Bankruptcy Litigation Blog

It's been a while since I've talked about the subprime mess.  For the record, I believe I was the first person to ever link the words "subprime" and "tsunami" in a single article when I predicted back on March 16, 2006, in a post entitled "The Subprime Squeeze," that "tsunami-like" waves of defaults would likely result from the "hockey stick" growth patterns in the subprime industry.  In fact, I just did a search of WESTLAW's newspaper database, and no one had ever used the words subprime and tsunami in the same article before I had written that post.  How things have changed!  The "Subprime Tsunami" has hit land, deluged households, stalled the economy, revived a moribund class action industry, and become the full employment act for a battalion of defense lawyers worldwide.

Back about a year ago when subprime litigation was first revving up, I was moved to comment in this post on the Bankers Life v. Credit Suisse case, one of the first subprime litigation complaints filed nationwide, based on a post I had read in the Calculated Risk Blog (which remains to this day my number 1 "go-to" blog for timely, insightful, and depressing financial news).  In that post, I predicted the 8-count complaint wouldn't fare too well.

Well, my prediction proved correct, as the plaintiff substantially amended the complaint about five months later to drop the four securities law-related counts and the third party beneficiary count that I predicted would be dismissed.  In its 17-count amended complaint, the plaintiff kept the fraud claims, which I predicted would be dismissed for lack of particularity, and added several new breach of fiduciary duty and breach of contract causes of action.  It also repled the negligent misrepresentation claim, which I predicted would be dismissed, by smartly beefing up this count to include specific allegations pointing to alleged misstatements in the prospectus upon which plaintiff allegedly relied in purchasing the depressed securities.

So how did the amended complaint fare against BigLaw's motion to dismiss?

| Posted By Steve Jakubowski In Bankruptcy in the News | 0 Comments | Permalink

Be sure to free some time up between 10:00 and 11:00 a.m. EDT on July 12 for this free web seminar sponsored by the Washington Legal Foundation entitled The Ongoing Saga of Marshall v. Marshall: Beyond the Anna Nicole Headlines. 

The speakers are WilmerHale's Craig Goldblatt (a friend of this blog who has filed many cert. petitions and merits briefs before the US Supreme Court, including, most recently, in In re Marrama), and Horace Cooper, former counsel to Former House Majority Leader Dick Armey and senior fellow with the National Center for Public Policy Research and the Centre for New Black Leadership. 

The program promises to:

• Discuss the case’s current posture before the 9th Circuit Court of Appeals
  
• Review the case’s implications for federal/state parallel litigation, especially in cases involving bankruptcy and probate.
• Analyze key issues pending before the appellate court, including claim & issue preclusion and “core proceeding” determinations.
• Consider the ramifications of the case, and the Court's opinion in Marshall v. Marshall, on future estate planning probating of wills & trusts.
  

Finally, here's a link to my post on the Supreme Court's Marshall v. Marshall decision, which has at the end a link to other posts of mine pertinent to the case.

| Posted By Steve Jakubowski In Bankruptcy in the News | 1 Comments | Permalink

As reported in my prior post last January, Judge Shira A. Scheindlin of the United States District Court for the Southern District of New York issued a ruling on January 24, 2007 that she called "one of the most difficult tasks this Court has yet confronted."  In it, by entering a stay of confirmation conditioned upon the posting of a $1.3 billion bond, she nearly derailed plan confirmation in the Adelphia bankruptcy, which Judge Robert Gerber, the presiding bankruptcy judge, called "among the most challenging -- and contentious -- in bankruptcy history."

By way of comparison, Judge Scheindlin's ruling last week that pulled the plug on the dissident bondholders' appeal seemed "a piece of cake."   Why the change of heart?  Judge Scheindlin realized, as she put it, that the bondholders "used the Court to obtain bargaining leverage to extract a better deal for their client with no intention of ever posting a reasonable bond."  "[Their] inconsistent positions," she found, "have had an impact on judicial integrity and have prejudiced Appellees."  "Such behavior," she observed, "is cynical at best and unprincipled at worst."  ACC Bondholder Group v. Adelphia Comm. Corp. (In re Adelphia Comm. Corp.), 07-1172 (S.D.N.Y. 4/2/2007) (Opinion at p.14 n.33).

By way of background as to how the case proceeded from my last post, Judge Scheindlin recounted that soon after the bondholders appealed Judge Scheindlin's initial decision, the 2d Circuit on 2/9/07 dismissed the appeal for lack of jurisdiction on the basis that bondholders were unwilling, rather than unable, to post the requisite bond.  (Op. at 4.)  The 2d Circuit, however, noted in remanding the case to Judge Scheindlin that the dissident bondholder group could

seek modification of the bond amount (a) if it can show that it is in fact unable (rather than unwilling) to post the required amount or (b) to present alternative arrangements for the District Court’s consideration that might lessen the amount of harm likely to be suffered by the Appellees in the event of an unsuccessful appeal, thereby perhaps justifying a reduction in the amount of the bond.  (Op. at 4.)

Because the bondholders would not budge from the $10 million bond amount originally proposed, however, Judge Scheindlin vacated the stay on 2/12/07, finding that "such a small bond was unacceptable to the Court in light of the magnitude of threatened harm to the Appellees."  (Op. at 5.) 

Once the stay was lifted, Adelphia wasted no time in consummating the plan, distributing $6.49 billion in cash to 8,000 claimants, 118 million shares of free trading Time Warner Cable stock to 13,500 claimants, and 9.56 billion freely tradable interests in the "Contingent Value Vehicle" (a post-confirmation litigation trust) to 8,000 claimants and 23,000 equity interest holders.   (Op. at 5-6.)

In the end, the bondholders' lost in part because they were so persuasive in the first round before Judge Scheindlin where they argued that if Adelphia were permitted to consummate the plan, then the appeal would be "equitably mooted."  This earlier argument, the Court held, precluded them under the principles of judicial estoppel from arguing the opposite view -- in this second bite at the apple -- that consummation of the plan would not equitably moot their appeal.  (Op. at 11-14.)

Regardless, Judge Scheindlin held, the appeal in fact was equitably mooted by the plan's substantial consummation because the bondholders "fail[ed] to meet their burden on four of the five Chateaugay factors" that would support hearing the merits of their appeal.  (Op. at 14-15) (citing Frito-Lay, Inc. v. LTV Steel Co. (In re Chateaugay Corp.), 10 F.3d 944, 952 (2d Cir. 1993) (these four factors being (i) whether effective relief can be granted (Op. at 15-20); (ii) whether such relief will unravel intricate transactions (Op. at 21-22); (iii) whether parties adversely affected have had notice and opportunity to participate in the appeal (Op. at 22-25); and (iv) whether appellants pursued a stay with diligence (Op. at 25-26)).

Judge Scheindlin closed the opinion by yet again expressing her displeasure with the bondholders for "pursuing a stay that they never intended to bond," once more demonstrating that a party attempting to "stop the confirmation train from leaving the station" better be prepared to "put up or shut up," as the old saying goes.

| Posted By Steve Jakubowski In Bankruptcy in the News | 2 Comments | Permalink

Practitioners before the Seventh Circuit Court of Appeals know that oral arguments in that Court can sometimes go well (e.g., by following the guidelines set forth in Question 4 here), and sometimes not so well (see here), and that one's success, failure, and/or embarrassment at oral argument may well hinge upon the panel drawn.

Counsel to the United Airlines Retired Pilots' Benefit Protection Association in preparing to argue the Retirees' appeal of United Airline's plan confirmation order surely had to be concerned upon learning that he had drawn a panel consisting of Judges Posner, Easterbrook, and Bauer.  As suggested here, one planning to argue a weak case before this group of heavyweights may as well throw away the script and pray to the Almighty for forgiveness because failure and embarrassment are the likely outcomes of such a test.

The Retirees' appeal presented the Court with two primary issues: 

First, whether the UAL's plan unfairly classified and treated active pilots differently from retired pilots in respect of their respective claims resulting from termination of pension benefits.

Second, whether the reorganization plan appropriately included exculpatory releases that shielded the union for the active pilots from claims that the retirees may desire to assert against the union.

In yesterday's oral argument (accessible here), Judge Posner took the lead in peppering the retirees' counsel with questions.  Judge Posner provides litigators a lesson in the importance of answering the precise question asked, regardless of how damaging the answer may be to one's case.  Here, while pressing the retirees' counsel to answer his question as to how this appeal is not a direct attack on Judge Posner's ruling last March (holding that the bankruptcy court could approve UAL's agreement with the active pilots' union providing for differential treatment that favored the active pilots interests over those of the retired pilots), Judge Posner had this to say in response to counsel's failure to respond directly to the question asked:

| Posted By Steve Jakubowski In Bankruptcy in the News | 1 Comments | Permalink

With chapter 11 filings at the lowest level in 10 years, the world awash with liquidity, and default rates at historic lows, a recent post on the excellent Econobrowser blog last week caught my eye when it suggested that recent yield-to-maturity data "yields a probability-of-recession estimate of 44.3%."

Yesterday's Reuters news bulletin, pointing to a study released yesterday by the Federal Reserve Bank of NY, further confirmed that the future may not be quite as rosy as present default rates (or, alternatively, bankruptcy lawyer billable hours) suggest.

This study, authored by Arturo Estrella (senior vice president in the Capital Markets Function of the Research and Statistics Group at the Federal Reserve Bank of NY) and Mary Trubin (former economist at the FRB who is now on track to get a Ph.D. in economics at Northwestern U.), concludes that a curve inversion lasting at least three months can signal a recession 12 months before it actually happens.  According to the study, the minimum spreads between three-month and 10-year yields ranged as much as -3.51% prior to the August 1981 to November 1982 recession, to as small as -0.08% before the August 1990 and August 1991 recession.

Thus far, according to yesterday's news release, 3-month yields have exceeded 10-year yields since mid-July.  The 10-year/3-month spread is presently about -0.26%.

Place your bets!

| Posted By Steve Jakubowski In Bankruptcy in the News | 1 Comments | Permalink

A bankruptcy examiner is appointed by the court in a bankruptcy case pursuant to Code section 1104(c) to "conduct such an investigation of the debtor as is appropriate, including an investigation of any allegations of fraud, dishonesty, incompetence, misconduct, mismanagement, or irregularity in the management of the affairs of the debtor." 

This simple grant of authority has led to the issuance of  reports that, when stacked together, surely validate former Fed chairman Alan Greenspan's conclusion in 2002 -- in pre-Sarbannes-Oxley testimony before the Senate -- that:

• The stock boom of the 1990's created "an outsized increase in opportunites for avarice," in which "[a]n infectious greed seemed to grip much of our business community.  Our historical guardians of financial information were overwhelmed."
• "It is not that humans became any more greedy than in generations past.  It is that the avenues to express greed had grown so enormously."

Historians of future generations need only look at examiner's reports in some of the more spectacular bankruptcies of the recent past to confirm Mr. Greenspan's conclusory observations.  (See, e.g., Enron, WorldCom-1&2 , Spiegel, Fibermark, and Gitto Global-1, 2, 3, 4).  Perhaps, though, they'll just conclude, like King Solomon, that "there's nothing new under the sun."

Another damning examiner's report, this one issued by Dan Harrow, the Court-appointed examiner in the Fruehauf Trailer Corp. case, has recently been the subject of considerable controversy, as these articles from the LA Times relate.  According to today's story:

What otherwise promised to be a low-key race for Orange County treasurer/tax collector has been anything but, with one candidate stung by allegations that he mismanaged the assets of a bankrupt trailer company, resulting in a district attorney's investigation....

After bankruptcy was granted in 1998, Street took over a successor company formed to liquidate Fruehauf's remaining assets as well as its pension plan. He resigned in August 2005, replaced by a new trustee, Daniel Harrow.

On March 15, five days after Street filed his candidacy papers to run for Moorlach's seat, Harrow filed a 63-page statement with the Bankruptcy Court in Delaware accusing Street of "mismanagement, conflicts of interest and greed" while in charge of the trust.

Street said the statement was rife with falsehoods. He defended his actions, saying that creditors had recouped their money and that he had shored up the company's ailing pension fund.

When the federal Pension Benefit Guaranty Corp. announced its takeover of the fund in 2004, its news release said that a $7-million deficit would be covered by insurance.

In April, Street filed a defamation and conspiracy lawsuit against Harrow and a union official who criticized Street before Orange County supervisors.

Street's "shoot the messenger" defamation suit likely won't go far given that private trustees like Harrow have, according to the 9th Circuit, quasi-judicial immunity for "actions that are functionally comparable to those of judges, (i.e., those functions that involve discretionary judgment)."  Curry v. Castillo (In re Castillo), 297 F.3d 940, 947 (9th Cir. 2002) (pdf). 

Street's failure to obtain a protective order under Code section 107(b)(2) to "protect [him] with respect to scandalous or defamatory matter contained in a paper filed [with the Court]" may also bar him on claim preclusion grounds from attempting to raise this issue again in another related proceeding.  Cf., Gitto v. Worcester Telegram & Gazette Corp. (In re Gitto), 422 F.3d 1 (1st Cir. 2005) (pdf) (contents of examiner's report only "defamatory" for purposes of Code section 107(b)(2) if material would cause a reasonable person to alter its opinion of the person in question and either (i) the material is untrue or (ii) the material is potentially untrue and irrelevant or included within a bankruptcy filing for an improper end).

Steve Jakubowski

| Posted By Steve Jakubowski In Bankruptcy in the News | 1 Comments | Permalink

The Wall Street Journal's James Haggerty wrote thi$ 3/11/06 article entitled "Millions Are Facing Monthly Squeeze On House Payments." In it, he provides some disturbing data regarding the subprime lending industry, including a graph showing subprime lending originations increasing from $150 billion in 2000 to $650 billion in 2005. Haggerty writes:

In the hot housing market of recent years, many households took advantage of "affordability" mortgage loans -- heavily promoted by lenders -- that hold down payments for an initial period. Now the initial periods are coming to an end on many of these loans, leaving borrowers to face resets of their interest rates that can cause monthly payments to shoot up between 10% and 50%.

More than $2 trillion of U.S. mortgage debt, or about a quarter of all mortgage loans outstanding, comes up for interest-rate resets in 2006 and 2007, estimates Moody's Economy.com, a research firm in West Chester, Pa....

A recent study by First American Real Estate Solutions, a unit of title insurer First American Corp., projects that about one in eight households with adjustable-rate mortgages that originated in 2004 and 2005 will default on those loans....

For a study released in February, Dr. Cagan examined adjustable-rate first mortgage loans made in 2004 and 2005, including refinancings. He figures about 7.7 million of these loans are outstanding, representing $1.888 trillion of debt.

About 1.4 million of those households face a jump of 50% or more in their monthly payments once their initial low-payment periods run out, Dr. Cagan says, and an additional 1.6 million face smaller increases that are still likely to strain their finances.

Assuming that home prices stay around current levels and interest rates don't rise sharply, Dr. Cagan figures about one million households eventually will default and lose their homes to foreclosure. That would cause about $110 billion of losses for lenders, he says.

Lenders and the economy as a whole could easily cope with such losses, Dr. Cagan says, though it would be devastating for some families and painful for some investors who bought securities backed by the riskiest loans. "It won't happen all at once," Dr. Cagan says. "It will be spread out over several years."

History has shown that "hockey stick" growth patterns in the subprime industry are more likely caused by looser adherence to underwriting standards than by increased demand for subprime products among qualified borrowers. If, in fact, looser credit standards have driven the current exponential growth since 2000 in subprime lending, then waves of defaults will be "tsunami-like" in proportion. That's what happened to the subprime auto lenders of the 1993 - 1997 era (e.g., Mercury Finance, First Merchants Acceptance Corp., National Auto Financial, Reliance Acceptance). Let's hope it's not the case here, but don't hold your breath that its not. Either way, the squeeze continues.

3/22/2007 Update:: See my latest update on the subprime squeeze here.

| Posted By Steve Jakubowski In Bankruptcy in the News | 2 Comments | Permalink

As UAL makes its final preparations for tomorrow's confirmation hearing, it surely is focusing its aim on the objections of the trustees for the holders of unsecured aircraft public debt and on the objections of the unions for the pilots (ALPA) and the flight attendants (AFA). Recent filings by UAL, however, suggest that its attitude as it enters the confirmation hearing is best captured by Alfred E. Neumann's favorite catch-phrase, "What, me worry?"

The Unions' Attack on UAL's Proposed Management Equity Incentive Plan

The WSJ Law Blog, Ideoblog, and the Business Law Prof Blog recently cited to and commented upon last Sunday's highly-charged NYT article by Gretchen Morgenson attacking the UAL Management Equity Incentive Plan (MEIP) as excessive, and even "exceed[ing] what was described as 'reasonable' by Towers Perrin, the compensation consultant employed by the company." These harsh refrains echo the separate objections filed by ALPA and AFA (here and here) against the proposed MEIP (which at the time the objections were filed offered almost 50% more than the recent scaled down version approved by the Unsecured Creditors' Committee and made part of the revised "Second Amended Plan" filed yesterday).

An interesting bankruptcy litigation angle to this dispute over the propriety of the MEIP relates to the unions' proposed use of expert testimony and other evidence related to "employee morale" or "shared sacrifice" in support of their objections. Last Friday, UAL filed this motion in limine to exclude the unions' use of such testimony and evidence. The primary focus of this objection is UAL's attempt to bar the testimony of the AFA's proferred expert, Thomas Jones, a professor of business ethics at the University of Washington School of Business, who was retained by the AFA to testify about the "ethical questions" surrounding UAL's proposed MEIP. UAL argues in its motion in limine :

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The Unsecured Creditors' Committee in the United Airlines case just filed this pleading announcing that it is withdrawing its objection to confirmation of UAL's plan of reorganization based on an attached 13 page "Term Sheet" setting forth the agreement among the parties. The changes of significance address the following main bones of contention:

• post-confirmation corporate governance issues, including the structure of the board (12 members, with 2 designated by the union, 5 by the Creditors' Committee, and 5 by the Company), an amendment of the by-laws to include "poison pill" and preferred stock provisions acceptable to the Committee;
• establishment of a post-confirmation "Plan Oversight Committee," a successor-in-interest to the Creditors' Committee (which will be dissolved on the plan effective date);
• revisions to the Management Equity Incentive Plan (MEIP): limiting the percentage equity to be issued under the MEIP to 8% of the common shares issued (i.e., 10 million shares, down from 15% posited in the plan); restricting future grants to agreed upon amounts; and staggering the vesting of share grants (with 40% vesting during the first year, and 20% vesting in each of the second, third, and fourth succeeding years);
• modification and reduction to the "SAM Distributions" provided in the plan to salaried and management (SAM) employees "by the amount that otherwise would have been distributed thereunder to the MEIP participants, who shall not share in the SAM Distribution" (please leave a comment if you can say in plain english how this works);
• establishment of a post-confirmation "Plan Oversight Committee," a successor-in-interest to the Creditors' Committee (which will be dissolved on the plan effective date); and
• litigation between the Committee and the PBGC would be settled, resulting in the Committee withdrawing its objection to the PBGC's claim.

Additionally, you'll find the Debtor's Memorandum of Law in support of confirmation here, and the Debtor's Witness and Exhibit Lists here.

UAL also filed this disclosure pursuant to Bankruptcy Code section 1129(a)(5)(B) of the persons that will serve as the officers and directors of the Reorganized Debtors (excluding the parent, UAL Corp. and officers of UAL Corp.). This disclosure also explains in four pages (including a summary chart) the nature and amounts of projected management compensation of the Reorganized Debtors.

Earlier posts on UAL are here, here, and here.

UAL's Plan Summary is a good document to read for an overview of proposed distributions under the plan to creditors (equity gets nothing).

| Posted By Steve Jakubowski In Bankruptcy in the News | 2 Comments | Permalink

The days preceding and following a company's bankruptcy filing are some of the most hectic in a bankruptcy lawyer's professional experience, with one good night's sleep typically representing the total number of hours slept during the entire week. Most debtor lawyers use first-day motions as the opportunity to educate the judge, who is seeing the case for the first time, of the circumstances leading to the bankruptcy filing, the business challenges ahead, and the debtor's reorganization prospects. Generally, the first-day hearing is a well-orchestrated event in which the debtor pretty much gets what it asks for, the judge begins to learn about the case, and final evidentiary hearings are scheduled on matters requiring notice and a hearing.

The NY office of Kirkland & Ellis, led by veteran lawyer Richard Cieri, handled Calpine's massive filing this week, and got several routine first-day motions granted which were aimed at providing a relatively seamless transition for the company into bankruptcy from a purely operational perspective. In addition, several key substantive motions were presented, including the following (all of which are available for your downloading convenience):

• Motion to Obtain Postpetition Secured Financing (interim order granting request here, and 2nd lienholders' unofficial committee objection here)
• Motion to Authorize the Debtors to (I) Continue to Honor Prepetition Trading Contracts, (II) Enter Into New Postpetition Trading Contracts, and (III) Pledge Collateral Under Prepetition and Postpetition Trading Contracts
• Motion for Order (A) Authorizing Payment of Prepetition Claims of Critical Vendors and Service Providers, and (B) Authorizing and Directing Financial Institutions to Honor and Process Checks and Transfers
• Motion for Order Establishing Notification and Hearing Procedures for Trading in Equity Securities (order approving notice to equity holders here)
• Motion for Interim and Final Orders Determining Adequate Assurance of Payment for Future Utility Services

Links to news reports on the filing are available here, here($), here($), and here. Here's a link to Tom Kirkendall's initial report on the filing.

On a related point, Calpine investors and speculators looking at the "end game" here and trying to predict ultimate values available for distribution will surely find of interest a recent opinion from Judge Dennis Michael Lynn, the bankruptcy judge overseeing the Mirant Group bankruptcy case. In re Mirant Corp., 2005 WL 3471546, (Bankr. N.D. Tex., 12/9/05). In this lengthly opinion, Judge Lynn tackles the question of how to determine the "total enterprise value" of the entities that make up Mirant Corp. and its 82 affiliated entities for purposes of plan confirmation. In the end, he concluded, valuation of a behemoth like Mirant is far more art than science. He wrote:

At best, the valuation of an enterprise like Mirant Group is an exercise in educated guesswork. At worst it is not much more than crystal ball gazing. There are too many variables, too many moving pieces in the calculation of value of Mirant Group for the court to have great confidence that the result of the process will prove accurate in the future. Moreover, the court is constrained by the need to defer to experts and, in proper circumstances, to Debtors' management. The law governing the court, from Till [v. SCS Credit Corp., 541 U.S. 465 (2004),] to Protective Comm. [v. Anderson, 390 U.S. 414, 442 (1968)] was developed in cases far different from that at bar.

It may be that there are better ways to determine value than through courtroom dialectic. That said, the court must work within the system created by Congress-and, in valuing a company in chapter 11, that system contemplates an adversary contest among parties before a neutral judge. The court believes all participants in the Valuation Hearing performed their duties to their constituencies, Debtors' estates, the public and the court, for which it expresses its appreciation.

The Court first described the process of sifting through the evidence and preparing for the contested hearing on valuation as follows:

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Below are some notable news posts for the week ended 12/2/05 on the following topical bankruptcy issues of interest to the bankruptcy litigator and practitioner:

Calpine News

Delphi's Bankruptcy

Delta Bankruptcy

Subprime Mortgages

***

| Posted By Steve Jakubowski In Bankruptcy in the News | 0 Comments | Permalink

We've heard a lot in the news about the fight between management and labor in the Delphi case. What gets in front of the Bankruptcy Court, however, is evidence and legal argument, not newspaper stories and press releases.

With a hearing before the Bankruptcy Court on Delphi's Motion to approve its "Key Employee Compensation Program" set for November 29, I thought readers of this blog would appreciate having the opportunity to see exactly what the parties are telling the Court in their filed pleadings.

Click the links to find Delphi's motion in support, the accompanying Watson Wyatt report, and the objections filed by the UAW, the PBGC, JPMorgan Chase (a "limited objection" as agent for 250 senior secured lenders), Wilmington Trust (as indenture trustee), and the Lead Plaintiffs (in the pending shareholder class action).

Bottom line, the proof is in the pudding, and it's hard to see the debtor winning on the measly submissions it has before the Court right now. The UAW appears to have the better side of the law in arguing that the Court should scrutinize the insider compensation plan under the "inherent fairness" standard, not the deferential "business judgment" standard advocated by Delphi's counsel. The UAW also rightly points out that:

Under [BAPCPA's new amendments to the Bankruptcy Code], a retention-type obligation incurred for the benefit of an insider "shall neither be allowed nor paid" absent findings by the court, based upon evidence in the record, that the individual has a job offer at the same or greater rate of compensation, that the services provided by the individual are "essential to the survival of the business" and that the payments meet a strict monetary test.

Although BAPCPA's amendments technically don't apply because Delphi filed before these amendments became effective, it's still a solid argument as they probably represent the proof that a litigator generally would want to introduce anyway under the "inherent fairness" standard governing insider transactions.

Still, while it's common for parties to reach agreement on the eve of trial, it's difficult imagining the unions caving on this one and agreeing to anything. Instead, I suspect, the unions will make the Court cram this one down their throats if the Court really wants management to benefit here (though this too seems unlikely given the weak generalized evidence presently before the Court and the equally shaky legal grounds upon which Delphi relies).

In the end, nothing is guaranteed for the workers being asked to sacrifice and stay, so why should anything be guaranteed to the 500 management employees who are being asked to do the same (other than the fact that they control the debtor's lawyers who are instructed to file these kinds of motions)? But maybe expecting that management will refrain from self-dealing while asking for workers to take severe pay cuts is asking too much of some people.

Stay tuned.

Steve Jakubowski

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Today I learned the sad news that Conrad B. Duberstein, former Chief Bankruptcy Judge for the Eastern District of New York, died peacefully at his home on November 18, 2005 after a long illness. This legend of the bankruptcy bar and courts will be sorely missed by all those who had the great fortune of being in his presence.

We at The Bankruptcy Litigation Blog express our deep condolences to the family of Judge Duberstein, and to his friends and colleagues. May his memory be a blessing and a comfort to those who mourn him.

Below is the obituary that appears in today's New York Times, courtesy of Judge Duberstein's former firm, Otterbourg, Steindler, Houston & Rosen, P.C. It speaks volumes of his known -- and unknown -- greatness.

His funeral is set for November 21, 2005 at 1 p.m., at Park Avenue Synagogue, 50 East 87th Street in New York City. Please make every effort to attend. Also, please do not hesitate to provide a comment below in honor and memory of this great man, especially during the initial 30 day mourning period.

Judge Duberstein's obituary follows below:

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