U.S. SECURITIES CLASS-ACTION SUITS INCREASE OVER LAST YEAR, BIG SUPREME COURT CASE LOOMS
Investors are pursuing more lawsuits accusing companies of fraud, according to a new study, but filings may plunge if the U.S. Supreme Court decides soon to remake the legal landscape, Reuters reported today. Plaintiffs filed 166 federal securities lawsuits seeking class action status in 2013, up 9 percent from 152 in 2012, according to data released Tuesday by Cornerstone Research and the Stanford Law School Securities Class Action Clearinghouse. Filings nonetheless were the third fewest over the last 15 years. The study attributed this in part to fewer lawsuits over the financial crisis, mergers and Chinese reverse mergers, and a drop in potential targets, with the number of U.S.-listed companies having slid by nearly half since the late 1990s. The Supreme Court, in a case involving Halliburton Co. to be argued on March 5, could accelerate that decline as it reexamines a 1988 precedent that made it easier to pursue class actions against companies. In the 1988 decision, Basic Inc. v. Levinson, the court let shareholders who claimed that they were defrauded by false statements in securities filings rely on a "fraud on the market" presumption that stock prices reflected those false statements, and not have to show that they relied on actual filings. The Supreme Court is expected to rule in the Halliburton case before July. Last term, it voted 6-3 to let Amgen Inc. shareholders sue as a group without first showing that the alleged misstatements were material. Read more.
COMMENTARY: THE INEVITABILITY OF INSTABILITY
While the frequency and severity of financial crises suggest that they are an inevitable part of capitalism, regulators should be careful when they try to stabilize the system, according to a commentary in the latest edition of the Economist. Regulators try to limit the problem by establishing requirements for capital and curbs on leverage, but their rules are constantly overtaken by financial innovation. If global financial regulators opt not for a rules-based system but for one based on general principles, the result is a lot of uncertainty over what is permitted and what is not. In their response to the crisis, U.S. authorities opted for a highly complex regulatory regime, in the form of Dodd-Frank. But Marcelo Prates of the Central Bank of Brazil points out that each new rule creates a burden for regulators as well as for the industry; supervisors cannot hope to keep track of all infractions. Each time the rules are evaded, the credibility of the system is reduced. Click here to read the full commentary.
DELINQUENT MORTGAGE DEBT SEIZED BY FORMER LEHMAN EXECUTIVES SEEING RECOVERY
David Sherr, who left Lehman Brothers Inc. in 2007 to start One William Street Capital Management LP, a $2.7 billion investment firm, is starting a fund to buy non-performing loans (NPLs) tied to delinquent borrowers who haven't yet lost their homes to foreclosure, Bloomberg News reported today. NPLs are selling at 60 percent to 80 percent of estimated property values, the letter said, offering the "cleanest exposure" to housing. One William Street joins investors including Ellington Management Group LLC and Starwood Property Trust Inc. targeting the soured home loans after property prices jumped 24 percent from the 2012 trough and foreclosures dropped to their lowest level since 2007. Sales of the debt are poised to increase as banks face new regulations that will make it more expensive for them to hold the loans, and as the government auctions mortgages to help avert foreclosures and stem losses at the financially troubled Federal Housing Administration. "The supply of NPLs is going to be very substantial for the next several years," said Michael Vranos, Chief Executive Officer of Ellington, which oversees $6 billion. Ellington forecasts that transactions will exceed last year's $25 billion. The U.S. Department of Housing and Urban Development, which has sold at least 50,000 non-performing single-family loans insured by the FHA since 2010, is planning further auctions this year. Read more.
HOME PRICES IN 20 U.S. CITIES INCREASE THE MOST SINCE FEBRUARY 2006
Home prices in 20 U.S. cities had the largest annual price gain in November in almost eight years, providing a boost to household wealth, Bloomberg News reported today. The S&P/Case-Shiller index of property prices in 20 cities climbed 13.7 percent from November 2012, the biggest 12-month gain since February 2006, after a 13.6 percent increase in the year ended in October. The month-over-month price gains were led by Atlanta and Miami, which showed 1.6 percent increases, followed by 1.3 percent gains in Detroit, Boston and San Francisco. Property values rose in all 20 metropolitan areas, with the smallest advances coming in Phoenix and Seattle. Read more.
COMMENTARY: BANKS CAN'T BE THE ONLY BACKSTOP FOR FRAUD
Recent retail data breaches underscore the need for updating payment systems to protect consumers from cybercriminals, according to a commentary in the Wall Street Journal today. On Thursday, luxury retailer Neiman Marcus announced that hackers had lifted the credit card information of as many as 1.1 million customers during four months in 2013. This news follows closely after Target's announcement that up to 110 million of its customers were affected by a data breach over the holidays. That's something bankers and retailers, who share responsibility for the system's integrity, should work together to safeguard. Retailers and bankers have been sparring for a long time over who should pay for losses when credit- and debit-card fraud occurs. Amid the current battle over interchange fees, the disagreement between banks and retailers is a distraction from the real, daily threats to the safety of the payments system. Neiman Marcus and Target appear to be victims of malware software that steals information before it ever leaves the companies. The breaches offer a timely reminder that cybercriminals are trying every day to steal customers' data -- and money -- and that combating this requires daily vigilance. Read more. (Subscription required.)
PURCHASE EITHER THE CONSUMER OR BUSINESS EDITION OF THE BEST OF ABI 2013 AND RECEIVE A FREE ADDITIONAL TITLE!
To make room for new books in 2014, ABI is having a special Bookstore clearance sale. Now, when you buy either Best of ABI 2013: The Year in Business Bankruptcy or The Year in Consumer Bankruptcy, you can choose a free book from a select list of ABI publications. You'll be able to make your selection when you click "Buy Now" on either edition of the Best of ABI 2013. To purchase the Best of ABI 2013: The Year in Business Bankruptcy, please click here.
To purchase the Best of ABI 2013: The Year in Consumer Bankruptcy, please click here.
LOOKING FOR A REPLAY OF THE "BACK TO BASICS" WEBINARS? CHECK OUT ABI'S CLE SITE!
The final installment of the ABI's "Back to Basics" live webinar series, hosted by the Young and New Members Committee, was held today, and you will soon have the opportunity to access the programs at your convenience! The three webinars in the series, an examination of financial statements and operating reports, using financial documents as evidence and issues surrounding bankruptcy and hedge funds, will be posted to ABI's e-Learning website. Let a trusted CLE provider help get your associates up to speed.
ABI'S SIXTH ANNUAL LAW STUDENT WRITING COMPETITION DEADLINE APPROACHING
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.
NEW CASE SUMMARY ON VOLO: BENTA, ET AL. V. CARROLL (3D CIR.)
Summarized by Valerie Hamilton of Sills Cummis & Gross PC
The Third Circuit ruled that an appeal alleging that a district court abused its discretion when dismissing declaratory judgment action is moot as the district court effectively ruled on the merits by denying the appellants' subsequent motion to withdraw the reference.
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: FUNDS TRANSFERRED FROM A CLIENT TRUST ACCOUNT CAN BE "PROPERTY OF THE DEBTOR" THAT IS SUBJECT TO A FRAUDULENT TRANSFER CLAIM
The Bankruptcy Blog Exchange is a free ABI service that tracks more than 80 bankruptcy-related blogs. A recent post on the ABI/St.John's Bankruptcy Case Blog examined In re Dayton Title Agency, Inc., in which the title company's bankruptcy estate sued a paid-off lender to recover a fraudulent transfer. The Sixth Circuit held that the funds paid out of the debtor's trust account constituted property of the debtor at the time of transfer for purposes of avoiding a fraudulent transfer.
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 Bankruptcy Code permits a debtor to artificially impair a class for cramdown purposes.
Click here to vote on this week's Quick Poll. Click here to view the results of previous Quick Polls.
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