Nice Tentative From Judge Albert re Trustee’s Sale of Avoidance Actions

By | June 2, 2015 | Cases, Chapter 7, Judges Corner | No comments

United States Bankruptcy Court, Central District of California
Judge Theodor Albert, Presiding

Tuesday, June 02, 2015 Hearing Room 5B
11:00 AM

8:14-12049 Ergocraft, Inc. Chapter 7

#16.00 Motion for Order: (1) Approving Asset Purchase Agreement and Authorizing the Sale of the Estate’s Interest in Avoidance Actions Pursuant to 11 U.S.C. Section 363(b); and (2) Approving Overbid Procedures

The Chapter 7 trustee moves for an order approving the asset purchase he has negotiated with Jiangsu World Plant Protecting Machinery Co., Ltd. (“Jiangsu”). Jiangsu previously obtained a judgment against the debtor in the amount of $1,821,983.28. This claim is designated Claim No. 1 on the claims register (“Jiangsu Claim”). Trustee has negotiated with Jiangsu for the purchase of estate’s interest in avoidance actions which are reportedly the only realizable assets of the estate. Jiangsu will pay $52,500, release the Trustee and the estate from all claims, and subordinate the Jiangsu Claim to the payment of all other allowed claims. In addition, the Trustee seeks approval of overbid procedures, whereby qualified bidders may bid on the same assets at an auction to be held during the hearing for the motion. Bidders must bid a minimum of $67,500 (an initial overbid of $15,000), and each subsequent increase must be by an increment of $1,000.

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Prof Mark Scarberry Offers Nice Analysis of Caulkett (and Dewsnup)

By | June 2, 2015 | Chapter 7, Supreme Court | No comments

Today, in Bank of America v. Caulkett (and Bank of America v. Toledo-Cardona), the Supreme Court reversed the Eleventh Circuit and held that a debtor may not strip off a wholly underwater mortgage in a Chapter 7 case.  The Court noted that the respondents had not asked it to overrule Dewsnup. The meaning given by Dewsnup to the term “allowed secured claim” in section 506(d) is controlling; that meaning does not involve the existence of any value backing up the claim.  The opinion is here: http://www.supremecourt.gov/opinions/14pdf/13-1421_p8k0.pdf.

A few of us (maybe only a very few) think Dewsnup was correctly decided.  I think it was. It’s particularly difficult to understand how section 722 would retain meaning (and how its limits would be respected) if the Court had decided Dewsnup the other way. Justice Scalia’s attempted response to this point in his Dewsnup dissent is unpersuasive.

Justice Thomas’s opinion for the Court includes several rather obvious digs at the Court’s Dewsnup decision. (Note that Justice Thomas didn’t participate in Dewsnup; I think he would have joined Justice Scalia’s dissent if he had participated.)

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Specialization Exam Class Coming Up

By | June 2, 2015 | Specialist Information | No comments

Counsel:

Our next monthly class (with MCLE credit) to prepare for the October, 2015 Exam will be held from noon to 1:30 pm on June 19, 2015 in the basement of 6055 E. Washington Blvd., Los Angeles CA 90012.  Free parking.  Dennis (this is the second of the two classes he always teaches alone) will be discussing Chapter 21 of the Blum Book (viz. Chapter 11 practice).  The texts for the free course are as follows (available on Amazon.com):

(1)     Blum, Brian A. – Bankruptcy and Debtor/Creditor Examples and Explanations 6th Edition (ISBN 1454833912); [Class Textbook]

(2)     EZ Rules for the Bankruptcy Code (ISBN 978-0-7355-7197-6) [Bankruptcy Code translated into Layperson English];

(3)     Martin, Nathalie – The Glannon Guide to Bankruptcy (ISBN 978-0-7355-0728-9); [Problem Sets]

(4)     AWHFY, L.P. – Annotated Mini Code Mini Rules Western Edition (ISSN 1553-264X) [9th Circuit Caselaw]; and

(5)     Markell, Bruce A. – Questions & Answers: Bankruptcy (ISBN 978-0-8205-5673-4) [Problem Sets]

Wesley H. Avery

Note:  The forms to sign up for the exam and information about the exam can be accessed here.  

Basic Introduction to Unsecured Creditors’ Committee

By | June 2, 2015 | Chapter 11 | No comments

This article is a quick introduction to unsecured creditors’ committees.

When an individual or company files bankruptcy, there are generally two routes it can take (for the purpose of this discussion, Chapter 13, a limited form of reorganization for individuals, is omitted.)

The first route is Chapter 7 liquidation where assets are liquidated for payment to creditors.

A Chapter 7 bankruptcy is structured as follows: a Chapter 7 Trustee is appointed; the trustee is a professional whose job is to maximize the value of the assets (referred to as the Estate) and to pay creditors as much as possible. The Department of Justice oversees the Chapter 7 Trustee. Creditors may participate in this process but since the Chapter 7 Trustee is a professional, experienced and neutral, the role of creditors is limited. They may seek to protect themselves but generally stay out of the Chapter 7 Trustee’s business.

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Nice Summary of Wellness from Prof. Dan Bussell

By | June 1, 2015 | Cases, Supreme Court | No comments

Prof. Dan Bussell from UCLA has posted some thoughtful comments about Wellness International Network v. Sharif on the SCOTUSBLOG site.  His comments are here.  The Wellness opinion is here.

Coincidental Caption: PennySaver files Bankruptcy

By | June 1, 2015 | Chapter 7 | No comments

From the O.C. Register:

PennySaver has filed for Chapter 7 bankruptcy in Delaware, a week after it shut down and in the wake of lawsuits claiming nearly 700 workers were abruptly laid off without notice or final pay.

A Delaware bankruptcy judge on Friday granted a lawyer representing the company and several of its affiliates a 14-day extension to file a list of assets and liabilities.

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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

Postconfirmation Subject Matter Jurisdiction of Bankruptcy Courts

By | June 1, 2015 | Case Briefs, Chapter 11 | 1 Comment

A trend among Chapter 11 practitioners over the last ten years has been to use general provisions in the Plans of Reorganization they draft. They copy and paste these provisions in all their Plans, close their eyes and hope for the best.

One of those clauses is this “retention of jurisdiction” clause. Some practitioners have a bland one, “The Court shall retain jurisdiction to the maximum extent possible under the law.” To me, that means nothing. The problem is this clause is not helpful. It doesn’t tell the court specifically what it’s allowed to do and not allowed to do, inviting litigation over this issue before the merits are even considered!

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Employers Must Accommodate Pregnant Workers!

By | May 29, 2015 | Community, Supreme Court | No comments

The Pregnancy Discrimination Act added new language to the definitions subsection of Title VII of the Civil Rights Act of 1964. The first clause of the Pregnancy Discrimination Act specifies that Title VII’s prohibition against sex discrimination applies to discrimination “because of or on the basis of pregnancy, childbirth, or related medical conditions.”

The Act’s second clause says that employers must treat “women affected by pregnancy . . . the same for all employment-related purposes . . . as other persons not so affected but similar in their ability or inability to work.”

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A New Wrinkle in Negligent Infliction of Emotional Distress

By | May 28, 2015 | Uncategorized | No comments

In Thing v. La Chusa (1989) 48 Cal.3d 644, 667–68 (Thing), the California Supreme Court established three requirements that a plaintiff must satisfy to recover on a claim for negligent infliction of emotional distress to a bystander: (1) the plaintiff must be closely related to the injury victim; (2) the plaintiff must have been present at the scene of the injury-producing event at the time it occurred and then aware that it was causing injury to the victim; and (3) as a result, the plaintiff must have suffered serious emotional distress, so the use of a personal injury lawyer boston really helped in this case.

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