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Trustee Smells Something in Fishery Bankruptcy, and It's HSBC

China Fishery had a noble plan to feed the world, but it didn't quite work out.

The company, which owned the world's largest factory ship, filed for bankruptcy protection in 2016. A court trustee has managed to liquidate some assets to pay creditors, but is investigating one in particular.

The trustee issued subpoenas to HSBC in the case, and now an appeals court has stymied the bank's efforts to block the subpoenas. The U.S. Second Circuit Court of Appeals said it doesn't have jurisdiction over the matter.

2nd Circuit Decertifies Class After Jury Returns $32M Verdict

A lesson of particular interest to class action civil procedure came out from a unanimous Second Circuit recently. That court of appeals affirmed a lower federal district court's decision to decertify a class of debtors on grounds of lack of commonality and typicality, even though the jury returned a $32 million verdict in favor of plaintiffs.

This ruling does not mean a free-for-all in courts, however. After all, the decertification took place before a final judgment in the case.

Failing to Warn Debtors of Fees Is a Violation of FDCPA, 2nd Circuit Rules

The Second Circuit Court of Appeals just ruled in favor of a pair of debtors who successfully argued that FDCPA requires creditors to inform debt-holders that their balances could increase due to interest and fees.

This is a relieving bit of case law that will surely give people with accounts payable some additional respite from worries of imbalances in their books.

Sovereign Immunity Saves SSA From Its Own Blunder, Bilks Lawyers

In a case that will actually make some people take sides with lawyers against the Social Security Administration, the Second Circuit recently found that applicable federal law of Sovereign Immunity shields the SSA from suit.

There aren't too many cases out there where people can agree that lawyers got the short end of the stick, but we think we might have a contender here.

Bernard Madoff was arrested in 2008, but the trail of infamy surrounding his Ponzi scheme is far from over when it comes to litigation, and the liquidation of assets related to the fraud. In the latest development, the Second Circuit affirmed the lower courts' rulings, and we received news that the Bankruptcy Judge presiding over the case passed away over the weekend.


Understandably, there is a litany of litigation arising from Madoff's Ponzi scheme gone awry. The case before the Second Circuit had to do with a fundamental question regarding the way the litigation has been handled.

On Monday, the Second Circuit reversed a district court’s decision, affirming a bankruptcy’s court decision, granting WorldCom Debtors’ objections to an IRS proof of claim, and a motion for taxes that WorldCom previously paid.

The decision centered on how “local telephone service” was interpreted, because the federal tax code requires the addition of a three-percent tax to the purchase of a local telephone service. At issue was WorldCom’s purchase of “central-office-based remote access” (COBRA), a service that gave customers the ability to connect to the Internet and WorldCom’s network through a regular phone line.

The bankruptcy court and district court concluded that COBRA was not a local telephone service, and therefore not subject to the three-percent tax. The Second Circuit disagreed.

Wrong Words Will Cost You Under FDCPA

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.

Court Revives Grant Thornton Securities Fraud Lawsuit

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.

Peter Angelos Can Proceed in Pfizer Asbestos Lawsuit

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.

Alleged Ponzi-Schemer's Ex Wins Asset Freeze Dismissal

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.