American Bankruptcy Institute Update

December 29, 2005

In This Issue

Highlights

LIQUIDATING ENRON’S MAZE OF PARTNERSHIPS COULD COST MORE THAN $1 BILLION

Four years after Enron Corp. collapsed, the Houston energy trader clings to life as "the financial equivalent of a Superfund site," its chairman said, the Washington Post reported today. New managers are struggling to clean up after the firm's December 2001 bankruptcy -- a process they say is likely to run into 2008. Two operating divisions must be unloaded. Lawsuits against banks that helped the company hide debt must be settled or brought to trial. Leftover cash must be dispensed to creditors claiming some $60 billion. As with everything else at Enron, a company that became a synonym for greed, a punch line for comedians and a curse word for thousands of workers who lost their retirement savings, closing shop hasn't been simple. "It probably ought to be called E-Liquidation Company," said Chairman John J. Ray III. "This company has no future life to it. We're just basically in a dismemberment sort of process." Click here for the full story.

CHIEF JUSTICE ROBERTS WINS EARLY PRAISE

Court watchers looking for an anecdote that illustrates how John Roberts is doing in his new role as chief justice point to the "Halloween incident." It was late October, less than a month into Roberts' new job, and the case before the justices was fairly benign: a discussion of state immunity to debt claims in bankruptcy proceedings, CNN reported today. Justice Ruth Bader Ginsburg was addressing a lawyer when a light bulb 44 feet above her head exploded, raining down a tiny spray of glass and causing police officers to scramble amid the momentary confusion. Justice Sandra Day O'Connor quickly figured out what had happened, telling the audience, "A light bulb exploded. A light bulb exploded." Then Roberts spoke up. "It's a trick they play on new chief justices all the time," he said, bringing huge laughter. "We're even more in the dark now than before," he added.

And so it has gone this term, where an atmosphere of practically buoyant camaraderie has drifted through an institution that prides itself on continuity and certainty. This is in stark contrast to the mood during the year preceding Roberts' arrival, when anxiety over the health of his ailing predecessor, William Rehnquist, cast a cloud over the court's mood. "The change has been amazing: The justices are a happy bunch again," said one court official. "They joke in arguments, they joke among themselves privately. The chief was just the type of man this place needed." The 50-year-old chief justice has left no doubt he is firmly in control, exercising his authority carefully and discreetly. But he does so no less forcefully than did his mentor Rehnquist, who led the court for 18 years before dying in September from thyroid cancer. Click here for the full story.

COMMENTARY: BANKRUPTCY LAW BACKFIRES ON CREDIT CARD ISSUERS

Credit card issuers and other lenders spent a small fortune to get bankruptcy reform legislation passed. Now the new law is costing them even more, MSN.com reported today. An unprecedented spike in filings before reform took effect in October is chewing into lenders' bottom lines, and the subsequent lull is showing signs of being short-lived. Bankruptcy attorneys say their caseloads are starting to pick up, and credit counseling agencies -- which provide now-mandatory sessions for consumers who want to file -- say they're seeing significantly more people than they initially predicted. All this is raising questions about whether lenders will profit as much from the new bill as they had hoped. Click here for the full story.

OPINION: AUTOMAKERS’ FINANCIAL WOES COME DOWN TO HEALTH CARE COSTS

America’s auto industry is in a crisis, stated an op-ed piece in today’s New York Times. Workers' wages are falling, and hundreds of thousands of jobs are being sent offshore. America's largest parts supplier, Delphi, filed for bankruptcy protection, and General Motors, Delphi's main customer, may too if a threatened United Auto Workers strike occurs next month. Meanwhile, Ford and its main parts supplier, Visteon, seem to be skidding down the same road.

How did we get here? There are many causes: poor car designs, high pension costs, increased foreign competition. But much of it comes down to the overwhelming health insurance costs borne by the auto makers. This is why the union's president, Ron Gettelfinger, has urged Congress to enact sweeping health insurance reforms. If the government paid everyone's health insurance bills, as those in Canada and most of Europe do, Detroit's Big Three could save at least $1,300 per vehicle. Profitability would return. With deeper pockets, the auto makers could afford to pay their suppliers. Click here for the full opinion.

ANALYSIS: UNIONS AND THE ROAD TO BANKRUPTCY

During a frustrating session of hard bargaining with union representatives, an exasperated manager asked the union negotiator to say frankly just what it was he wanted, according to a report in Cypress Mail. He got his reply in one word: "More." If you think about it, the reply was obvious. If unions hire leaders, they surely expect them to do something to earn their pay. In other words, they are paid to get "more." Highly paid executives (for that is what union leaders have become) are not needed to agree to whatever is easily available. The danger is that they can be too successful. Under enormous pressure by strikes and stoppages, it is possible for management to concede so much that the very viability of the business is threatened. These cases are particularly evident in the airline industry. Click here for the full analysis.

UPDATE TO MINI-RULES BOOK

The publisher of the 2006 edition of the Mini-Rules book, AWHFY Publishing, has issued an update to the book, which may be downloaded here. The one-page update label should be placed in your 2006 Mini-Rules on the last Note page at the back of your book. The label will update your Interim Rules with the most current amendments. We will apprise you of any additional updates as the publisher makes them available.

ANALYSIS ON CONSUMER PROVISIONS OF BAPCPA

ABI Member Michael Barnett (Michael Barnett, PA; Tampa, Fla.) has prepared an analysis of the consumer provisions of BAPCPA, updating it with case law as becomes available. Click here to view the analysis.

REGISTER NOW FOR ABI’S 24th ANNUAL SPRING MEETING

Join ABI in Washington, D.C., for its 24th Annual Spring Meeting, April 20-23, 2006. Top bankruptcy judges and nationally acclaimed practitioners will convene in the Nation’s Capital for four days of networking, CLE/CPE programming and headliner entertainment. Don’t miss a special Friday morning plenary session where Kathleen Ligocki, president and CEO of Tower Automotive, will discuss the problems U.S. manufacturers face today. Political pundit Mort Kondracke is the Friday luncheon program keynote speaker. In addition, this year’s program features the Tenth Annual Great Debates on hot topics and, among others, the following educational panels: 

    •         New World of International Insolvencies: Chapter 15 and Beyond
    •         Professional Compensation in the Post-BAPCPA Environment
    •         Implementing BAPCPA: More Rules and New Roles
    •         Judges Roundtable - Hot Splits in the Circuits
    •         Anatomy of a Health Care Insolvency
    •         Turnarounds after BAPCPA: Should We All Become Liquidators?
    •         Asset Protection after BAPCPA:  Testing the Limits
    •         Consumer Lawyer vs. Client: The Ethics of Disclosure after BAPCPA
    •         Business: Ethics and the Plan Process - When Is the Client a Fiduciary, and What Does That Mean?

You can also participate in numerous Educational Committee Sessions on Friday and Saturday, April 21 and 22. Get involved in ABI’s committees and earn CLE credit! Register early and save $80.

Register today and earn up to 19 hours of CLE credit!

Today's Featured Committee Meeting: Business Reorganization, Financial Advisors and Public Companies & Claims Trading (joint), Friday, April 21, 2006 at 2:15 p.m.

This joint panel discussion will focus on information dissemination and control immediately after a filing. Topics to be discussed will include: Who's in control, and how do you know? Who gets the information, and what are they going to do with it? How do you keep control if claims are sold?

NEW ON-DEMAND CLE: BEST OF MID-ATLANTIC WORKSHOP 2005

“Anything but Bankruptcy: ABCs, Receiverships & Other Alternatives” will be held live on Jan. 18, 2006, at 2 p.m. EDT. This “Best of ABI” program covers winning strategies involving state and federal receiverships, assignments for the benefit of creditors, out-of-court workouts and more. 90 minutes, $95. Click here for more information.

GET INVOLVED!

Do You Know?From publishing opportunities to committee involvement, ABI offers many options for members to raise their professional profiles. Click here for more opportunities.

Latest Job Postings at ABI Career Center

Check out the ABI Career Center. The Center is a one-stop site for job seekers and employers in the insolvency community. Career Center resources are available free to both employers and job seekers. New positions are featured daily. The latest listings include: