| March 2008 issue: 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: |
Education Opportunities and Sponsorships AvailableSponsor the CLLA programming at the NCBJ. Here’s why:
**Firm sponsorships are also available ($250 or more)** Call the CLLA office for more information (800)978.CLLA Recent Legislative ActionsOn February 14th, the CLLA (and its Bankruptcy Section) submitted commentary with respect to the proposal to amend Rule 8002 of the Federal Rules of Bankruptcy Procedure (the "Rules") for the time for filing a notice of appeal in a bankruptcy case from 10 to 14 days, and the suggested proposal to further extend that time period to 30 days. Click here to read the commentary in its entirety. Sua SponteDeborah K. Ebner Some of the lessons that I have learned As the end of my term approaches, I take moments such as this one to look
back over the past year. I accepted the chair position because I was
concerned about the league and our section. Reportedly, membership and enthusiasm
were waning. My motive was simple. I wanted to give something to this
organization since it has always been supportive of me. I thought that I
could bring an energy to the group and continue to move it forward. There
were many who insisted that I was naïve and that my perception of the
league was dated, distorted and simply put, inaccurate. Furthermore, these nay
sayers insisted that I would spend my term working and getting nothing
in return. Well, what happened? Case Law UpdateJoshua D. Greene Refinancing of mortgage after filing of chapter 7 subject to avoidance. Where chapter 7 debtor refinanced and consolidated his mortgages after his chapter 13 was converted to chapter 7, the Bankruptcy Appellate Panel affirmed the lower court’s ruling that the post-petition transfer was subject to avoidance. The refinancing was accomplished without court approval or notice to the trustee. Moreover, the BAP held that the judgment avoiding the lien, which left the mortgage company as an unsecured creditor, was not a violation of the single satisfaction rule of §550. Miranda v. Doral (In re: Marrero), 1st Cir. B.A.P., No. 07-039, 1/22/2008. Case AnalysisJames W. McNeilly, Jr. Attorney-Client Privilege did not apply to either the debtors counsel’s file or to communications with debtors’ counsel regarding representation in the bankruptcy. Summary: In In re Myers, ___ B.R. ___, 2008 WL 294554 (Bankr. S.D. Miss. 2008), the court ordered the attorney for the debtor to produce his complete file and to testify as to what specific information was given to him to by the debtors in order for him to represent them in the bankruptcy. ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ Sua SponteSome of the lessons that I have learned As the end of my term approaches, I take moments such as this one to look back over the past year. I accepted the chair position because I was concerned about the league and our section. Reportedly, membership and enthusiasm were waning. My motive was simple. I wanted to give something to this organization since it has always been supportive of me. I thought that I could bring an energy to the group and continue to move it forward. There were many who insisted that I was naïve and that my perception of the league was dated, distorted and simply put, inaccurate. Furthermore, these nay sayers insisted that I would spend my term working and getting nothing in return. Well, what happened?
Last month I discussed the tremendous business opportunity that we all have by taking advantage of our league membership. I gave you one of many true examples of a league relationship leading to significant new business in my office. League activity does translate into business.
This past year, I learned from and networked with some of the most talented people in our field. In July 2007 I met, worked with and learned from the Honorable Jeff Hopkins, former President of the NCBJ. Judge Hopkins told me that he was very impressed with our organization and its potential. Judge Hopkins was so impressed that he and the Judge Judi Fitzgerald, our Executive Council member, placed a link to our website on the NCBJ website. Now members of both organizations are becoming involved with the programs of one another with the click of a finger. Not only do these links provide wonderful late night entertainment for those who enjoy surfing the web, but they also provide real life opportunities for those who attend our conferences. Thanks to the relationship of our organizations, Judge Hopkins will travel to Chicago on May 1, 2008, where he will join additional esteemed faculty at our annual DePaul Symposium and present "Lawyers, Law Firms & the Legal Profession: An Ethical View of the Business of Law." The next day, Judge Thomas Bennett, current NCBJ President will join other national experts to present a cutting edge address on Hot Topics including the subprime mortgage debacle. Later that afternoon, we will turn to our panel of national forensics experts to discuss fraud and financial investigation for examiners, debtors and committees. You can view these presentations by clicking the following links:
In September 2008, we are scheduled to kick off an annual "Bankruptcy Year in Review" at which Professor Robert Zinman of St. Johns Law School and our own Bill Schorling will present the first of many annual bankruptcy review sessions with cutting edge material available for us. And, our own Judge Jeff Deller now chairs a tele-seminar committee within the section and promises me that we can all look forward to its annual programming. These talented people are league members. They attend our conferences and get involved in our programs. They network with us. They provide us opportunity for development that one simply cannot get at the conferences of our competitors. If these people are active league members and attend our conferences and participate in our causes, how can anyone say anything except that the CLLA really is the place to be these days?
One evening, this past November at the New York conference, I opted not to go to dinner with Alan Nahmias and Peter Califano because I couldn’t handle all of the food that they kept ordering. Instead, I took a long walk down Avenue of the Americas with Dan and Lana Goldberg and one of Dan’s associates, Eva Engelhart. While we walked, Eva asked me what kept me involved with the league after all of these years? As Dan and Lana were haggling with the street vendors over the price of Rolex watches and Prada purses, I told Eva about a conference long ago in Traverse City Michigan when Dan was running for League President. My sons were ages five and under that summer. I took the boys to a tee shirt factory down the road where I got them tee shirts that read "DAN GOLDBERG FOR PRESIDENT". The boys paraded around in those tee shirts the entire week and Dan was voted in as the next League President. About ten years later I was cleaning out the basement and stumbled upon those tee shirts long discarded by the boys. I chuckled and called Dan to see if he wanted them. Dan laughed as he also fondly remembered the incident. It brought both tears to our eyes and loud belly laughs for the both of us. I explained to Eva that I stay with the League so that I can continue to shop with Dan and Lana Goldberg for Rolex watches and Prada purses. Join us in Chicago. We will be at the Westin Hotel Debbie Ebner Law Office of Deborah K. Ebner Case Law UpdateJoshua D. Greene Refinancing of mortgage after filing of chapter 7 subject to avoidance. Where chapter 7 debtor refinanced and consolidated his mortgages after his chapter 13 was converted to chapter 7, the Bankruptcy Appellate Panel affirmed the lower court’s ruling that the post-petition transfer was subject to avoidance. The refinancing was accomplished without court approval or notice to the trustee. Moreover, the BAP held that the judgment avoiding the lien, which left the mortgage company as an unsecured creditor, was not a violation of the single satisfaction rule of §550. Miranda v. Doral (In re: Marrero), 1st Cir. B.A.P., No. 07-039, 1/22/2008. Bankruptcy court lacked jurisdiction. The Second Circuit reversed a bankruptcy court’s order barring future suits against Travelers Insurance Company, a major insurer of the Johns Manville Corporation. The bankruptcy court had no jurisdiction to issue the order because the suits were directly against Travelers and would not be settled out of any part of the bankruptcy estate. According to the court, the bankruptcy court only has jurisdiction to enjoin third-party non-debtor claims that directly effect the res of the bankruptcy estate. In re: Johns Manville Corporation, 2d. Cir., Nos. 06-2099, et al., 2/15/2008. Debtor denied discharge. The court of appeals affirmed the bankruptcy court’s ruling denying a chapter 7 debtor discharge where the debtor fraudulently concealed assets by moving them to corporations not under his control to keep those assets from being part of his bankruptcy estate and lied on his schedules about those assets. Serio v. DiLoreto (In re: DiLoreto), 3d Cir. No. 06-4818, 1/30/2008. Using funds from one credit card to pay off another is preferential transfer if within 90 day period. Where debtor used convenience checks drawn from her credit card account with one bank to make payments on a credit card account with another bank two months before her bankruptcy was filed, the bankruptcy appellate panel affirmed the bankruptcy court’s decision finding that it was a preferential transfer. The court rejected the creditor’s arguments that the earmarking doctrine applied and that the estate was not depleted by the transfer. Meoli v. MBNA America Bank (In re: Wells), 6th Cir. B.A.P., No. 07-8021, 2/11/2008. Chapter 7 trustee removal upheld. Where chapter 7 trustee was removed by the bankruptcy court for lying about a prior relationship with creditors, the court of appeals found that: (1) the removal of a bankruptcy trustee is a final order subject to appeal; (2) a bankruptcy judge may remove a trustee sua sponte for lying under oath without request from a party in interest; (3) the bankruptcy court had cause to remove the trustee in this case. Walden v. Walker (In re: Walker), 11th Cir. No. 06-11743, 1/31/2008. Hanging paragraph does not eliminate deficiency claim. The court of appeals held that the hanging paragraph of Section 1325 did not eliminate a secured creditor’s deficiency claim when an automobile is surrendered as part of the debtor’s chapter 13 plan of reorganization. The Eighth Circuit adopted the minority position, which says that since Section 506 does not apply when the debtor purchased the automobile within 910 days of the bankruptcy filing, then state law should apply, allowing the deficiency claim when the debtor surrenders the vehicle. Capital One Auto Finance v. Osborn (In re: Osborn), 8th Cir. No. 07-1726, 2/5/2008. Liquidation test for preferences conducted as of date of bankruptcy petition. In a preference action, the Eighth Circuit Bankruptcy Appellate Panel reversed a bankruptcy court ruling and held that the hypothetical liquidation test of Section 547(b)(5) is to be conducted as of the date of the filing of the bankruptcy petition, rather than the date of transfer. Falcon Creditor Trust v. First Insurance Funding (In re: Falcon Products), 8th Cir. B.A.P., No. 07-6036, 1/28/2008. Joshua D. Greene Case AnalysisAttorney-Client Privilege did not apply to either the debtors counsel’s file or to communications with debtors’ counsel regarding representation in the bankruptcy. James W. McNeilly, Jr. Summary: In In re Myers, ___ B.R. ___, 2008 WL 294554 (Bankr. S.D. Miss. 2008), the court ordered the attorney for the debtor to produce his complete file and to testify as to what specific information was given to him to by the debtors in order for him to represent them in the bankruptcy. Factual Background: Debtors filed a Chapter 13 bankruptcy petition with the assistance of counsel. Upon conversion to a Chapter 7, a creditor contended that the conversion was in bad faith. In preparation for the hearing on that matter, creditor requested the complete file from the debtors’ attorney and attempted to depose him about communications with the debtors regarding the preparation of the bankruptcy filing. Debtors’ attorney refused, citing attorney-client privilege. Creditor moved to compel, requesting the court to order the debtors’ attorney to "produce a complete copy of his file pertaining to his representation of the Debtors in their bankruptcy and to testify as to what specific information was given to him by the Debtors in order to represent them in their bankruptcy." The Creditor alleged that either the attorney-client privilege did not apply, or if it did, the debtors waived the privilege when one of them testified that they had relied on the attorney’s advice. Debtors defended, citing the attorney-client privilege and argued two procedural grounds the court found to be without merit. Discussion: The court first set forth the Mississippi attorney-client privilege rule and described its purpose: to "ensure the honest and open communication between attorneys and their clients." The court then went on to state that the privilege is narrowed in the context of a bankruptcy, because a debtor is obligated to disclose all assets and liabilities, and, as a result, a debtor has no reasonable expectation that information disclosed to debtors counsel relating to assets and liabilities will be kept confidential. Citing U.S. v. White, 950 F.2d 426 (7th Cir. 1991), and In re French, 162 B.R. 541 (Bankr. D.S.D. 1994), the court then held that the attorney-client privilege did not apply to the documents contained in the debtors’ attorney’s file. The court also held that even if the attorney-client privilege did apply, the privilege was waived once one of the debtors raised "advice of counsel" as part of his defense. Finally, the court further found that the creditor had produced enough evidence to raise a question of the "possibility of fraud," and that the requested documents were "essential to the court’s determination of whether fraud was, in fact, perpetrated." The court held that "the attorney-client privilege does not exist as to legal representation procured in furtherance of fraud," and that therefore, the privilege did not apply to the documents and testimony requested. Practice Pointers: The court’s holdings that the privilege does not apply once waived, and that the privilege does not apply when the legal services are utilized in the furtherance of a fraud or crime, are both in line with previous holdings by other courts. However, the court’s apparent holding that the privilege does not apply to any documents contained in a debtor’s counsel’s file nor does it apply to any communications between debtors and counsel in a bankruptcy proceeding seems to be broader than previous decisions. For example, the court in In re Stoutamire, 201 B.R. 592 (Bankr. S.D. Ga. 1996) held that while the privilege did not apply to information given to complete the bankruptcy filings, it still applied to communications between the debtor and attorney’s employee regarding interview questions used to prepare the schedules. Also, in In re Bauer, 132 F.3d 504 (9th Cir. 1997) the court held that an attorney’s statements to the debtor, warning him that he had to disclose all assets and advising him of the perjury implications of falsifying information in bankruptcy filings, constituted legal advice, and therefore, was protected by the attorney-client privilege. Finally, the court in In re Foster, 188 F.3d 1259 (10th Cir. 1999) stated that "(n)o general rule allows the trustee for an individual placed in involuntary bankruptcy to invariably control the individual’s attorney-client privilege as to the debtor’s pre-petition claims" and remanded the matter to the trial court to inquire further into the debtor’s claims that the requested documents were protected by the attorney-client privilege or the Fifth Amendment to the U.S. Constitution. In spite of the court’s apparent holding that the privilege did not apply, Myers should not be read as a blanket rule that the attorney-client privilege never applies in a bankruptcy case. First, the debtors waived the privilege, and second, it appears that the debtors were involved in fraud; both of which are solid grounds upon which the court could base its holding that the attorney-client privilege did not apply to either the file or to the communications between the debtors and their attorney. However, based on this decision and similar decisions, creditors may wish to take advantage of the opportunity to glean information from the debtors’ attorney and from the debtors’ attorney’s file, with regard to issues arising out of or related to a bankruptcy. Debtors’ attorneys need be aware of the possibility that not only their files, but all communications with the debtor, may be subject to discovery. Finally, debtors’ counsel may be well served by adequately preparing debtors to respond to discovery without waiving the privilege. James W. McNeilly, Jr. With
affiliated offices in Chicago, jmcneilly@lakelaw.com Upcoming Education Programs:
The Commercial Law League of America and it's Bankruptcy Section offers you the opportunity to catch up on everything from...Ethical considerations involved in fee setting to considerations to be made when mergers and other firm movement occurs, to ethics and professionalism in general.
How forensic accounting can assist you with issues surrounding asset valuation, misuse of funds or issues involving the employment of investigative accounting.
Bankruptcy Bootcamp with tips, updates and thoughts from all sides of the case (Debtors and creditors counsel and a Panel Trustee) a program geared specifically towards those in need of a brief of the basics and those in need of a refresher or even tips from trustees.
These programs are offered in conjunction with the CLLA's Annual Chicago Meeting but can be purchased individually ($85 each) as well. On behalf of the Bankruptcy Section you are cordially invited. Get CLE credits and a taste of what we are all about. We are actively involved in issues pertaining to the field of bankruptcy; we author and submit position papers, letters of support and call for attention to issues critical to the field. This is all in addition to our amicus filings. Your voice, your opinion counts and can be powerful. If you are interested in taking part and being heard consider joining the CLLA and its Bankruptcy Section at our May programs and as a member ($375.).
May 1st – 4th The 78th Chicago Meeting Thursday
Friday
Saturday
Bankruptcy Section MembersThe Section is again calling for member pledges to be applied towards the CLLA programming at the National Conference of Bankruptcy Judges - to be held this year on September 25th in Scottsdale, AZ. This is a great way for you as a section member to make a contribution towards this outstanding programming while at the same time highlighting your firm. Sponsorships begin at a base commitment level of thirty-five ($50.00.) which includes a listing on the morning presentation screensaver.
Copyright © 2008 Commercial Law League Bankruptcy Section Except as otherwise provided, the CLLA Bankruptcy Section newsletter permits any individual or organization to photocopy any article, comment, note, or other piece in this publication, provided that: (1) copies are distributed at or below cost; (2) the author and the CLLA Bankruptcy Section seal are prominently identified on the first page; (3) proper notice of copyright is affixed to each copy; and (4) all other applicable laws and regulations are followed. The CLLA Bankruptcy Section reserves all other rights. |