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9th Circuit Applies California Law to Contract Where Parties Agreed to Apply Georgian Law

By | September 1, 2015 | Appeals, Case Briefs, Cases | No comments

The basic facts of the case are an individual entered into an agreement with a bank located in Georgia to borrow money to purchase her home. It is not clear whether the individual even signed the contract or where the contract was signed but it ends up not mattering because the bank sued in California District Court under diversity jurisdiction. Note: in California, if a contract contains an attorney fees clause provision, both sides of the dispute get to use it. That’s not the law in Georgia. The Bank wanted to be able to enforce its attorney fee clause against litigants but to not allow other litigants to use that clause against the bank!

California law was applied to this contract in two instances.

Read more…

6th Circuit Holds That FDCPA Protects Corporations

By | August 25, 2015 | Appeals, Cases | No comments

The FDCPA is a powerful piece of legislature designed to eliminate abusive debt collection practice. The teeth behind the act are an attorney fees clause and provisions that allow for emotional distress and punitive damages to be awarded.

One distinction between consumer debt collectors and commercial debt collectors is that those practicing consumer debt collections had to be very careful not to violate the FDCPA while commercial debt collectors did not have the same worries. Consumers are not as sophisticated as those engaged in business and so this additional protection makes sense.

That distinction now blurred because the 6th Circuit held that corporations may take advantage of the FDCPA.  This is a BIG deal.

You can find the case here.

Hat tip to Professor Dan Schechter, Loyola Law School, Los Angeles and the ABA’s Insolvency Law Committee.

Judge Bauer Reversed, Trustee Clawback Power Strengthened

By | July 25, 2015 | Appeals, Case Briefs, Cases | No comments

In this case, the sole shareholder, director and president of a company (all the same Individual) transferred about $8,000,000 into a secret bank account which he then used to pay personal debts. The question before the Court was whether the transfers to the bank account made the Individual, in his personal capacity, an initial transferee within the meaning of § 550.

The surprising answer (although not stated in this way) is that it depends on whether the secret bank account was opened in the name of the company or individual. In this case, the secret account was completely under the dominion and control of the Individual; the Individual’s wife was a signatory on the account and the only purpose it served was to pay personal expenses. None of that mattered. The account was opened under the company’s name. The District Court held that the Individual was not an initial transferee since the account was a company account.

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Is It Community Property Or Separate Property?

By | June 26, 2015 | Appeals, Cases | No comments

The 9th Circuit really confused a lot of people in 2003 when it incorrectly interpreted California community property laws. The confusion spread to California courts of appeal until finally corrected by the California Supreme Court in 2014!

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Chapter 11 Debtors Are Prohibited From Paying Taxes… Without a Notice and Hearing!

By | June 19, 2015 | Appeals, Case Briefs | No comments

Before people worry too much, this is not as bad as it sounds but it is still pretty awful.

Under Bankruptcy Code section 102, “notice and hearing” is a due process safeguard: “after such notice as is appropriate in the particular circumstances, and such opportunity for a hearing as is appropriate in the particular circumstances.” In other words, there are circumstances where notice and hearing means just notice or notice and an opportunity to object. Hopefully local bankruptcy rules are modified to make these notice only requests.

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Bankruptcy Judges Might Not Be Able to Remand Removed Cases!

By | June 12, 2015 | Appeals, Case Briefs | No comments

This is a dangerous article to write but I am hoping the comments will be worth it.

So the Wellness case came out and the Supreme Court seems to have taken a pragmatic view by allowing parties to consent (implied or explicit) to the jurisdiction of bankruptcy courts. Fine. But is there more to this story?

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Not Paying a Few Creditors, After 48 months, Per Confirmed Plan is Grounds For Dismissal/Conversion (In re Warren)(Unpublished)

By | June 1, 2015 | Appeals, Cases, Chapter 11 | No comments
Debtors implemented their confirmed Plan for 52 months (8 months to go), but they  failed to pay a few unsecured creditors.   On Motion by the unpaid creditors, bankruptcy judge reopened the case, and found there was “cause” under 1112(b)(4)(N) to dismiss the case (rather than convert).
The Debtors were apologetic, and said they would immediately pay all the creditors what they are owed rather than facing the harsh consequence of a dismissal after 52 months of plan payments.  Section 1112(b)(2) allows an exception whereby if there is “unusual circumstances” to permit the court not to dismiss/convert.   Bankruptcy judge was not moved by Debtors excuses, and dismissed the case.   The B.A.P. affirmed (unpublished).
Lesson:  Road to discharge begins (not ends) at plan confirmation.
Link: http://cdn.ca9.uscourts.gov/datastore/bap/2015/05/28/Warren%20Memo%2014-1390.pdf

What’s Not a Claim In Bankruptcy?

By | May 7, 2015 | Appeals, Case Briefs, Cases | No comments

Before joining his firm, I visited Professor Hayes’ Bankruptcy class which he teaches at the University of West Los Angeles. The topic of the day was “claims.”  As we parsed through the case law, I gave the students a hint, if there is any question whether something is a claim, it’s a claim! In fact, I couldn’t think of something that wasn’t a claim! Read more…

Follow Up: Supreme Court Weighs Power of BK Judges (Wellness International Network Ltd. v. Sharif)

By | January 15, 2015 | Appeals, Cases, Supreme Court | No comments

From Sara Randazzo of the Wall Street Journal

The Supreme Court appeared open Wednesday to clarifying the powers of nearly 1,000 judges in the federal court system, a group whose constitutional authority has come into question since a 2011 high-court decision involving the late Playboy playmate Anna Nicole Smith.

Depending on how the court rules in a case argued Wednesday, the bankruptcy-court system could remain mired in confusion over when it has the power to offer final judgments on certain issues. By extension, the ruling could also curtail the ability of the federal magistrate system to handle some of the work of district-court judges.

“This case is enormously important for the workload of the federal district courts,” said Erwin Chemerinsky, a constitutional scholar and dean of the law school at the University of California, Irvine.

Read more…

Supreme Court Oral Arguments Today in Wellness International Ltd. v. Sharif

By | January 14, 2015 | Appeals, Cases, Chapter 11, Chapter 13, Chapter 7, Courts, Supreme Court | No comments

Today, January 14, 2015, the Supreme Court is scheduled to hear oral arguments in the latest case before the Court regarding the bankruptcy court’s jurisdictional powers — Wellness International Network, Limited v. Sharif.  The Court was not too interested in delving into this issue since the case was on the list of cases to be considered by the Justices at five separate conferences.  Regardless, the Court finally granted certiorari to the Seventh Circuit’s decision on July 1, 2014.

The Court will address the following two issues:

(1) Whether the presence of a subsidiary state property law issue in an 11 U.S.C. § 541 action brought against a debtor to determine whether property in the debtor’s possession is property of the bankruptcy estate means that such action does not “stem[] from the bankruptcy itself” and therefore, that a bankruptcy court does not have the constitutional authority to enter a final order deciding that action; and

(2) whether Article III permits the exercise of the judicial powers of the U.S. by the bankruptcy courts on the basis of litigant consent, and if so, whether implied consent based on a litigant’s conduct is sufficient to satisfy Article III.

For more information:  www.scotusblog.com/case-files/cases/wellness-international-network-limited-v-sharif/

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