The Stockton Saga Continues: Untouchable Pensions on the Chopping Block?

SheppardMullinRichterHampton@placeholder.com (Sheppard Mullin) — Wed, 22 May 2013 11:06:00 -0400

Judge Christopher M. Klein's decision to accept the City of Stockton's petition for bankruptcy on April 1, 2013 set the stage for a battle over whether public workers' pensions can be reduced through municipal reorganization.

Stockton's public revenues tumbled dramatically when the recession hit, leaving Stockton unable to meet its day-to-day obligations. Stockton slashed its police and fire departments, eliminated many

Bankruptcy Judge Sets Specialty Products’ Asbestos Liability At $1.16 Billion

emerson.heffner@lexisnexis.com (Emerson Heffner) — Tue, 21 May 2013 14:57:00 -0400

WILMINGTON, Del. -- (Mealey's) Former joint compound producer Bondex International Inc. and its related holding company Specialty Products Holding Corp. face an estimated $1.16 billion in pending and future asbestos personal injury claims, about double what the companies estimate their asbestos liabilities at, a federal bankruptcy judge in Delaware overseeing the companies' joint Chapter 11 case ruled May 20 (In re: Specialty Products Holding Corp., et al., No. 10-11780, D. Del. Bkcy.; 2013 Bankr. LEXIS 2051) knowledge of, or gross recklessness in respect to, the improper nature of the relevant fiduciary behavior

complained of. Bullock v. BankChampaign, No. 11-1518 (5/13/13), Slip Op., p.1, which can be found here. While the case represents a setback for the creditor in the specific case, the judicial hairsplitting engaged in by the Court ensures that trial courts will continue

The Ninth Circuit Holds that Bankruptcy Courts Have Authority to Recharacterize Debt as Equity

SheppardMullinRichterHampton@placeholder.com (Sheppard Mullin) — Tue, 14 May 2013 17:04:00 -0400

On April 30, 2013, the United States Court of Appeals for the Ninth Circuit held that the bankruptcy court has authority to recharacterize as equity, rather than debt, advances of funds made purportedly as a loan to the recipient prior to its bankruptcy. In re Fitness Holdings International, Inc., --- F.3d ----, 2013 U.S. App. LEXIS 8729 (9th Cir. 2013) [an enhanced version of this opinion is available to lexis.com subscribers]. The Ninth Circuit, in reversing the district court, held that the fact

U.S. Supreme Court Remands Bankruptcy Defalcation Case, Says Higher Standard Needed

james.cordrey@lexisnexis.com (James Cordrey) — Mon, 13 May 2013 13:43:00 -0400

WASHINGTON, D.C. - (Mealey's) The U.S. Supreme Court on May 13 unanimously vacated and remanded a case involving a bank's claim that a debtor who had acted as trustee for his father's insurance trust was guilty of defalcation for making loans to himself during the time he had control of the trust, ruling that the 11th Circuit U.S. Court of Appeals needed to review the case to determine if it should apply the higher standard of "defalcation" outlined by the high court (Randy Curtis Bullock v. BankChampaign, No. 11-1518, Chapter 7, U.S. Sup.) (lexis.com subscribers may

Video: Kathy Bazoian Phelps Interviewed on the Not So Legal Show

BankruptcyLaw@lnstaff.com (LexisNexis Bankruptcy Law Community Staff) — Tue, 07 May 2013 08:57:00 -0400

Kathy Bazoian Phelps, partner at Diamond McCarthy LLP, Ponzi scheme blogger, and coauthor of the Ponzi Book, was recently interviewed by attorney Stephanie Cohen of The Not So Legal Show. You can watch the interview below:

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April 2013 Ponzi Scheme Roundup

kphelps@diamondmccarthy.com (Kathy Bazoian Phelps) — Fri, 03 May 2013 15:25:00 -0400

April was a remarkably busy month for Ponzi scheme news, especially in India. Here is a summary of stories that were reported this month. Be sure to read the international news, because Ponzi schemes are not just limited to the U.S. Please feel free to post comments about these or other Ponzi schemes that I may have missed. And please remember that I am just relaying what's in the news, not writing or verifying it.

Gary Thomas Armitage, 62, was sentenced to 10 years in connection with a plea agreement regarding a $250 million real estate and investment Ponzi scheme that defrauded about 2,000 investors. Armitage's co-defendant, James Stanley Koenig

"Girls Gone Wild" Chapter 11 Case - [Insert Joke Here]

Kelley.Drye@placeholder.com (Kelley Drye & Warren LLP) — Wed, 01 May 2013 17:12:00 -0400

GGW LLC and its affiliates ("GGW"), which produce and distribute the soft core pornography videos known as "Girls Gone Wild", recently filed for relief under chapter 11 of the Bankruptcy Code. The filing follows years of legal troubles for the company's founder, Joe Francis, including criminal charges of racketeering and tax evasion, and civil litigation against Steve Wynn's Mirage Resorts

Duane Morris Alert: Second Circuit Establishes Relevant Time Period for "Center of Main Interests" Determination Under Chapter 15 of the Bankruptcy Code

Duane.Morris@placeholder.com (Duane Morris LLP) — Mon, 29 Apr 2013 16:03:00 -0400

The Second Circuit's decision is significant in international insolvency cases because wind-down activities conducted in advance of a foreign insolvency proceeding can impact the center of main interests analysis.

In Morning Mist Holdings Limited v. Krys (In re Fairfield Sentry Limited), 2013 U.S. App. LEXIS 7608, Case No. 11-4376, (2d Cir. April 16, 2013) [Law Debenture Trust Co. v. Charter Communications Inc., No. 12-847, Chapter 11, U.S. Sup.) (lexis.com subscribers may Adam McNeile

Conventional wisdom says that it is nearly impossible to obtain a discharge of student loan debt in bankruptcy. Indeed, Section 523(a)(8) expressly excepts student loans from discharge, unless the exception of such indebtedness from discharge would impose an undue hardship upon the debtor. But two recent developments may signal that this bedrock principle is eroding - i.e., (i) the Seventh Circuit's affirmance of a bankruptcy court's ruling that an impoverished but otherwise healthy woman's student loan debts were dischargeable, and (ii) the

Claims Trading from the Inside Out: Ninth Circuit BAP Holds that a Non-Insider Claimant's Vote on a Plan Is Not Discounted Merely Because the Claimant Purchased Its Claim from an Insider

SheppardMullinRichterHampton@placeholder.com (Sheppard Mullin) — Mon, 22 Apr 2013 13:31:00 -0400

by Michael M. Lauter

In an unpublished decision in In re The Village at Lakeridge, LLC, BAP Nos. NV-12-1456 and NV-12-1474 (B.A.P. 9th Cir. Apr. 5, 2013), the United States Bankruptcy Appellate Panel of the Ninth Circuit held that a vote on a plan of reorganization submitted by a non-insider claimant is not to be disregarded under Bankruptcy Code section 1129(a)(10) merely because the claimant purchased the claim from an insider. In other words, the transferee of a claim does not step into the shoes of the transferor vis à vis the transferor's status as an insider.

Under Bankruptcy

Wife's Homestead Claim Remains in Limbo With No Answer from Fifth Circuit

ssather@bnpclaw.com (Stephen Sather) — Mon, 22 Apr 2013 12:52:00 -0400

The plight of the non-filing spouse who stands to lose an interest in the homestead is a trap that is easy to overlook. Under 11 U.S.C. Sec. 541(a)(2), when one spouse files bankruptcy, all joint management community property enters the bankruptcy estate. This means that if the filing spouse elects not to claim the homestead as exempt in favor of selecting other property or is subject to a cap, the non-filing spouse may lose her interest in the property without having any say in the matter.

I have previously written about the Odes Ho Kim case here. In

Please Take Subpoenas Seriously: A Recent Sanction Ruling in a Ponzi Scheme Case

kphelps@diamondmccarthy.com (Kathy Bazoian Phelps) — Mon, 22 Apr 2013 08:47:00 -0400

The Moss Adams accounting firm was sanctioned for not complying with a bankruptcy trustee's subpoena for documents related to Frederick Darren Berg's Meridian Mortgage $100 million real estate investment Ponzi scheme. The court ruled that Moss Adams did not fully comply with a 2010 subpoena and must compensate the trustee for the costs of the legal battle to get the information. A copy of the court's unpublished decision is Danielle Kennedy

Round one of the fight between the City of Stockton, California and its creditors is finally over. On April 1, 2013, Bankruptcy Judge Christopher M. Klein held that Stockton satisfied the eligibility requirements for a Chapter 9 debtor.

Back on June 28, 2012, Stockton filed a petition seeking to adjust its debts under Chapter 9 of the United States Bankruptcy Code.

Stockton's bond insurers (who guaranteed payment of pension obligation bonds) objected to Stockton's petition. The bond insurers (joined by the indenture trustee

Now It Gets Interesting - Stockton, CA Found Eligible to Remain in Chapter 9

Kelley.Drye@placeholder.com (Kelley Drye & Warren LLP) — Thu, 11 Apr 2013 17:30:00 -0400

Nearly nine months after it filed for protection under Chapter 9 of the Bankruptcy Code, a federal bankruptcy judge last week determined that the city of Stockton, California has satisfied the requirements of Section 109(c) of the Bankruptcy Code and may proceed with its efforts to adjust its massive bond, pension and employee obligations. Eugene Kim

In a recent Fifth Circuit decision, Western Real Estate Equities, LLC v. Village at Camp Bowie I, L.P., No. 12-10271 (5th Cir. 2013) [an enhanced version of this opinion is available to lexis.com subscribers], the court held that the acceptance vote from a minimally and "artificially impaired" class of claims meets the 11 U.S.C. § 1129(a)(10) requirement for the confirmation of a non-consensual "cramdown" chapter

Bankruptcy Judge: California City May Proceed with Chapter 9 Bankruptcy

james.cordrey@lexisnexis.com (James Cordrey) — Tue, 02 Apr 2013 08:55:00 -0400

SACRAMENTO, Calif. - (Mealey's) A federal bankruptcy judge in California on April 1 ruled that the City of Stockton, Calif., which had filed for Chapter 9 bankruptcy in June, was eligible to seek bankruptcy because the city did not file its petition in bad faith and was indeed insolvent at the time it sought bankruptcy. The bankruptcy judge's decision makes Stockton the largest municipality in the country to file for bankruptcy (In Re: City of Stockton, California, No. 12-32118, Chapter 9, E.D. Calif. Bkcy.).

Bankruptcy Judge Christopher Klein issued a one-sentence order affirming the city's right to file for

March 2013 Ponzi Scheme Roundup

kphelps@diamondmccarthy.com (Kathy Bazoian Phelps) — Tue, 02 Apr 2013 08:19:00 -0400

March continued the trend of way too many breaking news stories in Ponzi scheme cases. Here is the summary of the stories that were reported this month. Please feel free to post comments about these or other Ponzi schemes that I may have missed. And please remember that I am just relaying what's in the news, not writing or verifying it.

Brett Amendola, 38, of Virginia, was sentenced to 84 months in prison in connection with his $5 million Ponzi scheme involving the purported purchase of a golf course that defrauded more than a dozen victims. Amendola had persuaded investors to provide short-term funding that would be held in escrow to fulfill a requirement

A Warning Against Do It Yourself Legal Forms

ssather@bnpclaw.com (Stephen Sather) — Mon, 01 Apr 2013 12:44:00 -0400

A debtor avoided losing her home in a recent case illustrating the perils of do it yourself legal forms. Lowe v. Vazquez, No. SA-12-CV-00399-DAE (W.D. Tex. 3/28/13) [an enhanced version of this opinion is available to lexis.com subscribers].

The Debtor paid $10 to download a living trust form while she was living in Nevada. When she moved to Texas, she conveyed her homestead to the trust. Her stated reason for setting up the trust was:

The one and only reason I created the Living

Bankruptcy Law Community Blogs

The Stockton Saga Continues: Untouchable Pensions on the Chopping Block?

Bankruptcy Judge Sets Specialty Products’ Asbestos Liability At $1.16 Billion

The Ninth Circuit Holds that Bankruptcy Courts Have Authority to Recharacterize Debt as Equity

U.S. Supreme Court Remands Bankruptcy Defalcation Case, Says Higher Standard Needed

Video: Kathy Bazoian Phelps Interviewed on the Not So Legal Show

April 2013 Ponzi Scheme Roundup

"Girls Gone Wild" Chapter 11 Case - [Insert Joke Here]

Duane Morris Alert: Second Circuit Establishes Relevant Time Period for "Center of Main Interests" Determination Under Chapter 15 of the Bankruptcy Code

Claims Trading from the Inside Out: Ninth Circuit BAP Holds that a Non-Insider Claimant's Vote on a Plan Is Not Discounted Merely Because the Claimant Purchased Its Claim from an Insider

Wife's Homestead Claim Remains in Limbo With No Answer from Fifth Circuit

Please Take Subpoenas Seriously: A Recent Sanction Ruling in a Ponzi Scheme Case

Now It Gets Interesting - Stockton, CA Found Eligible to Remain in Chapter 9

Bankruptcy Judge: California City May Proceed with Chapter 9 Bankruptcy

March 2013 Ponzi Scheme Roundup

A Warning Against Do It Yourself Legal Forms