Wednesday, March 22, 2017

Supreme Court Rules That Structured Dismissals Must Follow Priority Scheme

Stephen W. Sather
Barron & Newburger, P.C.
Austin, TX
ssather@bn-lawyers.com
 

In a blow to creative lawyering, the Supreme Court ruled today that a structured dismissal which allocates value contrary to the priority scheme of the Bankruptcy Code may not be approved.   Czyzewski v. Jevic Holding Corp., No. 15-649 (U.S. 3/22/17).   You can find the opinion here.

Thursday, March 16, 2017

CLLA Pursues Legislative Goals on Capital Hill


CLLA members blanketed Capital Hill on February 27, 2017 to pursue their legislative agenda with House and Senate staffers.   Members hailed from states across the country, including California, Georgia, Iowa, Massachusetts, Michigan, Ohio and Texas.   The league advanced proposals to reform the bankruptcy venue and preference law.   Links to the league's legislative positions can be found here and here.


On venue, the CLLA would like to eliminate state of incorporation venue and limit affiliate filing to cases where lower tier entities file with parent company instead of allowing the venue for one minor subsidiary to set venue for the entire group of companies.
  
The CLLA offered a package of three preference reforms:  requiring a meet and confer before filing suit, requiring that cases under $50,000 be filed in the defendant's forum and allowing payments under settlement agreements to fall within the ordinary course of business defense.   

Monday, March 13, 2017

Third Circuit Finds Homeowner's Mortgage Insurance Obligation Not Extended By Mortgage Modification


By Hon. Judith K. Fitzgerald (Ret.)
Tucker Arensberg, P.C.
Professor of Practice, University of Pittsburgh School of Law



      Mortgage insurance can be an expensive proposition for homeowners at the same time that it provides assurance to lenders.  Whether the term of paying insurance premiums can be extended as the result of a mortgage modification was the topic of the recent decision by the Court of Appeals for the Third Circuit in Ginnine Fried v. JP Morgan Chase & Co; JP Morgan Chase Bank NA, d/b/a Chase, --- F.3d ---- (3d Cir. 2017), 2017 WL 929752 (3d. Cir. Mar. 9, 2017).  The case involved a homeowner who sued JP Morgan Chase Bank (“Chase”) for unlawfully extending the requirement to purchase private mortgage insurance. In reaching its decision, the Court of Appeals examined the provisions of the Homeowners Protection Act (“Protection Act”), 12 U.S.C. § 4901 et seq., and concluded that the homeowner was correct.  Writing for the appellate court, Judge Ambro asked: “Does it [the Protection Act] permit a servicer to rely on an updated property value, estimated by a broker, to recalculate the length of a homeowner's mortgage insurance obligation following a modification or must the ending of that obligation remain tied to the initial purchase price of the home? We conclude the Protection Act requires the latter.” Ginnine Fried v. JP Morgan Chase & Co; JP Morgan Chase Bank NA, d/b/a/ Chase, No. 16-3069, 2017 WL 929752, at *1 (3d Cir. Mar. 9, 2017).

Thursday, March 9, 2017

Court Rules "Informational" Letters Did Not Violate Discharge

By Stephen W. Sather
Barron & Newburger, P.C.
Austin, Texas

A recurring problem in bankruptcy is how lenders can provide information about a debt to a borrower without violating the discharge or the automatic stay.    In some cases the borrower may wish to continue making payments and would appreciate receiving payment notices.   In other cases, the lender may be required to send notices to the borrower in order to comply with state laws governing foreclosures.    In these cases, lenders must walk a fine line between conveying information and coercively seeking to collect a debt.   In re Roth, 2017 U.S. Dist. LEXIS 28710 (M.D. Fl. 2017) illustrates how to send a notice that does not violate the Bankruptcy Code.

Thursday, February 16, 2017

Delaware Judge Swiftly Transfers Hospital Case

By Stephen W. Sather
ssather@bn-lawyers.com
Barron & Newburger, P.C.
Austin, TX

I recently wrote about a case that could not escape Delaware's gravity here.   However, a new decision from Judge  Laurie Selber Silverstein shows that it is possible to gain a transfer of venue out of The First State.    Case No. 17-10201, In re LMCHH PCP, LLC (Bankr D. Del).     

The case involved two jointly administered entities.   Louisiana Medical Center and Heart Hospital, LLC operated a hospital in Lacombe, Louisiana near New Orleans.   LMCHH PCP, LLC was the entity formed as a Physicians Group.   The hospital saw a surge in business after it was spared by the surging waters of Hurricane Katrina.  Unfortunately, when the hospital underwent a $40 million expansion, it could not cover its cost of operations.  When it could not locate a buyer outside of bankruptcy, it chose to file chapter 11.

The Debtors filed their petitions on January 31, 2017.    Two days later, on February 2, 2017, McKesson Corporation filed a Motion to Transfer Venue.   The Motion stated that  
This Court should transfer venue to the Louisiana Court because it is in the best interests of patients and the other stakeholders to have the local bankruptcy court handle the wind down, closure and potential sale/liquidation of this single hospital located in Lacombe, Louisiana. In single-location hospital and healthcare bankruptcy cases, the local bankruptcy court always is the best venue to oversee the myriad of issues that arise in these types of healthcare bankruptcy cases.

California State Court Rules That Released Parties Remain Liable For A Settlement Payment That Is Later Deemed To Be A Preferential Transfer And Is Disgorged From The Creditor

By Peter Califano
pcalifano@cwclaw.com
Cooper, White & Cooper, LLP
San Francisco, CA

In Coles v Glaser, 2 Cal. App. 5th 384 (2016), plaintiff Kevin Coles threatened a collection action against defendant Cascade Acceptance Corporation and defendant guarantors Barney Glaser and Fred Taylor on a loan past due.  Cascade informed Coles that it could not pay and would be unlikely to pay in the foreseeable future, resulting in a lawsuit for the unpaid loan balance and other amounts.  After being served with the complaint, Cascade wired approximately $309,000 and a settlement agreement was signed where Glaser and Taylor were released on all claims "except for obligations arising under the settlement agreement."  A week after the lawsuit was dismissed, Cascade filed bankruptcy.  The bankruptcy trustee later sued Coles for the return of the settlement payment as a preferential transfer.  Eventually, the parties compromised the claim and most of the settlement was paid over to the trustee.  Coles filed a claim in Cascade's bankruptcy case but only received a small dividend, leaving him with a significant shortfall.  Coles then sued Glaser and Taylor in state court for damages and, after a one-day bench trial, the trial court ruled in Coles' favor.  Glaser and Taylor appealed, claiming that the settlement agreement was fully performed because Cascade had paid the underlying obligation and that the guarantors received a release.  


Friday, October 14, 2016

Consumer Financial Protection Bureau Brought Down A Notch


 

Beverly Weiss Manne
Tucker Arensberg, P.C.
Pittsburgh, PA
bmanne@tuckerlaw.com


Earlier this week the United States Court of Appeals for the DC Circuit issued its 110 page opinion concerning the Consumer Financial Protection Bureau (“CFPB”) and CFPB enforcement action in Case No. 15-177, PHH Corporation Et al vs Consumer Financial Protection Bureau (D.C. Cir. 10/11/16)(which can be found here).  The opening sentence of the opinion declares “This is a case about executive power and individual liberty,” which reflects the seriousness of the issues addressed.