| November 2009 issue: Your Name Here! The Bankruptcy Section is looking for volunteers to write a Case Analysis for an upcoming edition. The Case Analysis is typically based on Court of Appeals or Supreme Court decisions, although you can use your discretion to discuss relevant BAP, District Court and Bankruptcy Court decisions -- especially those interpreting BAPCPA's amendments to the Code. If you are interested or would like to learn more, please send an email to the Managing Editor. You can view the archive here. Your subscription You have been subscribed to this list as part of your membership in the Bankruptcy Section of the Commercial Law League of America. CLLA 205 N. Michigan, Suite 2212, Phone: 312-240-1400 Newsletter design by: |
Sua SponteDeborah K. Ebner I know that I touched upon this in October, but I would really like to circle back and talk about New York a little more. As promised, our New York conference was amazing. Our section hosted United States Bankruptcy Judges Steven Rhodes (Michigan), Rosemary Gambardella (New Jersey), our own Judith Fitzgerald (Pennsylvania), Robert Grossman (New York), and Michael Williamson (Florida), each of whom, not only presented flawlessly, but made themselves available for loads of questions and answers. Furthermore, because of their geographic diversity, the geographic diversity of the audience and the managed size of the audiences, the sessions were interactive, which allowed all of our attendees and the panelists to learn from one another. As each session concluded, bench and bar alike were armed with more strategies with which to problem solve for clients. Furthermore, the discussions enabled all of us to identify portions of the Bankruptcy Code that do not work well in our peculiar economy, which of course, provided even more material and support for our legislative endeavors. Yes, our NCBJ programming is cutting edge and the place to be. Yes, our New York (and Chicago) conferences provide generous opportunity to brainstorm and problem solve with judges from all around the country. Honestly, our programming truly is second to none. I know it seems like a long way off, but our Chicago conference is around the corner. On April 29, 2010 through May 2, 2010, our section will again host judges from around the country and again provide meaningful educational and networking opportunities for everyone. If you missed New York, you missed something special: Don't repeat your mistake. Make plans now to join us in Chicago. You won't be disappointed. CLLA Bankruptcy Section NewsAttention Illinois bankruptcy attorneys! The Chicago Bar Association presents the Honorable Robert E. Ginsberg Continuing Legal Education Series on Bankruptcy on Tuesday, December 8, 2009.
Case Law AnalysisSecond Circuit Holds that Section 502(d) Does Not Apply to Administrative Expense Claims Under Section 503(b)(9) of the Bankruptcy Code Eric D. Novetsky Email: enovetsky@jaffelaw.com © All Rights Reserved In In re Ames Dept. Stores, Inc., 582 F.3d 422 (2d Cir. 2009), the Second Circuit Court of Appeals addressed an issue of first impression, "whether section 502(d) of the Bankruptcy Code, which bars allowance of certain claims filed against [a] debtor's estate by alleged recipients of preferential transfers, also bars allowance to such a claimant of postpetition administrative expenses pursuant to section 503(b) of the Bankruptcy Code." The Court ruled that it does not. In Ames, creditor ASM Capital, L.P. ("ASM") appealed a ruling of the Bankruptcy Court, affirmed by the District Court, denying its request for allowance of administrative expenses until its predecessor in interest returned an alleged preferential transfer. ASM had acquired various claims against the Ames Department Store, Inc. bankruptcy estate ("Ames"), including two claims for postpetition administrative expenses pursuant to section 503(b) from G & A Sales, Inc. ("GA"). GA was a defendant in an adversary proceeding brought by Ames to recover certain alleged preferential transfers ("Preference Action"). Ames refused to make distributions on ASM's administrative expenses asserting that section 502(d) of the Bankruptcy Code barred allowance of ASM's administrative expenses until the Preference Action was resolved. Ruling upon a motion from ASM for the allowance of the administrative expenses, the Bankruptcy Court held that the AMS's administrative expenses fell within the scope of, and were therefore disallowed by, section 502(d). The District Court affirmed. On appeal to the Second Circuit, ASM asserted that the disallowance provisions of section 502(d) were inapplicable to its section 503(b) administrative expenses. The Court conducted a primarily textual analysis of the applicable statutory language and concluded that sections 501 and 502 operate independently from and apply to different types of claims than does section 503(b). Thus, the Court ruled that ASM's section 503(b) administrative expenses were not barred by the disallowance provisions of section 502(d). In so holding, the Court reviewed the applicable statutory language. As a foundation for its statutory analysis, the Court observed that the Bankruptcy Code deals with the allowance of administrative expenses under section 503(b) in a manner that is independent from the process of addressing creditor "claims." The Court described how sections 501 and 502 of the Bankruptcy Code work in tandem to address a procedure for the allowance of creditor claims filed under section 501. As noted by the Court, that process "is entirely separate from the procedure for allowance of administrative expenses under section 503." The Court further explained that the internal language of 502(d) suggests that it applies only in the context of claims filed under section 501 and not to claims addressed by section 503(b). The Court also remarked that such an interpretation was reinforced by the absence of any reference to section 503(b) in 502(d) (which specifically references sections 502(a) and (b)). In the second part of its analysis, the Court explained that the context of sections 502 and 503(b) within the "Bankruptcy Code counsels in favor of holding 502(d) inapplicable to administrative expenses under section 503(b)." Citing section 553 (allowing for the offset of mutual prepetition obligations), the Court commented that the Bankruptcy Code establishes a clear policy distinction between a debtor in its pre and postpetition states. Thus, consistent with the Bankruptcy Code's general policy, it is logical for administrative expenses (which cannot generally be set off against prepetition obligations) to be addressed separately by section 503(b). In further support of this conclusion, the Court explained that the general policy of incentivizing third parties to supply goods and services on credit to the estate by granting such parties administrative expense priority would be frustrated by allowing a debtor to forestall or avoid payment by simply alleging a preferential transfer. Such policies, the Court found, confirmed its conclusion that Congress did not intend section 502(d) to apply to administrative expense claims under section 503(b). In footnote, the Court made its final point, explaining that that legislative history to section 502(d) was, at most, inconclusive on the issue. Pursuant to the analysis described above, the Second Circuit held that "both in its specific context and in the ‘broader context of the statute as a whole,' . . . section 502(d) does not apply to administrative expenses under section 503(b)." Accordingly, the Court vacated the decision of the District Court and remanded the case to the Bankruptcy Court for further proceedings. Case Law UpdateCLLA Staff Severo v. Commissioner of Internal Revenue In taxpayers' appeal of a tax court decision granting summary judgment for the IRS and permitting it to proceed with its collection action relating to petitioners' 1990 tax liability, the order is affirmed where the statute of limitations regarding collection was tolled during the pendency of petitioners' bankruptcy proceedings. O'Rourke v. U.S. Boston & Maine Corp. v. Massachusetts Bay Transp. Auth. In a suit filed by a railroad operator (B&M) seeking to enjoin the Massachusetts Bay Transportation Authority (MBTA) from making its Chapter 21E contribution claims against B&M for 95 percent of $15,340,810 for past costs and 95 percent of all future costs, as contribution for certain cleanup activities MBTA undertook at the railroad terminal operated by B&M some twenty-one years ago, district court's judgment is reversed and the appeals court directs entry of judgment for B&M as the MBTA's contribution claims under Chapter 21E for contamination prior to a 1983 discharge from bankruptcy were barred as a matter of law by a Consummation Oder. 2009 Business Bankruptcy SeminarTHE CHICAGO BAR ASSOCIATION PRESENTS THE HON. ROBERT E. GINSBERG CONTINUING Bankruptcy Sales and Automotive Supplier Cases Tuesday, December 8, 2009 CBA Building Two of the hottest topics in bankruptcy today are sales of assets (whether under plans or §363) and automotive supplier cases. This two-part seminar will feature experienced and knowledgeable professionals discussing the current issues arising in cases of all sizes. NOT YOUR FATHER'S SALE: CUTTING EDGE ISSUES IN BANKRUPTCY SALES Sales of assets, whether under a plan or §363, are the most common result of most bankruptcy cases today.
The distinguished panelists who will explain what you need to know about these issues are:
SHEDDING TIERS: AUTOMOTIVE SUPPLIERS IN BANKRUPTCY The Big Auto cases are over, but the number of automotive supplier cases is growing. This panel will consider the issues that may arise in a typical middle-market case, including:
The practitioners on this panel have extensive experience representing debtors, creditors and customers in
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