9th Circuit - Impositions of Sanctions by Bankruptcy Court - Affirmed - Failure to Transfer Real Property Located in Mexico (Published - 2014)

Contempt sanctions were issued by the bankruptcy court against a defendant for failing to a Mexican Villa to the Plaintiff.  Although the case just came down and I have not adequately reviewed, of interesting point is the reiteration that the Bankruptcy Court can issue contempt proceedings provide that notice is given and a statement of the burden.  Also, the Court examined the ability of the Debtor to actually comply with the order in light of Mexican Law.  Once again, the parties need to always examine who has the burden....



Once an alleged contemnor’s noncompliance with a court order is established, the burden shifts to the alleged contemnor to “produce[] sufficient evidence of [its] inability

comply to raise a question of fact.” United States v. Rylander, 656 F.2d 1313, 1318 (9th Cir. 1981), rev'd on other grounds, 460 U.S. 752 (1983). If the alleged contemnor does

not raise a question of fact through affidavits, and does not seek the opportunity to present its defense through live testimony, a court does not violate that party’s due process rights by holding it in contempt solely based on affidavits. 

See Thomas, Head, 95 F.3d at 1458

In re Jerry Icenhower

Attorney Fees Incurred by the Debtor in a Divorce Proceeding (simply a debt owed to the attorney) Discharged Because Former Counsel Could Not Meet its Burden (1st Circuit 2014)

Debtor, pre-petition, retained an attorney to proceed in a contentious divorce proceeding.  Counsel was paid an initial $25,000.00 retainer but billed over $60,000.00.  Due to the debt and other circumstances, the client filed bankruptcy.  Former Counsel sued the Client seeking a determination that the debt was not discharged based upon 523(A)(2)(a).  (i.e. the debt was incurred under false pretenses...perhaps a promise to pay)  Former Counsel lost at a bench trial, appealed the case to the BAP, lost and then filed an appeal the 1st Circuit.  The 1st Circuit affirmed.  The Court determined that the Counsel did not prove its case with a preponderance of the evidence.  It seemed like the Debtor was a bad apple and lacked candor but the Court stated:

The attorney argues pejoratively that the debtor

was shown to be a liar and that the debtor's "dishonest and

untrustworthy" testimony undermines the bankruptcy court's

factfinding. This argument is wide of the mark. The bankruptcy

court did not rest its decision on any illusions about the debtor's

veracity. To the contrary, the bankruptcy court found much of her

testimony to be self-serving and not deserving of credence. See

deBenedictis, 2013 WL 1342479, at *2.

Taking this lack of veracity into account, however, it

proceeded to find that the attorney's proof was not preponderant.

See id. at *7-8. We are not aware of any rule that mandates a

finding of nondischargeability against a party simply because her

testimony lacks candor. Although we do not countenance untruthful

testimony, a finding of nondischargeability requires more than a

showing that the debtor exhibited a serious character flaw. The

attorney, who had the burden of proof, made no such additional

showing here


IN RE KAREN A. BRADY-ZELL 1st Circuit 2014

A Nice Review of the FDCPA and 12(b)(6) Motions to Dismiss - Nevada 2014

Plaintiff filed a complaint alleging that the Defendant filed suit based upon a time-barred debt.  The Defendant filed a motion to dismiss alleging in part that the statute of limitations had not expired, that they were not a collection agency rather they were the owner of the debt and that the Plaintiff failed to dispute the debt within 30 days of the first communication.  The Court on a 12(b)(6) motion must determine if the factual allegations contained in the complaint together with all reasonable inferences state a plausible claim for relief. 


The Defendant's arguments may have had some validity but this was not a motion for summary judgment.  As a result, the majority of the causes of actions by the Plaintiff were sustained and only 1 cause of action was dismissed. 


The following is a brief statement by the Court on 12(b)(6) motions and an overview of the Act:




On a 12(b)(6) motion, the court must determine "whether the complaint's factual allegations, together with all reasonable inferences, state a plausible claim for relief." Cafasso, U.S. ex rel. v. Gen. Dynamics C4 Sys., 637 F.3d 1047, 1054 (9th Cir. 2011) (citing Ashcroft v. Iqbal, 556 U.S. 662, 678-79 (2009)). "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Iqbal, 556 U.S. at 678 (citing Bell Atl. Corp. v. Twombly, 550 U.S. 544, 556 (2007)).
When  [4] determining the sufficiency of a claim, "[w]e accept factual allegations in the complaint as true and construe the pleadings in the light most favorable to the non-moving party[; however, this tenet does not apply to] . . . legal conclusions . . . cast in the form of factual allegations." Fayer v. Vaughn, 649 F.3d 1061, 1064 (9th Cir. 2011) (citation and internal quotation marks omitted). "Therefore, conclusory allegations of law and unwarranted inferences are insufficient to defeat a motion to dismiss." Id. (citation and internal quotation marks omitted); see also Iqbal, 556 U.S. at 678 ("A pleading that offers 'labels and conclusions' or 'a formulaic recitation of the elements of a cause of action will not do.'" (quoting Twombly, 550 U.S. at 555)).




The FDCPA creates civil liability for "any debt collector who fails to comply with any provision [of the Act] . . . with respect to any person . . . ." 15 U.S.C. § 1692k(a). The Act defines a debt collector as "any person . . . in any business the principal purpose of which is the collection of any debts, or who regularly collects or attempts to collect . . . debts owed or due or asserted to be owed or due another." 15 U.S.C. § 1692a(6). This definition "'would include those who collect for others in the regular course of business.'" Romine v. Diversified Collection Servs., Inc., 155 F.3d 1142, 1146 (9th Cir. 1998)  [6] (quoting S. Rep. No. 95-382 (1977)). The FDCPA does not, however, apply to a "creditor," who is "any person who offers or extends credit creating a debt or to whom a debt is owed." 15 U.S.C. § 1692a(4). Notably, assignees of debt may be considered creditors only if the "'debt was not in default at the time it was assigned.'" Nool v. HomeQ Servicing, 653 F. Supp. 2d 1047, 1053 (E.D. Cal. 2009) (quoting Perry v. Stewart Title Co., 756 F.2d 1197, 1208 (5th Cir. 1985)). Thus, a person who collects a defaulted debt assigned or transferred "solely for the purpose of facilitating collection of such debt for another" is a debt collector, not a creditor. See 15 U.S.C. § 1692a(4).








Todorov v. Easy Loans Corp., 2014 U.S. Dist. LEXIS 84484
United States District Court for the District of Nevada
June 19, 2014, Decided; June 19, 2014, Filed
Case No. 2:13-cv-01264-MMD-GWF

At First Blush a Harsh Result in Failing to Advise the Court that the Debtor Passed Within 1 Month of Confirmation of a Chapter 13 - But Likely the Correct Result

A Colorado Bankruptcy Court was faced with a motion to reconsider a dismissal motion after a Chapter 13 plan was completed by payments made by the personal representative of the Debtor.  The Debtor had passed within the first month after confirmation, but no one told the Bankruptcy Court.  After the plan was completed, the Personal Representative filed a motion to waive the requirements of the financial management course.  The Court denied the motion and dismissed the case.  The Personal Representative then filed a motion to reconsider.


In the motion to reconsider, the Court analyzed the difference of Rule 1016 in a Chapter 13 case vs. a Chapter 7 case.  Rule 1016 provides in part that upon the death of a debtor the case can be dismissed or if it is in the best interest of the parties, the case may continue.  The Court focused upon the creditors as the parties vs. the personal representative who would have inherited the remaining assets of the deceased debtor.  If the case was dismissed, then the creditors would get paid more but on the other hand if the case was not dismissed then the representative would get the assets.


The Court appeared to be upset about the failure of the parties to inform the court of the death and chose to wait 3 years to then advise the Court.  The Court indicated that it would have been in a better position to analyze the situation if it was advised immediately. 


Based upon the Court's reading of the law, the Court denied the motion to reconsider.


A quick comment - this was a motion to reconsider and the Court did not seem to focus on why it should reconsider its prior order but rather analyzed the entire situation. 


In re Keith Fogel Ssn Xx 6566, 2014 Bankr. LEXIS 2734 Folder icon(Copy citation)
United States Bankruptcy Court for the District of Colorado
June 20, 2014, Decided
Case No. 10-38010 ABC Chapter 13

Supreme Court - Executive Benefits Case - Analyzed by a Ohio District Court (2014) - Granting a Motion to Withdraw the Reference

An Ohio District Court stayed a motion to withdraw the reference pending the decision by the Supreme Court in the Executive Benefits case.  The Ohio case had similar facts as to Executive Benefit in which the Trustee filed an adversary complaint to avoid a fraudulent transfer against a third party who was not a creditor....but....the third party made demand for a jury trial. 


The Ohio District Court determined that the case was a "Stern" claim and the bankruptcy court could submit proposed findings of act and conclusions of law.  The Court found that the Bankruptcy Court had jurisdiction to handle the pre-trial supervision of the case but granted the motion to withdraw the reference for permissive withdrawal under 157(d) ("for cause shown").  Although cause is not defined the court should look at  a variety of factors (1) core/non core; (2) legal/equitable claims; (3) efficient use of judicial resources and (4) effect of the ruling on uniformity in administering bankruptcy law. 


In this case, the Court noted that in any instance the Bankruptcy Court's decision would have to be reviewed de novo by the District Court; that the Defendant has exercised her right to a jury trial and that the defendant did not consent to the jurisdiction of the bankruptcy court.  Accordingly, the Court granted the motion for permissive withdrawal of the reference.


Query:  Will District Court's be forced to handle more bankruptcy related cases?

Emerson v. Order & Alan J. Treinish

United States District Court for the Northern District of Ohio, Eastern Division

June 20, 2014, Decided

CASE NO. 1:13-mc-52

A Court may decline to utilize issue preclusion based upon a prior Judgment (Bankruptcy Court - Montana - 2014)

A refresher on collateral estoppel in the 9th Circuit as it applies to dischargeability proceedings especially under 523(a)(6). The Court has discretion to decline to give issue preclusion effect to prior judgments in deference of countervailing considerations of fairness (In re Lopez, 367 B.R. 99, 108 (9th Cir. 2007)).  The Court declined to utilize such preclusion because the Plaintiff must prove willful and malicious injury.  The 9th Circuit has stated that Courts must separately analyze both the willful and malicious prongs.  As the underlying judgment did not analyze such prongs, the Court determined that a factual dispute has arisen in the adversary case and denied the motion for summary judgment.

In re Etzel

United States Bankruptcy Court for the District of Montana

June 19, 2014, Decided

Case No. 13-61353-11 Adv No. 14-00001

Taking Testimony Prior to Following Suit - FRCP 27 - This is a Rule that is not Typically Utilized - (ED of Michigan - 2014)

Rule 27 permit a party to obtain discovery through the taking of depositions and production of documents to preserve testimony and evidence for the anticipated suit....


Here is the general law:

To satisfy the court that the testimony is needed to protect against a failure or delay of justice, the great weight of authority requires the petitioner to show that there is a risk of loss of the desired testimony. Penn. Mut. Life Ins. Co. v. United States, 68 F.3d 1371, 1374-75, 314 U.S. App. D.C. 320 (D.C.Cir.1995) (indicating that Rule 27 requires a showing that there is "an immediate need to perpetuate testimony" and that "petitioner must establish danger that testimony may be lost") (citations omitted); Ash v. Cort, 512 F.2d 909, 911 (3d Cir.1975) (indicating that Rule 27 only applies "in that special category of cases

where it is necessary to prevent  [*7] testimony from being lost"); In re Hopson Marine Transportation, Inc., 168 F.R.D. 560, 1996 WL 547467 (E.D.La. 1996) ("The rule was intended to apply to situations in which testimony might be lost to a prospective litigant unless taken immediately, without having to wait for a lawsuit or other legal proceeding to commence."); In re Application of Checkosky, 142 F.R.D. 4, 6-8 (D.D.C.1992) (indicating that the "purpose of Rule 27 is simply to preserve evidence that otherwise would be in danger of being lost" and that "most courts have held that a petitioner must make a particularized showing that the testimony needs to be taken in advance of the contemplated action"). The common situation in which a Rule 27 deposition is appropriate is where there is a risk that a witness will be unavailable at the time of trial, either because of age or infirmity. Penn. Mut., 68 F.3d at 1374; In re Petition of Banks, No. 93-C-6914, 1993 U.S. Dist. LEXIS 17109, 1993 WL 502379 (N.D.Ill. Dec. 6, 1993) ("Most petitions to perpetuate testimony have been granted when a witness is aged or gravely injured an in danger [of] dying.").1996 U.S. Dist. LEXIS 15784, [WL] at *2.

PegaSync Techs., Inc. v. Patros

United States District Court for the Eastern District of Michigan, Southern Division

June 18, 2014, Decided; June 18, 2014, Filed

Case No. 14-MC-50440