| December 2006 issue: Washington Hot News Private Tax Collections Still an Issue According to Taxpayer Advocate Nina Olson, private debt collectors may have a place in collecting delinquent tax debts... Your Name Here! The Bankruptcy Section is looking for volunteers to write a Case Analysis for an upcoming addition. The Case Analysis is typically based on Court of Appeals or Supreme Court decisions, although you can use your discretion to discuss relevant BAP, District Court and Bankruptcy Court decisions -- especially those interpreting BAPCPA's amendments to the Code. If you are interested or would like to learn more, please send an email to the Managing Editor. You can view the archive here. Your subscription You have been subscribed to this list as part of your membership in the Bankruptcy Section of the Commercial Law League of America. CLLA 70 East Lake Street, Suite 630 Phone: 312-781-2000 Newsletter design by: |
Sua SponteIvan J. Reich First, I wanted to take the opportunity to wish all members of our section a Merry Christmas, Happy Hanukah, and Happy New Year. Last month was a very exciting time for our section, and I wanted to let everyone know about the exciting things that have been happening in our section. Case AnalysisFaye B. Feinstein, Esq. Asst. Lauren Nachinson The Saga Continues: State Courts vs. Federal Courts Just when you thought the battle between state law and the Bankruptcy Code had reached a tie, the California Court of Appeal for the Fourth Appellate District tips the scales toward state law Case Law UpdatePaula Lucas In challenge to new debt relief agency provisions, court held 1) section 526(a)(4) prohibition on advising assisted persons to incur debt in contemplation of bankruptcy is unconstitutional, and 2) because ambiguity existed between definition of "debt relief agency" and provision reserving to the states their traditional role of regulating attorneys, sections 526, 527 and 528 do not apply to attorneys. Milavetz, Gallop & Milavetz, P.A. v. United States, 2006 U.S. Dist. LEXIS 88785 (D. Minn. Dec. 7, 2006). ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ Sua SponteFirst, I wanted to take the opportunity to wish all members of our section a Merry Christmas, Happy Hanukah, and Happy New Year. Last month was a very exciting time for our section, and I wanted to let everyone know about the exciting things that have been happening in our section. In November I attended both the National Conference of Bankruptcy Judges in San Francisco, and the Commercial Law League’s Eastern Region Meeting in New York. At NCBJ, I was proud to be able to stand at the podium on behalf of our section and present our Breakfast Speaker, Dr. Michael Rozier, a renowned author and anti-aging expert, and that afternoon present our Hot and Emerging Topics round table program on Creditors Committee representation. Our section’s breakfast and seminar were both well attended and received. This is truly one of our sections signature events, and an opportunity for our section to shine. I want to thank our NCBJ co-chairs, Judith Greenstone Miller and Judges Judith Fitzgerald and Jeff Deller for a job well done. I want to also thank Jay Welford, Bill Schorling, Paula Lucus, Sid Friedman and Dave Watson for all their help in making this program a success. Next year NCBJ will be held several weeks earlier in Orlando, and now that NCBJ is not being held so close to our New York meeting, I encourage all of you to attend the NCBJ. Our programs will be held on October 11, 2007. We already have our breakfast speaker and seminars lined up for next year, and it is a credit to our NCBJ committee for having accomplished this as early as they have. Humorist Dave Barry will be our breakfast speaker, and our hot and emerging topics for next year will cover a wide range of issues from (1) constitutional challenges under BACCPA, (2) federalism issues including preemption of bankruptcy law over state law, to (3) statutory construction with an emphasis on the uses and misuses of Section 105 under the Code. It is never too early to take advantage of the opportunities that are available to sponsor either the breakfast or seminar at next year’s event, and if you are interested in doing so please contact Paula Lucas at plucas@clla.org. Similarly we had a great convention in New York as well. We had a full slate of educational programming, some jointly presented with the National Association of Credit Managers. We hope in the future to again work with NACM on other joint educational endeavors. I want to thank Education Co-Chairs Wanda Borges and Frank Buckley for their efforts in that regard. In New York we also had a highly successful bankruptcy section cocktail party. I want to thank Marketing Co-Chairs Jeff Schatzman and Brian Behar for their efforts in putting together a wonderful event that we will be repeated again in Chicago in April. Our Marketing Committee has worked hard this year to help in putting together what will soon be our first on line section directory, and large case referral blog open exclusively to section members who sign up to participate. This latter effort is a pilot program the section hopes to implement in the next year whereby section members will post new large cases that have been filed in their local district on the blog, and try to create business opportunities for other members by posting lists of 20 largest creditors and finding out how fellow Section members can assist each other in securing representations in these cases. We hope to be able to roll out both programs shortly. Our section has also recently been approached by Congressional Representatives about the possibility of a technical corrections bill to the Bankruptcy Code/Rules in the next Congress in order to correct substantive and procedural problems that have arisen under the BAPCPA. Therefore I am asking for your suggestions for possible bankruptcy amendments to improve current bankruptcy practice. I ask that you please email your suggestions to Paula Lucas at plucas@clla.org no later than January 26, 2007 with your suggestions. Please concisely frame the problem that needs to be addressed, along with your proposed solution and amendment to either the Code or the Rules. I want to thank Legislative Co-Chairs Peter Califano and Cathy Vance, along with other lobbyist/ legal counsel, David Goch, for their tireless efforts on the legislative front. Our legislative committee is also working on proposed forms for disclosure statements and plans. If any of you have a model or draft form that you would like to share with your fellow section members, please forward the same to Peter Califano at pcalifano@cwclaw.com. Our section also affords members the opportunity to assist in the writing of amicus briefs on behalf of the Section and the League. I want to thank Bill Schorling and his committee for their efforts this year with respect to amicus briefs we have written on behalf of the section regarding the constitutionality of BACCPA. We are currently working on another Amicus Brief being written by Louis Robin and Kathy Brewer in the Enron bankruptcy concerning whether a claim sold in bankruptcy to a bona fide purchaser can be equitably subordinated based upon the seller’s misconduct. If any of you have issues that you think our worthy for our Section’s amicus consideration, or if you wish to participate in writing such a brief, please make it a point to email your suggestions to William H. Schorling at WHSchorling@klettrooney.com. Our next meeting of the Section will be at the CLLA’s Midwestern (and now Annual) Meeting to be held at the Westin Michigan Avenue in Chicago from April 19 through 22, 2007. I hope each of you will make it a point to attend our next conference in Chicago from April 19 through 22, 2007. We again will have a full slate of educational programs including programs on forum shopping, involuntary bankruptcies and hidden liens (co-sponsored with the creditor’s rights section of the CLLA). Also in Chicago, our section is again actively involved in the presentation of the Depaul Symposium, an educational program presented in conjunction with the Depaul Law School. Thanks to Cathy Vance and Paige Barr for all their help with the Symposium. In Chicago, besides education and cocktail parties, we will now be having our annual section elections. I want to encourage each of you to consider running for office as a member of the bankruptcy section executive council. It is a wonderful opportunity to steer the course of our section, become involved with shaping changes in bankruptcy law through our lobbying and amicus writing efforts, and participate in the issues facing bankruptcy practitioners around the country. Please email either myself at Ireich@becker-poliakoff.com, or our Chair Elect Deb Ebner at dkebner@aol.com if you are interested in running for council or as an officer of the section. Lastly, the League is holding its first ever Strategic Planning Conference from July 19 through 22, 2007 at the Royal Pacific Hotel at the Universal Orlando Resort. This Conference is a wonderful opportunity for all League members to participate in the future planning of this League. I encourage all of you to circle these dates on your calendars, and make arrangements to attend. That is all until next year. I wish you all a happy, healthy and prosperous new year, and a joyous holiday. Ivan Ivan J. Reich Case AnalysisThe Saga Continues: State Courts vs. Federal Courts Just when you thought the battle between state law and the Bankruptcy Code had reached a tie, the California Court of Appeal for the Fourth Appellate District tips the scales toward state law. As you may recall, the California state and federal courts disagreed as to whether the Bankruptcy Code pre-empted the state's law allowing assignees to recover preferential transfers. After the 9th Circuit's decision in Sherwood Partners v. Lycos, 394 F.3d 1198 (9th Cir. 2005) (holding that the Bankruptcy Code precluded enforcement of state laws on the same subject and, therefore, that the Code preempted state preferential transfer laws) and the opposite decision from the California Court of Appeal for the Second Appellate District in Haberbush v. Charles and Dorothy Cummins Family Limited Partnership, Case No. B175947 (holding that the Bankruptcy Code does not preempt state law governing assignments for the benefits of creditors), the score was tied 1-1. However, the recent opinion in Credit Managers v. Countrywide Home Loans, Case No. G035839 tipped the balance in favor of state law. In that case, the court recapped the holdings of Sherwood Partners and Haberbush and then declared that "the Haberbush court's analysis of the issue [was] more persuasive." Specifically, the court reasoned that based on its independent reading of state law and the Bankruptcy Code, the underlying policies of both and Supreme Court precedent, Congress did not intend to occupy the entire field of preferential transfer law. Therefore, the state law allowing assignees to recover preferential transfers could be enforced alongside the Bankruptcy Code. The practice points we previously provided are still worth considering, i.e. use Sherwood Partners to argue in favor of preemption outside the Ninth Circuit, or consider removal of the action to federal court. On a related note, the Bankruptcy Court for the Northern District of Illinois recently focused on foreclosures, another area of tension between state and federal law, and held that only in very limited circumstances is a federal court barred from reviewing a state court judgment of foreclosure. In In re Hodges, 350 B.R. 796 (Bankr. N.D. Ill. 2006), the debtor brought an adversary proceeding to rescind his mortgage based on, inter alia, alleged violations of the Truth in Lending Act and fraud, despite the fact that the state court had previously entered a judgment of foreclosure which specifically found that the debtor was "justly indebted" to the lender. In deciding whether the bankruptcy court had jurisdiction to overturn the state court judgment, the court explained that pursuant to the Rooker-Feldman doctrine, "lower federal courts do not have subject matter jurisdiction over claims seeking review of state court judgments." However, the court emphasized that this doctrine only precludes federal jurisdiction when the federal suit is filed after state proceedings are final. Thus, a federal court does have jurisdiction to hear a "federal action attacking an interlocutory state court order." The court held that it was free to hear Mr. Hodges' adversary proceeding because though the state court had entered a judgment of foreclosure, the property had not yet been auctioned. The court stated that a judgment of foreclosure does not become final until the property is sold and the court enters orders approving the sale and directing a distribution Since the state court judgment ordering foreclosure of the mortgage had not become final, the Rooker-Feldman doctrine did not bar the bankruptcy court from hearing the debtor's adversary proceeding. We always assume that in a battle between federal and state law, federal law will prevail. However, these cases demonstrate a different truth - when faced with conflicting laws each court will protect its own territory. Just as the California court protected its state law over federal law when addressing preferential transfers, the Bankruptcy Court held that the Bankruptcy Code trumped state foreclosure law. Faye B. Feinstein, Esq. Asst. Lauren Nachinson Case Law UpdateIn challenge to new debt relief agency provisions, court held 1) section 526(a)(4) prohibition on advising assisted persons to incur debt in contemplation of bankruptcy is unconstitutional, and 2) because ambiguity existed between definition of "debt relief agency" and provision reserving to the states their traditional role of regulating attorneys, sections 526, 527 and 528 do not apply to attorneys. Milavetz, Gallop & Milavetz, P.A. v. United States, 2006 U.S. Dist. LEXIS 88785 (D. Minn. Dec. 7, 2006). No-look guideline fees for Chapter 13 appropriate. A judgment awarding the attorney a portion of his requested fees in a bankruptcy case is affirmed in part and reversed in part where: 1) the bankruptcy court's use of the presumptive no-look guideline fees for routine Chapter 13 cases was consistent with 11 U.S.C. section 330; 2) the court's criterion for awarding additional fees beyond the presumptive no-look fees was proper under section 330; and 3) a failure to hold a hearing on the application for additional fees violated Bankruptcy Rule 2017(b). In re. Eliapo 2006 U.S. App. LEXIS 28062 (9th Cir. November 29, 2006) Avoidance action is a core proceeding under section 544, even though it relies on state law.Although in bankruptcy cases more liberality is afforded to pleadings of fraud, requirements of particularity still apply, including constructive fraud pleading. To plead fraud, a plaintiff cannot merely recite the statutory elements. In re. Circle Y of Yoakum Texas Nov. 28th (Bank DE) (ADD LINK) Removal of trustee not in error. Trustee removed by court because of trustee connections with insiders which created a potential appearance of impropriety. In re: AFI Holding, Inc.. (9th Cir. B.A.P 2006) Trustee damage award denied. The bankruptcy court did not err in refusing to award a trustee statutory damages and attorney fees where the trustee filed a proof of claim on behalf of a payday loan creditor and then objected to the claim and sought counterclaim damages . In re. Ferrell (9th Cir. BAP. 2006) Paula Lucas
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