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Prison Love Story + Bankruptcy — “Pay My Debt and I Promise To Love You Forever”

I came across a memorandum re: decision by one of my favorite judges, Peter Carroll, about a prison love story involving bankruptcy.  There should be a Lifetime channel movie made about this.  Debtor, a married prison correctional officer became romantically involved with an intern.  They moved in together and debtor continually told her he loved her and wrote love letters saying they would be together happily ever after.  She believed him and used $130,000 of her savings to pay his old debts.  The relationship soured and she sued him for fraud alleging he lied to her to induce her to use her funds to pay for his old debts.  Naturally, he files for bankruptcy and she commences an adversary proceeding to except that debt from discharge under 523(a)(2).

Judge Carroll, after hearing testimony and reviewing the love letters, wrote this riveting opinion.

Difference Between “False Pretense” and “False Representation” under 523(a)(2)

Section 523(a)(2)(A) excepts from discharge any debt for money obtained by false pretense, a false representation or actual fraud.   But how can you tell the difference?

False representation is an express representation.  “There are no leaks in the roof of my house.” 

False pretense is an implied representation or conduct intended to create a false impression.  “Whenever it rains, it is dry as a bone in this house.”

 

Let’s go to SCOTUS — Can a Trademark Licensee keep using the mark after the Licensor files bk?

A good article I pasted below by David Kluft on an important Circuit Split headed to SCOTUS.   Can a Trademark Licensee keep using the mark after the Licensor files bk?  7th Circuit says yes but 1st Circuit says no.  Not that it has weight but I agree with 7th Circuit’s analysis.

All you trademark lawyers better sit down, because this may come as a shock: You are not “intellectual property” lawyers . . . at least not according to Section 11 U.S.C. § 101(35A) of the Bankruptcy Code, which intentionally omits trademarks from the definition of “intellectual property.”

Owing in part to this omission, there is an ongoing circuit split as to the rights of a trademark licensee when a licensor declares bankruptcy. Can the licensee keep using the licensed mark even if the debtor-in-possession of the bankrupt estate rejects the license? The Seventh Circuit says yes. The First Circuit says no.

But this split could be resolved soon. Last week, a petition for writ of certiorari to the Supreme Court was filed in Mission Products Holdings, Inc. v. Tempnology, LLC.

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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!
www.lataxi.com
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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