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Sua SponteIvan J. Reich EDUCATIONAL OPPORTUNITIES ABOUND Fall is a real exciting time to be Chairman of the CLLA’s Bankruptcy Section, since this is a great time to consider some of the fantastic educational programming that our section is putting on at both the National Conference of Bankruptcy Judges in San Francisco on November 2, 2006, and a week later at the New York Meeting of the Commercial Law League on November 9th, 2006.
Case AnalysisPaige E. Barr Efficiency vs. Ethical Responsibility Summary: In In re Rivera, 341 B.R. 435 (Bankr. D.N.J. 2006), the Court issued sanctions pursuant to Fed.R.Bankr.P. 9011 against mortgage lender’s counsel for favoring efficiency over their ethical responsibilities. Case Law UpdatePaula Lucas Debtor may sue to recover pre-petition preferences. Debtor, having sold to a third party all interest in a subsidiary (not included in the chapter 11 filing) seeks recovery of payments made. Citing Sec. 363, which permits court authorization of the sale of a debtor’s assets free and clear of any interest in that property and the specific provisions of the sale agreement, the debtor claimed a right to the recovery of preferences payments. ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ Sua SponteEDUCATIONAL OPPORTUNITIES ABOUND Fall is a real exciting time to be Chairman of the CLLA’s Bankruptcy Section, since this is a great time to consider some of the fantastic educational programming that our section is putting on at both the National Conference of Bankruptcy Judges in San Francisco on November 2, 2006, and a week later at the New York Meeting of the Commercial Law League on November 9th, 2006. Both of these meetings afford our section members with not only enormous opportunities to get valuable information about cutting edge issues in bankruptcy, but also afford great networking opportunities to meet with fellow practitioners, credit and turnaround managers, trustees, and others associated with the credit granting and insolvency industries. I encourage each of you to make it appoint to sign up for each of these conferences, even though they are a week apart, it will be the most productive two weeks you will spend in developing your knowledge and contacts in the bankruptcy field. On Thursday, November 2, 2006 from 7 a.m. to 8:45 a.m. I would hope each of you would attend the Annual CLLA Breakfast with our guest speaker, international aging specialist, Dr. Michael Rozien. Dr. Rozien will provide valuable insights into how we can all reverse the aging process, and transform our health and add years to our lives. That same afternoon, from 2:30 p.m. through 5:30 p.m., our section is presenting The Honorable Frank W. Koger Memorial CLLA Education Program, which is our 21st Annual Current Developments in Hot and Emerging Areas: Everything You Always Wanted to Know (And Didn't Necessarily Ask) About Creditor Committee Representation! There will be three panels on the topic, and they are:
I want to express my appreciation to the co-chairs of this Joint NCBJ/ CLLA Program: Judith Greenstone Miller, Judge Judith Fitzgerald, and Judge Jeffery Deller, along with our League bankruptcy staff liaisons, Erica Henry and Paula Lucas, for their tireless efforts in putting together and coordinating these high quality programs. Our educational offerings at our New York conference will be equally compelling. We have a full slate of bankruptcy education programs beginning on Friday, November 10, 2006 from 10 a.m. to noon, with a section program titled “Ethics: Arrow’s in the Bankruptcy Judges’ Quiver Approach,” to be followed at 1 p.m. with an hour and forty five minute joint program with the National Association of Credit Managers (“NACM”) examining the aftermath and effects over in the past year of BAPCPA, both upon the law and upon bankruptcy practitioners as a result of these sweeping changes. These programs are complemented by another joint NACM program on Saturday, November 11, 2006, called “Bankruptcy: A 360 Degree View”, from 8 a.m. to 9:45 a.m., which is a hands on practical program viewing the bankruptcy process from the viewpoint of a trustee, a trade creditor, both bankruptcy and creditors rights attorneys, and an adjustment expert. That program will be followed at 10:15 a.m. with an hour and forty five minute program titled “Preferences: Guilty Until Proven Innocent” examining all aspects of a preference case from the claim to the defense and strategies for avoiding such claims. These programs highlight what is one of the great strengths of the Bankruptcy Section of this League, and what sets us apart from other similar organizations, is that we offer excellent bankruptcy education. I want to thank our Section Educational Co-Chairs Francis Buckley and Wanda Borges for a job well done. While in New York, all members of the Bankruptcy Section are encouraged to learn more about the Bankruptcy Section, meet your fellow members, and invited to participate in all the meetings of the Section to be held there, including:
Between the educational and networking opportunities available to our members at these two events, you, our section members would be well served to take advantage of all we offer at these events and through out the year. While in New York, we hope you would attend our various section meetings and events so you can learn how to get more actively involved in the section. Looking forward to seeing you in November, Ivan Ivan J. Reich Case AnalysisEfficiency vs. Ethical Responsibility Summary: In In re Rivera, 341 B.R. 435 (Bankr. D.N.J. 2006), the Court issued sanctions pursuant to Fed.R.Bankr.P. 9011 against mortgage lender’s counsel for favoring efficiency over their ethical responsibilities. Factual Background: Mortgage lender’s counsel engaged in the regular practice of preparing vanilla certifications for agents of the mortgage lender to sign. Counsel kept the pre-signed certifications on file and attached them to summaries of mortgage defaults which were filed in support of stay relief motions. The filed certifications were never reviewed by the signatories of the certifications. In fact, in one instance the signatory to the certification had not been employed by the mortgage lender for over a year when the certification was filed. The practice was brought to the Court’s attention in this particular case when the mortgage lender filed a Certification of Default on August 16, 2005 executed by Amirah Shahied. The certification consisted of two pages. The first page had five numbered paragraphs including the total arrears and late charges. The second page had three typewritten lines, bearing a paragraph numbered “8,” the signature of Amriah Shahied, a blank date line, and across the top a facsimile transmission header dated “12/24/03.” The Debtor filed a response in opposition to the mortgage lender’s certification. The Court thereafter sua sponte issued an order to show cause to address the anomalies in the mortgage lender’s certification. The court warned the mortgage lender and its counsel that it would consider sanctions under Fed.R.Bankr.P. 9011, potential referral to the appropriate ethics authorities, and to the United States Trustee. At the hearing on the Order to Show Cause, counsel for the mortgage lender testified that the firm’s operational performance was measured in terms of timeliness. Discussion: The Court chose to use Fed.R.Bankr.P. 9011 as its disciplinary avenue. The Court reasoned that Fed.R.Bankr.P. 9011 is the most specific disciplinary option available to bankruptcy courts concerned with questionable written submissions. The Court ruled that no reasonable attorney would consider engaging in the practice of using these on-file certifications. The court found that this practice was in violation of Rule 9011 because writings were presented for an improper purpose, i.e., to have the court believe they were certifications. The court noted that the law firm had become a paper pushing factory; the pressure of turnaround time from receipt of a file to stay relief application was the driving force at the firm. That type of pressure must impact other firms providing services to other large mortgage companies and their servicing agents and perhaps prompts their taking unauthorized shortcuts. The court need not find “bad faith” or a nefarious intent in order to conclude Rule 9011 representations were breached. The pure heart and empty head defense is not available to anyone faced with Rule 9011 sanctions. The court found that the attorneys knew the practice of attaching presigned forms to documents required to be certifications was a shortcut; yet they acceded to pressures (whether to get an edge in competition with others or to best perform by client, firm, or industry stopwatch standards, or both). The court imposed a $500 sanction on the individual attorney involved and a $125,000 penalty on the law firm. Comment: In our modern state of “e-ness” the quest for efficiency is constantly evolving. In this age of blackberries we have come a long way from the days of the scroll. The business demands of practicing law are following in step with this evolution. Clients expect quick responses to their needs. There is a fine line between “efficiency” and “shortcuts.” The drive for efficiency and quickness can easily cross the line and become a shortcut, as demonstrated in Rivera. The clear judicial response to this drive is rejection of the idea that the business demands of practicing law might, in some circumstances, trump an attorney’s higher duties as learned professionals with ethical obligations to their clients and the courts. As the court in Rivera stated, “the court depends on the ethical and professional conduct of attorneys. As volume increases, judicial processes and participants are subjected to certain pressures. Electronic filing and retrieval are necessary court aids, but dependable, ethical performance by lawyers remains indispensable. Lawyers must maintain their independence – and resist, at the risk of losing a client or their employment, pressures from which would undercut their professionalism.” Ms. Barr is a panelist at the upcoming CLLA New York Meeting: Ethics: Arrows in the Bankruptcy Judges’ Quiver, Tools in the Toolbelt Approach, which will be presented Friday Nov. 10, 2006 Visit www.clla.org/events for additional panelists and more information. Paige E. Barr Case Law UpdateDebtor may sue to recover pre-petition preferences. Debtor, having sold to a third party all interest in a subsidiary (not included in the chapter 11 filing) seeks recovery of payments made. Citing Sec. 363, which permits court authorization of the sale of a debtor’s assets free and clear of any interest in that property and the specific provisions of the sale agreement, the debtor claimed a right to the recovery of preferences payments. The court agreed, pursuant to Sections 363 and 105, and in conjunction with the sale agreement, found there to be no waiver or release of preference claims. Amphenol Corporation and Amphenol Technical Products International Co., v. Chad Shandler, Trustee, (Bank DE) CLICK HERE FOR ACTUAL CASE Return of final payment on nondischargeable debt within preference period does not revive the claim. To be constituted as nondischargeable claim the claim must have been made on the date of petition filing. Although 11 USC 502(h) does in fact recognize a correlative claim inuring to the benefit of a party who returns an avoidable transfer, that claim is only against the estate, not against the individual debtor. The final payment of the claim during the preference period eliminated any personal claim against the debtor on the date of the petition. In re. Laizure 2006 Bankr. LEXIS 2087 (9th Cir. September 1, 2006) BAPCPA eliminates business judgment rule as standard for certain valuations. Where valuation of the propriety of postpetition payments made to either induce corporate executives to remain with the company or as severance pay. In re. Dana Corp. (Bankr. S.D. N.Y.) Secured mortgages may be modified. Under 11 U.S.C. Sec. 1322 (b)(2) mortgages secured by real property which includes both the debtors principal residence and other income property may be modified. In re. Scarborough 2006 U.S. App. LEXIS 21939 (3rd Cir. August 28, 2006)) Debtor may waive right to FDCPA protections. Specifically the court found a debtor may waive; 15 U.S.C. Section 1692 c (c) upon written request of a debtor, a debt collector must cease communication and that verification of a debt (15 U.S.C. Sec. 1692 g) requires that a collector merely provide written confirmation that the debt amount being demanded is in fact what the creditor claims to be owed. Clark v. Capital Credit & Collection Servs., Inc., 2006 WL 2441705 (9th Cir. August 24, 2006) Paula Lucas Don’t Forget to Register for CLLA’s NCBJ Breakfast and Education ProgramFor over a decade, the CLLA has produced two of the most highly regarded programs at the annual National Conference of Bankruptcy Judges. The CLLA educational program is entitled "The Honorable Frank W. Koger Memorial Current Development in Hot & Emerging Areas of Bankruptcy." This program--unequaled in the industry--puts together top-ranked speakers in the field and superior educational materials in order to educate attendees on the latest issues facing bankruptcy professionals. In addition to this program, the Annual CLLA Breakfast is a must-attend during the conference. Number one bestselling author Dr. Michael F. Roizen, well-known founder of the Scientific Advisory Board of RealAge, Inc. and often featured on The Oprah Winfrey Show for his age-defying wisdom, will be the keynote speaker at the 18th Annual Commercial Law League of America Breakfast to be held on November 2, 2006. Are you interested in learning your RealAge? Visit Oprah’s website at the following link, where Dr. Roizen’s RealAge test is featured: http://www.oprah.com/health/lifestages/realage/health_real_main.jhtml Additionally, click here for more information on the CLLA NCBJ programs. Washington Hot NewsPrivate Tax Collections Still an Issue - September 27, 2006 According to Taxpayer Advocate Nina Olson, private debt collectors may have a place in collecting delinquent tax debts, but it is not as envisioned under the Internal Revenue Service's current plan Olson believes that the core responsibility of collecting tax debt should remain with the IRS and private entities can assist with "skip tracing or trying to find assets." Proposed Senate Bill Barring IRS Utlization of Private Collection Agencies -September 22, 2006 Senate Bill Would Bar IRS From Utilizing Private Agencies to Collect Tax Delinquencies. On September 7th, the IRS turned over 12,500 of a projected 2.5 million delinquent debt cases to three of an ultimate 10 private collection companies, despite a House vote to bar such action contained in the fiscal year 2007 Transportation, Treasury, and Housing and Urban Development Appropriations bill (H.R. 5576) that would bar funding for the program for fiscal year 2007, which begins October 1st. Last week, Sen. Dorgan (D-N.D.) and eight Democratic co-sponsors, including Senate Finance Committee member Kerry (D-Mass.), introduced S. 3887, that permanently bar the IRS from outsourcing tax collection. Senate Judiciary Committee 9th Circuit Provision (S.1845) -September 22, 2006 Yesterday, the Senate Judiciary Committee passed, and ordered to be reported, S.1845, a bill to provide for the appointment of additional Federal circuit judges and to divide the Ninth Circuit into two circuits. David Goch
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