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Everyone Has Rejection Issues

March 21, 2018


Everyone Has Rejection Issues

March 21, 2018

Authored by: James Maloney


In the typical day-to-day experience in bankruptcy proceedings, the debtor’s ability to assume or reject executory contracts and leases under Section 365 of the Bankruptcy Code is seen from the sometimes-unfortunate perspective of the creditor.  To the creditor’s perspective, the prohibitions of the automatic stay, periods of time during which treatment of the contract is uncertain, struggling to acquire adequate protection, a loss of control over who the contract may be assumed and assigned to, and the alternative of being rejected and left with a deemed prepetition claim, all combine to an undesirable scenario.

As misery loves company, two recent cases have illustrated that the requirements and operations of Section 365 can also result in disappointment to a debtor estate seeking contract damages and to a civil action plaintiff seeking compensation for appropriation of its intellectual property.

In Lauter v CITGO Petroleum Corp.[1] a United States District

Preliminary Injunctions in Bankruptcy Courts: Can a Litigant Get a Second Opinion?

November 27, 2016


District courts can hear an appeal from any interlocutory order, as long as they agree to accept the appeal.  28 U.S.C. § 158(a)(3).  Final judgments, orders and decrees are always immediately appealable.  28 U.S.C. § 158(a)(1).  Certain interlocutory orders, such as orders increasing or reducing the exclusive time periods for a debtor to file and obtain acceptance of a plan for reorganization under Chapter 11 are also immediately appealable.  28 U.S.C. § 158(a)(2).  Other interlocutory orders are appealable only “with leave of the court.”  Preliminary injunctions are interlocutory orders that fall into the last category.

The timing and process for perfecting an appeal of a preliminary injunction is not certain.  Recently, Judge James Zagel in the Northern District of Illinois declined to grant leave to appeal a preliminary injunction entered in the bankruptcy court, finding the debtor had no automatic right to appeal.  Gilman v. Goldberg (In re Goldberg),

Creditors Beware: Fifth Circuit Court of Appeals Expands Purview Of Potential FDCPA Violations And Furthers Circuit Split

October 23, 2016


In Daugherty v. Convergent Outsourcing, Inc., No. 15-20392 (5th Cir. Sept. 8, 2016) the Fifth Circuit Court of Appeals recently joined the circuit split interpreting the Fair Debt Collections Practices Act (“FDCPA”) in a way that further limits debts collectors.

Under the FDCPA the term “debt collectors” is not limited to those collecting debts for others –  certain creditors collecting debts directly owed to them can be bound by the FDCPA.   This statute prohibits debt collectors from using “false, deceptive, or misleading representation or means in connection with the collection of any debt.”  A debt collector who violates the FDCPA can be forced to pay actual damages, costs, reasonable attorney’s fees and up to $1,000 of additional damages if the plaintiff is an individual or up to $500,000 or one percent of the debt collector’s net worth in a class action.

In Daugherty, the Fifth Circuit considered whether

Madoff Continues On: Recent Tax Court Case Rules on Treatment of Madoff Account

Editor’s Note:  Our colleagues in Bryan Cave’s Private Client practice are on the cutting edge of tax matters, estate administration, challenging end-of-life matters, and other issues of estate and family law.  This area of law evolves at just about the speed of light.  Their leading blog, Life, Death, and Taxes demonstrates a commitment to thought leadership in this area, and we at The Bankruptcy Cave were excited to see this discussion of a recent Madoff-related ruling.  Kudos to Stacie Rottenstreich and Karin Barkhorn from Bryan Cave’s New York Private Client group for this interesting writeup.

In a recent Tax Court decision, Harry H. Falk, and Steven P. Heller, Co-Executors, v. Commissioner of the Internal Revenue, the United States Tax Court ruled that in the case of the Madoff Ponzi scheme, an estate which paid estate tax on Madoff assets which

Non-Final Finality: Does One Interlocutory Issue Resolved in a Bankruptcy Court Order Render All Issues Addressed in the Order Non-Appealable?

appellate court concept with gavel. 3D rendering

As the Supreme Court recently reminded us in Bullard v. Blue Hills Bank, not all orders in bankruptcy cases are immediately appealable as a matter of right.  Only those orders deemed sufficiently “final” may be appealed without leave under 28 U.S.C. § 158(a).  In light of the numerous parties and controversies involved in a typical bankruptcy case, determining whether an order is “final” can be complicated affair.  Thus, finality in bankruptcy is a “flexible standard” applied to discrete disputes that arise within the larger case. See generally 14 Wright, Miller & Cooper, Federal Practice and Procedure § 3926.2 (collecting examples of final and non-final orders).  That flexibility, however, has led to disparate results.

In In re Wolff, B.A.P. No. CO-16-016 (B.A.P. 10th Cir.

Are Those Taxes Owing On Your Late-Filed Tax Return Dischargeable? Maybe, But You Better Be In The Right Circuit

File Tax Return!

Individual debtors with old tax debts relating to late-filed tax returns may be surprised to find that those tax debts may not be dischargeable under section 523(a) of the Bankruptcy Code due to the lateness of the tax filing.  There is a current Circuit split regarding whether a late tax filing constitutes a “return” at all, which is critical to the dischargeability inquiry.  The Ninth Circuit weighed in last week in In re Smith, 2016 WL 3749156 (9th Cir. July 13, 2016), further cementing the split.  Individuals considering whether to file bankruptcy to obtain a discharge of old tax debts would be well-advised to assess the current legal landscape and plan accordingly.

Section 523(a)(1)(B)(i) Exemption From Discharge For Tax Debts

Section 523(a)(1)(B)(i) of the Bankruptcy Code exempts from discharge any debt

Snooze Alert (but you really have to read this) – Bankruptcy Forms and Various Dollar Amounts Changing on April 1

On April 1, a bevy of dollar amounts set forth in the Bankruptcy Code will change. Some of these are quite important to substantive relief, and others are quite important to making sure you don’t look bad in front of the client or your favorite (least favorite?) judge. We have Section 104 of the Bankruptcy Code to thank for this malpractice-inducing enterprise, which we enjoy every three years. See 11 U.S.C. § 104 (a) (“On April 1, 1998, and at each 3-year interval ending on April 1 thereafter, each dollar amount in effect under sections . . . shall be adjusted . . . .”).

At some point in the careers of the contributors to The Bankruptcy Cave, we would love to speak to the legislative scribes who meticulously cross-referenced all of BAPCPA’s new dollar figures to Section 104, but still managed to give us the hanging paragraph

Click To Appeal: Recent Second Circuit Decision A Cautionary Tale Regarding Electronically Filed Notices Of Appeal

mouse click

A recent Second Circuit Court of Appeals decision, Franklin v. McHugh, 2015 WL 6602023 (2d Cir. 2015), illustrates the dire consequences of failing to comply fully with all electronic filing requirements for a notice of appeal. Although appellant’s counsel in that case attempted to file a timely notice of appeal, properly initiated the electronic filing process, paid the filing fee, and received payment confirmation, the Second Circuit dismissed the appeal for lack of appellate jurisdiction due to the technical failure of appellant’s counsel to “click all the buttons” required to complete the filing. In jurisdictions that require electronic filing, counsel must be mindful not only of the applicable procedural rules but also of the electronic filing requirements.

The Applicable Rules Minefield


Ninth Circuit Holds Twombly / Iqbal “Plausibility” Standard Does Not Apply To Denials

In a seminal pair of decisions, Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007) and Ashcroft v. Iqbal, 556 U.S. 662 (2009), the United States Supreme Court clarified that the pleading standard under Federal Rule of Civil Procedure 8(a) requires that a complaint contain sufficient factual allegations to state a claim to relief “that is plausible on its face.” Neither Twombly nor Iqbal addressed, however, whether this “plausibility” standard also applies to denials under Federal Rule of Civil Procedure 8(b). In its recent decision in In re Mortgages Ltd., 771 F.3d 623 (9th Cir. 2014), the Ninth Circuit Court of Appeals weighed in and held that the “plausibility” standard does not apply to denials.

The debtor in this case, Mortgages Ltd., was a private lender that made loans secured by real estate located in Arizona. Mortgages Ltd. funded its lending operations, in part, by selling fractional interests in its

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