A new post at Weil's Bankruptcy Blog includes commentary from Canadian lawyers on bankruptcy law flexibility when confronted with a mass disaster. In short, the recent mass rail disaster in Quebec produced an unexpected set of issues when the rail line sought bankruptcy protection. But under a quirk of old statutory law, railroads were excluded from the bankruptcy regime. Nonetheless, a Quebec judge took jurisdiction under the bankruptcy law, asserting power under equitable principles. The judge likewise issued an injunction protecting an insurer of the railroad. Apparently, however, the flexibility has not yet been challenged.
The D&O Diary includes a new post that provides a useful overview of the use and abuse of D&O in bankruptcy.
D & O Diary includes a useful new summary post on the use and/or abuse of D&O insurance in bankruptcy.
For both substance and style (breezy and brief, with some dry wit), it's hard to beat Weil Gotshal's Bankruptcy Blog. And, now, a new post at the blog brings a "Stern" update through a 7th Circuit case especially relevant to mass tort lawyers who find their clients more frequently intersecting with bankruptcy courts. As a reminder, Stern is notable for reminding - and holding again - that bankruptcy courts are courts of limited jurisdiction. Therefore, the bankruptcy courts sometimes are deemed too far off the reservation when they purport to decide issues that are not "core" bankruptcy issues.
In the 7th Circuit case, it held that the bankruptcy court went beyond its jurisdictional power when it resolved "alter ego" claims brought by a plaintiff. The outcome in the 7th Circuit, however, resulted in part from waiver of arguments by the defendant. Time will tell where all the Stern rulings go. For now, it's clear Weil's blog will keep us all informed, via the Stern Files.
Oklahoma Passes Legislation Aimed at Creating Intersections Between the Tort System and the Bankruptcy Claiming System
Asbestos defendants continue to convince state legislatures to create some long overdue intersections between personal in jury claims in te the tort system and in the bankruptcy trust claiming system. The most recent outcome is in Oklahoma, where legislators approved this new statute. The governor is expected to sign the bill.
The new statute is fairly broad. It applies to all types of personal injury trust funds created from a lawsuit - not just asbestos trust funds. The statute in essence forces plaintiff's to process and disclose claims against trust funds at least 180 days before a trial date. The statute also mandates presumptive admissibility of the documents submitted by plaintiff to the trust fund, as well as the governing documents for the trust. The statute gives defendants that go to verdict a right to offset a payment by the trust against damages awarded in court. The statute also creates a rebuttable presumption that the trust will make a payment for the "liquidated value" set out in the trust fund documents.
A Canadian View on the Enforceability of Contract Clauses that Operate Upon Insolvency or the Filing of a Bankruptcy Petition
Bankruptcies are frequently used to resolve mass tort situations. In some instance, a bankruptcy is fairly foreseeable as tort claims grow. Therefore, a pertinent question is whether or when bankruptcy courts will enforce or strike out contract clauses that purport to operate upon the filing of bankruptcy petition or insolvency. A recent case in Canada adresses the topic, and is summarized by Canadian lawyers in a guest post on Weil's Bankruptcy Blog. The introduction is set out below:
The story is here on the WSJ Law Blog. Mr. Scalia (the younger) knocks down $ 980. per hour.
The bankruptcy courts of Delaware and New York dominate major chapter 11 cases, to the great delight of lawyers in those areas. But the work of the courts has been oft-criticized as far too pro-debtor, with the Delaware courts receiving especially blunt criticism. See Professor Lynn LoPucki's 2005 book: Courting Failure: How Competition for Big Cases is Corrupting the Bankruptcy Courts. It's a great telling of a depressing story, with large amounts of objective data to prove the conclusion set out in the book's title.
Now, the March 2012 issue of The ABA Journal includes an article describing some of the perceived flaws of the courts, and reporting on new efforts to undo the prior legislation that allowed New York and Delaware to take over. Will the new efforts pass? Stay tuned.
As described here and here by DealBook, American Airlines has now joined the parade of airlines taking their second (or third) cleansing bath in the waters of chapter 11. Once upon a time, a chapter 11 filing was considered a stain on the image of a corporation and its executives. But today, with the rise of financial engineering, a chapter 11 filing is just another management tool, used frequently to obtain a "do over" on contracts that prove inconvenient. And, bankruptcy courts also are much used to trump or ignore state laws on tort and contract claims, and to manage litigation. One wonders if bankruptcy law and state law will ever catch up and change in order to intersect well with modern realities.
MF Global's $ 600 Million Fiasco - The Latest Example of the Intersections Between Bankruptcy and Mass Claiming - See Dealbook for Specifics
The MF Global fiasco has left $ 600 million missing, and 38,000 customer accounts being scrutinized as to what happened. Tort and contract claims will follow, and/or are pending, subject to the bankruptcy stay of all litigation. What to do?
Once again, as is true for many mass claims, chapter 11 is the primary vehicle being used to cope with the problems. Investigation is happening, findings will be announced, and the guilty will be pilloried in the media, and perhaps even punished. But, those steps matter less to the people who've lost money - maybe all or much of their asset base for some people. So, it is imperative that efficient and lawful intersections are built between the claiming processes that exist in our federal and state court systems, regulatory systems, and insurance claiming. And, consider also that there no doubt are non-U.S. claimants. So, international intersections also are needed.
Today, however, intersections have not been built between claiming systems. As a result, bankruptcy courts are making ad hoc decisions, and much time and money are being wasted. It is well past time for intersections to have been built by federal rules committees, ALI, The National Conference of State Courts, and other policy-making groups.
When intersections are built, the policy-makers need to understand the many disasters that have occurred in the ad hoc decision-making commonly known as asbestos bankruptcies. The governing statutory term, section 524(g) has proved to be deeply flawed. The problems are exacerbated by a material lack of meaningful transparency into the facts and outcomes arising from claims submitted to court-created trusts and funds.
For specifics on the MF Global fiasco and the bankruptcy-court proceedings, the best source seems to be the NYT's DealBook. The posts (here and here) include explanations and links to bankruptcy court filings.
U.S. bankruptcy judges purport to wield vast power, such as issuing purportedly global stays of all litigation pending against a debtor. Some would say that due process is improperly tossed out the door in such proceedings, but others would argue to the contrary. The market place suggests that the broad orders are desired by debtors, as evidenced by this recent article from three lawyers at Holland and Knight. The outcomes of cases in this sort may impact the extent to which the U.S does or does become a refuge for non-U.S. entities facing mass tort issues.
In recent months, U.S. bankruptcy filings – such as Omega Navigation (filed July 8 in Houston) and Marco Polo Seatrade (filed July 29 in New York) – have caught the attention of the worldwide shipping community. It is no surprise that some shipping companies have sought bankruptcy protection resulting from financial distress. Rather, the cause for surprise is that non-U.S. shipping companies have sought protection in U.S. bankruptcy courts. High-profile secured creditors in these cases have contested the exercise of the jurisdiction of U.S. bankruptcy courts on grounds that the debtor shipping companies lack sufficient assets in, and connections to, the United States.
I'm shocked, just shocked, that a judge could think inside information and lack of disclosure could have tainted a chapter 11 case (sarcasm intended).
Judge Says Hedge Funds May Have Used Inside InformationBy CHARLES DUHIGG and PETER LATTMAN
There have long been whispers on Wall Street that hedge funds have hijacked the bankruptcy process, using their influence as debt holders to obtain and trade on insider information about when and how a company will restructure.
A federal court ruling highlighted such concerns late Tuesday when a judge raised the possibility that four large hedge funds might have used confidential information to trade in the debt ofWashington Mutual.
The issue was raised amid the derailment of Washington Mutual’s emergence from bankruptcy protection, the final chapter in the largest bank failure in the nation’s history.
Judge Mary F. Walrath, in dismissing a proposed settlement in the federal bankruptcy court in Delaware, wrote that four hedge funds that had played a role in Washington Mutual’s restructuring might have received confidential information that could have been used to trade improperly in the bank’s debt.
The four hedge funds are Appaloosa Management, Aurelius Capital Management, Centerbridge Partners and Owl Creek Asset Management. All have denied any wrongdoing.
The Washington Mutual bankruptcy, and Judge Walrath’s ruling, have slightly thrown back the covers on the sharp-elbowed tactics used by investors in trading the stocks and bonds of companies in Chapter 11 bankruptcy protection. That market has exploded in recent years, driven by hedge funds buying up the loans of companies in bankruptcy at a steep discount in the hopes of obtaining big profits when the companies emerge from Chapter 11.
Judge Walrath’s ruling is a victory for the Washington Mutual shareholders who claimed that hedge funds had been using insider knowledge to influence proceedings and seek profits. And the ruling is a potential blow to the funds — who have long argued they acted properly — and the large law firm Fried, Frank, Harris, Shriver & Jacobson, which was representing some of the funds and is accused of passing them confidential information.
Part of Judge Walrath’s ruling focused on a dispute involving $4 billion held by JPMorgan Chase when Washington Mutual was put into bankruptcy. Early in the bankruptcy proceedings, Washington Mutual claimed ownership of those funds, and in confidential settlement talks, JPMorgan agreed to hand them over.
If the public had been aware of that agreement, the value of Washington Mutual’s bonds would probably rise, since the $4 billion could be used to pay bondholders, including hedge funds that had bought the debt.
The deal, however, was kept secret.
Lawyers representing some Washington Mutual shareholders, in a brief filed this year, claimed that lawyers from Fried, Frank, Harris, Shriver & Jacobson, which was involved in the bankruptcy negotiations, told its clients, the hedge funds, about the secret agreement. As a result, those hedge fund investors were able to buy bonds on the cheap, and then wait for their value to rise when the agreement came to light.
Judge Walrath, in her Tuesday decision, noted that certain shareholders said that Fried, Frank “was under a written confidentiality agreement barring it from sharing information with its clients, unless they were subject to confidentiality agreements of their own. Nonetheless, on July 1, 2009, Fried, Frank shared summaries of the April negotiations with both Centerbridge and Appaloosa, who were not at the time subject to a confidentiality agreement.” Centerbridge, the judge wrote, continued to trade in Washington Mutual bonds, while Appaloosa voluntarily restricted its trading activities.
The hedge funds and others have argued that though they may have had talks with Fried, Frank or others privy to confidential information, they received no “material information” that would rise to the level of insider trading.
The judge did not rule on whether the hedge funds had committed wrongdoing or whether the claims made by shareholders’ lawyers were true. Still, those accusations, she wrote, were “a colorable claim that” the hedge funds had “received material nonpublic information,” that could be resolved only through further inquiry.
But first, the judge wrote, the parties should go to mediation to resolve the dispute.
Representatives of Fried, Frank and Aurelius Capital Management declined to comment on the judge’s ruling. Owl Creek Asset Management did not return phone calls seeking its perspective. Centerbridge Partners declined to comment.
Will litigation liabilities overwhelm Countrywide and/or Bank of America and force one or more entities into insolvency? That's the question posed by Steven Davidoff in a DealBook post which presents various allegations drawn from AIG's recent lawsuit against the bank. AIG's complaint details various inter-bank transactions which could be characterized as fraudulent transfers.
Wall Street used to watch and bet on share prices as litigation claims took down former manufacturers facing mass tort claims from past asbestos-containing products. Now the scene has changed as Wall Street firms are themselves targeted as having committed massive, tortious frauds. If there is an insolvency, the liability estimation hearing certainly would be interesting.
Set out below are some of the key excerpts as culled by DealBook:
"The complaint filed by A.I.G. against Bank of America describes these transactions: On June 2, 2008, Countrywide Home Loans, a subsidiary of Countrywide Financial, sold Countywide Home Loans Servicing, another subsidiary, to NB Holdings, another subsidiary that was wholly owned by Bank of America. Bank of America paid Countrywide Home Loans for this sale by issuing it a note for $19.7 billion. Countrywide Home Loans Servicing was the actual subsidiary of Countrywide that serviced almost all of Countrywide’s mortgage loans. Countrywide Home Loans also sold a pool of residential mortgages to NB Holdings for $9.4 billion. On Nov. 7, 2008, Countrywide Home Loans sold the rest of its assets to Bank of America for $1.76 billion.
Separately, Bank of America also acquired notes worth $3.6 billion from Countrywide Financial’s bank and the equity in a number of other Countrywide subsidiaries. Bank of America also assumed $16.6 billion of Countrywide’s debt and guarantees.
If the A.I.G. complaint accurately describes these transactions, it means that the net effect was to leave Countrywide Financial and Countrywide Home Loans without assets, except the $11.16 billion payment and the $19.7 billion and $3.6 billion notes ($34.46 billion total). Countrywide’s liabilities stayed with the Countrywide.
Bank of America turned Countrywide into a shell with assets of $34.46 billion, part of it in the form of loans from Bank of America. Once the settlements exceed this amount, Countrywide is out of money. Again, the exact amount is uncertain and this is an approximation, but it appears that Countrywide’s remaining assets are rapidly being subsumed by litigation claims and other liabilities related to the financial crisis."
Social and Legal Issues Related to the Problem of the BP Oil Fiasco Creating Involuntary Creditors - Professor Helwege's Article
Earth Day. A day to consider some of the consequences of the BP oil rig fiasco in the larger context of mass torts. One problem arising from mass torts is that the world's legal systems are doing a lousy job of dealing with the persons and entities suffering loss caused by the tort. Among other problems, the injured parties are rendered involuntary and unsecured creditors of the person or entity causing the tort. In that context, one might also think of Mother Nature, the Gulf waters and its creatures as members of the vast group of international, involuntary creditors. All of the victims/creditors face new challenges because BP has now filed suit , blaming the fiasco on the owner of the rig (Transocean) and the maker of the blowout preventer (Cameron International). Accordingly, at least in theory, BP also could be an involuntary creditor of the real problems.
A business professor recently wrote touched on the social and legal problem of torts creating involuntary creditors through an article focused on the BP oil fiasco. Dr. Jean Helwege's online article unfortunately is locked away behind the digital barrier the American Bar Association shortsightedly imposes for articles published in its magazines. The article is titled: The Gulf Oil Spill: Social Versus Legal Obligations Facing BP, and appears in the Winter 2011 issue of the SciTech Lawyer, at 6-7.
Dr. Helwege's article is notable for at least three reasons. First, she raises the prospect of raising the creditor status for involuntary tort creditors, or "going back to a Superfund structure where we tax likely polluters in advance of their expected crimes. Conversely, if we do not push at all, these "accidents" will occur too often from lack of care. The situation is reminiscent of drunk driving in America before the creation of Mothers Against Drunk Driving (MADD). Back then drunks, would get behind the wheels of their cars and kill people, and we used to call them accidents. MADD convinced us that these incidents were not entirely unpreventable." Dr. Helwege's well-stated argument obviously could (and should) also be applied to protect the interests of personal injury creditors, and not simply environmental creditors.
Dr. Helwege's article also is valuable for making that point that the uncertainty of future toxic tort injuries creates leverage that is in fact used in bankruptcy court to allow shareholders to create bargaining power over the sometimes likely but not well organized groups of likely future victims. In making this point, Dr. Helwege correctly points to asbestos bankruptcies as a prime example of tortfeasors using bankruptcy to evade paying full value for losses caused, and identifies Manville as one of the entities that paid too little.
And, finally, the article is notable for coming close to calling a spade a spade with respect to tobacco industry asset movement games in which the non-tobacco assets have been separated from the tobacco assets so that less money is available to pay future injured smokers. Thus, she notes: "By separating the pieces of the negligent company and calling into question the which parts of the legal entity have obligations to pay, BP can reduce the pool of assets available for negotiation in bankruptcy. This line of thinking undoubtedly spurred the boards of Phillip Morris and RJR Nabisco to shed their food businesses as they faced increasingly unfavorable tobacco litigation outcomes."
Conclusion? Involuntary tort victims deserve better than law gives them today. New solutions are needed, including small-scale answers such as described in this post on the corporate bonding suggestion of Professor Rhee as a means for dealing with small-scale tort victims of insolvent corporate entities. A recent article on a young and tragically injured drunk driving victim made me think that Professor Rhee's proposal could be slightly modified to create a fund to provide better care for persons paralyzed by under-insured drunk drivers. Professor Helwege further drives the point home with her pointed observations about MADD having changed the legal and social landscape. The law needs to do better for tort victims/involuntary creditors, including even Amoco if in fact the fault lies with the rig owner and the manufacturer of the blowout preventer.
Asbestos claimants continue to pursue GM for asbestos-related recoveries. Here is a story from Bloomberg yesterday on a recent hearing that allowed plaintiffs to move forward with some discovery against GM. Plaintiffs predict possible claims for "billions."
Defendants remaining in the tort system will watch with interest. After all, if GM does not pay, then the plaintiff's will demand that other defendants pay GM's share.
Bankruptcy Courts Seem to Be The World's Biggest Litigation Funders, But Fail to Apply Free Market Rules to Reduce Expenses
A couple of observations on the Lehman bankruyptcy fees now that the case is back in the news as total professional fees approach $ 850 million, and Weil's fees edge just over $ 200 million. The fees rankle many because lawyers are being paid stunning hourly rates, such as over $ 1,000 for partners, and over $ 500 for young lawyers. Those numbers make no sense when much of it is for work that's nothing more or less than complex commercial litigation that could be done by many of the thousands of really good commercial litigation lawyers in the United States.
One observation is that the issues here are not new; the scale is simply bigger. Because this is not a new issue, critical thoughts and ideas are out there, and have been for some time. Indeed, expert ideas and commentary readily available from Professor Lynn LoPucki and others. Consider, for example, the following information stated on Professor LoPucki’s website page at UCLA Law:
“LoPucki has engaged in empirical research on large public company bankruptcies for the past twenty-five years and has been quoted in several hundred news articles on the topic in just the past five. His Bankruptcy Research Database http://lopucki.law.ucla.edu provides data for much, if not most, empirical work on the topic. LoPucki’s book, Courting Failure: How Competition for Big Cases Is Corrupting the Bankruptcy Courts (University of Michigan Press 2005) shocked the bankruptcy world with empirical evidence regarding the effects of forum shopping and court competition. The debate over those allegations has dominated recent scholarship in the field. LoPucki and his frequent coauthor, Joseph W. Doherty, are currently working on another book, Controlling Professional Fees in Corporate Bankruptcies, under contract with Oxford University Press.” (emphasis added).
Some defend the fees by saying the leaders of the estate are adding value, often by bringing lawsuits to recover money. What that really means is that the Lehman bankruptcy estate is the world's biggest litigation funder for litigation from one entity, and the US bankruptcy court system is the world’s biggest collection of litigation funders.. Unfortunately, the US Trustee's office and the judges apparently lack the resources or desire needed to manage the fees paid to bring lawsuits. So, in place, there is a bankruptcy cartel in which a few judges and lawyers take most of the big cases and work. That's possibly the least free market approach one could devise, except that it is at best problematic to see courts competing for cases.
So, why not bring free market principles into play for doing the litigation? District judges overseeing class action cases innovated competitive bidding and selecting among competing legal representatives, as described here, and here, back in 2006. The Federalist Society was pushing the concept back in 2002. Also see this paper on awards to class representatives.
Bankruptcy courts can and should at least be demanding competitive bids for doing litigation, and perhaps even to represent the estate. Yes, some will argue that the debtor should get its choice of counsel, but ask: why? The business went badly enough that it cannot operate with government court help. What reason is there to think the current owners and managers will make a good choice on counsel?
In sum, there are plenty of reasons why some say it's well past time to end the bankruptcy court cartels created by a few firms and courts, with forum shopping as a big part of the equation. For more on the forum shopping and competition between courts, see Professor LoPucki’s book, Courting Failure: How Competition for Big Cases Is Corrupting the Bankruptcy Courts (University of Michigan Press 2005). Hopefully the new book on controlling fees will be out soon !!
CERCLA Protects the Contribution Claim Rights of Allegedly Responsible Co-Defendants; Bankruptcy Courts Should Follow The Same Rule in Mass Tort Situations
A new article by Russel Prugh from Marten Law caught my eye because it explained that the federal circuit courts are now embracing a rule that permissive ointervention rules and CERCLA protect the contribution claim rights of allegedly responsible co-defendants. These ruliings stand in contrast to some asbestos bankrutpcy rulings that fail to protect the rights of co-defendants. The article focuses on a recent opinion, United States v. Aerojet General Corp., No. 08-55996, --- F.3d ---, 2010 WL 2179169 (9th Cir. June 02, 2010).
Why does this subject matter ? Because in some but not all mass torts, there are many potentially responsible parties that caused an indivisible harm. Think BP oil rig. Think asbestos litigation. Upon scrutiny of any real depth, it seems pretty obvious that there is no valid logic to respecting contribution claim rights in some mass tort settings, but not in bankruptcy court. Simply put, there cannot be a sound public policy that says that people who screw up a business through bad judgments should be protected from paying for physical injuries and property damage they caused through their bad judgments. Indeed, one can pretty easily argue that tort claimants and co-defendant are both involuntary creditors who should recevie more protection than do voluntary creditors.
The entire article and opinion should be read. But, for now, here are two key excerpts (text of footnotes omitted) to whet the appetite. Note especially the second quoted paragraph, and consider an analogy to the fairness of chapter 11 "pre-packs" in which the asbestos persoanl injury creditors and the debtor already have cut a deal. The key quotes are:
The Ninth Circuit panel rejected the reasoning of the Aerojet district court and a 2004 Ninth Circuit district court ruling, once thought to be in line with the majority view, holding that the contribution right was insufficient to permit intervention under CERCLA. These decisions focused on two broad themes: (1) the contribution right under CERCLA was a “contingent” or “speculative” interest that would not support intervention; and (2) intervention for non-settling parties was inappropriate under CERCLA Section 113(i) because CERCLA’s legislative history and underlying policies supported denying intervention.
The Ninth Circuit also briefly addressed whether CERCLA’s notice and comment procedure for consent decrees provides non-settling PRPs with a means to adequately protect their interests. The court rejected this proposition, noting that once the settling parties and the government have agreed, their interests “are essentially aligned and are adverse to those of non-settling PRPs who oppose entry of the decree.” Indeed, the court explained it would be “unrealistic” to believe that the government would “abandon or substantially modify” the proposed consent decree in response to the non-settling PRPs comments “at this late stage of the process.”
Comments as a Co-Chair - Can We Look Outside Asbestos to View the Role of Chapter 11 as the Tool for Resolving Most Types of Mass Tort Claims
I'm enjoying today a role as co-chair of this Perrin conference on asbestos chapter 11 cases.The timing of the conference is fortuitous in view of recent chapter 11 filings, and the prominent discussions regarding the BP fund. In the following cover letter for conference materials, I've asked conference participants to look outside the asbestos context to the wider world of all mass torts, corporate reorganizations, actual insolvency, and the reality that chapter 11 proceedings are now used by corporations for strategic purposes instead of being forced into chapter 11 by actual insolvency. The letter pulls together some of the points previously aired on this blog. The letter states:
My purely personal view is that current law and practice pays far too little heed to science and the rapid changes that I believe will over time bring tort claiming on a scale that will widely exceed the asbestos claiming. Science is especially important when it comes to considering the potential rights and claims of current and future persons cancer victims. These concerns are especially strong now that science indicates that some subsets of exposed persons pass on genomic changes that will or may disrupt endocrine systems or produce future cancers. The best known examples may be the plights of the so-called DES daughters and the Vietnamese families that have seen generations of cancer after Agent Orange exposures. For more on the general topic of science, genomes and future litigation, see the recent articles of a brilliant lawyer who also holds a PhD in genetics, Gary Marchant, of the Sandra Day O’Connor School of Law at Arizona State University. One of the recent articles is included.
This conference brings us together to talk about chapter 11 cases that arise from asbestos claiming. These chapter 11 cases, however, matter for more than just asbestos claiming. Indeed, the highly unusual world of asbestos is only part of the larger scene in which chapter 11 is becoming or is being considered as the way to resolve mass tort claims and other product liability claims. The current hot issue is whether the BP oil rig fiasco will be resolved using chapter 11. In addition, chapter 11 procedures and trusts or funds are in place or contemplated for breast implant claims, silica claims, claims arising from sexual abuse by Catholic priests, and Chinese drywall claims. Consider also the Chrysler and GM chapter 11 cases, and their impacts on non-asbestos tort claimants. Note also the Tronox reorganization arising out of massive environmental risks. Note further the Third Circuit’s recent sua sponte grant of rehearing en banc in the GIT/Narco case that has previously caused 19 state Attorneys General to file an amicus brief regarding disposition of insurance-related rights and the scope of chapter 11 injunctions.
Other reorganization-like procedures and events also are relevant. For example, in Australia, one corporation facing massive asbestos claiming is trying to use a "schemes of arrangement" to seek to limit the assets at risk to pay asbestos and claims. Another Australian entity reincorporated around the world as it sought to give effect to a private asbestos trust, and its officers were convicted of securities fraud (the issues are on appeal). Meanwhile, insurers limit their exposures to paying claims by using schemes of arrangement and run-offs that are not unlike reorganizations.
The attached materials address these various topics. Some are court papers. Others are my purely personal comments. My personal comments are offered from the perspective of someone who has lived since 1984 in the world of asbestos claiming while representing manufacturers in underlying claims, coverage cases, corporate arbitrations, and asbestos bankruptcies. Due to cancers that have stricken persons very dear to me, I also look at the issues from the perspective of current and future cancer victims who may someday be claimants against entities that sell or use substances viewed as "toxins." Hopefully you will find the materials useful to considering the precedents being set in asbestos chapter 11 cases.
In short, I suggest that current law and practice fails to respect the rights of co-defendants that end up paying tort claims left behind by entities that are either (1) first movers into chapter 11 because of massive liabilities, or (2) the financially sophisticated and wealthy entities that are later movers into chapter 11 for strategic purposes. I also argue that current chapter 11 practice fails to meaningfully respect the rights of claimants who live and die outside the United States. Set out below is the full text of the cover letter:
Dancing with The Masters of the Universe - Chapter 11 Strategies to Create Otherwise Unobtainable Res Judicata and De Facto Class Actions
Chapter 11 filings used to imprint a scarlet letter on a company that was usually actually bankrupt in the classic sense of the word. Not so today. To the contrary, events most everyday illustrate that chapter 11 filings have little to do with actual insolvency, and instead are just part of the larger dance between tort claimants, defendants, shareholders, directors and officers, and their insurers. The examples illustrate why chapter 11 is out of control, and needs serious improvement. As is, state laws are largely irrelevant except for fraudulent conveyance rules, and so bankruptcy courts are now the vehicle for displacing state laws that financiers find inconvenient and expensive. Chapter 11 cases also are where the MOUs go to obtain class actions and res judicata results they could never obtain in regular federal or state proceedings. Once has to ask - why is this allowed, and is it constitutional in application ?
Examples ? Here are two. This article looks ahead to Sam Zell''s deposition on the more than plausible claim that the Chicago Tribune lbo and related transactions included a fraudulent transfer of assets. As the article explains, the deposition is part of the dancing between creditors seeking leverage regarding all the debt taken on to finance Mr. Zell's activities. In short, one issue is whether the megalenders can be stripped of their purported rights so that other debt holders and ordinary trade creditors can be paid what they are owed ? Through the chapter 11 case, the parties likely will end up with a de facto class action, but Rule 23 class action standards will not be explored and its procedural rules will not be applied. Is this really "good" for anyone other than masters of the universe ?
In cases arising from mass tort claims, part of the dance is intended to immunize directors and officers from claims relating to corporate activities, such as corporate asset transfers of assets. The latter point is illustrated by this article from the Madison-St/ Clair Record regarding the Durabla asbestos bankruptcy and efforts to use an adversary proceeding in the chapter 11 to immunize the officers and directors for corporate transfers. Once again, the issues are being teed up to provide national res judicata that would not be created in an ordinary case between two litigants, and the proceedings can easily be viewed as a de facto class action that does not follow the rules for class actions.
After oral argument about a year ago, the 3rd Circuit has now sua sponte issued an order for reargument en banc in the important GIT mass tort chapter 11 case. Among other things, the case raises the question whether 1123(a)(5) can preempt anti-assignment provisions in insurance contracts. 19 state Attorneys General have filed an amicus brief in the GIT case to urge the 3rd Circuit to block the efforts of the debtor and the asbestos and silica plaintiff's bar to use bankruptcy court preemption powers to give asbestos and silica claimants exclusive access to GIT's insurance policies. The case also raises tawdry fact issues regarding generating a silica trust out of just a few claims. Some of the facts are set in past Globaltort posts here and here provide more information.
Important issues ? You bet,. Imagine how the rulings might apply to insurance for the oil rig fiasco.
Chapter 11 tort claim funds and trusts, backed by injunctions against litigation, are used for more than just chapter 11 asbestos claims. Thus, at least seven Catholic dioceses are using chapter 11 filings to resolve sexual abuses claims and to marshall insurance assets. A very focused litigation reporter on the subject is one of many available from the InterNet Bankruptcy Library located here. The Fairbanks Diocese in Alaska recently received confirmation of its plan that revolves around a trust to resolve the claims. The plan disclosure agreement is on line and provides a general summary of the plan. The website for the diocese includes the remainder of the plan documents.
A Chapter 11 Filing By BP and Other Entities Could Actually Provide Positives for Chapter 11 Cases Related to Mass Tort Claiming
Will the oil rig fiasco result in a chapter 11 filing by BP entities or others ? If so, it could well be a positive for chapter 11 cases related to mass tort claiming. It's been obvious for some time that it's likely that chapter 11 could and probably would be used to resolve claims for at least some of the many entities tangled up in the oil rig situation. Now, the popular press has caught on, and so recently there are more articles mentioning that lawyers and financiers are talking about preserving financial value in BP's share price via chapter 11.
No doubt the lawyers and financiers are talking about chapter 11 for entities other than just BP. Why ? Because, as proved by the chapter 11 cases of Manville, GM, Chrysler, and other events, judges in the Second and Third circuits take broad views of the powers of bankruptcy courts. And, about 15 years ago, professionals in those circuits learned to happily embrace the bankruptcy court's perceived power to quickly blunt some of the sting of massive errors. The professionals also learned that complex mass tort claims can generate hundreds of millions of dollars in barely scrutinized chapter 11 fees earned in forum shopped bankruptcy courts via cases that ultimately will generate decades of issues and work.
What could be good about BP and others using chapter 11 filings to resolve massive tort claiming ? Start with intense federal government and public scrutiny of what is done to resolve tort claims arising from this very large and very public event. Other mass tort chapter 11 cases are barely noticed by most lawyers, much less the federal government or the public. And, chapter 11 cases often but always operate with little if any transparency or useful public information due to absurd rules that bankruptcy courts and lawyers have put in place to seal most but not all hearing transcripts for 90 days.
An oil rig chapter 11 also could be good because it will force state governments to pay attention to chapter 11's impacts on persons and businesses in their states. Until recently, most states have failed to pay meaningful attention to mass tort chapter 11 cases. That's been an ongoing mistake because the chapter 11 mass tort cases involve sickness in state citizens, tens of billions of dollars being funneled to those persons, and chapter 11 games and orders that are used to circumvent and/or ignore state law rules which are supposed to govern tort claiming.
Resolving the oil rig fiasco in chapter 11 also could produce good things for chapter 11 mass tort cases because there will hundreds or thousands of lawyers and other professionals involved, and most will not be repeat players in the chapter 11 system. It would be refreshing to see a mass tort chapter 11 case with actual diversity of thought, and lawyers really acting as adversaries. In contrast, the recent world of asbestos chapter 11 cases involves a relative handful of lawyers who know the dance by heart and seldom challenge much of anything for very long. The few challenges that are raised virtually always settle. And, the issues quite often settle before appeals are heard due to most of the repeat players having a well known price, and the knowledgeable players banking on appellate courts rejecting appeals by invoking the due process defying doctrines of legal and equitable mootness.
Another good could arise because an oil rig chapter 11 claiming process would force the courts and lawyers to really think about science and the long term. Thoughtful professionals already say that the impacts of the fiasco will have consequences for decades, and many of the consequences are not now known. These realities hopefully will cause real scrutiny of what the future may bring. Better yet, it seems obvious that the chapter 11 court will have no choice but to appoint multiple different futures representatives who will not sacrifice their constituencies, and instead will have no choice but to engage real scientists (instead of statisticians) to really think about the future impacts from the massive release of "toxins" in oil. No doubt scientists will speak of myriad deaths of creatures of all kinds. No doubt some will also speak of toxins causing gross malformations of bodies due to disruption of endocrine systems, and of toxins causing genetic mutations that will be passed down for generations, with some changes producing future cancers. They probably also will say that the future is not scientifically knowable today, and that a prudent course would be to let better judgments be made in the future after future events unfold. Hopefully such testimony will cause bankrutpcy courts and scholars to see the massive flaws in the current rush to carve the pie all at one time, with large portions still being given to people who are not really sick and through carving the pie with little regard for future scientific developments.
An oil rig chapter 11 also could be good because it will force US courts and lawyers to actually honor rights of persons in other nations. BP as an entity obviously brings its own international and parochial views from the UK. Moreover, Mexico and other nations around the Gulf may be impacted. Unfortunately, in chapter 11 mass tort cases to date, bankruptcy judges approve "global" notices and injunction terms said to apply to non-US claimants, without providing due process notice to potential claimants. Instead, notices are usually only in English, and are usually only in newspapers. In this age of Internet, email, databases and translation engines, much more can and should be done to provide actually meaningful notice to persons in other countries. Because BP's oil apparently will be spreading through global seas for decades to come, other nations inevitably will care, and will pay at least some attention. Hopefully the international claims will actually be considered with real respect for the laws of other nations.
An oil rig chapter 11 claim estimation process also will need to occur, and could be a positive. In mass tort chapter 11 cases to date, the courts and parties have used estimation processes that make a mockery of science, as demonstrated by this detailed declaration from Professor James Heckman, a Nobel prize winning economist. With a very public and global set of oil rig chapter 11 cases, one hopes science actually will be used to the fullest extent possible. Consider, for example, the need to estimate the volume of oil released. Where it will go ? How many living things the oil already has killed ? How many will die next year, or in five years ? How many organisms will ingest oil and will then be consumed by other large creatures, thus spreading the consequences far and wide and into future generations. Will there be a future Silent Spring in parts of the vast unseen ecosystems beneath the waves ? Hopefully Congress and/or the bankruptcy courts will make new law and will actually force the litigants to apply the best possible science instead of the statistical voodoo too often used in asbestos chapter 11 cases.
In short, bring on chapter 11 filings from some or all of the entities involved with the oil rig. Let's hope they become the vehicle by which the bankruptcy process is actually made to work well. Working well would include embracing science. Working well also would include recognizing the obvious flaws in the current system of futures representatives. Working well also would mean recognizing that one time liability estimates are not wise because future liabilities are too often badly underestimated. When estimates are too low, the burden of shouldering the shortfall goes to either injured plaintiffs or co-defendants who remain in the tort system. Accordingly, the courts or Congress should require some form of remedy that leaves investors at risk until it's certain others are no longer at risk.
Bondex Asbestos Chapter 11 Filing Highlights the Disastrously Poor Functioning of Chapter 11 as a Means for Coping - Fairly - With Mass Torts
Two new asbestos chapter 11 cases were filed in the last two weeks. Both filings are interesting for various reasons. One of the filings was RPM putting into chapter 11 its Bondex business that previously produced joint compound material that contained chrysotile asbestos fibers in relatively small amounts. This press release describes the filing in more detail.
Market impact on RPM's stock price and debt rating ? Small. Here is Fitch's debt rating for RPM as issued after the chapter 11 filing; it's neutral. Here is a PowerPoint summarizing RPM's presentation and analyst questions; very little said of any real note. The stock ticker is RPM, and shows a price drop of less than 5 %.
The Bondex filing is interesting in that it is not a prepack. During the 2000s, multiple asbestos-related prepacks were ultimately approved. Hopefully those days are over because the prepacks did great violence to the rights of future claimants. Among other flaws, the prepacks tended to provide way too much money to people who were not sick. The prepacks also made a mockery of the rights of underlying case co-defendants to assert cross-claims or contribution claims against the entities in chapter 11. Insurers also were treated badly, but generally deserve little sympathy because they simply make case by case financial decisions that suit the insurers needs and reinsurance situation in a given case. That's regrettable in some ways because it means the chapter 11 system is deprived of advocates taking long term, principled positions on preserving insurance for those who are really injured or at real risk.
The Bondex prepack also is noteworthy for information set out in its "Informational Brief." An "Informational Brief" is the bankruptcy court equivalent of a white paper advocating a view.
Set out below are key excerpts from the brief. The brief and data are largely self-explanatory, but omit one key reality. The key reality is that current. solvent asbestos defendants are paying a huge price for disastrously bad rulings and outcomes in the early chapter 11s of the major "asbestos companies," such as Johns-Manville, UNARCO, and Raymark.
In short, the early chapter 11 cases took far too little money from investors in those corporations, and demanded far too little from their insurers. Why ? In short, because the parties were in a hurry to get to a "final" outcome to generate cash flow for their particular constituency. That rush to "finality" was a major mistake. The lawyers, judges and legislators failed to fully use science to look far ahead, and also failed to acknowledge all that they did not know. In short, they failed to appreciate that relatively lower levels of exposure would generate asbestos disease. The parties also failed to protect the money against massive raids by the not sick. The result? The Manville trust - the vehicle to supposedly solve all the problems - was broke the minute it opened its doors, and so the trust was soon back in chapter 11.
With that background in mind, consider the following excerpts from Bondex' Informational Brief, and note especiallyy the change in the claiming pattern against Bondex. According to industry records, Bondex was one of over 50 companies with less than 2% of the market for joint compounds. But, today, it is a named defendant in about 60% of annual mesothelioma case filings in the United States. Does anyone really beleive that mesothelioma victims had an uncanny knack for buying Bondex products ?
The Informational Brief states the following:
"Therefore, as early as 1980, even before the bankruptcy filing by Johns Manville, the world's largest vertically integrated asbestos producer, on August 26, 1982, plaintiffs' counsel in the asbestos litigation clearly knew that the Debtors existed and that they had manufactured and sold joint compound. Yet, during the 19-year period from 1980-1999, the Debtors paid a total of only $1.6 million in asbestos-related indemnity costs, demonstrating that before any major bankruptcy filing in the joint compound market, plaintiffs' counsel viewed the Debtors' joint compound products as a non-factor that played no material role in the causation of asbestos-related disease. 12 Significantly, even this relatively small amount of money ($1.6 million over 19 years, including third party insurance payments) represents to some extent inflated value because most of these claims arose after the Johns Manville bankruptcy filing and during the intervening bankruptcies of other asbestos giants, including Eagle-Picher, UNARCO and Celotex.
Although the Debtors were named in a limited number of asbestos lawsuits prior to 1999, the floodgates opened after the asbestos bankruptcy wave of 2000-2001. As they had in the past, plaintiffs' counsel began searching for of revenue to replace the payments that had up until that time come from then-bankrupt defendants, including USG. In the years following the USG bankruptcy, the Debtors' asbestos costs increased with a rapidity that is statistically and grossly out of proportion with any realistic assessment of Debtors' place in the joint compound market::
From 1980-1999: $1.6 million
Fiscal Year 2001: $10.6 million
Fiscal Year 2002: $43.0 million
Fiscal Year 2003: $52.0 million
Fiscal Year 2004: $63.0 million
Fiscal Year 2005: $67.4 million
Fiscal year 2006: $59.9 million
Fiscal year 2007: $67.0 million
Fiscal year 2008: $82.5 million
Fiscal year 2009: $69.4 million
Fiscal year 2010: $75.0 million
Additionally, since 2001, mesothelioma claims have increased against the Debtors substantially out of proportion to the incidence of mesothelioma filings in the tort system.This anomalous increase in mesothelioma filings again reflects over-naming or erroneous naming of the Debtors, as opposed to any realistic assessment of liability. The Debtors' mesothelioma filings, as compared with tort system filings of mesothelioma claims in general, demonstrate this striking difference:
Year Tort System Meso Filings Meso Filings vs. Debtors
2001 1600 150
2002 1700 200
2003 1750 650
2004 1850 600
2005 1775 790
2006 1775 1100
2007 1600 975
2008 1650 1025
2009 1800 1125
Note: all numbers approximate.
Recommended Reading on Torts - "Courting Failure: How Competition for Big Cases is Corrupting the Bankruptcy Courts", by Prof. Lynn LoPucki
Spring break included time to read several books. Some are relevant to a GlobalTort topics, including one highly relevant to the deep flaws in the usual chapter 11 approach to dealing with asbestos and other mass tort situations.
As regular readers of this blog know, I'm anything but a fan of the outcomes in most (not all) of the asbestos chapter 11 cases because the cases are conducted with large measures of secrecy, and too often produce results in which billions of dollars are paid out to people who would not be paid in most (any?) state court tort system. The frustration is not just academic - I tried one of the cases to judgment (trial in 2007, judgment in 2008), and then briefly was involved in a second such case until a grossly incorrect ruling eliminated the "standing" of the client. In both cases, state law was by and large ignored by the parties in settlements they crafted to generate hundreds of millions of asbestos claims. Worse yet, the chapter 11 bankruptcy judges rubber stamped almost all of the settlements, thus aiding and abetting the trampling of state law and common sense.
So, to learn more about how chapter 11 could be so flawed, I read Professor Lynn LoPucki's 2005 book: Courting Failure: How Competition for Big Cases is Corrupting the Bankruptcy Courts. It's a great telling of a depressing story, with large amounts of objective data to prove the conclusion set out in the book's title. Go here for a small website that includes his database of research on chapter 11 cases and related information. Go here for a detailed review of the book. Go here to download a related paper that tells much of the story in fewer words.
A key question the book addresses is: when legal systems compete with each other, does decision-making move towards or away from faithful application of existing law ? According to Professor LoPucki, the answer plainly is that competition between legal systems results in a “race to the bottom” as systems ignore established law in favor of expedient outcomes that appeal to the desired legal clientele. To prove the point, the book begins by reminding readers of the corporate law history in which New Jersey and Delaware gutted existing corporate law in order competed to attract corporate charters. That introductory reminder is by itself a valuable lesson, and a reminder of why "trust busting" later became part of our legal vocabulary when New Jersey trusts were attacked by new federal laws and enforcement efforts.
Courting Failure then turns to its real focus, the history of and reasons behind the extreme and objectively proven forum shopping that has caused so many the filing of so many large public company chapter 11 cases in Delaware. As the boo explains, Delaware was once a legal "backwater" with only one bankruptcy judge. Delaware's status changed because of, among other things, a pair of Delaware bankruptcy venue decisions that were never overturned in court or over-ridden by statute, thus paving the way for today's concentration of chapter cases in Delaware . In s a similar vein, Prof. LoPucki also details several other Delaware rulings and actions that could not possibly be explained by any rule of law learned in courses on federal jurisdiction. And, Professor LoPucki's subjective points are nicely buttressed by objective data analyzing chapter 11 case filings by public companies.
Prof. LoPucki's ultimate point is that Delaware's bankruptcy court created its own significant industry by providing "predictable" bankruptcy rulings that have little to do with bankruptcy law, and the chapter 11 system failed when judges rubber stamped outcomes. As to rubber stamping, Courting Failure explains that too many bankruptcy courts approve a plan if there are no objections. Therefore, chapter 11 plans can be and are approved, and can go effective, if objectors are eliminated through erroneous trial rulings or special deals. As a result, the trial court proceedings often are the final word. Courting Failure also is helpful because it teaches enough about bankuptcy politics and history to better understand how and why it is that the Chrysler and GM cases so quickly shot through the chapter 11 system. .
The book does not focus on the asbestos chapter 11 cases. That said, it's plain that the same principle applies to and explains why the chapter 11 asbestso plans often (not always) disregard the actually applicable state law rules that should govern the claims.
My overall message about the book ? Read Professor LoPucki's book to better understand how and why competition between legal systems is indeed a recipe for a race to the bottom. Read it also for proof that the "forum shopping" accusations so often lobbed against some plaintiff's lawyers apply at least equally strongly to some corporate lawyers and their clients, aided and abetted by other participants in the bankruptcy system who have found ways to turn "predictability" to their own ends. The biggest lesson of all is that agreed chapter 11 plans and settlements too often are a terrible outcome on the merits.
Due Process Dies Again in Chapter 11 - District Court in GM Case Affirms Orders Cutting off Pending Product Liability Claims of Victims and Co-Defendants: "The Voyage of the Damned" Continues
Apparently I missed an important day in law school. That is, I assume there was a day in which some professor explained when and how it is that bankruptcy courts were granted the power to do anything that's expedient towards allowing the debtor to declare victory in a chapter 11 case. And, apparently that power expands exponentially if some well-paid pro-debtor partisan will put in a reed thin, practically untestable declaration asserting, in effect:
The debtor really needs this injunction to be issued to block some state law rights of other people because gosh darn it, the debtor messed things up to the point it's in a self-created crisis. The way we can do something that appears maybe useful in the short term is to just take the deal on the table, not ask too many questions, and move forward fast. It's just too darned slow, expensive and annoying to conduct a chapter 11 case any other way.
A really candid declarant also would go on to say:
Due process is a nice concept, but it doesn't work well in chapter 11. Providing due process takes too long, and it costs too much. The debtor is so darned messed up from its past promises that it just can't afford to honor them. The debtor messed up really badly and so it can't afford the time, expense , uncertainty and cash flow hiccups of a chapter 11 case that would provide due process that respects and protects the state law rights of the tort victims and the co-defendants in the thousands of pending tort cases. That's especially true for the rights of thousands of tort victims who we cannot quickly cut a deal with because the victims are spread out around the country, some are grievously hurt and want lots of money, and these darned claimants have not been kind enough to all hire Wall Street lawyers we like to work with to cut quick deals towards achieving the goals of the well-capitalized masters of the universe. Worse yet. the tort cases all include thousands of co-defendants who've made cross-claims against the debtor. They are even harder to deal with in some ways.. For example, lots of those defendants have insurance company lawyers,. and the insurance companies almost never let them do anything important in less than a couple of years. And, some of the insurers have annoying reinsurance treaties that offer them an excuse to claim that each case is unique instead of just a fungible commodity, even though at the end of the day we all know that the insurers only care about the money.
In short, judge, our Excel spreadsheet deal calculations depend on people being paid based on multiples of free cash flow, and those calculations produce much lower numbers if we have to factor in uncertainty. So, please help us get our deal done and earn our administrative priority fees by holding your nose, issuing that injunction, and dumping all the uncertainty onto the victims and the co-defendants. Somewhere out there there must be rule of law that says we should give a fast process to ignore the constitution to the financial geniuses who messed up the most, and we should not worry too much about some people who have suffered crippling injuries. Besides, there are trade creditors out there, not to mention all those busy, busy hedge fund traders who are arbing the bonds and want to get a deal done now so they can lock in their profits on the trades and move on to the next opportunity to make some money by using chapter 11 to subvert state law and due process. The debtor really would appreciate you giving the value of certainty to the 363 sale buyer and the creditors who are easier to deal with than all these creditors involved in all those darned tort claims pending in state and federal courts around our nation.
The reason behind the above ? The opinion this week in the legal farce commonly known as the General Motors chapter 11 case. The opinion is by district judge Kaplan, and affirms the bankruptcy court''s order enjoining prosecution of tort claims pending as of the petition for chapter 11. Susan Beck's summary article kindly includes links to the opinion and some of the briefs. Read them at your peril - the results are absurd and the reasoning has nothing to do with real due process.
Example of Tort System Impact When Manufacturers Use Chaper 11 to Exit the Tort System - Many Laws Need Work
Today is a soapbox day. In my view, a recent jury verdict in a car wreck case in Georgia nicely illustrates the very real tort system impacts that arise when entities such as Chrysler exit the tort system via chapter 11 without leaving behind insurance, cash or other economic rights sufficient to pay valid underlying tort claims. The exemplar case is identified in the caption shown to the left; see below for the full story from the Fulton County Daily Report, which includes links to the verdict form and the full pretrial order.
In my view, as molded and shaped by a wise bankruptcy scholar, chapter 11 has many, many problems today. One is that it is badly in need of judges who actually apply existing law and do not acquiesce to deals that obviously violate due process and existing law. In addition, critical thought is needed about what the chapter 11 statutes and common law rules should say in connection with entities using chapter 11 to escape product liability and other long-tail tort risks or obligations. The exemplar trial also exposes some aspects of the material lack of continuity and rationale economic and social policy thinking as between chapter 11 law and state tort law. In addition, facts not in the trial expose other problems related to the presence or absence of insurance, and thus implicate domestic and overseas law regulating insurance. In my view, statutes and common law rules on insurance (or the absence of insurance) also need much work to deal rationally with the chapter 11 system, as well as the insolvency laws of other nations.
In the trial, the net result is that Chrysler's exit of the tort system left the plaintiff without full compensation as awarded by an apparently very rationale jury (see full story below), and also put a component supplier at what seems to be an unfair and unwise risk of being hit with a large verdict as indemnitor of Chrysler. As stated in the pretrial order, the facts are simple. A drunk driver's car hit another car with four occupants. Three occupants were essentially unhurt, but an 11 year old child suffered separation of her skull from her spine, and permanent injuries to her endocrine system. The child suffered the severe injuries because a car seat failed. The plaintiff sued the drunk driver and the car seat supplier. The seat supplier's contract with Chrysler called for it to indemnify Chrysler if the component supplier had erred.
Ultimately, the seat supplier was exonerated at trial. But, it surely was at risk that a frustrated jury might have decided to find against the seat supplier for Chrysler's failure. And, the jury might also have found against Chrysler. If that had happened, without Chrysler at trial, then Chrysler might later have sought to file new legal proceedings to invoke its indemnity rights against the component supplier, and in that new case (or arbitration) might have claimed that it was not bound by the jury verdict since Chrysler was not represented at trial.
In sum, the fact pattern illustrates some of the many flaws in the lack of a rationale interplay between chapter 11 and state tort law. To see some of the other issues, ask yourself: where is insurance for the claim? Apparently there was no insurance, probably meaning Chrysler had self-insured (or, perhaps it had settled out all its polices through a lump sum settlement in which the insurer paid a fee to Chrysler to terminate some or all of the old CGL policies, with Chrysler pocketing the money and using it for purposes other than tort claims.) And, further yet, ask if it is is wise to allow a self-insurance/no insurance approach by manufacturers when obviously cars will suffer defects and failures, causing devastating injuries to some number of unfortunate victims who were powerless to do anything to block their fate. Think also about how all that interplays with offshore manufacturers that may exit the US tort system under insolvency laws of other nations. Think too of the offshore insurers (e.g. Lloyds) that may exit the tort system via British" schemes of arrangement" that allow insurers to almost completely avoid honoring long-tail insurance obligations.
Remember that Crain's reported that the the solvent Chicago Cubs would made a quick trip last fall through chapter 11 for a cleansing bath and chapter 11 injunction to make the entity easier to sell, and my former partner's query whether the Cubs would need bankruptcy court approval to put on the take sign in a key game that could effect the value of the franchise ? Perhaps one of the reason was anticipation of a suit filed last week by Tribune bondholders challenging bonds sold prior to Sam Zell buying the Tribune in a massive leveraged buyout that ended in Chapter 11. Set out below are some excerpts from an article by Randal Chase regarding the allegations.
"DOVER, Del. — Bondholders in the Tribune Co.'s Chapter 11 bankruptcy case are suing the banks that financed the media company's 2007 leveraged buyout, claiming they knew that the resulting debt load would leave Tribune insolvent.
The lawsuit was filed in U.S. Bankruptcy Court in Wilmington by Wilmington Trust Co., agent for holders of $1.2 billion in bonds sold by the company before real estate mogul Sam Zell led Tribune's $8.2 billion buyout.
The bondholders argue that the deal was fraudulent because it loaded up the company with too much new debt that was used to cash out Tribune stockholders. They want a bankruptcy judge overseeing Tribune's Chapter 11 case to reject the banks' secured claims, or at least have them paid only after the bondholders' unsecured claims are satisfied. Typically, secured claims get higher priority.
Defendants in the lawsuit include JPMorgan Chase, Citigroup, Bank of America and its Merrill Lynch subsidiary, the lead banks involved in the leveraged buyout, or LBO. Representatives of Tribune and the banks declined to comment Friday."
The Supreme Court acted in unusual fashion yesterday on Chrysler, and the actions create some issues that need further thought as to their implications for underlying tort claimants and for due process. Specifically, in this order, the Court granted certiorari, but then immediately vacated the judgment and AND vacated as moot the Second Circuit's opinion that explained its reasons for affirming the district court. The Second Circuit's opinion was germane to mass tort claims and due process because of its language to the effect that future tort claimants would not be bound by the bankruptcy court rulings. See below for the exact wording of the order.
I'll readily admit that I'm not a Supreme Court scholar. That said, this all seems rather odd, and makes one wonder about the motivations and thoughts behind these actions. Are these actions unique to the odd facts and pressures of Chrysler? Are the actions related to Justice Robert's avowed interest in making a name for this Court by taking and resolving more "business issues" ? Do these actions in any way reflect hat the Court thinks it learned or held about bankruptcy court finality in its Travelers/Manville bankruptcy case ruling that remanded the Manville case back to the Second Circuit for further proceedings (which have been briefed and argued)?
I look forward to learning what others think. I think this means that everyone is now back to lower court orders which also include language suggesting that future claimants are not bound. For now, with a hat tip, here are excerpts from the commentary on LAW360, with quotes from Chrysler's counsel:
"The order makes clear the case is over," attorney Todd R. Geremia of Jones Day, which represents the Chrysler debtors, said Monday. "There's nothing for another day."
The high court's ruling vacated a 53-page ruling in the Second Circuit affirming the sale as legal under the Bankruptcy Code but declining "to delineate the scope of the bankruptcy court's authority to extinguish future claims" until a claim for injury caused by Old Chrysler could be brought under successor liability law.
While the court vacated the Second Circuit ruling, it did not necessarily disagree with it. The court invoked a precedent from a case known as United States v. Munsingwear Inc. that allows it simply to vacate and remand cases that become moot on their way up.
"Nothing in this order today reflects any disagreement with the Second Circuit," Geremia said. "It's an order that arises from the application of Munsingwear."
The Supreme Court's order states:
" IN POLICE PENSION TRUST, ET AL. V. CHRYSLER LLC, ET AL.
The motion of Washington Legal Foundation, et al. for leave
to file a brief as amici curiae is granted. The petition for a
writ of certiorari is granted. The judgment is vacated, and the
case is remanded to the United States Court of Appeals for the
Second Circuit with instructions to dismiss the appeal as moot.
See United States v. Munsingwear, Inc., 340 U.S. 36 (1950).
Using bankruptcy code chapters 11 and 15 to avoid litigation is not quite as easy as some might think, as illustrated by an order that is here and is described in the LAW 360 article below.
Law360, New York (December 03, 2009) -- A federal judge has ruled that a London-based fur broker that filed the equivalent of bankruptcy in the U.K. can't stay a bid-rigging suit in the U.S. without first petitioning for recognition of the U.K. insolvency proceedings under Chapter 15.
Judge Ricardo S. Martinez of the U.S. District Court for the Western District of Washington rejected Fein & Co.'s motion to stay the putative antitrust class action Wednesday, saying the fur broker hasn't shown that it can't file Chapter 15.
The fur broker had argued in a Nov. 3 motion that comity necessitated the district court to stay the antitrust suit against Fein as it would have if the company had filed for bankruptcy in the U.S.
Meanwhile, the two mink fur producers who filed the action accusing Fein and other fur brokers of bid-rigging said an entity going through insolvency proceedings outside the U.S. can obtain relief here only through Chapter 15.
Siding with the plaintiffs, Judge Martinez said Chapter 15 "has provided a specific structure for addressing cross-border insolvencies, together with appropriate remedies."
The Washington court will consider granting Fein relief if it receives Chapter 15 relief in the U.S., he added. "Until that time," he said, "the court declines to stay these proceedings."
The plaintiffs, Wanechek Mink Ranch and Smith Mink Ranch Corp., alleged that between 2000 and 2004, the defendants engaged in a bid-rigging scheme that depressed the prices the plaintiffs and other mink fur producers were paid for their furs at auctions.
In addition to Fein, some of the other fur brokers named in the case include Delta Trading Corp., Klondike International Furs Ltd. and Alaska Brokerage International Inc.
The defendants moved to dismiss the case in November 2008, but Judge Martinez refused to do so in early May.
Following the U.S. Supreme Court's landmark ruling in Iqbal v. Ashcroft in May, the brokers asked the court to dismiss the action again, this time saying it didn't meet the heightened pleading standard laid out by the high court.
The brokers noted that in the court's May 5 order declining to dismiss the case, it pointed to repeated statements in the complaint that the defendants "agreed" to a bid-rigging scheme as well-pleaded allegations.
"The Ashcroft case puts to rest any lingering notion after Twombly that such allegations are sufficient," the defendants said. "If all it takes to state an antitrust claim is to write the words 'they agreed,' no claim would fail under Rule 8."
The U.S. Department of Justice launched an investigation into anti-competitive practices among fur brokers in 2004. In 2006 Alaska Brokerage was indicted, and an individual broker pleaded guilty to a conspiracy charge. The company was fined $30,000.
Attorneys for both sides didn't immediately return calls for comment Thursday.
Plaintiffs are represented by Hagens Berman Sobol Shapiro LLP, Kohn Swift & Graf PC, Preti Flaherty Beliveau & Pachios LLP, Barrack Rodos & Bacine, Berger & Montague PC, Weinstein Kitchenoff & Asher LLC and Langer & Grogan PC.
Defendants are represented by Byrnes & Keller LLP, Wilson Smith Cochran Dickerson, Stoel Rives LLP and Yarmuth Wilsdon Calfo PLLC.
The case is Wanechek Mink Ranch and Smith Mink Ranch Corp., on behalf of themselves and all others similarly situated, v. Alaska Brokerage International Inc., case number 06-cv-00089, in the U.S. District Court for the Western District of Washington.
Here is an AmLaw article about the apparently fairly real possibility of chapter 11 type legislation in Hong Kong. This is getting ahead of the game, but it does provide an opportunity to pause and think about what Hong Kong or other sovereigns might use as an approach to corporate failures caused by mass tort claims. After all, we've seen some serious mass tort issues arise from Hong Kong's nearby neighbors.
Let's hope other sovereigns do better than section 524(g) of teh US bankruptcy code. Otherwise, we may see a global spread of mass claiming by the least sick.
Law360 and various news services had articles over the last two days regarding the Delaware Catholic Diocese filing for chapter 11 due to pending tort claims arising from priests molesting children. The Diocese is represented by Wilmington's Young Conaway law firm, which has been involved in many of the asbestos chapter 11 cases as counsel for futures reps. Will we see a trust fund or just tort claim resolution ? Either way, this presents just the latest example of how chapter 11 is being used as just another to to resolve tort claims. Here are two key quotes from the Law360 article.
"Filing for Chapter 11 offers the best opportunity, given finite resources, to provide the fairest possible treatment of all victims of sexual abuse by priests of our diocese," Bishop W. Francis Malooly of the Wilmington diocese said in a statement.
"Our hope is that Chapter 11 proceedings will enable us to fairly compensate all victims through a single process established by the bankruptcy court," Malooly said.
Will There Soon Be Another Chapter 11 Tort Claim Trust for Chinese Drywall Claims Against an Insolvent Builder, Perhaps With Insurers Involved ?
This summer brought the Chrysler and GM chapter 11 cases in which bankruptcy courts issued wide-ranging injunctions that seek to block some or all tort claimants from pursuing some or all current and/or future tort claims against the insolvent entities and their successors and/or buyers. Now, as we move into fall, here's the latest example of the expanding use of chapter 11 injunctions and trust funds as the proposed means to resolve underlying alleged "mass tort" claims. These ongoing expansions make it even more important to scrutinize the rules to the process by which Wall Street is now able to use chapter 11 to eliminate or transfer financial responsibility for underlying mass tort claims. These ongoing expansions also make plain that there is a pressing need to pull down the veil of secrecy that blocks meaningful scrutiny of the operations of most, if not all, chapter 11 trust funds that resolve tort claims.
This latest example arises from this new motion filed in the Tousa home builder bankruptcy. The effort in Tousa parallels the approach taken in the WCI home builder chapter 11 case. The new motion in Tousa seek to continue the automatic stay to block tort and contract claims regarding buildings built with allegedly defective Chinese drywall. The motion seeks to continue to block the underlying lawsuits based on the prospect of creating a chapter 11 trust to resolve the same underlying lawsuits. Presumably the trust also would be used to resolve the claims that would arise if the court were to allow a proposed class action against Tousa by would-be drywall claimants . The proposed class action is the subject of other bankruptcy court motions.
The motion in Tousa is noteworthy for multiple reasons. For one, it asserts that the debtor will welcome the involvement of its insurers in creating the proposed trust. In contrast, in the asbestos chapter 11 cases, the debtors virtually always assert that trust are "insurance neutral," meaning that whatever happens in the bankruptcy court does not effect the rights of insurers. Based on that claimed neutrality, the debtors and plaintiff's lawyers almost always argue that the tort claim insurers lack "standing" to be involved in the bankruptcy court proceedings.
Insurers sometimes but not always disagree, depending on what view suits a particular insurer's interest in a particular chapter 11 case and its overall financial status. Usually, but not always, insurers that issued primary policies re heavily exposed to the tort claims, and so will seek to cut a deal with the debtor and the plaintiff's bar in order to achieve certainty. Other insurers that issued higher level excess policies tend to fight the debtor on the standing issue until they've created enough of a record that the debtor agrees to accept from the high-level insurer a nominal payment over time in return for a release of all obligations under the higher-level excess insurance policy.
The motion also is noteworthy for what it does not mention. For one, it makes no mention of the current or future rights of other, solvent companies that are now or will in the future end up as co-defendants in the underlying lawsuits. Co-defendant entities can be incredibly harmed by the terms of the bankruptcy trust if the terms cut off or in any way limits the right of co-defendants to bring cross-claims or equitable contribution claims against the debtor or the trust. In the chapter 11 asbestos cases, the trust terms almost always have imposed severe and unconstitutional limits on the rights of the co-defendants to bring cross-claims against the debtor or the trust. To be fair to co-defendants, bankruptcy courts can and should appoint at least one person to represent the interests of fat least future co-defendants.
Additional adverse impacts arise for co-defendants if secrecy is allowed regarding claims submitted to the trust fund and its payouts to particular claimants. Once again, the chapter 11 trust model should not be followed because in most such cases, the plan tosses a veil of secrecy over information regarding which claimants have made claims and what they have been paid. Co-defendants rightly argue that the veil of secrecy is poor public policy because court-ordered trusts should instead be transparent as a matter of public policy. Beyond pure policy issues, the veil of secrecy also is improper because it blocks the co-defendants from asserting state law rights. Secrecy also blocks legislators from understanding what really is or is not being done to compensate legitimate and illegitimate claimants.
The motion also is significant because it does not mention various other sources of conflicts between constituencies with interests in the terms of a trust created to resolve tort system claims. One source of conflicts is that persons with strong and serious claims do not want to see trust fund money frittered away on payments to spurious or marginal claimants. Once again the asbestos chapter 11 cases highlight the problem because most of the trusts have been put in place with terms that have allowed billions of dollars to be paid to claimants who are not "sick" in any meaningful way.
Here are key excerpts from the Tousa motion:
4. Among other things, the Debtors are aware of the recent plan of reorganization confirmed in the chapter 11 cases of WCI Communities, Inc. and certain of its affiliates (collectively, "WCI") in which WCI successfully managed its liability with respect to Chinese Drywall by implementing a global strategy that will address Chinese Drywall claims through the use of a trust, a channeling injunction and claims liquidation procedures. Additionally, the plan of reorganization permitted WCI to efficiently address its' claims against its insurance carriers as well as the installers and manufacturers of Chinese Drywall. While the Debtors continue to analyze their own Chinese Drywall cases and their prospects for a chapter 11 plan, the WCI approach offers one possible alternative to piecemeal litigation of Chinese Drywall claims.
5. The Debtors intend to work with their major creditor constituencies in an effort to establish a global strategy with respect to claims arising from or relating to Chinese Drywall. This global strategy will prevent a "race" to insurance proceeds by similarly situated claimants that will have the negative effect of depleting the amount of insurance available to satisfy other claims or, otherwise, impact the Debtors' ability, as a practical matter, to craft a more comprehensive resolution of the Chinese Drywall-related claims. To that end, the Debtors intend to involve the alleged holders of Chinese Drywall-related claims and the Debtors' insurance carriers in any such discussions. Based on the Debtors' desire to develop a global resolution of the Movants and similar claims, the Debtors have filed this objection.
Hat tip to LAW360 for noting the motion to continue the automatic stay.
Today, more on the amazing world of bankruptcy where some say bankruptcy code section 105 may be used to issue an injunction to solve pretty much any and all problems of a debtor parent,including issuing injunctions to protect solvent subsidiaries.
Courtesy of LAW360, here's the link to an amazing adversary complaint filed in the Lyondell bankruptcy. There, the debtor seeks to enjoin creditors from suing 94 affiliated entities not yet in bankruptcy regarding a paltry $ 650 million. So, rather like the Tribune seeking to give the Cubs the benefit of bankruptcy without all the annoying hassles of being bankrupt, we now see yet another debtor seeking the benefits of bankruptcy without having to undergo the hassles of bankruptcy, all on the theory that issuing an injunction would in some way help the debtor. (Actually, Lyondell has done much the same thing before - this is just a new example.) I used to be impressed by the awesome power of federal district judges, but they may be pikers next to a bankruptcy judges wielding bankruptcy code section 105 powers.
Think about how this same principle could play out in the context of product laibility or other tort claims against uninsured subsidiaries of a debtor. For example,the next case may be a debtor asking the court to enjoin inconvenient things like co-defendants in tort suits bringing cross-claims against debtor entities not in bankruptcy. Thus, Parent Co. could file for chapter 11 but not put sits ubsidiaries into chapter 11. Parent Co. could then go to bankruptcy court to ask for an injunction barring cross-claims or tort claims against subsidiaries on the grounds it could be inconvenient to Parent Co.
Bad policy? Giving debtors that kind of power surely gets rids of some of the incentives to do responsible things like buying adequate insurance, carefully manufacturing well-designed products or otherwise acting responsibly. That outcome is bad news for responsible entities left as targets in the tort system. And, how do good lawyers craft meaningful warranty and indemnification agreements for sales of products between entities if tort and contract risks and obligations can all be terminated just by filing a petition for a parent entity.
Can you imagine the howls of "unfairness" and "bad policy" if a Chinese bankruptcy court issued such an order to protect non-bankrupt subsidiaries of a Parent Co. maker of defective cars that killed or maimed many people ?
Here's a key quote from the complaint:
NATURE OF ACTION
1. This is an adversary proceeding brought pursuant to Rules 7001 and 7003
of the Federal Rules of Bankruptcy Procedure (the "Bankruptcy Rules").
2. The Plaintiff-Debtors assert this complaint for a preliminary injunction
pursuant to section 105(a) of title 11 of the United States Code (the "Bankruptcy Code"), Rule
65 of the Federal Rules of Civil Procedure, and Rules 7001(7) and 7065 of the Federal Rules of
Bankruptcy Procedure (the "Bankruptcy Rules") to enjoin until at least January 31, 2010 any
attempts to enforce any rights or exercise any remedy under the $615,000,000 and
€00,000,000 8.375% senior notes due August 15, 2015 (collectively, the "2015 Notes") against
guarantors of the 2015 Notes that have not filed a petition for chapter 11 protection (the "Non-
This prior post reported on the possibility that the Tribune would put the Cubs into chapter 11 to cleanse the entity of risks. It's now happening as reported in this article in the Tribune, which states that the Cubs want a short stay so that the entity can get all the benefits of chapter 11, but no detriments:
"In court papers, Tribune Co. lawyers outlined a two-step process for court approval, which includes having the team file for bankruptcy at a later date. The company wants the team to be in bankruptcy for just a few days, according to court documents. An extended stay in court could damage the Cubs' baseball operations, team Chairman Crane Kenney said in court papers."The process of competing for player talent in MLB is incomparably fierce, and by operating in Chapter 11 the Cubs would face a severe competitive disadvantage in their ability to retain, acquire or trade for players, based on the perception that the transaction would require Bankruptcy Court approval or might be unwound at a later date," Kenney said." I (emphasis added).
So, now we have yet another example of chapter 11 being used more or less solely to obtain injunctive relief against the possibility of future claims. One has to wonder what has happened to chapter 11 when it can be used for benefits but not detriments, with little or no notice to the rest of the world, and does not save any jobs or a business and instead is just legal engineering. For much more on this topic from a lawyer who argued for tort claimants in Chrysler, go to this blog by bankruptcy lawyer Steve Jakubowski.
All that said, I still love and so will repeat the comment I heard when discussing the Cub's possible use of chapter 11 with a colleague who is a bankruptcy law expert and a Brooklyn native. The response was brilliant; he said:
"It is the bottom of the 8th in a crucial game against the Cardinals. Cards lead 4 to 3. There are 2 outs. Cubs have the bases loaded with Derek Lee at bat. The count is 2 and 0. Would you need bankruptcy court approval to put "on" the take sign ?"
Would the Cubs Need Bankruptcy Court Approval to Put on The Take Sign in an Important Game (That Might Change the Value of the Cubs) ?
The AmLaw Daily has more here on whether the Chicago Cubs corporate entity may file for chapter 11 to cleanse itself of potential claims by creditors. Various involved lawyers were contacted but declined to be quoted. The article goes on to say:
"Should the committee approve the proposed sale, Tribune plans to have the Cubs seek bankruptcy protection in a quick process that could last anywhere from a few days to several weeks, according to several sources. (All agree that the idea of a one-day bankruptcy procedure, which has been floated in some news stories, is unrealistic). The Chapter 11 process would clean up the team's books in preparation for a sale." (emphasis added)
Some uses of chapter 11 create constitutional and bankruptcy law issues because the bankruptcy court orders/injunctions approving the asset sales or a plan purport to cut off present or future state law claims and other property rights held by some persons or entities. (For much more on this topic from a lawyer who argued for tort claimants in Chrysler, go to this blog by Steve Jakubowski.) When I mentioned the Cub's possible use of chapter 11 to a friend ( a Brooklyn native), the response was brilliant:
"It is the bottom of the 8th in a crucial game against the Cardinals. Cards lead 4 to 3. There are 2 outs. Cubs have the bases loaded with Derek Lee at bat. The count is 2 and 0. Would you need bankruptcy court approval to put "on" the take sign ?"
Chicago Cubs to Follow GM and Chrysler in Using Chapter 11 - Just Another Tool for Managing/Ending Liabilities ?
The following item from Crain's Chicago Business speaks for itself as to today's use of chapter 11 to manage/resolve risks and "liabilities." In some instances, though, the table is being set for constitutional law battles ahead on just how much a bankruptcy judge can do to alter rights arising under state law or the law of other nations.
Cubs may file for bankruptcy protection to speed sale: report
By: Todd J. Behme July 13, 2009
(Crain's) -- Tribune Co. may file for Chapter 11 bankruptcy protection for the Chicago Cubs to smooth the sale of the team, according to a report.
A short bankruptcy would be a legal move to prevent the Cubs from having any liability related to the bankruptcy case of Tribune, which filed for Chapter 11 protection in December, Bloomberg News said, citing four unnamed sources familiar with the matter.
Spokesman for Tribune, Major League Baseball and Tom Ricketts declined to comment to Bloomberg. The Ricketts family reportedly has reached a deal with Tribune to buy the team.
It's possible the team could be sold without a bankruptcy protection filing, the sources told Bloomberg.
A Chapter 11 filing could ensure that the team isn't tangled up with Tribune's creditors, Michael J. Cramer, an assistant professor of sports management at New York University and who formerly was president of the Texas Rangers, told Bloomberg.
"This would make sense for Major League Baseball," he told the news service. "They would like to see that asset be stand-alone, very clean, not tied up in other issues."
A filing by the Cubs would be meant to provide for quick selling of the team assets, the sources told Bloomberg.
Filing for bankruptcy protection would not mean that the Cubs are having financial problems, Gregory A. Cross, head of the bankruptcy practice at law firm Venable LLP, told Bloomberg.
"You do not have to be insolvent to be in bankruptcy," Mr. Cross, who is not involved in the matter, told Bloomberg. "All you need is a legitimate business reason."
An AmLaw blog article here reports some GM bondholders are not appealing because they lack funds to fight after Judge Gerber refused to appoint an official committee for which legal fees would be paid by the estate. The article includes a helpful link back to a prior article regarding the refusal to allow an official committee.
According to the article:
"Second, and perhaps most interesting for bankruptcy gurus, Richman argues that the sale of GM under §363 of the bankruptcy code stretches §363 to a place it wasn't supposed to go. Here's his direct quote: "Our position on appeal would have been that in enacting section 363 as part of Chapter 11, Congress intended that it would only be used for legitimate sales to commercial purchasers, and not for a government-sponsored rescue where the government is the only purchaser."
GM Agrees to Assume Future Product Liability Claims and Asbestos Plaintiffs File Deposition Notices for Treasury Department and GM Spokerspersons
The Wall Street Journal for June 29 is reporting that GM agreed to assume the financial burden of future product liability claims. The article, by Mike Spector. is here.
Meanwhile, Docket Number 2609 is a Rule 30(b)(6) deposition notice from counsel for an asbestos creditor to take depositions of persons designated to speak by the Treasury Department and GM regarding various facts, including the reasons for the structure of the GM deal. The deposition notice is well worth reading. It call for depositions beginning Monday morning at 10:00. The same lawyers at Caplin & Drysdale previously issued notices calling for depositions of persons submitting declarations on behalf of the government.
In Chrysler, the Official Committee Of Unsecured Creditors has filed a "limited objection to the efforts of the debtors to obtain their release of all potential tort and other claims against managers and others related to old Chrysler. The objection is Docket number 3991 on the Chrysler bankruptcy website and also is available here. The gist of the objection is that it is premature to release such claims until at least a hurried investigation has been conducted. The hearing on this issue apparently will occur tomorrow, June 18.
In other chapter 11 cases, the US Trustee's office in NY has recently objected to releasing non debtor parties when they have not made an extraordinary contribution to the bankruptcy estate, as I learned yesterday from reading LAW360 on bankruptcy. The objection was asserted in the Charter One bankruptcy, and is available here.