“Without these [mediated] settlements, there is no Plan.”

• From Opinion on Plan confirmation, In re Boy Scouts of America, Case No. 20-10343, Delaware Bankruptcy Court, Doc. 10136, at 80 (issued July 29, 2022).

The Boy Scouts of America bankruptcy has achieved a milestone: on July 29, 2022, the Bankruptcy Court issues a 281-page Opinion on confirmation of Debtor’s Plan of Reorganization. The Opinion is generally favorable toward Plan confirmation but identifies a number of issues remaining to be resolved.

“[T]he bankruptcy court— . . . (2) shall excuse compliance . . . if . . . an assignee for the benefit of the debtor’s creditors . . . was appointed or took possession more than 120 days before the date of the filing of the petition, unless . . . necessary to prevent fraud or injustice.”

11 U.S.C. § 543(d)(2) (emphasis added).[Fn. 1]

On August 15, 2022, the Tenth Circuit Court of Appeals reinstates its prior In re Hammons opinion, which deals with remedies for unconstitutionally lower quarterly fees charged to bankruptcy debtors in Alabama and North Carolina.[Fn. 1]

Opinion Points

Check out these points from the Hammons opinion:

Congress must be allowed“to fashion a modern bankruptcy system which places the basic rudiments of the bankruptcy process in the hands of an expert equitable tribunal.”

—from Granfinanciera, S.A. v. Nordberg, 492 U.S. 33, 94 (1989) (Blackmun dissent, emphasis added).

Justice Blackmun had a point—back in 1989—that remains true today:

When parties contract for arbitration of their disputes:

Assignment for benefit of creditors (“ABC”) laws are, historically, a debtor remedy. ABC laws are a voluntary debtor tool for shutting down and winding up the debtor’s failed business.

Ancient History

ABC laws began under the common law, back in merrie olde England, arising out of the law of trusts. Under trust law, any person can, without restriction, transfer assets into a trust for the benefit of one or more people.

An assignment for benefit of creditor (“ABC”) is, historically, a nonjudicial process for administering the affairs of a failed business. ABC laws are rooted in English common law and predate enactment of federal bankruptcy laws in the U.S.[Fn. 1]

An ABC is made by a formal, voluntary transfer of most-or-all of a business’s assets to an assignee, in trust, to apply the property or its proceeds to the payment of debts and to return any surplus to the debtor.

I’m on a curiosity-quest to find the first-ever U.S. Supreme Court opinion on the subject of bankruptcy.

Excitement arises, for a moment, upon discovering Gibbs v. Gibbs, 1 U.S. 371 (1788). After all, Gibbs v. Gibbs:

Here’s a hard-knocks rule for debtor attorneys:

• Never file Chapter 7 for a corporation or an LLC.

Chapter 7 has always been a grave yard for failed Chapter 11s: that’s where Chapter 11 cases go when debtors can’t get a Chapter 11 plan confirmed. For example, 35.4% of Chapter 11 cases filed between 1989 and 1995 converted to Chapter 7. [Fn. 1]

But Chapter 7 is rarely a good first-choice for corporations and LLCs who want/need to liquidate.

Every now and then we get a glimpse into the past . . . that casts light on issues and events of today.

One such glimpse is a Harvard Law Review article from 1909: “The Effect of a National Bankruptcy Law upon State Laws.”[Fn. 1]. It’s by Samuel Williston—the same Samuel Williston who authored “Williston on Contracts” and who served as professor of law at Harvard Law School from 1895 to 1938. 

Bankruptcy v. State Laws—in 1909