Volume 1 | Issue 4 | July/August 2014

TURNAROUND MANAGEMENTTurnaround ASSOCIATION Times OHIO President’s Report July/August Scott Opincar 2014 McDonald Hopkins LLC

In This Issue According to the Federal Reserve, growth in economic activity rebounded in the second quarter of 2014. Labor market condi- Page 2 tions improved and the unemployment rate fell to 6.1%. Fed Bankruptcy Courts’ policymakers agreed to reduce purchases of Treasury bonds and Power to Resolve Disputes Among mortgage-backed securities to $25 billion a month, from $35 bil- Consenting Litigants Still lion. In addition, the Fed has stated its intention to end the bond Unresolved After New purchase program in October of 2014. Supreme Court Decision Although the news is positive, the Fed asserted that there remains a significant underutilization Page 4 of labor resources and the recovery in the housing sector remains slow. To support continued 2014 Awards progress toward maximum employment and price stability, the Fed is not expected to raise its Announcement benchmark short-term interest rates earlier than expected in 2015. According to certain forecasts, Page 6 the central bank is expected to raise short-term interest rates in the second half of 2015. TMA Now: Chapter 11 commercial filings in July 2014 declined by 26% compared to the 481 filings in A Pipeline for June 2014. Total bankruptcy filings decreased by 12% in July 2014 over July 2013. More- Female Leaders over, according to Epiq Systems, Inc., commercial Chapter 11 filings dipped 34%, to 357 Page 7 filings in July 2014 from the 539 commercial Chapter 11 filings in July 2013. Turnaround 2014 Events Schedule and restructuring professionals will need to utilize cash flow management, out-of-court workouts, secured party sales, receiverships, and the use of forbearance agreements to pro- vide tactical and strategic options to financially distressed companies. Our TMA chapter has a number of great programs and networking events scheduled over the next few months. On September 18, 2014, Ohio TMA will be hosting a breakfast meeting at the Global Center for Health Innovation to discuss the Affordable Care Act and its impact on About TMA turnarounds and restructurings. Dr. Thomas Zenty, III, CEO of University Hospital Systems, will be our featured guest speaker. On September 23rd we will be hosting an evening with TMA is the premier Judge Alan M. Koschik at Lockkeepers. On October 23rd, please join us for a discussion on national organization of professionals the changing landscape of turnarounds and the exploration of oil and gas. On November 20th, dedicated to Ohio TMA and the Commercial and Bankruptcy Law Section of the Cleveland Metropolitan corporate renewal Bar Association will be holding a joint education event on various turnaround and restructur- and turnaround ing topics. Finally, Ohio TMA will be hosting a holiday party at Great Lakes Brewing Compa- management. ny on Thursday, December 11th. I hope to see you at these events. Please remember to renew your membership in Ohio TMA. For information regarding membership in the TMA, please contact [email protected] or Robert Folland at Visit our website: [email protected]. www.turnaround.org Please also remember that Ohio TMA is currently accepting nominations for the Turn- around/Transaction of the Year Award and Lifetime Achievement Award. You’ll find the Follow us on Twitter: details and nomination forms elsewhere in this issue. @OhioTMA Thank you for your continued support of Ohio TMA. Scott Opincar July/August 2014 | 1 Feature Story

Bankruptcy Courts’ Power to Resolve Disputes Ohio TMA Officers Among Consenting Litigants Still Unresolved President After New Supreme Court Decision Scott Opincar By John P. Hickey and Suzana K. Koch Vice President The constitutional cloud over so-called “Stern claims”—claims that Congress attempted to assign Sally Barton to bankruptcy courts for final resolution but which cannot constitutionally be heard outside the Secretary Article III judiciary—remains unresolved following the Supreme Court’s decision earlier this year in Executive Benefits Insurance Agency v. Arkison. While the high court clarified that bankruptcy Mark Kozel courts confronted with such claims may still make proposed findings of fact and conclusions of law Treasurer for review by a district court, it did not reach the potentially more practically important question of whether bankruptcy courts can, with the consent of the litigants, enter final orders directly rather than Mark Kutylowski ones requiring district court review. Past President In its 2011 ruling in Stern v. Marshall, the court held that Congress had unconstitutionally attempt- John Lane ed to give bankruptcy judges the power to enter final judgments in cases involving private rights of litigants when those rights were not necessarily adjudicated in the process of ruling on a creditor’s proof of claim. The Stern ruling left a gap in the bankruptcy adjudicatory scheme, because the statute Ohio TMA governing the exercise of the bankruptcy courts’ power did not provide a mechanism for how to deal Board Members: with so-called “core” claims that the bankruptcy courts now lacked constitutional authority to de- cide. It assumed that bankruptcy courts would hear core matters and enter final orders in them.There Kelly Burgan was no express fallback position in the event that bankruptcy courts constitutionally couldn’t hear a given core matter. Daniel DeMarco Answered and Unanswered Questions Bryan Farkas Litigants and lower courts faced two principal questions following Stern: (1) could a bankruptcy Rob Folland court enter a final order on aStern claim if the litigants consent, and (2) in the event there is no consent or even consent is insufficient, what should a bankruptcy court do when presented with such Dov Frankel a claim? Executive Benefits answers the second question without answering the first.

Suzana Koch Answered: Stern Claims Can Be Handled as Non-Core Claims The Supreme Court unanimously held that a core claim that nevertheless must constitutionally be John Lalley decided by an Article III judge may be treated as a “non-core” claim, meaning it can be heard first by a bankruptcy judge. The bankruptcy judge may make proposed findings of fact and conclusions Mark Seryak of law for review de novo by the district court, just as a federal magistrate would. But the court held Rob Stefancin that the “gap” never really existed because the statute also contains a severability clause that allows any provision held to apply, impermissibly, to particular circumstances could still apply to others. Jerry Stethem This is arguably a strained reading of the relevant severability clause (what it really means, on its face, is that § 157(b) still applies where it is constitutional to do so, not that § 157(c) should automat- Rick Szekelyi This Month’s Featured Sponsor David Wehrle

Chapter Administrator Brouse McDowell is a full-service law firm with offices in Akron, Cleveland and Lorain County. For nearly a century, Louise Walsh the firm has offered the sophistication and talent of a large firm and the personal attention and efficiencies of a smaller firm. Its 70 attorneys work in an interactive and collaborative culture, yielding creative, practical solutions for clients.

2 | Turnaround Times ically fill the gap in other circumstances). But all nine justices adopted it, and it is certainly a prag- matic result given the overall structure of that law. In the world of most bankruptcy professionals, Ohio TMA that is all that will matter for everyday practice. The high court’s unanimous willingness to stretch Corporate the severability clause slightly to reach this result is more an item of interest for enthusiastic watch- ers of the Supreme Court itself. This reading of the severability clause allows the court to escape Sponsors the conclusion that its “purpose-based arguments describe a statute Congress reasonably might have Baker & Hostetler LLP written, but not the statute it wrote.” (Abramski v. U.S., 2014). Unanswered: Can Litigants Consent to Bankruptcy Court Adjudication? Barnes & Thornburg LLP The decision, however, leaves unresolved the question of whether litigants can consent to a bank- ruptcy court entering final orders in a core matter that falls outside its regular jurisdiction. In other Brouse McDowell words, the question is whether the Constitution creates a private right to have traditional civil cases heard by an independent Article III court, which can be waived, or a structural feature of our federal Calfee Halter government requiring Stern-type claims to be finally adjudicated in Article III courts, which thus & Griswold LLP cannot be waived by agreement. Implications for the District Courts, Creditors, and Debtors Centrus Group, Inc.

This is not a trivial matter. While the total volume of bankruptcy filings is down overall nationwide, Chikol Equities, Inc. the number of claims that are potentially within the scope of Stern is still considerable, and could grow significantly in a different fiscal and economic climate. District judges could still face a signif- First Business icant increase in their workload—a concern many have voiced since Stern was announced—if they Capital Corp. need to review every Stern decision of every bankruptcy court. Ice Miller LLP Since 2012, the Bankruptcy Court for the Northern District of Ohio has averaged about 26,000 cases per year. In 2009, it was more than 38,000. The total of all 2012 civil filings in this district inevery Inglewood other field of civil litigation combined was 7,265, including multi-district litigation (MDL) filings. Associates LLC Traditional civil case filings (excluding MDL cases) numbered only 3,105. While only a small por- tion of those bankruptcy cases will likely involve Stern-type claims, it will not take a high percent- McDonald age to create a significant additional burden on district courts, and one which could easily result in a Hopkins LLC substantially delayed pace of progress in any bankruptcy case in which a Stern claim arises. Moreover, if avoidance actions such as fraudulent transfer and preference claims are considered Phoenix Management Stern claims (the court in Executive Benefits assumed without deciding that the fraudulent transfer Services claim before it was a Stern claim), then while most routine no-asset Chapter 7 cases will not in- volve any such claims, a few major Chapter 11 cases will involve dozens or even hundreds. Larger Taft Stettinius commercial cases in Delaware and New York could involve thousands. If even consent does not & Hollister LLP allow the bankruptcy court to enter final orders, then that would necessarily includeagreed orders, including settlements. The need to provide de novo review of all such actions that are actually being litigated fully, as well as de novo review of every settlement of most or all avoidance actions (and presumably numerous other core claims that implicate private rights of litigants), is likely to increase the already-significant costs of bankruptcy litigation. The court’s interpretation of the jurisdictional statute was practical, but the implications of leaving the consent issue for another day may not be.

The co-authors, pictured here, are attorneys with Brouse McDowell

Koch Hickey July/August 2014 | 3 2014 Awards Announcement

We are excited to announce the 2014 Ohio TMA Lifetime Even if you do not have an entry this year, please encourage Achievement Award and the Turnaround/Transaction of the someone you know who has completed an outstanding turn- Year Award. around to send in an application. Or better yet, let us know and we will contact them! Turnaround/Transaction of the Year Award If you have any questions regarding the application, please This year we will recognize the best Turnaround or Transac- contact Louise Walsh, at [email protected]. tion in Ohio for 2014, and we will celebrate the winner at an awards ceremony during the TMA Holiday social in December. Lifetime Achievement Award The deadline to submit applications is September 30th. This award is to celebrate the significant achievements of a The entry package is to be completed by the turnaround pro- TMA member’s career and the turnaround profession. We ask fessional with the assistance and concurrence of the company you to consider submitting names of TMA members, active involved. or retired, who deserve to be considered for this Lifetime Achievement Award.  Click here for an entry package. Email your recommendations by October 31st to  Click here for the historical financial statement form. [email protected].  Please email the application form to [email protected].

MAMidAmerica RegionalRC Conference2014 September 11-12 ▪ The Graves Hotel ▪ Minneapolis, MN

4 | Turnaround Times Twin September Events – Don’t miss either one!

The Affordable Care Act – One Year Later How have businesses been affected?

Join us at the Global Center for Health Innovation with our special guest speaker Dr. Thomas F. Zenty III, the Chief Executive Officer of University Hospital Systems, Inc. who will provide his unique perspective on how businesses – and service providers – have been affected by the Affordable Care Act based on his considerable knowledge on both sides of that equation.

When: Thursday, September 18, 2014 ▪ Where: Global Center for Health Innovation (at the Cleveland Convention Center), 1 St. Clair Ave NE, Cleveland, OH 44114 ▪ Time: 7:45 - 8:30 AM – Registration & buffet breakfast; 8:30 – 9:30 AM - Presentation

Registration:  Mail – TMA, 1120 Chester Avenue, STE 470, Cleveland, OH 44114   Facsimile – 216/696-2582 Special Pricing for September  Email – [email protected] 2014 Twin Events   Telephone – 216/861-5627  Online – www.turnaround.org Single Event TMA Member - $35.00 Name Non-Member - $65.00 Company Address Both Events City State Zip TMA Member - $50.00 Non-Member - $100.00 Guests Phone Email Charge to MC/Visa/Amex Card # Exp Signature

An Evening with Judge Alan M. Koschik Lessons learned and observations from our newest bankruptcy judge in the Northern District

With nearly 27 years as a practicing attorney focused on corporate restructuring, Judge Koschik is uniquely qualified to provide some perspective as he sees the world from the other side of the bench. Join us for a very informative evening.

When: Tuesday, September 23, 2014 ▪ Where: Lockkeepers, 8110 Rockside Road, Valley View, OH 44125 ▪ Time: 5:30 – 6:30 PM – Registration, cocktails & heavy hors d’oeuvres; 6:30 – 7:15 PM – Presentation; 7:15 – 8:30 – Networking & meet the judge

Upcoming TMA Events Oct 23 – Changing Landscape of Turnarounds ▪ Nov 20 – Annual Education Event ▪ Dec 11 – Annual Holiday Party – Great Lakes Brewing Company

Thanks to our Sponsors Baker & Hostetler ■ Barnes & Thornburg LLP ■ Brouse McDowell ■ Calfee Halter & Griswold LLP ■ Centrus Group, Inc. ■ Chikol Equities, Inc. ■ First Business Capital Corp. ■ Ice Miller LLP ■ Inglewood Associates ■ McDonald Hopkins ■ Phoenix Management Services ■ Taft Stettinius & Hollister LLP Featured Sponsors:

July/August 2014 | 5 TMA Now: A Pipeline for Female Leaders By Suzana Koch TMA NOW, short for network of women, is designed to foster female leadership by creating the premier business development and networking group for women in the turnaround community. The group attended the regularly scheduled Ohio TMA golf outing held recently at Mayfield Country Club, and we are happy that Ohio’s TMA NOW sponsored a golf clinic, open to all golfers, immediately preceding the outing. The clinic was well attended, and we are grateful to Drew Parobek of Vorys and his planning committee for including TMA NOW in the golf outing. In attendance that day were (left to right) Tina Lucas (Applied Business Strategy, LLC), Bridget Franklin (Brouse McDowell), Jennifer Pinkerton (BNY Mellon) and Suzana Koch (Brouse McDowell). Not pictured were: Kari Coniglio (Vorys), Maju Gupta (McDonald Hopkins), Heather Heberlein (Buckley King) and Rachael Steinlage nextGen’s Late Summer Networking Event (Myers Roman). Sponsored by BakerHostetler

Please join us after work to relax and unwind while networking with colleagues and enjoying cocktails and hors d’oeuvres.

Thursday, September 4, 2014 5 – 7 p.m. BakerHostetler | PNC Center 1900 East 9th Street, Suite 3200 Cleveland, OH 44114

Register here

nextGen Members*: $0 (use promo code CF7 when registering online) Non-nextGen Members: $15 Non-members are welcome!

*TMA members who are under 35 or who have practiced for fewer than 10 years qualify for nextGen pricing. Anyone who qualifies for nextGen can join TMA for $150, which is 50% off the standard price.

6 | Turnaround Times 2014 Schedule

Sept. 4 Oct. 23 nextGen’s Late Summer Networking Event. Striking it Rich: New Opportunities in the Oil and Gas Networking over cocktails and hors d’oeuvres at Industry BakerHostetler’s offices in the PNC Center, from 5:00-7:00 Is this the next industry ripe for reorganization – and what p.m. Free for nextGen members, but non-members are do we need to know to work in this space? welcome. When: Thursday, October 23, 2014; Sept. 18 Time: 5:30 p.m. Registration, cocktails & networking, The Affordable Care Act One Year Later How has 6:15 – 7:15 p.m. Program 7:15 – 8:30 p.m.– more business been affected? networking Join us at the Global Center for Health Innovation with our Location: Announcement soon. special guest speaker Dr. Thomas F. Zenty III, the Chief Nov. 20 Executive Officer of University Hospital Systems, Inc. Navigating the New Realities who will provide his unique perspective on how businesses The TMA and the Bankruptcy and Commercial Law – and service providers – have been affected by the Section of the CMBA’s annual education event Affordable Care Act based on his considerable knowledge When: Thursday, November 20, 2014. on both sides of that equation. Where: New CMBA facilities at One Cleveland Center,  When: Thursday, September 18, 2014 1375 East Ninth St., Cleveland, Ohio 44114  Where: Global Center for Health Innovation (at the Time: 11:30 a.m. Registration, 12:00 Lunch, 12:15 – Cleveland Convention Center), 1 St. Clair Ave NE, 4:30 Program, 4:30 – Reception; CLE Credits: 4.00 Cleveland, OH 44114 CLE requested  Time: 7:45 - 8:30 a.m. – Registration & buffet breakfast; Dec. 11 8:30 – 9:30 a.m. - Presentation Annual TMA Holiday Party Sept. 23 A classic event held, this year, at the home of Great Lakes An Evening with Judge Alan M. Koschik Christmas Ale. Lessons learned and observations from our newest bankruptcy When: Thursday, December 11, 2014; judge in the Northern District. Where: Great Lakes Brewing Company, 2516 Market With nearly 27 years as a practicing attorney focused on Ave., Cleveland, OH 44113; Time: 5:30 p.m. corporate restructuring, Judge Koschik is uniquely qualified to provide some perspective as he sees the world from the other *Event dates and locations are subject to change side of the bench. Join us for a very informative evening. When: Tuesday, September 23, 2014  Where: Lockkeepers, 8110 Rockside Road, Valley View, OH 44125  Time: 5:30 – 6:30 p.m. – Registration, cocktails & heavy hors d’oeuvres; 6:30 – 7:15 p.m. – Presentation; 7:15 – 8:30 – Networking & meet the judge.

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