Category Archives: Bankruptcy

Boy Scouts files for bankruptcy amid deluge of child sex abuse cases

Boy Scouts of America filed for bankruptcy after a flood of sex abuse cases, reports of declining membership, & legal battles with insurance companies.

Alexis Arnold, USA TODAY

The Boy Scouts of America bankruptcy case has reached a critical step: Sexual abuse survivors are being asked to vote on the organization's restructuring plan. A two-thirds majority is needed to pass. If survivors vote in favor of the plan, itwill be evaluated by Judge Laurie Selber Silverstein at hearings in January.

So what led up to this point? And what's in the plan? Below is a synopsis of the bankruptcy case sofar.

If you are one of the 82,000 who filed a claim in the case, visit the Boy Scouts' restructuring website for more information including contact information for questions. Voting information can also be found on the website.

Aftermonthsof speculationand mountingcivil litigation, Boy Scouts filed Chapter 11 paperwork in February 2020in U.S. Bankruptcy Court in Delaware, amid declining membership and a drumbeat ofchild sexual abuse allegations. Even in the beginning, the Scouts' case was unprecedented in bothscope and complexity.

In court filings, the Boy Scouts said it faced275 abuse lawsuits in state and federal courts around the country, plus another 1,400 potential claims.

BANKRUPTCY PROTECTION: Boy Scouts files Chapter 11 in the face of thousands of child abuse allegations

FUTURE OF SCOUTING:What we know about victims, assets and the future ofthe BSA

Boy Scoutsof Americahas argued thatthe national organization should be the only entity required to coverfinancial settlements in thesexual abuse casesthatlanded the organization in dire financial straits.

The national organization describes its relationship with local councils asessentiallya franchise arrangement:The national group handles the development of Scout content and structure, licensing, training, human resources, legal support and information technology; the local councils are separate legal entities that run the troops.

However, attorneys for survivors of abuse say the local councils bear much of the responsibility for that abuse, and shouldn't be protected from liability. They further accusedBoy Scouts of attempting to shield assets the majority of which are owned by local councils, notthe national organization.

In theoriginalbankruptcy filing, the national organizationestimated it owns$70 million in land and buildings.

The USA TODAY Network found$101 million in local councils property in the state of New York alone.

TENSIONS RISE: What is the role oflocal councils' role in Boy Scouts bankruptcy proceedings?

A historic 90,000 plus sexual abuse claims werefiled by the November 2020 deadline making it thelargest-ever child sex abuse caseinvolving a single national organization.

Roughly 10% of those claims were duplicates, dropping the number to 82,000.

Additional vetting will happen after a plan is confirmed and a trustee is appointed to administer the trust. That process islikely to include a review of information provided by claimants, including the name of their abuser as well as the location and date of the abuse.

UNPRECEDENTED: Nearly 90,000 file sexual abuse claims against the Boy Scouts

In March, Scouts proposedpaying roughly $220 milliontoward a trust to compensate survivors, andanother$300 million from a voluntary contribution from local councils.

The number is a fraction of the $1 billion of the organization's estimated value, and a sliver of the value of its subsidiaries, including local councils and various trusts and endowments, which USA TODAY estimates could exceed $3.7billion.

The proposal equated to roughly $6,000 per survivor if divided evenly and was universally met with pushback.

More: Boy Scouts of America plan to exit bankruptcy would pay abuse survivors an average of $6,000 each

More: Boy Scouts says it's safe, and offers sex abuse victims just 80 days to file claim. Victims balk.

Attorney: Boy Scout plan "woefully inadequate"

An attorney representing over a thousand former Scouts calls the bankruptcy reorganization plan submitted by The Boy Scouts of America this week "woefully inadequate." Michael Pfau said the plan "is short on facts and frankly, short on money." (March 2)

AP

In July, Boy Scouts more than doubled itsinitial offer of compensation to sexual abuse survivors increasing the contribution from the national organization to $219 million and from the local councils to $600 million.

The$850 million settlementhas been praisedas the largest for sex abuse claims in U.S. history.Yet,it remains unclear how the plan would get anywhere close to Boy Scouts' own estimation of thevalue of theclaims, which they say isbetween $2.4 billion and $7.1 billion.In a footnote, Scouts acknowledgedthe settlement reached with victims attorneys will only cover 10% to 30% of thetotal value.

At issue is whetherclaims that are time-barred under statutesof limitations will be eligible for payouts. In many states, victimsare barred from filing lawsuits over abuse after aperiod of time has passed; however,laws in roughly two dozen states have changed in recent years.

Under theBoy Scouts' plan, claimants wholive in states with restrictive statutes of limitationswill be dinged an unspecified amount, or they can take an expedited payment of $3,500. Insurers argue that any plan requiring them to pay those claims violates both their policies and bankruptcy code because lawsuits on those same claims wouldn't be viablein civil court.

HISTORIC SETTLEMENT: Boy Scouts offer to compensate sexual abuse victims$850

UPDATES:Settlement OK'd by judge, but amounts for survivors still unknown

Within the hundreds of pages of the Boy Scouts' reorganization plan and accompanying court documents are explanations for how the 82,000 abuse claims will be vetted and paid out.

One person the bankruptcy trustee will make the decisions, guided by three main topics: how severe the abuse was, where it occurred and how well the claimants can document it.

How much money will be available for victims once their claims areevaluated is another of many unknowns holding up the case 18 months after it was filed.

A USA TODAY analysis of court filings suggests that as many as half of those who filed claims could end up with a few thousand dollars a fraction of what their counterparts have been allotted in more than a dozen bankruptcy cases involving Catholic dioceses.

The plan also sets up commitments to keep scouts safer, including:

PAYOUTS: In Boy Scouts bankruptcy, which sexual abuse victims will get a settlement?

Judge Silverstein signed an order in late September allowing the nonprofit'splan for reorganizationto be voted on bycreditors,includingtens of thousands of sexual abuse survivors.

It marked the first time abuse survivors had a direct say in theBoy Scouts' plan.

On Dec. 13, an $800 settlement was announced with another of Boy Scouts' primary insurers, Century Indemnity Company. Also included is an additional $40 million from local councils, upping their contribution to $640 million.

The settlement would increase the value of the trust for survivors to around $2.6billion.

VOTE: Survivors will soon vote on Boy Scout's plan to exit bankruptcy, a crucial next-step in case

Read more:

Boy Scouts of America bankruptcy updates: What we know about settlements, payouts, more - USA TODAY

Tuesday, December 14, 2021

Many creditors have been warned of the need to halt collection efforts once they are put on notice that a debtor has filed for bankruptcy. However, the why behind this warning, mainly the automatic stay, is often misunderstood or disregarded. Since violations of the automatic stay can have serious ramifications, it is crucial that creditors know what the automatic stay is, what it protects, and how to get relief from the stay so that the creditor can proceed with collection efforts.

A debtor commences a bankruptcy by filing a bankruptcy petition. This is the case regardless of whether the debtor files under Chapter 7, 11, 13, or any other chapter of the United States Bankruptcy Code. Pursuant to 11 U.S.C. 362 et seq., the filing of the bankruptcy petition also triggers an automatic stay of all collection activities against the debtor and the debtors bankruptcy estate. Immediately upon the filing of the bankruptcy petition, the debtors bankruptcy estate is formed.

The bankruptcy estate is comprised of virtually all interests of the debtor, including, but not limited to, equipment, inventory, tangible property, cash, outstanding accounts receivable, unpaid contract balances, etc. When in doubt, a creditor of a bankrupt debtor should assume that the collateral in which the creditor claims an interest is part of the debtors bankruptcy estate.

Upon receiving notice of the bankruptcy petition being filed, the creditor is prohibited from taking action to collect any debts from the debtor that arose prior to the case being filed. Said differently, until you can get advice from bankruptcy counsel:

Stop contact: Automatic robo calls, standard collection calls, emails, letters, etc.

Stop collections efforts: Litigation, foreclosure proceedings, enforcement actions, etc.

Stopnewcontracting: Renegotiating contracts, refinancing, mortgage modifications, wage garnishment arrangements, payoff plans, etc. A creditor shouldnot, however, terminate a contract with a debtor because a debtor files for bankruptcy.

What Can a Creditor Do in Order to Collect?

While the protections of the automatic stay are instantaneous, they are not indefinite. Through the filing of a motion for relief from stay, a creditor can ask the court for permission to pursue collection efforts against a debtor and specifically against an asset of the bankruptcy estate. For example, a mortgage creditor can ask for relief to foreclose on a piece of property that is under water. Likewise, a lender can request relief to repossess an under-secured asset like a vehicle. In each instance, the creditor must show the court that cause exists to lift the automatic stay.

Pleaseclick hereto access a visual outlining the stay relief process and considerations that creditors should examine when determining whether to file a motion for stay relief.

In making the decision of whether or not cause exists to lift the stay, courts will look to a number of factors, including:

Whether the collateral is properly insured;

Whether the debtor is taking proper care to maintain the collateral;

Whether the debtor has failed to pay taxes on the collateral;

Whether the debtor is making interim payments on the collateral (i.e., adequate protection payments);

Whether there is any equity in the collateral;

Whether the collateral is needed for the debtor to reorganize (i.e., a mechanic who needs his mortgaged garage to repair cars and run his business);

Whether the collateral is diminishing in value; and

Whether the debtor is causing undue delay in the bankruptcy case.

If a debtor fails in any one of these categories, a court may find cause to lift the automatic stay. If the creditors motion for relief from stay is granted, the creditor can then proceed with all collection efforts vis--vis the collateral that is no longer subject to the automatic stay. It is critical that the creditor only proceed against that collateral that is specifically listed in the motion for relief and order granting same. If the creditor takes collection action against other property of the estate or the debtor personally, the creditor may still be sanctioned for violating the automatic stay.

Conversely, a court may deny a creditors motion for relief from the automatic stay. If so, the collateral remains part of the bankruptcy estate and subject to the protections of the stay. This means no foreclosures, no litigation, no repossessions, etc. Importantly, creditors can have more than one bite at the apple. A creditor whose motion is originally denied may file another motion for relief if, a few months into the bankruptcy, the debtor is, for example, still not making payments, destroying the property, or failing to maintain the required insurance.

In summary, creditors should heed the warnings given to them when it comes to dealing with debtors in bankruptcy. Indeed, it is better to ask a bankruptcy court for relief from the stay rather than forgiveness for violations of the stay.

2021 Bradley Arant Boult Cummings LLPNational Law Review, Volume XI, Number 348

The rest is here:

The Automatic Stay and Debtors Filing for Bankruptcy - The National Law Review

On 1 November 2021, the Federal Decree Law No. 35 of 2021 (the "Decree") (amending certain provisions of the Federal Decree Law No.9 of 2016 concerning Bankruptcy (the "UAE Bankruptcy Law")) came into force. The publication of the Decree follows a significant decision relating to directors' duties by the Dubai Court of First Instance in the matter involving the bankruptcy of Marka Holdings PJSC ("Marka") (the "Marka Case").

In the Marka Case1, the Dubai Court of First Instance found the managers and the directors of Marka personally liable for the debts of Marka in an amount equal to approximately AED 450 million (which was close to the total amount of all the debts payable by Marka).

Prior to the publication of the Decree, the UAE Bankruptcy Law and the Federal Law No. (2) of 2015 concerning Commercial Companies (as amended) ("CCL") contained provisions relating to the potential personal liability of the members of the board of directors and managers of a company. In particular, such individuals were previously able to, subject to certain conditions, be held personally liable under the UAE Bankruptcy Law for payment of a company's debts if a UAE court deemed them to be responsible for that company's losses.2

The Marka Case may therefore seem to be consistent with the provisions of the UAE Bankruptcy Law prior to the publication of the Decree. Notwithstanding this, since the court's findings have been reported, the Marka Case has been viewed as a significant development in the UAE's approach towards personal liability in corporate bankruptcy proceedings. This is because (1) such an approach towards personal accountability does not appear to have been previously applied in practice by the UAE courts; and (2) the extent to which such personal liability was applied. Whilst it may be that the particular fact pattern is specific to the case and distinguishable going forward, nevertheless there has been a discernable market reaction to the outcome.

The Decree came into force shortly after the Marka Case. The amendments brought about by the Decree apply to Article 144 and Article 201 of the UAE Bankruptcy Law, specifically in relation to the liability of the directors and managers in a bankruptcy scenario. It is worth highlighting that the Decree itself does not provide for any significant standalone amendments to the UAE Bankruptcy Law save for clarifying the previous provisions relating to the personal liability of the directors and managers. The amendments include, amongst others, (1) clarification that each director or manager will be held liable to the extent of their responsibility for such debts; (2) providing the directors or managers held in contravention of the law the right to appeal the relevant ruling; and (3) further introducing a financial penalty for contravention of the relevant articles of an amount equal to no more than AED 100,000) (this is in addition to the criminal liability previously included in the law).

The timing of the enactment of the Decree to be read alongside the decision of the Marka Case can be seen as a key reminder to the market by the UAE Government of the existence of personal liability to senior officials in a company. Additionally, taken together, the Decree and the Marka Case reinforces the Government's aim to demonstrate and uphold "best practice" standards of corporate governance and accountability in the UAE, in order to continue to attract inward investment in the country.

The decision of the Marka Case may potentially be reversed following its appeal. Notwithstanding this, directors and managers (which, under the UAE Bankruptcy Law includes anyone who plays an active role in the decision making of a company) are now likely (if they are not already doing so) to more actively seek separate independent advice to ensure that decisions made on material transactions will not affect their personal liability following a bankruptcy or similar insolvency procedure.

The decision of the Marka Case is fairly recent and it is yet to be determined whether the decision will set a new approach towards personal liability in UAE corporate bankruptcy proceedings. The UAE legal system does not operate on the basis of binding precedent. As such, the legal ruling in this case, does not mean it would apply in all other cases. Nevertheless, directors and managers across the UAE will likely remain mindful of their duties under the relevant laws and ensure compliance.

1 Case #14/2019 Bankruptcy Procedures2 Article 144 and 201 of the UAE Bankruptcy Law and Article 162 of the CCL

[View source.]

Originally posted here:

Directors Duties: a stark reality following the recent Marka Ruling and subsequent amendments to the UAE Bankruptcy Law - JD Supra

As a property owner in North Conway, I am furious to see the money collected not being used for local resources that will help benefit the town in more positive ways.

As my family and I are considering moving permanently to North Conway to raise our kids, I have witnessed reckless spending of late and it appalls me that others are not furious as I am. For example: spending $50,000 on a list to determine the STRs in the area is sickening and robbery of the taxpayers' money. How many people would have preferred to see this money go to our schools for another teachers' salary raise or a school music program or fine arts program or even a robotics program?

The same list was generated for a fraction of the cost and was more accurate by others. So why was all of this money spent? Did the town obtain three estimates or just impulsively spend $50,000?

The town is looking at re-evaluating all properties in town to raise our assessed values and capitalize on this increased market. Legally, they do not need to do this for three more years but they are insisting on doing this now because they are in an economic pinch and bind with their reckless spending and legal fees. That means everyones taxes will be raised when there is no need to do this for three more years.

What I ask is that the people of this community dont act emotionally use logic and reason to decipher if you agree with all of this spending or if you would prefer to see the tax money generated go towards more local resources. The town is heading towards bankruptcy and its because of these poor decisions.

Dont let this happen! Voice your concerns. Dont stay quiet because youre going to regret not speaking up and questioning these people who are pushing an agenda and not looking at your best interests.

Read more here:

Matt Collard: Because of poor spending decisions town is heading toward bankruptcy - Conway Daily Sun

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This week, the Ninth Circuit takes a close look at a sizableantitrust jury award, and explains what constitutes a taxreturn for purposes of bankruptcy law.

OPTRONIC TECHNOLOGIES, INC v. NINGBO SUNNY ELECTRONIC CO.LTD.

The Court held that sufficient evidence supported a jury verdictholding telescope manufacturers liable for antitrustviolations.

The panel: Judges Tashima, Gould, andRakoff (S.D.N.Y.), with Judge Gould writing the opinion.

Key highlight: The documentaryevidence and expert testimony that Orion presented during trial . .. showed that Sunny had the technical capacity to manufacture thesame telescopes as Synta, but chose not to. . . . Other emailsbetween Sunny and Synta indicate that they had agreed to dividecustomers. . . . This is quintessential evidence of a marketallocation conspiracy.

Background: Plaintiff OptronicTechnologies, Inc., also known as Orion Telescopes & Binoculars(Orion), designs and markets telescopes. Orion sueddefendants Ningbo Sunny Electronic Co., Ltd. and Sunny Optics,Inc., (collectively Sunny), manufacturers oftelescopes, for violations of federal antitrust law and Californialaws arising out of Sunny's alleged conspiracy with othertelescope manufacturers (Synta) in relation toSunny's acquisition of telescope manufacturer/distributorMeade, and other conduct. Before trial, the district court grantedpartial summary judgment to Sunny, holding that Orion lackedstanding to challenge Sunny's conduct on the ground that itprevented Orion from acquiring Meade, but holding that Orion maystill have been harmed by Sunny's acquisition of Meadebecause it concentrated the telescope market. After a trial, thejury found Sunny liable and awarded Orion $16.8 million in damages.The district court trebled the damages pursuant to the Clayton Act,and awarded Orion $50.4 million, but then deducted $3.1 millionbased on the value of a settlement and supply agreement Orion hadreached with Synta. The court refused to deduct the profits Orionderived from the supply agreement because Sunny had the burden ofproof and, the court concluded, the expert declaration it submittedto support this argument was untimely. The district court alsogranted Orion an injunction that ordered Sunny to supply Orion andMeade at non-discriminatory terms for five years; and notcommunicate with Synta to the extent such communication violatedfederal antitrust law.

Result:The Ninth Circuit vacated onlywith regard to the valuation of the settlement set-off, which wasremanded for further proceedings, and affirmed in all otherrespects.

The Court first rejected Sunny's challenges to thedistrict court's evidentiary rulings as toexpertsholding that the testimony of Orion's telescopemanufacturing expert and damages expert was properly admitted, andthe testimony of one of Sunny's proposed rebuttal experts wasproperly excluded. The Court further held that the districtcourt's mid-trial curative instruction limiting thejury's consideration of the testimony of one of Sunny'srebuttal witnesses was proper.

The Court also upheld that jury's verdict as based onsufficient evidence. The Court thus rejected Sunny's argumentthat Orion failed to present sufficient evidence to support thejury's verdict in Orion's favor on its Sherman Act1 claim. The Court explained that the elements of aSection 1 claim are: (1) a contract, combination, or conspiracy (2)that unreasonably restrained trade under either a per se rule ofillegality or a rule of reason analysis, and (3) that the restraintaffected interstate commerce. The Court noted that horizontal pricefixing and market allocation are per se Section 1 violations.Contrary to Sunny's argument, Orion had presented sufficientevidence that Sunny conspired with horizontal competitor Synta toensure that Sunny acquired Meade to protect their market share andguarantee that a competitor would not buy Meade. Orion alsopresented sufficient evidence from which the jury could properlyfind, as it alternatively did, that Sunny conspired with acompetitor to fix prices and credit terms. And Orion presentedsubstantial evidence to support the jury's verdict that Sunnyagreed with Synta, a horizontal competitor, either not to competewith one another in the market, or to divide customers or potentialcustomers between themanother per se Section 1violation.

The Court also rejected Sunny's challenge to thejury's verdict in favor of Orion on its Sherman Act2 claim. The court explained that Section 2 makes itillegal to monopolize, or attempt to monopolize, or combineor conspire with any other person or persons, to monopolize anypart of the trade or commerce. The jury could have foundthat Sunny and Synta intended for Sunny to have a monopoly over thetelescope manufacturing market, and thus the jury's verdictdid not depend on an impermissibly joint monopoly theory. And Orionhad not failed to define the relevant market, but insteadestablished the relevant market through expert testimony. Likewise,sufficient evidence supported the jury's finding that Sunnyexpressed a specific intent to gain monopoly power. Finally, Orionalso presented sufficient evidence to establish that Sunny wasdangerously close to attaining monopoly power. The evidence Orionpresented at trial established that Sunny's market share wasabove the forty-four percent market the Court has recognized assufficient to establish a dangerous proximity to market power atthe relevant time and there had been no new entrants to thetelescope manufacturing market for ten years.

The Court also denied Sunny's request for a new trial onOrion's Clayton Act 7 claim on the ground thatOrion had not proved damages from this violation as required. Onthis claim, the jury found Sunny violated Clayton Act 7because there was a reasonable likelihood that Sunny'sacquisition of Meade would substantially reduce competition in thetelescope manufacturing market or create a monopoly. Orion hadpresented evidence of antitrust injury on this claim on the theorythat Sunny's acquisition of Meade reduced the number of majortelescope manufacturers from three to two, enabling Sunny and itscompetitors to charge supracompetitive prices for telescopes, whichwas a major factor in the overcharges that Orion experienced in itsbusiness dealings with Sunny, Synta, and Meade.

The Court also concluded that the injunctive relief granted bythe district court was not overbroad. The Court stressed that adistrict court may order an injunction beyond a simple proscriptionagainst the precise conduct previously pursued and that thereviewing court asks only if the relief is a reasonable method ofeliminating the consequences of the illegal conduct. In particular,the district court validly ordered Sunny to supply Meade onnon-discriminatory terms because the telescope manufacturing marketwould become over-concentrated if Sunny eliminated Meade. And thedistrict court properly ordered Sunny to supply Orion even thoughit had earlier dismissed Orion's refusal-to-deal claimbecause the district court can order conduct to avoid a recurrenceof the antitrust violation and eliminate its consequences and here,the jury had found that Orion had been forced to pay inflatedprices as a result of the market power exerted by Sunny and Syntafollowing the unlawful Meade acquisition.

The Court also disagreed that Orion could not receive damagesarising after September 2016, when Sunny contended any conspiracymust have ended, because Orion offered substantial evidence thatthe conspiracy had continued after 2016 because although Synta hadat that point agreed to supply Orion on most favored customerterms, it actually kept overcharging Orion. And even if theconspiracy had ended in 2016, Orion could recover post-2016 damagesbecause it continued to suffer economic harm from the harm tocompetition caused by the illegal concerted activity. TheCourt found, however, that the district court had abused itsdiscretion in excluding a declaration of Sunny's expert insupport of Sunny's post-trial motion to alter or amend thejudgment as untimely disclosed because the expert had been timelydisclosed. The Court accordingly remanded for the district court toreconsider whether to accept the expert's declaration.

Turning to Orion's cross-appeal challenging the districtcourt's entry of summary judgment for Sunny on the issue ofwhether Sunny caused Orion's failure to acquire Meade, theCourt again affirmed. The Court explained that Orion did not haveantitrust standing to raise the issue because the timing of bidscreated a strong presumption that Orion would not have acquiredMeade even if Sunny had not outbid another competitor for Meade andthus there was no genuine dispute of material fact on whether Sunnyprevented Orion from buying Meade.

RUDOLF SIENEGA V. STATE OF CALIFORNIA FTB

The Court holds that a Chapter 7 debtor's state tax debtswere non-dischargeable where the debtor notified the CaliforniaFranchise Tax Board of a federal tax adjustment, but did not paystate taxes.

The panel: Chief Judge Thomas, andJudges McKeown and Molloy (D. Mont.), withChief Judge Thomas writing the opinion.

Key highlight: [T]he [BankruptcyAppellate Panel] correctly concluded that sending faxes was not theequivalent of paying taxes. Therefore, it properly affirmed theholding of the bankruptcy court that the California state taxesthat Sienega owed were nondischargeable in bankruptcy.

Background: Rudolf Sienega failed to fileCalifornia state income tax returns for 1990, 1991, 1992, and 1996.The IRS made upward adjustments in Sienega's federal taxliability for those years, and the U.S. Tax Court later ruled thatSienega was liable for additional accuracy-related penalties. AfterSienega's counsel notified the Franchise Tax Board of theadjustments to his income, the Board issued a notice of proposedassessment to Sienega for each of the four tax years. Sienega laterfiled for bankruptcy. The Board filed an adversary complaintseeking to have Sienega's outstanding state tax debtsdeclared nondischargeable on the ground that he had not filed statetax returns in any of the relevant years. The bankruptcy courtgranted summary judgment to the Board, rejecting Sienega'sargument that notifying Board about the income adjustments entitledhim to a discharge.

Result:The Ninth Circuit affirmed. TheCourt explained that Section 523(a)(1)(B) of the Bankruptcy Codebars the discharge of tax debts for which the debtor did not file areturn. A paragraph added in 2005 clarified thatthe term return' means a return that satisfiesthe requirements of applicable nonbankruptcy law, andincludes a return prepared pursuant to section 6020(a) ofthe Internal Revenue Code of 1986, or similar State or locallaw. Section 6020(a) authorizes the IRS to prepare a returnfor someone who has failed to file a return but has disclosedall information necessary for the preparationthereof. Sienega argued that he had complied with asimilar California state law by faxing the Boardnotice of his federal tax adjustments under California Revenue andTaxation Code section 18622, which requires taxpayers to report IRSchanges and corrections. The faxes did not constitute areturn, the Court said, because they did not meetCalifornia law requirements for returns, did not purport to bereturns, were unsigned, did not contain enough data to allowcomplete computation of state tax, and nothing in the faxesindicated an honest and reasonable attempt to satisfy therequirements of tax law. In short, the Courtsaid, one of these things is not like the other. TheBankruptcy Appellate Panel thus correctly concluded that becausethe faxes did not constitute state tax returns, Sienega'sstate tax debts were not dischargeable.

Because of the generality of this update, the informationprovided herein may not be applicable in all situations and shouldnot be acted upon without specific legal advice based on particularsituations.

Morrison & Foerster LLP. All rights reserved

See the article here:

This Week At The Ninth: Telescopes And Tax Returns - Insolvency/Bankruptcy/Re-structuring - United States - Mondaq News Alerts

December 13, 2021

December 10th saw a submission entered into Intelsats Chapter 11 bankruptcy hearing which used the phrase actio pauliana, which translates as meaning designed to protect creditors from fraudulent legal transactions.

The phrase was used by Luxembourg lawyer, Yann Hilpert, in his declaration to the court. He told the court that under Luxembourg law, an actio pauliana is a legal term brought by creditors to challenge acts done by their debtors in alleged fraud of certain rights. Hilpert is a lawyer acting for a number of creditors known as the Jackson Crossover Group.

The Luxembourg complication is that many of the Intelsat businesses were formally located and financially domiciled in Luxembourg because of its favourable taxation advantages.

Hilperts submission says that he had been asked to investigate and analyse (by the Jackson Crossover Group) whether, in the facts and circumstances here, a Luxembourg court would find Intelsat SAs and Intelsat Investment Holding Sarls (the TopCo Guarantors) release of their guarantees (the TopCo Guarantees) of three series of unsecured notes (the Jackson UnsecuredNotes) issued by Intelsat Jackson Holdings, S.A. (Jackson) to be ineffective if challenged under actio pauliana under Luxembourg law.

The lawyer states that he believes a Luxembourg court would likely find that the facts and circumstances surrounding the TopCo Guarantors releases here satisfy all five elements of an actio pauliana claim.

Excerpt from:

Fraud allegation in Intelsat bankruptcy | - Advanced Television

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December 6, 2021 - Most vendors that trade with debtors know that administrative expense claims are required to be paid in full. In recent large Chapter 11 cases, however, debtors have leveraged the risk of administrative insolvency to escape their obligation to pay trade and ordinary-course administrative claim holders in full as required under sections 503(b), 507(a)(2), and 1129(a)(9) of the Bankruptcy Code. Some debtors have continued paying certain administrative claim holders (typically, professionals) in full, while trade and ordinary-course administrative claimants receive only a small percentage.

In many recent Chapter 11 cases, debtors were able to avoid paying administrative claimants in full.

Verity Administrative claims reduced after plan reserve underestimated the amount of the claims. Recently, in the Verity Health System of California, Inc. bankruptcy in the Central District of California, the debtors secured post-plan confirmation approval from Judge Ernest Robles to pay certain administrative claimants between 15% and 23%. Professionals and administrative claim holders that had already been paid were not subject to this reduction.

Register

The plan established a $52,749,000 reserve to satisfy non-professional administrative claims that were allowed and unpaid as of the plan's effective date. The reserve amount was based on the debtors' projections of administrative claims that were to be filed. In support of plan confirmation, the debtors submitted a declaration from their financial advisor attesting to the sufficiency of the administrative claim reserve.

The plan was confirmed before the bar date for administrative claims, however, and the debtors greatly underestimated the amount of administrative claims by a factor of eight. In fact, according to the debtors, at one point, they had a mere $5.3 million to satisfy over $25 million in administrative claims. This shortfall led to the liquidating trustee seeking and obtaining court approval over vehement creditor objection to pay administrative claimants between 15% and 23%.

Southern Foods Administrative claim reduced by protocol enabling the accelerated payment of reduced claims.In the Southern Foods bankruptcy before Judge David Jones in the Southern District of Texas, the debtors, seeking to avoid administrative insolvency, obtained approval of administrative claim "protocols" that would enable them to reduce the amount of administrative claims.

Under the protocols, administrative claimants that affirmatively opted in received an "accelerated" cash distribution in exchange for reducing their claim to 80% of the "reconciled" claim amount. These administrative claimants received an initial cash distribution equal to 30% of the reduced administrative claim within 10 business days after opting in, with the remaining amount to be paid at some future date to be determined by the debtors with the consent of the official committee of unsecured creditors. Conversely, claimants that declined to reduce their administrative claim were subordinated to the administrative claimants that opted in.

In this case, the debtors successfully leveraged the risk of administrative insolvency to reduce the amount of administrative claims.

Pier 1 Administrative claims put in peril after court orders delay in payment until plan effective date. Finally, in the Pier 1 bankruptcy in the Eastern District Court of Virginia, Judge Kevin Huennekens approved the debtors' motion to delay payment of all but certain "critical expenses" included on an interim budget.

Numerous landlords, among other creditors, objected to the motion because the rent due under their respective leases would be deferred. As an alternative, the landlords requested the immediate payment of rent. The court granted the landlords an administrative expense claim for the deferred rent but denied their request for immediate payment.

After the debtors remained in possession of their leased premises and delayed paying rent for two months, the debtors became administratively insolvent, resulting in the landlords' administrative claims becoming virtually worthless.

The debtors subsequently filed a plan that called for administrative claimants to receive reduced payment. In order to obtain creditor body approval, the plan provided a release from Chapter 5 causes of action for administrative claim holders that voted in favor of the plan. (Chapter 5 of the bankruptcy code contains the debtor's avoidance powers, including preferences and fraudulent transfers under 11 U.S.C. 547 and 548.) The creditor body voted in favor of the plan, and administrative claimants were paid far less than 100-cent dollars.

While creditors are required to continue providing services to debtors post-petition and the Bankruptcy Code requires administrative claims to be paid in full, Verity, Southern Foods, Pier 1 and other cases, such as Sears (Bankr. S.D.N.Y. 2018) and Toys "R" Us (Bankr. E.D. Va. 2017), show that holders of administrative claims must be vigilant in protecting their claims; otherwise, they may be left with drastically reduced claims.

Below are several tips that can assist creditors in collecting 100% of their administrative claims. Of course, whether these will work depends on the circumstances of the case and the creditor's leverage:

Be proactive. Do not assume that administrative claims will be paid in full. Monitor the debtors' operations and ensure, to the extent possible, that the debtors make payment in advance or on delivery.

Participate on the creditors committee. Committee members will receive timely periodic reporting on cash flows (and administrative solvency).

Attempt to work with the debtors to obtain immediate payment on an informal basis, rather than seeking court intervention. As Pier 1 demonstrates, seeking court intervention may backfire badly for administrative claimants. As in Pier 1, the court may allow debtors to defer the payment of the administrative claim until a plan effective date, creating the risk that the debtors could become administratively insolvent in the interim.

If the administrative claim is based on an executory contract, move to compel the assumption or rejection of the executory contract. The assumption of the executory contract will ensure that post-petition cure amounts are paid. The rejection would cap the amount of the administrative claim that would potentially be at risk.

If the plan calls for administrative claims to be satisfied from a reserve, make sure that the administrative bar claim date occurs before plan confirmation, in order to ensure the sufficiency of the administrative claim reserve. Additionally, seek discovery from the debtors to confirm the sufficiency of the plan's reserves.

Ensure that the plan provides identical treatment for all administrative claims and does not permit certain claims (i.e., professional fees) to be paid ahead of others.

Negotiate a plan provision providing for (i) cash distributions to comply with the absolute priority rule to avoid any distribution to any lower priority creditor prior to the satisfaction of all administrative claims; (ii) any excess amount set aside for professionals to be paid to administrative claimants that remain unpaid; and (iii) the clawback of previously paid administrative claims in the event of a shortfall in the distribution to administrative claimants.

Negotiate release and exculpation provisions to become effective only upon the actual payment in full for administrative claims.

Negotiate for the capping of professional fees that may otherwise deplete the debtors' estates.

Negotiate to trade a reduction in the administrative claim in exchange for a release of Chapter 5 claims.

Register

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.

Schuyler G. Carroll is a partner in Loeb & Loeb's Restructuring and Bankruptcy practice. His practice focuses primarily on Chapter 11, 15 and 7 bankruptcy proceedings; distressed acquisitions; creditors' rights enforcement; and litigation and advisory work. He can be reached at scarroll@loeb.com.

Bethany D. Simmons, a partner with the firm's Restructuring and Bankruptcy practice, focuses her practice on bankruptcy reorganization and commercial litigation, and has experience guiding debtors in health care and oil and gas industries through the stages of Chapter 11. She can be reached at bsimmons@loeb.com.

Noah Weingarten, an associate in Loeb & Loeb's Restructuring and Bankruptcy practice, provides advice on complex bankruptcy and restructuring matters. He maintains a commercial and bankruptcy litigation practice with an emphasis on bankruptcy avoidance litigation and media and entertainment disputes. He can be reached at nweingarten@loeb.com.

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Protecting creditors' administrative claims in Chapter 11 bankruptcy cases - Reuters

* Country is being pushed towards bankruptcy - EranSun, Dec 12, 2021, 11:16 am SL Time, ColomboPage News Desk, Sri Lanka.

Dec 12, Colombo: The country has plunged into a massive financial crisis, with all sectors including the economy collapsing but the budget -2022 has no proposals to resolve any of the burning issues said MP Eran Wickramaratne addressing the final debate of the budget 2022 held in Parliament on Friday.

At a minimum this government should properly identify the fundamental reasons for the crisis, and its failure to recognize the depth of the crisis is pushing the country further into the abyss and plunging it into financial bankruptcy.

Further speaking on the expenditure vote of the finance ministry Mr. Wickramaratne said that as the Opposition understands the extent of the crisis in which the country has fallen, they as a responsible opposition, are not asking " " now. In fact, the first of the serious problems we face is the widening budget deficit. The second is the Balance of Payments deficit leading to a foreign reserve depletion and now pushing the country into near financial bankruptcy.

The objective and the policy of this government is not to develop the country but to deceive the people using various slogans such as national economy, national security and narrow nationalism or racism.

Amidst boasting of these slogans even in 2006, when Mahinda Rajapaksa came into office, government revenue as a percentage of gross domestic product (GDP) was 17.3%. But by 2014 it had dropped to 11.40 %.

But in a very short time during the previous regime the national revenue began to grow again. Accordingly, by the year 2018, the government revenue had increased to 13.5% of the GDP. During this period there was a constitutional coup. Further, despite the unfortunate Easter attack in 2019, we were able to maintain government revenue at 12.6%. But what has happened now?

When we took over the government in 2015, the government revenue was Rs.1000 billion and by 2019 it had almost doubled to 1997 billion rupees. This is what a country needs to improve its economy he said.

Elaborating on the governments accounting gimmicks the SJB MP said that this government estimated the revenue for 2021 at 2029 billion rupees. But now the estimate is revised to be 1561 billion rupees. But by December, it could further drop by Rs 100 billion rupees. Then there is a shortfall of 500 to 600.

Even under this budget government revenue for 2022 is projected to be at 2284 billion rupees, an impossible target. That means 800 billion rupees increase in revenue within a year. This is again a false assessment. I urge the government to tell the truth and face reality. What are the proposals in this budget to increase revenue by 40%? Public officials knowingly should not sign reports where it is abundantly clear that estimates are unrealistic. According to the governments false estimate, the budget deficit will be 8.8% by 2022. But the Verite Research Institute states that it will exceed 11 %.

The balance of payments of deficit over a period of time has led to a foreign reserve crisis. Imports should be reduced, and exports should be increased. No budget proposals have been put forward to address any of these structural issues. So how could economy and the financial stability be improved?

The Rajapaksa regime constitutes family rule in which the economy of the ruling cohorts is strengthened rather than the upliftment of the country and its people. It was during the first term of Mahinda Rajapaksa that excessive and unproductive borrowing led to a debt trap. Who was the Finance Minister at that time? That is the present Prime Minister. Who was the Secretary to Finance? The present Secretary to the President. Who was the then Governor of the Central Bank? It is the present Governor of the Central Bank! It is the same bunch of people running the show, with major portion of the annual budget allocations at their disposal.

When the country was short of foreign currency in 2007, they introduced International Sovereign Bonds (ISB) to the market. Nivard Cabraal was then the Governor of the Central Bank. These were short term bonds at a high commercial rate. The country is still repaying these loans rolled over many times obtained during the period of Rajapaksas. It was gambling without the management of fiscal policies.

Amidst strikes, threats, political conspiracies and Easter attacks, when the government was handed over in 2019, foreign reserves stood at $ 7.2 billion. Today the cash reserves are about $ 1 billion as stated by the state minister of Finance in Parliament. Possibly the lowest foreign currency reserves for any country in the world.

Could there be a more dangerous situation facing the country than this? "This government and its members perhaps may not understand what we are saying or the severity of the situation of the country." he said.

When a country plunges into such a low rating, who gives us credit? In addition to paying off debts, how do we import essential goods? Already, thousands of containers stuffed with essential goods are stuck at the port for want of dollars for banks to pay for letters of credit.

Thousands of small businesses have been left stranded due to the arbitrary import ban. There are about 85,000 registered SME businesses in the country. Of those, 29,000 have been shut down or crippled. The private sector is the only real engine to create employment. The Finance Minister said that the public Service is a burden on the economy. It goes without saying that the public sector of 1.4 million is heavily over staffed, Real jobs must be created in the private sector. The private sector requires a stable fiscal policy regime, Governments have failed in providing that climate. This budget is no different.

If the debt is not paid the country will be a bankrupt economy. Then, the country ratings will be gone. By the beginning of 2022, we are close to this major catastrophe as the budget does not address any of the burning issues facing the country. Therefore, Mr. Eran Wickramaratne requested that Parliament pays attention to the issues before it is too late. (MP Eran Wickramaratnes Media Unit)

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Sri Lanka : Country is being pushed towards bankruptcy - Eran - Colombo Page

Have you been inside a Hertz office lately? I was, last month, at Los Angeles International Airport. It didnt feel like a successful business. It wasnt like stepping into, say, an Apple store, agleam with brushed steel and white walls and pleasant, impeccably groomed salespersons. It wasnt even like stepping into a Starbucks. It was like stepping into a soup kitchen for the homeless: short-staffed, shabby decor, long lines, unhappy customers. A clerk told me to fetch my car from a separate office a couple of miles away (Take an Uber); the industrial-looking building I was sent to didnt have any kind of sign indicating whom I was doing business with. The sole attendant on the premises said it didnt matter that Id booked a reservation. There were no cars. The managers had overbooked, he said, and whenever they do that, they go home and leave me to handle irate customers like you. I felt sorry for him.

Yes, Covid-19 has created supply chain problems for Hertz and other rental car companies, and also a labor shortage that makes it hard for Hertz to staff back up. Still, it was hard to reconcile my customer experience with an enterprise thats so successful its profit margin is 39 percent and so flush that its buying back its own stock. Profits were up not because Hertz was renting more cars; they were up because Hertz was renting fewer cars, pricing them, according to an analyst cited by Warren, 147 percent higher than before the pandemic.

The supply chain snafu drove up the price of cars, but, as Warren further pointed out, Hertzs pricing for what it called the elements in vehicle rental pricing that management has the ability to control was up 44 percent over the previous year. Hertz wasnt enjoying financial success in spite of its seedy rental offices, its loss of half its workforce, its inability to furnish many rental cars, and the outrageously high price it commanded for those few rental cars that were available. It was enjoying financial success because of these things. It was acting very much like a corporation owned by two finance companies.

Whats happening at Hertz is emblematic of whats been happening at American corporations. Some people look at this picture and conclude that corporations increased concentration and rising profits demonstrate theyre becoming more powerful than ever. Thats true. Other people look at corporations indifferent treatment of all personnel except those in the C-suites, their disinclination even to pretend that they provide customer service until someone makes a stink on social media, and their desperation to please shareholders and conclude that corporations have become pitifully weak. Thats also true.

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Elizabeth Warren Wants to Know How Hertz Went From Bankruptcy to Buybacks in Six Months - The New Republic

NEW DELHI :The Insolvency and Bankruptcy Board of India (IBBI) will set up panels of resolution professionals based on location of their registered office and the volume of their ongoing assignments, a databank that tribunals can use to quickly appoint a professional to take over defaulting companies.

IBBI said a new set of guidelines will come into effect from 1 January 2022 on the appointment of insolvency resolution professionals, liquidators and bankruptcy trustees, on the basis of which it will draw up panels of experts to be hired by tribunals.

Bankruptcy tribunals reach out to IBBI under different circumstances to rope in resolution professionals, but the process of identifying, nominating and appointing a resolution professional takes time. The proposed creation of panel of resolution professionals will have a validity of six months after which a new panel will replace it, IBBI said in the new guidelines issued on Wednesday.

For example, the first panel under these guidelines will be valid for appointments during January June 2022, and the next panel will be valid for appointments during July December 2022, and so on," IBBI said in the regulations.

Usually, when a tribunal asks IBBI to nominate a resolution professional, the regulator does not have information about the volume, nature and complexity of an insolvency or bankruptcy process and the resources available at the disposal of an insolvency professional. In such a situation, IBBI is unlikely to add much value by recommending a professional for the process, IBBI said explaining why the proposed panels will be useful for quick decision making by the tribunal.

The current process of appointment may entail two to three weeks, which could be saved if the tribunal has a ready panel of professionals recommended by IBBI and it can pick up any name from it for appointment, IBBI said.

The regulators move is in line with the governments efforts to quicken the process of bankruptcy resolution, a policy priority. Avoiding delays in the resolution process is key to preserving the value of assets available for restructure and for effective turning around of the corporate debtor.

A Parliamentary standing committee on finance led by BJP leader Jayant Sinha had in August flagged the delays in the bankruptcy resolution process saying that more than 71% of the cases were pending for more than 180 days.

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IBBI to make panel of professionals to speed up bankruptcy process - Livemint