All posts in Case Briefs

Outside Reverse Veil Piercing now available for LLCs in California

This is a case brief regarding Curci Investments, LLC v. Baldwin, Cal. Ct. App. Case No. G052764 (Aug. 10, 2017), which is a case about “reverse veil piercing” which the Court found can be applied to LLCs. Corporations continue to be protected by reverse veil piercing.

Ordinarily a corporation is considered a separate legal entity, distinct from its stockholders, officers and directors, with separate and distinct liabilities and obligations.[1] The same is true of a limited liability company (LLC) and its members and managers.[2]

Read more…

In re Sundquist – $45 million in Punis Sounds About Right to Me

I hereby nominate Judge Christopher Klein for Super Judge.  This is my brief of the 109 page Memorandum.

Sundquist v. Bank of America (In re Sundquist) 566 B.R. 563, 14-02278 CN (Bkrtcy, E. D. Cal. May, 2017) Klein, J.

Issue:   Given that Bank of America violated the automatic stay, what is the proper amount of damages under section 362(k)?

Holding:   Actual damages of $1,074,000 plus $5 million of punitive damages, further punitive damages awarded of $40 million payable to two consumer organizations and five law schools.

Judge Christopher Klein

The debtors here had attempted unsuccessfully prepetition to do loan mods with Bank of America.  They finally filed chapter 13 to stop the foreclosure sale.  Notwithstanding that it had notice, the bank conducted the foreclosure sale the next day anyway.  “Bank of America committed at least six further automatic stay violations by the end of August 2010 as it bulled forward.”  This included bringing an unlawful detainer.  About the same time, a different department of the bank recognized the error and notified the foreclosure company.  But upon receiving the three day notice, the debtors panicked and immediately moved.  “Although Bank of America knew on August 20, 2010, and beyond cavil by September 7, 2010, that the foreclosure would be rescinded, it did not withdraw the unlawful detainer action or tell the Sundquists the action would be dismissed.”  Six months later, the bank finally rescinded the foreclosure sale but did not tell the debtors nor their counsel.  The debtors learned about the rescission a month or two later and asked for the keys back.  The bank gave them the keys.  When they moved back into the property, the tress were dead, appliances gone, the place was ransacked, and the HOA had assessed a $20,000 penalty for not taking care of the place.  The bank not only refused to pay for the damages but demanded that the debtors pay the mortgage for the time when it owned the property.  Read more…

Fair Use is a Defense to DMCA Takedown Notices and Could Subject Copyright Holders to Attorney Fees

The Digital Millennium Copyright Act provides a potent mechanism for copyright owners to demand that certain copyrighted materials be taken off of websites. This is because online services providers are given immunity from liability as long as they “expeditiously” remove content after receiving notification from a copyright holder that the
content is infringing.

The idea behind giving service providers immunity is rooted in the idea that if all the service provider is dong is allowing people to post content, then the content poster, and not the provider, should be liable for the copyright violation. That makes sense. Service providers like YouTube would go out of business if they were held liable for all the copyrighted videos posted on there.

Read more…

Slavery + Chapter 11

I loved reading this case.  Felt like a Grimms’ fairy tale.

Picture this — you earn a paycheck, right?  Now put yourself in a position that when you receive your paycheck, an invisible hand (no not Uncle Sam) comes and takes a big chunk of that paycheck to pay your creditors, and you cannot do anything about it!   Kind of like an involuntary wage garnishment.  This is what a bankruptcy court was faced with in a Chapter 11 case in New Jersey.

Read more…

CCP 1717 – Getting Attorneys Fees (In re Penrod, 9th Circuit)

There was a recent published Ninth Circuit opinion re: the hanging paragraph in 1325(a).   In re Marlene A. Penrod, 13-16097, Ninth Circuit (2015)(Published).

However, to me, what was more interesting was the fight over whether the auto loan lender should pay debtor’s attorneys fees (about $250,000).   Court said yes.

The contract between the debtor-borrower and the lender said ‘in the event of a default, the borrower (debtor) was to pay the lender to collect what it was owed plus attorneys fees.”

Read more…

Ninth Circuit: Ch. 20′s Keep Stripping (In re Blendheim)

Ninth Circuit cleared it up:  In a “Chapter 20,” ineligibility for a discharge in a subsequent Ch. 13 does not preclude a debtor from permanently voiding a lien.  In short, strip away.

Debtors got Ch. 7 discharged, and next day filed Ch. 13.  Debtors home was encumbered by 2 liens.  The first lienholder, a Bank, filed a claim and it is their lien that is at issue on this appeal.

Debtors objected to the Bank’s POC arguing that it failed to attach the promissory note as required by FRBP 3001 (Bank only attached the deed of trust).  The Bank simply ignored the objection.   Court entered a default order disallowing their claim.  Next, Debtors filed an adversary to void Bank’s first lien since their claim was no longer an allowed secured claim.  Court agreed and said the lien would be void upon completion of their chapter 13 bankruptcy.

Debtor’s reached plan confirmation, and the Bank woke up…..

Read more…

Trust Beneficiary Has Limited Standing To Object in Chapter 11 says Ninth Circuit (IN THE MATTER OF: TOWER PARK PROPERTIES, LLC)

This Opinion interested me because a few weeks earlier I read about this infamous Beverly Hills property battle in the Hollywood Reporter.

For those interested in the juicy Hollywood fight about the property mentioned in this Opinion, see here:

For those interested in the Ninth Circuit Opinion, please see my brief below.

In re: Tower Park Properties LLC, Ninth Circuit. 

To have standing in federal court – you must satisfy three requirements:  (1) statutory standing (i.e. one afforded under the Bankruptcy Code), (2) constitutional standing under Article III, and (3) prudential standing.  In re Thorpe Insulation Co., 677 F.3d 869, 883–84 (9th Cir. 2012).

In this case, a Trust Beneficiary was objecting to the settlement agreement between the debtor, the Trust (as a creditor) and former trustees.   The Ninth Circuit held that the Trust Beneficiary did not have statutory standing under §1109(b), and as such, the Court did not even consider the two other standing requirements.

As a rule, to have standing to be heard in Chapter 11 proceedings, you must be a “party in interest,” which includes, but not exclusive of, the debtor, trustee, creditors (or committee), equity security holder (or its committee), indenture trustee.  Section 1109(b).    The word “party in interest” is not defined.

Ninth Circuit has said that a “party in interest” is one who has a “legally protected interest that could be affected by a bankruptcy proceeding.”  In re Thorpe.   But, an entity “that may suffer collateral damage” but does not have a legally protected interest does not have standing under § 1109(b).  Id.

Read more…

Thursday, September 24, 2015 – OCBA – Exemptions Case Law and Statutory Update


September Meeting

Exemptions Case Law and Statutory Update
 Learn about 2014-2015 developments regarding exemptions including recent case law imposing the burden of proof on the Debtor and allowed surcharges after Law v. Siegel;
 Discover best practices for maximizing exemptions without risking denial of discharge; and
 The panelists will also discuss proposed Senate Bill 308 increasing the homestead exemption to $300,000 across the board and eliminating the requirement to reinvest exemption proceeds.

D. Edward Hays, Esq., Partner, Marshack Hays LLP
Jeffrey I. Golden, Esq., Partner, Lobel Weiland Golden Friedman LLP Read more…

Pop Quiz! How Long After Entry Of Order Confirming A Plan Can The Order Be Revoked? Hint: It’s Not What You Thought!

If an order confirming a Plan of Reorganization is procured by fraud, how many days from entry of order does one have to ask the court to revoke the order?

The answer depends on which chapter of the Bankruptcy Code we’re talking about! In a Chapter 12 or Chapter 13 case, one would have up to the 180th day after the date the order was entered to seek revocation of the discharge. In a Chapter 11 case, one would have up to the 179th day after the date the order was entered to seek revocation. That is a pretty tough lesson to learn the hard way.

Read more…

Sometimes Complete Disclosure, Disinterestedness and an Approved Employment Application are Not Good Enough!

On August 24, 2015, Judge Lee, a Bankruptcy Judge in the Eastern District of California, disqualified the Estate’s general bankruptcy counsel even though counsel was properly employed under § 327(a). The Court found that counsel was a disinterested person within the meaning of the code and did not hold or represent an interest adverse to the estate. This is a wild (but proper) result because under California law, a client’s waiver or consent can cure these types of deficiencies and under Bankruptcy law, those defects cannot be cured!

So how is it that under Bankruptcy law, counsel was properly employed but had to be disqualified under California law?

Read more…