Diocese of Stockton Considers Bankruptcy

Quick Update:  The Diocese of Stockton, California, of the Catholic Church, is considering filing for bankruptcy protection amid costly settlements with sex-abuse victims.  It would become the tenth Diocese in the U.S. to do so.  Bishop Stephen Blaire announced that “options other than filing for bankruptcy protection have not emerged.”

Morgan Lewis to Pay $1.15 Million to Howrey Bankruptcy Estate

Morgan, Lewis & Bockius has agreed to pay $1.15 million to the bankruptcy estate of Howrey LLP to settle $12 million in potential claims for unfinished business under Jewel v. Boxer.  The agreement is awaiting approval by the bankruptcy court.

AnchorBank's Holding Company Tries New Bankruptcy Strategy

A bank holding company typically files bankruptcy after the FDIC takes over its bank subsidiary, when the only task left is to marshal assets and liquidate. Anchor BanCorp, holder of AnchorBank, is trying something new.

Specifically, Anchor BanCorp filed a chapter 11 bankruptcy petition on August 12, 2013, before a takeover of AnchorBank, which may be avoided in light of the bankruptcy.  Anchor BanCorp proposes a genuine restructuring in which it would pay off more than $180 million in debt owed to other banks for just $49 million; it could convert the U.S. Treasury’s preferred stock into an equity stake worth about $6 million (the bank received $100 million in TARP funds); and it would recapitalize by canceling its existing shares and sell the remaining new equity to investors.  The bankruptcy court approved the plan last week, but regulators still need to sign off.

If successful, Anchor BanCorp could provide a model for other struggling regional banks to get ahead of the FDIC and take control of their own restructuring.

IRS Penalties for Late Filed Corporate Tax Returns are NotAdministrative Expenses

The Ninth Circuit Bankruptcy Appellate Panel has ruled that penalties imposed by the Internal Revenue Service for untimely filing corporate tax returns were not administrative expenses.  In Kipperman v. Internal Revenue Service (In re 800ideas.com), 13 C.D.O.S. 9790, BAP No. SC-12-1496-JuBaPa (9th Cir. BAP July 22, 2013), chapter 7 trustee Richard M. Kipperman appealed from the bankruptcy county's order allowing the penalties as an administrative expense necessary for preservation of the debtor's estate pursuant to Bankruptcy Code Section 503(b)(1)(A).  The BAP disagreed and remanded the case to bankruptcy court for determination of whether the penalties qualify as administrative expenses for other reasons.  

Specifically, the BAP noted that the case was a chapter 7 case.  Accordingly, the penalties were not incurred in the operation of a business and, as a result, the penalties were incurred neither to benefit the estate nor preserve it.  Moreover, the failure to timely file tax returns did not constitute a post-petition tort under Reading Co. v. Brown, 391 U.S. 471 (1968).

It is important to timely file estate tax returns or comply with procedure to excuse the filing requirement (the opinion has a good review of certain new procedures).  Nevertheless, the upshot of this case is that penalties for late filing are not entitled to administrative priority on the grounds advanced by the IRS and are apparently limited to general unsecured claims.

Bankruptcy Court May Handle Compensation for Victims in Lac-Magantic Train Crash

Montreal, Maine and Atlantic Railway, owner of the runaway freight train that crashed in Lac-Megantic, Quebec, killing 47 people, filed for Chapter 11 bankruptcy protection in Bangor, Maine, and Canada on August 7, 2013.  Last month, the railway asked Bankruptcy Judge Louis Kornrich to appoint a committee to represent wrongful death and personal injury claimants, seeking to avoid the burdens of handling dozens of individual lawsuits. The estates of 33 of the victims joined in supporting the motion.  The railway is likely to be sold in the course of bankruptcy proceedings, reported the Maine Sun Journal.

Getting Employed & Getting Paid in Bankruptcy Cases

Join us for a white-linen lunch and this wonderful program:

Getting Employed and Getting Paid in Bankruptcy Cases

Tips for Effectively Negotiating the Employment and Fee Application Processes

Speaker

Lynette Kelly
U.S. Trustee’s Office

Christopher D. Sullivan
Greenfield, Sullivan, Draa & Harrington LLP

Michael G. Kasolas, CPA
Chapter 7 Panel Trustee, Oakland

Bill Brinkman
Jigsaw Advisors, LLC

Moderator 

Scott H. McNutt
McNutt Law Group LLP

Time & Location

Noon to 1:30 pm

Le Meridien Hotel
333 Battery Street
San Francisco, CA

Topics

• How to get employed and get your fees approved in an efficient, stress-free way
• How to guide other professionals in the case through the process
• A discussion of the Northern District’s treatment of employment and fee applications
• New U.S. Trustee guidelines regarding fee applications in large cases

Section Chair: Reno Fernandez, Macdonald Fernandez LLP 
Barristers Section Chair: Benjamin Uy, Jr., Pillsbury Winthrop Shaw Pittman LLP


RSVP HERE

Contractor's Withdrawal Liability for Unpaid Pension Contributions Dischargeable in Bankruptcy

In Carpenters Pension Trust Fund for Northern California v. Moxley, 13 C.D.O.S. 9503, No. 11-16133 (9th Cir. August 20, 2013), the United States Court of Appeals for the Ninth Circuit ruled that a construction contractor's withdrawal liability for unpaid pension fund contributions is dischargeable in bankruptcy.

Contractors who stop working under collective bargaining agreements but stay in business must continue to fund the amount necessary to ensure payment to vested pension beneficiaries under ERISA.  29 U.S.C. §§ 1381, 1391.  In this case, Michael Moxley's obligations under a California carpenters multiemployer collective bargaining agreement lapsed but he continued in business without making pension contributions.  He filed bankruptcy owing the pension fund more than $170,000, and the fund brought an adversary proceeding to except it's claim from Moxley's discharge under Bankruptcy Code Section 523(a)(4).

Section 523(a)(4) excepts from discharge "any debt . . . for fraud or defalcation while acting in a fiduciary capacity . . ."  Although the pension fund is arguably a trust, the court determined that Moxley did not act in a fiduciary capacity with respect to the fund because, among other things:  (1) he did not administer the fund; and (2) the unpaid funds did not become an asset of the pension fund.

Section 523(a)(4) issues frequently arise in contractor cases, and this opinion should provide a valuable tool in determining how pension obligations are treated.