BankruptcyProf Blog

Elena Kagan Lack of Judicial Experience?

Unable to knock anywhere else, the knock on Elena Kagan is that she has no judicial experience.  I took a look at the last 19 judges on the Supreme Court.  Roberts and Thomas had two whole years each on the District of Columbia Court of Appeals before joining the Supreme Court.  Scalia and Thurgood Marshall had four years on the court of appeals, and John Paul Stevens five years - total judge experience.  And I don't think that being on the court of appeals is exactly what the public would think of as judicial experince.  

Of the last 19 judges going back to the 1962 appointment of Byron White, only three sat as judges on a trial court: Sonia Sotomayor, six years as a district judge in New York; David Souter, five years on the New Hampshire Superior Court; and Sandra O'Connor, four years on the Arizona Superior Court.  Five had never been a judge; White, Goldberg, Fortas, Powell and Rehnquist. 

The most experienced judges?  Sotomayor 17 years on the bench; Alito, 16; Breyer, 14 (usually considered an academic); Ginsburg (academic), Kennedy and Burger, 13 years each.

Circuit Court of Appeals Cases from Last Week

U.S. Supreme Court, June 17, 2010
Schwab v. Reilly, --- US --- (2010)(debtor gave “the value of [her] claimed exemption[s]” on Schedule C dollar amounts within the range the Code allows for what it defines as the “property claimed as exempt,” the trustee was not required to object to the exemptions in order to preserve the estate’s right to retain any value in the equipment beyond the value of the exempt interest)

1st Circuit Court of Appeals, June 15, 2010
In re Nosek, --- F.3d --- (1st Cir. 2010)(In a creditor's appeal from a $250,000 sanction issued sua sponte by the bankruptcy court, the sanction is reduced to $5,000 where: 1)creditor's claim that it was the holder of the mortgage at issue was not a deliberate falsehood or intended in any way to mislead the court or debtor or achieve anything for creditor; and 2) the bankruptcy court did not identify any actual prejudice from the inaccurate claim of holder status)(Note:  David Souter sat on the panel in this appeal)

2nd Circuit Court of Appeals, June 15, 2010
SEC v. Byers, --- F.3d --- (2nd Cir 2010)(In nonparties' appeal from the district court's order holding that its jurisdiction in rem and its equitable powers provided it with sufficient authority to issue an injunction barring non-parties from filing involuntary bankruptcy petitions against any of the defendants, the order is affirmed where, while it should be sparsely exercised, district courts possess the authority and discretion to enter anti-litigation orders, including those that bar the filing of involuntary bankruptcy petitions absent the district court's permission)

9th Circuit Court of Appeals, June 09, 2010
In re Southern Cal. Sunbelt Developers, --- F.3d --- (9th Cir. 2010)(In actions seeking damages for filing of involuntary bankruptcy petitions against two alleged debtors, judgment for damages is affirmed in part where: 1) 11 U.S.C. section 303(i) permits an award of attorney's fees for a section 303 action as a whole, including fees incurred to litigate claims for fees and damages under section 303(i)(1) and (2); 2) section 303(i) permits an award of punitive damages under section 303(i)(2)(B) in the absence of an award of actual damages under section 303(i)(2)(A); and 3) award against two individual appellants jointly and severally liable for the costs and attorney's fees the debtors incurred in obtaining dismissal of the involuntary petitions is proper. However, the judgment is reversed in part where the bankruptcy court erred by holding the individual appellants liable for the debtors' costs and fees incurred on the section 303(i) motions themselves)

Thanks to Findlaw.com  

Mortgage Wars Episode V - The Empiricist Strikes Back (or Out): A Reply to Professor Levitin’s Response

From Prof. Mark Scarberry

MARK S. SCARBERRY, Pepperdine University School of Law
Email: Mark.Scarberry@pepperdine.edu

Professor Adam Levitin has responded to my recent symposium article critiquing proposed congressional legislation that would allow modification (including strip down) of home mortgages in Chapter 13 bankruptcy. A portion of my Critique criticized his empirical studies concerning the likely effect of the proposed legislation on mortgage interest rates and availability, and also criticized the arguments he has made in support of the proposed legislation. The Critique did note, however, that the insight involved in conceiving of such empirical studies was impressive.

Surprisingly, Professor Levitin’s Response fails to deal with the substantial case authority discussed in my Critique. He treats the Critique’s case authority on a critical question as if it consisted only of one relatively recent Ninth Circuit case and supposed dicta from an “old” Second Circuit case. But the Critique in fact relies on about twenty cases that deal with the question; the only supposedly contrary case authority he discusses in his Response turns out to be one of the cases cited in my Critique and not to be contrary at all. The case authority shows that the main defense put forward in his Response - that the mortgage modifications that would be permitted under the proposed legislation are similar to those permitted before the Supreme Court’s 1993 Nobelman decision and similar to those currently permitted where the collateral is not the debtor’s principal residence - is simply untenable.

It is also surprising that the entire weight of his defense of the empirical studies rests (A) on a very likely mistaken view of the law - that the law permits Chapter 13 debtors to use a novel, flawed approach in modifying secured claims under current law - and (B) on two remarkably bold and implausible assertions regarding how the market data he collected supposedly should have reflected the risk that debtors might use that novel, flawed approach, even though his data was collected before anyone had suggested that debtors might even try to do so. In addition, one of Professor Levitin’s assertions, if accepted, would fatally undermine
the design of a key part of his empirical studies.

The article notes in conclusion that law professors and others who have taken divergent positions on the wisdom of the congressional proposals might yet be able to agree on a common-sense middle ground; there is no need to consider those who disagree with us as having been seduced by the Dark Side.

The citation for my Critique is Mark S. Scarberry, A Critique of Congressional Proposals to Permit Modification of Home Mortgages in Chapter 13 Bankruptcy, 37 Pepp. L. Rev. 635 (2010). The Critique is available at http://ssrn.com/abstract=1520794. The citation for Professor Levitin’s Response to the Critique is Adam J. Levitin, Back to the Future with Chapter 13: A Response to Professor Scarberry, 37 Pepp. L. Rev. 1261 (2010). His Response is available at http://ssrn.com/abstract=1534912. The citation for this Reply is Mark S. Scarberry, Mortgage Wars Episode V - The Empiricist Strikes Back (or Out): A Reply to Professor Levitin’s Response, 37 Pepp. L. Rev. 1277 (2010).

Supreme Court Rules on Schwab v. Reilly

The Supreme Court has ruled, 6-3, majority opinion by Clarence Thomas, that the debtor exempts only a dollar interest in property, not the actual property itself and the trustee can sell the property after the objection period has expired.  The opinion is here. 

Strange Bedfellows at the Supreme Court

This has nothing to do with bankruptcy but the Supreme Court issued a 5-4 opinion today in DOLAN v. UNITED STATES.  The majority was Breyer, Thomas, Ginsburg, Alito and Sotomayor.  The dissent was Roberts, Stevens, Scalia and Kennedy.  This also means that Thomas got to pick the author of the majority opinion - Stephen Breyer. 

Supreme Court Approves "Forward Looking Test" in Computing Chapter 13 Plan Payments

Hamilton v. Lanning, --- U.S. ---, 2010 WL ------- (2010)

Issue:  May a Bankruptcy Court stray from the rigid formula in the Bankruptcy Code for computing the amount of a chapter 13 plan payment?   

Holding:  Yes, in “exceptional cases.”   

Justice Samuel Alito for 8-1 court,
Scalia dissented

This chapter 13 debtor proposed a plan to pay her creditors $144 per month for 36 months.  That amount, according to the debtor was her “projected disposable income” under section 1325(b) for that period.  The chapter 13 trustee, Jan Hamilton, objected arguing that her “projected disposable income” was some $1,700 per month and should be paid for 60 months.  Since that was more than the amount required to pay all debts, the trustee proposed that the debtor pay $756 per month for 60 months.  The trustee conceded that this was more than the debtor could afford based on her current income.  The bankruptcy court confirmed the plan at $144 but for 60 months.  The trustee appealed.  The 10th Circuit BAP and the 10th Circuit Court of Appeals affirmed.

The Supreme Court also affirmed.  The issue of how long the plan should be was not before the Supreme Court.  The Bankruptcy Code requires that the plan payment must be the debtor’s “projected disposable income.”  But while the Code does not define “projected disposable income” it “specifie(s) in some detail how ‘disposable income’ is to be calculated.”

"The parties differ sharply in their interpretation of §1325's reference to ‘projected disposable income.’ [The trustee], advocating the mechanical approach, contends that ‘projected disposable income’ means past average monthly disposable income multiplied by the number of months in a debtor's plan.  [The debtor], who favors the forward-looking approach, agrees that the method outlined by [the trustee] should be determinative in most cases, but she argues that in exceptional cases, where significant changes in a debtor's financial circumstances are known or virtually certain, a bankruptcy court has discretion to make an appropriate adjustment.  [The debtor] has the stronger argument."

Justice Alito focused first on the meaning of the word “projected” since that word is not defined in the code.  “While a projection takes past events into account, adjustments are often made based on other factors that may affect the final outcome.”  “[T]he word ‘projected’ appears in many federal statutes, yet Congress rarely has used it to mean simple multiplication.”  He points out that the Bankruptcy Code uses the words “multiplied by” in various places and therefore Congress would have said “disposable income” “multiplied by” by some time period if that is what it meant.  Also, bankruptcy courts were permitted to look to the future to determine the appropriate amount of the monthly payment before BAPCPA, the amendments in 2005, and the Court should not “read the Bankruptcy Code to erode past bankruptcy practice absent a clear indication that Congress intended such a departure.”

Justice Alito writes that the “mechanical approach” “clashes repeatedly” with other parts of section 1325.  “Section 1325(b)(1)(B)'s reference to projected disposable income ‘to be received in the applicable commitment period’ strongly favors the forward-looking approach.”  “Section §1325(b)(1) directs courts to determine projected disposable income ‘as of the effective date of the plan.’"  It requires “that projected disposable income ‘will be applied to make [the plan] payments.’” “In cases in which a debtor's disposable income during the 6-month look-back period is either substantially lower or higher than the debtor's disposable income during the plan period, the mechanical approach would produce senseless results that we do not think Congress intended.”   Justice Alito discusses the arguments for the mechanical test and the trustee’s offer of strategies that the debtor could have used to overcome the problem she finds herself in, i.e., she cannot get a plan confirmed, but discards them as “unsatisfactory.”   

In his dissent, Scalia writes “the Court concludes, in determining ‘projected disposable income’ a bankruptcy court may depart from §1325(b)(2)'s inflexible formula, at least in ‘exceptional cases,’ to account for ‘significant changes’ in the debtor's circumstances, either actual or anticipated.”  “That interpretation runs aground because it either renders superfluous text Congress included or requires adding text Congress did not.  It would be pointless to define disposable income in such detail, based on data during a specific 6-month period, if a court were free to set the resulting figure aside whenever it appears to be a poor predictor.  And since ‘disposable income’ appears nowhere else in §1325(b), then unless §1325(b)(2)'s definition applies to ‘projected disposable income’ in §1325(b)(1)(B), it does not apply at all.”  He says that under the Court’s ruling, “[a] bankruptcy court must still begin with that figure, but is simply free to fiddle with it if a ‘significant’ change in the debtor's circumstances is ‘known or virtually certain.’  That construction conveniently avoids superfluity, but only by utterly abandoning the text the Court purports to construe.”

Note:  My book Bankruptcy Jurisprudence From the Supreme Court can be purchased on Amazon.com. 

National Association of Chapter 13 Trustees Annual Program July 14, 2010

Grapevine, TX, you can access the brochure here. 

Circuit Court of Appeals Cases from Last Week

U.S. Supreme Court, June 07, 2010
Hamilton v. Lanning, --- U.S. ---- (2010)(Supreme Court approves "forward looking approach" for computing chapter 13 plans by above-median debtors, i.e. the court may account for changes in the debtor’s income or expenses that are known or virtually certain at the time of confirmation)

9th Circuit Court of Appeals, June 09, 2010
In re Southern Cal. Sunbelt Developers, --- F.3d --- (9th Cir 2010)( 1) bankruptcy court properly concluded that 11 U.S.C. section 303(i) permitted an award of attorney's fees for a section 303 action as a whole, including fees incurred to litigate claims for fees and damages under section 303(i)(1) and (2); 2) section 303(i) permitted an award of punitive damages under section 303(i)(2)(B) in the absence of an award of actual damages under section 303(i)(2)(A); and 3) the bankruptcy court properly held two individual appellants jointly and severally liable for the costs and attorney's fees the debtors incurred in obtaining dismissal of the involuntary petitions. However, the judgment is reversed in part where the bankruptcy court erred by holding the individual appellants liable for the debtors' costs and fees incurred! on the section 303(i) motions themselves)

Thanks to Findlaw.com

Article on Tax Rules Applicable to Bankrupt Partnerships

The first sentence caught my eye:  "Tax lawyers have known for a quarter-century that a bankruptcy restructuring of a partnership can result in a crushing tax burden for the partnership’s owners."  You can access the article here.  File it under "Reasons to make your client hire a tax professional." 

Great Article by Jan Hamilton re Hamilton v. Lanning

(Copied from NACTT)

Reflections On A Journey To The U.S. Supreme Court
Hamilton v. Lanning, Case No. 08-998

Jan Hamilton is the Chapter 13 Trustee for Topeka, Kansas. He has served in this position since 1998. Jan is a graduate of Washburn University and Washburn School of Law. He is also a 2009 inductee as a Fellow in the American College of Bankruptcy.

Teresa L. Rhodd is a cum laude graduate of Washburn University and a summa cum laude graduate of Baker University. She has been staff attorney for Jan Hamilton since 2006.
 

On Leaving Kansas

In retrospect, it all now seems like a trip to a foreign country without the benefit of Berlitz or Rosetta Stone. But, mostly, it has been a blur of paper, extraordinarily long hours, and hard work. Maybe you will end up there one day, perhaps just as much by accident as I did. Maybe you won’t. Nonetheless, a trip to the Supreme Court of the United States is a relative rarity for those of us who are ordinary mortals. I thought that sharing The Experience might be of some interest. For me, it was the most incredible experience of my legal career.

The Record

I should note that although this article is not particularly about the merits of the case, for those interested, the entire history of the case can be found at SCOTUSblog.com. All briefs and decisions, including a transcript of the oral arguments, can be found with a single click.1

“We’re Gonna Do What?”

I suppose I should say that this didn’t start out to be a US Supreme Court case. Maybe they never do. Appellate advocacy has not been my stock in trade, although over the years I’ve ended up in the higher courts, here and there. So, I must confess that prior to November 2, 2009 (the day certiorari was granted on my case), I likely would not have scored a passing grade on reciting the names of the United States Supreme Court Justices, let alone their perceived judicial bent. My staff attorney, Teresa Rhodd, without whom this case could not possibly have been properly prosecuted, put their pictures on the wall of my office, by the light switch, along with their names and seating positions. By the end of this “Mr. Toad’s Wild Ride” the pictures and I were old friends. When I stepped up to the podium on March 22, 2010, I knew the names of the Justices, where they sat, and quite a bit about each of them. Addressing these almost mythical figures by name was not only required, but now seemed almost natural.

By The Numbers . . .

The case of Hamilton v. Lanning is unusual in many respects. First, the sheer odds of a case actually being decided by the SCOTUS are not good, to say the least. Only about 1 out of 100 petitions for certiorari is granted.2

Since the Judiciary Act of 1925 ("The Certiorari Act" in some texts), the majority of the Supreme Court's jurisdiction has been discretionary. Each year, the court receives approximately 10,000 petitions for certiorari, of which approximately 100 are granted plenary review with oral arguments, and an additional 50 to 60 are disposed of without plenary review.3

Although I can’t take much of the credit, really, I am the only Chapter 13 Trustee to obtain a writ of certiorari in the history of modern bankruptcy law. Only one other Chapter 13 Trustee has ever argued a case before the U.S. Supreme Court.4 Certainly, without the involvement of the Solicitor General, Lanning would never have shown up on the Court’s radar. Once again, we proved that it is always better to be lucky than smart.

In The Beginning, Was The New Law — BAPCPA

It all started in 2005, when Congress amended, or I should say appended to, the Bankruptcy Code of 1978. The changes were many, but central to these modifications was the “means test.” That year, at the National Association of Chapter 13 Trustees (“NACTT”) Convention in Orlando, Florida, many suggested that Chapter 13 Trustees should endeavor to obtain circuit level authority as quickly as possible in order to resolve apparent interpretative anomalies. Teresa and I took these admonitions to heart. We really didn’t know what we were getting into, but nonetheless, we started down the path.

What WERE We Thinking?

Our central thought was that “messy facts make messy law.” So, we carefully selected a case where the facts were simple and clear. We wanted them to be at least uncontroverted, if not stipulated to. Additionally, we narrowed the issue by choosing a case implicating only the income side of “means test,” as we thought the expense side issues were markedly different and needlessly complicated the equation. We also chose facts that appeared to be outrageously anti-debtor, as it appeared conventional wisdom was that the “means test” was debtor-oriented. We believed this wisdom to be incorrect. Our thought was that the new law cut both ways. We sought to illustrate that point with our case selection.

And The Issue Was?

The issue, simply put, was whether courts should follow the plain language of the new statute or whether courts might adjust the “means test” formula for changes in circumstances. The briefs turned this simple proposition into a fairly complicated one, but at the core, that was and is the true issue. The Debtor, Stephanie Lanning, had unusually high income in the six months prior to bankruptcy filing. This event skewed what the means test required her to pay. In fact, she couldn’t pay it. We sought to demonstrate that if the law was interpreted properly, the “means test” could still be used. The subtitled agenda was that if the statute doesn’t work, it is up to Congress to fix it, not the Courts.

The position we took was the simplest, although not the most supportable, of the positions.5 We chose the “textualist” or plain reading view of the statute as it made it easier for us to articulate a position, stake out our territory, and defend it. At the time we started, we had no thought of winning, only to assist in getting clarification, at the circuit level, of a portion of the statute that seemed destined to be a Petri dish for litigation. Bankruptcy Judge Janice M. Karlin obliged us with a finely researched and written decision. Although not stated, the subliminal message was “Appeal me!” We needed to lose at both the bankruptcy and appellate levels, or there would be no Tenth Circuit decision. (Don’t think for a moment that we tried to lose. We stepped into the shoes of the textualist position and never took them off . . . ) As of this writing, we don’t know if we will “win” or “lose” or even if our efforts will result in resolving this important interpretative issue. However, we really thought the end of this road would be a Tenth Circuit decision.

The Bumpy Road Up

So. We lost at the bankruptcy court level.6

We lost at the Bankruptcy Appellate level.7

And, we lost at the Circuit level.8  So far, so good . . . but . . . then events we hadn’t planned on occurred.

First, we became enamored of our position and became convinced the “losing” side we had picked to take up had considerable merit. We didn’t know if this was a result of good advocacy or denial. Second, a clear split in the circuits developed.9  I can remember the morning we became aware of the split. Teresa and I looked at each other and said the word we were then unable to spell: “Certiorari!”10

The Petitioner in Frederickson filed his Petition on January 23, 2009. Of course, we thought ours was a more appropriate case — our facts were simpler, the legal issues were narrower, and naturally we thought our presentation was better from a bankruptcy perspective.

Filing the Petition for Certiorari

We quickly educated ourselves on the process. It was relatively straightforward, except for the extremely technical briefing requirements at the Supreme Court level. Our Petition for Certiorari was as carefully prepared as we were capable of doing. We focused on clear and simple sentence structure with paragraphs that followed the same formula. Sample certiorari petitions were reviewed to see what made sense to us. We endeavored to avoid complicating the issues which we thought would “compound the felony” of BAPCPA. Non-lawyer friends were actually asked to read the finished product to see if the Petition made sense, in an ordinary, plain reading sort of way.

We filed our Petition for Certiorari on February 9, 2009.

Of course, we had no idea if the Petition actually mattered, but we sure tried to make it matter. We hoped that a combination of uncomplicated, attention-getting facts and a plainly written Petition for Certiorari would catch someone’s interest. We didn’t really know how hard that would be. But for the Solicitor General’s involvement, this was about like trying to flag down a freight train.

Who Is The Solicitor General And Why Was She Involved?

The Office of the Solicitor General, an agency of the U.S. Department of Justice, supervises and conducts appellate litigation on behalf of the U.S. Government.11 Often referred to as “the 10th Justice,” the SG is involved in approximately two-thirds of all the cases the U.S. Supreme Court decides on the merits each year. Here, the SG’s involvement was quite by happenstance. As the Debtor chose not to defend the appeal to the Bankruptcy Appellate Panel, I notified the United States Trustee for this region that perhaps the Government ought to consider being involved. This was an important issue, and the other side would not otherwise be defended. The Office of Richard A. Wieland, United States Trustee for Region 20 (Kansas, Oklahoma, and New Mexico) briefed the matter at the BAP level. At the Tenth Circuit level, the SG took over. But for the Debtor’s non-participation, the SG would likely not have been involved. Consequently, but for the SG’s involvement, certiorari likely would not have been granted, as I am not sure we would have been spotted.

Reading The Directions

There are many books and articles on appellate advocacy. Given the time constraints, we concentrated on a few resources that appeared promising. Of course, starting with the information available from the Supreme Court seemed particularly appropriate. Time devoted to in those in-house publications was well spent. The “Guide for Counsel” in cases to be argued before the Supreme Court of the United States and the Rules of the United States Supreme Court were the cornerstones of our research on what it was, exactly, we were supposed to be doing.

The Clerk Of The United States Supreme Court—The Way Government Should Work

As, an aside, Teresa and I were very impressed with the Clerk of the Supreme Court, William K. Suter, and his staff. The office was easily accessible. We were able to speak to live and knowledgeable court staff who were courteous and really helpful. The process was quite fluid and forgiving, for the most part.

Immediately preceding oral argument, Mr. Suter, dressed in traditional morning suit, gave us a short explanation as to how things would work, and then even asked us to advise if we had any comments on how they could improve their operation!

A Pleasant Surprise

The find of the year was Justice Antonin Scalia and Bryan A. Garner’s Making Your Case: The Art of Persuading Judges (Thompson-West, 2008). We felt this appellate primer was spot-on with simple, yet detailed explanations of what would be expected of us. (Well, we thought, Justice Scalia should know . . .) This work is a “must read” for any lawyer involved in an appellate case.

Bed Time Reading . . . Bankruptcy And The Supreme Court.

I must confess that when I first looked at Kenneth Klee’s Bankruptcy and The Supreme Court (Lexis-Nexis 2008) my eyes glazed over. This is not an exciting area to any but the most hardcore bankruptcy enthusiast. Some would even say using “bankruptcy” and “enthusiast” in the same sentence is the ultimate oxymoron. However, once we found ourselves donning gladiator gear, this most excellent resource material suddenly became an exciting, if not riveting, piece of work. It gave us a good feel for how bankruptcy law had developed in the Supreme Court over the years.

Professor Klee suggested that the Supreme Court might appreciate hearing from experienced bankruptcy counsel. We took that notion to heart in making our final decision to not farm out the case to experienced appellate counsel.

A Waiting Game

The SCOTUS denied the Frederickson application for certiorari on March 23, 2009.  We waited for the other shoe to fall.  Week after week went by. A month turned into months. Finally, SCOTUS asked the Solicitor General, “What do you think?” The SG said, well, Hamilton is wrong, but you should decide the case. Again we waited and waited. Finally, on November 2, 2009, certiorari was granted.

In The Trenches

For the better part of five months, Teresa and I worked nights and weekends, in addition to our “day jobs.” The amount of reading necessary just to get started writing was nearly overwhelming. In addition to all of the United States Supreme Court cases, there were literally dozens of lower court decisions implicated. Researching the legislative history presented a special challenge for us because of the number of years it took for the legislation to pass. The time and energy commitment was far greater than that of any jury or bench trial in which I have been involved.

Opening Briefs

Organization of the Opening Brief was challenging. I am sure I spent the better part of two days trying to construct a syllogism that made sense. Some would say I never accomplished that goal, I am sure.

After constructing a comprehensive outline of our argument, Teresa and I each picked sections and wrote them. We relied heavily upon Justice Scalia’s book as to how to approach the writing of the brief. We were not sorry for accepting this guidance. We exchanged drafts, rewrote each other’s sections and eventually tied it all together. Only then were we able to write the Summary of the Argument and the Statement of the Case. True or not, we assumed as true the street wisdom that often times only the Summary and the Statement of the Case were read. Avoiding duplication was difficult as the various argument points often intersected. Finally, we locked ourselves in my office for a couple of days and read the brief aloud, correcting errors, editing sentence structure, and reorganizing paragraphs. We shipped it off to the printer and waited for reactions. To our relief, the feedback from other bankruptcy professionals was overwhelmingly positive. We had apparently not missed the mark.

We were even more relieved after reading the opposing and supporting briefs. We had not missed any significant cases; our arguments had been dead on. The fine attorneys on the other side were not invincible and had shown their underbelly on many of the finer points of bankruptcy law. At this point, who knows if those hair splits will prove germane? I am sure they might have similar thoughts about our appellate efforts.

In addition to the Solicitor General’s brief, Tom Goldstein of the firm Akin-Gump, who specializes in Supreme Court advocacy, filed an Opening Brief for Ms. Lanning. He was quite the gentlemen and helpful. We attempted to reciprocate. The entire process was much more civil than the rough and tumble trial advocacy common here.

Our Reply Brief took as much, or maybe even more time than our Opening Brief. We now had four briefs to respond to in fewer than 6,000 words. Never play the other person’s game. We reorganized the oppositions’ arguments into our framework and attempted to turn their game into our game. At least we entertained ourselves with this scholastic endeavor.

Printing The Briefs

Gutenberg would not recognize modern printing. Certainly, WE didn’t recognize what United States Supreme Court printing was all about. Upon the recommendation of others who had been before us, we hired an outside printing firm, Cockle Printing, out of Nebraska. These folks were wonderful. They did the fine proofing . . . consistency in punctuation, citation, etc. They also made sure we followed the briefing rules. This turned out to be a technical area we could not have hoped to command while trying to write the briefs. Although our printing bill would eventually reach about $13,000, this was money well spent, but does point out how a case of this nature may be beyond the means for many. When all was said and done, we likely had $17,000 or so in out-of- pocket expenses. The thought of what it would have cost to hire outside counsel made us shudder, when we considered the hours we put in multiplied by $750 or more per hour, even discounting our time for the learning curve.

Moot Court

We lucked out and obtained a moot court session at the Georgetown University Law Center Supreme Court Institute. Two professors and a practicing appellate lawyer raked me over the coals for close to an hour a few days before the actual oral arguments. This free service was absolutely invaluable. It gave me confidence in believing I would actually survive oral arguments. It also permitted us to fine-tune some of the points we thought relevant.

Oral Arguments

While we waited for the Opening and Amicus to come in, we worked on the oral argument. This preparation was detailed and time consuming. There would be no “winging it” here. While the allotted time to speak was only 30 minutes, I had to be prepared to answer nearly any question relative to the case, the facts, the law, and the lower court and Supreme Count cases. I read and re-read the statutes and pertinent decisions, first creating detailed outlines, then summaries, and finally, brief Post-It note references. I took very little to the podium and used none of what I had prepared. Not unexpectedly, I spoke for only a short period of time before being interrupted by the Court, first by Justice Ginsberg. The remainder of my time was spent responding to tag-team questions. The focus was the actual statutory language and how the pieces fit together. We were on my home turf.  Regardless of the result, I was going to survive.  I was able to intertwine much of my argument into the answers to the questions.  At least I was going to have, as they say on BBC, “my say.” I spoke for 28 minutes, reserved 2. The time flew by quickly and the white light turned red before I knew it. The exhilarating ride was nearly over.

Sundry Items That Don’t Fit Anywhere Else

We got free quill pens.
28 lawyers represented other parties. There were two of us for Petitioner.
I received 7,203 emails referencing “Lanning” from January 1, 2007, to the date of oral arguments, March 22, 2010. During that same period I sent 4,576 emails on the same subject.
I took at least one of my dogs with me to the office at night, when working on this case. I often tried out my sentences and paragraphs on them. They generally looked confused during those endeavors.
Staying well was a worry and a priority. I took more vitamin C during that 5 months than I have in the rest of my lifetime.
Dark suits—charcoal gray, black or dark blue are encouraged for oral argument. We joked about showing up in light blue seersucker suits and straw hats.
Teresa bought a new suit. I bought new shoes and belt. We both got haircuts.
The Justices were well prepared. They were courteous. They were respectful. There was no mean spiritedness about them.
I took an extra suit and shirt . . . just in case, and packed most of what I would take a month before we left.
We checked our clothing suitcases and carried all legal materials on the plane. We thought it would be easier to buy new clothes than to replace the books. We also had most of what we need stored on external drives and on drives at the office we could access.
The podium is very close to the justices; maybe ten feet away. Had we not been warned, this could have been disconcerting.
Making mistakes in oral arguments in front of a bankruptcy judge with a room full of sleepy lawyers is a lot different than making mistakes in a large courtroom packed full of friends, non-friends and Supreme Court groupies.
There is almost no way to really prepare for oral arguments except to know your argument as well as you know your family.
Patient spouses were necessary and appreciated. Most days, I wasn’t sure what month it was.
Did I tell you we got free quill pens?
Epilogue

And when it was over, the pressure of the months of hard work faded, and relief washed over me. I could see Teresa was experiencing the same. After a post mortem with Tom Goldstein and some of his Harvard law students, we walked toward the exit on the lower level. A small group of Chapter 13 Trustees stood to one side. As we approached, they smiled broadly and began to clap. We heard “Bravo!” “Good job!” “Excellent!” We smiled and waived. Regardless of the outcome, we knew we really had done our best and it was time to go back to Kansas, where we belong 

1 Hamilton, Chapter 13 Trustee v. Lanning at SCOTUSwiki.

2 Glossary of Supreme Court Terms.

3 http://en.wikipedia.org/wiki/Certiorari.

4 Fidelity Financial Services, Inc. v. Fink, 522 U.S. 211, 118 S.Ct. 651(1998). Richard V. Fink is the Standing Chapter 13 Trustee for the Western District of Missouri.

5 See Maney v. Kagenveama (In re Kagenveama), 541 F.3d 868 (9th Cir. 2008); contra Coop v. Frederickson (In re Frederickson), 545 F.3d 652 (8th Cir. 2008).

6 In re Lanning, 2007 WL 1451999 (Bankr. D. Kan. May 15, 2007).

7 In re Lanning, 380 B.R. 17 (10th Cir. BAP 2008).

8 In re Lanning, 545 F.3d 1269 (10th Cir. 2008).

9 See In re Kagenveama and In re Frederickson, supra.

10 Author’s confession: Teresa could always spell certiorari, and I still can’t.

11 http://www.justice.gov/osg/index.html.

Central District Filings

	2008	2009	%	2010	%
Jan	3,694	6,004	63%	9,013	50%
Feb	3,787	6,971	84%	9,659	39%
March	4,381	8,529	95%	12,840	51%
April	5,023	8,512	69%	12,114	42%
May	5,177	8,967	73%	11,906	33%
June	5,351	9,595	79%

Bankruptcy Filings May, 2010

Thanks to Bankruptcy Data Project.

	2008	2009	%	2010	%
Jan	70,300	89,000	27%	102,600	15%
Feb	79,500	102,000	28%	117,800	15%
March	90,400	131,000	45%	159,200	22%
April	93,200	128,700	38%	146,200	14%
May	89,700	120,400	34%	133,500	11%
June	89,900	124,800	39%
July	96,400	130,500	35%
Aug	94,300	120,000	27%
Sept	96,200	125,500	30%
Oct	108,900	130,200	20%
Nov	91,400	115,500	26%
Dec	95,900	117,000	22%
	1,096,100	1,434,600	31%

Tribute to John Wooden

 

 

Supreme Court Rules on Hamilton v. Lanning

The Supreme Court has affirmed the "forward looking approach" in Hamilton v. Lanning.  You can access the opinion here.  I'm reading it now. 

3rd Circuit Overrules Frenville

In re Grossman’s,  --- F.3d --- (3rd Cir. June, 2010)

Issue:   Should the 3rd Circuit overrule In re Frenville re when a claim arises?  If so, when does a claim arise?  
   
Holding:    Yes.    A claim arises when a person is exposed to the product or conduct which “gives rise to an injury.” 

In Banc ruling.  Note:  the 3rd Circuit is Pennsylvania, New Jersey and Delaware.   

“In 1977, Appellee Mary Van Brunt, who was remodeling her home, purchased products that allegedly contained asbestos.”  Grossman’s filed chapter 11 in 1997.  “It was only in 2006, almost ten years later, that Ms. Van Brunt began to manifest symptoms of mesothelioma, a cancer linked to asbestos exposure.  She was diagnosed with the disease in March 2007.”  She died in 2008.  The bankruptcy court ruled that the claim was postpetition and therefore not discharged because it arose after the plan was confirmed.   The basis for the ruling was In re Frenville, 744 F.2d 332 (3d Cir. 1984).  The district court affirmed.

The 3rd Circuit reversed and specifically overruled Frenville.  “According to Frenville, the claims arose for bankruptcy purposes when the underlying state law cause of action accrued.  The New York tort cause of action accrued in 2006 when Ms. Van Brunt manifested symptoms of mesothelioma.  The claims were therefore post-petition under Frenville.”  “The question remains, however, whether we should continue to follow Frenville and its accrual test.”  “Frenville has proved a remarkably unpopular decision and no other Circuit Court of Appeals has followed it.’  At least one bankruptcy court has stated that Frenville ‘may be fairly characterized as one of the most criticized and least followed precedents decided under the current Bankruptcy Code.’”  “We are persuaded that the widespread criticism of Frenville’s accrual test is justified, as it imposes too narrow an interpretation of a ‘claim’ under the Bankruptcy Code.  Accordingly, the Frenville accrual test should be and now is overruled.”

The opinion then goes on to state the rule which will now replace Frenville in the 3rd Circuit at least. 

“Irrespective of the title used, there seems to be something approaching a consensus among the courts that a prerequisite for recognizing a ‘claim’ is that the claimant’s exposure to a product giving rise to the ‘claim’ occurred pre-petition, even though the injury manifested after the reorganization.  We agree and hold that a ‘claim’ arises when an individual is exposed prepetition to a product or other conduct giving rise to an injury, which underlies a ‘right to payment’ under the Bankruptcy Code. See 11 U.S.C. § 101(5).  Applied to the Van Brunts, it means that their claims arose sometime in 1977, the date Mary Van Brunt alleged that Grossman’s product exposed her to asbestos.”

The 3rd Circuit remanded for further findings re whether Van Brundt received adequate notice of the bankruptcy proceeding, the bar date etc and therefore whether the discharge injunction applied to her or whether the plan otherwise adequately provided for the claim which would require her to make a claim under the plan. 

Circuit Court of Appeals Cases from Last Week

3rd Circuit Court of Appeals, June 01, 2010
In re Exide Technologies, --- F.3d --- (3rd Cir 2010)(agreement to sell substantially all of its industrial battery business is not an executory contract because it does not contain at least one ongoing material obligation for the other party and therefore cannot be rejected)

3rd Circuit Court of Appeals, June 02, 2010
In re Grossman's Inc., --- F.3d --- (3rd Cir 2010)(In Chapter 11 proceedings, plaintiffs' tort claims, arising from exposure to asbestos contained in home improvement products sold by the debtor, are "claims" where: 1) the Frenville accrual test is overruled as it imposes too narrow an interpretation of a "claim" under the Bankruptcy Code; 2) a "claim" arises when an individual is exposed pre-petition to a product or other conduct giving rise to an injury, which underlies a "right to payment" under the Bankruptcy Code, and here, plaintiffs' claims arose sometime in 1977, the date the plaintiff alleged that debtor's product exposed her to asbestos; and 3) on remand, whether a particular claim has been discharged by a plan of reorganization depends on factors applicable to the particular case and is best determined by the appropriate bankruptcy court or the district court)

5th Circuit Court of Appeals, June 03, 2010
In re Velocita Worldwide Logistics Inc., --- F.3d --- (5th Cir 2010)(no implied right of contribution among defendants who agreed to be jointly and individually liable for a payment as part of the settlement agreement for a state tort action where the obligations in the instant settlement agreement were not analogous to the obligations in surety and guaranty agreements, the contractual arrangements in which Texas courts had allowed contribution claims against co-obligors)

5th Circuit Court of Appeals, June 03, 2010
In re Moore, --- F.3d --- (5th Cir 2010)(bankruptcy court's approval of a settlement of estate claims over creditor's objection and despite its offer to purchase the claims for higher value is reversed where the claims at issue could be sold as well as compromised, and the bankruptcy court's failure to consider the effect of such a sale was an abuse of discretion)

6th Circuit Court of Appeals, June 04, 2010
Nat'l Union Fire Ins. Co. v. VP Bldg., Inc., --- F.3d --- (6th Cir 2010)(insurer's petition for administrative expenses dissallowed on the ground that the claim was not "actual" and did not benefit the estate, the insurer's request for reimbursement is not an "actual" expense within the meaning of the bankruptcy code)

D.C. Circuit Court of Appeals, June 01, 2010
Moses v. Howard Univ. Hosp., --- F.3d --- (D.C.Cir 2010)(In an action against a hospital claiming retaliation in violation of the Civil Rights Act, summary judgment for defendant is affirmed where, even after he had filed for bankruptcy, plaintiff continued to hold himself out before the district court as a valid plaintiff, a position "clearly inconsistent" with his pursuit of relief in bankruptcy)

Thanks to Findlaw.com

John Wooden 1910-2010

I cannot see John Wooden's picture or listen to any of the tributes and programs without getting weepy.  He was the greatest man of my lifetime.  I saw him many times at a restaurant in Encino, once with Bill Walton, and always wanted to shake hands with him but never did.  Another loss for mankind.   

New Hamp Regulations

Thx to Karen Cordry:

New Home Affordable Modification Program (“HAMP”) Loan Modification Guidelines Taking Effect June 1, 2010

The federal government provided new HAMP borrower outreach and communication guidelines for foreclosure actions while a borrower is being evaluated under HAMP.  Furthermore, these guidelines provide additional protection for delinquent borrowers who have filed bankruptcy but would otherwise be eligible for HAMP benefits. For a copy of the full disclosure, see Supplemental Directive 10-02.

Here are some of the key highlights from the directive include:

FORECLOSURE
Additional Foreclosure steps are required:
• The servicer must evaluate the borrower’s eligibility under HAMP and determine that the borrower is ineligible before referring the borrower to foreclosure (or make “reasonable solicitation efforts”).
• If foreclosure activity has already been initiated, the foreclosure sale cannot occur until after the servicer has determined the borrower is ineligible under HAMP (or make “reasonable solicitation efforts”).
• The servicer must give the borrower 30 days to respond to HAMP “Non-Approval Notices” in certain circumstances before conducting the foreclosure sale.
• The servicer must provide the foreclosure attorney certification in writing that the borrower is ineligible for HAMP before conducting the foreclosure sale.

BANKRUPTCY
• If the borrower in active Chapter 7 or Chapter 13 bankruptcy (or attorney or bankruptcy trustee) requests, the servicer MUST consider the borrower under HAMP and can no longer decline borrower as a “proper exercise of discretion.”
• If the borrower has been approved on a trial loan modification and files a Chapter 7 or Chapter 13, the servicer MAY NOT deny the borrower for a permanent modification only because of filing bankruptcy.
• If a delinquent borrower has a discharged Chapter 7 and chose not to reaffirm the first lien mortgage debt is still eligible under HAMP, with the following provision added to the permanent modification agreement: “I was discharged in a Chapter 7 bankruptcy proceeding subsequent to the execution of the Loan Documents. Based on this representation, Lender agrees that I will not have personal liability on the debt pursuant to this Agreement.”

Karen Cordry, Bankruptcy Counsel
National Association of Attorneys General

Nice Powerpoint on the new Consumer Financial Protection Agency

Prof. Jeff Sovern has prepared a nice powerpoint summary of the two bills creating a new federal Consumer Financial Protection Agency.  You can access the presentation here. 

Texas Rangers File Chapter 11

U.S. Bankruptcy Court
Northern District of Texas (Ft. Worth)
Bankruptcy Petition #: 10-43400-dml11

Assigned to: D. Michael Lynn Chapter 11 Voluntary

Date filed:   05/24/2010

Debtor Texas Rangers Baseball Partners 1000 Ballpark Way Suite 400 Arlington, TX 76011 Tax ID / EIN: 75-2585320	represented by	Martin A. Sosland Weil, Gotshal & Manges LLP 200 Crescent Court, Suite 300 Dallas, TX 75201-6950 214-746-7700 Fax : 214-746-7777 Email: martin.sosland@weil.com Ronit J. Berkovich Weil, Gotshal & Manges LLP 767 Fifth Avenue New York, NY 10153 212/310-8000 Fax : 212/310-8007
U.S. Trustee UST U.S. Trustee 1100 Commerce Street Room 976 Dallas, TX 75242-1496 214-767-8967	represented by	Meredyth Kippes US Trustee 1100 Commerce St. Rm. 976 Dallas, TX 75242 Email: meredyth.a.kippes@usdoj.gov