Handling the Non-Profit Workout/Bankruptcy
July 27, 2005
On April 15, 2005, one of the largest not-for-profit bankruptcy cases ever filed, <i>In re: The National Benevolent Association of the Christian Church (Disciples of Christ) et al.</i>, (Bankr. W.D. Texas), Case No. 04-50948 (RBK), came to an extraordinary conclusion when the joint plan of reorganization of the Debtors and the Unsecured Creditors' Committee became effective. Under the Plan, all of the Debtors' creditors were paid the full amount of their pre-petition principal and interest, plus a stipulated amount of post-petition interest, together with reimbursement of the full amount of their pre- and post-petition legal fees. After paying their creditors in full on the effective date, the Debtors, a separately constituted arm of the Disciples of Christ Church, retained certain of their assets and will continue their charitable mission. This unusual outcome, in which creditors were paid in full and the Debtors continued certain of their operations, marked the end of a process that began with the Debtors' unsuccessful attempts to negotiate a substantial write-down of their debts outside bankruptcy, was followed by a year-long bankruptcy case in which the Debtors argued that their charitable status and mission should take priority over their bankruptcy law duty to maximize creditor recovery, and was finally resolved when the Debtors were compelled to sell the bulk of their real estate assets in order to fund full payment to creditors.
Assignee's Preference Avoidance Power
July 27, 2005
In <i>Sherwood Partners, Inc., Assignee for the Benefit of Creditors of International Thinklink Corporation v. Lycos, Inc.</i>, 394 F.3d 1198 (9th Cir. 2005), the Ninth Circuit Court of Appeals, by a divided court, recently held that a state statute authorizing an assignee for the benefit of creditors to void a preferential transfer is preempted by the federal Bankruptcy Code.
You Just Can't Give It Away
July 27, 2005
Last month, we explained that the proposition that a creditor can do whatever it wants with its recovery from a Chapter 11 debtor may seem to be a fundamental right -- but that in the context of confirmation of a Chapter 11 plan, that right may not be unqualified. It may, in fact, violate well-established bankruptcy principles. We went on to explain that one such principle that applies only in the context of non-consensual confirmation of a Chapter 11 plan, or "cramdown," is commonly referred to as the "absolute priority rule," a pre-Bankruptcy Code maxim that established a strict hierarchy of payment among claims of differing priorities.
Parental Abductions
July 27, 2005
The Hague Convention on the Civil Aspects of International Child Abduction (the Hague Convention) provides that a child who is habitually resident in one party country, and has been removed to or retained in another party country in violation of the left-behind parent's custodial rights, should be promptly returned to the country of habitual residence. However, many countries are not parties to the Convention, and even some that are parties enforce the laws only sporadically or in accordance with their own societal customs. Thus, the attorney must take special care when faced with the possibility that his client's foreign national spouse might take the children to such a country.
Grandparent Custody
July 27, 2005
In last month's newsletter, we explored the state of the law on grandparent custody of children prior to the amendments to FCA ' 651(b) and DRL ' 72(2)(a) (b) (c), which codified jurisdiction to hear and determine petitions filed by grandparents for custody of their grandchildren. The amendments, which went into effect on Jan. 5, 2004, appeared to change the law to make it easier for grandparents to gain or keep custody of grandchildren. The leading case law previous to the amendments could be found in <i>Matter of Bennett v. Jeffreys</i>, 40 NY 2d 543, 387 NYS 2d 821, 356 NE 2d 277 (1976), in which the Court of Appeals held that a parent has a superior right to custody over a nonparent unless the nonparent meets the burden of proving "extraordinary circumstances." Once such extraordinary circumstances are shown, a court may then move on to consider custody in light of the best interests of the children. After the amendments went into effect, the question became, did those amendments substantially change the law for grandparents seeking custody?
Enhanced Earnings Capacity
July 27, 2005
Two recent cases in our office have highlighted the legal and procedural conundrums occasioned by parties residing in different states at the time divorce proceedings are commenced, where one of the spouses earned a medical degree and obtained medical licenses and board certifications (ie, enhanced earning capacity) during the course of the marriage. As most readers of this publication are surely aware, New York is the only major jurisdiction in our nation to value enhanced earning capacity for purposes of equitable distribution. Thus, whether the case is litigated in New York or in a different state can have a marked effect on the outcome of the financial aspects of the case, to the tune of hundreds of thousands of dollars, if not more.
New Jersey Appellate Court Rejects Marriage Equality
July 27, 2005
The New Jersey Superior Court Appellate Division rendered a decision in the appeal of <i>Lewis v. Harris</i>, 378 N.J.Super. 168, 875 A.2d. 259 (App.Div.2005) that the "statutory limitation of marriage to members of the opposite sex does not violate the New Jersey Constitution." Although disappointing, the 2-1 decision was not unexpected and, because there is a dissenting opinion, under New Jersey Rules of Court there is an automatic right of appeal to the New Jersey Supreme Court. The notice of appeal has been filed, and as of this writing the parties awaited a briefing schedule.
Fast Track for California Gay Marriage Ruling
July 27, 2005
When the California attorney general asked the state Supreme Court on July 1 to immediately take up the issue of gay marriage rather than wait for the appeals process to play out, some of his courtroom opponents got on board with the idea.
