Things that make you say hmmm... NV Supreme Court Seems to Hold that a Bankruptcy Proceeding without the filing of an Adversary Case is non-adversarial.... Moon v. McDonald Carano (8-1-13)

There is no litigation in bankruptcy.....unless you file an adversary proceeding. 

 

The Nevada Supreme Court in examining a dismissal of a malpractice claim determined that for purposes of the statute of limitations an attorney's negligence in representing a creditor in the "non-adversarial parts" of a bankruptcy proceeding does not constitute litigation malpractice causing the so called Hewitt litigation tolling rule to apply.

 

The Nevada Supreme Court, in a panel decision, seemed to misinterpret what constitutes litigation within a Bankruptcy Proceeding.  Anyone that practices bankruptcy has certainly litigated issues outside of an adversary proceeding... for instance, motions to lift stay, objections to exemptions, objections to plan, objections to disclosure statements, valuation hearings etc. etc.  Bankruptcy Rule 9014 described the process of a contested proceeding.

 

Moreover the Advisory Notes state:  Whenever there is an actual dispute, other than an adversary proceeding, before the bankruptcy court, the litigation to resolve that dispute is a contested matter. For example, the filing of an objection to a proof of claim, to a claim of exemption, or to a disclosure statement creates a dispute which is a contested matter. Even when an objection is not formally required, there may be a dispute. If a party in interest opposes the amount of compensation sought by a professional, there is a dispute which is a contested matter.

 

Despite this fact, the Nevada Supreme Court found that a rejection of an unexpired lease that was resolved by a stipulation is not adversarial.  However, just because someone resolved an issue, doesn't that infer that the matter was contested, but was simply resolved?

 

Perhaps I am reading more into the decision but as a published decision, it seems to me that the Nevada Supreme Court could have determined that the matter was not a contested proceeding because there was no dispute (assuming the facts supported such position) but clearly a contested proceeding is adversarial in nature....

 

Time will tell if they revisit this issue.  The link to the case follows:

Moon vs. Mcdonald Carano & Wilson 8-1-13