At Least 50 Temporary Judgeships Needed to Respond to Financial Distress of COVID-19 Pandemic, According to Bankruptcy Scholars

A group of bankruptcy scholars is calling for the appointment of at least 50 temporary bankruptcy judges to handle the onslaught of filings that could result from the COVID-19 pandemic, according to a letter sent to congressional leaders. The letter, signed by Prof. Jared Ellias of the University of California, Hastings College of Law, who chairs the Large Corporations Committee of the Bankruptcy & COVID-19 Working Group (comprised of law professors), urged Congress to (1) appoint additional temporary bankruptcy judges; (2) increase the budget that Congress provides bankruptcy judges to spend on operations and staff, including the support necessary for retired judges who are recalled and willing to serve; and (3) increase the number of U.S. Trustees appropriately. "An appropriate, conservative target would aim to quickly start the process to fill the minimum plausibly estimated need — 50 [judges] — and then revise the estimates as we see economic and bankruptcy developments," according to the letter, which was signed by 34 bankruptcy scholars.

U.S. Layoffs Easing, Labor Market Distress Persists

The number of Americans seeking jobless benefits fell last week, but millions laid off because of COVID-19 continue to receive unemployment checks, suggesting that the labor market could take years to heal from the pandemic even as hiring resumes, Reuters reported. The weekly jobless claims report from the Labor Department today followed news last Friday of a surprise 2.5 million increase in nonfarm payrolls in May. Initial claims for state unemployment benefits fell 355,000 to a seasonally adjusted 1.542 million for the week ended June 6. The 10th straight weekly decline pulled claims further away from a record 6.867 million in late March. Still, claims are more than double their peak during the 2007-09 Great Recession. Though the number of people staying on benefits is abating, the ranks of the unemployed are still uncomfortably large. The number of people receiving benefits after an initial week of aid fell 339,000 to 20.929 million for the week ended May 30. Continued claims, which are reported with a one-week lag, dropped from a record high of 24.912 million in early May.

Analysis: CARES Act's additional $600 in Weekly Unemployment Benefits Ends Next Month; Here’s What Lawmakers Are Proposing to Replace It

Americans who have been laid off from their jobs because of the coronavirus pandemic have been able to collect an additional $600 a week in unemployment benefits on top of what they get from their state through the CARES Act. But next month, if lawmakers fail to act, Americans who are out of work will see that $600 a week disappear from their unemployment checks, according to a MarketWatch.com analysis. The supplemental $600 Americans have been receiving has been controversial, especially given that two-thirds of laid-off workers have been receiving more money from their unemployment benefits than they did from their jobs. But at the same time, proponents of the extra $600 say that decreasing those benefits could cost the country even more jobs. As lawmakers consider a new round of stimulus funding, there are three proposals on the table for how to replace the extra $600:

Extending the Supplemental $600 Through Jan. 2021

Last month, the Democratic-run House passed the $3 trillion HEROES Act, which would, among other things, extend the extra $600 federal unemployment benefit to January 2021. The Congressional Budget Office found that if these benefits were extended through January 2021, an estimated five of every six recipients would receive more in benefits than they would from working those six months. Some have argued those generous benefits will keep people from seeking new jobs.

Sliding Scale of Unemployment Benefits Tied to State Unemployment Rates

Unlike the HEROES Act, one Democratic proposal that has bicameral support calls for additional unemployment benefits that are tied to state unemployment rates. The proposal, known as the Worker Relief and Security Act, which was proposed by Rep. Don Beyer (D-Va.), would allow Americans to continue to receive the additional $600 benefit for as long as the national emergency or state emergency for COVID-19 is in effect. Once the national or state emergency is terminated, jobless Americans would receive benefits based on their state’s unemployment level.

A Return-to-Work Bonus

Sen. Rob Portman (R-Ohio) is proposing a back-to-work bonus, which would provide an additional $450 a week for Americans who return to work. “Not only is the return-to-work bonus proposal the right policy in terms of incentivizing people to safely return to work and allowing businesses to reopen, but it could also benefit the American taxpayer through significant cost savings compared to the current money we’re spending on the CARES Act unemployment benefits,” Sen. Portman said.

U.S. Auto Suppliers Cheer as Carmakers Relaunch, but Long-Term Worries Remain

Auto parts suppliers across North America said they are encouraged as major automakers accelerate production after coronavirus pandemic shutdowns, but they are holding back on hiring and investment because of longer-term uncertainty, Reuters reported. U.S. automakers reopened most assembly plants in late May after states began loosening restrictions, and stronger-than-expected retail auto sales in May have automakers ramping up production of the highly profitable trucks and SUVs consumers are buying. However, several auto suppliers interviewed by Reuters worry about demand heading into 2021. U.S. and global auto sales are not expected to recover to pre-COVID-19 crisis levels until 2022 or 2023, Bank of America analyst John Murphy said today. Andreas Weller, CEO of aluminum parts maker Aludyne, sees very strong orders for July, but he laid off more than 10 percent of his workers because the days of Americans buying 17 million new vehicles a year will not return anytime soon. “What’s the market going to look like for the rest of the year, going into next year? That’s a bigger unknown,” he said. Magna International Inc. CEO Don Walker said that orders from automakers were good and the “big unknown” was how consumers respond. Other concerns include the potential for smaller parts makers to fail and bring production to a halt, and the possibility of another COVID-19 outbreak in the fall.

Auctioneers Race to Unload Oil Equipment as U.S. Drilling Dries Up

The oil industry auction market is more active now than at any point since the downturn of the 1980s, said Dan Kruse, a San Antonio-based auctioneer and founder of Superior Energy Auctions, which specializes in energy equipment, Reuters reported. Oil prices crashed this year, dropping at one point to -$37 a barrel. While the U.S. crude benchmark CLc1 has recovered to nearly $40 a barrel, U.S. and Canadian oil companies have slashed production by over 3 million barrels per day (bpd) and cut working rigs by nearly 800 from a year ago to just 305 in June, leaving a lot of idled equipment. Spending is down about 35% from the first quarter to the second. The cutbacks have prompted auctions from Odessa, Texas, to Alberta, Canada, where auctioneers like Highsmith are banging gavels to close deals on equipment. Even if oil prices remain in the high $30s, that will not be enough to spur much in the way of additional drilling. Ritchie Brothers, the biggest industrial auctioneer, conducted its largest-ever Texas auction in Fort Worth earlier this month, selling nearly 5,300 equipment items and trucks for over $81 million. Due to the coronavirus pandemic, the auction was held online, drawing 11,600 prospective buyers from 68 countries.

U.S. Households’ Net Worth Had Record Fall in First Quarter

The net worth of U.S. households saw a record decline in the first three months of this year as the coronavirus pandemic sent shock waves through the economy and caused equity prices to plummet, the Wall Street Journal reported. Household net worth fell 5.6 percent in the first quarter from the previous three months to a seasonally adjusted $110.79 trillion, the Federal Reserve said today. That was the largest single-quarter drop in records going back to the early 1950s. The figures, published in a quarterly Fed report known as Flow of Funds, show the beginning of the pandemic’s impact on the U.S. economy, which entered a recession in February. Gross domestic product contracted at an annualized rate of 5 percent in the January-to-March period, as lockdowns prompted consumers to reduce spending and companies to hold back investment. The downturn deepened in the second quarter, economists say, as companies and governments laid off more than 20 million people in April. Most of the decline in household net worth in the first quarter resulted from a $7.8 trillion drop in the value of directly and indirectly held corporate equities, the Fed said today. Fears about the virus and its impact on the economy, as well as a severe liquidity shortage in swaths of the financial system, caused the Dow Jones Industrial Average to fall some 23 percent in the first quarter, decimating household investment portfolios. (Subscription required.)

Upcoming abiLIVE Webinars to Examine Real Estate Industry, Automotive Landscape and Bankruptcy Court Procedures During COVID-19 Pandemic

ABI will be holding 3 webinars starting next week to examine financial distress in the real estate industry, automotive insolvency issues and how bankruptcy court procedures have evolved during the COVID-19 pandemic.

- June 17's "Post-Pandemic Real Estate Restructuring from Wall Street to Main Street" webinar features Saul Burian of Houlihan Lokey (New York), Megan Murray of Underwood Murray PA (Tampa, Fla.) and Michael Rosow of Winthrop & Weinstine, P.A (Minneapolis), with David Levy of NRC Realty & Capital Advisors, LLC (Chicago) moderating the panel. Register for free.

- Sponsored by the Federal Bar Associations of both the Eastern District of Michigan and Western District of Michigan, the "Automotive Insolvency Issues in the Post-COVID Age" webinar on June 18 features Bankruptcy Judge Phillip J. Shefferly (E.D. Mich.; Detroit), Bankruptcy Judge John T. Gregg (W.D. Mich.; Grand Rapids), Daniel F. Gosch of Dickinson Wright, PLLC (Grand Rapids, Mich.), Stephen M. Gross of McDonald Hopkins, PLC (Detroit), Richard E. Kruger of Jaffe Raitt Heuer & Weiss, P.C. (Southfield, Mich.) and Alicia B. Masse of Alderney Advisors (Southfield, Mich.). Register for free.

- Changes in the process and practice of bankruptcy courts in the COVID-19 era will be discussed on the June 22 webinar featuring Bankruptcy Judge Hannah L. Blumenstiel (N.D. Cal.; San Francisco), Clerk of the Court Una M. O'Boyle (D. Del., Wilmington), Brian L. Shaw of Fox Rothschild LLP (Chicago) and Matt Wapnick of CourtCall LLC (Los Angeles), with attorney Robert J. Ambrogi (Boston) moderating. Register for free.

SBRA, Consumer Hot Topics and More Featured at Central States Virtual Bankruptcy Workshop; Great Sessions, Networking at an Affordable Price from Your Home or Office!

While ABI had to cancel its in-person Central States Bankruptcy Workshop for 2020 due to the COVID-19 pandemic, sessions designed for this year’s program have been converted into a two-day virtual experience, to be held June 25-26. With two online educational sessions each day of the conference, ample networking opportunities both days and a price that is right ($100 for the entire program), it is easy to include the Central States Virtual Bankruptcy Workshop in your schedule this year! This year’s program sessions include:

• Small Business Restructuring Act of 2019
• Great Debates: The Ethical Response to Client Misconduct
• Hot Consumer Topics
• Liquidating Assets
• Judicial Round-and-Round

Click here to register.

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