BankruptcyProf Blog

Crystal Cathedral gives founder board vote again

"The Crystal Cathedral megachurch has restored the voting rights of its founder, the Rev. Robert H. Schuller, on the church's governing board."

Read more here.

The Broke and the Beautiful: Vegas Edition

"This week on The Broke and the Beautiful, Beso’s back in the news and football players are fumbling. Also, actor Tobey Maguire may need to ramp up his Spidey senses for next year’s poker-lawsuit trial."

Read more here.

Madoff, Borders, Lehman, Giordano’s, Spansion: Bankruptcy

Nice summary of bankruptcy current events: read it here.

Maguire's poker lawsuit heading to trial

"Tobey Maguire's legal battle against the bankrupt trustees of convicted conman Bradley Ruderman is heading to trial in January, 2012.

The Spider-Man star is accused of beating Ruderman in a series of unlicensed poker games in California, taking more than $300,000 in winnings from the bankrupt hedge fund manager, who is currently serving time in prison after being convicted of operating a fraudulent Ponzi scheme."

Read more here.

Former USC, NFL football player sentenced for bankruptcy fraud

"Richard Francis Sanford, 54, of Lexington, pleaded guilty in U.S. District Court in Columbia to bankruptcy fraud and was sentenced to two years’ probation, 30 days’ home confinement and 100 hours of community service, U.S. Attorney Bill Nettles said Friday."

Read more here.

Alabama's Jefferson County hires bankruptcy lawyers

"Alabama's Jefferson County on Tuesday hired outside bankruptcy lawyers ahead of a critical decision on its debt that could result in what would be the largest municipal bankruptcy in U.S. history.

The hiring of Klee, Tuchin, Bogdanoff & Stern, LLP, the law firm that helped Orange County, California, through its landmark bankruptcy in 1994, appears to signal that bankruptcy has moved sharply up the agenda for Jefferson County."

Read more here.

Bankruptcy Mortgage Project Website

Subject: [Bankr-L] new Bankruptcy Mortgage Project website
Date: Fri, 22 Jul 2011 07:55:01 -0400
From: John Rao <jrao@NCLC.ORG>
Reply-To:

The National Consumer Law Center has set up a website that collects and makes available for download a variety of documents (local rules, forms, orders, etc.) dealing with mortgage issues in consumer bankruptcy cases. Copied below is an information sheet on the new website, and the link for the site is here.  

If there are documents from your district that we did not find and you would like added to the site, please let me know.

John

John Rao
Staff Attorney
National Consumer Law Center?
7 Winthrop Square, 4th Floor
Boston, MA02110
(617) 542-8010
www.nclc.org <http://www.nclc.org>

Governor Brown Signs Bill Protecting California Homeowners from Claims by Junior Mortgage Holders Following Consent to and Completion of a Short Sale

July 22, 2011

Dear Insolvency Law Committee Constituency List members:

The following is an EBulletin prepared by Insolvency Law Committee member Robert G. Harris: 

Governor Brown signs bill protecting California homeowners from claims by junior mortgage holders following consent to and completion of a short sale

On July 11, 2011, Governor Brown signed SB 458 into law.  Click [HERE] to read the text of the bill.  SB 458 amends section 580e of the California Code of Civil Procedure (enacted in 2010) to apply certain limitations on first mortgage holders who accept short sales to junior mortgage holders.  In order to mitigate the impact of the ongoing foreclosure crisis and to encourage the approval of short sales as an alternative to foreclosure, the bill was passed with an urgency provision and became effective on July 15, 2011, when it was filed with the Secretary of State.

Code of Civil Procedure section 580e, as amended, prohibits a deficiency judgment on a note secured solely by a deed of trust or mortgage for a dwelling of not more than 4 units should the trustor or mortgagor sell for less than the remaining debt with the written consent of the holder of the deed of trust or mortgage if title has been voluntarily transferred to a buyer by grant deed or by other document that has been recorded and the proceeds of the sale are tendered as agreed.

SB 458 clarifies an ambiguity in the original wording of Code of Civil Procedure section 580(e).  With respect to a multiple collateral loan made for business purposes, a short sale conducted pursuant to section 580(e) might arguably have been interpreted to extinguish the entirety of a debt obligation secured by a 1-4 unit dwelling and other residential, commercial, or vacant land property, or other personal property related to or used in connection with the property.  Such an interpretation would have left commercial lenders with multiple collateral no choice but to foreclose and reject any short sale in order to protect their security and ability collect the loan balance.  In order to resolve the issue, SB 458 replaced the words "fully discharge" in section 580(e) with language treating the deficiency as though the 1-4 unit dwelling had been sold through foreclosure under a power of sale under Code of Civil Procedure section 580d. 

Other important provisions of SB 458 are as follows:

●  A holder of a note shall not require the trustor, mortgagor, or maker of the note to pay any additional compensation, aside from the proceeds of the sale, in exchange for the written consent to the sale.

●   Exceptions to the new law include a lender asserting damages for a borrower's fraud or waste, a borrower that is a corporation, LLC, limited partnership, or political subdivision of the state, and liens secured by a public bond, as well as by public utility liens;

●   Any purported waiver of the provisions of section 580e is void and against public policy.

AUTHOR COMMENTARY

Second mortgages are generally, unless the mortgage was used to purchase a home, recourse as to the borrower.  As a result, a second mortgage holder can usually sue the homeowner for the balance of debt owing following a foreclosure by senior lien holder or a short sale in which liability is not explicitly released.  Typically, the threat of suit has been used to extract a cash payment from the homeowner as consideration for consent to a short sale.

Now that requiring payment to a mortgage holder to accept a short sale is illegal, there is a valid concern that, unless the first and second mortgage holders are the same entity, there may be little incentive for the second mortgage holder to accept a short sale. If a lender thinks a borrower may recover financially and wants to preserve its right to go after him or her, it may refuse to consent to a short sale and seek a judgment for the loan balance, sell the debt, or assign it to a collection agency.   It is worth noting that the new law does not prohibit a mortgage holder from negotiating for a contribution from someone other than the borrower, such as another lender, an agent, a relative, or some other third party.

These materials were prepared by Robert G. Harris of Binder & Malter, LLP in Santa Clara, California.

Thank you for your continued support of the Committee.

Best regards,

Insolvency Law Committee
The Insolvency Law Committee of the Business Law Section of the California State Bar provides a forum for interested bankruptcy practitioners to act for the benefit of all lawyers in the areas of legislation, education and promoting efficiency of practice. For more information about the Business Law Standing Committees, please see the standing committees web page.

Judge Forces Dodgers to Negotiate with MLB for Financing

Judge Gross rejected the Dodgers' request to get its financing from Highbridge Corp, saying that “a comparison of the Highbridge loan and the proposed MLB loan clearly shows the substantial economic superiority of the MLB loan.”  The order requires the team to negotiate with the MLB in good faith to attempt to get the best possible rates for its DIP financing.

Poor old Frank McCourt.

Read about it here.

-CHH

Borders to Seek Approval of Deal to Sell 30 Stores to Books-A-Million

"Borders Group Inc., the bankrupt bookstore chain, may avoid a total wind-down by selling as many as 35 stores to Books-A-Million Inc. (BAMM) in a deal involving liquidators, Borders lawyer Andrew Glenn said."

Read more here.

KOBO COMMENTS ON BORDERS’ LIQUIDATION

KOBO COMMENTS ON BORDERS’ LIQUIDATION

TORONTO – July 19, 2011 – The management of Kobo, a global leader in eReading with over 4.2 million users in more than 100 countries worldwide, has issued comments relating to the ongoing liquidation of Borders to clarify misconceptions about Kobo that have been inaccurately reported by the media and misunderstood by consumers. 

Kobo management provides the following facts regarding the company:

• Kobo is a privately-held company that offers over 2.4 million eBooks, newspapers, and magazines -- one of the largest eReading catalogues in the world. 
• Readers from over 100 countries across the globe download and read using Kobo’s top-ranked eReading applications for iPad, iPhone, BlackBerry, Android, Windows and MacOS.  Kobo is the eReading application of choice for leading tablet OEMs. 

• While Borders is one of the early investors in Kobo, it holds only a minority stake in Kobo, approximately 11 percent. The Borders shares are subject to the terms of the Kobo shareholders’ agreement which, among other things, restricts their transfer or disposition.
• Borders serves as part of Kobo’s distribution in the U.S. along with Best Buy, Walmart, Sears and other top retailers.
• Kobo does not rely on Borders for content.  Kobo owns the publishing agreements and has direct relationships with all major publishers, including Random House, Simon & Schuster, HarperCollins, St. Martin’s Press and many more.  Kobo is solely responsible for payment to publishers for eBooks sold through the Kobo platform and publishers will continue to be paid on time as usual.
• For some time, Kobo and Borders have been in the process of transitioning Borders' customers' eBook accounts to Kobo, in order to provide such customers direct access to the most up-to-date eReading functionality, apps and devices. All Borders customers that have transitioned to Kobo shall enjoy uninterrupted access to their e-Reading accounts. Kobo shall continue to work with Borders to transition customer accounts to Kobo.  
• For those Borders customers who haven’t transferred their eBook libraries to Kobo, the process is quick and easy.  Borders customers can visit kobo.to/bmigrate to transfer their Borders eBook library to Kobo. No additional steps are required to continue reading on your Kobo eReader. For those Borders customers that are using Borders apps to access their eBook libraries, visit kobo.com to download a free Kobo eReading app for your computer, smartphone or tablet.

• Owners of Kobo eReaders will continue to use their Kobo eReader as usual, and be able to browse and shop for new titles in the Kobo Store with no interruption or change in service. 
• Kobo continues to grow in the U.S. and around the world.  Kobo is very pleased with progress of the launch of the new Kobo eReader Touch Edition which is available at leading retailers including Indigo, Walmart, Best Buy and WH Smith. 
• Kobo continues to build international growth with the successful launch of Kobo in Germany, the first rollout of several planned international launches.

As an interested party in the Borders bankruptcy proceedings, Kobo has made certain filings with the court to preserve its legal rights moving forward.

Kobo offers their support to the Borders’ community of employees, families and friends.

Statement from Michael Serbinis, CEO, Kobo, Inc:

“As one of the early investors in Kobo, Borders has a minority stake in our company and serves as part of our distribution in the U.S. along with Walmart, Best Buy, Sears and other leading retailers.  As a member of the broader book publishing and retailing community, we are watching Borders' story and will offer our support to Borders and their employees.  Kobo will continue to serve Borders customers – in this time of transition as well as moving forward – to provide the ultimate eReading experience and one of the widest selection of eBooks available to the eReading community worldwide.”

About Kobo, Inc.
Kobo is a global eReading service with more than 2.4 million eBooks, magazines and newspapers – one of the largest eReading catalogues in the world.  Kobo believes consumers should have the freedom to read any book on any device and has attracted millions of readers from over 100 countries across the globe.  Kobo has top ranked eReading applications for iPad, iPhone, BlackBerry, Android, Windows and MacOS, and is the eReading application of choice for leading tablet OEMs.  The Kobo Wireless eReader and the new Kobo eReader Touch Edition are available at leading retailers, including Indigo, Walmart, Best Buy and WH Smith.  Kobo's innovative Reading Life is an industry-first comprehensive social eReading experience – Kobo users can earn awards simply for time spent reading and encouraging others.  Kobo is backed by majority shareholder Indigo Books & Music Inc, Cheung Kong Holdings, and institutional investors.
# # #

Contact: Wendy Zaas/Karina Tang, Rogers & Cowan, 310.854.8148/212.445.8419, wzaas@rogersandcowan.com, ktang@rogersandcowan.com

 

Dodgers, MLB lock horns over bankruptcy loan

"The Los Angeles Dodgers fought on Wednesday to keep control of their finances while in bankruptcy, arguing Major League Baseball's offer to provide a $150 million loan was a 'deal with the devil.' "

Read more here.

Unclaimed Funds Database Available on the Court's Website

Jon,

Please let the world know about this via your Blog!

Thanks!

Scott

http://ecf-ciao.cacb.uscourts.gov/unclaimedfunds/

Hon. Scott C. Clarkson
United States Bankruptcy Judge
Ronald Reagan Federal Building and Courthouse

----- Forwarded by Scott Clarkson/CACB/09/USCOURTS on 07/13/2011 04:10 PM -----

Date: 07/13/2011 11:18 AM
Subject: Unclaimed Funds Database Available on The Court's Web Site

Today, we are unveiling a web page with a search feature for the Court's Unclaimed Funds. This project has been a long term goal of the court and due to the hard work of the Finance and I.T. staff, I am pleased to announce its debut. As many of you may know, Unclaimed Funds are monies deposited with the court that have gone unclaimed by creditors or debtors in bankruptcy cases; mostly in Chapter 7 asset cases, but also some in Ch. 13 and Ch. 11 cases. The Treasury held account has a balance of over $19 million: Just over $3 million is from cases closed within the last 5 years.

The intent of having this database available is to allow individuals or companies that may have money due to them, the ability to complete the research themselves. The site has instructions to make it easier for them to submit a Motion for the Order Releasing Unclaimed Funds (Form F3011-1) on their own, instead of hiring a locating company. The form and instructions are in pdf format and can easily be downloaded from the site.

Just about half of the nation's bankruptcy courts have some information regarding unclaimed funds on their web sites. About 85% of those, have a searchable database. As the largest BK court in the country, providing information on Unclaimed Funds and having access to a searchable database is a great public service and long overdue. Now, when you get inquiries about any unclaimed funds, you can refer them to the page, which can be located by selecting Information-->Unclaimed Funds Search under the Case column or click here. With this new web page, we can assist the public much more efficiently and help creditors or debtors find their unclaimed funds.

A special thank you to Windsor Akim, Olga LaChapelle, and Harrison Quan for their dedication to the project. You may contact me for any questions or comments at 213-894-0999.

James Sandino
Financial Services Department
United States Bankruptcy Court, Central District of California

Notes from Counsel for the Chapter 13 Trustee

From Aki Koyama's Facebook page:

If a motion to avoid lien has been granted by the Judge, both Judge Donovan and Judge Klein now require the order granting the motion to be entered before the plan will be ordered confirmed. Please make sure to get the orders uploaded as soon as the motion has been granted.

Neither Judge Donovan nor Judge Klein have an advisory opinion on the issue of whether or not the automatic stay exists as to the bankruptcy estate for the 2nd filing for the debtor within a one year period. Please read In re: Reswick and In re: Rinard to understand this issue in greater detail.

Judge Donovan will be moving to one chapter 13 calendar a month to hear all confirmation hearings and Trustee's Motions. He will set motions to avoid liens and other miscellaneous chapter 13 motions on other days of the month. All August 11, 2011 confirmation hearings and Trustee motions will be rescheduled to the August 25, 2011 date. Please keep an eye out for the notices of rescheduled hearings.

Both Judge Donovan and Judge Klein will not dismiss a case sua sponte for failure to obtain credit counseling or obtain credit counseling on a timely basis. Judge Klein may dismiss a case on this basis but only if a party requests dismissal and the Judge has had an adequate opportunity to review the evidence.

Webinar on the Supreme Court

Join Supreme Court expert Lyle Denniston for this upcoming CLE conference.

Join us online on Tuesday, August 9 at 1:00PM ET for SCOTUS Annual Term Update: Recent Decisions You Need To Know

Key issues that will be discussed:
**   Overview of recent SCOTUS decisions and how they impact you
**   Which Supreme Court decisions affect Employment Law practice
**   Effect the Wal-Mart ruling will have on employer s employment policies
**   Other constitutional cases affecting video games, child vaccines and more
**   Controversial issues: US Military funeral protests & generic drug warnings

Register or view the complete agenda
http://www.mylegaltraining.net/1PR/0/2/p5YAZWc/p6B5CBKDi/p0e

Two ways to Register:
Online
http://www.mylegaltraining.net/1PR/0/2/p5YAZWc/p6B5CBKDi/p0e
or By phone 1-888-669-6067   Use priority code: 207995

Injured Giants Fan to Play Role in Dodgers Bankruptcy.

"Bryan Stow, the San Francisco Giants fan brutally assaulted outside Dodger Stadium on Opening Day, will play a role in the Los Angeles Dodgers’ pending bankruptcy case.

Representatives of Stow, who suffered brain damage in the attack, were named Wednesday to serve on the influential unsecured creditors committee in the Dodgers’ Chapter 11 case, along with the Major League Baseball Players Association and three trade creditors."

Read more here.

LAW CLERK, EXTERN AND IEBF RECEPTION

To my Colleagues that practice in Riverside:

A college of lawyers and others dedicated to the study of bankruptcy and insolvency

PLEASE JOIN US FOR HORS D'OEUVRES WITH THE LAW CLERKS AND EXTERNS FROM THE UNITED STATES BANKRUPTCY COURT (RIVERSIDE DIVISION), OFFICE OF THE UNITED STATES TRUSTEE AND ROD DANIELSON, CHAPTER 13 TRUSTEE. PLEASE TAKE THIS OPPORTUNITY TO MEET THE PEOPLE WHO ARE WORKING UP YOUR PLEADINGS AND FOR THE LAW CLERKS AND EXTERNS TO NETWORK!
Tuesday, July 19, 2011
No Host Cocktails and Light Hors D'Oeuvres beginning at 6:00 p.m.

The Mission Inn
3649 Mission Inn Avenue, Riverside, CA
There is no charge for this event!
Hors D'oeuvres will be provided,
but please register by July 15 so we can know how many people to expect.

To register, email info@IEBF.org,
or complete and return the reservation form to:
The Inland Empire Bankruptcy Forum
6789 Quail Hill Parkway, #204, Irvine, California 92603

Questions?
Contact the IEBF at (951) 479-3585 or info@IEBF.org.

KEITH ALAN HIGGINBOTHAM
2011 cdcbaa President

David Bergstein Grilled for Three Hours in U.S. Trustee's Office

"Looking uncomfortable during three intense hours of grilling Thursday at a second creditors hearing in the U.S. Trustee's office in downtown Los Angeles, beleaguered financier David Bergstein said he didn't know, didn't remember or didn't have the resources to answer questions about the affairs and assets of the five movie companies he ran, including Capitol and Thinkfilm, which were forced into involuntary bankruptcy earlier this year.

However, when asked by Leonard Gumport, the attorney for court-appointed bankruptcy trustee Ronald Durkin, if it was not a fact that he backdated a contract by more than a year to make it appear his business partner Ronald Tutor had sold his interests in the movie business to him for $10 prior to the bankruptcy action, Bergstein defiantly and repeatedly said, "No," it was not true.

Gumport hammered away charging the document showing the sale of a holding company called R2D2 was actually created around May 2010. Bergstein said he couldn't remember exactly when he signed that agreement, but that it was some time in the first or second quarter of 2009. The involuntary bankruptcy case began in March 2010."

Read more here.

 

Court Ruling Sharply Narrows Severstal's Clean Up Liabilities

"In a little-noted court decision with potentially long-term local consequences, a federal judge has ruled that Severstal Sparrows Point LLC is not liable for the pollution that occurred at the Point before the bankruptcy court approved the sale of the former Bethlehem Steel Corp. plant to the Russian-owned steelmaker.

The U.S. District Court did require Severstal to undertake a sediment study of offshore pollution in the immediate area around the Sparrows Point plant, so the former owner of Sparrows Point may not be completely off the hook. The decision was signed by United States District Court for the District of Maryland Judge J. Frederick Motz on July 5."

Read more here.

Atl.-area gym owner files bankruptcy, blames NFL lockout

"David Irons Sr., a former Detroit Lion who typically spends his days training professional athletes at his Atlanta-area sports facility, is instead dealing with the fallout of the long-running NFL lockout. Irons, who is also the father of Auburn University standouts Kenny and David Irons Jr., has filed for Chapter 11 protection for his gym, Georgia Training Alliance Inc., to snag more time to hold off creditors until the lockout is over, reports the Wall Street Journal."

Read more here.