Category: News

Spector Gadon Rosen Vinci P.C. distinguished attorney Stanley P. Jaskiewicz recently had a featured article published by the American Bar Association’s Voice of Experience publication.

SGRV attorney Stanley P. Jaskiewicz has been appointed to serve on the American Bar Association’s Voice of Experience Board for the 2021-22 bar year.

Voice of Experience (VOE) is the Senior Lawyers Division’s monthly e-newsletter. Each issue covers a broad range of topic areas, such as lifestyle, physical and mental health, financial well-being, practice management, technology, and more.

The magazine’s main audience is senior attorneys specializing in any area of law. It publishes articles on topics of interest for these lawyers, along with those related to business planning and management, politics, history, culture, travel, health, and the arts. Each article offers practical advice to lawyers later in their careers or those who’ve retired or are semi-retired.

In this issue, Mr. Jaskiewicz delves into the in’s and out’s of navigating the “fine print” present in both the professional and the mundane world.

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In our society, ownership usually beats other claims to property.

As lawyers learn in first year Property class, “a thief can’t convey good title.”

But in business, sometimes ownership doesn’t matter.

In one common situation, an undisputed owner will lose its property, to someone it may never have known about.

How can this happen? More importantly, as a business owner, how can you avoid it?

This risk arises when property is consigned to another firm, rather than sold.

Consignment allows a seller to obtain possession of property for resale, without having to pay for it.

Sellers sometimes prefer consignment, because of the naïve perception that retaining title is safer than selling to a customer with less than stellar credit – a “poor man’s” form of security, without the legal fees.

I suspect that most people think of pawn shops and upscale resale boutiques when they hear “consignment”.

However, even before the Pandemic’s challenges, some businesses relied on consignments as a way to reduce their firm’s cash flow needs.

For example, I worked with one client that financed inventory acquisition for its manufacturing process by accepting it on consignment, rather than purchasing it.

Rather than pay upfront for inventory, such firms pay for it only as it is used, after they have the cash from a sale.\

This transfers the carrying costs and risk of financing, from an intermediate buyer, to the original seller.

If the intermediate seller doesn’t find a buyer, the original seller – which still owns the inventory – can, in theory, take it back, and try to sell it elsewhere.

But that takes time and money, including shipping costs.

As a legal matter, firms supplying inventory to such firms must understand that commercial rules in all states require extremely specific steps to protect the owner’s interest.

If the owner of the property doesn’t follow the procedures of the Uniform Commercial Code on consignments, secured creditors of the intermediate buyer will have a better claim to the inventory than its owner.

In simple terms, the intermediate buyer’s lender can foreclose on inventory that its buyer doesn’t own, as illogical as that seems.

The owner that supplied it to the buyer can complain, but will lose – unless it took two simple steps before shipping the inventory:

  • File a UCC-1 Financing Statement against the recipient of the inventory (the “consignee”, in legal jargon), identifying the transaction as a “consignment” (a check box on the form). The consignee no longer must sign the UCC-1, but you, as supplier of the goods, should demand that it sign an “authorization” for you to file against the consignee that receives your goods.
  • Notify the recipient’s secured creditors, in writing, that the consignee will receive your inventory. (You will have to pay for a public records search to identify them.)

Again, you must do both of these, before the recipient receives any inventory, to protect your ownership of your consigned goods.

If you miss a detail, the law makes your ownership of the consigned inventory irrelevant.

Even though the recipient hasn’t paid you for it – remember, you shipped on consignment – your ownership is legally meaningless. The recipient’s creditors can seize that inventory on foreclosure to satisfy the recipient’s debt, without any obligation to pay you for them, even though you were (not “are”) owner of those goods.

You still have a claim against the recipient to recover the goods’ value, but good luck.

If the recipient’s lender has begun a foreclosure, you have to decide whether suing for the value of the inventory you “owned” (again, past tense) would just be throwing good money after bad.

If all of this sounds complex, congratulations! You are correct – secured credit involving consigned goods is not something anyone should try at home.

As a practical matter, don’t let a lender force you to incur significant legal fees, by encouraging you to be able to borrow more, by including consigned goods in your borrowing base.

The lender may believe – perhaps sincerely, but wrongly – that it is as easy as filing a UCC-1.

In fact, you will probably have to pay your lender’s additional legal fees under the typical “borrower pays all lender expenses” provision of your loan agreement.

Instead, consult with counsel to understand the legal cost of consigning inventory, rather than selling it. Then balance that expense against the benefit of the additional borrowing availability from such added collateral, and the carrying cost of continuing to own those consigned goods until the recipient actually sells them, and can pay you for them.

In other words, there is a reason most boilerplate asset-based loan agreements exclude consigned goods in the possession of a third party (the recipient of the goods) from the consignor’s borrowing base.

A typical lender may see inventory onsite, without realizing that its borrower does not own it (and can’t use it as collateral).

The business moral of the story is simple: call your counsel before incurring costs on a new business arrangement, whether as a supplier or lender.

If you don’t, the cliché, “you snooze, you lose” will become “you own, you lose” – and you will pay your counsel for the privilege of doing so.

For further information on this issue, or on writing your form agreements to protect your business and assets in everyday transactions, please contact Stanley Jaskiewicz (https://www.sgrvlaw.com/attorney/stanley-p-jaskiewicz/) at 215-241-8866, or sjaskiewicz@sgrvlaw.com for a no-cost initial consultation.

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Effective April 1, 2022, certain dollar amounts will be adjusted under the Bankruptcy Code to reflect the changes in the Consumer Price Index. In many instances, these adjustments are very important as they can make a difference between whether a Debtor can preserve its assets or not. Some of the changes are as follows:

Pursuant to 11 USC Section 522: under 522(d)(1), the aggregate amount which a debtor can exempt in value of its residence has increased from $25,150 to $27,900; under 522(d)(2), the aggregate amount which each debtor can exempt in a motor vehicle has increased from $4,000 to $4,450; under 522(d)(3), the aggregate amount a debtor can exempt in household goods furnishings, etc. has increased from $13,400 to $14,875; under 522(d)(4), the aggregate amount a debtor can exempt in jewelry has increased from $1,700 to $1,875; under 522(d)(5), the aggregate amount a debtor can exempt in any property of $1,325, plus up to $12,575 of any unused portion of allowed exemption of the residence under (d)(1) has increased to $1,475 and $13,950 respectively; under 522(d)(6), the aggregate amount which a debtor can exempt for tools of a trade, books, etc. has increased from $2,525 to $2,800; under 522(d)(8), the aggregate amount which a debtor can exempt for accrued dividend or interest or loan value in any unmatured life insurance contract has increased from $13,400 to $14,875; and under 522(d)(11)(D), the aggregate amount of debtor’s interest on account of personal bodily injury has increased from $25,150 to $27,900.

Further, other Bankruptcy Code Sections have been adjusted as follows: the maximum aggregate value of assets of the debtor in an individual retirement account has increased from $1,362,800 to $1,512,350 (Section 522(n)); the state homestead exemption, limit for interest acquired less than or equal to 1,215 days before filing has increased from $170,350 to $189,050 (Section 522(p)); and the state homestead exemption, limit under certain circumstances has also increased from $170,350 to $189,050 (Section 522(q)).

Finally, under Chapter 13 cases, some of the adjustments are as follows: under Sections 1322 (b) and (d), each time $750 appears, the sum has been adjusted to $825; and under Section 1326 (b)(3) the payments to a Chapter 7 trustee has been adjusted to a flat $25 only.

Again, please note that the above represents a non-exclusive list of adjustments which become effective as of April 1, 2022. To discuss these adjustments or any other issues regarding creditors rights and bankruptcy, please contact Leslie Beth Baskin, Esquire at lbaskin@sgrvlaw.com or 215-241-8926.

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Delaware Bankruptcy Judge John Dorsey issued a 103 page opinion in In re Mallinckrodt PLC., Case No. 20-12522-JTD (Bankr. D.Del. Feb.3, 2022, Docket #6347) wherein he confirmed a Chapter 11 Plan which included non-consensual third-party releases and applied the Third Circuit position as articulated in Millenium Lab Holding II, LLC, 945 F.3d 126 (3d Cir. 2019).
Mallinckrodt (“Debtor”) filed for Bankruptcy in October 2020 having approximately $5.3 billion in debt in order to settle the multitude of lawsuits brought by local and state governments and private citizens claiming that it had inappropriately and deceptively marketed opioids. Debtor was in the global pharmaceutical industry and manufactured and sold pharmaceutical products including opioids. On February 3, 2022, the Chapter 11 was confirmed over objections of a few creditors. In confirming the Plan, the Court acknowledged that it did not follow the reasoning in recent Second and Fourth Circuit decisions respectively in In re Perdue Pharma, L.P. 2021 WL 5979108 (SDNY De. 16 2021) or Mahwah Bergen Retail Group, Inc.(fka  Ascena Retail Group, Inc). but instead applied the Third Circuit standards.
The Plan provided four different types of releases which included: (a) releases made by the Debtors; (b) releases made by non-debtor third parties where certain claimants were given a chance to “opt out” of third-party releases; (c) non-consensual releases by opioid claimants; and (d) releases by the Debtors and affiliates of the opioid claimants. Although the Plan was (ultimately) overwhelmingly supported by the creditors, the US Trustee, the SEC and Rhode Island were objectors to different releases. The US Trustee and Rhode Island argued that the releases were “vastly overbroad, releasing persons and entities that did not contribute anything of value to the reorganization”. The US Trustee also argued that this Court lacked jurisdiction to approve the releases and that the creditors due process rights would be violated. The Court ultimately overruled the objections holding that it did have the jurisdictional authority to do so as the releases were integral to the success of the Chapter 11 plan and without the releases the Plan would fail. The Court also found that the two standards set forth in the Third Circuit case of In re Continental, 203 F3d 203 (2000) were met and insofar as it was unclear from the evidence produced that there were any material claims for liability against the non-debtors that were being waived, the non-consensual third-party releases were both “necessary to the reorganization” and “fair”.
Concerning the issue of “necessity,” the Court found that the releases were an integral part of the settlements embodying them, and therefore a necessary part of the Plan. Regarding the release to the non-debtors (third parties) they too were necessary because they were involved to such a degree with Debtor’s business that litigation against them would be a drain on the Debtor’s finances. As to the second prong of “fairness” vis-à-vis the opioid claimants, the settlements were negotiated at arms-length with a large group of sophisticated parties representing diverse interests and substantial consideration was provided in exchange for the releases via a well-funded trust to which the opioid claimants could look to for compensation. The Court emphasized the nature of the case as there were more than 3000 lawsuits regarding opioids and the releases would remove the continued issue of litigation and ensure recoveries to the opioid claimants. The Court then noted that since this case is occurring during an “extraordinary” time during the height of the opioid crisis, time was of the essence to resolve these claims.
In this opinion, the Court was clearly looking at the practical side of the Plan—without its confirmation there would be continued and extensive litigation which would not benefit the claimants, thereby increasing the estate’s legal fees and consequently reducing any recovery to the opioid claimants.
Note that the current Bankruptcy Code is basically silent as to whether non-consensual third party releases are permitted. Often, Debtors rely on 11 US.C. §1123(b)(6) to support these releases. With that said, the closest we had to allowance of such releases is in 11 U.S.C. §524(g). In October 1994, Section 524(g) was added to the Bankruptcy Code to “clarify” the ability to use third party releases as a result of the Johns Mansville bankruptcy proceeding, in that instance a release from future holders of future asbestos demands. (Discussion of Section 524(g) is for another day as this section did not clarify all of the nuances and issues which have arisen since then).
Due to the conflict amongst the Circuits regarding non-consensual releases, the issue will have to be addressed with some clarity by the Supreme Court or legislation. The nonconsensual releases have become the cornerstone of some of the biggest Chapter 11 Plans and can play an enormous role in Plan viability.
To discuss the issues raised here or any other issues involving creditors rights and bankruptcy, please contact Leslie Beth Baskin, Esquire at 215-241-8926 or at lbaskin@sgrvlaw.com.
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Spector Gadon Rosen Vinci P.C. distinguished attorney Stanley P. Jaskiewicz recently had a featured article published by the American Bar Association’s Voice of Experience publication.

SGRV attorney Stanley P. Jaskiewicz has been appointed to serve on the American Bar Association’s Voice of Experience Board for the 2021-22 bar year.

Voice of Experience (VOE) is the Senior Lawyers Division’s monthly e-newsletter. Each issue covers a broad range of topic areas, such as lifestyle, physical and mental health, financial well-being, practice management, technology, and more.

The magazine’s main audience is senior attorneys specializing in any area of law. It publishes articles on topics of interest for these lawyers, along with those related to business planning and management, politics, history, culture, travel, health, and the arts. Each article offers practical advice to lawyers later in their careers or those who’ve retired or are semi-retired.

In this issue, Mr. Jaskiewicz reflects on his experiences as an unpaid patient advocate.

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On January 14 2022, Judge Silverstein of the Bankruptcy Court for the District of Delaware issued a very thoughtful opinion, Wolfson v. DeVos, et al. (In re Wolfson), 19-11618, LSS (Adv. No. 19-50717), regarding the dischargeability of student loans for a disabled debtor who relied on the financial assistance of his parents. Debtor commenced his Chapter 7 in 2019 and brought an adversary proceeding to determine if his student loans were dischargeable pursuant to 11 U.S.C Section 523(a)(8), as imposing an “undue hardship” to repay. The adversary proceeding trial (“Trial”) was held on December 7, 2020. Contrary to counterarguments of the Defendants, the Court found that Debtor met his burden as required under the Brunner case (U.S. v. Brunner, 831 F2d 395 (2d Cir.1987)), which holding was later adopted by the Third Circuit. Note that there is a clear split in the Circuits as to the fairness of the Brunner standard.

The specific facts regarding Debtor were critical to the Court’s determination. Debtor was in his mid-thirties, not married and had no children. He had epilepsy. He graduated from Penn State in 2010 and held down part-time jobs while in college. From 2010-2016, Debtor had 30 job interviews with no real success. From 2014-2016, he was the full-time caretaker for his grandmother and then sporadically worked thereafter. In 2017, while working for a home renovation company he also did part time work as a driver. In August 2019, while working as a driver (Uber/Lyft), he suffered a grand mal seizure and totaled his car. Since then, he has been unemployable. He applied for more than 200 jobs over the next 10 months post- car accident with no success. Debtor moved back in with his father thereafter. He relied upon his father for financial support and had no health insurance for years.

In 2005, Debtor signed, inter alia, two Master Promissory Notes to finance college and then obtained a Federal Family Educational Loan which provided for repayment over a 10-year period after a 6-month grace period after graduation from college. As of the date of the Trial, the loan was due and owing. Other educational loans were also due and owing as of the date of the Trial (totaling almost $100,000.00). With the above history of illness and inability to work, he had a poor credit rating and could not repay the loan debt. Although his father made some of the minimum payments allowed under the loan, he could no longer do so.

The harsh three prong test for debtors under Brunner to allow for discharge are: (1) that the debtor cannot maintain a minimal standard of living for himself and dependents if forced to repay the loans based upon current income and expenses; (2) that the debtor’s financial situation is likely to remain the same for a large part of the repayment period; and (3) that the debtor has made a good faith effort to repay the student loans. The Court herein determined that it would not consider the parental support (referenced as the “third party charity”) as income for Brunner income testing purposes as there was no guarantee that debtor could rely upon receiving these voluntary gifts of funds from his father. Further, the Court found that Debtor’s long-standing, expansive and largely futile efforts since graduation in trying to find a job (1-2 hours per day on internet job boards) were important considerations weighing in his favor.

Defendants herein contended that the Debtor had not met his burden on any of the three Brunner elements. For example, they contended that only spending 1-2 hours per day looking for jobs was “barely looking for work.” The Court responded to this argument by saying that it was clear that Debtor was not avoiding work and that he was not “holding out” for a job. In fact, Debtor testified that he would take any job and that this has been “his way for about 5 years.” The record also showed that he had personally never made a payment on the student loans as he was never in a position to do so, and this convinced the Court that his continual search for gainful employment was enough to demonstrate his good faith. The Court noted the split in the jurisdictions as to the strict standards imposed upon a debtor as to proving “undue hardship” under by Brunner. The Court found the following as critical factors in concluding that this debt was dischargeable: Debtor was substantially supported by his family for his entire adult life (father gave him $1000-$2000/month) and that even without repaying these loans, his income was not sufficient to maintain a minimal standard of living, and more importantly since his family had no obligation to give him any money, this “support” is NOT income but rather “familial charity” which could cease at any moment. Based upon the foregoing, the first prong of Brunner is met. Brunner’s second prong as to whether his inability to pay will persist during the repayment period was clearly net. Herein, the repayment period had expired. This prong also requires an analysis as to whether “additional circumstances” exist indicating that Debtor cannot maintain a minimal standard of living if forced to repay the loans during the repayment period. The Court concluded that Debtor met the second test (also noting a paucity of caselaw on the issue of ability to repay when the repayment period has run). Finally, the third prong (good faith effort to repay the loans) encompasses the standard that Debtor did not willfully or negligently cause his own default, and that the default is due to factors outside of his control. Herein, Debtor has never been in a position to make loan payments and has shown good faith efforts to maximize his income and reduce expenses. The record at Trial made it clear that his low income will most likely be persistent for his lifetime, for which he cannot be faulted.

The Court went on to discuss the “policy considerations” of her decision. The “fresh start” policy behind discharging debts was a fairly strong factor. Debtor continues to struggle to make ends meet and has tried to turn the situation around, but to no avail or as the Court put it, this was “not for want of a work ethic.” Therefore, the Court determined that Debtor meets the burden that this debt should be discharged based upon the undue hardship upon him.

To discuss the issues raised here or any other issues involving creditors rights and bankruptcy, please contact Leslie Beth Baskin, Esquire at 215-241-8926 or at lbaskin@sgrvlaw.com.

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The Martin Luther King Jr. Day of Service is a Time-honored tradition cherished by many across the country, from students to CEO’s. Helping our local communities grow and flourish to the best of their abilities has the power to open one’s heart and see the world and its people as the late Martin Luther King Jr. saw them, with compassion.

SGRV is no stranger to service and community engagement, so many of our staff were eager to get out and make a difference on this past day of service. While the Philadelphia office had planned an outing to Bartram’s Garden, a community garden in Southwest Philadelphia, this was unfortunately cancelled due to inclement weather. The attorneys and staff of the Philadelphia office instead partook in their own personal service projects.

The weather situation fared much better in sunny Florida, where SGRV attorneys and staff gathered together at the Trinity Café in Tampa. Trinity Café is a free, full service restaurant for those in need of a healthy and hearty meal. 365 days a year, chefs prepare fresh, nutritious dishes for guests. SGRV assumed the roles of restaurant “wait staff”, and enjoyed their time waiting, hosting, and busing tables in addition other various tasks. They also assisted in their drive-thru meal service for guests.

We thank everyone who took part this year, and look forward to an even more involved 2023!

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The bustling kitchen at Trinity Cafe as SGRV attorneys and staff prepared to serve hot meals to guests.
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SGRV’s Leslie Beth Baskin will speak at the upcoming Tenth Annual International Women’s Insolvency and Restructuring Confederation’s At The Shore Conference, taking place at the Hard Rock Hotel & Casino in Atlantic City, NJ, from March 3-4, 2022.

The International Women’s Insolvency & Restructuring Confederation (IWIRC), is a global community creating opportunities through education, mentoring and networking. IWIRC’s mission is to promote the success of women in the insolvency and restructuring profession. The “At the Shore Conference” is a time-honored tradition.

The conference will involve a number of panels, activities, and networking opportunities. Ms. Baskin will speak on a panel titled “Putting Your Best Case Forward: Best Practices for Evidentiary Hearings and Bankruptcy Trials.”

Ms. Baskin is one of the founding members of the Greater Philadelphia Chapter of the IWIRC and was its chair for a two-year term. She is currently serving as secretary.

As a Member of Spector Gadon Rosen Vinci P.C., Chair of the Creditors Rights and Bankruptcy Section of the Business Services Group with over 35 years of experience, Ms. Baskin represents creditors and debtors in non-bankruptcy work-outs and in consumer and commercial bankruptcy proceedings. She is also a seasoned commercial litigator.

Ms. Baskin has handled a wide array of commercial, transactional, and bankruptcy-related matters including several high profile cases in the region. She recently served as both Chapter 11 and Chapter 7 Trustee for a three-year period in the high profile case of the Legal Coverage Group whose principal embezzled $35 million from the Company. She also has represented Peter Nero and the Philly Pops in the Philadelphia Orchestra Bankruptcy, and numerous debtors/creditors in healthcare Chapter 11 proceedings. She has also represented a diverse group of clients, including banks, real estate enterprises, healthcare providers, small businesses and individuals experiencing financial problems.

Spector Gadon Rosen Vinci P.C. has represented clients nationally and internationally for 45 years and provides counsel and expertise across the entire spectrum of legal practice, from complex litigation to sophisticated transactional and corporate matters.  The firm has offices in Philadelphia, New Jersey, Florida, New York and Atlanta.

The firm represents businesses, corporate boards, and highly placed individuals.  Its clients are engaged in a variety of industries including finance and banking, manufacturing, hospitality, gaming and entertainment, real estate and commercial development, insurance and venture capital, energy, financial services, health care, security and telecommunications.

The firm’s practice areas include high stakes litigation, business disputes, commercial litigation, professional liability, products liability, securities, trust and estates, fiduciary litigation, bankruptcy and creditors rights, civil RICO, trade secrets, trademark and restrictive covenants, intellectual property, antitrust, white-collar criminal defense, banking and financial services, corporate formation and governance, cyber risk and security, employment, entertainment and amusements, environment and energy, wealth management, healthcare, hospitality, insurance coverage and insured casualty litigation, mergers, acquisitions and divestitures, real estate, sports and tax law.

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Spector Gadon Rosen Vinci P.C. was overjoyed to help provide some holiday cheer to two families in need this year through the Philadelphia Ronald McDonald House’s “Family to Family” program. Thanks to this generous program, the Ronald McDonald house has helped countless families experience the joy of the season.

The holidays can be a unnecessarily stressful time for families facing difficulties like childhood illness. The Ronald McDonald House’s “Family to Family” program seeks to ease this stress and provide their resident families with the holiday cheer they deserve. The program pairs families staying at the house with individuals, groups, and businesses to supply the families with everything on their wish lists, and more for the holiday season.

Associates Dana A. Bernstein and Evan N. Saltzman, accompanied by Communications Associate Michael Vinci, dropped off three large boxes full of presents of all kinds— toys, clothes, gift cards, and so much more.

Many staff and attorneys selflessly contributed to brightening the holidays for one of the families, and attorney Heather Eichenbaum took up the task of providing gifts to an entire separate family on her own, and we commend her generosity.

We give endless thanks to our generous attorneys and staff, thanks to whom we were able to make this holiday season one to remember for not just one, but two families!

You can learn more about the Ronald McDonald house, and the incredible things they do for families in need, here.

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On Thursday, December 16, 2021, Spector Gadon Rosen Vinci attorneys and staff gathered together for an evening of food, drinks, and holiday merriment.

The gathering was hosted at The Dandelion restaurant, located at 124 S. 18th Street in Philadelphia.

After an evening of delicious food and sweets, SGRV Chairman Paul Rosen spoke about the dedication and diligence of one of SGRV’s longest-serving staff, controller Fred Firmani.

Firmani has served SGRV for over 15 years, and has been nothing but a blessing to our accounting department. Things have always run smooth as butter with him in the office. He will be missed dearly, but we are enthusiastic for him as he begins a new, exciting chapter in his life.

As we wish him a happy retirement, we look forward to the future with gratitude for the past.

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