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Detroit has reached a final settlement with its greatest opponent, bond insurer Syncora Guarantee Inc., this Monday, according to a lawyer for the city.
Under the deal, Syncora will recover roughly 14 percent of money owed, which they've long claimed totals more than $333 million. Syncora will receive two sets of notes from Detroit, a lease to control a tunnel to Canada, land near the tunnel, and the possibility of leasing and controlling a parking structure.
With this settlement, Syncora is fully exiting the Chapter 9 bankruptcy case , including any future appeals.
David Heiman of Jones Day, a lawyer for Detroit, said to U.S. Bankruptcy Judge Steven Rhodes in Monday’s hearing that both parties have “laid down their swords.”
While the agreement with Syncora is an important cleared hurdle for Detroit’s bankruptcy emergence, the city still faces creditor Financial Guaranty Insurance Co., who is seeking roughly $1.1 billion from the pension debt it insured.
On Monday, FGIC asked Judge Rhodes to suspend the trial until September 22 so the company can modify its approach in the wake of Syncora’s settlement. The trial is currently on hold since last week so Detroit and Syncora could finalize their deal.
Detroit’s Grand Bargain is centered around an estimated $816 in pension debt. FGIC may be held responsible for payment if investors end up taking losses.
The Grand Bargain aims to relieve $7 billion in liabilities while supporting state retirement arrangements from state and private contributors. Detroit has guaranteed it will not sell off any pieces from its art collection to pay back any debts.
Syncora apologized in a court filing Monday. The company has been a longtime adversary in the case and recently accused court appointed mediators of inappropriate conduct and conflict of interest.
Because of the apology, Rhodes has stated he will no longer sanction Syncora in its attorneys.
The post Detroit Reaches Settlement With Largest Creditor appeared first on The Bankruptcy Blog.
Detroit reaches a settlement with its greatest opponent, bond insurer Syncora Guarantee Inc., this Monday, according to a lawyer for the city.
Under the deal, Syncora will recover roughly 14 percent of money owed, which they've long claimed totals more than $333 million. Syncora will receive two sets of notes from Detroit, a lease to control a tunnel to Canada, land near the tunnel, and the possibility of leasing and controlling a parking structure.
With this settlement, Syncora is fully exiting the Chapter 9 bankruptcy case, including any future appeals.
David Heiman of Jones Day, a lawyer for Detroit, said to U.S. Bankruptcy Judge Steven Rhodes in Monday’s hearing that both parties have “laid down their swords.”
While the agreement with Syncora is an important cleared hurdle for Detroit’s bankruptcy emergence, the city still faces creditor Financial Guaranty Insurance Co., who is seeking roughly $1.1 billion from the pension debt it insured.
On Monday, FGIC asked Judge Rhodes to suspend the trial until September 22 so the company can modify its approach in the wake of Syncora’s settlement. The trial is currently on hold since last week so Detroit and Syncora could finalize their deal.
Detroit’s Grand Bargain is centered around an estimated $816 in pension debt. FGIC may be held responsible for payment if investors end up taking losses.
The Grand Bargain aims to relieve $7 billion in liabilities while supporting state retirement arrangements from state and private contributors. Detroit has guaranteed it will not sell off any pieces from its art collection to pay back any debts.
Syncora apologized in a court filing Monday. The company has been a longtime adversary in the case and recently accused court appointed mediators of inappropriate conduct and conflict of interest.
Because of the apology, Rhodes has stated he will no longer sanction Syncora in its attorneys.
The post Detroit Reaches a Settlement With Largest Creditor appeared first on The Bankruptcy Blog.
An indictment a few days ago against a chapter 7 debtor in Palm Beach County provides an occasion to review the bankruptcy crimes provisions of title 18 of the United States Code. This indictment gives credence to the rule of thumb to beware of the debtor who mentions the words "Rolex watch."
Recent IndictmentThe indictment for a bankruptcy crime against the former chapter 7 debtors in alleged that they "did knowingly and fraudulently conceal and cause to be concealed property belonging to the bankruptcy estate" in violation of 18 U.S.C §152. First on the list of undisclosed property - a Rolex watch.
18 U.S.C. §152Section 152 of title 11 provides that [a] person who - (1) knowingly and fraudulently conceals from a custodian, trustee, marshal, or other officer of the court charged with the control or custody of property, or, in connection with a case under title 11, from creditors or the United States trustee, any property belonging to the estate of a debtor (2) knowlingly and fraudulently makes a false oath or account in or in relation to any case under title 11; . . . shall be fined under this title, imprisoned not more than 5 years, or both
The U.S. Attorney Manual provides some guidance. It explains that that elements of the offense of concealment under 18 U.S.C. § 152(1) are
1. the bankruptcy proceeding was in existence
2. the defendant fraudulent concealed the property from the custodian (such as the bankruptcy trustee)
3. the property belong to the estate
The manual makes reference to the cases of United States v. Guiliano, 644 F.2nd 85, 87 (2nd Cir., 1981) and United States v. Beery, 678 F. 2nd 856 (10th Cir. 1982), cert. denied, 471 U.S. 1066 (1985).
Jury not a Bankruptcy Judge
The U.S. Attorney's manual sets forth that it is a question for a jury to determine whether assets are property of the debtor and belong to the bankruptcy estate. Query how this difference to this same determination being made by a bankruptcy judge in a bankruptcy case. Interestingly enough, the manual makes reference to a bankruptcy judge testifying in the criminal case, but that the bankruptcy judges testimony "that property is an asset of the estate is inadmissible to prove that the assets in question belong to the bankruptcy estate."
"Might Be" Property of the EstateThe U.S. Attorney's refers to the case of United States v. Cherek, 734 F.2d 1248, 1254 (7th Cir. 1984), cert. denied, and takes the position that the all-encompassing definition of "estate" in section 541 of the Bankruptcy Code, even requires the debtor to disclose information about all property that "might be" property of the bankruptcy estate and to disclose "the existence of assets whose immediate status is uncertain." It further takes the position that even if the asset is not ultimately determined to be property of the estate under the Bankruptcy Code, section 152 of title 11 "properly imposes sanctions on those who pre-empt a court's determination by failing to report the asset."
Concealment The U.S. Attorney's manual also sets forth its position on the definition of concealment. It states that conceal "does not mean merely to secrete or hide away" but concealment also means to "prevent the discovery of the asset or to withhold knowledge of the asset." United States v. Schireson, 116 F.2d 881, 884 (3d Cir. 1941); Burchinal v. United States, 342 F.2d 982, 985 (10th Cir.), cert. denied, 382 U.S. 843 (1965). It further explains that the concealment may take prior to the filing of the bankruptcy as well as after the filing of the bankruptcy. Concealment prior to the filing of a bankruptcy constitutes a single offense as there is only a single duty to disclose the existence of all assets but that each asset concealed after the filing of the bankruptcy petition constitutes a separate offense because each concealment represents a separate act with intent.
Further ReferencesOutlines on the topic of bankruptcy and related crimes is available here and here. Jordan E. Bublick is a Miami Bankruptcy Lawyer with over 25 years of experience in filing Chapter 13 and Chapter 7 Bankruptcy Cases and Mortgage Modifications (305) 891-4055
An indictment was filed a few days ago against former chapter 7 debtors in Palm Beach County. It provides an occasion to review the bankruptcy crimes provisions of title 18 of the United States Code.
Recent IndictmentThe indictment for a bankruptcy crime against the former chapter 7 debtors alleged that they "did knowingly and fraudulently conceal and cause to be concealed property belonging to the bankruptcy estate" in violation of 18 U.S.C §152. First on the list of undisclosed property - a Rolex watch.
18 U.S.C. §152Section 152 of 18 U.S.C. provides
A person who—(1) knowingly and fraudulently conceals from a custodian, trustee, marshal, or other officer of the court charged with the control or custody of property, or, in connection with a case under title 11, from creditors or the United States Trustee, any property belonging to the estate of a debtor; (2) knowingly and fraudulently makes a false oath or account in or in relation to any case under title 11; . . .shall be fined under this title, imprisoned not more than 5 years, or both.
ElementsThe U.S. Attorney Manual explains that the elements of the proof for the offense of "concealment" under 18 U.S.C. § 152(1) are
1. the bankruptcy proceeding was in existence
2. the defendant fraudulently concealed the property from the custodian (such as the bankruptcy trustee)
3. the property belong to the estate
The manual makes reference to the cases of United States v. Guiliano, 644 F.2nd 85, 87 (2nd Cir., 1981). Jury Determination The U.S. Attorney's manual sets forth that it is a question for a jury to determine whether the assets are property of the debtor and belong to the bankruptcy estate. It appears that the determination of whether the asset is part of the "estate" under the "technical rules" of the Bankruptcy Code, is not co-determinative of whether it is property of the estate for purposes of this criminal bankruptcy statute. (See footnote 10 in law review article on bankruptcy crimes was written by Nevin M. Gewertz.) One commentator states that Interestingly enough, the manual makes reference to the bankuptcy judge testifying in the criminal case, but that the bankruptcy judges testimony "that property is an asset of the estate is inadmissible to prove that the assets in question belong to the bankruptcy estate."
"Might Be" Property of the EstateThe U.S. Attorney's refers to the case of United States v. Cherek, 734 F.2d 1248, 1254 (7th Cir. 1984), cert. denied, and takes the position that the all-encompassing definition of "estate" in section 541 of the Bankruptcy Code, even requires the debtor to disclose information about all property that "might be" property of the bankruptcy estate and to disclose "the existence of assets whose immediate status is uncertain." The manual takes the position that even if the asset is not ultimately determined to be property of the estate under the Bankruptcy Code, section 152 of title 11 "properly imposes sanctions on those who pre-empt a court's determination by failing to report the asset."
Concealment The U.S. Attorney's manual also sets forth its position on the definition of "concealment." It states that conceal "does not mean merely to secrete or hide away" but concealment also means to "prevent the discovery of the asset or to withhold knowledge of the asset." United States v. Schireson, 116 F.2d 881, 884 (3d Cir. 1941); Burchinal v. United States, 342 F.2d 982, 985 (10th Cir.). It further explains that the concealment may take prior to the filing of the bankruptcy as well as after the filing of the bankruptcy. Concealment prior to the filing of a bankruptcy constitutes a single offense as there is only a single duty to disclose the existence of all assets but that each asset concealed after the filing of the bankruptcy petition constitutes a separate offense because each concealment represents a separate act with intent.
Further ReferencesOutlines on the topic of bankruptcy and related crimes is available here and here. Jordan E. Bublick - Miami Bankruptcy Lawyer - Kendall & Aventura Offices - (305) 891-4055 - www.bublicklaw.com
The 11th Circuit Court of Appeals recent decision in In re Donald J. Donovan, 532 F. 3rd 1134 (11th Cir. 2008) dealt with an appeal of the Bankruptcy Court's denial of an unsecured creditor's motion to dismiss a chapter 7 case as being "abusive". The Circuit Court held that it lacked jurisdiction as the order denying the motion was not a "final" order and no exception applied.
First, the Court reviewed the differences in scope of appellate review of district court and appellate courts in the bankruptcy context as set forth in 28 U.S.C. §158(a) and (d). In general, district courts may review final orders as well as interlocutory orders from bankruptcy proceeding, but circuit courts may only hear appeals of final orders.
Final Order The Court reviewed that the general requirement that an order be "final" in order to be appealed. For an order to be "final" it must "end the litigation on the merits, leaving nothing to be done but execute the judgment." The Court explained that in the bankruptcy context, the finality requirement is applied to "discrete controversies within the administration of the [bankruptcy] estate." The Court further explained that in the bankruptcy context, the finality requirement is given a "more flexible interpretation".
Exceptions to the Finality RulePrior 11th Circuit decisions discuss the three exception to the final order requirement.
- collateral order doctrine
- doctrine of practical finality
- intermediate resolution of issues fundamental to the merits of the case
Jordan E. Bublick is a Miami Bankruptcy Lawyer with over 25 years of experience in filing Chapter 13 and Chapter 7 Bankruptcy Cases and Mortgage Modifications (305) 891-4055
A recent decision from the 11th Circuit Court of Appeals gives occasion to review the finality rule and its three exceptions. The 11th Circuit Court of Appeals decision in In re Donald J. Donovan, 532 F. 3rd 1134 (11th Cir. 2008) dealt with an appeal of the Bankruptcy Court's denial of an unsecured creditor's motion to dismiss a chapter 7 case as being "abusive". The Circuit Court held that it lacked jurisdiction to hear the appeal as the order denying the motion to dismiss was not a "final" order and no exception applied.
FinalityThe Court also reviewed the general requirement that an order must be "final" in order to be appealed. In general, to be "final" under 28 U.S.C. §158(d) and §1291, an order must "end the litigation on the merits, leaving nothing to be done but execute the judgment." The Court explained that in the bankruptcy context, the finality requirement is applied to "discrete controversies within the administration of the estate."Three ExceptionsIn prior cases, the 11th Circuit explained that there are three exceptions to the "finality" requirement as follows:
- collateral order doctrine
- doctrine of practical finality
- intermediate resolution of issues fundamental to the merits of the case
The Court in Donovan explained that in a bankruptcy context "finality" is given a more "flexible interpretation" as bankruptcy is an "aggregation of controversies and suits". It gave the example that it is "generally the particular adversary proceeding or controversy that must have have been finally resolved rather than the entire bankruptcy litigation."1. Collateral Order DoctrineThe 11th Circuit explained in the case of In re F.D.R. Hickory House, Inc., 60 F. 3rd 724 (11th Cir. 1995) explained that the collateral order doctrine applies to orders that (1) finally determine a claim separate and independent from the other claims in the action, (2) cannot be reviewed after the final judgment because by then effective review will be precluded and that the rights conferred will be lost and (3) are too important to be denied review because they present a significant and unresolved question of law.2. Practical FinalityThe "practical finality" rule, which is referred to as the Fogay-Conrad rule, permits a circuit court to review an interlocutory order thatdecides the right to the property in contest, and directs it to be delivered up by the defendant to the complainant, or directs it to be sold, or directs the defendant to pay a certain sum of money to the complainant, and the complainant is entitled to have such decree carried immediately into executionin Walker, the 11th Circuit explained that this exception is applied "where practical considerations require it" and that "judicial economy" would be "turned on its head" if the appellate court could not review the case.3. Fundamental Issues"Fundamental Issues" is the third exception to the finality rule. The 11th Circuit explains that this exception is the “most extreme” exception to the final judgment rule, applicable “even [to] an order of marginal finality [is] if the question presented is fundamental to further conduct of the case.”Further ReferencesFurther material is available in this article in the Florida Bar Journal, an article on practice tips, a blog post on Weil Gotshal's "Bankruptcy Blog", and an article "Bankruptcy Appeals - Useful Reminders."
Jordan E. Bublick - Miami Bankruptcy Lawyer - Kendall & Aventura Offices - (305) 891-4055 - www.bublicklaw.com
All debt is generally discharged in a chapter 7 bankruptcy case with certain important exceptions. A recent case decided in January, 2014 by the Bankruptcy Court in Miami involved the dischargeability of a dental malpractice claim.
In this case, a former dental patient obtained a judgment for dental malpractice in the Dade-County Circuit Court in 2011. In 2012, the dentist filed for chapter 7 bankruptcy relief. The former patient sought to except the dental malpractice claim from the chapter 7 discharge on the alleging that the dentist obtained his fee under "false pretenses, a false representation, or actual fraud..." 11 U.S.C. § 523(a)(2)(A). The Court noted that the action for exception from discharge was not brought under 11 U.S.C. § 523(a)(6) on an allegation of "will and malicious injury by the debtor to another entity or to the property of another entity." The former dental patient alleged that there was a "false representation" or "fraud" claiming that the dentist did not disclose his drug dependency and lapse in malpractice insurance.
False RepresentationThe bankruptcy court judge explained that to establish a "false representation" under 11 U.S.C. § 523(a)(2)(A) requires proof of a false or misleading statement with the intent to deceive, inducing a person to turn over money or property. The court stated that the establishment of a "false representation" requires an "expressed misrepresentation - oral or written" and that "[s]ilence, or lack of communication, cannot deliver proof by a preponderance of the evidence." Hanft v. Church, (In re Hanft, N.D., P.A.), 315 B.R. 617 (S.D. Fla. 2002). In this case, the court did not find that the dentist had made any misrepresentations that were intended to deceive the former patient and cause her to turn over money or property. The court noted that the dentist performed the services while licensed and insured.
Actual FraudThe court also found that there was a lack of "actual fraud." The court reviewed that the establishment of "actual fraud" under this section "refers to common law fraud, and requires" the proof by a preponderance of the evidence that 1. there was a false representation made with the purpose and intent of deception, 2. that the representation was relied upon, 3. that the reliance was justifiably founded, and 4. that the person was damaged as a result of the false statement. Field v. Mans, 516 U.S. 59, (1995). The court noted that "actual fraud" may be proven by a misrepresentation that is express or implied, but proof of actual fraud is required and not fraud merely implied in law. The court found that the former patient did not prove express or implied "actual fraud" was committed.
The Court also rejected the former patient's argument that the dentists silence or omissions regarding his drug use or lapse in insurance coverage constituted "fraud" giving rise to an exception to discharge. The Court held that there was no proof that the dentist was under "any duty to disclose facts regarding either his drug use or his business' fiscal operations..." The court stated that no "statute or legal case was presented to prove that illnesses, weaknesses or impairments must be disclosed by medical professionals to their patients."
The Court also held that the dentist's failure to disclose the lapse of the malpractice insurance did not of itself constitute "fraud." The Court distinguished case law presented with regard to the lapse of malpractice insurance involving physicians as opposed to dentists as the Florida regulations as to each profession differ. The Court noted that dentists are cover by the provisions of Chapter 466 of Florida Statutes while physicians are governed by the provisions of Chapter 458. The Court pointed out that while physicians are required to disclose the failure to carry insurance, dentists are not.
Finally, the Court rejected that former patient's argument that malpractice judgments should be excepted from bankruptcy discharge when there was reckless action or their was a lack of malpractice insurance as the U.S. Supreme Court has already rejected that argument in the case of Kawaauhau v. Geiger, 523 U.S. 57 (1998).
The Court though did express sympathy for the unfortunate victim of the dentist's malpractice and suggest that it may be appropriate for the Florida legislature to require dentists to disclose the lack of malpractice insurance as is required of physicians or for the Board of Dentistry to establish a fund "like that established by the Florida Bar for victims of a lawyer's misappropriation or embezzlement."
Jordan E. Bublick is a Miami Bankruptcy Lawyer - www.bublicklaw.com
All debt is generally discharged in a chapter 7 bankruptcy case with certain important exceptions. A recent case decided in January, 2014 by the Bankruptcy Court in Miami involved the dischargeability of a dental malpractice claim.
In this case, a former dental patient obtained a judgment for dental malpractice in the Dade-County Circuit Court in 2011. In 2012, the dentist filed for chapter 7 bankruptcy relief. The former patient sought to except the dental malpractice claim from the chapter 7 discharge on the alleging that the dentist obtained his fee under "false pretenses, a false representation, or actual fraud..." 11 U.S.C. § 523(a)(2)(A). The Court noted that the action for exception from discharge was not brought under 11 U.S.C. § 523(a)(6) on an allegation of "will and malicious injury by the debtor to another entity or to the property of another entity." The former dental patient alleged that there was a "false representation" or "fraud" claiming that the dentist did not disclose his drug dependency and lapse in malpractice insurance.
False RepresentationThe bankruptcy court judge explained that to establish a "false representation" under 11 U.S.C. § 523(a)(2)(A) requires proof of a false or misleading statement with the intent to deceive, inducing a person to turn over money or property. The court stated that the establishment of a "false representation" requires an "expressed misrepresentation - oral or written" and that "[s]ilence, or lack of communication, cannot deliver proof by a preponderance of the evidence." Hanft v. Church, (In re Hanft, N.D., P.A.), 315 B.R. 617 (S.D. Fla. 2002). In this case, the court did not find that the dentist had made any misrepresentations that were intended to deceive the former patient and cause her to turn over money or property. The court noted that the dentist performed the services while licensed and insured.
Actual FraudThe court also found that there was a lack of "actual fraud." The court reviewed that the establishment of "actual fraud" under this section "refers to common law fraud, and requires" the proof by a preponderance of the evidence that 1. there was a false representation made with the purpose and intent of deception, 2. that the representation was relied upon, 3. that the reliance was justifiably founded, and 4. that the person was damaged as a result of the false statement. Field v. Mans, 516 U.S. 59, (1995). The court noted that "actual fraud" may be proven by a misrepresentation that is express or implied, but proof of actual fraud is required and not fraud merely implied in law. The court found that the former patient did not prove express or implied "actual fraud" was committed.
The Court also rejected the former patient's argument that the dentists silence or omissions regarding his drug use or lapse in insurance coverage constituted "fraud" giving rise to an exception to discharge. The Court held that there was no proof that the dentist was under "any duty to disclose facts regarding either his drug use or his business' fiscal operations..." The court stated that no "statute or legal case was presented to prove that illnesses, weaknesses or impairments must be disclosed by medical professionals to their patients."
The Court also held that the dentist's failure to disclose the lapse of the malpractice insurance did not of itself constitute "fraud." The Court distinguished case law presented with regard to the lapse of malpractice insurance involving physicians as opposed to dentists as the Florida regulations as to each profession differ. The Court noted that dentists are cover by the provisions of Chapter 466 of Florida Statutes while physicians are governed by the provisions of Chapter 458. The Court pointed out that while physicians are required to disclose the failure to carry insurance, dentists are not.
Finally, the Court rejected that former patient's argument that malpractice judgments should be excepted from bankruptcy discharge when there was reckless action or their was a lack of malpractice insurance as the U.S. Supreme Court has already rejected that argument in the case of Kawaauhau v. Geiger, 523 U.S. 57 (1998).
The Court though did express sympathy for the unfortunate victim of the dentist's malpractice and suggest that it may be appropriate for the Florida legislature to require dentists to disclose the lack of malpractice insurance as is required of physicians or for the Board of Dentistry to establish a fund "like that established by the Florida Bar for victims of a lawyer's misappropriation or embezzlement."
Jordan E. Bublick - Miami Bankruptcy Lawyer - Kendall & Aventura Offices - (305) 891-4055 - www.bublicklaw.com
I am pleased to report that attorney Mark Ditton who has long managed many of our bankruptcy cases in Portland and Salem, Oregon will be moving to Seattle this week to expand our Seattle Bankruptcy Law Office. Mark will now supervise all of our Washington cases including Chapter 13 matters in Vancouver and Tacoma. Our
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The original post is titled Expanded Bankruptcy Law Office Hours , and it came from Portland Bankruptcy Attorney | Northwest Debt Relief .
The Circuit Court of Appeals of the 3rd Circuit recently issued its opinion in In re SCH Corp., et al, 2014 WL 2724606 in which it had the occasion to review the application of the doctrine of "equitable mootness" in the bankruptcy context. The Court explained the distinctions between the concepts of "mootness" (an Article III Constitutional issue), "equitable mootness", and "prudential considerations." In its application of the doctrine of "equitable mootness", the Court looked to the five-factor test set forth in In re Continental Airlines, 91 F.3d 553 (3rd Cir. 1996). I reviewed this decision here.
Statutory MootnessThe Court in SCH Corp. did not reach the concept of "statutory mootness". This ABI article explains that the concept of statutory mootness as provided for in Sections 363(m) and 364(e) of the Bankruptcy Code to protect capital providers, including purchasers and lenders. Supreme Court Other articles, here and here, review the Supreme Court denial of cert. in a case involving the issue of equitable mootness in the case involving a "multi-billion dollar" Chapter 11 plan in Law Debenture Trust Co. v. Charter Communications, Inc., No. 12-847. In the petition for a writ of certiorari, a brief amici curiae was filed by a group of law professors. The doctrine of equitable mootness as applied in the 2nd Circuit is also reviewed in this article by Hunton & Williams, LLP. Jordan E. Bublick is a Miami Bankruptcy Lawyer with over 25 years of experience in filing Chapter 13 and Chapter 7 Bankruptcy Cases and Mortgage Modifications (305) 891-4055