Disgruntled debtors seeking to evade their obligations by filing fraudulent liens soon face new threats under Illinois law. On July 25, 2012, Governor Patrick Quinn approved and signed Senate Bill 1692, which is intended to provide additional remedies for wrongfully filed UCC liens.5 Senate Bill 1692 becomes effective January 1, 2013 and will be incorporated into section nine of the Illinois Uniform Commercial Code.
A few weeks ago, the Sixth Circuit affirmed the Western District Court of Michigan’s holding in U.S. v. Quality Stores Inc., 424 B.R. 237 (W.D. Mich. 2010), that severance payments made to employees pursuant to an involuntary reduction in force were not “wages” for Federal Insurance Contribution Act (“FICA”) tax purposes. U.S. v. Quality Stores Inc., No. 10-1563 (6th Cir. 2012). The Sixth Circuit’s decision creates a circuit court split with the Federal Circuit and its 2008 decision in CSX Corporation v. United States, 518 F.3d 1328 (Fed. Cir. 2008).
On September 14, the Sixth Circuit affirmed the trial court's finding that a failed bank's parent did not make a capital maintenance commitment to the bank. After the parent filed for bankruptcy, the FDIC was appointed receiver for the bank. The FDIC then sought payment from the parent under the statute requiring a party seeking reorganization to fulfill commitments to maintain the capital of an insured depository institution.
In 2012, several judicial opinions have reminded directors, officers and “responsible persons” that personal liability may be imposed for business taxes. See our alert from June 20, 2012. Responsible persons are reminded again that not only will authorities impose liability for unpaid taxes of a business on individuals but that the imposition of such taxes may not be dischargeable in bankruptcy.
On August 20th, the U.S. Court of Appeals for the Tenth Circuit reversed a trial court's ruling finding that judgments against Ponzi scheme "net gainers" were non-dischargeable in bankruptcy. The debtors were early investors in what turned out to be a Ponzi scheme and received more money than they invested. When the Ponzi scheme was uncovered, the state State of Oklahoma sued the debtors for unjust enrichment but not for any securities violations. After the State obtained a judgment on the unjust enrichment claim, the debtors declared bankruptcy.
The Department of Education (DOE) and the CFPB are pushing Congress to make it easier for students to discharge student debt issued by private lenders by filing for bankruptcy protection. The recommendations of the DOE and CFPB would not affect the majority of student debt, which is issued by the federal government, because federal loans already offer leniency in the form of deferrals, forbearance or more flexible payment options. No such cushion exists for private loans.
On July 16th, the National Futures Association ("NFA") announced it has requested that the Special Committee for the Protection of Customer Funds, consisting of the public representatives on NFA's Board of Directors, retain the services of a national law firm to conduct a careful internal review of NFA's audit practices and procedures, and the execution of those procedures in the specific instance of Peregrine Financial Group, to assure that the right procedures are in place and that they are being properly followed.
On March 15, 2012, the American Bar Association’s Electronic Discovery (ESI) in Bankruptcy Working Group (the “Working Group”) published an interim report addressing certain principles and suggested best practices for electronic discovery in bankruptcy cases (the “Interim Report”). The Working Group was formed to study and prepare guidelines or a “best practices” report on the scope and timing of a party’s obligation to preserve ESI in bankruptcy cases.
On June 22nd, the Federal Deposit Insurance Corporation ("FDIC") and the Treasury Department issued a final rule on the calculation of the maximum obligation limitation ("MOL"), as specified in the Dodd-Frank Wall Street Reform and Consumer Protection Act (the "Dodd-Frank Act"). The MOL limits the aggregate amount of outstanding obligations that the FDIC may issue or incur in connection with the orderly liquidation of a covered financial company. The new rule is effective July 23, 2012.
On May 29, 2012 the United States Supreme Court ruled that a plan of reorganization may not be confirmed over the objection of a secured creditor if the plan provides for the sale of collateral free and clear of the creditor’s lien, but does not permit the creditor to credit bid at the sale. The ruling resolved a conflict between a decision from Seventh Circuit Court of Appeals, which denied confirmation of such a plan, and decisions from the Third and Fifth Circuit Courts of Appeal, which approved such plans.