Here’s a link to the amicus brief filed on 11/21/05 by the US in support of Anna Nicole Smith in her case before the US Supreme Court, Marshall v. Marshall, No. 04-1454 (referenced here) (<a href="pdf). Looks like this is the first brief filed since the Court granted Anna’s petition for certiorari last September.
The “Question Presented” is:

Whether a claim that falls within the scope of the jurisdiction conferred upon the federal courts and that seeks neither to probate a will nor to administer or assume control over the property in a decedent’s estate is nevertheless excepted from federal jurisdiction if it involves the adjudication of rights related to property that is the subject of an ongoing state probate proceeding.

The “Interest of the United States” is described as follows:

Continue Reading US Supports Position of Anna Nicole Smith in Amicus Brief Filed with the US Supreme Court

The following six bankruptcy-related working papers can be downloaded from the Social Science Research Network:
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University of Texas Law School’s A. Mechele Dickerson: “Words that Wound: Defining, Discussing, and Defeating Bankruptcy ‘Corruption’.”
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Harvard Law School’s Ethan Bernstein: “All’s Fair in Love, War & Bankruptcy?: Corporate Governance Implications of CEO Turnover in Financial Distress.”
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Boston College Law School’s Catharine P. Wells: “Who Owns the Local Church? A Pressing Issue for Dioceses in Bankruptcy.”
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Syracuse University Law School’s Gregory L. Germain: “Income Tax Claims in the Year of Bankruptcy: A Congressionally Created Quagmire.”
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University of Reading’s Charles Grant and Institute for the Study of Labor’s Winifried Koeniger: “Redistributive Taxation and Personal Bankruptcy in US States.”
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Texas A&M’s Li Gan and Washington University’s Tarun Sabarwal: “A Simple Test of Adverse Events and Strategic Timing Theories of Consumer Bankruptcy.”
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Abstracts for each of these working papers follow:

Continue Reading Six Bankruptcy-Related Working Papers Available for Downloading from SSRN

The Bankruptcy Court for the District of Columbia has released about 16 opinions for publication this year, and five of them have related to the litigation spawned by the Greater Southwest Community Hospital Corp. (“GSCH”) bankruptcy. GSCH’s bankruptcy case commenced in November 2002, and its reorganization plan was confirmed in April, 2004. Under the plan, the debtor’s operations vested in the “Reorganized Debtors,” and the debtor’s litigation assets vested for the benefit of pre-confirmation creditors in the “DCHC Liquidating Trust” (the “Trust”). Sam J. Alberts was named Trustee, and the Trust was funded with $1 million to cover some of the litigation expense.
Judge Teel, the bankruptcy judge assigned to the case, recently issued a lengthy opinion in the case, Alberts v. Tuft (In re Greater Southeast Community Hospital Corp.), 2005 WL 3036507 (Bankr. D.D.C., 10/31/05), in which he addressed the defendants’ Rule 12(b)(6) motion to dismiss for failure to state a claim upon which relief can be granted.
The Court summarized the complaint’s allegations as follows:

The Trust alleges that DCHC’s former directors and officers (the “D & O Defendants”), with assistance from two law firms (collectively the “Law Firm Defendants”), Epstein Becker & Green P.C. (“Epstein Becker”) and Kutak Rock LLP (“Kutak Rock”), negligently and in some instances intentionally drove the Debtors further into debt in furtherance of a Ponzi scheme perpetrated by the Debtors’ primary if not sole lender, National Century Financial Enterprises (“NCFE”), and its subsidiary and affiliated lenders (collectively the “NCFE Entities”). It seeks recovery not only for assets actually drained out of the Debtors’ estates prior to their bankruptcy filings, but also for the debt accumulated by the Debtors in the years leading up to DCHC’s bankruptcy filing–an amount totaling $242 million.

The Trust’s Complaint contained a total of twenty-one counts, broken down as follows as to the various defendants:

As Against All Defendants: (A) Deepening insolvency claims (Counts X-XII); (B) Claims as a hypothetical judgment lien creditor under § 544(a) (which, according to the complaint, “permits it to (1) to pursue claims that such creditors would hold for breach of fiduciary duty and (2) garnish or ‘seize’ the Trust’s own claims and prosecute those claims as a creditor rather than as a representative of the estate”) (Count XV)
As Against the D&O Defendants: (A) Breach of fiduciary duty (Counts I-V); (B) Corporate waste (Counts V-IX)
As Against the Law Firm Defendants: (A) Aiding and abetting fiduciary duty (Count XIII); (B) Malpractice (Count XIV); (C) Aiding and abetting “deepening insolvency” (Count XI); (D) Fraudulent conveyance (Counts XVI-XXI)

As to the defendants’ motion to dismiss, the Court’s holdings are summarized as follows:
(1) The Court dismissed the “deepening insolvency” claims (Counts X-XII), stating that they were a mere “re-packaging” of the breach of fiduciary claims with respect to the D&O Defendants and the malpractice claims with respect to the Law Firm Defendants.
(2) The Court further dismissed the Section 544(a) claim (Count XV), stating that “the Trust cannot use § 544(a) to bring claims separate from those of the estate or to constructively “seize” the estate’s claim in the guise of a creditor.”
(3) The Court dismissed the breach of fiduciary duty claims with respect to the D&O Defendants relating to the NCFE Entities’ lending practices (Counts I and I-V), as well as the claims alleging corporate waste (Counts V-VII and IX).
(4) The Court did not dismiss Count VIII with respect to loans made to officers for which no consideration was provided in exchange.
(5) The legal malpractice claim (Count XIV), which challenged the sufficiency of the opinion letters that the Law Firm Defendants prepared, survived the motion to dismiss. The Court stated that the allegations regarding these opinion letters were “far from precise,” but that they were sufficient at this stage of litigation to state a claim for malpractice.
(6) Finally, the Court rejected the Law Firm Defendants’ res judicata and judicial estoppel arguments, as well as the statute of limitations and in pari delicto affirmative defenses that were common to all Defendants.
Excerpts from the Court’s opinion on the Court’s dismissal of the “deepening insolvency” and section 544 claims follow:

Continue Reading DC Bankruptcy Court Rejects Deepening Insolvency Claims as Duplicative, But Allows Other Related Counts in Trustee’s Serpentine Complaint Against Debtors’ Former D&O’s and Lawyers

Here’s our popular weekly roundup of significant recently decided cases involving complex bankruptcy disputes for the week ended 11/20/05. Enjoy!
Administrative Claim – Critical Vendor – Setoff: In re TSLC I., Inc., 332 B.R. 476 (Bankr. M.D. Fla., 11/1/05)
Plan – Feasibility: In re Repurchase Corp., 332 B.R. 336 (Bankr. N.D. Ill., 10/31/05)
Plan – Third Party Release: Simmons v. 22 Acquisition Corp., 2005 WL 3018726 (E.D. Tex., 11/10/05)
Preference – Ordinary Course: In re Terry Manufacturing Company, Inc., 2005 WL 3003701 (M.D. Ala., 11/9/05)
Setoff – Mutuality: Universal Guaranty Life Ins. Co. v. Health Receivables Management, Inc. (In re Health Management Limited Partnership), 332 B.R. 360 (Bankr. C.D. Ill., 11/2/05).
Bonus Supplement: Reed Smith’s guide to recent bankruptcy decisions.

Continue Reading Notable Reported Cases for the Week Ending 11/20/05

Today I learned the sad news that Conrad B. Duberstein, former Chief Bankruptcy Judge for the Eastern District of New York, died peacefully at his home on November 18, 2005 after a long illness. This legend of the bankruptcy bar and courts will be sorely missed by all those who had the great fortune of being in his presence.
We at The Bankruptcy Litigation Blog express our deep condolences to the family of Judge Duberstein, and to his friends and colleagues. May his memory be a blessing and a comfort to those who mourn him.
Below is the obituary that appears in today’s New York Times, courtesy of Judge Duberstein’s former firm, Otterbourg, Steindler, Houston & Rosen, P.C. It speaks volumes of his known — and unknown — greatness.
His funeral is set for November 21, 2005 at 1 p.m., at Park Avenue Synagogue, 50 East 87th Street in New York City. Please make every effort to attend. Also, please do not hesitate to provide a comment below in honor and memory of this great man, especially during the initial 30 day mourning period.
Judge Duberstein’s obituary follows below:

Continue Reading Lower the Flags and Say a Prayer, for Judge Conrad B. Duberstein Has Passed from Our Midst

Anyone’s who’s experienced the spectacle of an oral argument at the US Supreme Court will surely appreciate the scare, laughter, and tricks served up at oral argument on Halloween Day in Central Va. Community College v. Katz. In the end, however, I expect that Judge Goldgar‘s prediction at the National Conference of Bankruptcy Judges in early November that the Supreme Court “dodged another bullet” on the sovereign immunity question will likely prove correct, and that the litigants will find at the end of the day that their bags contain few treats.
A good summary of the case going into oral argument is found here, courtesy of our friends at SCOTUSblog, which also alerted us to the availability of the 49 page transcript.
At oral argument, William E. Thro argued on behalf of the petitioner-claimants from Virginia, and Kim Martin Lewis argued for Katz, the respondent-bankruptcy trustee. All Justices, except Justice Thomas, actively engaged counsel in discussion and debate, with Justice Scalia overtly supporting Mr. Thro’s arguments, and Chief Justice Roberts showing good-natured exasperation at the respondent’s own bag of tricks (p.44, and see below).
Still, the argument was interrupted by no fewer than six good-hearted chuckles of record from the Justices and the gallery, including (p.37) from a loud, sudden “pop” and “flash” that clearly startled the Justices on this ghoulish day and led to the following amusing rapid-fire sequence of comments, starting with–

Justice O’Connor, who proclaimed, in Paul Revere-like fashion, “A light bulb exploded. A light bulb exploded.”
Followed by Chief Justice Roberts signaling the “all clear”: “I think it’s safe.”
Followed by the dry Justice Breyer: “A light bulb went out.”
Then again by a relieved Chief Justice Roberts: “It’s a trick they play on new Chief Justices all the time.”
Then by Justice Scalia, who wished everyone “Happy Halloween”.
Meanwhile, the unflappable Justice Ginsburg stayed on track with her line of questioning, not missing a beat: “Let me ask this–“.
While Justice Kennedy tried to allay Katz’s shaken counsel, who was already having difficulties of her own on the merits: “Take your time. We’re interested–“.
Only to be thrown off yet again by Chief Justice Roberts, who reminded counsel of the noticeably shaky ground on which she was treading: “Yeah, we’re even more in the dark now than before.”

Thro’s arguments for the Petitioners were workmanlike, and–most importantly–he didn’t stray from his two main arguments (Seminole Tribe controls; and sovereign immunity bars monetary judgment claims) despite attempts by four of the nine Justices to trip him up within the first few minutes of his argument, including:

Continue Reading More Tricks Than Treats in a Light-Popping Halloween Performance at the US Supreme Court in Central Va. v. Katz

Below is our second installment of notable blog posts on topical bankruptcy issues of interest to the bankruptcy litigator and practitioner for the week ending 11/18/05. Enjoy the weekend!
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Continue Reading Weekly Blog Roundup on Bankruptcy-Related Topics for the Week Ended 11/18/05 – Part 2

In a recent post, I noted the recent 10th Circuit case of In re Commercial Financial Services, Inc., 427 F.3d 804 (10th Cir., 10/25/05). In that case, the 10th Circuit cut a $1.9 million fee request by Houlihan, Lokey, Howard & Zukin Capital (“Houlihan”) by over $1 million. The 10th Circuit focused, among other things, on boilerplate-type language in the retention application stating that Houlihan’s fee request would be “[s]ubject to the approval of the court” as well as to “final review by the Bankruptcy court as to the relative fairness” of the proposed fee. In essence, the 10th Circuit adopted the “reasonable” standard of Bankruptcy Code section 330(a) in reviewing the appropriateness of Houlihan’s monthly fixed fee request.
Last week, in Houlihan, Lokey v. NorthWestern Corp. (In re NorthWestern Corp.), 2005 WL 3018590 (D. Del., 11/8/05), Judge Farnan for the District Court for the District of Delaware affirmed in part and reversed in part a fee order of the bankruptcy court, holding that since the Bankruptcy Court had already approved Houlihan’s $175,000 monthly fee as “reasonable” in Houlihan’s retention order, the Bankruptcy Court erred by applying the “reasonable” standard of Bankruptcy Code section 330(a) instead of the “improvident” standard of Bankruptcy Code section 328(a). Under this standard, the Court noted, “only ‘developments not capable of being anticipated at the time of the fixing of [the] terms and conditions’ of engagement may render a previously approved term improvident.”
Additionally, in allowing the fixed monthly fees, the District Court found that the potential for duplication of services by Houlihan and Lazard Freres (the Debtor’s financial advisor), which the Bankruptcy Court had found “could not have been foreseen … at the time it approved the Committee’s application,” was a “clearly erroneous” finding of fact because “whether or not those services were inappropriately duplicative, the potential for duplication was certainly not unforeseeable.”
The crux of the District Court’s analysis in reversing the Bankruptcy Court’s decision regarding the standard of review applicable to a monthly fixed fee retention agreement is provided below:

Continue Reading Delaware District Court Holds that Houlihan Lokey’s Fixed Fee Retention Arrangement Is Governed by the “Improvident” Standard, Not the “Reasonableness” Standard

In a prior post, I wrote:

The old phrase “Don’t Mess with Texas” rings true in today’s ruling from the Bankruptcy Court of the Southern District of Texas, In re Hubbard, 2005 WL 2847420 (Bankr. S.D. Tex., 11/2/05), where the Court denied a chapter 13 debtor’s request to extend the time to provide verification of credit counseling…. This case makes clear that lawyers and debtors should expect bankruptcy judges to hold a debtor’s feet to the fire and require it to follow BAPCPA’s rigid credit counseling guidelines. In sum, a tighter squeeze.

Six days later, the Hubbard court changed its mind, sua sponte, advising that it was reconsidering its prior order. In re Hubbard, 2005 WL 3061939 (Bankr. S.D. Tex., 11/08/05). Notably, however, Judge Isgur did not change his mind about the “plain meaning” of the statute, saying he “sees no ambiguity in the statute.” He also didn’t change his view that
“[t]he applications filed by the debtors do not constitute certifications under the law, stating that “[u]ntil certifications are filed, the Court will not consider whether the factual allegations made in the applications satisfy the requirements of § 109(h)(3).”
Instead, the court focused on the availability of credit counseling in the Houston area, and the debtor’s allegation that credit counseling was not available. Seizing this hook, the Court found grounds for dispensing justice to the poor debtor caught in BAPCPA’s imperfect transitional world. The Court stated:

Continue Reading On Second Thought… Texas Bankruptcy Court Reverses Its “Don’t Mess With Texas” Stance Based on Lack of Proof of Availability of Credit Counseling