All posts in Cases

Annual Report 2015 for the Central District of California

This report is really nice.  You can get it here.  Congratulations to Kathy Campbell and her gang.

Big Win in the Ninth Circuit for Public Law Center

Hello All,

I wanted to share with you that just yesterday, the Ninth Circuit Court of Appeals overturned the Bankruptcy Appellate Panel and held that a debt owed by a parent to the Orange County Probation Department as the result of the involuntary incarceration of the parent’s minor child is not in the nature of support, and therefore is a dischargeable debt.

The BAP had previously held that the debt was “in the nature of support” and therefore was a Domestic Support Obligation that was nondischargeable under 101(14A) and 523(a)(5). The Ninth Circuit reversed, saying, amont other things, that BAPCPA changed who could be creditors, not what type of debts were covered by 523(a)(5), and this debt does not fit within the state’s family support infrastructure. This is an incredible win for our client, but also a win for other debtors in Orange County who were being pursued by Probation for similar debts.

Read more…

Kozinski “fed up with verbose lawyers and their bloated briefs”

Nice article about Judge Alex Kozinski.  9th Circuit Appellate opening briefs are limited to 14,000 words.  I can’t imagine preparing a brief that is longer than that, and filing it the day it’s due along with a motion for permission to exceed the limits.  Apparently it happens a lot.  This is a nice little article in the LA Times today.  Kozinski says he won’t read the additional 14 pages.

Appealing to the BAP v District Court

I am told that bankruptcy appeals have been going 56% to the district court and 46% to the BAP.  Judge Jury thinks that one reason for that might be that the BAP is perceived to be more casual about granting extensions of time to file briefs than the district court.  I doubt that myself.  She also commented to me that district court rulings are appealed to the 9th Circuit more than BAP rulings.

My own guess re why the district court is higher is that non-bankruptcy lawyers think that the BAP will “hometown” them or “rubber-stamp” the ruling of their buddy.  But I have also heard people say that district court judges rubber-stamp the bankruptcy court since they don’t know anything about bankruptcy anyway.  Both of those views are silly.  I suppose that there is the lazy judge here or there that rubber-stamps stuff but my perception is that judges try to get it right.

Judge Laura Taylor made a great comment at a program I attended – that if the party is pretty sure that the case is going to go to the 9th Circuit no matter what, the appeal should go to the BAP.  She said, rightly so, that the BAP will understand the issue a little better and will “set it up” for the 9th Circuit.  ”We will see where this is going and try to explain that to the 9th Circuit for the parties.” Good point.

Is “Allowance” of a Claim Binding in the Next Case? Bankruptcy or Otherwise?

I came back from Montana with a treasure trove of tidbits, some of which will save my postier in the future.  I was bragging to Judge Jury about an appeal I am working on before the BAP (which she will never be involved in because it is the Central District).  But I told her that it is a chapter 13 case and the case may be dismissed so the issue will be moot.  She asked if it was a claims objection issue.  Yes.  Well then, she said, the creditor (us) will not be able to renew the issue if there is a subsequent filing, in bankruptcy court, or otherwise.  The next day she handed me a note with the case that says this.  Is this a great judge or what? Read more…

Ozenne to be Heard by the 9th Circuit en banc

Ozenne is the 9th Circuit case that announced that the BAP is not “a court established by Act of Congress,” and therefore cannot issue a writ of mandamus.  The opinion is here.  There is a pretty interesting discussion about “what is a court established by Act of Congress”?  The BAP said “that’s us” and then denied the writ.  The 9th Circuit panel (two of the three) said the BAP had no jurisdiction and therefore must dismiss the petition for the writ.   Read more…

Last Add – Sunnyslope Goof Up

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…

Great Definition of Clear and Convincing

This is in a footnote in the BAP opinion in Emmert v. Taggart (In re Taggart), 548 B.R. 275 (9th Cir. BAP April 2016)(Jury J.) 

“The clear and convincing evidence standard requires the moving party to ‘place in the ultimate factfinder an abiding conviction that the truth of its factual contentions are ‘highly probable.’ Colorado v. New Mexico, 467 U.S. 310, 316 (1984).  Factual contentions are highly probable if the evidence offered in support of them ‘instantly tilt[s] the evidentiary scales in the affirmative when weighed against the evidence [the non-moving party] offered in opposition.”


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.

James T. King Bankruptcy Inn of Court

 November 18, 2014

Involuntary Bankruptcy Petition Trial

Presented by Teams 2 & 6 Read more…