SUPREME COURT BACKS POWER OF BANKRUPTCY JUDGES IN WELLNESS DECISION
The U.S. Supreme Court ruled today that bankruptcy judges have the power to make final judgments in certain disputes if everyone involved consents to the arrangement, the Wall Street Journal reported today. In a 6-3 ruling, the Court reversed a Seventh Circuit finding that the bankruptcy court didn’t have the constitutional authority to decide whether certain property belonged to the bankruptcy estate because the dispute also involved state law issues. Justice Sonia Sotomayor, writing for the court, said that bankruptcy courts can be the final arbiter of disputes so long as those involved consent to the arrangement. "Adjudication based on litigant consent has been a consistent feature of the federal court system since its inception," she said in the 19-page ruling. "Reaffirming that unremarkable fact, we are confident, poses no great threat to anyone’s birthrights, constitutional or otherwise." It was the third time in the last four years that the Court has faced the question of the power of the bankruptcy court. Four justices joined Justice Sotomayor's opinion in full, with Justice Samuel Alito joining in part. Justices John Roberts, Antonin Scalia and Clarence Thomas dissented. Read more. (Subscription required.)
CONGRESS URGES CFPB TO DELAY ENFORCEMENT OF NEW MORTGAGE DISCLOSURES
Hundreds of lawmakers from both sides of the political aisle are pushing for the Consumer Financial Protection Bureau to grant a grace period for banks, credit unions and other lenders to comply with a new mortgage disclosure rule, National Mortgage News reported on Friday. Bipartisan letters from both the House and Senate were sent to the CFPB this week urging it to allow lenders until Dec. 31 instead of the current Aug. 1 deadline before enforcing the new rule, so long as institutions make a "good faith effort" to start compliance. Trade groups have long been pushing for such an extension, but CFPB officials have refused to grant one. More than 290 lawmakers asked the CFPB to offer a grace period. The CFPB was required by Congress to integrate the Truth in Lending Act and the Real Estate Settlement Procedures Act into one form, now called TRID. The integration is meant to create a more seamless disclosure process when consumers close on a home purchase. Read more.
ANALYSIS: PENSIONS AND POLITICS FUEL CRISIS IN ILLINOIS
Illinois is facing one of the worst fiscal crises of any state in recent decades, largely because it has mismanaged its pension system, according to a New York Times analysis today. The shortfalls could potentially mean sharply higher taxes and cuts in spending. And even though the state's highest court just this month threw out a landmark plan to cut worker and retiree benefits, some lawmakers say that they may have to find another way to make those reductions as well. Illinois has one of the worst-funded pension systems in the nation. Chicago also has a pension crisis, leading Moody's Investors Service to downgrade its credit rating to junk status on May 12, potentially threatening the city’s ability to borrow. And the state faces an expected budget deficit of $6 billion, which it needs to address quickly. With just days before a legislative deadline, the new Republican governor, who ran his platform on cutting costs and holding down taxes, is at odds with Democrats, who hold a veto-proof supermajority in the legislature. "Really, it's not a clear road map at this point," Illinois Governor Bruce Rauner (R) said of solving the pension crisis. Read more.
COMMENTARY: FEDERAL GOVERNMENT STANDS BEHIND 60 PERCENT OF ALL U.S. FINANCIAL LIABILITIES
Researchers at the Federal Reserve Bank of Richmond found that as of the end of 2013 taxpayers were standing behind nearly $26 trillion of financial liabilities, representing 60 percent of the financial industry's $43 trillion in total liabilities, according to a Wall Street Journal editorial today. Even more striking, according to the commentary, is that the amount has hardly changed since 2009, when the government was still employing allegedly temporary rescue programs. Richmond Fed researchers count almost $15 trillion in explicitly guaranteed liabilities. More than $5 trillion comes from government mortgage monsters Fannie Mae and Freddie Mac. More than $6 trillion comes from bank deposit accounts, which are covered up to $250,000 by the Federal Deposit Insurance Corporation. Taxpayers also stand behind nearly $3 trillion at the Pension Benefit Guaranty Corporation. As recently as 1999, the first year for which the Richmond Fed calculated its Bailout Barometer, taxpayers stood behind less than 45 percent of financial liabilities. That’s still way too high for a vibrant market that allows success and failure, but it shows that relatively recently the economy was thriving with much less federal support and could do so again, according to the editorial. Read the full editorial. (Subscription required.)
DON'T MISS TOMORROW'S "TOP OF THE TOWN" D.C. NETWORKING EVENT WITH TMA CHESAPEAKE, ABI, IWIRC GREATER MD & DC AND ARNOLD & PORTER!
Don't miss tomorrow's Annual "Top of the Town" Networking Event on the rooftop deck of Arnold & Porter LLP in Washington, D.C. The event is co-sponsored by ABI, TMA Chesapeake, IWIRC Greater MD, IWIRC DC and Arnold & Porter. Enjoy this D.C. networking event from 6-8 p.m. ET with a full bar and heavy hors d'oeuvres. For more information to register, please click here.
THURSDAY: BLOOMBERG AND ABI’S "EYE ON BANKRUPTCY" WEBINAR EXAMINES LEADING BANKRUPTCY OPINIONS FROM APRIL
ABI members are invited to watch the next edition of Bloomberg's complimentary "Eye on Bankruptcy" webinar from 1-2 p.m. ET on May 28 to examine the latest opinions. The program is jointly prepared by ABI and Bloomberg Law, and features Bill Rochelle, editor-at-large and bankruptcy columnist for Bloomberg News, talking with G. Eric Brunstad, Jr. of Dechert LLP and Prof. Charles J. Tabb of the University of Illinois College of Law and an editor of Bloomberg Law: Bankruptcy Treatise.
This webinar is the third in a series of monthly presentations designed to keep you up to date on changes in bankruptcy and restructuring; track recent filings, motions, and decisions; and implement revisions to bankruptcy rules and forms. For your complimentary registration, please register here.
ABI LIVE WEBINAR ON JUNE 16 TO EXAMINE ASSET SALES ISSUES IN OIL AND GAS BANKRUPTCIES
Join the latest abiLIVE Webinar on June 16 to explore the unique challenges that can arise in a § 363 sale of the assets of a business involved in the energy industry, with a particular emphasis on oil and gas bankruptcies. Presented by ABI's Asset Sales Committee, the webinar features experts discussing the interplay in energy company bankruptcy cases among the Bankruptcy Code, federal and state laws, the regulatory structure governing the energy industry, and the political and practical realities of the industry’s significance on national, regional and local levels. Speakers on the program are Bryan M. Gaston of Conway MacKenzie (Houston), Ira L. Herman of Thompson & Knight LLP (New York) and Shari L. Heyen of Greenberg Traurig, LLP (Houston). Click here for the ABI member price.
NEXT ABI WORKSHOP TO FEATURE BANKRUPTCY JUDGES EXAMINING COMMISSION RECOMMENDATIONS ON RESOLVING COURT SPLITS
The next ABI Workshop, the 2015 Bankruptcy Judges Roundtable, will take place at ABI headquarters on Aug. 4 to examine the Chapter 11 Reform Commission's recommendations on resolving court splits. The Commission identified more than 30 splits in case law on important bankruptcy issues. Attend the program from 3:00-4:30 p.m. ET in person or via live webstream to hear five bankruptcy judges discuss the recommendations and issues surrounding the court splits. ABI will seek 1.5 hours of general CLE credit in 60-minute-hour states and 1.5 hours of credit in 50-minute-hour states for the program. Networking reception to follow from 5-7 p.m. ET for in-person attendees, and registration for just the reception is also available. Click here to register.
TAKE ADVANTAGE OF THE "EARLY ADOPTER" PROMOTION FOR THE AUDIO ABI JOURNAL FROM MODIOLEGAL!
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NEW CASE SUMMARY ON VOLO: 1756 W. LAKE ST. LLC V. AMERICAN CHARTERED BANK AND SCHERSTON REAL ESTATE INVESTMENTS, LLC (7TH CIR.)
Summarized by Kurt Carlson of Carlson Dash LLC
The Seventh Circuit ruled that value derived from several forbearance agreements, and related concessions from a creditor, satisfies the reasonable equivalence test in the face of an avoidance action brought by the debtor where the equity in the property is eaten up by the value of the bank's concessions that had kept debtor in business for four years beyond the time that the property was deeded to the bank, in relation to the financial accommodation.
There are more than 1,700 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: DELAWARE COURT REVIEWS STANDARD FOR DERIVATIVE CLAIMS
A recent blog post examines a recent opinion by the Delaware Chancery Court extensively reviewing the rights of an insolvent company's creditors to pursue derivative claims against the company's directors. In the opinion, Vice Chancellor J. Travis Laster said that "to bring a derivative action, a creditor-plaintiff must plead and later prove that the corporation was insolvent at the time the suit was filed."
To read more on this blog and all others on the ABI Blog Exchange, please click here.
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.
