| Sept/Oct 2011 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: |
September/October 2011 Bankruptcy Section Newsletter Section NewsRegister for the Stern v. Marshall Webinar And Learn More About This Hot Bankruptcy Issue While Earning CLE Credit! Stern v. Marshall And The Limits Of Bankruptcy Courts' Article III Jurisdiction On June 23, 2011, the United States Supreme Court issued its 5-4 opinion in Stern v. Marshall, 131 U.S. 2594 (2011) in which it held that Article III of the United States Constitution precluded a bankruptcy court from issuing a final order adjudicating a counterclaim that had been asserted by a debtor in response to a proof of claim filed by one of the debtor’s creditors. This opinion is perhaps the most important decision that addresses the limits of Article III jurisdiction of the bankruptcy courts since the Supreme Court’s decision in Northern Pipeline Const. Co. v. Marathon Pipe Line Co., 458 U.S. 50 (1982) (plurality opinion) and it is certain to impact (and already has impacted) the handling of a number of cases pending before the courts. While the scope of the opinion, on first blush, is limited in nature; nevertheless, the opinion raises a number of issues - without any clear answers or direction - with which practitioners and the courts will need to grapple. The panel will explore (i) the facts and holding of the case; (ii) bankruptcy jurisprudence on jurisdiction; (iii) what the opinion means to practicing attorneys; (iv) what the opinion means to bankruptcy judges; (v) procedural and practical challenges going forward; and (vi) alternative strategies for dealing with the impact of the Supreme Court’s decision. In addition, the panel will highlight recent case decisions and articles that have been published since the Supreme Court’s ruling.
1:00 - 2:30 p.m. Eastern time $85 per registration; register online here. CLLA Bankruptcy Section Takes Position On Venue Issue: “A Correction to Bankruptcy Venue Is Sorely Needed.” There is ample evidence that over the last 20 years more and more major companies are filing in a bankruptcy court away from the debtor's headquarters. This has resulted in a greater rate of re-filings and failed reorganizations from these "remote" venues. This is not good for the proper functioning of the bankruptcy process. A recently introduced bipartisan bill by Representatives Smith and Conyers (HR 2533) attempts to constructively address the growing forum shopping problem by proposing that corporate debtors must file only in districts where its principal place of business or principal assets have been located for at least one year prior to the commencement of the case, as well as placing other restrictions on "pending case" filings. The CLLA’s primary goal when opining of legislative and related matters, is the fair, equitable and efficient administration of bankruptcy cases. Therefore, the CLLA supports HR 2533. To read the entire opinion article, click here. The CLLA Will Present The Lawrence P. King Award To The Honorable Judith Fitzgerald The Commercial Law League of America (CLLA) and its Bankruptcy Section are pleased to present the King Award to the Honorable Judith K. Fitzgerald at the National Conference of Bankruptcy Judges in Tampa, Florida on Oct. 13, 2011. Each year, the Executive Council of the Commercial Law League’s Bankruptcy Section presents the Lawrence P. King Award to recognize a lawyer, judge, teacher or legislator who exemplifies the best in scholarship, advocacy, judicial administration or legislative activities in the field of bankruptcy. The award was designed to recognize the lifetime achievements of Professor King, which include contributing to the practice of bankruptcy law through teaching and working to elevate the profession through bankruptcy-related legislative activities. This year’s recipient - Fitzgerald - was appointed to the Bankruptcy Court for the Western District of Pennsylvania on Oct. 30, 1987, after serving for nearly 12 years as an assistant United States attorney. She sits by designation in the Bankruptcy Court for the District of Delaware and formerly sat by designation in the Eastern District of Pennsylvania and the District of the Virgin Islands. Read more about the judge’s contributions to bankruptcy law. Earn CLE Credit At The CLLA New York Meeting’s Outstanding Bankruptcy Programs! The Value of Everything And The Worth of Nothing: Legal And Practical Perspectives On Understanding Both
Sua Sponte Peter Califano, Bankruptcy Section chair The U.S. Supreme Court recently decided Stern v Marshall, 564 US 2594, 131 S.Ct. 2594 (June 23, 2011) concerning the longstanding controversy over Anna Nicole Smith's alleged gift from her late husband. The Court in Stern held that bankruptcy courts are unable to issue final judgments on state law claims that are asserted as a counterclaim against creditors who file a proof of claim in the bankruptcy case. The holding appears narrow, but it looks as if the decision will actually have a wide-spread impact on the bankruptcy court's jurisdiction. We are receiving many reports from lawyers across the country who are experiencing the issue in their bankruptcy cases. Commentary and analysis on this important development is ongoing, as courts and practitioners attempt to address the consequences of the decision. The Bankruptcy Section is working on an E-Alert that will be distributed shortly and will be sponsoring a teleseminar next month to help us all understand the significance and how to address Stern in our practices. In the meantime, the Section is busy. Earlier this month, Section members Gary Weiner; Ivan Reich, Jeffrey Schatzman, Louis Robin and myself met with various congressional staff members in Washington DC to discuss the Commercial Law League America's positions and recommendations on limiting bankruptcy venue (HR 2533), addressing problems in small business reorganizations and the impact of Section 363 sales on the bankruptcy process. Also, we have recently received word that the 5th Circuit's decision in Reed v. Arlington (No. 08-11098 (August 11, 2011)), has been reversed, en banc, as advocated by the Section in submitted amicus curie briefs. You may have already seen our E-Alert on the outcome. Finally, we are completing preparation for the CLLA's Annual New York Meeting (November 10 - 12, 2011) with an array of impressive valuation and hot topic educational panels. During that weekend, the Section's Executive Council and its subcommittees will be meeting and we will host a dinner for the Section's members and guests. We hope you will come to NY and join us for these events and activities! Case Law Analysis Heather Hildreth, Candidate for B.S. Physics and B.A. French at the University of Virginia 2013; BANKRUPTCY COURT WEIGHS IN ON SAME-SEX MARRIAGE The U.S. Bankruptcy Court for the Central District of California recently denied a motion to dismiss a joint Chapter 13 petition of a same-sex couple in In Re Balas and Morales, 449 B.R. 567 (Bkrtcy. C.D. Cal. 2011) holding that the Defense of Marriage Act ("DOMA") was unconstitutional, violating the due-process clause of the Fifth Amendment. BACKGROUND On February 24, 2011, Gene Balas and Carlos Morales ("Debtors") filed a joint Chapter 13 bankruptcy. The United States Trustee moved to dismiss the case under Section 1307(c) of the Bankruptcy Code, claiming that the Debtors were ineligible, because the Debtors were two males, and thus was in violation of Section 302 and the definition of spouse as defined in DOMA. The Debtors, however, were legally married in California August 20, 2008 (prior to the enactment of California Proposition 8 - limiting marriage to a woman and a man). The matter was decided on June 13, 2011, by Judge Thomas Donovan and signed by 19 other California bankruptcy judges ruling in favor of the Debtors. DISCUSSION Judge Donovan's analysis of this case relies heavily on the assumption that the marriage of Balas and Morales was legal and valid. Since the marriage was finalized before Proposition 8 went into effect, the Debtors' marriage was recognized based on the passage of California Senate Bill 54, a bill that went into effect in January 2010 legalizing all same-sex marriages performed prior to Proposition 8. In addition, the Court cited favorably the Obama Administration's position as stated in a letter from U.S. Attorney General Eric H. Holder, Jr. to Speaker of the House of Representatives John Boehner, dated February 23, 2011 that DOMA was unconstitutional. Given that the Debtor's marriage was legal and valid, Judge Donovan framed the issue as whether or not legally married same-sex couples have the same rights as other legally married couples. He noted that the eleven causes for dismissal listed in Section 1307(c) do not apply to this case, and that the only issue arises with the term "spouse" in Section 302(a). Judge Donovan found that the U.S. Trustee's cited cases of In re Jephunneh Lawrence & Assoc. Chartered, 63 B.R. 318 (Bkrtcy. D.C. 1986, (joint petition was improperly filed by a corporation and its sole shareholder) and In Re Malone, 50 B.R. 2 (Bkrtcy. E.D. Mich 1985) (two unmarried, cohabitating people were not entitled to file a joint petition) were inapplicable to the case at bar. However, two cases that were relevant were In re Somers, 448 B.R. 677 Bkrtcy. S.D.N.Y. 2011 (insufficient grounds to dismiss a joint petition based on the "only for cause" provision of Section 707(a)) and In re Ziviello-Howell, 2011 WL 2144417 (Bkrtcy. E.D.Cal. 2011), (no cause for discretionary dismissal under Section 707(a) for two married women filing a joint petition). Judge Donovan's opinion then proceeds to provide extended analysis for challenging DOMA's constitutionality citing favorably the heightened scrutiny test contained in Witt v. Dep't of Air Force, 527 F.3d 806 (9th Cir. 2008) claiming that "the question the court must focus on is whether dismissing the Debtors' bankruptcy case pursuant to DOMA 'advances an important governmental interest.'" Judge Donovan holds that it does not and then finally refers to the history of discrimination against homosexuals, and states that permitting the Debtors' joint bankruptcy petition will not interfere with DOMA's goals, i.e. to encourage responsible child-bearing, defending the traditional institution of heterosexual marriage, defending traditional notions of morality, and preserving limited governmental resources. COMMENT Since the Bales and Morales opinion was decided, the U.S. Trustee has withdrawn its appeal, so the decision is only legally binding in the Central District. However, other courts appear ready to follow the results of Bales and Morales. For example, the U.S. Bankruptcy Court for the Northern District of California recently announced on its website that although the Balas and Morales decision is not binding in its court, joint petitions will be accepted by the clerk by two individuals who represent that they are lawfully married and the court will not on its own initiative investigate whether the married couple is same-sex or mixed-sex are in fact legally married. Counsel representing debtors or creditors should review and update their local court's practice on this issue. Legislation UpdatesUS HR 2533 Chapter 11 Bankruptcy Venue Reform Act of 2011 Status: Referred to the Subcommittee on Courts, Commercial and Administrative Law - 8/25/2011 A bill related to local government bankruptcy and neutral evaluation.
A bill related to banking and financial institutions.
A bill relating to debtor exemptions in bankruptcy Enacts the Amendments to Article 9 of the Uniform Commercial Code
Washington Hot News:New Report Outlines Debtor Statistics The Administrative Office of the U.S. Courts' (AOUSC) annual report to Congress, “2010 Report of Statistics Required by the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005,” as mandated by 28 U.S.C. Section 159(b) provides detailed statistics about debtors -- including their income, expenses, and assets and liabilities for the nation as a whole, as well as by judicial circuit and district. The report also contains an interactive map. A summary of the findings:
A copy of the report is available here. The tables in the 2010 report can be viewed here. Congressional Members Ask Mortgage Companies To State Policies United States Senate Committee on the Judiciary Chairman Patrick Leahy (D-Vt.) and committee member Richard Blumenthal (D-Conn.) recently sent letters to 11 leading mortgage servicers seeking information about their policies and practices related to foreclosures in the bankruptcy courts. The letters inquire about the policies and procedures related to mortgage foreclosures, and the institutions’ practices/policies that relate to filing proofs of claim and motions for relief from stay in bankruptcy. The letter referenced the Executive Office for the United States Trustees' review of filings from several districts, concluding the error rate in proofs of claim in bankruptcy courts is much greater than previously disclosed. Earlier this year, Leahy introduced S. 1054, the “Fighting Fraud in Bankruptcy Act of 2011,” (co-sponsored by Blumenthal and Sen. Sheldon Whitehouse (D-R.I.), which seeks to strengthen the tools available to U.S. bankruptcy trustees to protect American homeowners from creditor fraud in bankruptcy court. Reps. Steve Cohen (D-TN) and Jim McDermott (D-Wash.) also introduced H.R. 2713, a bill to limit investor and homeowner losses in foreclosure. |