There was some serious discussion at one of the programs at the 9th Circuit Judicial Conference about Sunnyslope, more in the area of equitable mootness than in property valuation issues. Someone reminded us that a confirmed plan in a corporate chapter 11 cannot be modified after it has been substantially consummated. In Sunnyslope, everyone involved in the case agreed that the plan was substantially consummated. The opinion says, “the plan as approved by the bankruptcy court was substantially consummated, as all parties acknowledge.” So it must be “unraveled,” – pitched out. The court (the two person majority) concluded, “As a result, the plan of reorganization confirmed by the bankruptcy court and affirmed by the district court must be set aside.” So I guess it will not be modified, the parties will simply start over four years later. Read more…
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Down with “Bankruptcy Remote Vehicles”
I was bitten by this concept once. At the time I was stunned to learn that the courts seem to say that bankruptcy remote vehicles were appropriate and enforceable. Finally Bankruptcy Judge Timothy Barnes, Northern District of Illinois, has ruled that public policy overrides the veto given to the lender that was appointed in a workout to be a “special member” of the debtor, a Michigan LLC. The article can be accessed here. The case is In re Lake Michigan Beach Pottawattamie Resort LLC, 2016 WL 1359697 (Bankr. N.D.Ill. April 5, 2016). The court also denied the lender’s motion to dismiss the bankruptcy as a bad faith filing under section 1112 (b) of the Bankruptcy Code because the lender failed to meet its burden of showing bad faith.
So what’s this all about? The lender agrees to lend to an LLC but only if the Operating Agreement provides that the lender or some third party be entitled to vote on whether the LLC may file a bankruptcy case. In fact, the lender or the third party is given a complete veto on the issue. This means that the members that owe fiduciary duties to the entity are prevented from voting for bankruptcy protection by a person whose sole interest is the lender. Assuming the lender’s appointee has fiduciary duty of care to the LLC, Delaware law permits “exculpation from all fiduciary duties except the duty of loyalty.”
So the foreclosure sale of the LLC’s sole asset is next week. The managing members are trying to figure out the best course for the LLC. The third person is not involved in this. It is only when the members decide to vote on a bankruptcy filing that they must give notice to the new person, appointed by the bank, who then gives a thumbs up or thumbs down. This is simply a waiver in advance of the right to file bankruptcy! That violates public policy but is largely, hopefully until now at least, permitted by the courts.
Involuntary Bankruptcy – Nice Summary of the Basics
This is a skit prepared by Peter Lively, Hale Antico and others for presentation to the Inn of the Court on November 18, 2014. It was a rousing success. It explains very nicely how this very scary area of bankruptcy law works. Why is it scary? Attorneys fees and sanctions are almost mandatory if the petitioning creditors are wrong and the case is dismissed.
There are also specialist in the area, with a bankruptcy lawyer you can be distressed, he will take care of the administrative issues, filling any paperwork and protect your property as much as possible. If you are looking for good rates, you definitely need to check https://www.rosenfeldinjurylawyers.com/ as you already worried about the bankruptcy case you probably feel there is nothing t do, or that the lawyers fees are to much for you.
James T. King Bankruptcy Inn of Court
November 18, 2014
Involuntary Bankruptcy Petition Trial
Presented by Teams 2 & 6 Read more…
Nice Discussion of Laches in a Non-Dischargeability Action from Judge Albert Tentative
I would not have thought that laches would come up in a non-dischargeability action. The facts in issue are prepetition by definition. The time to file the complaint is short. Here, Judge Albert was dealing with an adversary proceeding that had been pending for at least a few years. Plaintiff came up with a new brainstorm which apparently would work had Plaintiff not waited 3-4 years to make the argument. This is part of Judge Albert’s tentative. He also has a nice discussion of how res judiciata and collateral estoppel works in these matters.
Adv#: 8:11-01520 Read more…
Learning from Antonin Scalia – The Story of the “Hapless Law Clerk”
I found this story by Justice Scalia’s former law clerk John Duffy on Scotusblog. It discusses Scalia’s concurring opinion in Conroy v. Aniskoff (1993). It contains a great lesson about the usefulness of legislative history. The full article is here.
It seems there is a federal law somewhere that says that if a governmental agency forecloses on property, the redemption period (assuming there is one I guess), is extended or “tolled” by the amount of time the debtor is in the military. Sounds good so far. Who could be against that? Some guy gets drafted or volunteers and schleps off to somewhere to defend freedom, he should get more time to redeem property being sold because he didn’t pay some tax. Does the additional time however apply to a career military man? In that case, the tolling period might be 30 years? He just doesn’t have to pay his taxes until he retires? That’s what happened in Conroy. The Supreme Court ruled – 9-0 – that the code says what it says, that if it doesn’t make much sense, tell Congress. The majority said that the language is clear – yes it’s tolled for whatever time the man is in the military. The opinion then went on to explain that the ruling is justified by the legislative history.
Scalia separately concurred, taking the majority to task and giving us a nice lesson to remember, to wit – to hell with legislative history. He writes, Read more…
Los Angeles County is Challenging the BAP’s Decision in Mainline Equipment
I have been advised that Los Angeles County has appealed the adverse decision in Mainline Equipment to the Ninth Circuit. It has filed its opening brief and the responsive brief should be coming in the next few weeks absent any extensions. Obviously, the county disagrees with Judge Brand’s decision but we’ll see what happens. It seems to me that the tax is still a priority debt and must be paid in full with interest (which is 18% at the present time) so it really only matters if the debtor is trying to sell the property free of the county’s lien.
My brief of the BAP decision is below: Read more…
Courts Required to Consider Continuance of Hearing on a Motion for Summary Judgment
Warkentin v. Federated Life Ins. Co., 594 Fed. Appx. 900 (9th Cir. Cal. 2014) has a great lesson for litigators:
“These consolidated appeals concern a dispute over a [an insurance policy]. We vacate the district court’s order granting summary judgment to Federated and remand for proceedings consistent with this disposition.
“The parties are familiar with the facts, so we will not recount them here. After realizing he failed to timely oppose Federated’s motion for summary judgment, Warkentin filed an opposition and requested that the district court “continue the [summary judgment] hearing 14 days to allow [Federated] time to reply to [Warkentin’s] Opposition.” This request was filed the night before the hearing on the summary judgment motion. (Emphasis added.) Read more…
UPDATED!!! Thursday, February 18, 2016 – The Force Awakens: Objections to Exemptions After Law v. Siegel
The Force Awakens: Objections to Exemptions After Law v. Siegel
Thursday, February 18, 2016 Program 12:00 – 1:00 P.M.
Location Los Angeles County Bar Association 1055 W. 7th Street, Suite 2700 Los Angeles, CA 90017 Read more…
Judicial Estoppel: Can’t Have Your Cake & Eat It Too
Did the Debtor forget to list a lawsuit on his Schedule B or Statement of Financial Affairs?
Judicial estoppel is used to prevent a party from asserting inconsistent positions in different judicial proceedings (i.e. you say one thing in bankruptcy court but then another in state court). This rule was set in Supreme Court case of New Hampshire v. Main (2000).
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