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Message from the Chair:
The in pari delicto defense has puzzled many bankruptcy trustee counsel who have been thwarted in recovering assets for the benefit of creditors defrauded as a result of the bad acts of the debtor's former management. In a recent article published in the March 2016 edition of the American Bankruptcy Institute Journal (reprinted below), Brett Theisen offers a fresh approach to this case law-created Bankruptcy Code problem that has been inhibiting the ability of bankruptcy trustees to right the wrong that has been visited upon the debtor's defrauded creditors.
An important recent bankruptcy law development for professionals who seek to be retained in a bankruptcy case is the 2015 decision of the United States Supreme Court in Asarco, which determined that fees incurred in the defense of objections to a debtor's counsel's fee application are not compensable. In this newsletter, Natasha Songonuga analyzes recent decisions of the Delaware Bankruptcy Court addressing unsuccessful (albeit creative) attempts to avoid the consequences of such decision. We also share news about our attorneys' recent and upcoming professional appointments, honors, and activities.
We hope you find this issue informative and welcome any feedback you may have.
Happy Spring!
Karen A. Giannelli, Esq.
Chair, FR&CR Department
ARTICLES & CLIENT ALERTS
Delaware Bankruptcy Court Finds Contractual Workarounds to Asarco to Be Unworkable
By: Natasha Songonuga
In a string of rulings, three judges from the U.S. Bankruptcy Court for the District of Delaware recently issued opinions rejecting attempts by bankruptcy professionals to use contractual retention provisions to avoid the prohibition against fee shifting in Section 330 of the Bankruptcy Code as found by the Supreme Court in Baker Botts, L.L.P. v. ASARCO LLC, 135 S. Ct. 2158 (U.S. 2015) (hereinafter "Asarco"). In each case, the bankruptcy judge found that retention terms providing for payment of defense costs out of the bankruptcy estate are not "reasonable" terms of employment for estate professionals under the Bankruptcy Code.
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Inequitable: In Pari Delicto vs. Bankruptcy Trustees
By: Brett S. Theisen
American Bankruptcy Institute Journal, March 2016
Enron. Madoff. Stanford. These cases evoke the same set of rotten facts: a company in bankruptcy, investor funds missing and executives indicted. Creditors swarm, and a bankruptcy trustee is appointed to recover whatever assets can be found. In all likelihood, recoveries will be pennies on the dollar.
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Slump in Crude Oil Price Creates Growing Risk for Creditors
By: Brett S. Theisen
The Business Advisor – Special Alert, February 8, 2016
In the last 18 months, the price of a barrel of crude oil has fallen from nearly $110 to $26 on January 20, 2016. The most recent slide – to a 13-year low – exacerbates an already dire situation for energy companies and their lenders. To date, the upstream exploration and production ("E&P") sector has taken the hardest hit. In 2015, 42 E&P companies commenced bankruptcy cases in the U.S. and Canada.
DEPARTMENT NEWS
Gibbons Relocates Wilmington Office
As of November 30, 2015, the Gibbons Wilmington office has a new address. To enhance client service, Gibbons has outfitted the new office and meeting spaces with some of the most solutions-oriented technology, videoconferencing, and audiovisual platforms currently available. Resident in the Delaware office is FR&CR Director Natasha Songonuga.
DEPARTMENT HONORS & AWARDS
New Jersey Super Lawyers and Rising Stars Highlight Six Gibbons Financial Restructuring & Creditors' Rights Attorneys
The Gibbons FR&CR Directors and Counsel listed in the 2016 issue of New Jersey Super Lawyers are:
In addition, associate Brett S. Theisen was listed in this year's edition of Rising Stars for New Jersey.
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Four FR&CR Attorneys Individually Ranked in 2016 Best Lawyers
The FR&CR Department earned regional practice rankings for New Jersey in the areas of Bankruptcy and Creditor Debtor Rights/Insolvency and Reorganization Law. The Gibbons attorneys individually highlighted in the 2016 edition of Best Lawyers are:
PROFESSIONAL ACTIVITIES
Upcoming Events
Karen A. Giannelli, Chair of the FR&CR Department, will speak on a panel addressing recent case law updates from the U.S. Supreme Court, Third Circuit Court of Appeals, and U.S. District Court (NJ) at the 18th Annual William H. Gindin Bankruptcy Bench-Bar Conference, to be held at the Hilton East Brunswick on April 8, 2016.
On April 19, 2016, David N. Crapo will moderate and speak on a panel entitled "Financial and Demographic Challenges Facing Colleges and Universities" at the 13th Annual Joint Meeting of the New Jersey Chapters of the Turnaround Management Association and the Association for Corporate Growth, to be held at the APA Hotel Woodbridge in Iselin, NJ. Mr. Crapo will also be speaking on the legal minefields complicating the turnaround and restructuring of private colleges and universities at the "Higher Education Summit," sponsored by the Association of Catholic Colleges and Universities and Caldwell University, on June 22-24, 2016 at Caldwell University.
Natasha Songonuga is a member of the Advisory Board and its Program Committee for the American Bankruptcy Institute's ABI Mid-Atlantic Workshop, which will be held August 4-6, 2016, at the Hyatt Regency Chesapeake Bay in Cambridge, MD.
On September 29, 2016, Mr. Crapo will serve as both a moderator and speaker at a New Jersey Institute for Continuing Legal Education Conference, "The Law of Privacy," which will be held at The Law Center in New Brunswick, NJ. He will discuss topics related to HIPAA and health privacy law.
Ms. Giannelli also serves as a member of the Advisory Board for the 2016 Bankruptcy Views from the Bench Conference, to be held at Georgetown University Law Center in Washington, DC on October 7, 2016.
Recent Events
Karen A. Giannelli, Chair of the FR&CR Department, recently completed a four-year term as Third Circuit Regent for the American College of Bankruptcy and is a newly elected member of the College's Board of Directors.
David N. Crapo, Counsel in the FR&CR Department, was recently appointed the Patient Care Ombudsman in the chapter 11 bankruptcy case of In re Hebrew Hospital Senior Housing, Inc., which is pending before the U.S. Bankruptcy Court for the Southern District of New York. Mr. Crapo is a Certified International Privacy Professional (CIPP/US). In addition, he has been elected to the Board of Trustees of Newbridge Services of Parsippany, NJ, a nonprofit organization providing mental and behavioral health and counseling opportunities, including substance abuse counseling and elder support, to New Jerseyans of all ages.
On March 5, 2016, Mr. Crapo spoke about the impact of HIPAA on the protection of client information as part of a panel on "Protecting Client Confidences" at the New Jersey Institute for Continuing Legal Education's (NJICLE) annual conference for solo and small firm practitioners. On March 23, 2016, Mr. Crapo gave a presentation entitled "Health Data Breaches and HIPAA Enforcement" for Lawline, Inc. in New York.
Natasha Songonuga, Director in the FR&CR Department and co-chair of the Multicultural Judges and Lawyers Section of the Delaware State Bar Association, facilitated and moderated a panel on "The Ethical Implications of Unconscious Bias and the Lack of Cultural Diversity in the Legal Profession" on February 2, 2016 (pictured below).
PRO BONO SPOTLIGHT
The Gibbons Expungement Clinic, a partnership with Volunteer Lawyers for Justice, assists individuals in need of criminal record expungements. Expungements are critical to many of the individuals who utilize the clinic. A tainted criminal background can prevent a person from obtaining employment and public housing. These barriers significantly limit a person’s ability to get a fresh start after completing a sentence, many times for a crime that was committed at a relatively young age.
Laura Saborio Dunn, an associate in the FR&CR Department, participated in the Gibbons Expungement Clinic on January 12, 2016. Ms. Dunn performed initial client intake for multiple clients and undertook representation of a woman seeking expungement of an offense from 1988.
Brett S. Theisen, an associate in the FR&CR Department, also working with the Volunteer Lawyers for Justice group, obtained an expungement for a pro bono client. The client was a young woman with two arrests but no convictions and was seeking to expunge her criminal history to further her career opportunities.
FIRM NEWS
New Jersey Super Lawyers and Rising Stars Ranks 71 Gibbons Attorneys (March 11, 2016)
Gibbons Promotes Six New Directors in New Jersey and Pennsylvania (January 13, 2016)
Gibbons Earns Recognition as a Leading Law Firm from Benchmark Litigation (December 22, 2015)
Gibbons Relocates Philadelphia Office (December 14, 2015)
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