November 1, 2008
UCI School of Law Inaugural Year is Coming
An email I received from Bankruptcy Judge Sheri Bluebond.
I just received a letter from Erwin Chemerinsky, the dean of the new law school that will be opening at UC Irvine in the fall of 2009. They are hoping to have an incoming class of 60 students for the first year (and at some point have 200 students per year). He also says, "To attract top students, we plan to have a three-year, full scholarship for all or nearly all of our entering class." I just thought I'd pass this along in case you know of anyone who would make a terrific lawyer but cannot afford to go to law school. You might suggest that they apply to UC Irvine.
October 31, 2008
10th Circuit BAP Rules on Turnover of Tax Refunds
In re Graves, --- B.R. ---, 2008 WL ----------- (10th Cir. BAP, October, 2008)
Issue: Is turnover the proper remedy where the debtor applies a tax refund to future taxes?
The chapter 7 debtors filed their 2006 tax return in July 2007. They were entitled to a refund of about $3,000. They elected on the return to have the refund applied to their 2007 tax obligations, not yet determined. They filed chapter 7 on September 20, 2007. The trustee filed a motion demanding turnover of the refund. The bankruptcy court denied the motion.
The BAP affirmed. “This appeal exemplifies the concept that ‘you cannot get blood out of a turnip.’ The Trustee seeks to obtain from the Debtors that which they simply do not have: the amount they could have received from the IRS in 2007, but did not.” “In 1948, the United States Supreme Court defined the pre- Bankruptcy Code turnover power, noting that ‘the primary condition of [turnover] relief is possession of existing chattels or their proceeds capable of being surrendered by the person ordered to do so.’” Citing Maggio v. Zeitz (In re Luma Camera Serv., Inc.), 333 U.S. 56, 64 (1948). "Turnover is a remedy that is specifically limited by § 542 to ‘property that the trustee may use, sell, or lease,’ and is in the turnover target’s possession or control during the bankruptcy case. A contingent reversionary interest in funds held by another is simply not something that is in the debtor’s possession that can be turned over to the trustee.” “When the petition was filed in this case, the Debtors had no current right to possession of the pre-paid taxes.”
The court commented that it was not ruling on the propriety of the debtors' conduct in making this refund non-available. It seems like it might result in a Section 727 complaint for transfering property with actual intent etc.
October 30, 2008
Video On Bankruptcy Basics Prepared by the Court
The Administrative Office of the United States Courts has created a video presentation which provides general information about the basics in the bankruptcy process. The videos can be accessed here. Its really basic. I would sure love to know what the cost of the videos are.
October 29, 2008
Tax Lesson - Let's put TAX CUTS in terms everyone can understand.
Suppose that every day, ten men go out for beer and the bill for all ten comes to $100. If they paid their bill the way we pay our TAXES, it would go something like this:
The first four men (the poorest) would pay nothing.
The fifth would pay $1.
The sixth would pay $3.
The seventh would pay $7.
The eighth would pay $12.
The ninth would pay $18.
The tenth man (the richest) would pay $59.
So, that's what they decided to do. The ten men drank in the bar every day and seemed quite happy with the arrangement, until one day, the owner threw them a curve. 'Since you are all such good customers,' he said, 'I'm going to reduce the cost of your daily beer by $20.' Drinks for the ten now cost just $80.
The group still wanted to pay their bill the way we pay our taxes so the first four men were unaffected. They would still drink for free. But what about the other six men - the paying customers? How could they divide the $20 windfall so that everyone would get his 'fair share?'
They realized that $20 divided by six is $3.33. But if they subtracted that from everybody's share, then the fifth man and the sixth man would each end up being paid to drink his beer.
So, the bar owner suggested that it would be fair to reduce each man's bill by roughly the same amount, and he proceeded to work out the amounts each should pay. And so:
The fifth man, like the first four, now paid nothing (100% savings).
The sixth now paid $2 instead of $3 (33%savings).
The seventh now pay $5 instead of $7 (28%savings).
The eighth now paid $9 instead of $12 (25% savings).
The ninth now paid $14 instead of $18 (22% savings).
The tenth now paid $49 instead of $59 (16% savings).
Each of the six was better off than before. And the first four continued to drink for free. But once outside the restaurant, the men began to compare their savings.
'I only got a dollar out of the $20,'declared the sixth man. He pointed to the tenth man,' but he got $10!'
'Yeah, that's right,' exclaimed the fifth man. 'I only saved a dollar, too. It's unfair that he got ten times more than I!'
'That's true!!' shouted the seventh man. 'Why should he get $10 back when I got only two? The wealthy get all the breaks!'
'Wait a minute,' yelled the first four men in unison. 'We didn't get anything at all. The system exploits the poor!'
The nine men surrounded the tenth and beat him up!
The next night the tenth man didn't show up for drinks, so the nine sat down and had beers without him. But when it came time to pay the bill, they discovered something important. They didn't have enough money between all of them for even half of the bill!
And that, boys and girls, journalists and college professors, is how our tax system works. The people who pay the highest taxes get the most benefit from a tax reduction. Tax them too much, attack them for being wealthy, and they just may not show up anymore. In fact, they might start drinking overseas where the atmosphere is somewhat friendlier.
David R. Kamerschen, Ph.D.
Professor of Economics
University of Georgia
For those who understand, no explanation is needed. For those who do not understand, no explanation is possible.
October 28, 2008
Disney Seeks Examiner in Lehman Bros.
Disney has filed a Motion for Appointment of an Examiner in the Lehman Bros bankruptcy case and set the matter for hearing in New York on November 5, 2008. You can access the motion here. It seems Lehman owed Disney about $100 million when it filed. The motion asks the court to order the examiner to investigate several specific matters including:
- Prepetition acts and omissions from and after March 16, 2008 in respect of LBCC's officers and directors, and LBHI’s officers and directors and the officers and directors of LBHI’s other direct and indirect subsidiaries impacting their respective fiduciary duties of care, loyalty, and good faith;
- Postpetition acts and omissions in respect of LBHI’s officers and directors, LBCC's officers and directors, and the officers and directors of LBHI’s direct and indirect subsidiaries impacting their respective fiduciary duties of care, loyalty, and good faith;
- Whether LBCC and LBHI’s other direct and indirect subsidiaries took any steps to protect their respective enterprises and constituencies in connection with the sale to Barclays Capital;
- What LBCC and other nondebtor subsidiaries of LBHI did with their cash after LBHI commenced its chapter 11 case.
- What became of LBCC's business, including without limitation, its personnel, client lists, trade secrets, telephone numbers, after September 20, 2008.
- Is Barclays Capital Inc. operating and/or benefiting from LBCC's business?
Objections are due Friday, October 31, 2008. I can hear it already. "Judge, we agree completely and have nothing to hide but we are really busy right now so order this a few months from now."
October 27, 2008
Lehman Bros. Committee Files Employment Applications
The Committee in Lehman Bros filed employment applications on October 21 seeking to employ Milbank Tweed as its General Counsel; Quinn Emanuel as its Special Counsel; FTI Consulting as its Financial Advisor; and Houlihan Lokey as its Investment Banker.