Longtime El Cajon
City Attorney Retires
Amounts owed to a bank under a “swap” agreement may not be recharacterized in bankruptcy as interest on a conventional loan, making the payments uncollectable in Chapter 11 bankruptcy cases, the U.S. District Court for the Southern District of California ruled early this month.
The San Diego office of Pillsbury Madison & Sutro LLP publicized the local ruling, noting it will clarify the law on the subject. Pillsbury attorney Patrick Shea served as counsel for Bank of America in the case.
The ruling came in an appeal of Thrifty Oil Co.’s bankruptcy case. An attorney for Thrifty, Alan Pedlar of Stutman, Treister & Glatt in Los Angeles, said his client will appeal.
Interest rate swap agreements are widely used by banks, businesses and governments to manage interest rate volatility. Challenges to swap obligations have been asserted in several major bankruptcies, according to a statement released by Pillsbury, which added the largest swap dealers have previously been required to compromise tens of millions of dollars in claims because there was no definitive case law on the subject.
The Pillsbury statement said Judge Thomas Whelan, in a 30-page opinion, rejected Thrifty Oil Co.’s argument that swap termination damages owing to Bank of America on three interest rate swaps should be considered interest on a loan that the swaps hedged. Thrifty had sought the ruling in its Chapter 11 bankruptcy case, the Pillsbury statement said, because the Bankruptcy Code relieves the debtor from paying certain interest obligations on loans accruing after the bankruptcy filing. In rejecting Thrifty’s argument, the court held that “No matter how tightly the borrower integrates the swap with its loan, the payments made under the swap cannot represent interest,” the Pillsbury statement noted, adding that the court’s opinion affirms an earlier bankruptcy court decision awarding the defendant $6 million.
The international market for swaps exceeds $22 trillion, according to the Pillsbury statement.
Pillsbury Madison & Sutro is headquartered in San Francisco.
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El Cajon Exit: Lynn McDougal of the El Cajon law office of McDougal, Love, Eckis, Smith & Boehmer retires from his post as El Cajon’s city attorney June 30. He has held the job since 1968.
During his tenure, McDougal has dealt with issues such as taxes, cigarette vending machines, smoking in public places, mobile home rent control, the display and sale of alcoholic beverages and adult entertainment businesses.
The McDougal law firm has a long association with El Cajon; its attorneys have represented the city since 1955. Today the firm acts as city attorney for six cities and has represented more than 25 San Diego County municipalities, redevelopment agencies, fire districts and water districts. In addition to municipal law, the firm also practices family law, personal injury litigation, tax and business planning, and probate and estate law.
The El Cajon City Council this month named Morgan Foley, another attorney with the McDougal firm, as McDougal’s successor.
New Blood At Baker: The San Diego office of Baker & McKenzie has six new associates: Erik J. Gantzel, Marisa Janine-Page, Adina Kurjatko, Peter R. Martinez, William R. Reiter II and Scott Sigman. Janine-Page was previously an associate with Milberg Weiss Bershad Hynes & Lerach LLP in San Diego. Martinez was previously with Baker & Maxham in San Diego. Reiter comes from Luce, Forward, Hamilton & Scripps, LLP, in San Diego. Sigman comes from the local office of Seltzer Caplan Wilkins & McMahon. Baker & McKenzie is based in Chicago.
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More On Morrison: The rapid growth at the local office of Morrison & Foerster LLP, discussed last issue, also involved the transfer of attorney Paul Friedman from Arnold & Porter in Washington, D.C. Attorneys Peng Chen, Juli Oh and Dr. Kurt Springmann have come to San Diego from other offices of the San Francisco-based firm, which specializes in intellectual property. Its local office is in Carmel Valley.
Graves’ law column appears weekly. E-mail items to bgraves@sdbj.com.
