Pratt’s Journal of BankruPtcy law VOLUME 7 NUMBER 3 APRIL 2011 HEADNOTE: IN THE COURTS Steven A. Meyerowitz 193 TREATMENT OF “MAKE-WHOLE” AND “NO-CALL” PROVISIONS BY BANKRUPTCY COURTS David M. Hillman and Lawrence S. Goldberg 195 DELAWARE COURT OF CHANCERY REJECTS ATTEMPT BY CREDITORS OF INSOLVENT LLC TO BRING DERIVATIVE CLAIMS Robert S. Reder and Nehal M. Siddiqui 201 DOES THE RECENT STRING OF EXAMINER APPOINTMENTS IN DELAWARE REPRESENT A SEA CHANGE IN APPROACH OR MERELY A PERFECT STORM OF CASES? Ryan M. Murphy 207 IN RE LESLIE CONTROLS, INC.: THE DELAWARE BANKRUPTCY COURT WEIGHS IN ON THE COMMON-INTEREST DOCTRINE Brad B. Erens and Timothy W. Hoffmann 226 IN RE QUIGLEY COMPANY, INC.: NEW YORK BANKRUPTCY COURT DENIES CONFIRMATION OF PROPOSED CHAPTER 11 ASBESTOS PLAN Brad B. Erens 232 GERMAN BANK RESTRUCTURING ACT TAKES EFFECT Thomas Schürrle and Klaudius Heda 237 THE YEAR IN BANKRUPTCY: PART I Charles M. Oellermann and Mark G. Douglas 244 EDITOR-IN-CHIEF Steven A. Meyerowitz President, Meyerowitz Communications Inc. BOARD OF EDITORS Scott L. Baena Mark G. Douglas William I. Kohn Bilzin Sumberg Baena Price & Jones Day Schiff Hardin LLP Axelrod LLP Timothy P. Duggan Matthew W. Levin Leslie A. Berkoff Stark & Stark Alston & Bird LLP Moritt Hock Hamroff & Horowitz LLP Gregg M. Ficks Alec P. Ostrow Coblentz, Patch, Duffy & Bass Stevens & Lee P.C. Andrew P. Brozman LLP Clifford Chance US LLP Deryck A. Palmer Mark J. Friedman Cadwalader, Wickersham & Kevin H. Buraks DLA Piper Rudnick Gray Cary Taft LLP Portnoff Law Associates, Ltd. US LLP N. Theodore Zink, Jr. Peter S. Clark II Robin E. Keller Chadbourne & Parke LLP Reed Smith LLP Lovells Thomas W. Coffey Tucker Ellis & West LLP PRATT’S JOURNAL OF BANKRUPTCY LAW is published eight times a year by A.S. Pratt & Sons, 805 Fif- teenth Street, NW., Third Floor, Washington, DC 20005-2207, Copyright © 2011 THOMPSON MEDIA GROUP LLC. All rights reserved. No part of this journal may be reproduced in any form — by microfilm, xerography, or otherwise — or incorporated into any information retrieval system without the written permission of the copyright owner. Requests to reproduce material contained in this publication should be addressed to A.S. Pratt & Sons, 805 Fifteenth Street, NW., Third Floor, Washington, DC 20005-2207, fax: 703-528-1736. For permission to photo- copy or use material electronically from Pratt’s Journal of Bankruptcy Law, please access www.copyright.com or contact the Copyright Clearance Center, Inc. (CCC), 222 Rosewood Drive, Danvers, MA 01923, 978-750-8400. CCC is a not-for-profit organization that provides licenses and registration for a variety of users. For subscrip- tion information and customer service, call 1-800-572-2797. Direct any editorial inquires and send any material for publication to Steven A. Meyerowitz, Editor-in-Chief, Meyerowitz Communications Inc., 10 Crinkle Court, Northport, NY 11768, [email protected], 631-261-9476 (phone), 631-261-3847 (fax). Material for pub- lication is welcomed — articles, decisions, or other items of interest to bankers, officers of financial institutions, and their attorneys. This publication is designed to be accurate and authoritative, but neither the publisher nor the authors are rendering legal, accounting, or other professional services in this publication. If legal or other expert advice is desired, retain the services of an appropriate professional. The articles and columns reflect only the pres- ent considerations and views of the authors and do not necessarily reflect those of the firms or organizations with which they are affiliated, any of the former or present clients of the authors or their firms or organizations, or the editors or publisher. POSTMASTER: Send address changes to Pratt’s Journal of Bankruptcy Law, A.S. Pratt & Sons, 805 Fifteenth Street, NW., Third Floor, Washington, DC 20005-2207. ISSN 1931-6992 The Year in Bankruptcy: Part I CHARLES M. OELLERMANN AND MARK G. DOUGLAS In the first part of a two-part article, the authors explore the key bankruptcy developments from the past year. hat should have been the best economic news of 2010 was largely obscured by the deluge of bad news dominating world Wheadlines. The latter included tidings of: • chronically high unemployment; • a continuing malaise in the U.S. housing market; • wars in Iraq and Afghanistan; • debt crises precipitating the implementation of austerity measures in Britain, Portugal, Italy, Greece, Spain, and Ireland (to name but a few), as well as countless state and local governments in the U.S.; • a sharp escalation of food prices worldwide; • a deepening U.S. mortgage foreclosure crisis; • natural disasters; and • the worst environmental disaster in U.S. history. Charles M. Oellermann is a partner in the Business Restructuring and Reorga- nization Practice of Jones Day in Columbus. Mark G. Douglas is the firm’s Re- structuring Practice Communications Coordinator. The authors can be contacted, respectively at [email protected] and [email protected]. 244 Published in the April 2011 issue of Pratt’s Journal of Bankruptcy Law. Copyright © 2011 THOMPSON MEDIA GROUP LLC. 1-800-572-2797. THE YEAR IN BANKRUPTCY: PART I END OF THE GREAT RECESSION? Now for the good news. According to the National Bureau of Eco- nomic Research, the organization responsible for marking turning points in the U.S. business cycle, the U.S. recession that started in December 2007 ended in June 2009. On January 7, 2010, the Euler Hermes Econom- ic Outlook for Winter 2009/10 similarly reported that the world economy has “staged a technical exit from recession” by piggybacking on the posi- tive performance of the Asian markets. Pronouncements of the demise of the Great Recession — to the extent that anyone other than economists was paying attention — were greet- ed with a healthy dose of (well-deserved) skepticism. Abroad, Eurozone countries struggled in 2010 to rein in spending, resulting in the adoption of highly unpopular austerity budgets and yet another round of sovereign bailouts. The United States’ balance sheet fared no better. Year-end of- ficial debt figures published by the U.S. Treasury show that the federal government accumulated more new debt — $3.22 trillion — during the tenure of the 111th Congress (which expired at the end of 2010) than it did during the first 100 Congresses combined. That equals $10,429.64 in new debt for each of the 308,745,538 people counted in the U.S. by the 2010 Census. At the end of 2010, the total national debt of $13.86 trillion stood at $44,886.57 for every man, woman, and child in America. In 2010, more U.S. banks failed than in any other year since 1992, the height of the savings-and-loan crisis. Amid near double-digit unemploy- ment, a struggling economy, and a still-devastated real estate market, the U.S. closed the year with 157 bank failures, up from 140 in 2009. More- over, the Federal Deposit Insurance Corporation’s list of “problem” banks — banks whose weaknesses “threaten their continued financial viability” — stood at 860 as of September 30, the highest since 1993. Average Americans are not only more debt-ridden, but poorer. U.S. Census Bureau data released in September 2010 showed that poverty among the working-age population of the U.S. had risen to the highest level in almost 50 years at the beginning of 2010. Poverty among those aged 18 to 64 rose by 1.3 percentage points to 12.9 percent — the highest level since the early 1960s, prior to then-President Lyndon Johnson’s “War 245 PRATT’S JOURNAL OF BANKRUPTCY LAW on Poverty.” The overall poverty rate rose by 1.1 percentage points to 14.3 percent, the highest since 1994. More than 14.5 million U.S. workers were out of work at the end of 2010, including 6.4 million who have been jobless for six months or longer, according to data reported by the U.S. Department of Labor in January 2011. This equates to an unemployment rate of 9.4 percent. Some estimates put the “underemployment” rate, which counts those looking for jobs as well as those who have given up looking, in addition to people who want full-time employment but settle for part-time, at nearly 17 percent. The number of Americans filing for personal bankruptcy topped 1.5 million in 2010, as high long-term jobless rates, depressed home prices, and soaring medical bills drove more households to seek court protec- tion. This represents a nine percent increase from 2009 and is the highest level since the Bankruptcy Code was overhauled in 2005, according to the American Bankruptcy Institute, an association of bankruptcy profession- als, and the National Bankruptcy Research Center. Banks took steps to repossess a record 2.87 million U.S. homes in 2010, as the two year old mortgage crisis continued to weigh heavily on the economy. According to RealtyTrac, an online marketplace for fore- closure properties, foreclosures hit 2.23 percent of all housing units in the country, or one out of 45, an increase from 2.21 percent in 2009. More than one million homes were actually repossessed in 2010. According to the National Association of Realtors, fewer people bought previously owned U.S. homes in 2010 than in any year since 1997. Sales fell 4.8 percent to 4.91 million units in 2010, the weakest perfor- mance in 13 years. Home prices were depressed by a record number of foreclosures and high unemployment, and many potential buyers held off on purchases in 2010, fearful that prices had not yet bottomed out. MUNICIPAL DISTRESS The financial plight of towns, cities, counties, and other municipalities in the U.S.