly fee income by at least $40 million. Regions will stop using the process of high-to-low reordering of processing withdrawals, a technique designed to maximize the overdraft fees collected from consumers. Regions is not alone. A number of bankers have delivered grim outlooks on the future of overdrafts during third-quarter earnings conference calls. Read more. (Free registration required.)
COMMENTARY: ARE BANKS TOO EXPENSIVE TO USE?
According to a new Federal Deposit Insurance Corporation report released on Wednesday, 25 million Americans were unbanked in 2013, and another 68 million are "underbanked" or have bank accounts but also rely on alternative financial services, according to a New York Times editorial today. Meanwhile, policymakers continue to insist that Americans need bank accounts, that banks are safer and less costly than the alternatives, and that a bank account signifies stability. It is difficult to build a credit score if you don't have a bank account and credit card, and credit scores now affect one's ability to rent an apartment or get a job, according to the commentary. However, many choose to use alternative and informal financial services because they found banks to be more expensive and confusing and less service-oriented. The average monthly service fee on checking accounts increased 25 percent in one year alone, from 2010 to 2011. Only 39 percent of noninterest-bearing checking accounts were free in 2011, down from 76 percent in 2009. And the average overdraft fee is now $32.74. Click here to read the full commentary.
To read the FDIC's "National Survey of Unbanked and Underbanked Households," please click here.
OBAMA ADMINISTRATION ISSUES RULES TO REGULATE COLLEGES WITH CAREER-TRAINING PROGRAMS
For-profit colleges will have to limit how much debt students amass in career-training programs or have their federal funding cut, according to rules issued yesterday by the Obama administration, the Washington Post reported yesterday. The rules are the culmination of years of contentious debates over the responsibility for-profit colleges have to ensure that graduates of career programs receive "gainful employment." While the restrictions could place 1,400 programs in jeopardy of losing federal student aid, critics say the rules still leave room for schools to abuse the system. Administration officials championed the rules in 2009 as a way to protect students from programs that could leave them drowning in debt. For-profit colleges, which get most of their revenues from federal student aid, argued that they were being unfairly targeted and the regulations would hurt low-income students. The new rules, which take effect in July 2015, require programs to show their graduates having loan burdens that don't exceed certain levels of their pay. It will cover thousands of programs at for-profit colleges and non-degree programs at public and private nonprofit colleges. But critics say the regulations are too lax because they only examine the debt burdens of those who graduate from the programs not those who drop out. Read more.
CASES FILED ON OR AFTER NOV. 1 (SATURDAY): UTILIZE USTP UPDATED MEDIAN FAMILY INCOME DATA
The U.S. Trustee Program (USTP) has updated the Census Bureau's Median Family Income Data and will apply the updated data to cases filed on or after Nov. 1. For the latest data required for completing Form 22A and Form 22C, please click here.
WATCH NOW: ABI'S SAM GERDANO PREVIEWS THE FORTHCOMING CHAPTER 11 REFORM COMMISSION REPORT
NEXT FREE COMMITTEE TELECONFERENCE WILL BE NEXT WEEK ON THE BANK SECRECY ACT!
Members are encouraged to dial-in and listen to or participate in upcoming ABI Committee conference calls. While committee membership is encouraged, it is not required to join the free teleconferences. Upcoming Committee teleconferences include:
- Unsecured Trade Creditors Committee: Tuesday, Nov. 4; 3 pm ET
Topic: "Bank Secrecy Act and Anti-Money Laundering"
Speakers: Mark Gittelman of PNC Bank and Brent Weisenberg
All committee teleconferences are free to ABI members and registration is not required. Simply utilize the following dial-in information:
Call in: (712) 432-1500
Participant code: 692933
ABI MEMBERS IN SOUTHERN CALIFORNIA- DON'T MISS THE SPECIAL TMA EVENT TO BENEFIT THE WOUNDED WARRIOR PROJECT ON NOV. 12
ABI members are invited to attend TMA Southern California's special fundraiser to support the Wounded Warrior Project and SoCal veteran support groups on Nov. 12 at the Beverly Hilton. Funds raised will benefit the Wounded Warrior Project, Veterans Legal Institute and the Public Law Center. For more information or to attend, please click here.
ABI MEMBERS INVITED TO ATTEND RETIREMENT DINNER FOR BANKRUPTCY JUDGE PETER J. WALSH ON NOV. 19
ABI members are invited to a special retirement dinner on Nov. 19 honoring the Hon. Peter J. Walsh's 50 years of dedicated service to the bench and bar. The event will be held at the Chase Center on the Riverfront in Wilmington, Del., and is being hosted by the Bankruptcy Section of the Delaware State Bar Association and the Delaware Chapter of the Federal Bar Association. Questions should be directed to Karen B. Owens at 302-654-1888. To attend, please go to https://sites-pepperhamilton.vuturevx.com/107/772/uploads/judge-walsh-retirement-dinner-form.pdf
NEW CASE SUMMARY ON VOLO: NIELSEN V. ACS INC. (IN RE NIELSEN; 8TH CIR.)
Summarized by William Wallo of Weld, Riley Prenn & Ricci SC
The Eighth Circuit Bankruptcy Appellate Panel affirmed the bankruptcy court's determination that the debtor's student loans were not dischargeable.
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: BANKS' NEW MERGER STRATEGY IS TO BECOME "TBTF"
A new blog post expects more regional banks to pursue deals that put them over the $50 billion-asset threshold in an effort to reap the benefits of implicit government subsidies.
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
The §547(c)(2) ordinary course preference defense should be repealed.
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