Recently in Bankruptcy Law Category

Words matter when your communications are scrutinized under the Fair Debt Collection Practices Act (FDCPA). For example, there’s a different between “ineligible for bankruptcy discharge” and “presumptively nondischargeable.”

Federal courts quantify that difference through damages. Which brings us to a recent decision from the Second Circuit Court of Appeals.

The Second Circuit Court of Appeals revived a securities fraud lawsuit on Thursday accusing Grant Thornton LLP (GT) of defrauding Winstar Communications shareholders and bondholders, reports Reuters. Winstar, a GT auditing client, went bankrupt in 2001.

Winstar was a broadband communications company that provided wireless Internet connectivity to various businesses. GT served as Winstar's independent auditor from 1994 until Winstar filed for bankruptcy in April 2001. GT had regarded Winstar as "one of its largest and most important clients," according to court filings.

The Second Circuit Court of Appeals announced on Tuesday that Pfizer can be named in some class action lawsuits related to its now-defunct subsidiary, Quigley.

The ruling opens the door for Peter Angelos to pursue Pfizer under Pennsylvania law for manufacturer liability. Angelos, a prominent asbestos attorney, argues that Pfizer should be held accountable for Quigley products that contained asbestos because the Pfizer logo appeared on Quigley products, reports Bloomberg.

Divorcing a Ponzi-schemer offers greater financial stability than marrying a Ponzi-schemer.

Last week, the Second Circuit Court of Appeals ordered two federal agencies to un-freeze the ill-gotten gains that an alleged-Ponzi schemer’s ex-wife received through their divorce settlement. Unlike the still-married Ruth Madoff, who forfeited $80 million following husband Bernie Madoff’s arrest, this ex-wife may have a shot at keeping the funds.

Janet Schaberg was married to Stephen Walsh for more than two decades. By the time of their separation in 2004, Walsh had amassed a substantial fortune and the two negotiated a settlement that gave Schaberg a not-insubstantial fortune of her own.

Law firms representing 200 customers cheated by Bernard L. Madoff Investment Securities Inc. (BLMIS) filed papers in the Second Circuit Court of Appeals last week requesting a full court rehearing in In Re: Bernard L. Madoff Inv. Sec., LLC.

In August, a three-judge panel affirmed a bankruptcy judge's decision to disregard the Madoff victims' falsified account statements in calculating recovery from the customer property fund.

Irving Picard, the trustee for liquidation of BLMIS, argued that the customer statements do not reflect "securities positions" that could be "liquidated" because the account statements were wholly the invention of Madoff and do not reflect actual securities positions.

Debtor's Appeal From Reversal of Attorney's Fee Award

In US v. Hudson, No. 09-3600, debtor's appeal from the district court's reversal of an award of attorney's fees in favor of the debtor after he successfully challenged a claim lodged against him in bankruptcy court by the IRS, the court affirmed where lawyers appearing pro se who prevail in administrative or court proceedings against the U.S. are ineligible for attorneys' fees under IRC section 7430.

Fair Debt Collection Practices Act Involving Inflated Proof of Bankruptcy Claim

In Simmons v. Roundup Funding, LLC, No. 09-4984, a Fair Debt Collection Practices Act action claiming that a creditor filed an inflated proof of claim in plaintiffs' bankruptcy, the court affirmed the dismissal of the complaint where a proof of claim filed in bankruptcy court cannot form the basis for a claim under the Fair Debt Collection Practices Act.

In Re: Zarnel, No. 07-0090, involved an appeal from a district court's order dismissing a bankruptcy trustee's appeal for lack of standing and in the alternative affirming the bankruptcy court's decision to strike the bankruptcy petitions filed by respondents rather than to dismiss their cases.  The court vacated the order on the grounds that 1) the U.S. Trustee's responsibility to represent and protect the public interest afforded it a substantial interest in, and therefore standing, to proceed with this appeal; 2) the court needed only assure itself that it was deciding a live case or controversy, and Article III jurisdiction existed; and 3) the restrictions of 11 U.S.C. sections 301 and 109(h) were not jurisdictional, but rather elements that must be established to sustain a voluntary bankruptcy proceeding.

Oneida Indian Nation v. Cty. of Oneida, No. 07-2430, involved an action by the Oneida Indian Nation claiming that the State of New York wrongfully appropriated its lands.  The court affirmed in part partial summary judgment for defendants, holding that was controlling, and thus all claims dependent on the assertion of a current possessory interest in the subject lands were barred by equitable defenses.  However, the court reversed in part on the grounds that 1) plaintiffs' purportedly nonpossessory claim was also barred, both by New York's sovereign immunity and by the equitable principles applied in Cayuga; and 2) on the same basis, the alternative nonpossessory claim articulated on appeal by the plaintiffs, premised on a violation of the Nonintercourse Act, was also barred.