Shulman Hodges & Bastian LLP

April 2016 Archives


Changes that come with the New Year are not limited to personal resolutions. Laws also change and/or are enacted that affect all of us. From statutes which mandate equal pay to those that increase minimum wage, the legal landscape in 2016 has undergone changes and developments which directly affect businesses and employers. Yet, many businesses and business owners are unaware of changes in the law that affect them and, as a result, unknowingly find themselves on the wrong side of a legal dispute. On April 20, 2016, Shulman Hodges & Bastian presented a workshop highlighting some of the more notable changes in employment and labor law and estate planning. Len Shulman, Jim Bastian and Greg Anderson (Of Counsel to the firm) led the discussion and provided an overview of how these developments affect businesses, business owners, employees and customers. The workshop took place at the Irvine Campus of California State University Fullerton.

Enforcing Commercial Landlord's Rights in Bankruptcy

Despite the unambiguous language of Bankruptcy Code Section 365(d), which requires a debtor, debtor-in-possession, or bankruptcy trustee to "timely perform" all obligations under an unexpired non-residential lease, it is somewhat common-place for these lease obligations to be ignored based on an assumption that they are merely entitled to an "administrative claim" and need not be immediately paid. However, nothing could be further from the truth in the Ninth Circuit.

Professionals Employed by Bankruptcy Estate Beware

Professionals seeking to be employed under Bankruptcy Code Section 328, most commonly when seeking to be employed on a contingency fee basis, should be careful to ensure the employment motion and order specifically state the professional is being employed under Section 328. Compensation under Section 330 is subject to a reasonableness test but under Section 328, compensation under the terms stated will be allowed absent the Court finding that such compensation terms were "improvident in light of developments not capable of being anticipated at the time of the fixing of such terms." As such, if the professional seeks compensation under the "easier" test of Section 328, the professional must be sure to explicitly seek employment under Section 328 in the employment motion and to be safe, should also so state in the employment order.


In 2014, the U.S. Supreme Court struck down the Ninth Circuit's imposition of an equitable surcharge on the basis of bad faith against a debtor's exempt property in Law v. Siegel, 134 S.Ct. 1188 (2014). The Supreme Court held that the general equitable powers of Bankruptcy Code Section 105(a) did not provide authority for judge-made exemptions to explicit mandates of the Bankruptcy Code. The Supreme Court emphasized that "federal law provides no authority for bankruptcy courts to deny an exemption on a ground not specified in the Code," and that any basis for denial of a state law exemption must arise under state law. Id. at 1197-98. As a result of Law v. Siegel, a growing number of cases have held that bankruptcy courts lack the authority to disallow a debtor's claimed homestead exemption based on Section 105(a), whether indirectly by denying leave to amend, or directly by disallowing the exemption; therefore, effectively rendering an objection to claimed exemptions on the basis of bad faith a nullity.

New Notice and Posting Requirements for Employers

Owning and managing a business in California can be very challenging given the pro employee legal climate. In order to avoid liability you must stay on top of new laws effecting your rights as an employer. Effective April 1, 2016, employers are required to comply with the California Department of Fair Employment and Housing's ("DFEH") new notice and posting requirements regarding Pregnancy Disability Leave. See 2 CCR § 11051. 

"Actual Knowledge" Requirement Addressed By The 9th Circuit BAP in Case Regarding Claim of Violation of the Discharge Injunction

In Emmert v. Taggart (In re Taggart), BAP No. OR-15-1119-JuKiF, the 9th Circuit Bankruptcy Appellate Panel (the "BAP") reversed an Oregon bankruptcy court's decision to sanction an Appellant for willfully violating the discharge injunction because the bankruptcy court applied the wrong legal standard for determining whether the contemnor had the sort of actual knowledge necessary for finding willfulness. A party who knowingly violates the discharge injunction under Section 524(a)(2) of the Bankruptcy Code may be held in contempt under Section 105(a) of the Bankruptcy Code. 

Application of Automatic Stay to Actions By a Debtor

The automatic stay only applies as to actions against a debtor and not as to actions filed by a debtor. See, In re Merrick, 175 B.R. 333 (9th Cir. BAP 1994); In re Mitchell, 206 B.R. 204, 212 (Bankr. C.D. Cal. 1997) ("Section 362 stay does not apply where, as here, the debtor is the plaintiff in a lawsuit."). Even dispositive motions filed against the debtor plaintiff are not a violation of the automatic stay. See, In re White, supra (motion for summary judgment against debtor plaintiff and dismissal of the case did not violate the stay); In re Miller, 262 B.R. 499 (9th Cir. BAP 2001) (demurrer to debtor plaintiff's suit not stayed).

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