GM JUDGE SAYS HIDING SWITCH DEFECT WOULD HAVE BEEN FRAUD
The bankruptcy judge in the 2009 General Motors Co. bankruptcy case said that customers who sued the automaker over fallen car prices might have a stronger case if they could prove company executives defrauded the court about a faulty ignition switch when they testified during its 2009 bankruptcy proceedings, Bloomberg News reported yesterday. If then-Chief Executive Officer Fritz Henderson "knew about the switch problem and intended to keep it from me, that might constitute fraud on the court," Bankruptcy Judge Robert Gerber said at a hearing yesterday. Such deception would be a worse offense than the one customers' lawyers propose to fight on, which is that GM didn't give the car owners a say in court during the company's restructuring, the judge said. Henderson said in an e-mail yesterday that "I did not know anything about it." The stakes are high for how the case proceeds. Customers injured in car accidents tied to the initial 2.59 million vehicles recalled for switch repairs might be paid about $3 billion, a Barclays analyst estimated in March. By contrast, one lawyer with a car-price suit has demanded as much as $10 billion for car owners who weren't injured except for having almost unsaleable Cobalts and Ions. In the same court where the U.S. financed the automaker's turnaround in 2009, Judge Gerber yesterday met with lawyers bringing about 90 lawsuits on behalf of GM customers. Judge Gerber's task is to decide whether to allow them to proceed with cases that he's halted until at least Sept. 1, or to bar the largest claims. Read more.
REPORT: HOME FINANCE WRITE-OFFS DECREASE MORE THAN 37 PERCENT IN ONE YEAR
According to the latest Equifax National Consumer Credit Trends Report, the total balance of home finance write-offs year-to-date in May is $43.5 billion, a seven-year low and a decrease of more than 37 percent from the same time period a year ago. Home finance includes first mortgage and home equity installment and revolving lines of credit. Year-over-year changes in home financing total delinquencies (30 or more days past due), measured as a percentage of outstanding balances, include:
First mortgage: decreased 29 percent
Home equity installment: decreased 27 percent
Home equity revolving: decreased 10 percent
The report also showed that the total balance of first mortgages 90 or more days past due or in foreclosure is less than $230 billion, a six year low and a decrease of 30 percent from same time a year ago. Read more.
ILLINOIS SUPREME COURT RULES AGAINST CUTS IN RETIREE HEALTH BENEFITS
A ruling by the Illinois Supreme Court today is casting new doubts on an overhaul of public employee retirement benefits in a state that is struggling to prop up its deeply underfunded pension system, the Wall Street Journal reported today. The court ruled health insurance subsidies for retired state workers are protected by the Illinois constitution after public sector unions challenged cuts put in place by lawmakers in 2012. The decision was being watched closely because labor leaders are challenging on similar grounds a larger overhaul of the retirement system passed last year. Illinois lawmakers last fall reduced future retirement costs by shrinking cost-of-living increases for retirees, raising retirement ages for younger employees and capping the size of pensions. The law aims to stabilize a retirement system that's helped drive the state's credit rating to the lowest among U.S. states. Labor unions challenged the pension system overhaul, saying that the cuts also violated protections for retirement benefits in the state constitution. Read more. (Subscription required.)
COMMENTARY: ANOTHER FAILURE TO REGULATE DERIVATIVES
By the time the Securities and Exchange Commission finalized a rule last month to regulate derivatives under the Dodd-Frank financial reform law, the big banks that dominate the multitrillion-dollar market had already figured out how to game it, according to a New York Times editorial today. The SEC has written and passed a rule that is custom built for evasion, according to the editorial, all the while insisting, unconvincingly, that it does not have the legal authority to craft tougher regulations. At issue is how to regulate derivatives trading by the overseas affiliates of American banks and by the foreign banks and foreign companies that do business with them. The aim of the Dodd-Frank law is to prevent gambling in derivatives, financial contracts that are supposed to manage risk, but that have long been misused for catastrophically excessive speculation. Under the SEC rule, derivatives regulations will apply to foreign affiliates of American banks only if the affiliates' derivative contracts are explicitly guaranteed by the American parent banks, say, by writing a guarantee into a contract. Read more.
REPORT: RECORD-SETTING LAW FIRM MERGER PACE CONTINUES
A second-quarter report by legal consultancy Altman Weil has found that the 39 law firm mergers announced in the U.S. so far this year match the pace of 2013, which yielded a record number of law firm unions, the American Lawyer reported yesterday. Most of the combinations this year involved East Coast and Midwest firms looking to western markets -- such as California and Colorado -- for future growth. Firms generally eschewed bigger deals in favor of focusing on smaller acquisitions, says Altman principal Ward Bower. The National Law Journal, in its annual analysis of the nation's 350 largest firms by attorney head count, reported last month that the record number of domestic mergers in 2013 were relatively small in size, thus resulting in little dramatic change to firm sizes. Only one megamerger, the June 1 union between Squire Sanders and Patton Boggs that created 1,500-lawyer Squire Patton Boggs, was announced during the second quarter of this year. Read more.
CHIEF BANKRUPTCY JUDGES REACT TO BELLINGHAM DECISION
On June 16, 2014, ABI presented a panel of chief bankruptcy judges who discussed the new U.S. Supreme Court decision in Bellingham as well as other hot topics. Bankruptcy Judges Dennis R. Dow (W.D. Mo.), C. Ray Mullins (N.D. Ga.), Brendan Linehan Shannon (D. Del.), Cecelia G. Morris (S.D.N.Y), and Barbara J. Houser (N.D. Tex.) reviewed the Bellingham decision and provided commentary on what effect it will have on the bankruptcy courts. You can still hear what these judges had to say by purchasing the program by clicking here.
ARGENTINIAN DEBT CRISIS AND ITS IMPLICATIONS FOR SOVEREIGN DEBT RESTRUCTURING? WATCH JAMES MILLSTEIN'S PRESENTATION AT THE CROSS-BORDER SYMPOSIUM
Not able to catch James Millstein's presentation on Argentina and the future of sovereign debt restructuring on June 20 at ABI's Cross-Border Symposium? Watch the full presentation in ABI's Newsroom.
NEW CASE SUMMARY ON VOLO: SETHI V. WELLS FARGO BANK (IN RE SETHI; 9TH CIR.)
Summarized by Joel Newell of Lane & Nach, P.C.
In the unpublished decision, the Ninth Circuit BAP ruled that the bankruptcy court's order denying the debtor's discharge pursuant to 11 U.S.C. Sec. 727 did not make sufficient findings to support its ruling; therefore, the bankruptcy court's ruling was vacated and remanded. In regards to the 11 U.S.C. Sec. 727(a)(2) claim, the BAP ruled that there was sufficient evidence supporting the bankruptcy court's findings that Wells Fargo's collateral had been concealed; however, the BAP could not decipher from the bankruptcy court's findings whether property the debtor hid was the debtor's property of the medical practice's property.
There are more than 1,300 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 GRANTS CERTIORARI TO DECIDE MEANINGFUL STERN V. MARSHALL QUESTIONS
While disappointed that the Supreme Court did not provide more meaningful guidance in Executive Benefits Insurance Agency v. Arkison regarding the nature and extent of bankruptcy judges' authority, a recent blog post provides a preview of Wellness Int'l Network v. Sharif that the Court granted cert to on Tuesday.
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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