The 'Doctrine of Necessity': Missing Authority
March 24, 2004
<i>Nothing ... in the Code covers payments made to pre-existing, unsecured creditors, whether or not the debtor calls them 'critical.' Judges do not invent missing language ... A 'doctrine of necessity' is just a fancy name for a power to depart from the Code. In re Kmart Corp.</i>, 2004 U.S. App. LEXIS 3397, *5, *11 (7th Cir. Feb. 24, 2004) (Easterbrook, J.)
Tactics for Defending Preference Actions
March 24, 2004
In a troubled business climate, a scenario all too often occurs wherein a once steady and reliable customer becomes delinquent in payment and eventually files for bankruptcy protection. In this common situation, your client's good customer becomes a debtor and your client becomes one of many creditors jockeying to recover a small portion of its investment. To make matters worse, your client receives a letter from the debtor or court appointed trustee demanding repayment of a pre-petition preferential payment pursuant to section 547(b) of the Bankruptcy Code (the Code).
Investors May Be Liable to WARN Act Plaintiffs
March 02, 2004
Major investors in companies that commit violations of the federal Worker Adjustment and Retraining Notification (WARN) Act may not be immune to liability, according to a federal court sitting in the Southern District of New York. <i>Vogt v. Greenmarine Holding, LLC</i>, No. 02 Civ. 2059 (S.D.N.Y. Jan. 1, 2004). Relying on Department of Labor (DOL) regulations, the court denied a motion to dismiss the claims of a class of plaintiffs who were terminated by a bankrupt company against the investors in the bankrupt entity.
What Are the Odds?
March 02, 2004
28 U.S.C. ' 157(d) contains the standards for mandatory or permissive withdrawal of the reference from the Bankruptcy Court to the District Court, which…
Secret Liens: Can They Really Have Super-Priority Status?
March 02, 2004
In the restructuring world certain constants exist: The Bankruptcy Code (Code) has not dramatically changed since 1978, a Chapter 7 corporate debtor cannot receive a discharge, and exemptions are defined to the penny. But be wary -- there are unknown pitfalls out there. State governments, to appear responsive to local issues caused by distressed businesses, have increasingly enacted laws that spring "secret liens" or other penalties on debtors. Although bankruptcy practitioners may instinctively deride such laws as subordinate to the federal Code, recent federal opinions disagree.
Critical Ruling on Compensation from Supreme Court
March 02, 2004
The Supreme Court has held that Bankruptcy Code Section 330(a)(1) does not allow a Chapter 7 debtor's attorney to be compensated from the estate unless the attorney is employed by the Trustee with the approval of the Bankruptcy Court. Lamie v. United States Trustee, 2000 WL 110846 (U.S. 2004). This decision conclusively ends the controversy over the 1994 amendments to that Section, and puts Chapter 7 debtors' counsel on notice that, if not retained pursuant to Section 327, they are on their own with respect to fees.
What Should You Know About the Rules of Evidence?
March 02, 2004
In last month's issue, we discussed the fact that bankruptcy lawyers may think they do not have to worry about the rules of evidence ' and we then went on to prove otherwise. The Federal Rules of Evidence apply to most issues that arise in bankruptcy cases, according to Rule 9017 of the Federal rules of Bankruptcy Procedure. We discussed two of the four useful subjects under these rules: attorney-client privilege, and attorney work-product doctrine. Part Two of this article, below, discusses settlement offers and affidavits.
