Shulman Hodges & Bastian LLP

June 2014 Archives

Eroding Bankruptcy Court Jurisdiction and Unresolved Questions Following the Bellingham Decision

The Supreme Court of the United States issued its long awaited follow up decision to Stern v. Marshall, 564 U.S. ___ (2011). In Stern, the Supreme Court held the U. S. Constitution does not permit a bankruptcy court to enter final judgment on certain bankruptcy related litigation claims - including certain claims which are expressly identified as "core" claims pursuant to 28 U.S.C. Section 157 (b)(2). Instead, a bankruptcy court may only make proposed findings of fact and conclusions of law which then must be reviewed "de novo" by the district court before a final judgment may be entered on the matter. A de novo review, by definition, requires a complete and independent review with no deference to the decision by the lower court. By comparison, prior to Stern, bankruptcy courts were able to issue final judgments on all core claims which then would be subject to review by the appellate court with much greater deference to the lower court's decision (e.g. findings of fact would only be reversed if they were "clearly erroneous" while issues of law would be reviewed de novo review).

Changes to the Federal Rules Regarding Testifying Expert Discovery

Prior to the December 2010 amendments to the Federal Rules of Civil Procedure ("FRCP"), Rule 26 required that a party produce all "data or other information considered by" its testifying experts. This included draft expert reports and notes, as well as communications between testifying experts and counsel. In 2010, in order to "alter the outcome in cases that have relied on [the pre-2010 Rules] requiring disclosure of all attorney-expert communications and draft reports," FRCP 26(a)(2) and (b)(4) were amended to "provid[e] work-product protection against discovery regarding draft reports and disclosures of attorney-expert communications." See Advisory Committee Notes on 2010 Amendments to Rule 26.

Supreme Court Gives Cell Phones Constitutional Protection

"The Supreme Court of the United States unanimously decided on Wednesday, June 25th, that the contents of your cell phone are worthy of protection under the Fourth Amendment from unreasonable searches and seizures by the government. The Court was clear that if the government wants to search your phone, it must first obtain a warrant. In ruling against an Obama administration position, Chief Justice John Roberts wrote the opinion for the Court finding that merely because a person might have a cell phone on them at the time they are detained does not give the authorities the ability to search the contents of the phone. Chief Justice Roberts distinguished cell phones from other devices calling it "not just another technological convenience[.]" Cell phones contain vast amounts of personal information which is no less deserving of Fourth Amendment protection. The Court was very clear in its expectations of law enforcement going forward: "Our answer to the question of what police must do before searching a cell phone seized incident to an arrest is accordingly simple - get a warrant[.]"

Jury verdict favors Facebook in patent infringement case

Whether you're seeking to hold someone liable for patent infringement or defending against a patent infringement claim, it is important that you have a legal professional investigate the patents in question and monitor patent portfolios. With the proper documentation many patent disputes can be resolved outside of court. That wasn't the case, however, in a recent trial involving Facebook and a company representing a now-deceased computer programmer. According to Rembrandt Social Media, which sued Facebook, a Dutch programmer named Joannes Van Der Meer patented the means to operate an online personal diary called Surfbook prior to Facebook's existence.

Costa Mesa-based Elephant Bar to reorganize through Chapter 11

A number of relief options are available for businesses with heavy debts. Depending on your financial situation and how your business is structured, there may be out-of-court solutions such as a negotiated settlement with creditors or debt restructuring. In other cases, the best option may be business reorganization through Chapter 11 bankruptcy.

The Ninth Circuit Permits Award of Appeal Fees to a Debtor Defending a Creditor's Appeal of a Finding that the Creditor Violated the Automatic Stay

The Ninth Circuit recently issued the opinion, America's Servicing Co. v. Schwartz-Tallard (In re Schwartz-Tallard), Case No. 12-60052 (9th Cir. April 16, 2014), which held that in spite of the Ninth Circuit's holding in Sternberg v. Johnson, a debtor is not precluded from recovering, as damages, attorneys' fees for defending against a creditor's appeal of a finding that the creditor violated the automatic stay. Sternberg had held that a debtor could not recover attorney's fees for services performed in an adversary proceeding seeking damages for a stay violation. Sternberg v. Johnson, 595 F.3d 937, 947 (9th Cir. 2010)(finding that "the proven injury is the injury resulting from the stay violation itself. Once the violation has ended, any fees the debtor incurs after that point in pursuit of a damage award would not be compensate for 'actual damages' under § 362(k)(1).").

The Ninth Circuit's Bankruptcy Appellate Panel Holds That Post-Petition Eviction of a Debtor From His Home Violated the Automatic Stay Which Protects His Possessory Interest in the Home

The Bankruptcy Appellate Panel of the Ninth Circuit ("BAP") recently issued the opinion Eden Place LLC v. Perl (In re Perl), Case No. 13-26126-NB (9th Cir. BAP June 5, 2014), which held that debtors' filing for bankruptcy voids his eviction from the home he still occupied because the automatic stay protected his possessory interest in the home. Nine days prior to the debtors filing a voluntary petition under Chapter 13 ("Petition Date"), the state court entered an unlawful detainer judgment ("UD Judgment") in favor of the plaintiff. Six days prior to the Petition Date, the state court entered a Writ of Possession in favor of the plaintiff. One day before the Petition Date, the debtors failed to obtain a stay of the UD Judgment. Seven days after the Petition Date, the Sheriff proceeded with the lockout of the debtors, thereby evicting the debtors.

The Ninth Circuit Holds That the Trustee's Turnover Power is Not Restricted to Property of the Estate at the Time the Motion for Turnover is Filed

The Ninth Circuit Court of Appeals recently issued the opinion, Shapiro v. Henson, which held that a party has a statutory duty to turn over property that it had possession, custody or control of at any time during the bankruptcy case. Prior to filing a voluntary Chapter 7 bankruptcy petition, the debtor had written several checks drawn on a Bank of America checking account with $6,955.19 in it, but the bank did not honor those checks until after the debtor filed her bankruptcy petition. The trustee requested turnover of all the money that was in the account as of the date the petition was filed. The debtor responded that she was no longer in possession of the funds and could not comply. The bankruptcy court ruled in favor of the debtor, stating that she did not have possession or control of the funds at the time the trustee filed the motion for turnover. The district court affirmed. However, the Ninth Circuit Court of Appeals reversed the district court's decision, holding that two key phrases in Section 542 of the Bankruptcy Code supported its ruling: "during the case" and "or the value of such property." The Ninth Circuit found that the phrase "during the case" evidenced that there is no temporal restriction for turnover of property or the filing of a turnover motion. Since a trustee can recover "the value of such property" instead of the property itself, possession is not a prerequisite for a turnover motion. Accordingly, a trustee may seek turnover against a party regardless of whether or not a debtor is in possession of the property in question when a motion for turnover is filed.

Scope, use and purpose of express easements should be clear and unambiguous

When drafting an express easement to be recorded, it is important to explicitly provide for the scope, use and purpose of such easement. The easement language should be clear and unambiguous so as to avoid potential misinterpretation and disputes. In the recent California appellate case of Arnold J. Schmidt v. Bank of America, 223 CA4th 1489, 168 CR3d 240, 2014 CA Lexis 165, plaintiff (owner of burdened land) commenced an action against the owners of the adjacent benefited land alleging trespasses and nuisances over and under the easement including the improper and unauthorized installation of certain structures and improvements. The language of the easement at issue reads as follows: "RESERVING to the grantor, her successors, assigns and/or heirs, the right of ingress and egress for public road purposes over, along and across the Easterly 40 thereof."

Earnings increase amid supermarket mergers

Planning, forming and growing a new business can be immensely satisfying. From the legal structuring process to the eventual expansion of operations, the excitement of new opportunities is often what drives success. Of course, sometimes healthy growth involves merging with or acquiring other businesses, and such complex legal transactions must be handled with great care for shareholders to continue profiting.

CA financial adviser told to pay $3.7 million to ex-employees

Litigation comes with great expense and uncertain results. If you're involved with a serious business dispute you should appreciate the benefits of avoiding the courtroom unless it is absolutely necessary. With solid legal planning, mediation or arbitration may be the most cost-effective way of resolving a dispute. If an out-of-court settlement can't be reached, then you will need experienced attorneys who are prepared to litigate.

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