Above the Law reports that a U.S. District Judge delivered a benchslap to a Baker Donelson partner and a senior public policy advisor after they tried to jump the line in a receivership situation involving a hundred-million-dollar Ponzi scheme.

The judge had put a hold on any individual victim trying to carve back money in lieu of allowing a receiver to get the maximum recovery for all victims, but then Jon Seawright, the Baker Donelson partner, and Brent Alexander, the firm’s lobbyist, went out and tried to recover some money.

The judge responded with a lecture about the concept of a receivership, using the boarding process on Southwest Airlines as an example, writes Above the Law’s Joe Patrice.

Read the Above the Law article.

Purdue Pharma’s chief executive said the company is considering bankruptcy as it faces a cascade of lawsuits alleging that the drugmaker played a key role in driving the nation’s opioid crisis, including aggressively and deceptively marketing the powerful painkiller OxyContin, reports The Washington Post.

Craig Landau said that the company has not yet decided whether to file bankruptcy, but it is something the company is weighing as it considers the impact of potential legal settlements or jury verdicts that could cost tens of billions of dollars, according to the Post‘s Katie Zezima.

“Declaring bankruptcy could halt litigation against the company, bankruptcy lawyers said, and it can be more difficult for plaintiffs to secure judgments in bankruptcy court than in civil court,” Zezima writes.

Read the Post article.

In a post for Above the Law, Tom Kulik of Dallas-based Scheef & Stone discusses what happens when a bankruptcy debtor exercises its statutory right to reject a contract.

The U.S. Supreme Court recently heard oral arguments in Mission Product Holdings Inc. v. Tempnology, LLC to address this question that has plagued the intersection of intellectual property and bankruptcy law for decades.

He writes that the supreme Court’s ruling on the issue “may draw a clear line for trademark licensors and licensees in the event of bankruptcy (a good thing), or leave a blot on the issue by finding that the issue is moot (a bad thing).”

Read the article.

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In a recent ruling, the Fifth Circuit strongly suggested that claims for make-whole damages be characterized as “unmatured interest” and that claims for postpetition interest on unsecured debt be limited in bankruptcy proceedings, reports Jones Day in a post on its website.

The Fifth Circuit reversed the Bankruptcy Court’s order holding that the debtors’ plan impaired the unsecured noteholders’ claims and vacated and remanded for reconsideration determinations by the bankruptcy court that noteholders were entitled to recover such contractual amounts.

The decision makes the Fifth Circuit unattractive to unsecured or undersecured lenders asserting claims for make-whole payments and default rate postpetition interest, the authors conclude.

Read the article.

San Antonio oil and gas entrepreneur Brian Alfaro avoided getting hauled off to jail Friday, a day after a bankruptcy judge issued a warrant for his arrest, reports the San Antonio Express-News.

Alfaro had failed to provide various records to a court-appointed receiver, prompting the judge to issue an arrest warrant. But in a hearing in which Alfaro, attending via phone from his lawyer’s office as four federal marshals stood ready to take him to jail, the judge granted him an additional 10 days to comply.

The judge “presided over a trial in 2017 on 28 investors’ claims that they had been defrauded by Alfaro. The judge awarded nine of them $8 million. Alfaro is appealing. Rose’s duties include ensuring that investors collect on the judgment,” writes Patrick Danner of the Express-News.

Read the article.

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Squire Patton Boggs warns that a recent decision by the Fifth Circuit Court of Appeals in In re Provider Meds, L.L.C. is a stark reminder to chapter 7 trustees that they have an affirmative obligation to examine a debtor’s assets.

A trustee’s failure to conduct a sufficient and timely examination may deprive the estate of significant value, writes Mark Salzberg.

“The issue before the Court in Provider Meds was whether the assumption and assignment of an intellectual property license agreement . . . conveyed any intellectual property rights since the Agreement had not been timely assumed by the trustee,” Salzberg explains.

Read the article.

A  bankruptcy court has ruled that an arbitration clause was binding and ordered the stay lifted to permit arbitration in a bankruptcy proceeding to go forward, according to a post on the Bankruptcy Update Blog of Patterson Belknap Webb & Tyler.

Authors Jonah Wacholder and Daniel A. Lowenthal explain that, when a bankruptcy petition is filed, an automatic stay comes into effect staying proceedings against the debtor or the debtor’s property.

The court “reasoned that because the contracts had been formed before the bankruptcy case was filed, and because the bankruptcy case was now a chapter 7 liquidation rather than a chapter 11 reorganization, adjudication of the validity of the contracts was not sufficiently entangled in the bankruptcy case to count as a core proceeding.”

Read the article.

A recent Second Circuit opinion provides a reminder of the importance of reserving rights pending final documentation and the risks of being bound despite the absence of definitive agreements in place, writes Rama Douglas of Kramer Levin Naftalis & Frankel.

The circuit upheld the bankruptcy court’s and district court’s ruling that an email by defendant’s counsel to the opposing side stating that the defendant will sign a settlement agreement creates a binding contract even if the defendant later chooses not to sign the settlement agreement.

The case is Shinhan Bank v. Lehman Brothers Holdings Inc.

Read the article.

There is a circuit split on the weight courts should give contractual provisions allowing the appointment of a receiver in loan documents, points out William Easley in a post for Bryan Cave Leighton Paisner. While some courts treat the provision as granting a contractual right to a receiver, others treat it merely as a factor to be considered.

He writes that “many district courts recognize that allowing the appointment of a receiver upon a contractual provision is imperative to give the creditor the benefit of its bargain.”

“A creditor’s contractual right to appoint a receiver under the loan documents will differ drastically between the circuits. Potential creditors need to consider the likelihood of succeeding on a motion to appoint a receiver to determine whether these provisions should be included in their loan,” he adds.

Read the article.

Hundreds of lawyers and financial consultants involved in the $42 billion corporate restructuring of Energy Future Holdings, once the largest power supplier in Texas, have been paid a gusher of cash, and more huge paydays may be in the works, reports The Houston Chronicle.

Mark Curriden of The Texas Lawbook writes that the law firms, banks and consultants working on the EFH case have received more than $600 million, making it one of the most complex and expensive corporate bankruptcies in U.S. history. For comparison, similar fees in the Enron bankruptcy topped $700 million.

“The total fees for all the professionals – for the lawyers, bankers, accountants, restructuring experts for all the companies involved – will probably hit $1 billion,” EFH General Counsel Andy Wright told The Texas Lawbook in an exclusive interview.

Read the article.

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Remington Outdoor Co.’s decision to seek court protection brings up the question of whether people with pre-existing legal claims against the company will be made whole.

Bloomberg reports that lawsuits over firearms defects and the use of its weapons in the Sandy Hook attack were pending when the company filed for bankruptcy, and the company has moved to suspend those cases.

As reporters Eliza Ronalds-Hannon and Polly Mosendz write: “As much as $500 million could hang in the balance. Remington, which is owned by Cerberus Capital Management, is embroiled in litigation over trigger defects on guns such as its iconic Model 700 rifle, as well as another lawsuit by survivors of the children and teachers killed in the 2012 elementary school shooting in Newtown, Connecticut. Bushmaster, owned by Remington, manufactured the firearm used in that massacre, which left 26 dead. ”

Read the Bloomberg article.

CNBC is reporting that an expected bankruptcy filing by Remington could jeopardize a landmark class action settlement involving the company’s iconic Model 700 bolt-action rifle, according to an attorney involved in the case.

The article quotes Mark Lanier, a lead attorney for plaintiffs: “If they file for bankruptcy, it will stay all proceedings.”

Plaintiffs claim that Remington covered up a deadly design defect that allows the rifle — and a dozen similar models — to fire without the trigger being pulled. Remington denies those accusations.

“In 2014, while still maintaining the guns are safe, Remington agreed to replace the trigger mechanisms, free of charge, on millions of guns in order to settle the case. But two Model 700 owners, Richard Denney of Oklahoma and Lewis Frost of Louisiana, appealed the settlement. They argue the agreement deliberately downplays the risks from the guns, and does not do enough to notify the public,” reports Scott Cohn.

Read the CNBC article.

A new book by the former general counsel of American Airlines tells the story of the company’s journey from the brink of insolvency following the loss of two of the airline’s jets in the Sept. 11, 2001 attacks through the most successful corporate bankruptcy and restructuring in U.S. history.

The Dallas Business Journal, with The Texas Lawbook, has an advance copy of Gary Kennedy’s “Twelve Years of Turbulence: The Inside Story of American Airlines’ Battle for Survival,” scheduled for release in February.

According to writer Mark Curriden, the book reveals that American Airlines paid lawyers and financial advisers involved in the bankruptcy proceedings $300 million – or $500,000 a day. It also goes behind the scenes of the terrorist attacks of 2011.

Read the Dallas Business Journal article.

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Before entering into a long-term contract, you should consider that the longer the contract, the greater the risk of a change in the contract counterparty’s financial situation. A safe credit risk in 2017 might find itself filing for bankruptcy by 2020, warns Jeffrey A. Krieger, a partner in Greenberg Glusker Fields Claman & Machtinger LLP.

For those who respond that they’re not worried because the agreement includes a bankruptcy termination clause, Krieger says: “The U.S. Bankruptcy Code has a lot to say about the rights of both the debtor and the non-debtor party once a bankruptcy is filed – often to the chagrin of the non-debtor party.”

“A Right to Terminate clause is unenforceable because the non-debtor party’s termination would violate the ‘automatic stay’ of Bankruptcy Code section 362. Once a bankruptcy is filed, section 362 puts a halt to any action to obtain possession of, or exercise control over property of the estate,” he writes.

He offers an approach that could deal with this potential problem before signing the agreement.

Read the article.

General Motors Co. accused the trust set up to handle its bankruptcy claims of secretly plotting with plaintiffs’ attorneys to make it pay $1 billion in stock as part of a $15 million class-action settlement. Bloomberg Law is reporting.

As Bloomberg’s Erik Larson explains, the accord will pit GM against the “Old GM” General Unsecured Creditors Trust for the first time since the 2009 bankruptcy sale created the split to save the company.

Larson writes that attorney Steve Berman said that the settlement “between the plaintiffs and the trust for old GM will resolve hundreds of personal-injury cases stemming from GM’s faulty ignition switches, as well as a class-action suit over millions of vehicles that allegedly lost value due to a series of recalls in 2014.”

Read the Bloomberg article.

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The complex bankruptcy and restructuring law firm Forshey Prostok announces the promotion of three attorneys and the addition of two lawyers to its Dallas/Fort Worth offices.

“This is an important milestone for the firm, and great news for the companies we represent on the bankruptcy and workout side,” said Jeff Prostok, a founding partner at Forshey Prostok. “These dedicated lawyers represent the best in the business, and we’re glad to have their level of expertise on our team.”

Suzanne K. “Suki” Rosen has been promoted to partner. She has extensive experience litigating complex commercial disputes, including avoidance actions and other business bankruptcy matters. Throughout her 20-year career, Ms. Rosen has helped clients substantially reduce outstanding bankruptcy claims, smoothing the reorganization process and providing higher recovery to creditors.

Matthew G. Maben also has been promoted to partner. His practice includes bankruptcy, business reorganizations and creditor’s rights. He also counsels debtors, creditors and trustees in restructuring and liquidation matters. He has been recognized three times among the “Leaders in their Field” in the prestigious Chambers USA legal guide.

Lynda L. Lankford, with more than 25 years’ experience in bankruptcy litigation, business reorganizations and creditor rights, has been promoted to of counsel. A former auditor who is Board Certified in Business Bankruptcy Law by the Texas Board of Legal Specialization, she is uniquely positioned to provide key financial insights to the firm’s clients.

Matthias Kleinsasser joins Forshey & Prostok as a partner from Kelly Hart. He has extensive experience in bankruptcy litigation, as well as general business litigation in federal and state court. He began his legal career with a bankruptcy court clerkship, after which he practiced in the bankruptcy section of Weil, Gotshal & Manges.

Laurie Dahl Rea joins as of counsel. Her career includes two federal judicial clerkships, as well as extensive experience representing debtors and creditors in large reorganizations and liquidations. Immediately prior to joining Forshey Prostok, Ms. Rea served as the career law clerk to the Honorable Russell F. Nelms.

Forshey Prostok provides extensive experience in all areas of bankruptcy law. The firm’s scope of representation includes handling complex business reorganizations, enforcing of creditor’s rights, leading commercial and bankruptcy-related litigation, overseeing creditors’ committees, directing workouts, and closing bankruptcy acquisitions. Forshey Prostok is ranked by the Chambers USA legal guide and is home to lawyers who are AV-rated by Martindale-Hubbell.

U.S. Bankruptcy Judge Anita Shodeen slapped down a fee request from Weil Gotshal, writing, “By any measure the fees requested in Weil’s motion are staggering.”

Joe Patrice, writing for Above the Law reports on the case, quoting from Law360 (sub. req.).

Weil Gotshal submitted a request for $976,000 for fees for its representation of TCTM Financial FS, Wellman’s senior secured lender, during the months of September and October of last year, the report says. The judge criticized Weil’s billing rates, the number of attorneys assigned and its lack of specificity in billing entries, trimming its fees to $488,452 and denying about $32,200 in additional costs.

“Based simply upon the number of attorneys and hours billed leads to the inherent conclusion that there was a distinct lack of billing judgment exercised by Weil in its representation of TCTM,” Shodeen wrote.

Read the Above the Law article.

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The Office of the Comptroller of the Currency announced Tuesday that it is ordering U.S. Bank National Association to pay a civil penalty of $15 million for what it calls “bankruptcy filing violations” that occurred between 2009 and 2014, according to a HousingWire report.

The OCC claimed that U.S. Bank “engaged in filing practices in bankruptcy courts with respect to proofs of claim, payment change notices, and post-petition fees among others that did not comply with bankruptcy rules and constituted unsafe or unsound banking practices.”

HousingWire reporter Ben Lane adds that the OCC said that as a result of the bank’s bankruptcy practices, U.S. Bank “has made or will make approximately $29 million in remediation to approximately 22,000 account-holders.”

Read the HousingWire article.

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At least three apparel chains — Wet Seal, Eastern Mountain Sports and Bob’s Stores — are running short of cash and on the verge of filing for bankruptcy protection, according to a New York Post report.

The report by Lisa Fickenscher and Josh Kosman also says outdoor retailer Gander Mountain — some of whose vendors stopped talking orders — have hired financial adviser Lazard.

A regulatory filing indicated Wet Seal — owned by Versa Capital, a private equity firm — reported a poor holiday made it impossible to obtain new financing.

“Over the last several weeks, Versa tried unsuccessfully to sell both EMS and Bob’s, sources said,” according to the Post‘s report.

Read the Post‘s article.

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Eduardo Espinosa, a member with law firm Dykema, has been appointed trustee for the Position Holders Trust as part of Life Partners Holdings Inc.’s Chapter 11 Plan of Reorganization, which was confirmed on Nov. 1, 2016.

In a news release, the firm said Life Partners, a life settlement provider, filed for Chapter 11 protection in 2015 in response to a $47 million jury verdict secured by the U.S. Securities and Exchange Commission (SEC). The company sold more than $1.3 billion of fractional interests in individuals’ life-insurance policies to more than 20,000 people. The estate includes 3,400 policies with more than $2.4 billion in face value; and more than 22,000 investors holding more than 100,000 positions in said policies. Thompson & Knight served as counsel to the bankruptcy trustee and Munsch Hardt Kopf & Harr, P.C., was counsel to the unsecured creditors committee.

Espinosa was appointed trustee to administer the bankrupt estate’s assets and the claims against them as part of the reorganization plan confirmed by Judge Nelms of the U.S. Bankruptcy Court for the Northern District of Texas. The plan also creates a Creditors Trust to pursue the estate’s claims against third parties and names AMJ Advisors LLC’s President Alan Jacobs as its trustee.
In addition to Espinosa, a former SEC enforcement attorney, the trust will be supported by Dykema members Michael Napoli, Mark Andrews, Aaron Kaufman and senior counsel Jeff Goldman.

“This has been a very difficult and contentious bankruptcy,” Espinosa said. “The Trustee has successfully collaborated with various stakeholders and they’ve collectively crafted a plan of reorganization that is designed to preserve flexibility and maximize value for Life Partners’ victims.”

The Plan of Reorganization is expected to be effective in early December.