Posts Tagged ‘bankruptcy’

Feds: we’ll be watching for asbestos-bankruptcy chicanery

For well over a decade it’s been apparent that the distinctive arrangements by which asbestos plaintiff’s lawyers acquire control of the bankrupt remains of defendant corporations they’ve sued, and then exercise control over those firms’ claims, disbursements, and general management, is fraught with self-dealing and sometimes fraud, ranging from the charging of unnaturally high fees to the concealment of double- and triple-dipping by claimants. Business interests have pursued a campaign in the states and Congress to require more transparency and better judicial oversight of asbestos bankruptcy trusts. Now they may have a powerful ally indeed in the federal government, which has weighed in with an early statement of interest in one such bankruptcy to insist on better controls against fraud and abuse. Its standing for such an intervention arises in part from its role as Medicare and Medicaid payor (entitled by law to recoup some health-related outlays) rather than merely from any interest it might have in heading off fraud generally. [Daniel Fisher, Forbes; Daniel Gill, Bloomberg Law] Fisher:

In the Trump administration, at least, the government will no longer look the other way as asbestos lawyers negotiate lenient terms that make it easy for their current clients to get money at the expense of future claimants and federal entitlement programs….

The government’s unusually blunt statement of interest in the Kaiser Gypsum bankruptcy, long before any plan of reorganization has been approved, warns lawyers against including terms that make it hard to ferret out fraud and abuse, including confidentiality requirements that make it impossible to determine how much claimants have been paid and the basis for their claims….

The Justice Department also warned it will be looking for excessive fees and may not allow claimants to deduct those fees from reimbursement due the government for Medicare and Medicaid expenses.

Sequel: Feds object to trustee candidate in Duro Dyne bankruptcy.

Local legal cultures and consumer bankruptcy

“In Memphis, an entrenched legal culture has made bankruptcy a boon for attorneys while miring clients in a cycle of futility.” [Paul Kiel with Hannah Fresques, ProPublica/The Atlantic]

Under federal bankruptcy law, people overwhelmed by debt have a choice: They can either file under Chapter 7, which wipes out debts and, since most filers lack significant assets, allows them to keep what little they have. Or they can choose Chapter 13, which usually requires five years of payments to creditors before any debts are eliminated, but blocks foreclosures and car repossessions as long as debtors can keep up. In most of the country, Chapter 7 is the overwhelming choice. Only in the South, in a band of states stretching from North Carolina to Texas, is Chapter 13 predominant….

Upon filing, debtors are shielded from garnishments and debt collectors. But whereas under Chapter 7 those protections are generally made permanent after a few months, under Chapter 13 they last only as long as payments are made. Most Chapter 13 filers in Memphis don’t last a year, let alone five.

The two options have a different structure of legal fees. While Memphis lawyers typically charge around $1,000 for a Chapter 7, most offer a Chapter 13 for free. “Ultimately, the fees for Chapter 13 filings are higher — upwards of $3,000 — but the payments are stretched over time.” Now, the no-money-down model of Chapter 13 bankruptcy is spreading to Northern states. But there is another point of view as well: “many see Chapter 13 as the more honorable form of bankruptcy because it includes some attempt to repay debts.”

Bankruptcy trusts yield evidence of asbestos double-dipping

North Dakota and Mississippi have become the third and fourth states to enact laws requiring more transparency of the trusts formed to administer companies declaring bankruptcy amid asbestos litigation [Sara Warner, Huffington Post] “With Obama’s veto threat gone, asbestos ‘double-dipping’ bill reintroduced” [Jessica Karmasek, Legal NewsLine] “State AGs Probe Asbestos Bankruptcy Trusts To Recover Medicare Payments” [Daniel Fisher] And per a paper from the U.S. Chamber, Ohio’s pioneering asbestos claim transparency law is working well [Institute for Legal Reform]

Banking and finance roundup

Garlock asbestos bankruptcy settlement

The case famous for helping crack open some of the secrets of the asbestos litigation business has reached a settlement, which will apparently include a settlement (probably without admission of wrongdoing) of civil RICO claims against several law firms. The revelations in the Garlock bankruptcy helped to bolster evidence that “some victims and their lawyers tell one story in one venue and another someplace else to ‘double dip’ the system” in cases against separate defendants. [Sara Warner, National Courts Monitor/Huffington Post; earlier]

Schools roundup

  • Bernie Sanders proposals on college finance would not only cost megabucks but homogenize/bureaucratize higher ed [David Fahrenthold, WaPo] While Sen. Sanders “understands that health care and education are the New Commanding Heights”, his colleague Sen. Warren knows how to inquisit-ize them [Arnold Kling]
  • It’s often said that student loans are undischargeable in bankruptcy, truth seems to be a bit more complicated [George Leef]
  • The zombie programs that just won’t die at the Department of Education [Danny Vinik, Politico]
  • If you wonder why the construction costs of a new high school in my area clock $115 million, look to changes in state prevailing wage law [Charles Jenkins, Frederick News-Post]
  • Modest ideas for federal-level education reform: repeal IDEA, English-language-learner mandates [Education Realist]
  • How Title IX came to shape college procedures on sexual assault allegations [Scott Greenfield]
  • British Columbia Supreme Court: not negligent to allow middle schoolers to play variety of tag called “grounders” [Erik Magraken]

Attorneys’ fees roundup

  • We’re worth it: lawyers in credit card case want judge to award them $720 million [Alison Frankel, Reuters] Johnson & Johnson will fight $181 million payday for private lawyers in Arkansas Risperdal case [Legal NewsLine]
  • British Columbia, Canada: “Lawyer Ordered To Pay Costs Personally For ‘Shoddy Piece Of Counsel Work’” [Erik Magraken] Ontario client questions lawyer’s fee [Law Times]
  • Sixth Circuit: attorneys fees statute not intended to cover dry cleaning and mini-blinds [Legal Ethics Forum]
  • Indiana lawmaker goes back to drawing board on loser-pays bill [Indiana Law Blog]
  • ‘Shocked’ by $3M legal fee in fatal car-crash case, judge tells lawyers to pay plaintiff lawyer $50K [ABA Journal]
  • Seth Katsuya Endo, “Should Evidence of Settlement Negotiations Affect Attorneys’ Fees Awards?” [SSRN via Legal Ethics Forum]
  • In Israel, more of a discretionary loser-pays arrangement [Eisenberg et al, SSRN via @tedfrank]
  • British cabbie beats ticket, recovers only some of his legal costs. Still better than he’d do here, right? [Daily Mail]
  • Turnaround guru Wilbur Ross: current structure of bankruptcy fees encourages lawyer “hyperactivity” [Reuters]

WSJ investigation on asbestos claims fraud

It’s behind a paywall, but TortsProf has a few highlights. Some lawyers are battling to stave off transparency that could catch out counsel and clients who tell inconsistent stories from one case to the next in the course of squeezing maximum payouts from bankruptcy trusts set up to handle claims against asbestos defendants; the trusts themselves have extensive managerial ties to leading plaintiff’s-side firms.

P.S. And House hearings [Bloomberg News, Chamber-backed Legal NewsLine].