April 16, 2009
Fees In Lehman Bros Near $100 million for First Five Months
From my friend and fellow bankruptcy lawyer, Steve Fox:
The WSJ bankruptcy blog has a reference to the fee/expense applications by the attorneys and other professionals in the Lehman Bros. case. The focus is on the fees. The expenses are pretty high, including one for over $1,000,000 by Debtor’s counsel. I don’t know about you but I can’t imagine carrying that kind of expenses in house waiting for reimbursement. Here is the link. For the Milbank firm, take a look at this link. Many of the associates’ billing rates are double my rates including a couple of associates recently admitted to practice. Talk about feasting on a dead cow in the road.
Great Little Bio on Elizabeth Warren in Newsweek
You can access the article here. According to Bob Lawless, Prof. Warren is now offically the coolest person he knows. She will appear as tonight's guest on The Daily Show with Jon Stewart.
April 15, 2009
Texas Attorney Disbarred for Failure to Pay His Debts or File Bankruptcy
Brief by my law clerk, Roksana Moradi, third year student at the University of West Los Angeles School of Law
Frank P. Santulli v. Texas Board of Law Examiners, 2009 WL 961568 (Tex.App.-Austin)
Issue: Can a "longstanding lack of financial responsibility" be the basis for revoking an attorney’s license to practice law in Texas?
Appeal from a trial court’s affirmation of the Texas Board of Law Examiners’ recommendation that Santulli’s license to practice law be revoked.
In 2001 the Texas Board of Law Examiners (the “Board”) entered into an agreement with attorney Frank P. Santullli III providing for a two-year “probationary license.” Santulli had a substantial amount of personal debt and student loans but he had also entered into a debt management plan and began making payments. As part of the agreement, the Board required Santulli to make payments under the debt payment plan and in accordance with a student debt management program and provide proof of those payments periodically.
Santulli initially made payments, but in mid-2002 he had fallen behind in both the student loans and his debt payment plan. In late 2002 the Board held a hearing to determine whether Santulli’s license should be revoked due to his failure to meet the conditions set in the agreed order. The board expressed concern that Santulli could find himself “in a situation where [he would be] in so much debt and under so much pressure that there are opportunities and temptation either to short-shrift [his] clients or…convert money from your clients to take care of those debts.” Upon hearing that Santulli had experienced some changes in his work status and illness in his family, but had arranged to have his student loans deferred and was looking into retaining a bankruptcy attorney, the board extended his probationary license for another six months.
The extension contained amended provisions which required him to “make suitable arrangements for payment or discharge of all past due debts during the term of his probationary license, and detail any such arrangements with each of his periodic questionnaires.” The Board's order found that Santulli's failure to comply with the payment conditions of the agreed order would be an indication “of the character trait of a lack of trustworthiness in carrying out responsibilities" and concluded that there would then be a clear and rational connection between Santulli's "lack of trustworthiness in carrying out responsibilities . . . and the likelihood that Mr. Santulli would harm a client, obstruct the administration of justice, or violate" disciplinary rules.
In late 2003 the Board held another hearing. Santulli testified that he had not made any more payments on his debt nor filed a petition in bankruptcy. He asked the Board to give him another month to file for bankruptcy, explaining that he had recently been hired to lead a family-law section of a law firm and that he would restart making payments on his student loans at the end of December 2003. The Board refused and issued an order finding that he had violated the conditions of his probationary license. Santulli sought judicial review of the Board's order. The trial court affirmed the Board's decision.
The Texas Court of Appeals affirmed the trial court’s order. The court held that good moral character is a functional assessment of character and fitness of a prospective lawyer and the purpose of requiring present good moral character is to exclude from bar admission persons with character traits that "are likely to result in injury to future clients, in the obstruction of the administration of justice, or in a violation" of the rules of professional conduct. Further, these character traits usually involve either dishonesty or lack of trustworthiness in carrying out responsibilities.
The court stated “The supreme court has held that the ethical standards required for admission to the Texas Bar demand more than ‘an absence of convictions involving serious crimes and crimes of moral turpitude’ or the ‘mere absence of gross misbehavior.’” It said, evidence of a "longstanding lack of financial responsibility" may be, on a case-by-case basis, "substantial evidence that [an attorney] suffers from a 'persistent inability to discharge, or unreliability in carrying out, significant obligations.'" "[T]here is a 'clear and rational connection' between . . . financial irresponsibility on the one hand, and 'the likelihood that [an] applicant would injure a client,' on the other."
The 2003 hearing was held more than two years after Santulli agreed to the original order that required him to make payments under his payment plan and student loan debt-management plans. Up to this point Santulli had not made any payments or made any arrangements to pay or discharge his debts. Santulli stated he had "made arrangements" with one lawyer to obtain information about filing for bankruptcy, although this fell through. He testified that he had hired another attorney one to two months before the hearing, but had not yet drawn up a petition or filed for bankruptcy. Santulli did not bring any documentation to the hearing showing that he was in the midst of filing or even preparing to file for bankruptcy, nor did he bring a contract or other proof that he had actually hired the second attorney or that the attorney was in the process of filing for bankruptcy on Santulli's behalf. The appellate court agreed with the trial court in that there was substantial evidence to support the Board’s determination that there was a clear and rational connection between Santulli's lack of trustworthiness or reliability in carrying out responsibilities and the likelihood that he would harm a client, obstruct the administration of justice, or violate the disciplinary rules.
So I'm working on my tax extension. I'm reminded that today is also the day that Abraham Lincoln died and the day the Titanic sank. I assume the IRS knew that when they choose this day to file tax returns.
April 13, 2009
GM to File Chapter 11 on June 1?
Court of Appeals Cases from Last Week
6th Circuit Court of Appeals, April 07, 2009
Lindsay v. Covenant Mgmt. Group, LLC, --- F.3d ---, 2009 WL --------- (6th Cir. 2009)(no usury under Michigan law)
6th Circuit Court of Appeals, April 10, 2009
MBNA Am. Bank, N.A. v. Meoli, --- F.3d ---, 2009 WL --------- (6th Cir. 2009)(two "convenience checks" paid from the Debtor's bank account to offset her credit card balance before filing for bankruptcy were preferential transfers)
7th Circuit Court of Appeals, April 08, 2009
Illinois Inv. Trust No. 92- 7163 v. Am. Grading Co., --- F.3d ---, 2009 WL --------- (7th Cir. 2009)(assignment of rights to a landfill after a bankruptcy improper based on terminated lease)
April 12, 2009
Filings up in the Central District of California
In March, 2009, the Central District saw 8,518 total filings, up 22% over the 6,967 in February and 42% over the 5,999 in January. Total filings for the first quarter were 21,484, up a whopping 81% over the 11,862 filings in the first quarter of 2008.
Chapter 13s in the first quarter totaled 4,677 or 22% of total filings. The first quarter ch 13 filings exceeded the 2,833 filings in the first quarter of 2008 by 65%.
Chapter 11s in the first quarter totaled 325 or a 239% increase over the 96 filings in the first quarter of 2008. Of the 325 chapters 11s in the first quarter, 69 were individual petitions.
This info can be found at the Bankruptcy Data Project.