Professional Licenses and Equitable Distribution
May 28, 2004
In last month's newsletter, we discussed the issue of the unused professional license and its value, if any, when seeking equitable distribution at the time of divorce. The court in <i>Pino v. Pino</i>, 189 Misc.2d 331 (Sup. Ct. Nassau 2001), for one, has compared equitable distribution to imputed child support and maintenance and concluded that it possesses full authority to calculate the enhanced earning potential from the license and can add that monetary result to the monies to be equitably distributed. But this is a rather unexplored area of the law in New York -- an area ripe for litigation. <b>Part Two of a two-part article.</b>
Student Loan Discharge Proceeding Not a 'Suit'
May 27, 2004
The Supreme Court, in its May 17, 2004 decision in <i>Tennessee Student Assistance Corporation v. Hood</i>, __ U.S. ___ (2004), declined to reach the issue of whether the Bankruptcy Clause in Article I of the Constitution grants authority to Congress to abrogate state sovereign immunity from private suits. Instead, in a 7-2 decision, the Court ruled that a proceeding to determine whether an otherwise nondischargeable student loan can be discharged because of an undue hardship on the debtor is not a "suit" against the state for purposes of the Eleventh Amendment. The Court's decision, written by Chief Justice Rehnquist, turned on the in rem nature of the proceeding and reasoned that the bankruptcy court did not need jurisdiction over the state where it had jurisdiction over the debtor and her property.
Draw on Letter of Credit Has Same Effect As Cash Forfeiture
May 27, 2004
It is well-settled that "property of the estate" is broadly defined under section 541 of the Bankruptcy Code as including all legal and equitable interests of a debtor. Therefore, the breadth of property of the estate includes a debtor's indirect, residual or reversionary interest in the return of funds. It is also equally acknowledged that, in general, a letter of credit (LC) is an independent obligation of the issuing bank and, under the "independence principle," is not necessarily property of the estate. From time to time, these two concepts -- broad estate interest in property versus the treatment of a LC -- clash in bankruptcy. In these instances, some courts will look at "substance" and not "form" to determine whether the debtor's residual interest in an LC is property of its estate.
Section 502(d) Roulette
May 27, 2004
Case management in large and complex Chapter 11 bankruptcies has never been easy. Successfully navigating the morass of filing requirements and deadlines contained in the Bankruptcy Code, its accompanying procedural rules and various local court rules can be challenging. When added to the remaining issues that routinely need to be addressed during the course of a case -- among many others, claims resolution, development of a business plan and plan of reorganization, analysis of executory contracts and investigation of potential litigation claims -- the array of activities that must be carefully coordinated can be daunting.
Partnership Taxation in Bankruptcy
May 27, 2004
Most of the debtors involved in our restructuring work are corporations. On occasion, however, we find ourselves working on a matter involving a bankrupt partnership. Partnerships in bankruptcy raise a host of tax issues that differ from the issues we deal with in our typical corporate debtor work. In this article, we first discuss some basic elements of partnership taxation, and then review some of the tax issues unique to partnerships in bankruptcy.
The Death Knell for One-on-Ones?
May 27, 2004
When the Securities and Exchange Commission settled a Regulation FD enforcement action against Schering-Plough Corporation and its Chief Executive Officer in late 2003, the reaction from the pundits was swift. Repeatedly quoting a sentence from the SEC's cease-and-desist order that indicated that a violation had arisen through "a combination of spoken language, tone, emphasis, and demeanor" (emphasis added), many securities counsel began speculating that the enforcement action would irrevocably and further chill communications with securities professionals. Some went so far as to predict that so called "one-on-one meetings" with analysts should no longer be a part of a responsible company's investor relations program.
