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| vol 16, num 1 | June, 2017 |
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| A Look at the Hottest Retail Trend of 2017: Chapter 22 Bankruptcy Filing |
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Is bankruptcy the new “black” in the retail industry? With the rise in retail bankruptcies, some commentators believe repeat chapter 11 bankruptcy filings are the “hottest 2017 retail trend.” “Chapter 22” is the designation given to these repeat filings.
Radio Shack, Wet Seal, and American Apparel are recent examples of retail Chapter 22s. Every week, it appears that a string of long-established retailers close additional stores. Many turnaround professionals believe that the retail industry will suffer the most financial distress this year, ousting the oil and gas industry which held the top spot in 2015 and 2016. It is also predicted that many of these retail bankruptcies will be orderly liquidations rather than restructurings.
General bankruptcy statistics show that between 15 and 18% of all chapter 11 debtors file again. In light of the exorbitant administrative expenses accompanying a bankruptcy proceeding, no creditor wants to escort a debtor back to bankruptcy court.
Courts frown upon serial filings. Creditors deserve an element of finality to chapter 11 proceedings. During plan confirmation hearings, § 1129(a)(11) requires a bankruptcy court to find that confirmation is “not likely to be followed by liquidation or the need for further financial reorganization.”
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| Czyzewski v. Jevic Holding Corp.: Structured Dismissal Must Follow Priority Rules Even in “Rare Cases” |
| In Czyzewski v. Jevic Holding Corp., the Supreme Court, overturning the Third Circuit, held that bankruptcy courts are not authorized to disregard the priority system set forth in the Bankruptcy Code via structured dismissal orders — even when “sufficient reasons” exist in “rare case[s].” Although careful to distinguish situations such as prepetition wage orders or critical vendor payments where the Court noted “significant offsetting bankruptcy-related justification[s],” the Court found that the “priority system constitutes a basic underpinning of business bankruptcy law,” and the Court “would expect to
see some affirmative indication of intent if Congress actually meant to make structured dismissals a backdoor means to achieve the exact kind of nonconsensual priority-violating final distributions that the Code prohibits in chapter 7 liquidations and chapter 11 plans.” Given the narrowly crafted reasoning of the opinion, the Jevic opinion should not, however, be read as providing authority for an absolute prohibition against deviations from the timing and priority schemes set forth in the Code. |
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| A Step Too Far in the Right Direction? Narrowing § 546(e)’s Settlement Payment Safe Harbor by Broadly Defining the “Mere Conduit” Rule |
Editor’s Note: The following article, “A Step Too Far in the Right Direction? Narrowing § 546(e)’s Settlement Payment Safe Harbor by Broadly Defining the “Mere Conduit” Rule,” won the prize for second place in the Ninth Annual ABI Bankruptcy Law Student Writing Competition. Mr. Diehl is a recent graduate of Georgia State University School of Law in Atlanta. Since graduation, he is serving as a term law clerk to the Hon. John T. Laney, III in the Middle District of Georgia Bankruptcy Court. Once completing the clerkship, Mr. Diehl hopes to practice commercial bankruptcy and real estate
law.
In July 2016, the Seventh Circuit issued its decision in FTI Consulting v. Merit Mgmt. Grp. LP (the "FTI decision"). There, the appellant asked the court to review the application of 11 U.S.C. § 546(e) (the safe harbor), which protects settlement payments made “by or to (or on the behalf of)” a broad range of financial institutions, intermediaries and brokers (collectively, financial actors) from many types of avoidance actions. In particular, the parties asked the court to determine whether the safe harbor protected the defendants from an avoidance action targeting funds transferred in a leveraged buyout (LBO). The defendants, citing decisions from the majority of circuit courts addressing this issue, argued that the safe harbor applied because financial actors facilitated the transaction.
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| Annual Committee Awards Announced at ASM |
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At this year's Annual Spring Meeting, Paul Hage, immediate Co-chair of the Unsecured Trade Creditors Committee, was given the "Committee Leader of the Year" award for his continued efforts with the committee. With the help of his leadership team, Paul led the UTC to a successful year that included publishing 5 newsletters and a “Representing the Creditors' Committee: A Guide for Practitioners”, opening the first committee LinkedIn group, and hosting bi-monthly committee calls and two webinars. Paul will now join the Technology & Intellectual Property Committee as Education Director.
The Commercial Fraud Committee was recognized as "Committee of the Year" for all the work that was completed in 2016. During 2016, the Commercial Fraud Committee was able to publish a total of 8 newsletters, co-host a networking reception at the Winter Leadership Conference, host two
webinars, and hold several committee calls on a variety of topics.
In the photo above at left, Rick Rein (Education Director, Commercial Fraud) and Paul Hage (right - Co-chair, UTC) receive their leadership awards from Scott Williams (center), ABI's immediate Vice President of Membership. |
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| Nobody Likes to Face Rejection: Recent Issues Regarding Executory Contracts |
The Business Reorganization and Unsecured Trade Creditors Committees recently held a session at this year's Annual Spring Meeting titled "Nobody Likes to Face Rejection: Recent Issues Regarding Executory Contracts." This session focused on recent case law developments in the area of executory contracts. The panelists discussed issues concerning gathering agreements and the Sabine Oil decision, collective bargaining agreements, telecommunication agreements and more.
Speakers for this panel included:
- Sharon L. Levine - Saul Ewing LLP; Newark, NJ
- Shane G. Ramsey (Moderator) - Nelson Mullins Riley & Scarborough, LLP; Nashville, TN
- Sarah A. Schultz - Akin Gump Strauss Hauer & Feld LLP; Dallas
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| ABI to Name Industry's Top 40 Under 40 |
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ABI is looking for innovators, disruptors and risk-takers who are creating change in our industry. Candidates will be distinguished by professional achievements and service, and will be selected by a group of experienced professionals from ABI’s leadership. The person does not have to be an ABI member to apply or to be nominated. Submissions are due July 31.
Help us find the future leaders of our industry - nominate a rising star! |
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©2017 American Bankruptcy Institute . All rights reserved.
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