Hot Topics in Business Law

Oct 31, 2019 |

Article 1: “Forever 21 Files for Chapter 11 Bankruptcy Protection, May Close up to 178 U.S. Stores”

Article 1: “Forever 21 Files for Chapter 11 Bankruptcy Protection, May Close up to 178 U.S. Stores”

https://www.usatoday.com/story/money/2019/09/29/forever-21-chapter-11-bankruptcy/3816101002/https://www.usatoday.com/story/money/2019/09/29/forever-21-chapter-11-bankruptcy/3816101002/

Note: In addition to the article, please also see the video included at the above-referenced internet address.

According to the article, Fashion retailer Forever 21 filed for Chapter 11 bankruptcy protection recently after being hobbled by expensive leases, declining mall traffic, digital competition and fashion choices that fell flat.Forever 21 requested court protection from its creditors in a bid to stay in business.

The family-owned company, which has about 32,800 employees, said it would close “most” of its stores in Asia and Europe and up to 178 stores in the U.S.

The retailer said the exact number of closures would be contingent on negotiations with landlords, but “we … expect a significant number of these stores will remain open and operate as usual, and we do not expect to exit any major markets in the U.S.”

The company, which did not release a list of store closures, is negotiating lease concessions in hopes of lowering its costs. Four landlords account for nearly half of the retailer’s leases, according to a court filing.

With about 785 stores worldwide, including 534 company-owned locations in the U.S., Forever 21 is one of the largest specialty apparel retailers. The company’s stores are typically smaller than the average department store but larger than many of its apparel competitors.

The fast-fashion retailer’s aggressive expansion in recent years has led to problems, including the opening of more than 200 locations in foreign markets from 2005 to 2015, many of them struggling. In the U.S., Forever 21 snapped up retail spaces previously occupied by retailers like Saks, Sears and Borders, but the company now has too much space to sustain what it calls “ultra-low prices.”Much like other traditional retailers, the company is grappling with digital competition and changing shopping habits. Forever 21, which gets only 16% of its sales from digital sources, has been slow to adapt to e-commerce.

In bankruptcy, Forever 21 said it would continue to honor gift cards, returns and exchanges. Bankruptcy experts typically urge consumers to spend gift cards if there’s any concern that a retailer will liquidate. “This was an important and necessary step to secure the future of our company, which will enable us to reorganize our business and reposition Forever 21,” Forever 21 executive vice president Linda Chang said in a statement.

Across the retail sector, more than 8,200 stores have already announced plans to shut down this year, according to Coresight Research. That’s up from nearly 5,900 in 2018.

Mall retailers that have announced plans to liquidate in 2019 have included Payless Shoe Source, Gymboree, Charlotte Russe and Charming Charlie.

Forever 21 is owned by the family of Do Won and Jin Sook Chang, a husband-and-wife team who founded the company in 1984 as Fashion 21 in Los Angeles after immigrating to the U.S. from South Korea three years earlier with no savings.

“The Changs, the founders and owners of Forever 21, serve as a rare and exemplary model of the American Dream,” Forever 21’s chief restructuring officer, Jonathan Goulding, said in a court filing.In the early days, design and merchandise chief Jin Sook Chang had a “nearly-clairvoyant ability to predict trends,” Goulding said.

But the company acknowledged that in recent years, it made bets on new fashion that “failed to resonate with customers,” saddling the company with excess inventory that “crowded out new product” due to debt terms that made it difficult to discount.

What’s more, a macro trend that has undermined many of its competitors has also barraged Forever 21: Fewer people are shopping in malls.

“Many Forever 21 storefronts are located in malls. As its neighbors have closed, the number of customers walking past Forever 21 has declined. This has led to a decrease in sales through what has traditionally been Forever 21’s predominant retail channel, its brick and mortar stores,” Goulding said.

“Despite Forever 21’s continued efforts to adjust its sales strategy to one capitalizing on its online store, it remains saddled with excessive floor space from leases entered almost a decade ago or more in unprofitable markets.”

Neil Saunders, managing director of Global Data Retail, said Forever 21 “was once a colossus on the fashion stage” but has “fallen increasingly out of favor” due to competition like H&M, and “a lack of clarity and differentiation.”

“Store standards have also been sliding and consumer ratings for the quality of displays, merchandise, and the amount of inspiration in shops have dipped considerably over the past year,”

Saunders wrote in an analysis. “In an era when it has become very easy to buy online, Forever 21 has not taken care of its physical assets and the profitability of its estate has suffered.”

Forever 21’s fast-fashion segment, known for generating new styles quickly to appeal to consumers, is also facing challenges.
Cowen retail analyst Oliver Cohen noted earlier this month that fast-fashion retailers face a challenge in the form of increasingly popular clothing rental services, for example.

“Department stores and fast fashion may be at risk if they fail to innovate and adapt to the new emerging trends in retail,” he wrote in a note to investors.

In addition to lease concessions, the company’s turnaround plan includes “impactful” marketing, investments in e-commerce and a “refocusing” on “trendy and affordable apparel, accessories, jewelry and handbags,” Goulding said.

But what if fast-fashion is no longer fashionable?

“Prevailing consumer trends have also been against Forever 21 as some younger shoppers have migrated away from fast fashion in favor of more sustainable models of consumption,” Saunders said. “Although this is not the main reason for the decline – as is witnessed by the success of other chains in the segment such as Primark – it has been broadly unhelpful to growth and has added further pressure to a business desperate to drive its sales line.”

Discussion Questions

1. What is Chapter 11 bankruptcy?

Chapter 11 bankruptcy is debt restructuring for a business. The bankruptcy court considers, and if it accepts approves, a debt restructuring plan. Chapter 11 does not focus on debt forgiveness (although there may be some debt forgiveness associated with the plan); instead, the mission is to make the debtor’s periodic debt payments more manageable, with an eye toward returning to a financially-sound footing in the future. If a Chapter 11 plan is unsuccessful, the court may modify the plan, or the debtor may convert the filing to a Chapter 7 liquidation bankruptcy.

2. What is Chapter 7 bankruptcy?

Chapter 7 bankruptcy is liquidation bankruptcy for a business (individual debtors can also file for this type of bankruptcy). In the Chapter 7 process, the petitioning business offers up all of its assets to the bankruptcy trustee, who will then distribute those assets to creditors in an attempt to at least partially satisfy their claims. Once the Chapter 7 process runs its course, any remaining debts are discharged, and the business ceases to exist.

3. In your reasoned opinion, will Forever 21’s Chapter 11 reorganization plan be successful? Why or why not?

This is an opinion question, so student responses may vary.

Article 2: “Author of Texas ‘Castle Doctrine’ Self-Defense Law Says It Wasn’t Designed for Defendants Like Amber Guyger”

Article 2: “Author of Texas ‘Castle Doctrine’ Self-Defense Law Says It Wasn’t Designed for Defendants Like Amber Guyger”

https://abcnews.go.com/US/author-texas-castle-doctrine-defense-law-designed-defendants/story?id=65978174&cid=clicksource_4380645_null_card_hed

Note: In addition to the article, please also see the video included at the above-referenced internet address.

According to the article, the former Texas lawmaker who wrote the state’s “Castle Doctrine” self-defense law said it “wasn’t designed” to be used to defend people like former Dallas police officer Amber Guyger, who was convicted of murder recently for fatally shooting an innocent man in an apartment she thought was her own.

Former Texas state Senator Jeff Wentworth, a Republican, told the media that he drafted the “Castle Doctrine” twelve years ago to provide protection to citizens who use lethal force to defend themselves against intruders into their own homes.

In Guyger’s use of the law, which is similar to Florida’s “stand your ground” self-defense law, she claimed she believed she was in her own apartment when she mistakenly entered the unit of 26-year-old Botham Jean, who lived a floor above her at the South Side Flats apartment complex in Dallas and shot him to death after wrongly suspecting him of being a burglar.

“It was designed for you in your home. It wasn’t designed for this kind of circumstance that existed in this Dallas case,” Wentworth, now a justice of the peace in San Antonio, told the media following Guyger’s conviction.

Dallas District Court Judge Tammy Kemp, who presided over Guyger’s trial, instructed the jury that they could consider the “Castle Doctrine” in deciding its verdict.The jury ended up rejecting the defense and convicted Guyger of murder after less than two days of deliberations.

“Clearly, I don’t think anybody anticipated, I certainly did not, that someone would shoot and kill someone in their own house believing that they were in their own,” Wentworth said. “I mean that’s just a circumstance I don’t think anybody had thought of. I can say that I didn’t foresee this kind of situation. No.”

Wentworth used the term “Castle Doctrine” to refer to his Senate Bill 378, meaning if a person is in their “castle” — or home, apartment, business or even their car — the use of deadly force is presumed to be reasonable. Former Texas Governor Rick Perry signed the bill into law in 2007.

“I don’t criticize the judge for saying in this instance it was allowable for the jury to consider because if, in fact, the woman (Guyger) truly believed that she was in her house defending herself from an intruder, it would have been an appropriate use. Apparently the jury didn’t buy that story,” Wentworth said.

He said he wrote the legislation after reading a newspaper article about former Florida Governor Jeb Bush signing that state’s “stand your ground” law.

“I thought to myself, ‘Well, isn’t that amazing that Floridians haven’t had this right that we here in Texas have had for decades.’ And then I thought, ‘You know, I’d better double-check,” Wentworth said.

When he went back and checked for such a law, he said he was “shocked” to learn he was wrong and that Texas did not have such a statute.

“Over the years, either through legislative action or court cases, we had lost that right to defend ourselves in our own homes and that, in fact, we had a duty to retreat,” Wentworth said. “That just genuinely offended me because, you know, if I’m sitting with my family in my house watching the news at 10 o’clock at night and somebody’s bashing in the front door with a crowbar, I shouldn’t have to have a duty to retreat.”

The “Castle Doctrine” defense was used successfully in January when a homeowner in Corpus Christi, Texas, shot and killed a suspect who had broken into his home. The 41-year-old homeowner invoked the “Castle Doctrine,” telling police he feared for his life. He was not charged with a crime, officials said.

In June 2010, the owner of a taco truck fatally shot a man who allegedly stole a tip jar from his truck and started to run away. The case was ruled a justifiable homicide after the taco truck owner invoked the “Castle Doctrine,” the Houston Chronicle reported.

One of the most famous “Castle Doctrine” cases came shortly after the law was passed in Texas when a homeowner in Pasadena, Texas, named Joe Horn fatally shot two burglars in the back after he spotted them allegedly breaking into his neighbor’s house and despite a 911 dispatcher telling him repeatedly not to intervene. The Harris County District Attorney’s Office presented the case to a grand jury that declined to indict Horn.

In other Texas cases, the law did not apply. In June 2012, a jury convicted a man of killing his neighbor during a confrontation over loud music, rejecting a claim that he was within his rights to fatally shoot the man under the “Castle Doctrine.” A jury rejected the defense by retired Houston firefighter Raul Rodriguez, who went to his neighbor’s house to complain about the noise and ended up killing the man.
Rodriguez was sentenced to life in prison.

Discussion Questions

1. Describe the “Castle Doctrine.”

As the article indicates, according to the “Castle Doctrine,” if a person is in her “castle” – i.e., home, apartment, business or even her car – the use of deadly force is presumed to be reasonable. It is a self-defense law.

2. In your reasoned opinion, did the jury reach a just verdict in the Amber Guyger case? Why or why not?

This is an opinion question, so student responses may vary.

3. Evaluate the four (4) Texas cases mentioned at the end of the article in terms of why the “Castle Doctrine” either did or did not apply in each case.

In the Corpus Christie case, the “Castle Doctrine” applied because the person shot and killed a suspect who had broken into his home, and the person asserted that he did so because he feared for his life. In a Houston case, the owner of a taco truck fatally shot a man who allegedly stole a tip jar from his truck and started to run away. Although the case was ruled a justifiable homicide, your author cannot justify application of the “Castle Doctrine” based on the facts presented, since the thief was running away from the truck. In the Pasadena (Texas) case, a man fatally shot two burglars in the back after he spotted them allegedly breaking into his neighbor’s house and despite a 911 dispatcher telling him repeatedly not to intervene. Again, your author cannot justify application of the “Castle Doctrine” based on the facts presented, since the alleged burglars had their backs turned to the man who exercised deadly force, and since the home involved was his neighbor’s house, not his. In the last case, a jury convicted a man of killing his neighbor during a confrontation over loud music, rejecting a claim that he was within his rights to fatally shoot the man under the “Castle Doctrine.” The jury rejected the defense by retired Houston firefighter Raul Rodriguez, who went to his neighbor’s house to complain about the noise and ended up killing the man. Your author supports the jury’s decision in this case, since again, the home involved was not owned by the man who exercised deadly force; rather, it was his neighbor’s.

Article 3: “Supreme Court Justices Should Have Term Limits”

Article 3: “Supreme Court Justices Should Have Term Limits”

https://www.cnn.com/2019/09/30/opinions/supreme-court-term-limits-law-roosevelt-vassilas/index.html

Note: In addition to the article, please also see the video included at the above-referenced internet address.

Note: The following article is an opinion-editorial written by Kermit Roosevelt, a constitutional scholar and professor at the University of Pennsylvania Law School, and Ruth-Helen Vassilas, a University of Pennsylvania Law School graduate and an associate in the London, England office of Skadden, Arps, Slate, Meagher & Flom, L.L.P.

While on his recent book tour, Supreme Court Justice Neil Gorsuch said that the framers of our Constitution did not want “nine old people in Washington sitting in robes telling everybody else how to live.” Yet that is the current reality of our Supreme Court.

These days, it’s the justices, and not the people or their elected representatives, who decide who gets health care and who can vote, whom we can marry and who’s allowed into the country, who’s won a presidential election and who can spend money on the next one.

Meanwhile, the court has also had a historic lack of turnover and nationally embarrassing confirmation hearings. Justices often serve past their prime, including one who stayed after a debilitating stroke, until they feel assured that a politically like-minded president will occupy the Oval Office and guarantee an appropriate replacement. When unexpected vacancies occur, partisans on both sides wage no-holds-barred battles for the seat.

These trends make it no wonder that three-fourths of the country supports swapping out Supreme Court life tenure for term limits. Judicial term limits are not a novel concept; they already exist for many of the highest courts across the Western world. Plus, 49 of 50 U.S. state courts of last resort have term limits, retention elections, or mandatory retirement age.

Even some justices support term limits. Chief Justice John Roberts, while working in the White House Counsel’s office in 1983, wrote that “there is much to be said for changing life tenure to a term of years, without possibility of reappointment….” He recognized that “a judge insulated from the normal currents of life for 25 or 30 years was a rarity then, but is becoming commonplace today.”

The most direct way to adopt term limits would be through a new constitutional provision. The Constitution, however, is notoriously difficult to amend. Obtaining both House and Senate supermajority support, followed by ratification from 38 state legislatures, would be nearly impossible. But there are other ways to achieve term limits.

Some suggest encouraging court nominees to pledge to retire after a fixed term. Former White House Counsel Robert Bauer, for instance, wrote an essay ahead of Chief Justice Roberts’ 2005 confirmation asking that Roberts pledge to serve a fixed term if confirmed. Such an assurance, however, would be unenforceable. A justice, at the conclusion of the promised term, could easily contend that the national importance of his or her continued service outweighs words uttered under pressure long ago. Congress could, in theory, impeach a justice who refused to adhere to the pledge. Nevertheless, removal requires two-thirds Senate approval and could fall prey to the same partisan dysfunction as the confirmation process.

Others suggest imposing a mandatory retirement age instead of term limits. This approach, though, would be discriminatory and ineffective. It would increase the incentive to nominate young judges rather than the best available legal minds and would fail to regularize the appointment process.

The best solution is to create Supreme Court term limits by statute. Several proposals exist for statutory term limits. The one we favor would give justices a fixed term of 18 years. Appointments would be staggered to allow each president two appointments per term, one in both the first and third year.

As each new justice joins the bench, the most senior justice would move to senior status. Justices with senior status would retain the option to sit on lower courts, as Justices Sandra Day O’Connor and David Souter have done post-retirement, and to serve as an active justice as needed, as Justice John Paul Stevens proposed in 2010. The lengthy fixed term would preserve judicial independence, while the regularized appointment process would make the court more responsive to the outcomes of national elections and less subject to chance and partisan hardball.

There’s a question of what would happen to the current justices. Some scholars suggest applying the statutory timeframe to them retroactively so that, following a president’s first appointment, the most senior sitting justice would be required to move to senior status.

Because the sitting justices took office under a different set of expectations, however, such removals strike us as extreme.

Fortunately, they are not necessary. The more moderate solution would be to permit the current nine to keep their seats indefinitely.

Though that may mean a 10 or 11-member court for a time, this temporary outcome is preferable to waiting in vain for the “perfect” moment to implement term limits. Each passing year under the current regime increases the likelihood of disruptive vacancies and strategic retirements.

This proposal is lawful under the Constitution. First, Congress has the authority to change the size of the court and has done so repeatedly throughout history. Second, federal judges are constitutionally entitled to “hold their offices” during good behavior and not have their salaries reduced. This plan does not diminish salaries, and it is consistent with a current US law (28 US Code § 371(b)) that states explicitly that district and circuit judges who take senior status “retain the office.” It follows that our legislators can assign senior status to justices, as well.

Political clashes, coupled with Methuselahn tenures, have eroded the institutional integrity of the Supreme Court. By statutorily setting term limits, we can bring predictability and fairness to a broken appointment process. Moreover, we will reduce partisan conflict and appropriately limit the influence of the “nine old people in Washington.”

Discussion Questions

1. As the article indicates, three-fourths of the country supports replacing United States Supreme Court life tenure for term limits. In your opinion, how relevant is this in terms of considering whether to adopt term limits for Supreme Court justices?

This is an opinion question, so student responses may vary.

2. As the article indicates, term limits for judges already exist for many of the highest courts across the Western world, and 49 of 50 U.S. state courts of last resort have term limits, retention elections, or mandatory retirement age. In your opinion, how relevant is this information in terms of considering whether to adopt term limits for Supreme Court justices?

This is an opinion question, so student responses may vary.

3. Do you support terms limits for United States Supreme Court justices? Why or why not?

This is an opinion question, so student responses may vary.