NCBJ Report 2016: Restructuring and Bankruptcy Challenges in the 21st Century World of Not for Profits

This was the first of two educational programs sponsored by the Commercial Law League of America.   I had the privilege of appearing on a panel featuring moderator Beverly Weiss Manne, Prof.  Pam Foohey, Sam Maizel and Nancy Peterman.   Prof. Foohey and I focused on religious entities in bankruptcy, while Sam Maizel and Nancy Peterman discussed healthcare non-profits.   

Types of Cases Filed

On the church side, Prof. Foohey's research shows that 654 churches filed bankruptcy between 2006 and 2013.   The vast majority of these churches were African American congregations.    Some of the notable filings during 2016 included Carter Tabernacle Christian Methodist Episcopal Church, a 100 year old congregation in Orlando and Metropolitan Baptist Church in the District of Columbia.    Since 2004, fifteen Catholic Dioceses and religious orders have sought chapter 11 protection to resolve sexual abuse claims.   Two examples of these cases are the Diocese of Stockton which is proceeding toward a consensual confirmation following a two year mediation process and the Diocese of St. Paul and Minneapolis, MN where competing plans have been proposed by the Diocese and the Committee of Unsecured Creditors.    Finally, a handful of predominantly white mega-churches, such as the Crystal Cathedral and Great Hills Baptist Church have entered chapter 11 proceedings.   On the healthcare side, there have been at least nine hospital bankruptcies filed this year.   However, healthcare filings range from community hospitals to skilled nursing facilities.    In re Bayou Shores, SNF, LLC, 828 F.3d 1297 (11th Cir. 2016) is an example of the issues that can arise in the healthcare sector.

NCBJ Report 2016: From Detroit to San Juan--Perspectives on Municipal and Territorial Restructurings

The Commercial Law League of America held its annual luncheon at NCBJ featuring the Lawrence King Award and a keynote speech by Andy Dillon.

Bankruptcy Judge Dennis Montali received this year's King Award, joining such luminaries as Elizabeth Warren, Steven Rhodes and Gene Wedoff.   Among his accomplishments, Judge Montali sailed from San Francisco to Hawaii when he was only seventeen.    He served in the Navy.   As a practitioner, he helped to craft the emergency rule which allowed the courts to function after the Marathon decision.  He was appointed to the bench in 1993 and presided over the Pacific Gas & Electric case.   He gave a heartfelt acceptance speech in which he emphasized his commitment to treating each case as if it was his most important.

Andy Dillon was the keynote speaker.  Mr. Dillon was speaker of the Michigan House of Representatives before becoming Michigan's State Treasurer.   As Treasurer, his responsibilities included placing failing cities, including Detroit, into receivership.    More recently, he has advised Puerto Rico on its financial issues through his association with Conway McKenzie.    

NCBJ Report 2016: Hot Spots in a Cold Restructuring World: Energy and Healthcare Restructuring

This panel examined energy and healthcare reorganizations.   The unifying theme of this panel was that industries that are highly regulated, highly leveraged and lack control over their prices are prime candidates for bankruptcy.   According to the moderator, Judge Margaret Mann, the panel hoped to make its presentation relevant to practitioners regardless of whether their typical client was a gas station or dentist as opposed to a major oil producer.   Judge Mann said that these two areas are "vital to the economy and heavily regulated."

Bill Wallander explained that the energy industry was in a mess because oilprices dropped from $110 per barrel to $26, although they have recovered to $50.   He said that companies had made their plans based on being able to survive at $70-80 a barrel but that prices kept dropping.  He did add that companies that hedged were able to hold on later but that many did not have sufficient hedges.  Ana Alfanso stated that banks didn't see the drop coming either.   She stated that the crisis highlighted the problem with asset based lending.   She added that cash was a major issue because companies without cash could not drill.

NCBJ Report 2016: Broken Bench Radio

The first plenary session of NCBJ was Broken Bench Radio, a fast-paced discussion of hot topics in the form of a radio call-in show.   It covered insights from the Caesar's Entertainment case, upcoming Supreme Court decisions, recharacterization, equitable mootness, Chapter 13 updates, the CFPB and the Husky case.  

Insights From Caesar's Entertainment

James Sprayregen was the first caller in to the show.   He talked about the Caesar's Entertainment case.    He repeatedly alluded to the interesting issues that could have been decided, such as the involuntary petition filed against the company and the section 105 injunction in favor of the parent company, if only the case hadn't settled.   His best quote was "Settlement negotiations are never over and the activities in the courtroom are an extension of the settlement negotiations.

Upcoming Supreme Court Decisions

Prof.  Erwin Chemerinsky gave a brief public service announcement about two upcoming Supreme Court cases:  Czyzewski v. Jevic Holding Corp and Midland Funding, LLC v. Johnson.   The Supreme Court has granted cert in both of these cases.   Jevic is about whether a  settlement agreement resulting in a structured dismissal can violate the priority scheme under the Bankruptcy Code.   Midland Funding deals with the question of whether it is a violation of the Fair Debt Collection Practices Act to file a proof of claim that is barred by the statute of limitations.   This is an issue where the Eleventh Circuit, which says yes, is at odds with at least three other circuits.  I have a case on this issue pending before the Fifth Circuit so it is of special interest to me.

NCBJ Report 2016: The Streets of San Francisco

I am resuming my coverage of the National Conference of Bankruptcy Judges this year.   Last year the demands of work kept me off the blog.   NCBJ 2016 is taking place in San Francisco.  A few random observations.    People in San Francisco wear jackets even when it isn't cold.   There are mica specks in the sidewalk that make them glitter when the light hits them.   The Golden Gate Bridge looks incredible when it is lit up at night. 

Another observation is that San Francisco is one of the most expensive cities to live in.  I am told that a 700 square foot teardown sells for a million dollar.  However, in walking the streets, I noticed that they were teeming with milennials.    It makes me wonder where they live and how they live.

I started NCBJ wondering why I agreed to wake up at 5:00 a.m. to go running.   This year was the Seventh Annual Wake Up and Run event.   About 70 runners got to experience the darkened streets of San Francisco and the waterfront for a 5k fun run. The turnout was impressive given the early hour and the prior night's festivities.  As usual, I finished near the back of the pack but I was not alone.   It was a good way to start the conference and see some of the City.