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Message from the Chair:
Welcome to our Summer edition of The Business Advisor. Please read below about the victory obtained by the Gibbons team as counsel to Gibbons Of Counsel James R. Zazzali, DBSI Estate Litigation Trustee, in his multi-year litigation against the IRS, which resulted in a decisive summary judgment obtained last month on behalf of the victims of the former owners' fraudulent acts. Gibbons Counsel David Crapo reports on the recent advice revealed in a published interview with a privacy officer from the US Department of Health and Human Services speaking about the Phase II HIPAA audit process, which has begun, and highlights the privacy risks that are growing for entities that are smaller in size. Turning from the factual to the theoretical, Gibbons associate Brett Theisen provides a different look at bankruptcy practice today in a thought-provoking discussion of the potential application for such practice in the expanding field of virtual reality entities.
Our attorneys remain engaged in a variety of professional activities. We appreciate the recognition bestowed on us by our clients and peers for our commitment and dedication to the profession and look forward to our continued camaraderie with all of you, our colleagues and friends.
Karen A. Giannelli, Esq.
Chair, FR&CR Department
ARTICLES & CLIENT ALERTS
DBSI Estate Litigation Trustee Wins $13.4 Million Judgment Against IRS
By: Mark B. Conlan and Jennifer A. Hradil
The Internal Revenue Service's mission is to "[p]rovide America's taxpayers top quality service by helping them understand and meet their tax responsibilities and enforce the law with integrity and fairness to all." In the case of the beneficiaries of the Trusts created under the 2010 DBSI Plan Debtors Joint Chapter 11 Plan of Liquidation, the IRS apparently believes that "fairness to all" includes trying to hang on to personal income tax payments made with company funds taken from thousands of defrauded investors and which the government presented as proceeds of a fraud in obtaining criminal convictions for securities and wire fraud of DBSI's CEO, Douglas Swenson, and General Counsel.
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Keep Your Data Secure:
The Phase II HIPAA Audit Process Has Begun and Hackers Have Targeted Smaller Entities!
By: David N. Crapo
Deven McGraw, the Deputy Director of Health Information Privacy at the Office of Civil Rights (“OCR”) of the US Department of Health and Human Services, was recently interviewed by Marianne Kolbasuk McGee, the Executive Director of the HealthcareInfoSecurity.com media site. During that interview, Ms. McGraw provided advice concerning the Phase II HIPAA audit process, which began this spring.
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Can US Bankruptcy Law Extend to Virtual Reality Entities?
By: Brett S. Theisen
Some of the technology sector's biggest names – Facebook's Mark Zuckerberg, Amazon's Jeff Bezos, and serial entrepreneur Elon Musk – have lately increased their attention (and investment dollars) on virtual reality ("VR"). To date, retail consumer VR applications primarily focus on entertainment and gaming; for instance, using VR, a person could "vacation" in Hawaii without leaving her couch. VR's ultimate potential, however, increasingly appears almost limitless. Basic commercial uses already include flight and combat simulators for pilots and soldiers and training modules for surgeons. Mr. Musk and others hail VR's "transformative" prospects, including the potential for "billions of simulations" and entire virtual worlds. Given the advertising industry's appetite for personalized consumer data, the value from "billions" of cheap, simulated trials in a virtual world that mimics our own is obvious. Or, a startup company wooing investors might utilize simulations to support its future cash flow projections. Such VR simulations, or "worlds," have been described as "intermediate environments: the first settlements in the vast, uncharted territory that lies between humans and their machines."
GIBBONS LIQUOR LICENSE PRACTICE UPDATE
ABC Grants Special Ruling. Brett S. Theisen recently represented a New Jersey licensee on a petition for a special ruling to the Director of the New Jersey Division of Alcoholic Beverage Control ("ABC") to allow the licensee to reopen its retail wine and liquor store. The licensee experienced financial difficulties that forced it to cease operations for several years. Liquor licenses in New Jersey, which may be bought and sold (subject to approval by the issuing agency), are limited by a municipality's population and can thus become valuable assets to licensees. Therefore, New Jersey permits a licensee to maintain a license as "inactive" even during periods the license is not operational. During times of inactivity, however, a licensee is still required to file annual renewal applications with the local municipality and the ABC. In this case, the licensee failed to do so, and the license "lapsed" under state law – meaning the licensee lost the ability to use, or even sell, the license. Gibbons filed a petition for a special ruling on behalf of the licensee under N.J.S.A. § 33:12.18 seeking to permit the re-issuance of the license, arguing that the licensee "substantially complied" with the annual renewal requirement because it intended to renew, but, after conversations with the ABC and the local municipal clerk, honestly believed it was not permitted to do so because of unpaid taxes. The ABC Director agreed with Gibbons that the licensee had substantially complied with the statute and was entitled to re-issuance of the license. As a result, the licensee will resume its retail operations and retain its valuable asset.
DEPARTMENT HONORS & AWARDS
Six Gibbons FR&CR Attorneys Individually Ranked in 2016 Chambers
The 2016 edition of the Chambers USA Guide to America's Leading Lawyers for Business features the Gibbons FR&CR Department and six of its attorneys. The six FR&CR Directors and Counsel listed are:
In the 2016 edition of Chambers, sources were quoted as saying of the firm's bankruptcy practice: "They are a great resource for us," and "They are a strong regional firm and they provide quality representation at rates below those of Wall Street firms. They are very user-friendly and a pleasure to work with."
PROFESSIONAL ACTIVITIES
Upcoming Events
Join Gibbons Director and ABI Mid-Atlantic Advisory Board Member Natasha Songonuga at the 12th Annual Bankruptcy Workshop in Cambridge, MD, August 4-6, 2016
Natasha Songonuga, a member of the ABI's Mid-Atlantic Advisory Board, joins the American Bankruptcy Institute in inviting you to attend this year's 12th Annual Mid-Atlantic Bankruptcy Workshop at the Hyatt Regency Chesapeake Bay Golf Resort, Spa and Marina, beautifully situated on the banks of the Choptank River in Cambridge, MD, August 4-6, 2016.
This twelfth anniversary year promises to offer what we have come to expect – a nationally renowned faculty of judges, academics, and practitioners to speak on current hot topics in business bankruptcies. It also provides plenty of opportunity for the bench and bar to mingle in a relaxed setting and to earn 7 hours of CLE, including 1.25 hours of ethics.
Workshop highlights include two spirited debates between retired and sitting bankruptcy judges on the following issues:
- Whether parties can contract around the ASARCO decision, in which the U.S. Supreme Court barred attorneys from receiving compensation for successfully defending their fee applications (click here for a related article)
- Whether structured dismissals are permissible; a structured dismissal is the dismissal of a chapter 11 case following a sale of substantially all of the debtor's assets under an order with certain "bells and whistles" (including release and exculpation provisions and retention of jurisdiction by the bankruptcy court)
The Workshop will also feature panel discussions on:
- Restructuring issues affecting the oil and gas industry
- Obamacare and healthcare distress cases, including a look at the three major healthcare segments that are ripe to go through distress in the next several years – residential care, durable medical equipment, and testing labs/imaging facilities
- Electronically Stored Information retention concerns for bankruptcy trustees
- Issues affecting reorganization of middle-market retailers, including going-out-of-business sales, consignment issues, consumer privacy issues, and WARN Act issues.
For more information on what promises to be a comprehensive and informative program, please see http://www.abi.org/events/12th-annual-mid-atlantic-bankruptcy-workshop.
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On September 29, 2016, David N. Crapo will give a presentation entitled "Privacy and Health: HIPAA and Beyond" at a New Jersey Institute for Continuing Legal Education conference entitled "The Law of Privacy" at the New Jersey Law Center in New Brunswick.
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Karen A. Giannelli, Chair of the FR&CR Department, serves as a member of the Advisory Board for "Bankruptcy 2016: Views from the Bench," co-sponsored by the American Bankruptcy Institute and Georgetown University Continuing Legal Education Division and taking place at Georgetown University Law Center in Washington, DC on October 7, 2016. This program offers a unique opportunity for bankruptcy practitioners to hear from 18 bankruptcy judges during a full day of high-quality CLE and networking opportunities in our nation's capital, including small group lunchtime breakout sessions with the morning presenters. The theme of this year’s program is both a pragmatic and philosophical examination of the systematic and existential "threats" to the historical way the bankruptcy system has functioned, viewed through the prism of recent developments in bankruptcy law, including structured dismissals, equitable mootness, gifting, successor liability, RSAs, and costs and legal fees. Two of these topics – structured dismissals (which the U.S. Supreme Court has just agreed to hear on appeal from the Third Circuit Court of Appeals in the case of Casimir Czyzewski et al. v. Jevic Holding Corp. et al., case number 15-649 (U.S. Sup. Ct.)), and successor liability – will serve as a framework for two "great debates" between a member of the bar and a current or recent member of the judiciary. For more information on this recurring informative program, please see http://www.abi.org/events/bankruptcy-2016-views-from-the-bench.
Recent Events
David N. Crapo co-presented with Timothy R. Hurley, Certified Insolvency & Restructuring Advisor (CIRA) of Deloitte CRG, at a panel entitled "Creating Margin for Mission: Keeping the Faith-Based College Afloat and Faithful in an Era of Disruptive Change." The panel was part of a higher education summit held at Caldwell University on June 24, 2016 and sponsored by the Association of Catholic Colleges and Universities.
FIRM NEWS
Gibbons Recognized as a Leading Firm by Chambers USA (May 31, 2016)
Gibbons Launches Government Affairs Alert Blog (May 19, 2016)
Gibbons Named One of the NJBIZ Best Places to Work in New Jersey for the Eleventh Consecutive Year (April 20, 2016)
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