Weekly Blog Roundup on Bankruptcy-Related Topics for the Week Ended 11/25/05

Below are notable blog posts on the following topical bankruptcy issues of interest to the bankruptcy litigator and practitioner for the week ending 11/25/05.

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Judge Alito's Bankruptcy Jurisprudence

The Portland Archdiocese Disclosure Statement Filing

The Problem of Legal Valuation Uncertainty

Asbestos Trust Fund Talk

The UK Housing Bubble and Its Lessons

Management-Labor Disputes Spilling Into Bankruptcy Courts

Professional Feasting in Bankruptcy

Derivative Risks

Entergy's Failure, Katrina, and a Dark New Orleans

Delphi and GM's Woes, from a Union Perspective (with lots of good news stories from the Detroit Free Press, Automotive News, and other great newspapers)

Delta Bankruptcy Judge Beatty's "Live-Wire" Comments

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Judge Alito's Bankruptcy Jurisprudence

Professor Todd Zywicki of The Volokh Conspiracy posts a link to "an extensive analysis of Judge Alito's bankruptcy jurisprudence" by Nathalie Martin of the American Bankruptcy Institute.

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The Portland Archdiocese Bankruptcy

Professor Howard Friedman at The Religion Clause blog provides this post on the disclosure statement filed by the Portland Archdiocese, which he describes as "one of the most interesting ever disclosure statements filed." He writes:

The disclosure statement says that if the archdiocese prevails, the compensation will be only about half as much as under last week's proposal-- shrinking from $40.5 million to $21.5 million. In the statement, the archdiocese said engaging the property dispute is in no one's best interest, since the case could take years. The disclosure statement argues the Archdiocese side of the case:
All church property, whether held in the name of the archdiocese, the archbishop, a parish or a school, has been acquired with charitable donations made by parishioners, religious organizations, charitable foundations, and others. As such, the archdiocese asserts that much of the property titled in its name is held in trust, or is otherwise restricted, for the use of the benefit of the parishes, parishioners, parents, students and others who rely on the continued use of such property in order to practice their religion and educate their children, and that certain property is specifically designated for a particular purpose and can only be used for that purpose.

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The Problem of Legal Valuation Uncertainty

Guest blogger Professor Keith Sharfman, who teaches bankruptcy (among other topics) at Rutgers Law School, writes this very interesting post about "the problem of legal valuation uncertainty--that is, the uncertainty associated with how the legal system resolves controversies over the value of legal entitlements." He adds:

Rather than focus on a particular doctrinal context, I have analyzed the problem at a higher level of generality and proposed a solution that may be used in every doctrinal context in which the valuation problem may arise.


The solution is this: replace the current regime of valuation uncertainty with an algorithmic valuation mechanism of the type often agreed to in contracts between sophisticated firms who anticipate a future valuation dispute. A typical contract of this type will require each side to propose a valuation, and if the valuations are within close range of each other (say within 12%) the dispute will be resolved by averaging the two valuations together. In cases where the party valuations are far apart, the dispute is resolved by obtaining at the parties' shared expense a neutral third party valuation and averaging it together with any party valuation that is reasonably close to the neutral figure (say within 30%). If sophisticated firms find it in their mutual interest to contract for such procedures, my thought was that valuation litigants who have not so contracted might similarly benefit from having such a procedure as the default norm in valuation litigation.

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Asbestos Trust Fund Talk

Ted Frank at the Point of Law blog provides this post entitled "Specter-Leahy $140 billion asbestos trust fund: insufficient?." This post links to a September 2005 report from Bates White calling a $140 billion fund insufficient "on the grounds that the medical criteria in the FAIR Act are so permissive as to allow millions of non-asbestos-related claims on the fund." The post also reviews other legislative wrangling over responses to the asbestos litigation nightmare.

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The UK Housing Bubble and Its Lessons

The Housing Bubble 2 Blog links to an article from Bloomberg suggesting "it's too early to declare a soft landing in the UK" with property still overvalued and mounting debt woes. The article quotes James Carrick, an ABN Amro economist as saying:

Insolvency declarations by people in England and Wales rose 46 percent in the third quarter. Meanwhile, figures released last month showed the number of court actions to repossess homes surged to a 12 year high of 29,991 in the third quarter. People have borrowed too much and are struggling to meet the payments. For everyone declaring bankruptcy, and for every home repossessed, there are probably 10 others close to the edge.

Analogies between the UK experience and the current US housing market are worth considering.

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Management-Labor Disputes Spilling Into Bankruptcy Courts

The California State Employees Association (CSEA) blog posts to a number of blog and news bites in a post entitled, "27,000 pay cuts, 20,000 layoffs?" Quotes from Working Life, Ft. Wayne Journal, Detroit Free Press, and Boston.com, on the union/management disputes spilling over into bankruptcy courts around the land. The post cites to the Fort Wayne Journal Gazette, which asks: "How did we get to the place where labor rights are so unprotected that bankruptcy-court judges are the arbiters of wages, benefits and working conditions in what are still some of our most important industries?"

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Professional Feasting in Bankruptcy

The Turner Report provides a post describing the feasting by professionals at the O'Sullivan Industries' trough (not an uncommon bankruptcy phenomenon, as reported here).

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Derivative Risks

The Prudent Investor in a post entitled "Too Much Derivatives Risk In Too Few Hands" cites to an excellent Bloomberg story where "ratings agency Fitch said that the 10 major players in the credit derivatives market hold more than two thirds of the risk in the $12.4 trillion market, which is about the same size as the US equity market." It further reports that the aggregate "size of the derivatives market is estimated around $270 trillion or almost 20 times the size of the US stock market." Scarry stuff in uncertain times, to be sure.

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Entergy's Failure, Katrina, and a Dark New Orleans

The Pensacola Beach Blog offers an insightful post entitled "Double Whammy In Dark New Orleans" on the Entergy bankruptcy in New Orleans spawned by Katrina's devistation, and the absence of contingency planning there.

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Delphi and GM's Woes, from a Union Perspective

The Future of the Union provides a lengthy post entitled "Face To Face with Catastrophe" on how "the UAW is in the midst of its worst catastrophe since Caterpillar."

This blog also has a number of posting with stories from the Detroit Free Press, Automotive News, and other papers on the fights in Delphi's bankruptcy over executive compensation and other union issues (here, here, here, here, here, here, here, here, and here), as well as on GM's continuing woes and union battles ahead (here, here, here, here, here, and here).

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Delta Bankruptcy Judge Beatty's "Live-Wire" Comments

Houston's Clear Thinkers remarks here on Delta's Bankruptcy Judge Beatty's "live-wire" comments at a hearing regarding pilot compensation, citing to this article from the 11/18/05 W$J.

Thanks to Allison Grow for help in compiling this post.

© Steve Jakubowski 2005

Written By:PHILLIP BORIS On January 25, 2006 2:29 PM

HOW WILL OLD COMMON STOCK FOR UNITED AIR LINES BE TREATED AFTER EMERGENCE, AND CAN YOU TELL ME WHAT THIS STATEMENT MEANS:
NOT ENTITLED TO RECEIVE ANY DISTRIBUTION UNDER THE PLAN;PROVIDED,HOWEVER,THAT DEBTORS RESEVRE THE RIGHT TO REINSTATE AT ANY TIME.

Written By:Steve Jakubowski On January 25, 2006 4:27 PM

Take a look at my many UAL posts, and you'll see that old equity is wiped out under the plan. The plan reserved the right to change the treatment and give equity something, but that didn't happen best I can tell.

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