BankruptcyProf Blog

Cert Petitions Filed in Debt Relief Agency Case of Milavetz

Cert Petitions in the 8th Circuit case of Milavetz, Gallop & Millavetz v. USA were filed by both the Plaintiff law firm and the USA.  Plaintiff's brief can be accessed here.  The government's brief can be accessed here.  The response briefs can be found on the Scotusblog.com.  Tom Goldstein has picked this as a case which the Supremes might grant cert.  It would sure be fun if they did.  

The 8th Circuit ruled that attorneys are debt relief agencies, that the DRA rules which seem to restrict speech are unconstitutional, and that the requirements re statements DRAs have to make in advertising are constitutional.

The Supreme Court is considering this coming week whether to grant cert on this case.      

Lynn LoPucki Research Data Base

All the data my little heart can handle on big bankruptcy cases.  Here you can compute the amount of expected fees in a big case or look up the data on 830 previous cases.  The website can be accessed here.  In Los Angeles from 1980 to 2009 there have been 21 "big cases."  Twenty of those cases (each of which is listed by name) had confirmed plans, one case - IndyMac Bank is pending.  Three cases in the San Fernando Valley during the same time, two converted and one is pending - Meruelo Maddux Properties.  What a great site.   

NY Times Article on the Process of Choosing Sonia Sotomayor

This is pretty interesting.  I wish I could look at at one of the 75 page memos. 

Review of Recent Developments by the Financial Lawyers Conference

This is the continuation of the George Triester program of years gone by. 

Financial Lawyers Conference
214 Main Street, #336, El Segundo, CA 90245 · (310) 322-1350 · Fax (310) 615-4581
FOR MORE INFORMATION: www.financiallawyers.org

This meeting is jointly sponsored by The Financial Lawyers Conference and The Los Angeles County Bar Association Commercial Law and Bankruptcy Section, Bankruptcy Committee.

FLC's annual review of recent developments in bankruptcy law including discussion of significant judicial opinions from around the country.

Thursday, June 4, 2009

Register Online
Speakers: Jeffrey H. Davidson, Stutman, Treister & Glatt, P.C.
K. John Shaffer, Stutman, Treister & Glatt, P.C.
 
Location: The Omni Hotel
251 S. Olive Street
Los Angeles, California
click here for map
 
Time: 6:00pm - 6:45 pm - Registration and Cocktails
6:45pm - 7:30 pm - Dinner
7:30pm - 8:30 pm - Program 
 
Cost: $70.00 FLC & LACBA Members
$85.00 Nonmembers
$40.00 Lawyers in Gov’t Svc. 

General Motors Bankruptcy Lawyers

From the ABA Journal today:

Lawyers Joke that GM Bankruptcy Will Deplete Experienced Bar
By Debra Cassens Weiss

A General Motors bankruptcy would require so many restructuring specialists that lawyers joke there wouldn’t be enough to go around.

GM had nearly $150 billion in revenue last year; its restructuring would be more complicated and possibly larger than that of any American corporation, including Enron, the New York Times reports. “Legal fees totaling hundreds of millions of dollars are likely during the course of the case given the high-powered and high-fee lawyers involved,” the Times says.

Hundreds of bankruptcy lawyers from nearly every major firm with restructuring teams have spent months preparing documents that would be required in a GM filing, expected before June 1.

Among the experts tapped to work on the bankruptcy are Harvey Miller of Weil, Gotshal & Manges and Martin Bienenstock of Dewey & LeBoeuf. Miller and other Weil lawyers are principal legal counsel for the bankruptcy filing, while Bienenstock could end up representing the reorganized company, the Times says.

The American Lawyer identifies other lawyers advising GM: corporate group chairman Joseph Gromacki and partner Michael Wolf of Jenner & Block in Chicago, and bankruptcy and reorganization chair Robert Weiss of Honigman Miller Schwartz and Cohn in Detroit.

Meanwhile, GM’s board is represented by Cravath, Swaine & Moore, the Times says.

Judge Bruce Markell Sanctions Attorney for Filing Second Chapter 13 When First Case was Still Pending

Brief by University of West Los Angeles student Roksana Moradi:

In re Sanford, --- B.R. ---, 2009 WL 901760 (Bkrtcy.D.Nev., Judge Markell)

Issue:  Is the attorney’s conduct here, filing a second case when the first is still pending, sanctionable conduct? 

Holding: YES

BRUCE A. MARKELL, Bankruptcy Judge.

Attorney Goldberg filed Mr. Sanford's Chapter 7 case in 2004.  The schedules indicated that the debtor had $100,023 in unsecured debts and $159,000 secured by his home worth $200,000.  The $41,000 of equity was claimed exempt.  Goldberg charged the debtor $791.  At the meeting of creditors, the trustee questioned the valuation of the home.  The debtor decided to convert the case to chapter 13.  He later filed a Motion to Convert even though the discharge had already been entered.  At the hearing, the court granted the motion but instructed Goldberg to provide in the order that the discharge was revoked.  Goldberg failed to submit an order.  Instead he filed a second case, also a chapter 13, for the debtor charging him $2,700.  The trustee on the first case eventually submitted an order converting the First Case 20 months later. 

In the Second Case, the home was listed at $460,000 but still exempt because Nevada law had changed the exemption amount in the interim from $200,000 to $350,000.  In the Second Case, no creditor filed a proof of claim probably because they had already received the notice of discharge in the First Case.  When no POCs were filed, Goldberg amended the plan to pay himself only by selling the home.  The home was then sold $415,000 and the plan completed.  

One year later Goldberg brought a motion seeking an order requiring the discharge to be entered in the Second Case.  The court orally granted the motion on October 4, 2007.  Mr. Goldberg, however, failed to submit an order regarding this motion.  About two months later, the trustee figured out what had happened.  The court then set an OSC re sanctions.  

The court focused on Goldberg's failure to submit an order after the conversion motion, given its consequences to the court and to his client; and Goldberg's filing of the Second case.  Goldberg argued that Rule 58 absolved him from the requirement of submitting an order as the ruling became effective 150 days after it was orally entered.  He obviously confused the national rule which promotes finality for purposes of appeal and the local rule which prevents a prejudicial lag between a court's oral ruling and the docketing of the order giving that ruling effect.

As to filing the Second Case, Goldberg argued that there was no rule against filing multiple chapter 13 cases for one debtor.  The court disagreed and said that not only was Goldberg's conduct objectively unreasonable but was also in bad faith.  Given the oral conversion in the First Case, there was no need to file the Second Case.  “Moreover, Mr. Goldberg took unfair advantage of creditor confusion in filing the Second Case, effectively eliminating creditor claims while increasing his overall attorney's fee.”

For four reasons, the court found that Goldberg's actions were made in bad faith.  First, Goldberg filed the Second Case, in part, to take advantage of the Nevada legislative change that increased the homestead exemption.  Second, his knowledge of the prior case is further evidence of bad faith.  This is not a situation in which an attorney was negligent in not investigating and discovering that another lawyer filed an earlier case.  Third, he charged legal fees for both cases.  Fourth, the court considered Goldberg's experience in making its determination regarding bad faith. Goldberg testified that he has filed between 15,000 to 20,000 bankruptcy cases over the last 12 years of practice.  He boldly asserted in advertisements that he could solve almost any consumer's financial problems.

The court ruled as follows for sanctions:

1. Mr. Goldberg received a public reprimand for his conduct in these cases in the form of the publication of the opinion of these cases in the West Reporter system, and in any other reporter system generally publishing bankruptcy court opinions.

2. Mr. Goldberg had to return all fees charged Mr. Sanford.

3. Mr. Goldberg was directed to submit a copy of the opinion of this case with every fee application he submits in this district for work done during the two-year period following the date of entry of this opinion.  During such period, he was also directed to deliver a copy of this opinion to each client that he files a bankruptcy petition for, once his aggregate billings for that client, for any one case or related matters, exceed $5,000.

4. For the two-year period following the date of entry of the opinion of this case, should Mr. Goldberg be served with a motion or an order to show cause that seeks, as relief, sanctions for his conduct in a case or proceeding in this court, or in any other state or federal court in Nevada, he shall deliver a copy of this opinion to the person or entity serving him with such motion or order, and shall include a copy of such opinion in any response to such motion or order that is filed with the court.

5. To the extent that Mr. Sanford still desired his discharge, Mr. Goldberg should pay all costs and expenses, including attorneys' fees, as may be necessary for Mr. Sanford to obtain his discharge.

More Real Life on Negotiating a Loan Modification

More from the Bankruptcy Roundtable list serve:

I share your pain. Client endured a series of phone calls by herself after the phone calls that I referred to in my original posts and then she and I spent yet another marathon in which we were informed that filing a bankruptcy would terminate her application for a modification under the Making Home Affordable program.  We went ahead and filed because unless she gets rid of her unsecured debt, a Making Home Affordable modification isn't going to do her any good.  What really irritates me is that unless there is an "active" bankruptcy,  Chase won't connect you to any department that actually handles bankruptcy cases.  The people who we have reached appear to have no idea what actually happens in bankruptcy. And actually, we were put on hold twice in this last round of phone calls because the person on the other end acknowledged they didn't know how Making Home Affordable would be affected by a bankruptcy. And when they came back on line it was pretty clear they hadn't spoken with anyone in a bankruptcy-related department.

Carol G. Stebbins
Attorney at Law

That's funny. I am trying to just start the loan mod/ loss mitigation process with a client who has chase. You have to send them an authorization form to a centralized fax number. Four weeks later. Ten calls later. Chase can only tell me they haven't got my fax. Can't email it. Can't mail it. For a while I was faxing it twice day. Their loss mitigation personnel are a joke.  Worst customer service ever.  And yet, while on hold numerous times, their hold voice mesage kept saying how committed they were to helping their customers

Eric Southward
Houston TX

No wonder the lenders and their lobbyists did not want cramdown - - they might have become accountable and something might have actually been done to modify debt.  Back in the 80's, when I had clients with FmHA, HUD or other government agency debt, I always told them, just go into chapter 11-12-13 or whatever because outside of BKC you will never get an answer due to this problem.  At least in BKC court, they are participation is mandatory & they coerced to the table, there are deadlines for action and some agency lawyer or outside counsel will have to speak with authority on behalf of the entity.

JAMES H. (JIM) COSSITT, ATTORNEY & COUNSELLOR AT LAW
Board Certified, Business & Consumer Bankruptcy Law, American Board of Certification

It is quite amazing about this bureaucracy.  My favorite story is at least five years old.  After making a series of phone calls, and finally getting through to someone who seemed to know who I had to speak to, she (who understood my frustration), was going to transfer me to the right party.  I asked if she could "conference call" this as I had been disconnected a couple of time and didn't want to start the process again.  She complied, and when we got the third person, I could only hear this third poorly - - - so I suggest that this third person call me back.  She responded that her facility had no telephones that could dial out.  I quickly responded that I felt really sorry for her because, if there was a fire, she couldn't call the fire department and would "fry".  The person who had set up this call just laughed and laughed.

Louis S. Robin, Esq.

Would anyone be upset if I were to publish this thread on my website or give it to clients that ask about these programs. 
 
We all know what the real answer is for the clients, the whole program is a misdirection.  There is no serious intent to help the average homeowner, but politicians and the industry felt that they needed cover for the billions they are handing themselves to correct their own excesses and make their constituents / customers feel included. It is a sham; otherwise, it would be working.  There are only two institutions that I have found to be serious about loan modifications (1) HSBC (British), and (2) American General Finance. 
 
The rest of the mortgage companies / servicers have no interest in rehabilitation.  They seem to be more interested in the properties becoming bank owned. 
 
I can think of only two reasons for this.  The first is that the banks are betting that the toxic asset purchase program will net them at tax payer expense more money than they will get at a foreclosure auction if they let others take the properties at present market values.  The second is that there is a very long game going on here and the same banks that are being floated by the government anticipate hyper inflation and these same properties are a hedge against this inflation which will produce a dizzying amount of profit later for those institutions. 
 
Done ranting.  Sorry.  I think I am just jealous that I'm not one of these guys.
 
Mark McClure

IndyMac Bank has been telling my client for six months: "We can't give you a loan modification unless your BK attorney reopens your case and files a reaffirmation of your previous loan." It's maddening. Each of us has dozens of loan mod horror stories, all ending the same way - abject failure of the entire loan mod process.

During 2008 my office kept good statistics on the number of clients who had managed to get all the way through their lender's loan mod process. We tracked 106 clients, of whom only 2 were offered any kind of modification. Both consisted of a 6-month rate reduction and tacking missed loan payments on the back end of the loan. Some modification.

As Congress was preparing to vote on cramdown legislation, I put this info in a detailed letter to my Congresswoman, Mary Bono Mack. My letter caught her eye and she personally called me the day after I faxed my letter to her office. We spoke on the phone for almost 30 minutes and she told me she was
worried about her "credit union constituents" who would suffer enormous losses under cramdown legislation. She voted against the bill.

Gary Holt

Bankruptcy Judge Rules that Conditional Promise to Repay Cost of Training by Union is Non-Dischargeable Student Loan

Brief by University of West Los Angeles Law Student, Sara Hussain.

In re Kesler, 401 B.R. 356 (Bkrtcy, S.D. Ill. 2009) 
         
Issue: Is a conditional promise to repay the cost of training by a union an “educational loan” and, therefore, exempt from discharge pursuant to Section 523(a)(8)(A).

Holding:   Yes. 

Facts:  The plaintiff, Indiana/Kentucky Regional Council of Carpenters Joint Apprenticeship and Training Committee (the "JATC"), is a multi-employer apprenticeship and training trust fund.  The debtor Michael O. Kesler was an apprentice from 1996 to 2000 in a union program.  The debtor entered into five apprenticeship loan agreements with the JATC.  In exchange for signing these agreements, the debtor received carpentry training from the JATC through both classroom teaching and field work.  The apprenticeship loan agreements provided that the debtor would have an obligation to repay the cost of his training to the JATC by repaying the loans in cash if he obtained employment in the carpentry industry with a non-signatory employer.  Obtaining such employment, however, was a breach of the agreement and triggered an acceleration clause making all amounts due and owing immediately payable.  The debtor never earned the in-kind credits because he breached the apprenticeship loan agreements by accepting employment within the carpenter's industry with a non-signatory employer.  The debtor failed to repay the funds and the JATC filed suit against him.

The debtor contends that Section 523(a)(8)(A) does not apply as the agreements between the debtor and the JATC are not educational loans within the meaning of the statute.  The JATC counters that the debt fits within the statutory definition of an educational loan made under a program funded by a non-profit institution, and that the debtor has not demonstrated undue hardship to himself or his dependents.
The Plaintiff argued that the language of Section 523(a)(8) referring to educational obligations was not limited to obligations for education received at institutions of higher education, and that the purpose of the nondischargeability provision was to preserve the solvency of student loan programs so that funds would be available for future students.  They argued that the obligation under the agreement reflected the cost of his training and was therefore an educational obligation within the scope of Section 523(a)(8).  Plaintiff argued that “loan” includes extension of credit for tuition and does not to require the delivery of a sum of money ... According to the Scholarship Loan Agreement the plaintiff extended credit ... to pay for the cost of the training program.  The debtor acknowledged the money owed and received training by agreeing to pay the specified amount.

Here, “an agreement to repay existed between the debtor and the creditor that was “prior to or simultaneous with the educational services by which the institution extend[ed] credit.”  Here, as a condition of receiving training, the debtor affirmatively signed a loan agreement which contained language that a loan existed between the debtor and the JATC.  This is an educational loan under Section 523(a)(8) and is not discharged without a showing of undue hardship. 

3rd Circuit Rules that Mother Transferred Only Bare Legal Title to Debtor Son

Brief by University of West Los Angeles law student, Roksana Moradi (now studying for the California Bar exam)

In re John S. Stewart, Jr., 2009 WL 1111540 (3rd Cir. 2009)(unpublished)

Issue:  How does a court determine when the title owner of real property holds only “bare legal title”?

Holding:  Intent of the parties.  A failed transfer in trust creates a resulting trust under Pennsylvania law and the title owner therefore holds only bare legal title.  

Circuit Judge Sloviter,

Debtor’s mother obtained title to the Property in 1951 when she purchased it jointly with her husband.  In 2002, she transferred the Property to the Debtor for one dollar (“First Deed”) in an attempt to minimize inheritance taxes on her estate.  The Bankruptcy Court found that the Debtor and his mother both understood that the First Deed was conveyed for estate planning purposes and that his mother, not the Debtor, would remain the owner of the Property until she died.  Later, Debtor’s mother realized that she had inadvertently omitted her daughter from her estate-planning effort and requested that the Debtor transfer half of his interest to his sister, which he did.  Notwithstanding these conveyances, Debtor’s mother continued to reside at the Property and pay all of the bills and taxes associated with the Property out of her own funds.

In 2005, the Debtor filed chapter 7.  In his bankruptcy filings, the Debtor listed his ownership interest in the Property as “ 1/2 Bare Legal Title of Caroline Stewart's property.”  The Trustee subsequently filed a motion to sell the Debtor's interest in the Property pursuant to 11 U.S.C. § 363(h).  The Debtor filed an adversary complaint seeking to enjoin the Trustee from selling the Property.
 
At trial the Bankruptcy Court held that, under Pennsylvania law, the Debtor’s mother’s transfer of the Property to the Debtor was subject to a resulting trust in favor of herself, who was therefore the equitable owner of the Property.  As a result, the bankruptcy estate succeeded only to bare legal title in the Property.  The Trustee appealed to the District Court, which affirmed.
 
The Court of Appeal also affirmed. 

 
A bankruptcy estate includes “all legal or equitable interests of the debtor in property as of the commencement of the case.” 11 U.S.C. § 541(a)(1).  However, “[p]roperty in which the debtor holds ... only legal title and not an equitable interest ... becomes property of the estate under [§ 541(a)(1) ] ... only to the extent of the debtor's legal title to such property, but not to the extent of any equitable interest in such property that the debtor does not hold.”  Therefore, the “bankrupt estate ... obtains no greater ownership right ... than [the debtor] ... would have ... prior to the bankruptcy filing.” Universal Bonding Ins. Co. v. Gittens & Sprinkle Enters., Inc., 960 F.2d 366, 372 (3d Cir.1992).

The court then looked to the applicable state law in Pennsylvania to determine what interests the debtor possessed.  “[A] resulting trust arises where a person makes or causes to be made a disposition of property under circumstances which raise an inference that he does not intend that the person taking or holding the property should have the beneficial interest therein.” Galford v. Burkhouse, 478 A.2d 1328, 1334 (Pa.Super.Ct.1984).

The court found Galford to be persuasive.  The Pennsylvania Superior Court there held that “[w]here an express trust fails, a resulting trust may be imposed by operation of law.”  Further, because “[t]he Statute of Frauds specifically exempts such trusts ... from its operation,” parol evidence is “admissible to show the circumstances under which [the] resulting trust arose” as long as such evidence is “clear, explicit and unequivocal.”  Also, “that the testimony of all parties ... was in agreement that [the transferor] intended to transfer only bare legal title to [the son] at the time he executed the deed,” and thus the “evidence was clearly sufficient to establish a resulting trust.”
 
 Similarly, here the Bankruptcy Court concluded that the Debtor held the Property in a resulting trust for his mother because she “intended to transfer the Property to the Debtor in trust” but “her intentions were ineffective due to the wording of the instrument [i.e., the First Deed] used to effect the transfer.”  The Bankruptcy Court found that that the First Deed “was motivated wholly by the estate planning advice [Stewart] received from friends” and that both understood that she would own the Property until she died.  Further, that she continued to live at the Property and pay all costs associated with it.  The transaction culminating in the Second Deed also supports the conclusion that she retained beneficial ownership of the Property because the Debtor executed the Second Deed on the instructions of his mother in order to further her estate planning goals, “again suggesting that both parties considered the Property to be hers to control.”

The Trustee raised three arguments;  First, the Trustee argued that the court should not look beyond the four corners of the First Deed because it unambiguously conveyed Stewart's entire interest in the Property to the Debtor by “grant[ing]” the Property to the Debtor “in Fee.”  However, as noted above, the Pennsylvania Statute of Frauds exempts resulting trusts from its strictures so that parol evidence is “admissible to show the circumstances under which a resulting trust arose.” Further, the parol evidence here is “clear, explicit and unequivocal” that Stewart did not intend to convey to the Debtor her equitable ownership in the Property.
 
The Trustee next argued that Stewart must have intended to grant the Debtor her entire interest in the Property because, if Stewart retained an equitable interest in the Property, it would have been subject to inheritance taxes upon her death, in contradiction of her avowed estate planning purposes.  The court found that at most this argument showed that Debtor’s mother, who was an unsophisticated party with a high school education and no legal training, may have failed to minimize her estate taxes through the conveyances at issue.
 
Finally, the Trustee contended that, even if the Debtor held the Property in a resulting trust in favor of Stewart, she may avoid Stewart's equitable interest in the Property pursuant to her strong-arm powers under 11 U.S.C. § 544(a)(3). However, under Pennsylvania law, Stewart's clear and open possession of the Property put the Trustee on constructive notice of Stewart's equitable interest therein, and therefore the Trustee may not avoid that interest under § 544(a)(3). 
 

So Much for the "Making Homes Affordable Program"

From: Carol G. Stebbins [mailto:cgstebbins@earthlink.net]
Sent: Monday, May 18, 2009 9:50 AM
To: 'bankruptcy_roundtable_USA@yahoogroups.com'
Subject: NACBA or any other organization organizing a statement to the White House about the failure of Making Homes Affordable as a result of lender bureaucracy?

I've spent a significant amount of time and frustration in the last month and 1/2 trying to find some actual results from the Making Homes Affordable program. The lender having the most of my clients' loans is, not unexpectedly, Chase.  Communications with Chase have been a disaster. You think you are dealing with one department, you get mailings that you assume are from that department and three weeks later you are told that the mailing was from "President Obama's Making Home Affordable" program . . . .uh, that would be Chase's office that is participating in the $75 billion and not the Pennsylvania Ave address itself, right? And maybe that part of Chase could coordinate with the other Chase departments (at this point I know about Loss Mitigation, Home Preservation, Bankruptcy, and Subprime Departments, and I'm
sure that is ony the tip of the iceberg) through that little thing called the loan number?

Client and I are now at 45 minutes on line with directions to the Chase person not to leave us on a cold transfer but to stay on the line and make a warm transfer, since I've had multiple phone calls to Chase that have created a nearly endless loop, "nearly" because eventually we get a recording that says "I'm sorry, your call cannot be processed any further".

Do you know of any organization that is making an effort to emphatically tell the White House that the $75 billion is going down the administrative expense drain and leaving borrowers more frustrated than every? Because if there is such an effort, I'd be willing to spend time on that rather than on hold with Chase and the likes.

Carol G. Stebbins
Attorney at Law
18880 New Gambier Rd
Mount Vernon, OH 43050
carol@stebbinsbankruptcylaw.com

Hey, client and I are now at 1.5 hour on the phone and we are just getting the most wonderful runaround in the world. This is two times worse than it used to be before all these programs and you all know that it was really bad back in the Day.

So -----anybody have a handle on what will happen to this poor woman if I file her?  Any chance that the bankruptcy filing would improve her odds of getting something better?

Carol G. Stebbins

National Association of Chapter 13 Trustees Annual Meeting July 1-4 in Boston

The 44th Annual NACTT Seminar, July 1-4, 2009, Marriott Boston Copley Place, Boston, MA, is open to all chapter 13 practicioners.  You can access the brochure here. 

Circuit Court of Appeals Cases from Last Week

5th Circuit Court of Appeals, May 13, 2009
Valley Educ. Found. v. Eldercare Props. Ltd., --- F.3d ---, 2009 WL --------- (5th Cir. 2009)(assumption of real property lease proper where Plaintiff failed to terminate the lease and equitable intervention under Texas law applied to render effective the Debtor's renewal)

6th Circuit Court of Appeals, May 12, 2009
Patel v. Shamrock Floorcovering Servs., Inc., --- F.3d ---, 2009 WL --------- (6th Cir. 2009)(debt found non-dischargeable where debtor was a fiduciary of the creditor and breached his duty to the creditor, and Debtor's company was a "contractor" under Michigan law)

11th Circuit Court of Appeals, May 11, 2009
Carrier Corp. v. Buckley, --- F.3d ---, 2009 WL --------- (11th Cir. 2009)(preference where: 1) the creditor could have become secured but failed to do so; and 2) Debtor did not make the payments in the ordinary course of business)
 
11th Circuit Court of Appeals, May 15, 2009
Chira v. Saal, --- F.3d ---, 2009 WL --------- (11th Cir. 2009)(settlement agreement reached in the bankruptcy proceedings did not modify the pre-bankruptcy contract of sale, and the settlement agreement was equitable)

Thanks to Findlaw.com

Program on MERS

MERS - A Mortgage Industry Standard Built on Sand
 
Speaker:  Lewis Landau, Esq.  
        
Date:        Monday, May 18 
 
Time:          12:00 Noon  Lunch and Program

Place:       SFVBA Conference Room
                      21250 Califa Street, Woodland Hills
                             Ste 113 
 
Cost:         $30 Members prepaid; $40 at the door
                      $40 Non-Members prepaid
                      $50 Non-Members at the door

Lewis Landau will be speaking to the San Fernando Valley Bar Association’s Business, Real Property and Bankruptcy Section.  The argument Lew will make is that MERS is not a proper party to bring a motion for relief from stay and also that it is possible to invalidate the deed of trust where MERS is the beneficiary.  The program has attracted some attention and I believe some attorneys attending will be there to argue to the contrary.  Given the current real estate market, given the problems that the bankruptcy judges are having with the motions for relief from stay, the proof some judges are requiring before granting relief from stay and given the potential for litigation and helping debtor clients, the topic is very timely.  If anyone would like to attend, they should contact Linda Temkin at the San Fernando Valley Bar Association office at 818.227.0494, extension 105 or email her at events@sfvba.org.  One of the San Fernando Valley judges has committed to attend the program.

Circuit Court of Appeals Cases from Last Week

1st Circuit Court of Appeals, May 06, 2009
Colonial Surety Co. v. Weizman, --- F.3d ---, 2009 WL -------- (1st Cir. 2009)(discharge of liability from defendant's earlier bankruptcy discharge did not include plaintiff's claims against defendant, as defendant failed to list plaintiff's claim and 523(a)(3) makes listing the claim a condition of discharge)

7th Circuit Court of Appeals, May 05, 2009
United Air Lines, Inc. v. Regional Airports Improvement Corp., --- F.3d ---, 2009 WL -------- (7th Cir. 2009)(In a bankruptcy action involving the repayment and calculation of a secured loan for improvements to an airline terminal, district court judgment is reversed where: 1) the court did not properly calculate the annual rental rate for airport terminal space and the the appropriate discount rate; and 2) the calculation for the rental rate was too low and the discount rate too high)

9th Circuit Court of Appeals, May 04, 2009
California Self-Insurer's Sec. Fund v. Lorber Indus. of Cal., --- F.3d ---, 2009 WL -------- (9th Cir. 2009)(workers' compensation reimbursement claim not a priority since claim not an excise tax under 11 U.S.C. section 507(a)(8)(E)(ii))
 
9th Circuit Court of Appeals, May 06, 2009
Consolidated Freightways Corp. v. Aetna, Inc., --- F.3d ---, 2009 WL -------- (9th Cir. 2009)(recovery cap under 507(a)(5) is to be treated as an aggregate cap, but individuals who did not render services within a 180-day period preceding bankruptcy are not to be counted in determining the number of employees under Section 507(a)(5))

10th Circuit Court of Appeals, May 04, 2009
Hamilton v. Wash. Mut. Bank FA, --- F.3d ---, 2009 WL -------- (10th Cir. 2009)(Trustee cannot avoid Debtors' mortgage because a purchaser is deemed to know the contents of recorded documents in the Debtors' chain of title and, armed with this knowledge, a reasonably prudent purchaser would readily discover that the bank's mortgage encumbers the Debtors' house)

thanks to Findlaw.com

Student Loans in Bankruptcy

I volunteered once to take on a student loan case, i.e., file a complaint to have a loan discharged based on undue hardship.  Since then I get two or three emails or phone calls every week from someone who wants to file bankruptcy to get rid of their student loans.  I learned quickly that the person typically believes that you just go to the judge and tell them how miserable you are and the judge says something like "poor you, debt discharged."  So I wrote up a little blurb on how it works, i.e., full blown litigation, the Brunner tests, depositions, experts, trial and appeal.  Now I send the person my little blurb and I almost never hear from them again.  I assume the reaction is that I could not know what I'm doing and they will find a lawyer who does.  I assume many are shocked to find out that the litigation could easily cost $10,000 to $20,000 and likely fail anyway, at least in part.    

The biggest hangup for me is the Brunner requirement that the debtor must have made a reasonable effort to resolve the issue without bankruptcy.  The debtor is often being beat up on the phone by collectors who are telling them that they will take x amount per month and that x amount is some ridiculous number.  Is this a reasonable effort?  The collector won't sign anything or even give his name usually.  I've never even been close to reaching a settlement with a lender.  Part of that is very often because the debtor just doesn't want to pay.  The degree they got is not leading them to riches, the repayment is a long road, and they are looking for an easy way out. 

All of this is a lead-in to a nice article on student loans posted on the National Consumer Law website.  The article is entitled "Too Small to Help" and can be accessed here.  The article re enforces that private lenders in particular will not make deals.           

Jeffrey Skilling Petition for Writ of Certiorari

Jeffrey Skilling has asked the Supreme Court to hear his appeal.  You can access the Petition for Writ of Certiorari here. 

Chrysler Bidding Procedures Approved - Sale Hearing to be May 27

The Order approving the bidding procedures is 65 pages.  You can access it here.  All of you who want to overbid have until May 20 to submit your bid.  It has to be $100 million more than the Fiat bid.   

Phoenix Coyotes File Chapter 11

U.S. Bankruptcy Court District of Arizona (Phoenix)
Bankruptcy Petition #: 2:09-bk-09488-RTBP

Assigned to: Chief Judge Redfield T. Baum PCT Sr.
Chapter 11
 
 
Lead Debtor
Dewey Ranch Hockey, LLC
State Route 69
Dewey, AZ 86327
Tax ID / EIN: 26-4761961

Debtor
Coyotes Hockey, LLC
6751 N. Sunset Blvd., #200
Glendale, AZ 85305
Tax ID / EIN: 86-0989289

represented by  THOMAS J. SALERNO
SQUIRE, SANDERS & DEMPSEY, LLP
40 N. CENTRAL, #2700
PHOENIX, AZ 85004
(602) 528-4043
Fax : (602)253-8129
Email: tsalerno@ssd.com

April FIlings in the Central District of California Hold Steady

In April, 2009, the Central District saw 8,398 total filings compared to 8,518 in March, 6,967 in February and 5,999 in January. 

Chapter 13s were 1,815 or 22% of total filings - same percentage as last month.  That is 363 new petitions per trustee.   

Chapter 11s in the first quarter totaled 91 of which 28 were individual petitions.  

This info can be found at the Bankruptcy Data Project.   

Great Analysis of Chrysler Sale by Chicago Attorney Steve Jakubowski

With three part harmony, a little orchestration and stuff like (thx to Alice's Restaurant).  Steve's blog is at www.bankruptcylitigationblog.com.   If I knew I could get in, I would go to the sale hearing if I knew when it was (not set yet).  This is absolutely a sub rosa plan of reorganization - it also violates 363(f) if it's free and clear of non-consenting secured creditors.  I can't imagine the pressure though on Judge Gonzalez to approve it.  The free world is at stake or so the motion says.