All posts in Case Briefs

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

By | September 3, 2015 | Case Briefs, Cases | No comments

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?

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9th Circuit Applies California Law to Contract Where Parties Agreed to Apply Georgian Law

By | September 1, 2015 | Appeals, Case Briefs, Cases | No comments

The basic facts of the case are an individual entered into an agreement with a bank located in Georgia to borrow money to purchase her home. It is not clear whether the individual even signed the contract or where the contract was signed but it ends up not mattering because the bank sued in California District Court under diversity jurisdiction. Note: in California, if a contract contains an attorney fees clause provision, both sides of the dispute get to use it. That’s not the law in Georgia. The Bank wanted to be able to enforce its attorney fee clause against litigants but to not allow other litigants to use that clause against the bank!

California law was applied to this contract in two instances.

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Landlords Are Entitled To Priority Treatment of Lease Payments Which First Come Due During the Gap Period of an Involuntary Bankruptcy

By | August 20, 2015 | Case Briefs, Chapter 11 | No comments

In a case of first impression, Judge Montali had to decide whether a landlord’s claim for payment of rent during the gap period of a personal bankruptcy is entitled to priority.

Before delving into the facts of the case, a quick primer is appropriate. The treatment of a commercial landlord’s claims in bankruptcy is too complicated and will be discussed in more depth in a future article so this “quick primer” is very limited.

When a company files for bankruptcy, the landlord in a nonresidential context is usually the most powerful player in the scene. The landlord is entitled to be paid contract rate lease payments until the Debtor decides to either reject or assume the lease. This is provided for under § 365(d)(3) which states that “The trustee shall timely perform all the obligations of the debtor … arising from and after the order for relief under any unexpired lease of nonresidential real property … until such lease is assumed or rejected, notwithstanding section 503 (b)(1) of this title….” Read more…

Not All Expenses Of A Professional May Be Compensable By The Estate, Even In The Face Of A Clear Retainer Agreement And An Approved Employment Application!

By | August 19, 2015 | Case Briefs, Cases | 2 Comments

The facts of the situation are not in dispute. The Debtor in a Chapter 11 case needed to hire a forensic accountant. The Debtor applied for permission to hire the accountant under § 327(a) of the Bankruptcy Code. The employment application did not contain any special provisions but the engagement letter contained the following clause:

In the event we are requested or authorized by Debtor or are required by government regulation, subpoena, court order, or other legal process to produce our documents or our personnel as witnesses with respect to our engagements for Debtor, Debtor will, so long as we are not a party to the proceeding in which the information is sought, reimburse us for our professional time and expenses, as well as the fees and expenses of our counsel, incurred in responding to such requests.

No objection to employment was filed and the Court entered an order approving the application. Read more…

Judge Bauer Reversed, Trustee Clawback Power Strengthened

By | July 25, 2015 | Appeals, Case Briefs, Cases | No comments

In this case, the sole shareholder, director and president of a company (all the same Individual) transferred about $8,000,000 into a secret bank account which he then used to pay personal debts. The question before the Court was whether the transfers to the bank account made the Individual, in his personal capacity, an initial transferee within the meaning of § 550.

The surprising answer (although not stated in this way) is that it depends on whether the secret bank account was opened in the name of the company or individual. In this case, the secret account was completely under the dominion and control of the Individual; the Individual’s wife was a signatory on the account and the only purpose it served was to pay personal expenses. None of that mattered. The account was opened under the company’s name. The District Court held that the Individual was not an initial transferee since the account was a company account.

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

By | July 23, 2015 | Case Briefs, Uncategorized | No comments

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. It would have been preferable to associate with some better lawyers and better firms overall, and also use proper guidance around each case, ones that are very good at this are Valiente Mott, a law firm with tons of specialties in their market.

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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CD Case Summary: Judge Maureen A. Tighe on Contempt for Violation of Discharge Injunction and Automatic Stay

By | July 21, 2015 | Case Briefs, Cases | No comments

The creditor here had three excuses. First, they did not have actual notice of the bankruptcy (so there was no willful violation of the stay); second, that the statute of limitations for violating the automatic stay had run; and third, that it was the former attorney’s fault.

A violation of the automatic stay is willful if a party knew of the automatic stay, and its actions in violation of the stay were intentional. Note, it is not the intent to violate the stay that is at issue; it is having knowledge of the bankruptcy and voluntarily doing something that violates the stay! Even worse, once a creditor has knowledge of the bankruptcy, it is deemed to have knowledge of the automatic stay!

The Court did not buy the creditor’s argument that the notice of the bk was sent to “Creditors Specialty Service” instead of “Creditors Specialty Services.” The Court did not allow the creditor to blame its attorney but suggested that if the creditor though its attorney was to blame, it could pursue that claim. The conduct of an attorney is attributable to the client. See Seacall Development v. Santa Monica Rent Control Bd., 86 Cal. App. 4th 201, 204-205 (Cal.Ct.App. 1999) (citing Carroll v. Abbott Labroatories, 32 Cal. 3d 892, 895, 898 (1982)).

Finally, the Court reiterated the concept that Congress did not establish any limitations period for damage claims under § 362(k).

Full opinion here.

Chapter 11 Debtors Are Prohibited From Paying Taxes… Without a Notice and Hearing!

By | June 19, 2015 | Appeals, Case Briefs | No comments

Before people worry too much, this is not as bad as it sounds but it is still pretty awful.

Under Bankruptcy Code section 102, “notice and hearing” is a due process safeguard: “after such notice as is appropriate in the particular circumstances, and such opportunity for a hearing as is appropriate in the particular circumstances.” In other words, there are circumstances where notice and hearing means just notice or notice and an opportunity to object. Hopefully local bankruptcy rules are modified to make these notice only requests.

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Bankruptcy Judges Might Not Be Able to Remand Removed Cases!

By | June 12, 2015 | Appeals, Case Briefs | No comments

This is a dangerous article to write but I am hoping the comments will be worth it.

So the Wellness case came out and the Supreme Court seems to have taken a pragmatic view by allowing parties to consent (implied or explicit) to the jurisdiction of bankruptcy courts. Fine. But is there more to this story?

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Lawyers Cannot Be Held Liable For Malpractice If The Bad Advice They Give Leads To A Result That Was Not Foreseeable

By | June 11, 2015 | Case Briefs, Cases, Uncategorized | 1 Comment

For those of you who do not like analysis: according the 2019 crime statistics lawyers cannot be held liable for malpractice if the bad advice they give leads to a result that was not foreseeable. In the case summary below, the client was given bad advice which led to her being prosecuted for forgery. Under the particular facts of the case, forgery was a legal impossibility, so the court found that the lawyer’s bad advice (to forge a signature) did not have a causal connection to the crime the client was charged with.

Those of us who are lawyers remember the Palsgraf case written by Cardozo. If you’re looking for an excellent disability lawyer in Raleigh NC then be sure to contact the Disability Advocates Group legal team and ask them how they can help with your disability, SSI or SSDI claim.

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