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Adequate Protection and Takings Issue?

Ever thought about “adequate protection” as being a 5th Amendment Takings Violation?

I never thought about it like this, but the bankruptcy concept of “adequate protection” presents an inherent constitutional 5th amendment takings issue!  Doesn’t it?  Think — a creditor who has a lien has both (a) right to payment [contract right] and (b) an interest in property of the debtor securing that right to payment [property right].   We all know that the Fifth Amendment protects this interest in property such that a persons interest in property cannot be deprived without due process or just compensation.

So my nerdy bankruptcy friends — isn’t Congress’s exercise of its bankruptcy powers under Article I subject to the Fifth Amendment?  In dealing with whether or not a creditor’s interest is “adequately protected” is Congress not prospectively regulating your property rights?   The answer after the jump….

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Can you file a time-barred proof of claim? Absolutely! said SCOTUS today.

Justice Breyer held that a debt collector can file a stale claim that is obviously barred by the statute of limitations and by doing so he/she does not violate the FDCPA because filing the stale claim is not a “false, deceptive, misleading, unconscionable, or unfair conduct.”  The dissent, led by Justice Sotomayor, said this will lead to more bottom-feeding (my words) professional debt collectors who “do not file these claims in good faith rather they file them hoping and expecting the bankruptcy system will fail” and nobody will notice.

The case is Midland Funding and can be found here.

Client’s been defrauded in sale of property — what date do you choose to determine the value of the property in calculating damages? Contract Date, Date of Close of Escrow, Trial Date?

In an unpublished BAP opinion (but citing published authority), the panel held that in order to determine the proper value of the damages re: the property that you were defrauded of — the court must use a date close to the contract date or date when escrow closed but not a date much later (i.e. trial date that was 7 years later or even date of confirmation).

In Joseph Zenovic (click here), the BAP found the proper date for valuing certain real property for the purpose of calculating damages claim is a date closer to the transaction date/close of escrow and not “as of the trial date” which in this case was about 6 years later.  The panel said that the danger of using an unduly late valuation date is that it might subject the defendant to liability for losses that the defendant did not cause.

As a side note, the panel found the proper prejudgment interest to apply is California’s 7.0% and not the fairly low, less than 1% federal rate.

Neat case.

Word: Obstreperous

I was reading Justice Scalia’s Timbers case re: adequate protection and relief from stay.  In the opinion, Justice Scalia strongly disagreed with the Bank’s continual misinterpretation of 362(d)(2).  He writes…..

“[The Bank] offers no reason why Congress would want to provide relief for such an obstreperous and thoroughly unharmed creditor.” 

Obstreperous means noisy and difficult to control.

With one word, he calls the Bank a tantrum-throwing four year old.  I’ll be sure to use this word in my future oppositions.

Duty of Loyalty Nicely Explained

Reading an unpublished BAP opinion, the panel reminds me not only of my duty of loyalty, but that this duty continues even after I am done representing my client because an attorney may not do anything which will injuriously affect a former client.   Oasis W. Realty, LLC v. Goldman, 51 Cal. 4th 811, 821 (2011).

The best part was reading California Supreme Court’s recitation of the duty of loyalty over 80 years ago:

One of the principal obligations which binds an attorney is that of fidelity, the maintaining inviolate the confidence reposed in him by those who employ him, and at every peril to himself to preserve the secrets of his client.   This obligation is a very high and stringent one.   It is also an attorney’s duty to protect his client in every possible way, and it is a violation of that duty to assume a position adverse or antagonistic to his client without the latter’s free and intelligent consent given after full knowledge of all the facts and circumstances.   By virtue of this rule an attorney is precluded from assuming any relation which would prevent him from devoting his entire energies to his client’s interests.   Nor does it matter that the intention and motives of the attorney are honest.   The rule is designed not alone to prevent the dishonest practitioner from fraudulent conduct, but as well to preclude the honest practitioner from putting himself in a position where he may be required to choose between conflicting duties, or be led to attempt to reconcile conflicting interests, rather than to enforce to their full extent the rights of the interest which he should alone represent.

Anderson v. Eaton, 211 Cal. 113, 116 (1930).

Most Commercial Speech is Not Activity Protected by California’s Anti-SLAPP Statute.

On August 20, 2015, the Los Angeles Division District Court was presented with the issue of whether false advertising on the internet was subject to anti-SLAPP protection. The case is In L.A. Taxi Cooperative, Inc. v. The Independent Taxi Owners Association of Los Angeles and a copy can be found here.

Apparently rival cab companies are purchasing pay per click advertisements on leading search engines which purport to be the rival company but really redirect customers to their own websites and numbers. An example is:

Kia Tehrany, director of operations for Yellow Cab, stated that he conducted a search using the terms “‘Yellow Cab Los Angeles.’” The results included the following:

Yellow Cab Los Angeles – Call 800-521-8294 or Book Online!
Our Cabs get you there Fast & Safe.

Tehrany stated that neither the listed telephone number nor the website was owned or controlled by Yellow Cab. Instead, the website contained information related solely to taxi services provided by ITOA.

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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.

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A Surprising Twist on the Parol Evidence Rule!

The following is borrowed from Judge Carroll’s recent August 27, 2015 unpublished opinion on a claims objection which can be found here.

In law school, we learned that if a written instrument is valid, complete and unambiguous, extrinsic evidence is not admissible to vary, add to, or contradict the terms of the instrument. This is called the parol evidence rule. The exception to this rule is if there is an allegation of fraud, accident or mistake.

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Can I Sue My Attorney For Failing To Object To A Bogus Lien?

We all know the general statute of limitations for suing attorneys is within after one year of discovering the facts constituting the wrongful act or within one year of when the client should have discovered the facts constituting the wrongful act through the use of reasonable diligence but never more than four years from the date of the wrongful act or omission. See Code Civ. Proc. § 437c.

The limitations period is tolled if, among other reasons, the plaintiff has not sustained an actual injury or if the attorney continues to represent the plaintiff regarding the specific subject matter in which the alleged wrongful act or omission occurred. See Code Civ. Proc. § 340.6.

In the scenario discussed today, the attorney forgets the deadline to file an objection to a bogus lien. Because of the missed deadline, the client hires a different firm and ultimately agrees to accept $1.6 million less than it would otherwise have received.

The problem is even though the client knew his former attorney missed the deadline to object to the bogus lien, he waited over a year, until after the $1.6 million hit, to file a malpractice action. So is the malpractice action timely since the client had not sustained an actual injury?

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There Is No Limit to the Number of Times a Chapter 11 Debtor Can Receive a Discharge within a Certain Time Frame!

I have spoken with quite a few practitioners and surprisingly, all of them have said the same thing: an individual Debtor in Chapter 11 Bankruptcy can only receive a discharge once every 8 years.

Then a good friend of mine and told me about his magic bullet: he would vacate the prior discharge to make his clients eligible for the Chapter 11 discharge. It is quite brilliant actually but it turns out not to be necessary.

First, let’s discuss the code section which seems to have caused all the confusion:

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