Daily Archives: August 6, 2021

05 August 2021

Frankfurt Kurnit Klein & Selz

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Contested conservatorships, feuds over NFL feepayouts, Twitter battles making their way into court documents, and allegations of hundreds ofthousands of dollars in lottery ticket earnings being siphoned to a"Real Housewives" star's coffers: this summer hasbrought a cascade of lessons for ethics practitioners in thebankruptcy action facing plaintiffs' firm Girardi Keese,formerly headed by Thomas Girardi.

Both the firm and Mr. Girardi are currently embroiled ininvoluntary chapter 7 bankruptcy proceedings in U.S. BankruptcyCourt in the Central District of California, after Mr. Girardi wasfound last year to have failed to distribute$2 million in settlement monies to the families of plane crashvictims he was representing. Since then, a deluge of former clients have come forwardto accuse the firm of similarly misappropriating settlement funds.Thomas Girardi, famed for spearheading major class actionsand for appearing alongside ex-wife Erika Girardi on the reality TVshow "Real Housewives of Beverly Hills," was placed intoa conservatorship earlier this year after beingdiagnosed with Alzheimer's disease and dementia. TheState Bar of California also deactivated Mr. Girardi's law license.

Despite the firm's size and renown after decades inpractice, however, Girardi Keese did not carry professionalliability insurance. The bankruptcy proceedings must nowattempt to disburse recoupments to lenders, shareholders, andindividual creditors in turn. In sum, the creditors'claims against the firm total $130 million, according to documentsfiled in the action. In the absence of insurance, Ms. Girardihas recently attempted to convince the court to keep certain feearrangements in place on current firm clients, given the value ofthose legal fee arrangements as a source of potential income thatcould be redirected to creditors.

Last month, Ms. Girardi objected to the transition ofoutstanding cases on the firm's docket to other law firms.She argued that given the value of Girardi Keese'sremaining cases, she believed that the firm may be able to pay offits liabilities to outstanding debtors from attorney's feesrecouped in those pending actions. In her pleadings, Ms.Girardi made her interest in the proceedings clear: although shefiled for divorce from Mr. Girardi in November 2020, "therewas no pre-nuptial agreement" and under California laws, sheargued that she has an interest in any distributions due to Mr.Girardi after accounting for the firm's creditors.

Girardi objected specifically to the transference of two majorcases held by Girardi Keese. In one, Girardi Keeserepresented plaintiffs in 100 cases associated with the now-settledNFL concussion litigation, In re National Football LeaguePlayers' Concussion Injury Litigation No. 2:12-md-02323(E.D. Pa.), pursuant to a joint client agreement with the law firmGoldberg Persky White P.C. In that matter, Ms. Girardiasserts that Girardi Keese could receive a windfall of up to $20million in contingent fees should the structure under the originaljoint client agreement remain in place.

In a second objection filed with the court, Ms. Girardicontested the transference of Girardi Keese's portfolio of 52cases in connection with a class action against Johnson &Johnson and Boston Scientific Corporation, whose plaintiffs allegepersonal injury from the use of pelvic mesh products. Underthe proposed transfer, Girardi Keese's cases would betransferred to two law firms currently representing otherplaintiffs in the mesh litigation. These matters arescheduled for a hearing on August 10, 2021.

Though it may not be salacious enough for network syndication,these developments have significant lessons for ethicspractitioners. The law firm's predicament is an extremeexample of the consequences that can follow from a law firm notcarrying adequate professional liability insurance. Althoughthere is certainly an open question of whether a malpracticecarrier would agree to cover any of the losses here (given theallegations of intentional misconduct), it would have at leastprovided the injured clients with a possible avenue of recovery.This predicament also adds to the debate over whetherjurisdictions impose rules requiring lawyers to carry legalmalpractice insurance.

In the absence of liability insurance or sufficient assets tomake the firm's creditors whole, this action will largelycenter on the firm's present and future legal fees, and onparsing how those are divided. The court's relativereceptiveness to Ms. Girardi's arguments will provide insightsinto how courts view legal fees as a potential commodity to be usedin satisfying creditors.

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This alert provides general coverage of its subject area. Weprovide it with the understanding that Frankfurt Kurnit Klein &Selz is not engaged herein in rendering legal advice, and shall notbe liable for any damages resulting from any error, inaccuracy, oromission. Our attorneys practice law only in jurisdictions in whichthey are properly authorized to do so. We do not seek to representclients in other jurisdictions.

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Real Litigation Of Beverly Hills: Ethics Lessons From The Thomas Girardi Bankruptcy Case - Insolvency/Bankruptcy/Re-structuring - United States -...

Skip Transport Inc., one of the first electric scooter companies to operate in San Francisco, has filed for Chapter 7 bankruptcy, according to the San Francisco Business Times.

The company was originally founded as Waybots Inc. before launching as Skip in 2018 with seed funding. In August 2018, Skip was one of only two scooter companies (the other was Scoot) allotted one-year permits to operate in San Francisco. But by the end of 2019, the company's scooters were no longer permitted to operate in the city, which may have something to do with several incidents of their scooters bursting into flames.

In December 2020, Skip announced they had been acquired by competitor Helbiz, a New York-based startup that operates e-bikes, e-scooters and mopeds. Most recently, Skip's scooters were available in Long Beach, Portland and Washington, D.C. It is unclear how the bankruptcy filing will affect scooter availability, but at time of publication, Skip scooters are not available anywhere in the Bay Area, according to a search on the app.

The pandemic caused a dramatic drop in ridership for e-scooter companies across the board, but towards the end of last year, it had rebounded to within 20% of the previous years levels, according to the 2020 North American Bikeshare and Scootershare Association (NABSA) State of the Industry Report. Currently, four companies hold permits to operate in San Francisco: Lime, Scoot, Spin and Jump (a former Uber subsidiary that has since been folded into Lime).

While Skip has filed for bankruptcy, other e-scooter companies still operating in San Francisco are chugging along.

"While COVID-19 was certainly a challenge for Lime at its height, we've seen demand return well beyond expectations, leading to our first full-quarter of profitability in 2020," said a Lime representative in a statement to SFGATE. "Cities and riders quickly embraced shared electric bikes and scooters because they offer open-air, socially-distanced and sustainable travel options. We've continued to grow in 2021 and are excited about the future of micromobility as city officials increasingly recognize its value as a way to help residents connect to public transit and as a preferred alternative to cars."

SFGATE also reached out to Skip for comment but has not heard back at time of publication.

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One of the first e-scooter companies to operate in San Francisco files for bankruptcy - SF Gate

Calls for institutional risk sharing proposal to be dismissed from current legislation

Washington, D.C., Aug. 05, 2021 (GLOBE NEWSWIRE) -- UNCF (United Negro College Fund) opposes The FRESH START Through Bankruptcy Act of 2021 in its current form because the version for the 117th Congress includes institutional risk-sharing provisions. UNCF would support the baseline bill without these provisions.

I have spoken to Capitol Hill policy and decision makers on both sides of the aisle for years, and I have never been clearer about any issue, said Dr. Michael L. Lomax, president and CEO, UNCF. Institutional risk-sharing has a possibility of bankrupting historically Black colleges and universities (HBCUs) and keeping low-income students of color from attending college. Any proposal that does not take into account that higher education costs are rising each year, plus the fact that Black student borrowers are uniquely disadvantaged because of the lower amount of household wealth in Black families versus our majority counterparts, is just a non-starter for UNCF and HBCUs. If this bill was proposed as it was in other years without this provision, it would once again enjoy our strongest endorsement.

Institutional risk-sharing would have a disproportionately negative impact on HBCUs because they force colleges and universities to make financial payments to the United States Department of Education when their students default on their student loan without consideration for the background of the students, said Lodriguez Murray, senior vice president for public policy and government affairs at UNCF. Institutional risk-sharing is the opposite of comparing apples with apples. It is a proposal without nuance. While the base bill would help discharge debt, and that is needed; the institutional risk-sharing proposal would hurt HBCUs because they primarily serve low-income, first-generation and minority students who face challenges to college entry and completion.

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HBCUs are more likely to face risk-sharing penalties simply because they serve a high proportion (80%) of students who must borrow to attend college and have much greater student borrowing rate than the average (59%) borrowing rate at all public and private not-for-profit colleges and universities. Risk-sharing in effect penalizes HBCUs for ensuring the hardest-to-serve students have access to postsecondary education, while largely protecting the elite institutions that could most afford to send their students to college for free.

UNCF supports efforts to hold non-profit and for-profit colleges accountable, but there are better ways to achieve this goal. Institutional risk-sharing should be replaced with incentives that reward universities that serve at-risk students. For example, federal funding could be provided to institutions based on the number or percentage of Pell students they actually graduate. Policymakers should also double the Pell grant amount, helping to reduce the amount of student loans needed to complete college and going a long way towards leveling the playing field in higher education. Finally, interest rates should be lowered, and origination fees should be eliminated for federal student loans to reduce the cost of borrowing.

To learn more about UNCFs positions on this or other similar issues, please contact UNCFs Government Affairs team at UNCF.org/ContactUs.

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About UNCFUNCF (United Negro College Fund) is the nations largest and most effective minority education organization. To serve youth, the community and the nation, UNCF supports students education and development through scholarships and other programs, supports and strengthens its 37 member colleges and universities, and advocates for the importance of minority education and college readiness. UNCF institutions and other historically Black colleges and universities are highly effective, awarding nearly 20% of African American baccalaureate degrees. UNCF administers more than 400 programs, including scholarship, internship and fellowship, mentoring, summer enrichment, and curriculum and faculty development programs. Today, UNCF supports more than 60,000 students at over 1,100 colleges and universities across the country. Its logo features the UNCF torch of leadership in education and its widely recognized trademark, A mind is a terrible thing to waste. Learn more at UNCF.org or for continuous updates and news, follow UNCF on Twitter at @UNCF.

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UNCF Opposes The FRESH START Through Bankruptcy Act of 2021 - Yahoo Finance

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July 27, 2021 - In the wake of the COVID-19 pandemic, Congress passed the much-needed Consolidated Appropriations Act of 2021 (CAA). The Bill, which supplements the sprawling Coronavirus Aid, Relief, and Economic Security (CARES) Act from March 2020 and creates economic relief for those impacted by the pandemic, was signed into law on December 27, 2020.

Beyond providing $900 billion in stimulus funding that was attached to a $1.4 trillion spending bill, there were also a slew of alterations to laws that resulted from the passage of the CAA. In particular, there were significant changes for both debtors and creditors as it relates to multiple sections of the Bankruptcy Code.

These temporary changes will have a ripple effect in the coming year, as it provides much needed relief to both individuals and businesses impacted by the pandemic. And though we have not quite yet seen how just these measures will play out, bankruptcy trustees should expect to see a major shift in a number of aspects of their duties and responsibilities over the coming year.

The first substantial change relates to alterations to Section 364 of the Bankruptcy Code. In particular, these changes would permit bankruptcy debtors to seek financing approval through the CARE Act's Paycheck Protection Program (PPP).

When it comes to PPP loans, the SBA's position is that debtors who are in bankruptcy are ineligible. Rather, in order for these PPP loans to become available, it is necessary for the Small Business Administration's (SBA) Administrator to send a letter to the Director of the Executive Office for United States Trustee that provides consent to PPP loans in bankruptcy, per the CAA.

Further, driving home the Administration's stance, there was an Interim Final Rule issued by the SBA in January that also stated the ineligibility of debtors in bankruptcy in respect to PPP loans.

Another change alters Section 365(d)(3) and changes a debtor's post-petition lease obligations when it comes to Subchapter V cases. Under this change, it is now possible to get an extension in upwards of 120 days after either the beginning of a case or the day the lease is assumed/rejected.

Under the terms of the CAA, this extension can be granted as long as the debtor is currently experiencing or has previously experienced financial issues related to the COVID-19 pandemic. The amendment allows for an initial 60-day extension, as well as the possible addition of another 60-day extension.

Similarly, there has been a change to Section 365(d)(4) that modifies the rules surrounding the deadline for debtors as it relates to the assumption of leases for nonresidential real property.

Pursuant to the CAA's temporary changes to the Bankruptcy Code, there is now an extension in time for debtors or trustees to either accept or reject an unexpired lease for nonresidential real estate. Now the CAA has extended this period from 120 to 210 days and it is also possible to get an additional extension of 90 days with a show of cause.

For individual debtors, Section 366 of the Bankruptcy Code has been amended to protect them from having their services cut off by utility companies. Under the rule change, there is a 20-day period after a bankruptcy case begins where a utility company is not permitted to end services for debtors who have been unable to "furnish adequate assurance of payment."

To be eligible, a debtor must make a payment to the utility "for any debt owed to the utility for service provided during the 20-day period beginning on the date of the order for relief." Additionally, they must make a payment to the utility "for services provided during the pendency of case when such a payment becomes due" following the day when the 20-day period ends.

Overall, there are a number of other key provisions in the CAA that provide protection against debtors as they navigate the fallout of the COVID-19 pandemic. For instance, the CAA has an impact on Section 525 of the Bankruptcy Code as it relates to the protection of debtors who have filed for bankruptcy from discriminatory treatment.

Prior to the passage of the CAA, 11.U.S.C. Section 525 said that "a governmental unit may not deny, revoke, suspend, or refuse to renew a license, permit, charter, franchise, or other similar grant to, condition such a grant to, discriminate with respect to such a grant against, deny employment to, terminate the employment of, or discriminate with respect to employment against" current or former debtors who have filed for bankruptcy.

Under Title X Section 1001(c) in the CAA, there is an amendment to the Bankruptcy Code that adds in that an individual cannot be denied relief through provisions of the CARES Act due to their debtor status, meaning that someone cannot be discriminated against for pursuing funding through the CARES Act. This includes receiving help through programs like the eviction moratorium and the foreclosure moratorium.

There was also a change to Section 541 of the Bankruptcy Code, which governs what is considered to be property of a debtor's estate in bankruptcy cases. Under the CAA, Section 541 is amended to exempt COVID-19 relief payments from being considered as property of a debtor's estate.

Per the law's language, this is for "recovery rebates made under Section 6428 of the Internal Revenue Code of 1986" which means that stimulus checks would not be considered to be part of a debtor's estate. However, according to a March article published by the National Consumer Law Center (NCLC), it could be possible "that a court may construe Section 6428B as a separate statute and therefore not a recovery rebate 'under Section 6428.'"

Yet the NCLC acknowledged that an interpretation such as that "would render meaningless the enactment of Code 541(b)(11) because even the stimulus payments under the December 27, 2020 Consolidated Appropriations Act would not be protected they were authorized under Section 6428A."

The NCLC added that "earlier stimulus payments under the CARES Act would have already been spent by debtors at the time Code 541(b)(11) became effective" and that ultimately such a ruling "would be contrary to Congress's intent to protect stimulus payments."

The CAA also amended Section 1328, changing the rules regarding certain aspects of debtor discharge. As a result of this amendment, debtors that are under a confirmed Chapter 13 plan can still receive a discharge if the debtor defaults on a maximum of three monthly residential mortgage payments.

The payments must have been due either on or after March 13, 2020, and the missed payments need to have resulted from the COVID-19 pandemic. According to the amendment, the debtor still needs to make payments to the lending party; however they still maintain the benefits resulting from a bankruptcy discharge for their other remaining debts.

Additionally, one of the more sizable amendments that will have an impact on so many businesses throughout the country is the CAA amendment to Section 547 of the Bankruptcy Code.

This section allows a debtor or trustee to recover "preferential payments", and the amendment to this section now provides protection to lessors of nonresidential real estate as well goods/services suppliers from having to return arrearage repayments.

By enacting this amendment, debtors are protected from arrearage payments that were made before the enactment of forbearance/deferral arrangements. This type of amendment provides much needed breathing room for debtors in a year where real estate leases proved to be a financial burden for many especially considering that so many offices were forced to go into a remote setting. It also should be noted that this specific amendment does not impact personal property.

The changes to the Bankruptcy Code through the CAA are not going to be permanent. In fact, a number of the provisions were slated to be sunsetted this past March. However, in an effort to extend these much needed amendments for a longer period of time, Senators Chuck Grassley (R-IA) and Dick Durbin (D-IL) introduced the bipartisan COVID-19 Bankruptcy Relief Extension Act, which was passed on March 27, mere hours before many of provisions were about to expire.

As a result of the passage of the COVID-19 Bankruptcy Relief Extension Act, the sunset dates of CARES Act and CAA amendments have been extended to either December 27, 2021 or March 27, 2022. These changes provide a buffer period for debtors who are rapidly nearing certain deadlines, providing them with an additional period of time to get their financial affairs in order as they continue dealing with the impact of the COVID-19 pandemic.

It goes without saying that the world was turned upside down by the pandemic and though the country has made significant strides in returning to a sense of normalcy, it has also required multiple acts by Congress to help so many in the United States stay afloat financially.

Legislation such as the CARES Act and the CAA created significant financial relief while also modifying many laws in an effort to alleviate the monetary burden caused by COVID-19.

Ultimately, given the amount of changes the CAA made to the Bankruptcy Code, bankruptcy trustees will have to navigate a new set of laws throughout the course of this year and into the early part of next and though it will be temporary, they will need to get used to seeing their roles and responsibilities shift as they resolve matters.

Opinions expressed are those of the author. They do not reflect the views of Reuters News, which, under the Trust Principles, is committed to integrity, independence, and freedom from bias. Westlaw Today is owned by Thomson Reuters and operates independently of Reuters News.

Kelly Rathbun is regional director in the Denver office of Stretto, a bankruptcy technology and services firm that provides case-management solutions to facilitate the bankruptcy process. She brings more than 25 years of industry expertise to her role supporting bankruptcy trustees and professionals. She can be reached at Kelly.rathbun@stretto.com.

Scott Chernich, a shareholder at Foster Swift Collins & Smith PC in Lansing, Michigan, represents financial institutions in Chapter 11, 7 and 13 bankruptcy and handles commercial litigation and construction law. He can be reached at schernich@fosterswift.com.

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The significance of the Consolidated Appropriations Act for bankruptcy trustees - Reuters