A confession of judgment lets a creditor take a judgment without notice to the debtor, who usually first learns of the lawsuit when the creditor seizes his bank accounts and takes related steps. Here are strategies for representing commercial debtors facing such judgments. 

Your developer client borrows $5 million from a bank to improve a strip mall on Chicago’s northwest side. The developer signs a promissory note with a floating interest rate of 1 percent over the Wall Street Journal prime rate, and its principal shareholder signs a guaranty. 

Deepening a split of circuits, the First Circuit Court of Appeals held that the Bankruptcy Code waived the sovereign immunity of Native American Tribes. The May 6, 2022 opinion by Judge Sandra L.

As 21st century disputes take on an increasingly cross-border character, so, too have parties resorted to a powerful tool provided to non-U.S. litigants under American law -- petitions to take discovery pursuant to Title 28 of the U.S. Code, Section 1782.

While many have focused on the question of whether private international arbitrations can support Section 1782 petitions, case law has evolved on another question: Can Section 1782 be used by litigants seeking to identify property to satisfy judgments rendered in non-U.S. proceedings?

Johnson & Johnson (“J&J”) sold baby powder for decades.

Today, J&J is facing tens of thousands of lawsuits alleging that its baby powder causes cancer. And the number of new cancer claimants is increasing daily—with many thousands yet to be identified over decades to come.

So, J&J turns to bankruptcy to address this litigation threat, to protect future claimants, and to protect the going concern value of its global operations. [Fn. 1]

A discharge in bankruptcy usually discharges a debtor from the debtor’s liabilities. Section 523 of the Bankruptcy Code, however, sets forth certain exceptions to this policy, including for “any debt . . . for money, property, services, or an extension, renewal, or refinancing of credit, to the extent obtained by . . . false pretenses, a false representation, or actual fraud. . . .” 11 U.S.C. § 523(a)(2)(A).

Johnson & Johnson and its affiliates (“J&J”) have been selling baby powder for decades.

Along the way, studies began showing that talc in J&J’s baby powder can cause ovarian cancer and mesothelioma. So, since 2016, over 38,000 lawsuits have been filed against J&J contending its baby powder talc causes cancer.

In July of 2018, the talc litigation against J&J built-up serious steam when a jury awarded 22 women a $4.69 billion (yes, with a “b”) verdict against J&J—an appellate court reduced the verdict to $2.25 billion.

Courts Begin to Wrestle with the Impact of on a Debtor’s Ability to Recover Estate Property

During the course of 2022, Part V of the Cayman Islands Companies Act (the "Companies Act") will be amended to introduce a new restructuring officer regime available to companies in financial distress, which can be accessed without the need to present a winding up petition to the Grand Court of the Cayman Islands ("Cayman Court").

In June 2019, the U.S. Supreme Court issued its unanimous decision in Taggart v. Lorenzen, through which it turned to general standards governing contempt outside of bankruptcy in holding a creditor may not be found in contempt for its failure to comply with a discharge injunction when a fair ground of doubt exists as to whether the creditor’s actions are wrongful. 139 S. Ct. 1795, 1799–1804 (2019).

Creditors seeking to execute on debtors’ assets to collect on judgments face legal limits under Illinois law, which lets a debtor claim certain types of property as exempt from enforcement of a judgment, wage deduction order or other collection measure. A creditor’s attorney must conduct a thorough examination of a judgment debtor’s assets to determine which assets are available in whole or in part as sources of payment of the amount due.