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

Below is our second installment of notable news posts on topical bankruptcy issues of interest to the bankruptcy litigator and practitioner for the week ending 11/18/05.
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Continue Reading Weekly News 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

Cracking the Code, the blog of the American Bankruptcy Institute, reports on In re Marrama, 2005 WL 2840634 (1st Cir., 10/31/05), and In re Copper, 2005 WL 2648960 (6th Cir., 10/18/05), in which the 1st and 6th Circuits held that where the case had not been previously converted, a debtor’s right to convert a case from chapter 7 to chapter 13 under Bankruptcy Code section 706 “is not absolute but is subject to an exception for motions filed in bad faith.”
According to the post’s author, Mark P. Williams, of Norman, Wood, Kendrick & Turner; Birmingham, Alabama:

Continue Reading Sixth Circuit Notes Circuits’ Split in Holding a Debtor Has No Absolute Right to Convert a Case from Chapter 7 to Chapter 13 under Bankruptcy Code Section 706

Below is our first installment of notable blog and news posts on topical bankruptcy issues of interest to the bankruptcy litigator and practitioner for the week ending 11/18/05. Enjoy!

Continue Reading Weekly Blog and News Roundup on Bankruptcy-Related Topics for the Week Ended 11/18/05 – Part 1

The “don’t mess with Texas” attitude described earlier regarding a Texas bankruptcy court’s hard-nosed reading of the credit counseling requirements of BAPCPA’s new “bankruptcy abuse” provisions seems to be sweeping the land, as recently demonstrated in bankruptcy court decisions from Missouri and Virginia addressing another aspect of BAPCPA’s new “bankruptcy abuse” provisions: a debtor’s request for extension of time to obtain credit counseling services. See In re Gee, 2005 WL 2978962 (Bankr. W.D. Mo., 10/26/05), and In re Watson, 2005 WL 2990902 (Bankr. E.D. Va., 11/3/05).
If these early cases are any guide, then the future sure looks bleak for the poor consumer. Both these cases address the new BAPCPA requirement that permits a debtor who failed to comply with the onerous pre-filing debt counseling requirements to still be eligible to file a bankruptcy petition as long as it files a “Certification of Exigent Circumstance to Waive Debt Counseling Prior to Filing.” In this certification, the debtor requests that the Court, pursuant to § 109(h)(3), temporarily waive the requirement contained in § 109(h)(1) that Debtor receive credit counseling in order to be eligible to file a petition.
In the Missouri case, the certification alleged that a foreclosure sale of debtor’s residence was scheduled on the date of filing and that “Debtor’s counsel could not be assured a certificate could be supplied prior to the foreclosure.”
In the Virginia case, the debtor claimed he was engaged in negotiations with his landlord regarding a dispute concerning the continued occupancy of the business premises, was served with an unlawful detainer action ten days prior to filing, and was involved in mediation concerning this dispute until the afternoon prior to filing. This debtor filed his bankruptcy petition approximately twenty minutes prior to the hearing on the unlawful detainer.
The Bankruptcy Courts in both cases adopted the “plain meaning rule” of statutory interpretation and rejected each of the respective debtor’s certifications for failing to strictly comply with all the requirements of Bankruptcy Code section 109(h). This section requires, at a minimum that the debtor make a request for credit counseling services during the five-day period preceding the filing, and then certify its inability to obtain those services. Because in each case, the debtor failed to comply with the strict requirements of Section 109(h), the Courts dismissed the petitions, notwithstanding the clear exigencies facing the debtors.
In the Missouri case, the court stated:

Continue Reading BAPCPA’s “Plain Meaning” Requires That a Consumer Debtor’s Feet Be Held to the Fire

Here’s our popular weekly roundup of significant recently decided cases involving complex bankruptcy disputes for the week ended 11/13/05 (now with added topical indexing guides for easy reference and review).
Judicial Estoppel – Schedules: Karraker v. Rent-A-Center, Inc., 2005 WL 2979652 (C.D. Ill., 11/7/05)
Permissive Abstention: Allen v. Harris & Co., 2005 WL 2902497 (E.D. Pa., 11/2/05)
Preferences – Statutory Liens – Subcontractors: In re The IT Group, Inc., 2005 WL 2952619 (Bankr. D. Del., 11/1/05)
Procedure – Motions to Strike Jury Demand / Answer: Greenspan v. Snow (In re Brobeck, Phleger & Harrison), 2005 WL 2994291 (N.D. Cal., 11/8/05)
Professional Fees – Carve-Outs: In re US Flow Corp., 2005 WL 2952597 (Bankr. W.D. Mich., 10/29/05)
Rejection Damages – Landlord Statutory Cap: EOP-Colonnade v. Faulkner (In re Stonebridge Tech.), 2005 WL 2982311 (5th Cir., 11/8/05)

Continue Reading Notable Cases for the Week Ending 11/13/05