ABI Supports Passage of Three New Bankruptcy Bills

Petition to file for bankruptcy

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For more than three decades, Norman Kinel has practiced bankruptcy law in the Greater New York City area. He is currently a partner at Squire Patton Boggs, LLP, handling bankruptcy, and restructuring cases. Active in his professional community, Norman Kinel belongs to the American Bankruptcy Institute (ABI).

Since 1982, ABI has provided bankruptcy attorneys, judges, lenders, and other professionals with continuing education opportunities, legal research information, and networking events. Recently, the organization announced that the United States Senate passed three new bills that will modernize bankruptcy code in the country. These three bills are the HAVEN Act, the Small Business Reorganization Act of 2019, and the Family Farmer Relief Act of 2019. ABI testified in support of these bills and regards the Senate’s decision to pass them as a positive potential change in bankruptcy law.

The HAVEN Act affects veterans and injured individuals in the United States. According to this new bill, which was included in June’s National Defense Authorization Act, disability payments from the Department of Defense and Department of Veterans Affairs are to be excluded from income calculations used during bankruptcy filings. 

Meanwhile, the Family Farmer Relief Act of 2019 makes changes to Chapter 12 of the US Bankruptcy Code to reflect the financial challenges facing distressed farmers and fishers today.

Finally, the Smaller Business Reorganization Act of 2019 adds a subchapter to Chapter 11 that provides small businesses a better way to solve debt problems by reducing liquidations, increasing creditor recoveries, and saving jobs.

Article Examines the Future of Unsecured Creditors’ Recovery Efforts

A partner with Squire Patton Boggs, Norman Kinel brings more than 30 years of experience to bear as a bankruptcy attorney involved in some of today’s most complex Chapter 11 cases. Recently, Squire Patton Boggs served as lead counsel for the Official Committee of Unsecured Creditor in the Chapter 11 cases of Constellation Enterprises, LLC, et al. As Normal Kinel outlines in a recent journal article, the ruling in this case, based on an interpretation of a recent Supreme Court decision, may have significant implications for future recovery efforts by unsecured creditors.

In many of today’s large Chapter 11 cases, because the debtors are so over-leveraged, general unsecured creditors do not have a strong chance of a meaningful recovery. To improve the chances of a recovery, it is therefore a common practice for official unsecured creditors’ committees to try and leverage their position by asserting their rights under the U.S. Bankruptcy Code. This often involves raising good faith objections to a number of matters, then seeking to negotiate a settlement of these objections. At times, such a settlement may involve the “gifting” of certain non-estate assets to a trust (either liquidating or litigation) that has been established for general unsecured creditors’ benefit. In essence, this practice may have the effect of skipping certain claimants who have a higher priority than that of general unsecured creditors.

However, as a result of the recent Supreme Court ruling in Czyzewski v. Jevic Holding Corp., bankruptcy courts are now generally deemed not to have the legal power to order a distribution scheme that skips priority claimants and must not deviate from ordinary priority rules without the consent of the affected creditors or unless it is in furtherance of some other permissible bankruptcy code based objective. Consequently, in the Constellation Chapter 11 cases, the Bankruptcy Court did not approve the settlement agreement, reasoning that it was not permissible under Jevic. Although the Committee in Constellation disagreed and appealed the denial of the settlement, while the appeal was still pending, the Constellation Chapter 11 cases were converted to Chapter 7. In an opinion issued by the District Court, the Committee was determined to have been automatically dissolved upon conversion and as a result, the settlement appeal was dismissed.

If in the future courts follow the Bankruptcy Court’s ruling in Constellation, creditors’ committees may find their options and leverage for recoveries to be significantly impaired. For a closer look at the Constellation case and its implications, see Norman Kinel’s article, authored with his partner Nava Hazan, in the November/December 2018 issue of the Journal of Corporate Renewal.

Norman Kinel Co-Authors Article for the Journal of Corporate Renewal

A graduate of the American University Washington College of Law, Norman Kinel is a partner with Squire Patton Boggs’ Restructuring and Insolvency Group. Recently, Norman Kinel co-authored an article published in the Journal of Corporate Renewal titled “Did Jevic Doom Future Chapter 11 Recovery Efforts by Unsecured Creditors?”

The article begins with a focus on a Chapter 11 bankruptcy case involving Constellation Enterprises, LLC, et al., a private entity which produces metal parts for companies in the oil and gas, air transportation, nuclear, and rail transportation industries. An official committee of Constellation's unsecured creditors entered into a settlement agreement with Constellation and its senior secured lenders and submitted a motion for approval of the settlement agreement to the federal bankruptcy court. The settlement agreement provided for the contribution by the senior secured lenders of certain non-bankruptcy estate assets -- including cash and certain litigation claims -- to a trust to be established for the benefit of unsecured creditors. However, the proceeds of the trust would not be distributed in strict accordance with the Bankruptcy Code's "absolute priority rule." 

Due to the disparate proposed distribution of the assets to be received under the settlement agreement to priority claimants, such as the IRS, as well as to a group of delayed-draw term loan lenders (DDTL), the IRS, the United States Trustee and the DDTL lenders filed objections to the settlement agreement. The bankruptcy court, however, deferred action on the matter until the U.S. Supreme Court made a ruling in a case known as Czyzewski v. Jevic Holding Corp. 

Ultimately, in the Jevic case the high court reversed a 3rd U.S. Circuit Court of Appeals ruling that had allowed the distribution of non-estate assets to general unsecured creditors, even when skipping distribution higher-priority unsecured claimants.

As a result of the Supreme Court’s ruling in Jevic, the bankruptcy court declined to approve the settlement. On appeal, the committee disputed the applicability of the Supreme Court's Jevic ruling to their settlement, but the appeal was ultimately dismissed when the Chapter 11 case was converted to a Chapter 7 bankruptcy case. 

As a result, according to the journal article, the appeal was never determined on its merits, and an important issue has yet to be decided by an appeals court: whether the ruling set forth in Jevic prevents priority-skipping settlements where the property to be given in consideration is not property of the bankruptcy estate.

A Look at the Lehman Brothers Case

An alumnus of the American University, Washington College of Law, Norman Kinel has pursued a distinguished career in bankruptcy law spanning more than three decades. Over the years, Norman Kinel has worked on many major bankruptcy cases, including the Lehman Brothers case, where he represented individual clients and was also later selected to serve as a court-approved mediator.

The largest bankruptcy case in American history, the 2008 collapse of Lehman Brothers sent shockwaves through the financial markets and helped to precipitate a global financial crisis that devastated world economies and led to substantial regulatory and market reforms. This collapse was due in part to Lehman Brothers’ rapid acquisition of mortgage lenders in previous years and a reliance on subprime mortgage securities, which left the financial giant exposed to the housing collapse that began in earnest in 2007.

Now, 10 years after Lehman Brothers filed for bankruptcy, the trustee in charge of the proceedings has stated that the case is winding down. According to a court filing by James Giddens, only a few hundred of the more than 140,000 initial claims against Lehman Brothers remain open. According to the filing, secured creditors were repaid in full, while unsecured creditors received nearly 40 cents on the dollar for their claims.

2019 TMA Distressed Investing Conference

A respected bankruptcy attorney at Squire Patton Boggs, Norman Kinel draws on more than three decades of experience in handling complex bankruptcy litigation and corporate restructuring in his practice based in New York City. Also active in the larger field, Norman Kinel belongs to professional groups such as the Turnaround Management Association (TMA).

Founded in 1988 by a group of leading turnaround practitioners, TMA has grown into a global organization of turnaround professionals with more than 8,000 members in more than 50 countries. The organization serves its members through continuing education opportunities, research publications, and an industry-standard certification program. Additionally, TMA hosts a range of networking and professional development events each year, including the Distressed Investing Conference.

For the past 13 years, TMA has brought together the country’s top corporate restructuring and distressed investing professionals for several days of panels, keynote speeches, and networking opportunities. The 2019 conference will take place at the Encore at The Wynn in Las Vegas from February 6- 8. An annual event for distressed investing and corporate restructuring professionals, the conference has previously offered access to more than $5 billion in capital from deal partners such as Balmoral Funds, Excelsior Capital Partners, and Monroe Capital LLC.

Michael Psaros of KPS Capital Partners will be the keynote speaker for the conference's closing event, which will be moderated by Keith Maib of Mackinac Partners LLC and Scott Victor of SSG Capital Advisors LLC. To learn more about the conference, please visit distressed.turnaround.org.

ABI Lists the Most Common Reasons for Corporate Financial Distress

Bankruptcy attorney Norman Kinel has successfully handled numerous cases and litigation involving intricate bankruptcy and restructuring matters. With more than three decades of legal experience, Norman Kinel is an active member of several professional associations, including the American Bankruptcy Institute (ABI).

ABI is the nation’s largest resource for expert information on bankruptcy legislation, trends, and regulations. Moreover, the organization publishes case studies and long-form articles from its members in its monthly journal. In the July 2018 issue, bankruptcy experts Dr. Israel Shaked and Brad Orelowitz, CPA, outlined 10 of the most recurring causes of company bankruptcy, including the few listed here.

-The downside of success
Overconfidence stemming from success often leads to risky decision-making that can cause financial issues. Company analysts may also erroneously base the company’s success solely on sales and growth and not account adequately for shortfalls.

-Poor planning 
Companies may make restructuring or financial decisions that are only effective in the short-term. If financial problems occur unexpectedly, the lack of a cushion can push a company into bankruptcy.

-Fear of change
Bankruptcy is often a direct result of a company’s resistance to addressing significant changes in their market or consumer base.

The American University Washington College of Law Clinical Program

For more than 30 years, Norman Kinel has led an award-winning career as a bankruptcy attorney in prominent firms such as Squire Patton Boggs; Cadwalader, Wickersham & Taft; Whitman Breed Abbott & Morgan (now Winston & Strawn); Sidley Austin; and Lowenstein Sandler. To prepare for his career, Norman Kinel earned his law degree from the American University Washington College of Law (AUWCL).

Founded in 1896, AUWCL has developed a reputation as a center for academic excellence. The school stands out for its highly ranked programs in health law, business law, and international law, as well as its robust clinical program that provides students with hands-on learning experiences.

The AUWCL clinical program offers 10 distinct clinics in specialties such as immigration justice, disability rights, and community and economic development. The clinical program’s second- and third-year students receive extensive guidance from faculty but hold primary responsibility for all litigation, research, and transactional duties.

About The Bankruptcy Strategist Newsletter

Attorney Norman Kinel specializes in bankruptcy law as a partner at the New York City offices of Squire Patton Boggs (US), LLP, where he is a member of the firm’s Restructuring & Insolvency Practice. A respected voice in his industry, Norman Kinel serves on the Board of Editors for The Bankruptcy Strategist, a widely read law journal newsletter. 

The Bankruptcy Strategist is published by Law Journal Newsletters, which is a news portal that strives to deliver high-quality content from industry experts in specific verticals targeting the needs of attorneys in the fields of bankruptcy law, technology law, commercial law, and a number of other sectors. Recent topics covered by the Bankruptcy Strategist have included LLCs and the difficulty in enforcing judgments against them as well as non-compete clauses and fair market value. 

Interested attorneys can link their Lexis Nexis accounts to the Law Journal Newsletters website if they wish to subscribe to The Bankruptcy Strategist.

Court Rules Bankruptcy Courts Are Not Debt Collection Agencies

New York attorney Norman Kinel is a partner at Squire Patton Boggs LLP. Before joining this firm, Mr. Kinel worked as an associate at Cadwalader, Wickersham & Taft and later was a partner at Whitman Breed Abbott & Morgan; Sidley Austin; and Lowenstein Sandler. In his current position, Norman Kinel is a member of his firm’s restructuring and insolvency practice, is head of the firm's creditors' committee practice and represents numerous clients in bankruptcy cases nationwide.

Many times bankruptcy attorneys are approached by creditors who want to claim debts or enforce judgments against debtors. These creditors are often frustrated and eager to commence involuntary bankruptcy proceedings to force the debtor into bankruptcy. However, bankruptcy courts have shown reluctance to be treated as collection agencies. 

In the case of In re Mathew M. Murray, the creditor, a law firm, wanted to enforce a $19 million judgment against the debtor, Murray, by initiating involuntary bankruptcy proceedings. The law firm sought an order for the sale of real property that the debtor held jointly with his wife. 

While the petition did meet the minimum filing requirements, the bankruptcy court ruled that the case was commenced in bad faith to either enhance its rights against the debtor or obtain leverage in negotiations. The court held that courts are not to be misused as collection agencies, and bankruptcy proceedings are not judgment enforcement tools.

Norman Kinel - Experienced New York City Bankruptcy Attorney

Attorney Norman Kinel’s focus on bankruptcy law extends to providing legal counsel both in and out-of-court in various default and restructuring matters. Based in New York City as a partner at Squire Patton Boggs, Norman Kinel plays a key role in the international law firm’s Restructuring & Insolvency Practice.

Immediately before joining Squire Patton Boggs, Mr. Kinel was a partner at the corporate law firm of Lowenstein Sandler LLP. He has previously been affiliated with such other law firms as Cadwalader, Wickersham & Taft LLP and Sidley Austin, LLP.

Norman Kinel regularly represents debtors, creditors, bondholders, trustees and committees of creditors, equity holders and retirees. Norman also has extensive experience in bankruptcy asset sales and mergers and acquisitions, as well as cross-border insolvency proceedings. Coldwater Creek, Tavern on the Green, 360networks, Adelphia Communications and Daytop Village are among the notable Chapter 11 committee and debtor representations he has led.

A co-author of “Does a Bankruptcy Court Have the Authority to Disband an Official Committee?” in the New York Law Journal, Norman Kinel has also been interviewed and quoted by The Wall Street Journal and other publications on a variety of bankruptcy-related topics.