Community property works differently in bankruptcy. I probably don’t have to tell you that. On the issue of assets and debts, community property is pretty straightforward. All of the community property comes into the estate upon the commencement of a bankruptcy case, even when only one spouse files. §541(a)(2). Every creditor with a right to […] The post When The Marital Community Doesn’t Get A Bankruptcy Discharge appeared first on Bankruptcy Mastery.

 One of the big themes appearing in this year's National Conference of Bankruptcy Judges was the effect of mass tort cases on the bankruptcy system. The panel Mass Torts in Bankruptcy: Two Steps Forward or Two Steps Back focused on third party releases. The speakers were Hon. Craig Goldblatt (Bankr. D. Del.), Karen Cordry from the National Association of Attorneys' General, Prof. Douglas Baird and Sander Esserman.  Third party releases have been in the news a lot lately. In Purdue Pharma and Mahwah Bergen Retail Group, District Courts struck down overly broad provisions, while they were allowed in the Mallinckrodt PLC case. The panelists discussed the history of third party releases. Karen Cordry made the observation that the first time an innovation in the law is allowed it's based on unique circumstances, then it's allowed based on prior precedent and then it's settled law. Releases for Guarantors DisfavoredThird party releases were originally rejected by the Ninth and Tenth Circuits.Resorts Int’l v. Lowenschuss (In re Lowenschuss), 67 F.3d 1394 (9th Cir. 1995); In re Western Real Estate Fund, Inc., et al., 922 F.2d 592 (10th Cir. 1991). . These cases involved guarantor liability. and relied on section 524(e) to say that the discharge in bankruptcy doesn't benefit anyone other than the debtor. The Fifth Circuit continued with a hard line, rejecting not only third party releases but exculpation clauses. Bank of New York Trust Co., NA v. Official Unsecured Creditors' Comm. (In re Pacific Lumber Co.), 584 F.3d 229 (5th Cir. 2009). However, the Fifth Circuit's ruling was not based on guarantor claims like the earlier 9th and 10th circuit decisions. Mass Tort Cases Provide a Different JustificationSander Esserman provided what he described as the other side of the story. In the Johns-Manville case, Judge Burton Lifland was faced with a mass tort case that, like the Railroad equity receiverships threatened to go on forever. There was a profitable company faced with tort suits. At first its one, two or three at a time. The company is winning most of the cases. The plaintiff's lawyers threaten to just keep filing more suits until they got a big victory.For Judge Lifland, the question was wow do we get out of this mess? How do you give protection to people who want to contribute to a plan?  How do you protect the right of future claimants? His solution was to create what was later codified as 11 U.S.C. Sec. 524(g). It provided for both payment of future claims and third party releases. When the insurance companies wrote a check, they would be done. The insurance companies needed a release because they could not be assured that tendering policy limits would be enough. They could be faced with bad faith claims, direct claims and policies without limits.  What made the plan work as a practical matter was that the vast majority of claims voted in favor, it protected constitutional jury trial rights for those who wanted to exercise them and without the third party release, there would be no plan. This was later codified into law by Congress. However, at the time, Judge Lifland was crafting a remedy without clear statutory authority. The  mass tort claims provide a clear counterpoint to the guarantor cases. In the mass tort cases, the releases were necessary to provide a greater economic benefit to the creditor body as a whole as opposed to merely protecting someone who did not want to file bankruptcy.Ultimately the Third and Fourth Circuits endorsed third party releases in the mass tort context.  The Baird HypotheticalProf. Baird testified before Congress on July 28, 2021. In his testimony he presented the following hypothetical:ABC Corporation is a defendant in mass tort litigation There are claims about failure to warn the public about danger of its product. Some members of the family are named defendants.  The family members had received substantial dividends. After negotiations, the parties reach a global settlement. The former owners agree to make payment into a trust, but only if they receive third party releases. It is estimated creditors will get 85% of their claims paid. 92% of the creditors vote in favor of the plan. Can the Court bind the 8% who voted no? If the hypothetical sounds familiar, its very similar to the settlement with the Sackler family in the Purdue Pharma bankruptcy.Prof. Baird argued that it’s not a discharge, it’s a settlement. He pointed to the example that a trustee can settle fraudulent transfer claims under 11 U.S.C. Sec. 544 even those those claims could have been pursued by creditors outside of bankruptcy. He argued that the trustee is representing groups of claims that the debtor has with some third party. The Trustee is pursuing that claim on their account and settling that claim on their account. The settling party is going to say, "Why should I have one truce if the war isn’t over?" He said, "This isn’t outrageous." He then said, I have two buts coming. We should be dramatically limiting third party releases. The parties getting released should be paying the full value of their liability and the settlement should receive overwhelming consent. The Discussion Becomes LivelyOn of the panelists (Karen Cordry I think) bemoaned the fact that every case was becoming special. She compared it to Lake Woebegone where all the children are above average.  She said that to say you can have it in bankruptcy law doesn’t mean you have it in our bankruptcy law. She asked do we have Section 544(c)? (Section 544 as written ends with Section 544(b)). One of her fellows pointed out that we read lots of things into the code. Even if we don’t have an actual Section 544(c), we have a virtual Section 544(c). However, someone their water on that idea by saying that you won’t get you anywhere with the Supreme Court.  This power was explicitly rejected by the Supreme Court in Caplin v. Marine Midland Grace Trust Co., 406 U.S. 416 (1972). The Texas Two Step From there, the panel ventured into a discussion of the Texas Two Step. This was discussed extensively in other presentations so I am going to truncate my discussion here. Under the Texas Two Step, a company splits itself into an operating company and a liability company. It assigns all of the liabilities to the bad company. To avoid being a fraudulent conveyance, the good company has to assign sufficient assets to the bad company to cover the liabilities. This is a type of third party release because it is intended to shield the operating company from lawsuits. the whole premise of the Texas Two Step relies on the good company promising to pay all or most of the debts of the bad company in return for a release. Prof. Baird said he saw two issues. On the one hand, there is a slam dunk fraudulent conveyance claim without writing the big check. However, the problem is that the good company won't write the check unless they get the third party release. To do this, you have to be able to accurately value the liabilities. What if the tort claims are actually weak? Ms. Cordry  said that it affects negotiating positions. If the States know that there is no possibility of a third party release, they can take one position. However, if the debtor can just go into court and get a release, there is more of an incentive to make the deal. Opt In and Opt Out Releases. The panel then switched the discussion to opt in releases. Creditors will only be bound if they check a box saying they will be bound by release and the settling parties will only fund if 90% say yes.  If creditors have the ability to take or leave the settlement, it is not controversial.  However, what if the release requires a creditor to opt out? That depends on how conspicuous the release language. One of the panelists referred to disclosures that contain so many words that it actually discloses very little. Instead of creditor opting in, they have to opt out. What if most people don’t read and respond? What if only half of creditors return a ballot but 90% of those opt in and 10% opt out.   Under an opt in release, that would mean that only 45% of creditors would have opted in. However, if it were an opt out release, only the 10% of the 50% who returned ballots opting out (5% in total) would be exempt from the release.  Using a 363 Sale to Obtain a Third Party ReleaseThe panel also discussed a concept I had not thought of before. What is ABC Company owns an insurance policy. When it files bankruptcy, it proposes to sell all its rights under the policy back to the insurance company free and clear of liens. The sale would feature standard buyer protections, including that there would be no successor liability and there would be an injunction against pursuing claims against the buyer. Assuming that it meets the section  363 standard is anything else required? How is that different than tendering policy limits? How are third party releases different than sales free and clear of liens? Under another scenario, ABC Corp. has assets sufficient to cover greatest estimate of liability but ABC Corp. thinks the tort system is random with winners and losers. It doesn’t want to put ABC Corp. into bankruptcy because it will harm enterprise value.  What about doing a 363 type sale before hand? Sell the good company and leave a pot of cash in the bad company. The obvious problem here is that the good company has to file bankruptcy in order to do a sale free and clear of liens. If the parties attempt to do a 363 type sale outside of bankruptcy, it won't have the statutory protections and could be attacked by creditors. Is this a Problem Bankruptcy Can Solve? Rather than resolving these mass injury problems through the tort system or bankruptcy, government can set up a specific program to handle these claims. For coal miners, Congress created a program to compensate victims of Black Lung Disease. Workman's compensation laws protect employers at the state level. Perhaps the solution to asbestos and opioids and other societal problems is for Congress to set up a collective scheme to be funded from tax dollars outside of bankruptcy. The biggest obstacle would be getting Congress to act in an era of divided governance and suspicion of big government programs. Notwithstanding the obstacles, Ms. Cordry said that such a collective program is the only way to accomplish the goal constitutionally. Take-AwaysThe idea that the split in circuits over whether to allow third party releases is really a split between circuits dealing with guarantor claims and those dealing with mass tort claims was new to me. The potential use of Section 363 sales to accomplish third party releases was also something I had not heard before. I was also struck with the idea that bankruptcy courts dealing with new and thorny problems are like the engineered dinosaurs in Jurassic Park, that nature will find a way. Judge Lifland created Section 524(g) before Congress enacted it into law. It may be that the Code will follow the necessities of solving big, messy problems. Either that or the Supreme Court will squash the effort like the giant foot in the opening credits of Monty Python's Flying Circus.  I am also struck by the similarities between bankruptcy and class actions. Bankruptcy is essentially a class action between the debtor and its creditors. If bankruptcy can be expanded to be a class action between the debtor, its creditors and persons liable to the debtor, it may be possible to solve these problems through the vehicle of a class settlement rather than trying to incorporate third party releases into bankruptcy law. I have a draft of an article on third party releases that is going through the editing process. One realization that hits me when I attend programs like this is just how much updating I will have to do from my original draft in February 2022.The materials for this panel can be found here.

Medical debt can seem ever-growing, and debtors may have difficulty meeting payments while getting medical treatment. To erase your medical debt and move forward with your life, you can file for bankruptcy in Pennsylvania. If you have overwhelming medical debt in Pennsylvania, you can file for bankruptcy to eliminate it. Our attorneys can help debtors file for either Chapter 7 or Chapter 13 bankruptcy, depending on their income and preferences. The former works through liquidation, while the latter works via a repayment plan. Whichever path you choose, you can discharge your medical debt within a few months or years by filing for bankruptcy in Pennsylvania. While pursuing bankruptcy can feel daunting, it can be the answer to overwhelming medical debt that you need to disappear. We’re here to help debtors wipe the slate clean and regain financial stability. For a free case evaluation with the Philadelphia bankruptcy lawyers at Young, Marr, Mallis & Deane, call today at (215) 701-6519. Can You File for Medical Bankruptcy in Pennsylvania? Health care can be expensive, and people with or without insurance may have difficulty handling medical costs in Pennsylvania. The more treatments you require, the worse your debt may become. Those in serious medical debt may be unable to work because of their conditions or be unable to pay off creditors because of other debts. If medical debt has impacted your financial stability, consider filing for bankruptcy in Pennsylvania. “Medical bankruptcy” is an unofficial term, not a specific type of bankruptcy. However, you can use bankruptcy as a tool to eliminate your medical debt. Hospitals can be creditors, like everyone else. While this might contrast with how you view hospitals as a place for comfort and care, it is the case. If you owe a hospital money, it will want you to pay. So, medical debt is like many other types of dept. It is considered an unsecured debt and is easily dischargeable when you file for bankruptcy in Pennsylvania. Our Reading, PA bankruptcy lawyers can explain the benefits of erasing your medical debt and how to best do so. Which Type of Bankruptcy Should You File for to Eliminate Medical Debt in Pennsylvania? Depending on your income, your family’s finances, and the amount of medical debt you currently have, different types of bankruptcy might better suit your circumstances. Our Pennsylvania bankruptcy lawyers can assess your situation to determine whether or not you should file for Chapter 7 or Chapter 13 bankruptcy to eliminate your medical debt. Chapter 7 In order to be eligible to file for Chapter 7 bankruptcy in Pennsylvania, you must pass the means test. To qualify for Chapter 7, you can’t make over the average monthly income for your area. That’s because Chapter 7 works fast by liquating a debtor’s assets and paying off all debts within several months. If you need immediate relief from medical debt and pass the means test, filing for Chapter 7 bankruptcy might be ideal. However, if you have a family and assets that you can’t risk liquidating, Chapter 7 might not be right for you. To learn more about the ins and outs of Chapter 7 bankruptcy and how it can help you eliminate your medical debt, speak to our Pennsylvania bankruptcy lawyers. Chapter 13 If you have medical debt, you can eliminate it by filing for Chapter 13 bankruptcy in Pennsylvania. After you file, our Springfield, PA bankruptcy lawyers will devise a repayment plan. Once approved by the court, a repayment plan will go into effect. Your regular payments to medical creditors will be based on your disposable monthly income. With Chapter 13 bankruptcy, liquidation of assets is not necessary. Filing for Chapter 13 bankruptcy can be ideal for debtors with dependents that can’t risk losing their assets through liquidation. Generally, Chapter 13 bankruptcies can take about three to five years to complete. After that time, you can be entirely free from medical debt in Pennsylvania. Why Should You File for Bankruptcy in Pennsylvania if You Have Medical Debt? Medical debt can feel all-consuming, and people shouldn’t have to choose between their physical and financial health. That said, our attorneys understand that filing for bankruptcy is a big decision. Instead of viewing bankruptcy as a sign that your finances are unstable, see it as a vehicle to regain financial stability and eliminate medical debt. Automatic Stays Filing for bankruptcy when you have overwhelming medical debt can be wise. Immediately after you file, an automatic stay will go into effect. This is the case whether you file for Chapter 7 or Chapter 13 bankruptcy in Pennsylvania. This automatic stay prevents hospitals from contacting you regarding payments. An automatic stay can provide the immediate relief debtors need to take a deep breath and move forward with bankruptcy. Avoiding Lawsuits Creditors, including hospitals, might file a lawsuit against a debtor to get payment. This is never ideal, as a creditor lawsuit might put your home and bank accounts at risk. When you file for bankruptcy, you can eliminate all your debts and the chances that creditors will sue you for repayment. Whether you file for Chapter 7 or Chapter 13 bankruptcy, your medical debt can be repaid by the time bankruptcy ends, allowing you to avoid unnecessary lawsuits from medical creditors. Regaining Stability As medical debt grows, it can feel suffocating and overwhelming to anyone, especially those in need of further medical treatment. Hiring our Pennsylvania bankruptcy lawyers and filing for bankruptcy can allow you to hit the reset button, regain financial stability, and focus on your health. Call Our Pennsylvania Lawyers About Your Bankruptcy Case Today If you’re feeling overwhelmed by medical debt, our attorneys can help. For a free case evaluation with the Levittown bankruptcy lawyers at Young, Marr, Mallis & Deane, call today at (215) 701-6519.

 Yahoo is reporting that in October Individual Chapter 13 Bankruptcies Increase 27 Percent Over Last Year. The article can be found at https://lnkd.in/erj-t-4mJim Shenwick, Esq jshenwick@gmail.com 917 363 3391

 THE CFO website has a very useful article on restructuring businesses. The article is titled: 6 Steps to Prepare for the Next Restructuring WaveIt can be found at:https://www.cfo.com/budgeting-planning/strategy-budgeting-planning/2022/10/bankruptcy-restructuring-recession-supply-chain-liquidity-risk/Jim Shenwick, Esq jshenwick@gmail.com 917 363 3391

 Fox Rothchild has published an article regarding the standard for dismissal of an individual’s Chapter 7 case based on the Debtor’s pre-petition bad faith behavior. The article can be viewed at https://www.jdsupra.com/legalnews/is-prepetition-bad-faith-cause-for-45603/Jim Shenwick, Esq. jshenwick@gmail.com 917 363 3391

   In a detailed opinion from Judge Larson in the Bankruptcy Court for the Northern District of Texas the court found that in determining household size for purposes of a chapter 13 case, the appropriate test is the economic unit approach.  In re Poole, 2022 Bankr. LEXIS 2776, 2022 WL 5224087, Case No 21-32224 (Bankr. N.D. Tex, 30 Sept. 2022).  As of the filing of the Pooles' bankruptcy seven individuals were living in their home: the joint debtors, Mrs. Poole's mother, and sister, a nephew (age 12) and niece (age 21) and the debtor's adult son who was recovering from surgery and unable to work.  The niece is a college student and also works 30 hours/week.  Mrs. Poole's mother earns $700/month social security.  Mr. Poole's sister recently obtained new employment.  Thus these individuals helped contribute toward household expenses.  Debtors claimed a household of seven based on the heads on bed approach.  The trustee objected asserting that the economic unit approach would exclude the niece and allow only a household of six.  While not ruling on whether the niece should be included in the economic unit approach, Judge Larson went into some detail as to the alternative approaches to interpreting 11 U.S.C. §1325(b)(3)'s household size, as required to complete the means test.  Such interpretation is critical, both to compute how much has to be paid to unsecured creditors under §1325(b)(3), but also whether the plan is required to extend to five years if it does not pay unsecured creditors in full per §1325(b)(4).  The three tests for determining household size is the heads on beds approach, the income tax dependent approach, and the economic unit approach.  The heads on beds approach simply follows the household definition from the Census Bureau, the number of individuals occupying a housing unit.  Support for this approach may be found in the fact that §1325(b) references the Census Bureau's median income table, but nothing in §1325(b) incorporates the Census Bureau's definition.  Judge Larson found that this approach may over-estimate the household size, possibly including individuals transiently in the home without support from the debtors.  The income tax dependent approach examines who could be claimed as a dependent on the debtor's tax returns.  Judge Larson found that this would tend to undercount the individuals in the household.  The Internal Revenue Code narrowly defines who may be a member of the household on a tax return, setting specific requirements for dependency.  Part of the confusion on this issue is the use of the term household  under §1325(b)(2) and the term 'dependent of the debtor' under §707(b)(2).  Some courts have found that as both sections are part of a singular calculation, the terms must be read consistently.  Judge Larson rejected this argument, finding it did not provide a consistent approach.  The purpose of the Bankruptcy Code is not the same as the Internal Revenue Code, which is intended to collect revenue for the government.  The bankruptcy Code seeks an accurate assessment of a debtor's financial situation and thus what a debtor can feasibly pay over time to the creditors.1  Courts often see debtors who financially support others despite being unable to claim them as dependents on tax returns.  Ignoring this economic realty would be incongruent with the rehabilitative purpose of the Bankruptcy Code.  The economic unit approach assesses the number of individuals in the household who act as a single economic unit.  This considers 1) who is financially dependent on the debtor, 2) who financially supports the debtor, and 3) whose income and expenses intermingle with the debtor's.  This is the most flexible approach, allowing courts to adapt to each debtor's individual circumstances, though could result in a fractional number.     An example of this approach is found in the Robinson2 case where the debtor's four children spent 4 days/week with the debtor and three with their mothers.  Debtor provided for certain expenses for the children as well as child support.    Despite substantial contributions toward the children's expenses, he could not claim them as dependents on his tax returns, but counting all of them in the household per the heads on beds approach would have over estimated his household given the sharing of their expenses with the mothers.  These cases show the need for courts to have flexibility in their approach to household size.  The court sustained the trustee's objection in finding that the economic unit approach was the proper test in determining household size, but requested that the debtor and trustee determine the household size based on the economic unit approach. 1 Johnson v. Zimmer, 686 F.3d 224, 239 (4th Cir., 2012).↩2 In re Robinson, 449 B.R. 473, 475-82 (Bankr. E.D. Va., 2011).↩Michael BarnettMichael Barnett, PA813 870-3100https://hillsboroughbankruptcy.com

The first plenary session of NCBJ was a panel consisting of Professor Melissa Jacoby, Jennifer Hagle from Sidley and Austin and Judge Lisa Beckerman (Bankr. S.D.N.Y.). My overall impression of the panel was that it consisted of Prof. Jacoby asking why parties in big bankruptcy cases should be allowed to bend the rules, Ms. Hagle saying that its necessary to meet the demands of her creditor clients and Judge Beckerman trying to make sense of what parties are telling her. The Moderator, Judge Elaine Hammond, brought in the views of some of her judicial colleagues in the audience.Do Traffic Laws Apply in Large Chapter 11s? In a typical exchange, Professor Jacoby asked "Can you get an exemption from traffic laws?" Somewhat later in the program, she said  "Imagine going into a chapter 7 case and saying we don’t need a trustee, we don’t need a financial management course. We’ve got a better idea."  Ms. Hagle replied that "certainty is very strong currency."  She added that venue and jurisdiction and what judge and what precedent will apply gives creditors the ability to understand when you extend credit what’s going to happen. She also said that "risk equals money."Judge Beckerman said that from the judicial perspective she is looking at how far out is what I’m being asked to do?  She said "I did hedge funds. If it’s bothering me, it’s way out there."  She also said that she asks three questions:Is there any basis for this? Who is this going to harm? What is going to happen if I don’t approve it? Judge Beckerman said she also looks at whether she is being faced with a "faux emergency."  She also said that she is wary of parties who make a big ask on the first day and it is essentially a first round of negotiation with the court.  She added that "sometimes the parties are testing you." She addressed how to know when the sky is falling. She said that when the debtor is down to $250,000 in cash and they can't get by on cash collateral, there is little choice other than to approve the financing. However, she said that when she is told that everyone is in agreement, she is looking at who is being left out of the deal and who is going to get damaged if they are not part of the financing.Ms. Hagle asserted a very realpolitik view of large cases. She said that for lenders, "certainty is currency" (which was actually the second time she used that phrase) and that for a creditor's committee, time and expense and delay are its currency.Prof. Jacoby returned to defend the role of rules. She said that "the exception shouldn’t swallow the rule" and asked whether a  subset of private parties should be able to get together and override rule of law and say this is the only way to get this done. She added that as a matter of policy, the benefits of bankruptcy are a subsidy and that private parties have the ability to capture the big government subsidies that government offers.  Judge Beckerman said that she looks at the story I’m being told. When I probe I ask is that really accurate? Did people really have a negotiation session or is there something suspicious? She looks for validation. Was the company marketed for a year? Was this the only purchaser that came forward? Did they explore financing? Ms. Hagle stressed the need for integrity in the process. She said that having an independent director or directors mans that they must have real independence. Having an investigation means having a real investigation.  One of the judges (Judge Beckerman or Judge Hammond I believe) said that there are things that we will routinely approve and there are things we don't. She stressed the importance of the Delaware first day guidelines and the efforts of other courts to lay out some hard and fast rules. One of the speakers (I think Ms. Hagle) said that she was all for due process as long as it's not on the first day. There was plenty of room for due process on the second day. (I think that was a joke).There was also a discussion about the role of the judge in putting the brakes on overly aggressive requests. Sometimes the judge needs to suggest to the parties that they take a break and go out in the hall. Judge David Jones was given as an example of a judge who will independently review the assumptions in the bank's spreadsheet. However, Ms. Hagle asked "What is the judge's role in trying to renegotiate what has already been negotiated?" She also said that you can give someone all the time in the world except that the economics are already baked in. If there is funny business going on (my words, not hers), the Committee had an obligation to track it down after the fact. Bleedover Into Smaller CasesAnother topic beyond whether traffic laws apply in Delaware and New York was whether we are developing divergent systems. While there was some agreement that we are developing one system for mega cases and one for everyone else, there was some discussion about bleedover into smaller cases.Someone (from the audience I believe) asked whether lawyers who do small cases and consumer cases get to be as creative as lawyers in the mega cases? Someone (probably Prof. Jacoby) raised the specter of the exception swallowing the rule. Lawyers in other cases are going to look for precedents in the big cases.   Judges have to be willing to say "that was a very bespoke set of circumstances" that led to that result.Judge Hammond echoed that lawyers in smaller cases are picking up on what they see the big cases doing. She said that it’s not just pro ses that pick up things on the internet. She added that it goes to fees as well. She has seen counsel for chapter13 debtors requesting $700 per hour. (Note: There are practical limits here. I could charge as much as a third year associate in New York, but where would I find the client who could pay that much?)Tort Cases and Equitable Mootness Ms. Hagle pointed out that the mass tort cases might be different than the melting ice cream cases. In the Purdue Pharma case, the court was told that without third party releases, there would be no billions going to tort victims. The District Court said no and called their bluff. The panelists pointed out that the mass tort cases run the risk that the legislature steps in to fix the problem. A legislative fix was presented as only one step worse than the Supreme Court ruling on a case. Professor Jacoby argued that equitable mootness allows for the law to get remade without the involvement of the legislature.  She said the rules have changed. They haven’t changed because of Congress or the Supreme Court or even that much from circuits.  Equitable mootness is a big carve out of circuit courts doing their job. Overall the circuits may want to leave things going the way they’re going. Do they want to resolve these issues? To the extent there are concerns about what’s going on in big cases, circuits have some responsibility. Is it constitutional? Where did this come from? Judge Beckerman said that some circuits are more willing to look at substantive issues in confirmation. She pointed to the Fifth Circuit's recent Highland Capital case as one where the court reversed a confirmation order in part notwithstanding equitable mootness. She pointed out that the Fifth Circuit has a lot of big cases. Prof. Jacoby argued that  the Fifth Circuit is different than the 2nd or 3rd circuits when it comes to equitable mootness.Ms. Hagle noted that the Supreme Court has repeatedly passed on taking on equitable mootness.  They have not wanted to spend their time on it. However, she said that the landscape is changing and what is changing it is the mass tort cases. She argued that these cases were not crisis driven, but rather public policy driven.  She said that in the mass tort context there is a lot more willingness to grant stays pending appeal (which avoids equitable mootness).  She said that it’s just different than when you have the  DIP exploding. Judge Beckerman said that she does not make decisions thinking about whether she is going to get overturned. People make decision based on what they think right decision is. Prof. Jacoby said that mass tort cases and equitable mootness are a terrible combination. She said that in the Third Circuit oral argument on the Johnson and Johnson/LTL case, J & J's lawyers were asked whether it was better to resolve these mass tort cases through the bankruptcy system or the Multiu-District Litigation system. While this was not central to the issue of whether LTL filed in bad faith, it showed that the courts are thinking about how these cases get resolved. Judge Beckerman added that the appellate court has to look at commercial reality.Take-AwaysI thought the dynamic of this panel was interesting. You had the academic saying "stop, you can't do this" and the practitioner saying "we must do this" while the judge was left in the middle as the umpire trying to call balls and strikes in a setting where the strike zone is getting fuzzier. This panel focused on issues that came up throughout the conference. Is bankruptcy a better way to resolve mass tort claims? Has equitable mootness become a monster gobbling up appellate review? Will practitioners go so far that they push Congress into taking ill-advised action?The benefit of NCBJ is to hear what people are talking about at a high level. I think there was a recognition here (and in other programs) that some aspects of bankruptcy practice are going too far and may end up snapping back. I have a section in a law review article I am working on that talks about the revolt of the Article III judiciary against third party releases. Third party releases are one area where practice may be getting out ahead of the language of the code. However, at the opposite end of the spectrum, equitable mootness is an area where the Article III judiciary are arguably shirking their duty. I also think that Jennifer Hagle (the panel's equivalent of Gordon Gecko) had a point that it is one thing to bend the rules in the name of economics and be candid that is what is happening. And there is a role for the judiciary to impose limits and call the  lender's bluff. For example, a firm rule that chapter 5 causes of action are not subject to adequate protection liens will keep lenders from making that ask. On the other hand, the mass tort cases are clearly different and call for a different approach. Very often these are companies with a good business model who just can't handle the cost of litigation. It is not the case that the business will shut down unless the DIP lender's demands are met. As will be discussed in other articles from the conference, there is a major philosophical debate going on about whether the bankruptcy system or the MDL (multi-district litigation) system is better equipped to handle mass tort cases and whether the Bankruptcy Code as written furnishes the flexibility necessary to make it the better system.  Author's Note: My summary of this (and other programs) is only as good as my ability to listen and take notes at the same time. I apologize in advance if I have misquoted anyone. I have rearranged the order of some topics to make the summary flow better.

Besides sweeping away the competition in ballroom dancing competitions and having been a law school dean at a young age, Prof. Nancy Rapoport is known as the teacher who can make ethics interesting.  She gave the keynote address for the Commercial Law League luncheon titled Brave New World--Ethics Issues That We Never Knew We Had. Prof. Rapoport talked about how the pandemic changed us and the way we practice law. She pointed out that because of the pandemic we did things we didn't know we could do and did without things that we thought we had to have. Virtual platforms such as Zoom and Webex make it possible to connect remotely but pose their own challenges. She solicited stories from the audience and got the following.During the Gold's Gym case, there was an auction conducted by Zoom. There were two staid American bidders and a German contingent. The Germans were doing the auction from a hot tub. When they won the auction and jumped up to celebrate, the other participants were relieved to see that they were wearing swim trunks (although one was wearing a Speedo).In another case, a trustee was not so fortunate. A debtor was doing his 341 meeting from his phone in bed. When he shifted his position, the trustee saw more of the debtor than he cared to. In another case, a doctor was participating in a Zoom hearing when natured called. He forgot to turn off his camera when he went to use the restroom. An alert courtroom deputy warned the doctor's lawyer before things got too graphic.Prof. Rapoport said that the first rule of virtual connections is that you must wear clothes.This led to the obligatory reference to Comment 8 to ABA Rule 1.1:To maintain the requisite knowledge and skill, a lawyer should keep abreast of changes in the law and its practice, including the benefits and risks associated with relevant technology, engage in continuing study and education and comply with all continuing legal education requirements to which the lawyer is subject.Failure to keep up with technology can lead to some humorous results, such as the attorney who didn't know how to turn off the cat filter on his Zoom and had to tell the judge that he was not a cat or the attorney whose vocal settings were sped up so that he sounded like a chipmunk. However, episodes like this do not make you look good in front of your client.In some cases technology can lead to temptations to cheat in ways that people would not do in person. Someone from the audience mentioned a case where they could see the shadow of cue cards being shown to the witness. Prof. Rapoport recommended asking the following questions during virtual depositions or hearings:Who is in the room with you?What electronic devices do you have turned on?Is your email turned on?In one virtual trial I was involved in, a married couple was testifying from the same room and using the same camera. The judge had to caution them to stop correcting each other's testimony. Virtual practice provides new opportunities for the unauthorized practice of law. Rule 5.5(a) states:A lawyer shall not practice law in a jurisdiction in violation of the regulation of the legal profession in that jurisdiction, or assist another in doing so.What happens if a lawyer licensed to practice law in Texas begins practicing from his vacation home in New Mexico where he is not licensed? What happens if an attorney attending NCBJ in Florida appears for a WebEx hearing in Texas from his Florida hotel room?  ABA Formal Opinion 495 addresses this issue:Model Rule 5.5(b)(1) prohibits a lawyer from “establish[ing] an office or other systematic and continuous presence in [the] jurisdiction [in which the lawyer is not licensed] for the practice of law.” Words in the rules, unless otherwise defined, are given their ordinary meaning. “Establish” means “to found, institute, build, or bring into being on a firm or stable basis.”2 A local office is not “established” within the meaning of the rule by the lawyer working in the local jurisdiction if the lawyer does not hold out to the public an address in the local jurisdiction as an office and a local jurisdiction address does not appear on letterhead, business cards, websites, or other indicia of a lawyer’s presence.3 Likewise it does not “establish” a systematic and continuous presence in the jurisdiction for the practice of law since the lawyer is neither practicing the law of the local jurisdiction nor holding out the availability to do so. The lawyer’s physical presence in the local jurisdiction is incidental; it is not for the practice of law. Conversely, a lawyer who includes a local jurisdiction address on websites, letterhead, business cards, or advertising may be said to have established an office or a systematic and continuous presence in the local jurisdiction for the practice of law. As Prof. Rapoport summarized it, you can take your hat to a new locale but you can't hang out a shingle there.Remote work offers new opportunities for breach of privacy. If you are working on your laptop at Starbucks, can other people walk by and see what you are doing? If you are counselling a client and have Alexa or Siri turned on, can those electronic devices overhear your conversation? If you are sharing your screen on Zoom, be sure that you are not sharing more than you intend to. I had a hearing once where an attorney accidentally shared his outline for questions instead of an exhibit.It is not enough for attorneys to guarantee their own security of confidential information. The ABA rules include the duty to supervise. That means that a firm should establish rules for attorneys working remotely and monitor that they are being followed.While many younger attorneys enjoy the ability to work remotely, there is a darker side. Remote attorneys may experience more anxiety and isolation leading to substance abuse. Supervising attorneys need to do regular check-ins with their remote associates to make sure they are doing ok. Prof. Rapoport also raised an interesting issue as to how we train young associates when many of the tasks they used to do, such as drafting contracts can now be done through Artificial Intelligence. Hopefully the answer is to engage associates with more meaningful substantive work and less routinized drudgery. You can find Prof. Rapoport's slides here.   

    An issue that arises occasionally in chapter 13 practice occurs when a debtor filed under chapter 13, but then changes their mind and wants out of bankruptcy, despite a request from another party to convert the case to chapter 7.  The great majority of cases appear to support the debtor's absolute right to dismiss the case, including a recent decision from the 9th Circuit B.A.P.  In TICO Constr. Co. v. Van Meter (In re Powell), 2022 Bankr. LEXIS 3019, BAP No. NV-22-1014-FLB (21 October 2022).   Here TICO Construction sought to convert Mr. Powell's chapter 13 case to chapter 7 asserting that the debtor was abusing the bankruptcy process, and was ineligible to be a debtor under chapter 13.  TICO had filed an adversary under §§523(a)(4) and (6) to hold that their debt was nondischargeable, alleged that Powell transferred assets to his ex-wife prior to filing through a marital settlement agreement, and objected to the homestead exemption.  Asserting he was tired of the litigation, Mr. Powell submitted a motion to dismiss under 11 U.S.C. §1307(b).  TICO opposed asserting abuse of the system including a sham divorce, and that Powell was over the unsecured debt limit for chapter 13.  The bankruptcy court held that bad faith and debt limits are irrelevant to the debtor's right to dismiss the chapter 13 case. The 9th Circuit BAP initially examined the language of the statute.  11 U.S.C. 1307(b) provides that the court 'shall' dismiss a case upon request of the debtor unless the case was previously converted.  While a few cases hold bad faith can preclude the voluntary dismissal1, the BAP found that Law v. Siegel, 571 U.S. 415, 134 S.Ct. 1188, 188 L.Ed.2d 146 (2014) overruled cases finding that §105 allows the bankruptcy court to override explicit mandates of the Bankruptcy Code.  Thus, §1307(b)'s plain text requiring the court do dismiss a chapter 13 that had not been previously converted upon request of a debtor.   The BAP found that the debt limit argument did not change the result.  If TICO's argument prevailed, it would create a new exception to §1307(b) not contained in the Bankruptcy Code.  §1307(b) does not limit the right to dismiss to eligible debtors.   The BAP went on to note that the §109(e) debt limits are not jurisdictional.2  1 See In re Jacobsen v. Moser (In e Jacobson), 609 F.3d 647, 660 (5th Cir. 2010)  (asserting discretion to convert for cause under §1307(c) where debtor acted in bad faith or abused the system and filed a request to dismiss in response to the motion to convert); Mitrano v. United States (In re Mitrano), 472 B.R. 706, 710 (Bankr. E.D. Va. 2012) (right to dismiss limited to good faith debtors); In re Johnson, 228 B.R. 663, 668 (Bankr. N.D. Ill. 1999) (right to dismiss can be trumped in some circumstances by a motion to convert under §1307(c).↩2 Note a decision from the Southern District of Florida to the contrary, finding that §109(e) eligibility goes to the question of bad faith, and denied a motion to dismiss and converted a case on the trustee's motion for exceeding the debt limit and lacking regular income.  In re Letterese, 397 B.R. 507 (Bankr. S.D. Fla. 2008).↩Michael BarnettMichael Barnett, PA506 N Armenia Ave.Tampa, FL 33609-1703813 870-3100https://hillsboroughbankruptcy.com