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In many cases, a creditor in a bankruptcy case (the 'Primary Creditor') has the benefit of a guaranty, an escrow, or a letter of credit provided by a third party (the 'Subrogee') to which it can turn in order to satisfy its claim against the debtor. When the Subrogee pays the debtor's obligation to the Primary Creditor after the debtor has filed a petition in bankruptcy, the Subrogee will in most cases be entitled to assert a subrogation claim against the debtor in the bankruptcy case. Below, we discuss the relevant considerations in determining whether a subrogation claim is valid.
Without any reservation, it is safe to say that insolvency crisis facing the U.S. auto industry ' from myriad Tier 2 suppliers right up to the legacy-burdened OEMs ' has become the cause c'l'bre of the professional restructuring community, and for objectively good reason. In this year alone, at least eight parts makers (among them, Collins & Aikman Corp., Meridian Automotive Systems, Inc., Tower Automotive, Inc., Jernberg Industries, Inc., Harvard Industries, Inc., Jacobs Industries, Inc., and Delphi Corp.) filed for Chapter 11 relief. And many industry experts believe that these cases represent merely a harbinger of even bigger things to come.
Bankruptcy claims traders are currently on the lookout for a decision from the Enron bankruptcy court that could add significant uncertainty to distressed debt markets. The court has under advisement the issue of whether claims sold post-petition are subject to disallowance under ' 502(d) or equitable subordination as a result of pre-petition conduct or receipt of avoidable transfers by the transferor.
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Recent rulings from around the country.
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Courts and administrative law judges have begun grappling with issues concerning the scope of SOX's whistleblower provisions in two types of situations that any U.S.-based multinational corporation might encounter: 1) where the whistleblower is located and the whistleblowing occurred outside the U.S., and 2) where the whistleblower's employer is a nonpublic subsidiary of a publicly traded company.
In its first employment-related decision of this term, the U.S. Supreme Court held in <i>IBP, Inc. v. Alvarez</i> that the time food-processing workers spend walking between changing and production areas is compensable under the Fair Labor Standards Act (FLSA), as amended by the Portal-to-Portal Act. <i>IBP, Inc. v. Alvarez</i>, 2005 WL 2978311 (U.S., Nov. 8). The Court's ruling disposed of appeals from both the Ninth and First Circuits, and resolves a split among the circuit courts.
National rulings of interest to you and your practice.
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Perhaps the fastest growing new form of employee benefit arrangements, Health Savings Accounts (HSAs) are an alternative hybrid structure of health coverage. The HSA is a two part arrangement in which participants belong to a health care plan with a high annual deductible that provides insurance coverage for expensive health care procedures and preventative care. The objective of the HSA is to allow eligible individuals who participate in High Deductible Health Plans to contribute to a tax-advantaged savings account on an annual basis an amount equal to their annual deductible, that may be carried over from year to year to cover qualified medical expenses. Contributions to an HSA from employers or individuals are generally tax deductible. In the same way, distributions from an HSA are not included in ordinary income if the amounts are used for reasonable medical expenses. Contributions on behalf of an employee are immediately vested and the HSA program is designed to be portable.
Though Hurricane Katrina may flood bankruptcy courts with new filings from its victims, experts differ over whether the new Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, which took effect in October, will blow away small businesses in the Gulf Coast region.
Both established and recently enacted laws may offer aid and protection to employees affected by natural disasters such as Hurricane Katrina. Employees affected by natural disasters such as Katrina may be protected under the Americans with Disabilities Act (ADA) if they suffer from a disability as the result of the event, or may be eligible for leave under the Family and Medical Leave Act (FMLA" if they or a family member have suffered a serious health condition as the result of the storm. Additionally, affected employees may be eligible for relief under measures enacted as a direct response to the event, such as the Katrina Emergency Tax Relief Act of 2005 (KETRA), or may seek relief from previously established assistance programs, such as unemployment insurance or the federal Disaster Unemployment Assistance program.