All items from Credit Slips

It's hardly news that arbitration agreements are used to effectuate class action waivers.  The Supreme Court has blessed the comandeering of a federal policy favoring enforcement of forum selection clauses to limit types of proceedings, including those that have nothing to do with forum and are necessary for effective vindication of small value claims.  
While arbitration ageements have been a particular problem in consumer finance, they also appear in things like telecom agreements, and now, to my chagrin, for Dropbox, a popular free cloud storage service. Dropbox announced a change in its terms of service that includes an arbitration clause.

Here's how the changes are pitched on Dropbox's website:
Here’s a walk-through of the major changes:

Posted 8 weeks 9 hours ago

Chapter 15’s modified universalism structure requires cooperation between courts in different countries as well as tolerance for outcome differences under different bankruptcy laws. While in general it’s fair to say U.S. courts have been cooperative and tolerant, for some reason the issue of intellectual property licenses in bankruptcy brings out the worst in us.
In the appeal of Jaffe v. Samsung (the appeal of a case called In re Qimonda in the courts below), the Fourth Circuit recently held that a U.S. bankruptcy court can require a German court overseeing the liquidation of a German company to apply U.S. law when dealing with licenses of U.S. patents.
Congress is considering amending Chapter 15 to mandate a similar  result through the proposed Innovation Act, which would add the following language to Section 1522:

(e) Section 365(n) shall apply to cases under this chapter. If the foreign representative rejects or repudiates a contract under which the debtor is a licensor of intellectual property, the licensee under such contract shall be entitled to make the election and exercise the rights described in section 365(n).

Posted 8 weeks 11 hours ago

So Business of Fashion points to a story on the Independent's web page, wherein a fashion designer calls for the adoption of something like chapter 11 in the UK. While chapter 11 debtor advocates are few and far between in the US, the motivation in this case comes from the designer having lost control of his business when his lender took control and sold the operation to a private equity fund.
My knowledge of British fashion pretty much starts and ends with Turnbull & Asser, so clink on the links above if you want the juicy details.
My question is whether chapter 11 would have achieved what the designer thinks it would have.  I have doubts.
Namely, because chapter 11 as practiced today is so heavily controlled by senior lenders, I'm not sure he would have had too much more time to get his house in order here in the U.S. either. You basically have to work with the senior lender – who often becomes the DIP lender – or else. And the story suggests an inability to do that.

Posted 8 weeks 2 days ago

The liquidation of the largest Madoff feeder fund, Fairfield Sentry, recently made a major mark on Chapter 15 of the Bankruptcy Code. The lynchpin of Chapter 15 (and the Model Law on Cross-Border Insolvency) is the ability to locate a debtor’s center of main interests (COMI). If a debtor files for bankruptcy in the location of its COMI, then it is entitled to certain automatic protections from ancillary proceedings in other countries, e.g., the imposition of the automatic stay to bar all collection activities.

Posted 8 weeks 2 days ago

Lascaux_01Earlier today Argentina filed its petition for Superme Court review of the Second Circuit decision in the pari passu case. You may recall that its last request was rebuffed without explanation, perhaps because it was premature -- the Second Circuit had not quite finished ruling against Argentina. Now the appeals judges are all done, and Argentina has filed the the real thing. The new petition is notable for raising a broader range of issues than the first.

Posted 8 weeks 3 days ago

Shutterstock_144867838CapOne's taken a lot of flack today over its apparent desire to check what's in your wallet by visiting you at home and at work.  The LA Times story got even bigger when it made it to Twitter and  great (and lots of bad, see previous sentence) puns started rolling in.

Posted 8 weeks 3 days ago

Thank you to the Credit Slips team and, in particular, Bob, for inviting me to guest blog.
The recent news about the Tennessee Volkswagen workers’ voting against UAW representation fits into some of my current research looking at worker representation in bankruptcy. Shutterstock_158578121Interestingly, VW itself favored the unionization effort and, despite the rejection, VW has stated its intention to continue to find ways to create something akin to a German works council, which provides a way to incorporate employee voice into corporate governance.
Would something like a works council also improve governance in bankruptcy?

Posted 8 weeks 3 days ago

The New Mexico Supreme Court decided Bank of New York v. Romero, No. 33,224 slip op. (N.M. S. Ct. February 13, 2014), last Thursday, which can be found here. The court held that (1) the Bank of New York did not establish its lawful standing in this case to file a home mortgage foreclosure action, (2) that a borrower’s ability to repay a home mortgage loan is one of the “borrower’s circumstances” that lenders and courts must consider in determining compliance with the state Home Loan Protection Act (HLPA), which prohibits home mortgage refinancing that does not provide a reasonable, tangible net benefit to the borrower, and (3) that the HLPA is not preempted by federal law.
The opinion spelled out the tough standards banks must meet to have standing to  initiate foreclosures, reviewed a whole bunch of alleged “evidence” produced by Bank of NY to establish standing, including plenty of affidavits and testimony from people with no personal knowledge of what was going on. The opinion debunks the use of the business records exception to get in documents no one knows anything about and has some good MERS language too. The opinion on these facts should help homeowners with funky documentation in other states as the principles discussed are universal. As such, the case established strong principles for homeowner protection from unscrupulous lenders.

Posted 8 weeks 3 days ago

Credit Slips is please to welcome Professor Drew Dawson as a guest blogger. Drew is on the faculty at the University of Miami School of Law where he teaches the bankruptcy, commercial law, and the other sorts of course you would expect from someone at Credit Slips. He has published on collective bargaining agreements in bankruptcy and offshore bankruptcies. He is relatively newer voice in the academy, and we are happy to have him join us for a while.

Posted 8 weeks 4 days ago

The recent World Bank Report on the Treatment of the Insolvency of Natural Persons  highlighted in its first pages (13 and ff.) the alternatives regarding which debtors to be include in this special regime. Although the solutions to this question are not the same among different countries, the problem is identical: whether to include persons without any business activity—that is, “pure” consumers—or to limit its particular provisions to individuals engaged in business activity.

Posted 8 weeks 5 days ago