Filing 8 Bankruptcy Petitions = 5 year bar in refiling - 9th Cir. 8-13-13

The Ninth Circuit affirmed the Bankruptcy Court in barring a debtor for 5 years after filing 8 Chapter 13 petitions with 4 of them between 2008-2010 and unable to confirm any of them.

The Debtor argued the Court erred because it acted sua sponte in dismissing case with prejudice.  The 9th Cir. in citing to section 105(a) authorized the Court to sua sponte taking any action to prevent an abuse of the system and chose to apparently ignore the requirements in 1307(c). 

This was an unpublished decision.  Under In re Walls 276 F.2d. 502 (9th Cir. 2002), the 9th Cir. held that section 105(a) authorizes only such remedies as are necessary or appropriate to carry out the provisions of this tile.  As such, why 1307(c) was ignored is the unknown!?!  Perhaps the factual basis was so extreme that it warranted the use of 105(a)?  Once again, an unpublished decision. 

In re Berenice Carol Glover 8-13-13

August 22-24, 2013 - Southwest Bankruptcy Conference- AB - #SWBC13

If your signed up, I will see you there!  It should be a great convention with the ABI and a great location!!!

Here is a link for the convention if you desire to sign up now:

Southwest BK Conference - Lake Tahoe

The Refusal to Confirm a Reorganization Plan Create a Final Appealable Order? No - 6th Cir.

"Jurisdiction takes absolute priority over all merits questions in a case".  The parties to a Sixth  Circuit Appeal were hoping that the Court would determine if the absolute priority rule remains in full force for individual Chapter 11 cases.  However, the Court determined a different priority...jurisdiction. 

The Court joined the Ninth Circuit and three other circuits in determining that a party may appeal under 158(d)(1) because there is final decision confirming the plan or under 158(d)(2) because the court or parties successfully seek certification of a decision refusing to confirm a plan.

As this was not done, the Sixth Circuit determined that it did not have jurisdiction to hear the appeal.

In re Lindsey - 6th Circuit - 8-13-13

8-7-13 - Post-Petition Jail Time on Pre-Petition Civil Contempt = $30,000 punitive award

Commonwealth Financial Services obtained a pre-petition judgment against the Debtor.  The Debtor failed to answer and a default judgment was entered.  After obtaining a judgment CFS failed to answer interrogatories in aid of execution which resulted in CFS applying for and obtaining a bench warrant.  Such acts occurred 4 years prior to the bankruptcy.  Post-Bankruptcy, the Debtor was arrested on the bench warrant.  At issue was whether the bench warrant constituted a violation of the stay and a violation of the discharge injunction.  The Court found in the affirmative and sanctioned CFS $2,500 for violation of the discharge injunction, $1,740.00 in loss income, emotional distress of $10,000.00 and $30,000.00 for punitive damages. 

Despite such award, the Court stated ...

I am less than confident that my decision today will change CFS' course of conduct. I sincerely hope that its management will chart a new course and implement procedures which comply with the requirements of the Bankruptcy Code. It is also my earnest hope that this decision will deter other creditors from engaging in any similar course of conduct.

 

 

I should note that there is no discussion on whether CFS was represented by counsel in the State Court Litigation and if such counsel withdrew.  It seems like a small leap to hold the attorney liable if the attorney had notice of the bankruptcy and did nothing.  Accordingly, you should be aware of bankruptcy filings and any unique civil remedies that you may have. 

Iskric v. Commonwealth (2013 WL 4011126 (BANKR M.D. Pa) 8-7-13

5th Circuit upholds claim against Chapter 7 Trustee bond for her gross negligence - Ouch!

As a an attorney and Chapter 7 Trustee I hate to see claims of malpractice and/or breaches of fiduciary duty.  However, we all know that they occur but it is only on occasion do we see an actual case that discusses the issue.  On August 6, 2013, the 5th Circuit did just that and examined the liability of a the trustee's surety bond for a Trustee's gross negligence.  I will let all of you form your own opinion on whether this Trustee committed gross negligence but based upon the facts stated in the opinion I am not totally convinced.   

In re Schooler, 8-6-13 (5th Cir)

Bankruptcy - Criminal Case - Client Intake Form Protected? - US. v. Leonard-Allen and Walter Stern III - Seventh Circuit

The Seventh Circuit was faced with several interesting evidentiary rulings pertaining to an alleged conspiracy between an attorney (Attorney Number 1), who became romantically involved after an employment discrimination lawsuit settled, and his Client. 

Factually, the Client was going through a divorce and was to obtain funds from a marital settlement.  The Client met with Attorney Number 2 and filled out an intake form in which she indicated she was referred to Attorney Number 2 by Attorney Number 1.  Prior to the marital settlement being paid, the Client filed for bankruptcy with Attorney Number 2.  The Client failed to disclose the martial settlement in her bankruptcy petition and schedules.  When she received the marital settlement funds, she cashed the check, gave the funds to Attorney Number 1 who opened several certificate of deposits.

When the ex-husband found out about his wife's (the Client) bankruptcy he reported the undisclosed asset to the Trustee.  The Trustee reopened the case and the Client's discharge was revoked and referred for criminal investigation.  The Client pleaded guilty to two counts of making a false declaration in a bankruptcy proceeding.  After doing so, the grand jury was convened to investigate Attorney Number 1.  During the grand jury testimony, the Client testified that Attorney Number 1 did NOT refer her to Attorney Number 2.  She was then charged with making a false statement to the grand jury ....because the Client intake form which she filled out stated she was referred by Attorney Number 1.

During the trial, the Client objected to the Client intake form being admitted into evidence.  However, it was admitted and she was convicted.  An appeal was taken and the Seventh Circuit analyzed that Circuit's test to determine if it was covered by the privilege.  The privilege covers "only those communications which reflect the lawyer's thinking or are made for the purpose of eliciting the lawyer's professional advice or other legal assistance."  As the intake form pertaining to the referral did neither of these, the Court found it was properly admitted.

Conversely, Attorney Number 1's conviction was overturned based upon hearsay testimony.  The Court, in dicta, also examined what the District Court should focus upon on whether the intake form was admissible under the co-conspirator exception along with a discussion on relevant evidence.

In light of the typical Bankruptcy "civil" cases, this criminal case brought back the underlying evidentiary issues which we as bankruptcy practitioners should always keep in our mind when we file motions and handle evidentiary hearings and/or trials.

US v Leonard-Allen and Walter Stern III

Nothing about Bankruptcy - But what a Class Act by the Cleveland Browns in Helping a 5 Year Old Cancer Survivor!!

A five year old cancer survivor...scored a touchdown with the assistance of the Cleveland Browns.  In this day and age of sports stars...congrats to the five year old Ryan Encinas (and his doctors along with his family)...



5 Year Old Cancer Survivor Touchdown!