Bankruptcy Litigation Committee
ABI Committee News
Volume 6, Number 5/ August 2009
In This Issue
- Second Circuit Imparts Some Tender Loving Care on Reconsideration of Settled Claims
- Defrauded Parties' Recovery of Funds from Innocent Third Parties: The Relief Defendant
- ABI's 17th Annual Southwest Bankruptcy Conference
Second Circuit Imparts Some Tender Loving Care on Reconsideration of Settled Claims
by: Gilbert J. Bradshaw
Chadbourne & Parke LLP, New York
Deadlines may lead to unwelcome results, but they prompt parties to act and they produce finality. Taylor v. Freeland & Kronz, 503 U.S. 638 (1992)
It is well settled that bankruptcy courts, as courts of equity, have the power in many circumstances to reconsider previous orders. Some of these “motions for reconsideration” are made pursuant to 11 U.S.C. §502(j), which states, “[a] claim that has been allowed or disallowed may be reconsidered for cause” on the grounds of mistake of law or fact. Motions for reconsideration are governed in bankruptcy cases by Federal Rule of Bankruptcy Procedure 9024, which incorporates—with certain exceptions—Rule 60 of the Federal Rules of Civil Procedure (FRCP). One exception is that a motion for reconsideration of an order allowing or disallowing a claim against the estate, which is entered “without a contest,” is not subject to the one-year limitation set forth in FRCP 60(c).
Defrauded Parties' Recovery of Funds from Innocent Third Parties: The Relief Defendant
by: Camisha L. Simmons
DLA Piper LLP, New York
This country has recently been inundated with tales of investment fraud. On July 13, 2009, Marc Dreier was sentenced to 20 years for a conviction arising from securities fraud. On June 30, 2009, Bernard Madoff was sentenced to 150 years in prison for his involvement in a Ponzi scheme that cost investors billions. Sir Paul Allen Stanford was charged by the Securities Exchange Commission (SEC) for fraud and multiple securities law violations on Feb. 17, 2009. Often, the property traceable to profits derived from such scams is funneled to “innocent” third parties, such as a spouse or other relative. This article discusses the common-law equitable concept of the “relief defendant” and how it may be used in bankruptcy court to recover property obtained through fraud and funneled to supposedly innocent third parties.