Washington report

Burkett Van Kirk

National Bankruptcy Review Commission

The Commercial Law League of America and its Bankruptcy & Insolvency Section formally presented positions on behalf of the CLLA today before the National Bankruptcy Review Commission. The CLLA’s importance in the bankruptcy community was recognized by the Commission, which extended an official invitation to the League to appear by itself before the Commission.

Appearing on behalf of the League and the Section were Alan R. Gordon of Saul, Ewing, Remick & Saul, Philadelphia, Pennsylvania; Elliott D. Levin of Rubin & Levin, Indianapolis, Indiana; and Judith Greenstone Miller of Clark Hill, PL.C. of Birmingham, Michigan. They drafted papers specifically on issues relating to Chapter 11, Small Business and Governmental Issues. Under the leadership of B&I Section Legislative Committee Co-Chairs Frederick M. Luper of Columbus, Ohio, and Jay Welford of Detroit, Michigan, nearly a dozen members of the B&I Section worked for months to identify issues and draft position papers for discussion and ultimate approval by the League’s Emergency Legislative Committee. Others who authored position papers included Louis Levine of Melvin & Melvin, Syracuse, New York (consumer recommendations); Louis Robin of Fitzgerald. O’Brien, Robin & Shapiro), Longmeadow, Massachusettsand Philip E. Beard of Stonecipher, Cunningham, Beard & Schmitt, Pittsburgh, Pennsylvania (mass torts/future claims). Others who had the responsibility to review issues and proposals and make recommendations to the full committee included Cathy Pike of Goldberg & Simpson, Louisville, Kentucky (jurisdiction and procedure); Milton P. Goldfarb of Newman. Freyman, Goldbarb, Stevens and Klein, St. Louis, Missouri (government-tax); and Luper (transnational). Over 5O pages of detailed position papers on a dozen specific topics were presented to the Commission. Following are the highlights of the positions espoused by the CLLA and the B&I Section:

Chapter 11 Establish a bright-line measurement of what constitutes “ordinary course of business” in determining preference action defense.

Require that a creditor’s written consent be obtained in order to release a third-party guarantor through a plan of reorganization and specifically provide that voting for such a plan does not constitute that written consent. Amend Section 365(d)(4) to make it clear that a lease of nonresidential real property should not be considered rejected until a court has ruled on the issue if a motion to assume or reject or a motion to extend the time has been timely filed. Create a statutory good faith requirement for voluntary Chapter 11 cases.

Small Business

Eliminate the $4 million cap on the definition of Single Asset Real Estate.

Encourage the use of existing resources through the U.S. Trustee and existing law to reduce time and expense related to small businesses in Chapter 11 reorganization. Government

Oppose the repeal of Section 724(b)(2), which would effectively eliminate the subordination of tax liens.

Extend the “deemed filed” rule to all chapters of the Bankruptcy Code and all creditors. Oppose overruling the standards established in Energy Resources by legislative action.

Propose an amendment to the Internal Revenue Code to allow for the trustee in bankruptcy to receive a “stepped-up basis” in property to reduce the negative impact of capital gains taxes Consumer

Dismiss a Chapter 13 if filed within 12 months after debtor receives a discharge in a Chapter 7 unless the Court determines the filing was necessary due to circumstances for which the debtor should not be held accountable and for which a dismissal would impose an undue hardship. Service, Ethics

Support the lowering of the standard for retention of professionals to “materially adverse” from the current “disinterestedness” standard but require full disclosure of all interests.

Mass Torts/Future Claims Recommend that the Commission consider not limiting the process outlined to Chapter 11 but rather make them applicable to Chapter 7 as well. Rep. Henry Hyde (R-IL) and chair of the House Judiciary Committee introduced HR 764 on February 13, 1997, to make changes in the Bankruptcy Code.

Included in the changes are: 1. Eliminate the $4 million cap from the Code’s definition of “single asset real estate.”

2. Clarify that debtor’s attorneys may be compensated out of the debtor’s estate.

3. Amend Section 365(b)(2)(D), which provides an exception to the obligations that must be cured before a trustee may assume a lease, to clarify that it covers penalty rates in addition to penalty provisions.

4. Provide that the 1994 Bankruptcy Amendments to Section 525 only apply to barring discrimination concerning student loans and grants as a result of prior bankruptcies.

5. Set a procedure to elect a private Chapter 11 trustee at the initial creditors’ meeting.

6. Bar discharge of a debt for death or injury cased by operating watercraft or aircraft while intoxicated.

All the above provisions (except for #6) are also included in Rep. John Conyers’ technical amendments bill introduced on January 7, 1997 (HR 120).

There is also a difference in enactment date. HR 764 would apply to all cases pending on the date of enactment, or commenced on or after the date enactment, except for the amendments relating to single asset real estate, executory contracts and unexpired leases, and debts for drunk boating or piloting, which would apply to cases commenced on or after enactment. HR 120 would apply only to cases commenced on or after the enactment date. House Judiciary Committee

In our continuing series of providing contact information of those members of Congress who will have the greatest influence on legislation of interest to the CLLA, following is a listing of the members of the House Judiciary Committee. The individuals are listed in order of seniority on the committee. Information provided includes name, state and district represented, along with mailing addresses, phone and fax numbers, and e-mail addresses when available: Republicans

Hyde, Henry (IL-6th) 2110 RHOB 225-4561 225-1166, fax

Sensenbrenner, F. James (WI-9th) 2332 RHOB 225-5101 225-3190, fax sensen09@hr.house.gov McCollum, Bill (FL-8th) 2266 RHOB 225-2176 225-0999, fax

Gekas, George (PA-17th) 2410 RHOB 225-4315 225-8440, fax Coble, Howard (NC-6th) 2239 RHOB 225-3065 225-8611, fax Smith, Lamar (TX-21st) 2231 RHOB 225-4236 225-8628, fax lamars@hr.house.gov Schiff, Steven (NM-lst) 2404 RHOB 225-6316 225-4975, fax

Gallegly, Elton (CA-23rd) 2427 RHOB 225-5811 225-1100, fax

Canady, Charles (FL-12th) 2432 RHOB 225-1252 225-2279, fax canady@hr.house.gov Inglis, Bob (SC-4th) 320 CHOB 225-6030 226-1177, fax binglis@hr.house.gov Goodlatte, Bob (VA-6th) 123 CHOB 225-5431 225-9681, fax talk2bob@hr.house.gov Buyer, Steve (IN-5th) 326 CHOB 225-5037

Bono, Sonny (CA-44th) 324 CHOB 225-5330

Bryant, Ed (TN-7th) 408 CHOB 225-2811 Chabot, Steve (OH-lst) 129 CHOB 225-2216

Barr, Bob (GA-7th) 1130 LHOB 225-2931

bbarr@hr.house.gov Jenkins, William (TN-lst) 1708 LHOB 225-6356 225-7812, fax

Hutchinson, Asa (AR-3rd) 1535 LHOB 225-4301

Pease, Edward (IN-7th) 226 CHOB 225-5805 225-1649, fax

Cannon, Christopher (UT-3rd) 118 CHOB 225-7751 226-7683, fax Democrats

Conyers, John (MI-14th) 2426 RHOB 225-5126 225-0072, fax jconyers@hr.house.gov Frank, Barney (MA-4th) 2210 RHOB 225-5931 225-0182, fax

Schumer, Charles (NY-9th) 2211 RHOB 225-6616 225-4183, fax

Berman, Howard (CA-26th) 2330 RHOB 225-4695 225-5279, fax Boucher, Rick (VA-9th) 2329 RHOB 225-3861 225-0442, fax ninthnet@hr.house.gov Nadler, Jerrold (NY-8th) 2448 RHOB 225-5635 225-6923, fax nadler@hr.house.gov Scott, Robert “Bobby” (VA-3rd) 2464 RHOB 225-8351 225-8354, fax Watt, Melvin (NC-12th) 1230 LHOB 225-1510 225-1512, fax melmail@hr.house.gov Lofgren, Zoe (CA-16th) 318 CHOB 225-3072 zoegram@hr.house.gov Lee, Sheila Jackson (TX-18th) 410 CHOB 225-3816

Waters, Maxine (CA-35th) 2344 RHOB 225-2201 225-7854, fax Meehan, Marty (MA-5th) 2434 RHOB 225-3411 226-0771, fax mtmeehan@hr.house.gov Delahunt, William (MA-lOth) 1517 LHOB 225-3111 225-2212, fax

Wexler, Robert (FL-19th) 1609 LHOB 225-3001 225-8791, fax

Rothman, Steven (NJ-9th) 1608 LHOB 225-5061 226-0745, fax

(RHOB= Rayburn House Office Building; CHOB = Cannon House Office Building; LHOB = Longworth House Office Building. All area codes are 202. All ZIP codes are 20515.)

Burkett Van Kirk

Washington Legislative Counsel (As of February 20, 1997)

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