November 18, 2009
Financial Lawyers Conference Program with Ken Klee - December 10, 2009
(If it says Ken Klee, It's worth posting and is highly recommended)
Financial Lawyers Conference
FOR MORE INFORMATION: www.financiallawyers.org
"Current Topics in Bankruptcy Litigation: Five Causes of Action, A Theory of Damages, and a Defense"
Thursday, December 10, 2009
Ken and Matt will discuss at least five cutting-edge issues in bankruptcy litigation: equitable subordination, recharacterization, breach of fiduciary duty, aiding and abetting breach of fiduciary duty, and deepening insolvency (including deepening insolvency as a measure of damages and the defense of in pari delicto).
Speakers: Kenneth N. Klee, Klee, Tuchin, Bogdanoff & Stern LLP
Matthew Heyn, Klee, Tuchin, Bogdanoff & Stern LLP
Location: The Olympic Collection
11301 W. Olympic Boulevard
Los Angeles, California
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 Members
$40.00 Lawyers in Gov’t Svc.
November 16, 2009
9th Circuit BAP Adds to Debate on Above-Median Chapter 13 Plans, How to Compute Projected Disposable Income
American Express Bank v. Smith (In re Smith), ---- B.R. ----, 2009 WL -------- (9th Cir. BAP Oct, 2009)
Issue: When computing the chapter 13 plan payment, can an above-median chapter 13 debtor deduct payments to secured creditors for property they intend to abandon?
Trial Judge: Paul Snyder, Washington
Montali, Jury, Hollowell
Opinion by Montali (Hollowell dissenting)
These are above-median chapter 13 debtors. Their means test net income was minus $1,789. That included deduction for payments to secured creditors for “two houses and a vehicle” which they were surrendering. The plan proposed to pay $889 for six months which would pay 4% to unsecured creditors. The debtors’ I and J net was apparently (as it is not clear) about $900 to the positive. The chapter 13 trustee and a creditor objected that the debtors were not paying their “projected disposable income” and the plan was not proposed in good faith. If the means test did not include the secured payments and did include the housing allowance, the debtors had a positive net of $4,191 per month and could pay unsecured creditors in full in 24 months. The bankruptcy court overruled the objections. “The bankruptcy court held that section 1325(b)(3) supersedes -- not supplements -- subsection (b)(2) when debtors have above-median incomes.”
The BAP reversed, 2-1. It first dealt with Kagenveama. “The issue before the Ninth Circuit in Kagenveama did not involve either the determination of what are proper expenses (under section 1325(b)(2)) or the measurement of them (under section (b)(3)).”
It then states:
“Subsections (b)(2) and (b)(3) of section 1325, read together, provide that if an expense is not reasonably necessary for a debtor’s and/or dependants’ maintenance and support, it is not included in the calculation of disposable income. If the expense is reasonably necessary, and the debtor is an above median income debtor, subsection (b)(3) requires the court to determine the amount in accordance with section 707(b)(2).”
“If the expense is reasonably necessary for the debtor’s and/or dependants’ maintenance and support, then section 1325(b)(3) requires the court to determine the amount in accordance with section 707(b)(2).” “Items that a debtor has surrendered or intends to surrender are not necessary for his or her support or maintenance. The concepts -- surrender and necessity – are mutually exclusive of one another. Phantom payments for the surrendered item are not reasonably necessary for a debtor’s support and maintenance.”
Dissent of Hollowell.
“Under the guise of a plain meaning statutory analysis, the majority holds that § 1325(b)(2) and (b)(3) must be read sequentially, thereby arriving at a ‘common sense’ result which only permits an above median-income debtor to use the means test to calculate expenses after the debtor demonstrates the expense is reasonably necessary. While I sympathize with the majority’s desire to achieve a common sense result, I cannot agree with its contorted statutory analysis.”
“I cannot join my colleagues in an interpretation that upends the statutory inclusion of the means test in chapter 13, reverting back to the pre-BAPCPA judicial discretion as to what expenses of a debtor are reasonably necessary.”
Yarnall v. Martinez (In re Martinez), ---- B.R. ----, 2009 WL -------- (9th Cir. BAP Oct, 2009)
Issue: When computing the chapter 13 plan payment, can an above-median chapter 13 debtor deduct payments to a secured creditor for a lien which has been “stripped off” pursuant to a Lam Motion?
Holding: No. Note: The opinion references and is essentially the same as In re Smith decided the same day by the same panel.
Trial Judges: Riegel, Markell, Nakagawa, Nevada
Montali, Jury, Hollowell
Opinion by Montali (Hollowell dissenting)
This is an appeal from three separate chapter 13 cases. The debtors are above-median chapter 13 debtors who filed successful Lam Motions yet still deducted the payment on the avoided second from the calculation of the plan payment. The bankruptcy judges in Nevada held a joint hearing and approved the plans holding that Kagenveama and Section 1325(b)(3) require a mechanical test and specifically permit deducting payments to secured creditors, even those they do not intend to make.
The BAP reversed. 2-1. It held that subsections (b)(2) and (b)(3) of section 1325 must be read together. The expense must first be “necessary” pursuant to (b)(2) and, if necessary, it must be computed pursuant to (b)(3). “[The debtors] made the decision to strip the liens, not the bankruptcy courts. Phantom payments cannot be necessary.” “[I]f an item is not necessary for a debtor’s support or maintenance, a debtor cannot engage in the fiction of pretending to pay for it.”
The dissent is virtually identical to Judge Hollowell’s dissent in Smith (see above).
November 15, 2009
Ninth Circuit Annual Report 2008This was completed in August, 2009. I'm a little late in posting it but its kind of a fun read. There is a little article on page 31 about Dennis Montali and one on Judge Richard Medick who died in 2008 on page 13.
Circuit Court of Appeals Cases from Last Week
3rd Circuit Court of Appeals, November 12, 2009
In re Madera, --- F.3d ---, 2009 WL ----------- (3rd Cir. 2009)(summary judgment for creditor is affirmed where 1) the Rooker-Feldman precluded the bankruptcy court's jurisdiction over debtors' rescission claim because that claim was inextricably intertwined with a Court of Common Pleas' foreclosure judgment; 2) summary judgment for creditor on the Truth in Lending Act damages claim appropriate; and 3) debtor's motion to amend was untimely)
5th Circuit Court of Appeals, November 12, 2009
In re Bradley, --- F.3d ---, 2009 WL ----------- (5th Cir. 2009)(contempt of court and monetary sanctions affirmed where: 1) civil contempt power extends to defiance of a bankruptcy court injunction whose terms are known, but which has not yet been formalized as required by procedural rules; and 2) the lack of agreement between the opposing parties briefing the motion for injunction did not render the resulting ruling unclear)
6th Circuit Court of Appeals, November 13, 2009
In re Nowak, --- F.3d ---, 2009 WL ----------- (6th Cir. 2009)(informal proof of claim not allowed where 1) plaintiff had ample notice of the likelihood that it would lose its status as a secured creditor, necessitating the filing of a proof of claim; 2) plaintiff's unexplained delay weighed against allowing plaintiff's informal proof of claim; and 3) the large dilution in the distribution to other creditors in this case was an appropriate consideration weighing against allowing plaintiff's claim)
Thanks to Findlaw.com