Illinois Bankruptcy Lawyer Blog

The economy continues to gasp for air. You eye the want ads nervously. Are you one paycheck away from selling the family silver?

You bet! Cruise over to Inforuptcy.com to check out how a lifetime's worth of heirlooms can be bought and sold by bankruptcy trustees, investors, and guys with too much time on their hands.

And you thought there were no new ideas...

In re Leventhal - 11-A-1467 (ND IL ED, 2012)

On its face this case is an adversary where the Debtor is moving to disqualify the Plaintiff's attorney because the Plaintiff's attorney may be called as a witness in the case. The court cites the "Advocate Witness" rule which comes from the Model Rules of Professional Responsibility 3.7. There are 2 elements to the analysis to determine whether to disqualify an attorney-witness. The first is to determine the likelihood of the attorney being a necessary witness. The second is if the attorney is a necessary witness would the disqualification be a substantial hardship on the client.
The analysis of the first prong - the likelihood of the attorney acting as a witness, is where the case was interesting. The Plaintiff filed the adversary on the basis that he did not receive notice of the Debtor's bankruptcy until after the discharge so he was unable to charge the dischargeability of the debt owed to him under 523(a). The Debtor had only listed the Plaintiff's name and city on the bankruptcy petition, so notice was not mailed to him.

The Debtor attempted to impute knowledge to the Plaintiff based on two theories: (1) the creditors meeting was continued five times and this information was publically available on the bankruptcy docket (presumably CM/ECF). The court noted that all creditors are not routinely given notice of all events on the bankruptcy docket and that the Bankruptcy Noticing Center (BNC) does not send out notice of continued creditor meetings. In fact if the BNC does send out notice, there will be a separate docket entry for the BNC certificate of service. Since there was no record of notice sent out, simply being listed on the docket was not enough to impute knowledge of the bankruptcy to the plaintiff.

The second theory was given more weight by the court (although the issue was not decided by the court, this opinion was just a ruling on the motion to disqualify counsel). This theory was that the Debtor had emailed Plaintiff's attorney 2 weeks post-petition that had filed a personal bk. There is a presumption that a properly addressed item mailed to someone was received by that person. Laouini v. CLM Freight, 586 F.3d 473, 476-7 (7th Cir. 2009). That presumption has been extended to include email. American Boat v. Unknown Sunken Barge, 418 F.3d 910, 914 (8th Cir. 2005). Therefore if the Debtor were to testify that he emailed the Plaintiff's attorney, there would be a presumption that the Plaintiff's attorney received it. That knowledge can then be imputed to the Plaintiff. Based on this logic, the court concluded that the Plaintiff attorney would likely be a necessary witness.

This is the interesting part of the case - is a docket entry in CM/ECF sufficient for notice and is an email to a creditor's attorney sufficient for notice of the bankruptcy? From this case, clearly a docket entry alone in not sufficient; however, if there is a corresponding BNC certificate of service entry it could be. And while the court did not rule of the sufficiency of email notice from the debtor to a creditor, the court did cite enough case law to indicate that it could be.

Eva Longoria's company Beso LLC is not in desperate shape contrary to a filing by a creditor's group. A Las Vegas bankruptcy judge denied an emergency request to give control of the company to the trustee. The original articles can be found here and here.

Justia.com Opinion Summary

Defendant owned companies forced into Chapter 11 bankruptcy, but was not a debtor in the proceedings. The plan was confirmed and prohibited suits against the bankruptcy professionals and certain litigation against pre-bankruptcy creditors. Years later defendant sued plaintiff, pre-judgment creditors, and the bankruptcy professionals in an Indiana state court, based on Indiana law. The creditors removed the suit to bankruptcy court (28 U.S.C. 1452(a)) rather than asking the bankruptcy judge to enforce his order. The statute authorizes removal of any claim of which that court would have jurisdiction under 28 U.S.C. 1334, which confers on the district courts original jurisdiction of all civil proceedings arising under the Bankruptcy Code, or "arising in or related to cases under" the Code. The bankruptcy judge determined that the suit against the bankruptcy professionals was barred. Defendant filed an amended complaint eliminating all defendants except plaintiff and stating that the only claims arose from alleged violations of confidentiality agreements. The bankruptcy judge ruled that, as amended, the complaint was unrelated to the bankruptcy and ordered the suit remanded to the state court. The district judge affirmed. The Seventh Circuit concluded that the dismissal was not subject to review.

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Justia.com Opinion Summary:

Wisconsin smelting plant owed more than $1.3 million in delinquent utility charges to the local municipal utility when it filed for Chapter 11. Months later, despite the Automatic Stay, a utility company implemented a process pursuant to Wisconsin Statutes and Local Ordinances 66.0809 and 66.0627 by which the plant's unpaid utility bills became a lien against the Debtor's property. Both the Bankruptcy and District Courts found that none of the exceptions to the Automatic Stay applied to make their actions. They were, in fact, a violation of the Stay. The 7th Circuit Court of Appeals affirmed, holding that no exception to the Stay applied and the offending utility company creditor did not obtain a pre-petition security interest in the plant's property by providing services or by giving notice in the form of billing. Finally, the 7th Circuit agreed with the District Court that the utility bills produced did not amount to a "tax or special assessment" that would have exempted them from the operation of the Stay.

Click here to download this Opinion in PDF format

Issued: January 20, 2011 by Judge Doyle

Case #: 09 B 46723, 10 A 01292

The Issue: Whether an individual creditor has standing under § 523(a)(4) to bring a direct action against directors of an insolvent corporation for breach of fiduciary duty.

The Story: Debtor owned a plumbing company. Plaintiff claimed that Debtor breached his fiduciary duty to creditors after the plumbing company became insolvent due to the diversion of company funds to pay for the Debtor's personal debts. Creditor claimed that the debt was non-dischargeable in bankruptcy under Rule 523(a)(4). The court held that the individual creditor lacked standing. Also a good walk thru on Illinois law about "Special Circumstances Fiduciary Duty."

Click here to view and download the opinion in .pdf format.

On Monday Muzak Holdings LLC announced that it has completed its financial restructuring and has emerged from bankruptcy protection.The company, which provides background music programming is heard in stores, office buildings and on-hold phone systems, filed for Chapter 11 bankruptcy protection in Delaware a year ago to refinance heavy debt. The Fort Mill, S.C., company said it has significantly improved its balance sheet, reducing its outstanding debt by more than half and realigning its organizational structure to improve its clients' experience. In a prepared statement Stephen Villa, CEO of Muzak, was hopeful for the post-reorganization future of the company, saying:

As we move into the future, our strengthened capital structure provides us with the renewed ability to invest in new talent and technology that will allow us to provide new offerings and further enhance the first class products and services that our clients have come to expect from Muzak

Insert Muzak joke here ...

Copyright 2010 The Associated Press.

Posted via email from beyond bankruptcy

We would have accepted either C-I-T or A-D-V-A-N-T-A as a correct answer

As reported all over the Web, including this story by CNN, credit card overlord and perennial heavy-handed creditor Advanta filed for Chapter 11 bankruptcy protection a few days ago - just one week after CIT Group, a top secured lender to small business, did the same. Both lenders experienced (ha!) a sharp rise in defaults. Welcome to the world of the consumer. Personally I hope that their creditors show them no mercy. If the Bankruptcy System is to work then it must be an equal handicap for large and small. If Advanta or CIT are reconstituted through Chapter 11 I can only hope that this time the intention is to help small business and business owners - not to hound them to death as both creditors are famous for.

Q: I am a limited partner. I suspect that the general partner converted funds belonging to the limited partnership. How do I sue on behalf of other limited partners?

A: A general partner is a fiduciary to limited partners, much as a director is to shareholders in a corporation. This means that the gp account for his actions to the limited partners and at all times conduct itself with the utmost good faith. If those rules were not observed then the proper remedy is a derivative suit - so named because the complaining party must sue in the name of the limited partnership. Before filing suit however certain questions must be answered and you may need to hire a forensic accountant to fully investigate. Finally, keep in mind that if the limited partnership or the general partner need(s) to file bankruptcy then a post-filing adversary complaint is your route.

In re Griffin Trading Company, Inc., 98 B 41742

Leroy G. Inskeep, Trustee v. Farrel and Roger Griffin, 01 A 00007

Opinion: In an Adversary case stemming from the Chapter 7 bankruptcy of a futures broker, judgement for Trustee is reversed due to lack of sufficient causation following remand from the District Court.

Opinion Issued October 30, 2009

By the Honorable Bruce W. Black

View and download the opinion in PDF format here

Chapter 7 and 11 Calls

Effective immediately new motions to be heard after Oct. 12 should be noticed for Tue or Wed at 9:30 a.m.

Effectivethe week of Oct. 5 motions and set matters to be heard that week will be set for Thu, Oct. 8.

Effective the week of Oct. 12 J. Wedoff will begin hearing cases on Tuesdays and Wednesdays [regular schedule]. New motions, status hearings, or other set matters now scheduled for a Tue or Wed after Oct. 12 will be heard on the Tue or Wed on which they are scheduled.

Any motion already noticed for a Thu after Oct. 12 will still be heard as set noticed unless movant chooses to re-notice for a Tue or Wed after Oct. 12.

Chapter 13 Call

Judge Doyle will continue to hear Judge Wedoff"s Chapter 13 call on Thursdays at the regularly scheduled times until further notice.

Thank you for your cooperation during the last month in rescheduling Judge Wedoff"s Chapter 7 and 11 matters for Thursdays

To view and download this information in pdf format click here

In re Raymond Professional Group, Inc. et al., 06 B 16748

Raymond Prof. Group v. William A. Pope Co., 07 A 00639

Opinion Issued Sep. 15, 2009

By Judge Jack B. Schmetterer

To view the opinion in PDF format click here

From MacroScope comes this gem about the "recovery" we are supposed to be experiencing . The Blue Chip Survey published August 10 indicated that economists were in agreement about one thing: that the recession, the longest since the Great Depression, will be over in September. Can you feel the recovery yet? Maybe these opinions from the surveyed economists will help:

87% Expect a recovery by September

16% Expect a strong recovery

16% Expect a double-dip recovery

65% Expect a long, slow recovery

100% Were full of hot air (hey, they're economists)

Nearly all agreed that the economy would continue to lose jobs for some time no matter what. The consensus was that the national rate of unemployment would peak at 10.2% by the first quarter of 2010. In short, prepare for more pain.