October 20, 2016 LEGAL ISSUES OF IMPORTANCE TO THE … Seminar Powerpoint Borges.pdf• Court held the signed Insertion Order listing price for contract and reference to rate card

BORGES & ASSOCIATES, LLC

LEGAL ISSUES OF IMPORTANCE

TO THE MEDIA INDUSTRY

October 20, 2016

Presented by:

PRESENTATION FOR

BCCA MEDIA CREDIT SEMINAROCTOBER 20, 2016

Mary E. Seymour, Esq.Lowenstein Sandler LLP1251 Avenue of the AmericasNew York, NY 10020Telephone: (973) [email protected]

Wanda Borges, Esq.Borges & Associates, LLC575 Underhill Blvd.Syosset, NY 11791Telephone: (516) 677-8200 x [email protected]



• Code of Federal Regulation [47 CFR §73.1942]• Charges for Use of Media

– During 60 days preceding the general election– No more per unit than charged to “most favored

commercial advertisers” for the same classes and amounts of time for the same periods

– Any enhancements must be disclosed and made available to candidates on equal terms, including• Discounts, bonus spots, time-sensitive make goods,

preemption priorities or any other enhancements

POLITICAL ADVERTISING

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• All classes must be fully disclosed and made available to candidates

• Non-Preemptible and fixed position – must be clearly defined and disclosed and MUST be available to candidates

• Preemptible with notice – must be clearly defined and disclosed and MUST be available to candidates

• Immediately Preemptible– Permissible based on one or more demonstrable

benefits associated with each class• NOT based solely upon price or identity of advertiser

Preemptions

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• Stations shall NOT establish a separate, premium-period class of time sold only to candidates.

• Stations may sell higher-priced non-Preemptible or fixed time to candidates if such a class of time is made available on a bona fide basis to both candidates and commercial advertisers

– PROVIDED such class is not functionally equivalent to any lower-priced class of time sold to commercial advertisers.

PROHIBITED

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• Stations may implement rate increases during election periods only to the extent that such increases constitute “ordinary business practices” such as seasonal program changes or changes in audience ratings

• Stations SHALL review their advertising records periodically throughout the election period to determine whether compliance with this section requires that candidates receive rebates or credits

Rate Increases

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• Media may charge legally qualified candidates no more than the charges made for comparable use of the media by commercial advertisers.

• Rates charged all candidates for the same office shall be uniform and shall not be rebated by any means, direct or indirect

• A candidate shall be charged no more than the rate the media would charge for a comparable commercial advertising

• All discount privileges otherwise offered by media to commercial advertisers must be disclosed and made available upon equal terms to all candidates for public office

Rates: Generally

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• All discount privileges offered to commercial advertisers, including the lowest unit charges must be available upon equal terms to all candidates

• Media has an affirmative duty to disclose to candidates:

– Rates

– Terms & conditions

– All value-enhancing discount privileges offered to commercial advertisers

Charges for Use of Media

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• A description and definition of each class of time available to commercial advertisers sufficient to allow candidates to identify and understand what specific attributes differentiate each class

• A description of the lowest unit charge and related privileges (such as priorities against preemption and make goods prior to specific deadlines) for each class of time offered to commercial advertisers

• A description of media’s method of selling Preemptible time based upon advertiser demand, commonly known as the ‘current selling level’. Candidates MUST be able to purchase at these demand-generated rates in the same manner as commercial advertisers

• An approximation of the likelihood of preemption for each kind of Preemptible time;

• An explanation of media’s sales practices, if any, that are based on audience delivery, with the stipulation that candidates will be able to purchase this kind of time, if available to commercial advertisers

Disclosure Requirements

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• Treat the political candidate no differently than any other commercial advertiser

– Check the creditworthiness of the Candidate

– Determine your risk of non-payment

– Determine credit-ability of candidate using the same criteria as a commercial advertiser

– Determine your terms based on the foregoing

Requirement for Good Faith Sale

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• “In making time available to candidates for public office, no licensee shall make any discrimination between candidates in practices, regulations, facilities, or services for or in connection with the service rendered pursuant to this part, or make or give any preference to any candidate for public office or subject any such candidate to any prejudice or disadvantage; nor shall any licensee make any contract or other agreement which shall have the effect of permitting any legally qualified candidate for any public office to broadcast to the exclusion of other legally qualified candidates for the same public office.”

No Discrimination between Candidates

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• Media can apply its normal credit policies to political candidates

• If Media would not extend credit to a temporarily existing entity, then no credit need be extended to a political candidate

• Generally, media cannot require cash in advance by Federal candidates more than seven days in advance of the airing of the advertisement

No Requirement for extension of Credit

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For-Profit Colleges

• Numerous For-Profit colleges under investigation or sued by federal and state authorities– Suits allege deceptive advertising practices,

deceptive marketing practices, unfair and fraudulent recruitment practices, fraudulent private student loan programs

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For-Profit Colleges

– Relevant Government Agencies • Federal Trade Commission (“FTC”)

• Securities and Exchange Commission (“SEC”)

• Consumer Financial Protection Bureau (“CFPB”)

– Numerous states have also initiated investigations or brought charges

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For-Profit Colleges

• ITT Educational Services, Inc. filed voluntary Chapter 7 petition on September 16, 2016

– Owned and operated chain of for-profit higher education institutions for 50 years

– 138 Campuses in 39 states

• ITT Technical Institute

• Daniel Webster College

– 40,000 students in undergraduate and graduate programs

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For-Profit Colleges

• ITT business model relied on government-backed Title IV student aid loans/funding

• Title IV loans administered by U.S. Department of Education (“DOE”)– Loans available to students of educational institutions

that meet certain “financial health” requirements– ITT reported $850 Million in total revenue in 2015,

approximately $580 Million from federal student loans/aid • June 2016- DOE demanded increase in letter of credit

intended to cover expenses if ITT should close “precipitously” from $124 Million to $247 Million

• August 2016 - DOE banned ITT from enrolling new students who receive federal aid

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For-Profit Colleges

• Chapter 7 filing blamed on DOE demand for increased letter of credit and restrictions on financial aid to new students

• ITT closed all campuses one week prior to chapter 7 filing

• Chapter 7 trustee recently filed complaint seeking injunction barring government agencies (CFPB, SEC) and state attorneys general from pursuing their lawsuits and investigations

• Hearing on Ch. 7 Trustee’s complaint scheduled for November 2, 2016

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For-Profit Colleges

• DeVry University – 55 campuses across U.S.

• Routinely advertises that “Since 1975, 90% of graduates find jobs within six months of graduation”

– August 2015- DOE required DeVry to substantiate claim in advertising regarding graduate employment rates

– October 2016 - DeVry entered into settlement with DOE, must stop making claim about graduate employment on any platform and must post notice on its website for period of two years stating that graduate employment claim is unsubstantiated

– FTC also filed suit over alleged deceptive advertising

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Credit Application: Why Use it at All

• Generally Non-existent but recommended

– Formation of a contractual relationship

– Invoices are not contracts

• The Credit Application can become a contract

• The Credit Application can provide information as to the customer and specific legal remedies

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Signed Credit Application as a Contract

• Language held by Supreme Court NY to be binding:

All advertising is subject to the terms and conditions in our rate cards. Terms of sale are net 30 days. Interest is assessed at 1.5% per month on invoices past due. No amendment to the credit terms shall be effective unless the same is in writing and signed by Media Provider. If a past due balance is placed with an outside collection service or attorney, advertiser/Agency agrees to reimburse all cost of collection. …

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Does A Contract Exist?

• Most Media Providers take the position that a Rate Card in conjunction with an Insertion Order = a Contract

• NOT foolproof but close! – per various court decisions– Americas case – Court upheld

• “forum selection” clause requiring lawsuit to proceed in New York Supreme Court

• Agency had full authority to bind the Advertisers to the terms and conditions

– Vermilion case – found “explicit evidence” of a contract can exist in a contract OR from “custom and usage” in the industry• Agency claimed it was an agent for a disclosed principal and thus NOT liable

• Agency claimed it did not read the Rate card and did not know it was on the website

• Court held the signed Insertion Order listing price for contract and reference to rate card which was readily available on website and which contained “joint and several” liability language created liability for the Agency

– Kieselstein case – found knowledge by advertiser held it responsible• Unsigned rate card and Advertiser sworn statement that it never received rate card

• BUT – a Statement of Account was sent to and received by Advertiser with no objection by Advertiser

• Court held Advertiser’s failure to object to account stated held him to liability

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Insertion Order

• Often the only signed document evidencing the request for advertising services

– Sometimes NOT signed (problematic)

• A proper and complete Insertion Order can equate to a proper and complete Credit Application

– When Terms and Conditions are included – OR

– When Terms and Conditions are referenced• Such as on a rate card

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Insertion Order

• Issued by Advertising Agency or Advertiser– Should be reviewed THEN accepted or rejected by Media Provider

• Issued by Media Provider– Be sure it is filled out properly

– Be sure there are no deletions or additions which would change liability

• MUST check Terms and Conditions if the Insertion Order is issued by Advertising Agency or Advertiser

– If Terms and Conditions unacceptable

• Don’t just go ahead and run the ad

• Contact the Advertiser and/or Agency for clarification BEFORE the ad is run

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Problems with Insertion Orders

• Who has filled it out?

• Is the Insertion Order signed?

• If the Advertising Agency has signed the Insertion Order, is there an indication that the Agency is signing on behalf of the Advertiser?

• There MUST be an indication on the Insertion Order that the Advertiser has knowledge of the placement and has accepted responsibility for payment of same

• Description of Liability must exist

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Assessing the Liability Position: Key to Successful Enforcement

• Knowledge and Notification:

– Uniformity has never been attained in this Industry

– Unlikely it will happen in the near future

– One organization’s recommended credit application provides for the choice of liability

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Joint & Several Liability:[Recommended]

Notwithstanding to whom bills are rendered, Advertiser, Agency and Service[if applicable], jointly and severally shall remain obligated to pay to Media the amount of any bills rendered by Media within the time specified and until payment in full is received by Media. Payment by Advertiser to Agency or to Service, or payment by Agency to Service, shall not constitute payment to Media.

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Sequential Liability:Demanded By The AAAA’s

Agency is acting as an agent on behalf of its advertiser client, a disclosed principal, either named on this form or otherwise identified to Media Provider. Agency will only be liable for the cost of the advertising purchased and other obligations to media company to the extent Agency has been paid by the advertiser for any such amount payable to the media company. For amounts not paid to Agency, Media Provider will look solely to advertiser for payment.

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JOINT & SEVERAL LIABILITYV.

SEQUENTIAL LIABILITY IN COURT� Advertising Agency closed its doors without paying the Media

Company in full

� Advertiser and Advertising Agency claimed that payment in full was made to the Advertising Agency.

� Checks were presented at trial to show payments were made by Advertiser to Agency

� No clear demarcation indicating these checks paid for the advertising in question.

� Advertiser insisted it had no knowledge “Joint and Several Liability”

� Advertiser and Agency asserted that “Sequential Liability” is the standard in the industry.

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Joint & Several LiabilityWon The Day In Court

� Court Ruling:� Advertiser and Agency agreed to be jointly and severally liable on

the contract they entered into

� Media provided work, labor and advertising services at an agreed upon price and with a reasonable value

� Advertiser accepted Media’s advertising services without protest or objection

� Advertiser had sued the agency and was unable to collect from the agency who had gone bankrupt.

� Finally, and most importantly, the court ruled “This action is based upon the express contract of the parties, a written document known in the trade as the Rate Card. By the terms of the Rate Card the liability…” of the advertiser and the agency “…under their contract is joint and several liability. They are both equally liable on the contract.”

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Current Twist:Agency Of Record Letters

AGENCY is the Agency of Record for ADVERTISER and …is authorized to purchase Media on our behalf. ADVERTISER will assume ultimate payment responsibility for all media placed on behalf of ADVERTISER. All invoicing, however, should be sent to AGENCY for processing.

NOTE: CLEAR AND CONCISE. This is signed by the Advertiser who is taking sole liability for payment

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Agency Of Record Letter:Sequential Liability Assertion

ADVERTISER has retained AGENCY as our Media Buying Service… AGENCY is authorized to make purchases of media on ADVERTISER’S behalf acting in the capacity as agent for a disclosed principal… ADVERTISER hereby obligates itself to be solely liable for all such media billings…and further advises you that AGENCY will have no financial liability for the media ordered EXCEPT to the extent AGENCY has received payment from ADVERTISER designated for media providers. Upon receipt of such funds, AGENCY will assume sole liability

Advertiser is freed of liability upon payment to Agency – Risk of nonpayment of media provider’s claim if Agency becomes insolvent

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Disclaimers

Means by which Advertising Agency GETS OUT OF liability

Agency is acting as an agent on behalf of its advertiser client, a disclosed principal, either named on this form or otherwise identified to media company. Agency will only be liable for the cost of the advertising purchased and other obligations to media company to the extent Agency has been paid by the advertiser for any such amount payable to the media company. For amounts not paid to Agency, media company will look solely to advertiser for payment. Any terms in your invoices, documents or rate cards to the contrary are of no force or effect. Any modifications to this form made by media company are of no force or effect.

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Credit Department Involvement Essential

�Credit Review of all parties responsible for payment� Is the Advertiser capable of paying?

� Is the Agency solvent or will the Advertiser’s money disappear?

� Obtain confirmation that Advertiser’s money is being paid to the Agency strictly to be passed-through to Media Provider� Most difficult to obtain

� Preference defense

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Clean Up Your Documents

�Clearly indicate on the Insertion Order that there is an Advertiser distinct and apart from the Advertising Agency

�Clear Joint & Several Liability language on the Contract/Insertion Order/Rate card

� Language must indicate that Agency is acting on behalf of the Advertiser, is binding Advertiser to the contract AND is also accepting joint and several liability as the agency

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�Clear language on the Insertion Order which incorporates the rate card by reference

� Indicate where the rate card can be found

� Specify website – OR

� Specify Media Kit� Media Kit may be contained on the website

�Alternative:� Have Liability Language contained within the Insertion

Order itself

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�Notify Advertiser that it is and remains liable for the full payment of the advertising services until Media Provider is paid in full

�Alternative:

� Have the Insertion Order or other contract signed by the Advertiser acknowledging that it remains liable for the full payment of the advertising services until Media Provider is paid in full

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Preference: Elements Of Claim

• Any Transfer of an Interest of the Debtor in Property;

• To or for the Benefit of a Creditor;

• For or on Account of an Antecedent Debt Owed by the Debtor Before Such Transfer Was Made;

• Made While the Debtor was Insolvent;– On or within 90 days before bankruptcy filing; or

– Between 90 days and one year before bankruptcy filing for transfers to insider creditors; and

• That Enables Such Creditor to Receive More Than Such Creditor Would Receive if: – The case were a Chapter 7 case

– The transfer had not been made

– Such creditor received payment to the extent provided by other provisions of Title 11

– The greater than liquidation recovery requirement

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Preference Elements

• Any Transfer of an Interest of the Debtor in Property;– Is a debtor/advertiser's payment to an agency

where agency subsequently pays the media provider subject to preference risk?• Note: KSL Media

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Preference Elements – Greater Than Liquidation Recovery Requirement

• Creditor Whose Executory Contract Was Assumed by Debtor or Assigned by Debtor Is Not Subject to Preference Risk

– Caution – Trustee may still assert a preference • Quebecor

• NewPage

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Preference Defenses: New Value

• Creditor Extending Credit to Debtor AfterPayment, that was Not Secured and Not Paid by Otherwise Unavoidable Transfer

– e.g., Services provided on credit terms followingpayment reduce preference exposure

• New Value Cannot Be Applied to Subsequent Payments

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Hot New Value Issue: Critical Vendor

• Does Critical Vendor’s Receipt of Post-Petition Payment of Pre-Petition Claim Result in Loss of Section 547(c)(4) New Value Defense to Preference Claim?

– Yes and No!

– U.S. Court of Appeals 3rd Circuit Decision – In re

Friedman’s counts new value paid post-petition pursuant to court order because new value is determined as of bankruptcy filing date

– Other courts have disqualified new value paid post-petition

– Suggestion: Critical vendor order should either release preference claims against vendor or preserve new value defense

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Ordinary Course Of Business Preference Defense

• Transfer Was in Payment of a Debt Incurred by the Debtor in the Ordinary Course of Business or Financial Affairs of the Debtor and the Creditor; and

• Subjective Test – Made in the Ordinary Course of Business or Financial Affairs of the Debtor and the Creditor; OR

• Objective Test – Made According to Ordinary Business Terms

• Creditor Can Choose Most Beneficial (Subjective or Objective) Prong of Ordinary Course of Business Defense

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• Range of Views– How long of a payment history?

• 1 Year?

• 2 Years? U.S. Bankruptcy Court, Southern District, New York decision: Quebecor World

• Longer?

Ordinary Course of Business: Subjective – Litigated Issues

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• Range of Payments

– All payments? [American Home Mortgage Bankruptcy Court decision in Delaware]

– Modified range? [Philadelphia Newspapers Bankruptcy Court decision in Eastern District, Pennsylvania]

– Payments only when Debtor is healthy? [Circuit City

Bankruptcy Court decision in Eastern District, Virginia]

• Bucket Analysis – Examining Payments by Grouping –Accepted – Quebecor World, U.S. Bankruptcy Court, Southern District of New York

– Risk of skewed analysis

Ordinary Course of Business: Subjective – Baseline for Comparing Preference vs. Prior Payments

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• Comparison of Average Days to Pay/Days Late Prior to and During Preference Period

• Archway Cookies Bankruptcy and District Court decisions in Delaware –– Payments subject to subjective ordinary course defense,

notwithstanding approximately 5 day difference in average days to payment during historical period (42.3 days) compared to preference period (47.2 days)

• Quebecor World, U.S. Bankruptcy Court, Southern District of New York -– 30 days off average [27.56 average days outstanding prior

to preference period vs. 57.16 average days outstanding during preference period] too much

Ordinary Course of Business: Subjective – Baseline for Comparing Preference vs. Prior Payments

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• Defendant Proved Subjective Ordinary Course of Business Defense After Trial

– Did not matter that debtor paid invoices 27.9 days faster during preference period

• Average days-to-pay prior to preference period was 55.22 days

• Average days-to-pay during preference period was 27.3 days

Very Recent Ordinary Course of Business Defense –Subjective Component Decision: In re Sierra Concrete Design Inc.; United States Bankruptcy Court, Delaware

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• Defendant Did Not Prove Subjective Ordinary Course of Business Defense on Summary Judgment Motion based on expert testimony

– Average days-to-pay prior to preference period was 22.43 days

– Average days-to-pay during preference period was 43.95 days

– Court found for the Debtors because payments during preference period were made twice as late as pre-preference period payments

• Court Allowed Paid New Value

• The Court Awarded Pre-judgment Interest to Debtors

Very Recent Ordinary Course of Business Defense –Subjective Component Decision: In re AFA Investment, Inc.; United States Bankruptcy Court, Delaware

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First Time Transactions May Fall Within Subjective Ordinary Course of Business Defense

• Recent Decision of U.S. Court of Appeals for 10th Circuit – In re C.W. Mining Co.

– Payment on account of first time transaction between debtor and creditor might satisfy the subjective part of ordinary course of business defense

• Payment made 2 days before due date (within terms)

• No evidence of creditor collection activity

• 6th, 7th and 9th Circuits Agree

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• Consistency In Timing of Payments Prior to and During Preference Period Alone Might Not Be Sufficient to Prove Subjective Component of Ordinary Course of Business Defense

• Threats to Subjective Component– Change in the form of payment during preference period

(regular check to wire)

– Change in method of invoicing (electronic to paper)

– Change in credit terms

– Imposition of credit limit/enforcement of existing credit limit

– Threats to stop shipment; imposition of credit holds

– Change in mode of delivery (regular mail to Federal Express)

Subjective Ordinary Course of Business Preference Defense – Facts That Defeat Subjective Ordinary Course of Business On the Numbers

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Ordinary Course Of Business Preference Defense –Ordinary Business Terms Alternative: Objective Component

• Transfer Not Unusual or Idiosyncratic In The Relevant Industry

• Which Industry to Consider?

– Creditor’s? Debtor’s?

– Industry based on companies similar to creditor selling to companies similar to Debtor?

• Includes Range of Industry Terms

– No need to prove single set of business terms within an industry

– Ordinary Business Terms may vary widely across industries

• Creditor’s Changing of Business Terms Does Not Necessarily Result in Loss of Objective Ordinary Course of Business Defense

– Are new terms frequently used in industry?

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State Law Preference Claims

• Prerequisites Vary From State to State

• Some States (e.g., California) Have Preference Statutes Like Section 547

• Some States (e.g., Wisconsin, New Jersey, New York) Have Preference Statutes Like Bankruptcy Act of 1898

– 4 month reachback

– Intent to prefer

– No new value/ordinary course of business defense

• Some States Have No Preference Statute at All

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Trustees Using State Law Statutes In Bankruptcy Court Preference Cases

• 6th Circuit – In re Rexplore Drilling Inc. – Court held that Bankruptcy trustee may seek to avoid payment to

creditor as preferential under Bankruptcy Code or under provisions of state or federal law, using avoidance powers authorized by Bankruptcy Code. � Rebuttable presumption is that the Debtor intends to prefer a creditor if it is

insolvent

� Creditor may rebut by proving there was no motive or thought of giving an advantage or preference

– Relied on in the Jordan-Chiles bankruptcy� Kentucky statute “…any act or device done or resorted to by a debtor, in

contemplation of insolvency and with the design to prefer one or more creditors …shall operate as …transfer of all the property of the debtor.”

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Involuntary Bankruptcy Petitions

• Three or More Petitioning Creditors Have Unsecured Claims

– Not contingent

– Not subject to a bona fide dispute as to• Liability or

• Amount

– Totaling not less than $15,775 (for bankruptcy cases filed on and after 4/1/016)

– Debtor has 12 or more unsecured creditors

– Debtor generally not paying these debts as such debts become due

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Involuntary Petition Sanctions Upon Dismissal

• Debtor’s Costs and Attorneys’ Fees in Defending Involuntary Petition

– No bad faith prerequisite

• Petitioners’ bad faith filing could subject them to:

– Debtor’s actual damages arising from involuntary bankruptcy filing

– Punitive damages

– Could be substantial dollars

• Discourages Creditors From Joining in an Involuntary Petition

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Assignment For The Benefit Of Creditors (“ABC”) – Overview

• Formal Out-of-Court Liquidation – State Alternative to Chapter 7 Bankruptcy

– Governed by state law

– Statutory authority and common law

– ABC procedures vary from state to state

• Increasingly Used As An Alternative to Liquidating Chapter 11 Case

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ABC’s – Overview

• ABC Arises by Contract

– Agreement between Debtor/Assignor and Assignee

– Assignee is selected by Debtor/Assignor

• Assignee bias in favor of Debtor/principal?

• Assignee bias in favor of secured lender?

• Sometimes, unsecured creditors have a role in selecting assignee

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• An ABC Vests Title to All Debtor’s/ Assignor’s Property to an Assignee

– All personal property

– All real property

– All causes of action

– Creditors share based on priority status


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• Assignee is a Fiduciary for All of Debtor’s/Assignor’s Creditors

– Liquidates Debtor’s/Assignor’s property

– Notifies creditors of ABC; claims bar date; other matters

– Investigates/pursues claims vs. third parties

– Reconciles claims vs. Debtor/Assignor

– Distributes cash proceeds to Assignor’s creditors according to recognized state law priorities

– Provides final accounting at conclusion of case


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• Court Supervision

– Some states provide for court supervision of the ABC and assignee

– Other states provide little, if any, oversight

• No court supervision

• Assignee could follow state law applicable to liquidating business/assets


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ABC’s – Assignee’s Avoidance Powers

• UCC § 9-309 Gives Assignee Rights of a Perfected Secured Creditor as of Date of Assignment

– Similar to Chapter 7 trustee’s status as a hypothetical lien creditor

• Creditors Cannot Enforce Unperfected Security/Lien Interest Against Debtor’s/Assignor’s Assets

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ABC’s – Claims Priorities

• Similar to Bankruptcy

• First in Priority: Properly Perfected Secured Creditor Gets First Position on Collateral

• Next In Line: Costs of Administering ABC

• State Law Priorities are Next Level in Priority

• Bottom of Claims Priority Ladder: General Unsecured Claims

– No distribution to unsecured creditors until all secured administrative claims, taxes, priority wage and other claims with priority have been paid in full

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• Assignee Required to Establish Claims Bar Date by Which Creditors May Assert Claims Against Debtor/Assignor and Provide Notice to Creditors

– Creditors that fail to timely file proof of claim may not share in distribution

– Assignee can question any filed claim that exceeds amount reflected in Debtor’s/ Assignor’s books and records• No right to interest accruing during ABC of insolvent

debtor

ABC’s – Claim Reconciliation

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• State or federal

• Commenced by court proceeding

– e.g., Secured creditor seeking to protect collateral

– Generally unavailable to trade creditors

• Receiver is Fiduciary Appointed to Administer and/or Liquidate a Business or Specific Asset

Receiverships

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• Receiver’s Duties Prescribed by Statute or Court Order

– Take possession of and dispose of/sell Debtor’s assets

– Collect accounts and other sums due the Debtor

– Manage and operate the Debtor’s business and property to the extent necessary until sold

– Employ, compensate and discharge employees necessary to manage or control the Debtor’s assets

• Most Frequently Used by Mortgage Lenders to Protect Real Property Prior to Foreclosure

Receiverships

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Receiverships – What Trade Creditors Should Look For

• Check For Court Order Granting Injunction Preventing Creditor Collection Activity

• Check For Claims Bar Date and Method for Asserting Proof of Claim, Which is Determined by

– Statute or

– Court Order

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• Some States Refer to Assignee in an ABC as a “Receiver” – Different From Court Appointed Receiver

– Example: Wisconsin

• Role of Receiver Is Often More Limited Than Assignee in ABC

– Scope of Receivership often limited to specific assets

– Receiver’s actions more closely monitored by court

Receiverships

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Questions?

Wanda Borges, Esq.Borges & Associates, LLC575 Underhill Blvd.Syosset, NY 11791Telephone: (516) 677-8200 x [email protected]

Mary E. Seymour, Esq.Lowenstein Sandler LLP65 Livingston AvenueRosleand, NJ 07068Telephone: (973) [email protected]

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WANDA BORGES, the principal member of Borges & Associates, LLC., has been specializing in commercial insolvency practice and commercial litigation representing corporate clients throughout the United States for an excess of thirty-six years.

She is admitted to practice before the courts of the State of New York and the United States District Court for the Southern, Eastern, Northern and Western Districts of New York, the United States District Court for the District of Connecticut, the Second Circuit Court of Appeals and the Supreme Court of the United States. She is a member of the American Bar Association, American Bankruptcy Institute, The Hispanic National Bar Association, The International Association of Commercial Collectors, International Women’s Insolvency and Restructuring Confederation, New York Institute of Credit and the Turnaround Management Association. As a member of the Commercial Law League of America, she is a Past President of the League, is a Past Chair of its Bankruptcy Section, served for six years on the Executive Council of the Eastern Region of the CLLA and currently is the Chair of the Executive Council of the CLLA Creditors’ Rights Section.

Speaker Bio – Wanda Borges

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She has served as the Managing Editor and still is one of the contributing authors of the Manual of Credit and Collection Laws published by the National Association of Credit Management and is a contributing author to its Principles of Business Credit.. She is a member of NACM’s Editorial Advisory Committee. She has served as a Contributing Editor for the Commercial Law League of America's Bulletin and Journal and has contributed to the Bankruptcy Section Newsletter. Her treatise Hidden Liens: Who is Entitled to What? was published in the Fall, 1998 Edition of the Commercial Law Journal. She has authored Antitrust, Restraint of Trade and Unfair Competition: Myth Versus Reality, published by the NACM. Ms. Borges is the lead author and Editor-in-Chief of Enforcing Judgments and Collecting Debts in New York published by Thomson West Publishing Company and updated annually. She routinely publishes articles for the National Association of Credit Management “Business Credit” magazine and has published articles for its “Fraud Prevention News”. Upon the passage of the BAPCPA in 2005, Ms. Borges prepared and presents educational programs on this new legislation and co-authored The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 – An Overhaul of U.S. Bankruptcy Law, published by the NACM.


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She is a regular lecturer for the National Association of Credit Management (NACM) and its various affiliates. She has prepared and continues to update courses on "Advanced Issues in Bankruptcy", "Basics in Bankruptcy", "Current Cases in Bankruptcy", "Creditor's Committees", "Credit and Collection Issues", Sarbanes-Oxley Act of 2002, “Litigation Issues” and "Antitrust Issues" which have been presented at past NACM Annual Credit Congresses and at trade credit association meetings. Even prior to the passage of the “Red Flags Rule”, Ms. Borges worked with the NACM and the FTC to determine the applicability of the Rule to business creditors. Ms. Borges has prepared and presents seminars on the Red Flags compliance issues for the NACM, its various affiliates, corporations, collection agencies and various other organizations. Ms. Borges is a faculty member for the NACM's Graduate School of Credit and Financial Management at Dartmouth College. Ms. Borges has been a faculty member for the National Institute on Credit Management, a program jointly sponsored by the Commercial Law League of America and the National Association of Credit Management


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She has been a regular lecturer for the American Management Association on the Uniform Commercial Code and Fundamentals of Business Law for the Non-Lawyer, and for both the American Management Association, the Media Financial Management Association (formerly the Broadcast Cable Financial Management Association) and the Broadcast Cable Credit Association on Creditor's Rights in Commercial Litigation and Bankruptcy Matters. Additionally, she has presented seminars and webinars for the National Conference of Bankruptcy Judges, the American Bankruptcy Institute, The Commercial Law League of America, The International Association of Commercial Collectors, various local and national Bar Associations, Thomson West Publishing Company, the New York State Food Service Distributors Association and Riemer Reporting Service.

Ms. Borges frequently presents live seminars, tele-seminars and webinars for various trade credit group, many of whom are managed by NACM Affiliate Associations. Additionally, she has prepared and presented these educational programs for the American Automotive Leasing Association, the National Chemical Credit Association, the National Cement Trade Credit Group, the Health Industry Manufacturers Association, the Beauty and Barber Manufacturers Credit Association, the New Hampshire Association of Broadcasters and the Credit Association for Satellite History.


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She has published articles for the Broadcast Cable Credit Association "Creditopic$" and the “The Financial Manager” on Commercial Creditors' Rights in Bankruptcy, Bankruptcy issues generally, the FTC’s Red Flags Rule, the ECOA and Regulation B, Electronic Invoicing, "Dot Com" Businesses, and on Advertiser/Agency Liability; and has prepared the "white paper" on the discontinuance of notarization of broadcast invoices. She is a co-author of the National Association of Broadcasters' book Out of the Red and into the Black, as well as the Broadcast Cable Credit Association's Credit & Collection Handbook. Ms. Borges has appeared as a guest on the Fox News Channel program, "Fox on Consumers", speaking on consumer bankruptcy exemptions. In February, 2010, Ms. Borges prepared and presented a program entitled “Avoiding Bankruptcy Pitfalls: Creditors’ Rights and Professional Obligations in Bankruptcy Proceedings” for the Georgia Bar Association and the Institute of Continuing Legal Education in Georgia” which was televised live and telecasted to satellite locations throughout the State of Georgia.


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She has conducted "in-house" seminars on credit, collection, secured transactions and insolvency for corporate clients such as Agrium, Inc., Bristol-Myers Squibb, Burlington Industries, Inc., Cosmair, Inc., Doric Enterprises, Ferguson Enterprises, Inc., Mars Incorporated, McKesson Corporation, Mobil Chemical Company, Multi-Arc Corp., Pfizer Inc., R.J. Reynolds Tobacco Company, Sandvik, Inc., Sharp Electronics Corporation, Simon & Schuster Corp., SONY Corporation, Southeastern Freight Lines, Inc., Stanley Works and SunTrust Bank.

She is a past Chair of the Board of Trustees of Mercy College and served as a member of that board for nine years. She has served on the board of Regents College, and has taught Business Law at Seton College in Westchester County, New York. She is a past Chair of the Broadcast Cable Financial Management Association.


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Ms. Borges actively participates in community events. She is a Leader of Song and has directed the Youth Music Ministry at her parish, Our Lady Star of the Sea. She remains a member of the Fairfield County Chorale for which she served as its president for the years 1995 through 1997 and most recently served as a director and Executive Vice-President of the Fairfield County Chorale during the years 2012 through 2013.

She received the "Human Valor" Award by Noticias del Mundo, a New York based spanish-language newspaper in 1985, the Mercy College Alumni Association's "Professional Achievement" Award in 1991, honorary membership in Delta Mu Delta - The National Honor Society in Business Administration - in May, 1995 and in October, 1996, was awarded the Mercy College Trustee's Medal for outstanding dedication to her profession and alma mater. She is listed in Who's Who of American Women. In September, 2000 she was named one of the "50 Outstanding Alumni" of Mercy College. In February, 2001 she received the "Career Achievement Award" from the Broadcast Cable Credit Association. In May, 2004, she received the “Strength in Numbers Recognition Certificate” from the NACM. In December 2006, she was named one of “2006 Top25 Most Influential Collection Professionals” by Collection Advisor Magazine. Ms. Borges was recently inducted into Mercy College’s Alumni Hall of Fame celebrating its 60th year in existence. In November, 2010, Ms. Borges received the “Robert E. Caine Award for Leadership” from the Commercial Law League of America. Ms. Borges has been included on the New York Super Lawyers – Metro Edition list (Bankruptcy & Creditor/Debtor Rights) each year since 2009. Ms. Borges received a “Woman of Distinction” Award from St. Catharine Academy in April, 2015.


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Speaker Bio – Mary E. Seymour

MARY E. SEYMOUR has a broad range of experience advising clients on bankruptcy and

restructuring matters. Her practice involves all aspects of in-court and out-of-court restructuring of financially distressed businesses, including the representation of corporate debtors, official and unofficial creditors’ committees, significant stakeholders, and third-party purchasers.

Mary recently represented Binder & Binder – The National Social Security Disability Advocates, LLC, the nation’s largest Social Security and Veterans’ disability advocacy firm, and 23 related entities, in their Chapter 11 cases. She has been involved in numerous other high-profile Chapter 11 cases and out-of-court restructurings across a range of industries including energy, communications, media, paper and printing and transportation. Some of her current and recent debtor representations include Binder & Binder – The National Social Security Disability Advocates (NY) LLC, Love Culture, Inc.; Big M (parent company of Mandee’s and Annie Sez); Roomstore; American Community Newspapers and Ponderosa Pine Energy Partners.

Mary also represents creditors’ committees in numerous chapter 11 cases with a focus on identifying and obtaining value for general unsecured creditors. Recent committee representations include Taylor-Wharton Industrial; Holsted Marketing; Blitz U.S.A; Hayes Lemmerz; Lear Automotive; MarcalPaper Mills; Ronson.

Mary also served as special counsel to the Hoboken Municipal Hospital Authority (the only municipal hospital authority in the State of New Jersey), leading a team from Lowenstein Sandler in the successful sale of the Authority’s assets and the resolution of a potential $60 Million bond default by the City of Hoboken.

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