All posts in Courts

The purpose of this letter … is to provide notice of a current crisis [In the Eastern District]

Since not all of us are members of the Eastern District, I wanted to share a letter signed by all nine sitting district court judges in the Eastern District. I have attached a copy to this blog. Judgeship+Letter+June+2018

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“Notice” per Rule 2002 versus “Service” per Rule 7004

Some practitioners give “notice” of their contested motion on a corporation when they have to “serve” it.  What’s the difference?  Let’s take a look….

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Is Fraud under California Law the Same as Fraud under 523(a)(2)? Yes says Judge Maureen Tighe.

In Moussighi v. Talasazan (In re Talasazan), 1:16-ap-01119-MT (Bkrcy June 2018, C.A. Cal Tighe J.), Judge Tighe said,

Fraud under California law and § 523(a)(2)(A) are identical for purposes of collateral estoppel. In re Younie, 211 B.R. 367, 373 (B.A.P. 9th Cir. 1997), aff’d, 163 F.3d 609 (9th Cir. 1998); In re Jung Sup Lee, 335 B.R. 130, 136 (B.A.P. 9th Cir. 2005).

This came up in an argument I had with someone recently re res judicata.  I stated that a state court judgment that says ONLY “Plaintiff wins $1 million based on the fraud of defendant,” is res judicata in bankruptcy court whether entered by default or not.   I was told I was mistaken in no uncertain terms because fraud under California law is not the same as fraud under 523(a)(2).  Wrong!

By the way, the judgment example above IS res judicata as to the amount owed in any event – at least for claims purposes.  The typical state court judgment says “Plaintiff wins $1 million” (nothing else).  Collateral estoppel in that case as to fraud still MIGHT apply depending on whether it was actually litigated etc.  Underlying documents, rulings etc are needed.  But the judgment ITSELF is res judicata as to how much defendant/debtor owes the creditor.  That statement does NOT mean that if there was fraud, the damages for fraud are $1 million.  But it does mean debtor owes creditor $1 million (which is discharged unless 523(a) applies).

The Talasazan matter has an interesting twist.  The debtor moved for summary judgment on the grounds that fraud was litigated in state court and the ruling was in the debtor’s favor and therefore could not be relitigated.  The problem is that the state court judge did not say that.   Judge Tighe wrote:

“[W]hile fraud was pled, argued, and briefed after trial, the Third Amended Judgment does not include fraud in the list of causes of action on which Plaintiffs prevailed.

It appears that the Superior Court ruled in Plaintiffs’ favor on the negligent misrepresentation cause of action rather than fraud.

For purposes of collateral estoppel, as detailed below, the Superior Court’s silence with respect to the fraud action, in the context of undisputed evidence from both sides that the issue was fully litigated, was a ruling in favor of the Debtor and not the Plaintiffs.”

Public Counsel Reaffirmation Clinic – June 28, 2018

Email from Christian Cooper,

Did you know that bankruptcy filers with auto loans can not only keep their cars, but may be able to lower their payments substantially? Learn how at Public Counsel’s “Reaffirmation and Redemption in Chapter 7 Bankruptcy” MCLE program next Thursday in Downtown L.A. There is no cost to attend, and lunch is provided.

More info: surveymonkey.com/r/reaffmcle

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Judge Zurzolo Brown Bag on May 14, 2018

Judge Vincent Zurzolo will host a Brown Bag discussion on Monday May 14th at 12:15 p.m. in his courtroom at the Los Angeles Division.

The specific topic is his new procedure to advance the hearing date on confirmation of a chapter 13 plan for chapter 13 cases over which he presides.

In addition, attendees can ask questions about chapter 13 procedures or other general court matters. Please see the flyer and 4 exhibits that will be discussed by clicking the link below.

To view this announcement and the exhibits please click here.

Incredible! 1874 Supreme Court Tongue Lashing

Another memorable class with Prof. MJH when my jaw dropped upon reading Justice Miller’s opinion in a famous 1874 Supreme Court case about the balance between the purpose of the bankruptcy process versus what really goes on…….

Justice Miller writes….

“It is obviously one of the purposes of the Bankrupt law, that there should be a speedy disposition of the bankrupt’s assets.  This is only second in importance to securing equality of distribution……it is a wise policy, and if those who administer the law could be induced to act upon [the Codes] spirit, would do much to make the statute more acceptable than it is……….But instead of this, the inferior courts are filled with suits by or against [trustees], each of whom as soon as appointed retains an attorney, if property enough comes to his hands to pay one, and then instead of speedy sales, reasonable compromises, and efforts to adjust differences, the estate is wasted in profitless litigation, and the fee of the officers who execute the law.”  

I wish I could sarcastically ask Justice Miller — but how do you really feel?   This was in 1874…I gaze into the sky and wonder what he would think if he were to see the “suits” filed today (i.e. 547/548).  Smirk

RIP Hon. Stephen Reinhardt, Ninth Circuit Court of Appeals

Image result for stephen reinhardtThe “liberal lion” has passed.  He will be missed.  The LA Times article is here.

Favorite Quote By Late Justice Scalia’s Dewsnup Dissent

In a quick parenthetical Justice Scalia says “bankruptcy law has little to do with natural justice.”  I then reconcile this with Prof. MJH’s golden rule # 1 “bankruptcy really doesn’t do anything.”

Philosophical Friday thoughts.

Debtor’s Inherited IRA Not protected

Your client tells you “yes, I also have an IRA retirement account.”   Don’t stop there — ask them “is this your IRA that you created or you inherited from another person (i.e. spouse or parent)?”   If the latter — then be careful!  Inherited IRA’s can be taken by the trustee.  Why?  Because Justice Sotomayor, on behalf of the entire bench, said so in Clark v. Rameker (2014). Read more…

Supreme Court to Hear Consumer Bankruptcy Issue on Dischargeability 523(a)(2) – What is a “Statement of Financial Condition”?

On Jan. 12 the Supreme Court granted certiorari and will review Lamar, Archer & Cofrin LLP v. Appling, 16-1215 (Sup. Ct.), to resolve a split of circuits and decide whether a false oral statement about one asset is a statement of “financial condition” that must be in writing to result in denial of discharge of a debt under Section 523(a)(2).  The briefs are here.    It has not been set for oral argument.

The 11th Circuit has a nice summary of the issue in the first paragraph.

This appeal presents a question that has divided the federal courts: Can a statement about a single asset be a “statement respecting the debtor’s . . . financial condition”? 11 U.S.C. § 523(a)(2).  Ordinarily, a debtor cannot discharge any debt incurred by fraud, id. § 523(a)(2)(A), but a debtor can discharge a debt incurred by a false statement respecting his financial condition unless that statement is in writing, id. § 523(a)(2)(B).

Below is my brief on the issue resolved by the 9th Cir BAP.  Read more…