Image by Mike Mozart

Sports Authority’s creditors and the Justice Department have challenged the fading retailer’s plans to pay top executives as much as $2.85 million in bankruptcy bonuses, according to a Dow Jones Newswires report in The Denver Post.

Sports Authority once operated 460 athletic-gear but filed for bankruptcy protection and began going-out-of-business sales in an effort to pay its debts. As the liquidation entered its final weeks, Sports Authority unveiled plans for bonuses for four unnamed top executives.

“The bonus money is needed to encourage the executives to do their best in the company’s final days, according to Sports Authority’s lawyers. Confidentiality is appropriate to protect morale, and prevent competitors from using the pay data to lure Sports Authority’s leaders away, the company contends,” the report says.

Read the article.

Gibson, Dunn & Crutcher has posted an on-demand video discussing substantive litigation issues that tend to arise in a contentious bankruptcy, where many parties are fighting over a limited pool of assets — such as claims for breach of fiduciary duty, equitable subordination, and avoidance of fraudulent transfers, as well as litigation that arises in the context of plan confirmation.

The firm says the video covers some procedural tactics that have enabled parties to position themselves favorably among the various players in bankruptcy litigation.

“In light of the tumult in the junk bond market, the gyrations in the stock market, and other storm clouds on the global economic horizons, companies that face refinancing of their debt in 2016 and 2017 may find themselves restructuring through bankruptcy in Chapter 11,” the firm says on its website. “Creditors will face off for their respective piece of the restructured company, leading to specialized and fast-paced litigation.”

Watch the video.

Businesses need to have written protocols in place to deal with bankruptcy filings by their employees and independent contractors, or they risk serious sanctions and, potentially, punitive damages for violations of the bankruptcy laws, according to a report in Hunton & Williams’ Employment & Labor Law Perspectives blog.

The article discusses two scenarios: one in which the employer has unwittingly violated the Bankruptcy Code, and another in which the employer has knowingly violated the automatic bankruptcy stay by taking an action to collect a pre-bankruptcy debt from post-bankruptcy earnings.

“A process should be developed whereby notices relating to bankruptcy cases are channeled to a designated member of the legal or accounting team trained to immediately take action to ensure payments are correctly routed and stay violations are avoided,” the article says.

Read the article.

With U.S. crude almost doubling in price since February and natural gas gaining about 38 percent just since May 26, stakeholders in at least three bankrupt energy companies are contending that corporate assets have risen so much in value that they deserve a bigger payout, reports Bloomberg News.

The news service, citing a letter by its reporter, says that “Sabine Oil & Gas Corp.’s unsecured creditors and note holders of Forest Oil Co., which merged with Sabine in 2014, filed a report last week seeking a jump in recoveries. Shareholders of bankrupt driller Penn Virginia Corp. questioned current valuations, while Ultra Petroleum Corp. shareholders, who are the first to be wiped out in a bankruptcy, said earlier this month that they are “very likely ‘in the money.’”

Sabine creditors creditors are claiming the company is ignoring the recent increase in oil and gas prices to inflate the amount paid to the secured lenders at the expense of junior ones.

Read the article.

Image by Michel Curi

Hillary Clinton has bashed her probable eventual opponent Donald Trump for having led four companies into bankruptcy. But she was wrong, reports Tom Winter of NBC News: Trump actually has six bankruptcies on his record.

Those business failures include five casinos in Atlantic City, New Jersey, and a Manhattan hotel, he writes.

“Some may be referring to the three 1992 filings as a single bankruptcy; two of them were even filed on the same day. Or they may be lumping the three 1990s casino bankruptcies together,” Winter explains.

Read the article.

Gawker Media’s last-ditch effort to protect itself from a debilitating $140 million judgment using Chapter 11 may be a novel strategy to the media world but pharmaceutical and casino companies alike have recently used it with varying degrees of success, writes Maria Chutchian for Forbes.

A Florida jury recently awarded pro wrestler Hulk Hogan the damages in a privacy lawsuit stemming from Gawker’s publication of a Hogan sex tape in 2012, but Hogan is barred from executing the award against Gawker because of the company’s Chapter 11 protection from debtors.

“But Gawker founder Nick Denton, who is jointly liable for $115 million of that judgment plus another $10 million in punitive damages, doesn’t have the same protection. Gawker must convince a judge that the stay should be extended to cover Denton himself,” Chutchian writes.

Read the article.

The U.S. Supreme Court recently determined that the nondischargeability of debts under 11 U.S.C. § 523(a)(2)(A), which prohibits discharge of debts “obtained by . . .  false pretenses, a false representation, or actual fraud,” does not require a false representation, reports Brian Hockett of Thompson Coburn in an article posted on JDSupra.com.

His article says the “actual fraud” exception to a bankruptcy discharge includes other traditional forms of fraud, including fraudulent conveyances that do not necessarily include a representation by the debtor or reliance by the creditor.

“This important decision by the Supreme Court resolves a split among lower courts and opens up potential additional opportunities for creditors to pursue nondischargeability actions under 11 U.S.C. § 523(a)(2)(A),” Hockett writes.

Read the article.

Six publicly traded energy producers have filed for bankruptcy and five of them opted to file in Houston since March, reports Reuters. The latest was Houston-based Linn Energy LLC, which filed on Wednesday.

“Lawyers who help decide where a company seeks bankruptcy protection say the Houston court could move some cases more quickly, saving oil-and-gas companies millions of dollars in potential legal fees, which can then be used to pay creditors,” the report says.

“More companies began to file in Houston after the court adopted a work order that aimed to expedite large cases by directing them to two of its six judges: Martin Isgur and Chief Judge David Jones.”

Read the article.

Photo by NY Photographic

It is estimated that roughly 300 upstream energy companies will file for bankruptcy in 2016, and many management teams are curious about hedging alternatives during the restructuring and bankruptcy process, write Ryan Bouley & Shane Randolph, Managing Directors at Opportune LLP.

“There are various alternatives management teams can take with their hedging programs, ranging from full liquidation to actually increasing hedge coverage,” they write.

In an article posted on Opportune’s website, they discuss the purpose of an effective risk management program, what typically happens to hedges during the bankruptcy process, and the hedging alternatives for a distressed company.

Read the article.

A federal judge has ordered Bernard Madoff to submit to a deposition by lawyers for some former customers who lost money when the imprisoned swindler’s firm collapsed in December 2008, Reuters reports.

But the bankruptcy judge in Manhattan set strict limits on what Madoff can be asked, restricting questions to the meaning of more than 91,000 transactions recorded as “profit withdrawal” on the books of the former Bernard L. Madoff Investment Securities LLC.

“Madoff, 77, would be deposed at the North Carolina prison where he is serving a 150-year sentence for running a huge Ponzi scheme,” according to the report.

Read the article.

A legitimate fear among companies negotiating license agreements exists, and that is the fear of the license counterparty filing for bankruptcy, reports Christopher A. Ward and Cortney E. Mendenhall of Polsinelli PC.

“Given the business interruption that ultimately could occur as a result of a restructuring event, it is vital for practitioners to address bankruptcy or insolvency issues upfront during the negotiation of the license agreement,” they write. “This is especially true for licensees who often rely heavily, if not exclusively, on a licensor for significant aspects of their business.”

They discuss several negotiation and drafting tips that practitioners can utilize to help protect their licensee clients in the event of a bankruptcy filing under chapter 11, of Title 11, of the United States Code (the “Bankruptcy Code”) by the licensor counterparty.

Read the article.

Gardere Wynne Sewell LLP announces that financial restructuring and reorganization partner John P. Melko was inducted by the American College of Bankruptcy as a Fellow in the 27th Class of the College.

Melko was among 31 professionals from across the country recognized by The American College of Bankruptcy for their professional excellence and exceptional contributions to the fields of bankruptcy and insolvency. Honorees reside in 19 states and two foreign countries. The induction took place on March 18 in Washington, D.C., at the Smithsonian Donald W. Reynolds Center for American Art and Portraiture.

“John represents the highest standard of professionalism in the legal industry as evidenced by his ongoing commitment to the enhancement of bankruptcy and insolvency law,” says Firm Vice Chair Eric Blumrosen. “We congratulate him on this prestigious recognition.”

In a release, the firm said Melko is a partner and chair of Gardere’s financial restructuring and reorganization practice group. His practice focuses on complex sales, acquisitions, bankruptcies and financings in the energy sector throughout the U.S., as well as shipping-related issues in both foreign and domestic cases and financings. Melko has years of cross-border and multinational experience with oil and gas exploration and production, refining and marketing, airlines, telecommunications, electric utilities, manufacturing, retail, rig and ship finance, mass torts and asset-backed securities.

“John is greatly respected by his clients and peers for not only his experience, but also for his character and integrity,” says Deirdre B. Ruckman, a partner in the Firm’s financial restructuring and reorganization practice and a Fellow of The American College of Bankruptcy. “He fully embodies these traits in his every day practice and is a great addition to the fellowship of The American College of Bankruptcy.”

Fellowship nominees undergo a rigorous nomination process and are extended an invitation to join based on a record of achievement. The American College of Bankruptcy now has 848 active Fellows, not including Class 27, each selected by a Board of Regents from among recommendations of the Circuit Admissions Council in each federal judicial circuit and specially appointed Committees for Judicial and Foreign Fellows.

The American College of Bankruptcy is an honorary professional and educational association of bankruptcy and insolvency professionals. The College sustains professional excellence and supports educational and pro bono efforts in local communities around the country. The fellowship includes commercial and consumer bankruptcy attorneys, insolvency accountants, turnaround and workout specialists, law professors, judges, government officials and others involved in the bankruptcy and insolvency community.

Derivatives themselves were likely at most a secondary cause of the Lehman’s collapse, and played a more central role in other firms caught up in the financial crisis, like AIG, writes Stephen Lubben of Seton Hall University School of Law. “But the late Harvey Miller suggested that derivatives were responsible for a massive loss in value suffered by Lehman post-bankruptcy. Bryan P. Marsal, the Lehman estate administrator, likewise asserted that as much as $75 billion in value was destroyed, largely as a result of the sudden termination of Lehman’s derivatives book,” he adds.

He has published a paper that suggests that the continuation of the safe harbors “as is” renders chapter 11 nonviable for larger financial institutions, and recent contractual attempts to work around the safe harbors are insufficient to solve the problem, while the increased role of clearinghouses in financial institution failures will force regulators to confront difficult choices.

Read the article.

Justice Antonin Scalia’s death is big news in the larger political world, leaving a Supreme Court that may be evenly split on a wide range of politically and socially charged legal questions, writes G. Ray Warner in Greenberg Traurig’s GT Restucturing Review.

“Although one can view many bankruptcy law questions through a political or social policy lens, the Justices rarely see the cases they take in that way. Instead, they treat most of their bankruptcy appeals as technical questions of statutory interpretation,” the article says.

“Justice Scalia was very hostile to the idea of equitable powers and his opinion in Law v. Siegel threatened the very idea of bankruptcy courts as courts of equity. His departure leaves that side of the debate without a strong advocate and likely shifts the balance back towards more robust equitable powers in bankruptcy,” Warner writes.

Read the article.

Photo by Michael Vadon

Trump Entertainment Resorts has exited bankruptcy, reports Seeking Alpha. With that process complete, the equity is transferred to the senior lenders.

The report says former debt holder Carl Icahn provided Trump Entertainment Resorts with $82.5 million in exit financing, meaning he now owns its properties, including the Trump Taj Mahal and Trump Plaza Hotel and Casino in Atlantic City.

“Trump branded casinos have been through bankruptcy multiple times. Donald Trump had equity ownership for the first three,” the report says. “Trump branded casinos have had to use the bankruptcy process to protect it against litigation, cut labor cost, and restructure debt that it could not pay. Previous to the Trump Entertainment Resorts bankruptcy, Trump Atlantic City went bankrupt, then Trump Hotels & Casino Resorts went bankrupt, then Trump Atlantic City went bankrupt again.”

Read the story.

A lawyer for Sam and Dee Wyly said Thursday that the tax evasion and tax fraud case brought by the Internal Revenue Service in the Northern District of Texas is nothing more than “a bunch of sound bites” and allegations that are not based in federal tax law, reports The Dallas Morning News.

“The IRS’ lawyer countered that the evidence presented during the past four weeks of an unprecedented billion-dollar bankruptcy trial shows that the Wylys ‘never intended to pay taxes’ on the hundreds of millions of dollars they kept in offshore trusts on the Isle of Man,” the report continues.

The bankruptcy judge hearing the case is expected to take several weeks to rule in the complex bankruptcy trial in which the IRS accused Sam Wyly and Charles Wyly’s widow, Dee Wyly, of tax evasion and fraud and is seeking $2.2 billion in back taxes, fees and penalties.

Read the story.