While the country struggles with a nationwide shutdown, the Bucks County Police Department has instituted new protocols and procedures to keep its officers and the community as safe as possible. Through the implementation of an online system, the Bucks County Police Department can handle non-priority calls while emergency calls continue to go through the 9-1-1 […] The post Can I Get Arrested on a Warrant in Bucks County During COVID-19? appeared first on .

The Coronavirus Aid, Relief, and Economic Security Act (CARES Act), signed by President Trump on March 27, 2020We hope that all are safe and doing well in these uncertain times. The Coronavirus Aid, Relief, and Economic Security Act (CARES Act), signed by President Trump on March 27, 2020, contains several changes to the Bankruptcy Code, which are detailed below.1) a) With respect to personal bankruptcy, the CARES Act amends the definition of “income” in the Bankruptcy Code for Chapters 7 and 13 cases so that coronavirus-related payments from the federal government will be excluded from being treated as income.   b) Coronavirus-related payments made by the federal government under the CARES Act will be excluded from the disposable income calculation for purposes of confirming a Chapter 13 Plan.          c) Finally, chapter 13 debtors will now be able to extend their plan payments for up to seven years instead of five years (under the prior law).2) A. The Small Business Debtor bankruptcy provisions were modified such that small business debtors with debt up to $7.5 million will now be eligible to file for bankruptcy, rather than the old limit of $2,725,625 in debt.B. Under the chapter 11 reorganization plan, small business debtors can now retain their equity or member interests in an LLC even if creditors are not being paid in full. The law requires a small business debtor to pay their “projected disposable income” over the next 3 to 5 years to creditors who were owed money at the time of the bankruptcy filing. Under the new law, a creditors’ committee is not formed, but the small business debtor will only have 90 days to file a reorganization plan, with very limited right to extend. Additionally, a “standing trustee” will be responsible for oversight of the small business debtor instead of a creditor committee. The standing trustee will be selected by the U.S. Department of Justice from a list of preapproved turnaround professionals.People with questions about the CARES act should contactJim Shenwick   212-541-6224    [email protected]

The Alexandria Bankruptcy Court Trustee Hearings are now by Telephone. Bankruptcy Trustee hearings are now telephonic. That’s the policy of the Alexandria VA bankruptcy court, effective April 9, 2020. (Richmond and Norfolk, too.) People who file bankruptcy are required by law to “appear” in front of the bankruptcy trustee to answer question.  (For most people, […] The post Bankruptcy Hearings: Now Telephonic by Robert Weed appeared first on Northern VA Bankruptcy Lawyer Robert Weed - .

  In In re Walker, 2020 Bankr. LEXIS 890, Case No. 3:19-bk-33182-SHB (Bankr. E.D. Tenn, 2 April 2020) the court was faced with a good faith objection to confirmation based on conduct in a prior divorce case.  A detailed factual background is necessary to understand the Court's ruling.    A divorce final decree was entered between the debtor, Mrs. Walker, and her spouse on 7 July 2008, which involved two jointly owned parcels of real estate: the former home of the debtor and an adjoining 36 acre tract of unimproved land.  The home property was subject to a mortgage taken out to improve the home.  In exchange for transferring title to the debtor, the divorce order required the debtor to pay her spouse 156 payments of $427/month.  When no payments were made from August 2014 through August 2015 Mr. Walker obtained an order permitting him to file a lien on the properties and gave Mrs. Walker 60 days to refinance the debt on the home, removing Mr. Walker's name and releasing him from the mortgage debt.  The order went on to provide that if that was not done the vacant land would be sold and proceeds used to pay on the mortgage debt.    Mrs. Walker sold the vacant land to her sister and brother in law 58 days after the above order and received $40,000 net proceeds, of which $4,211 went to catch up the mortgage, with the balance spent on personal expenses.  Approximately 2 months after the deadline to refinance the property, on 14 January 2016 Mrs. Walker filed a motion in the divorce court to extend time to finalize any pending refinancing, failing to disclose the sale of the vacant property; and misstating that a financing offer was pending.  Such misstatements were repeated at the hearing on the motion.  Mr. Walker filed a motion for contempt in the divorce court, and Mrs. Walker filed for relief under chapter 13 prior to the hearing on the motion for contempt.  In the chapter 13 case Mrs. Walker scheduled Mr. Walker as an unsecured creditor in the amount of $66,000, and her case was quickly confirmed without objection.   This case was subsequently dismissed due to a delinquency in payments to the trustee, and debtor's desire to refile to bring the mortgage into the plan.  A new case was filed 6 days later, again scheduling Mr. Walker as an unsecured creditor.   Mr. Walker objected to this plan as it provided no treatment of his claim; and on the basis that Mrs. Walker failed to disclose all monies received from the transfer of properties subject to his lien.  An agreement was reached provided for payment of $2,525 plus 5% interest to Mr. Walker, and this plan was confirmed on 14 February 2018.  This case was also dismissed after a motion by Mr. Walker to file a motion for criminal contempt in the state court, and a nondischargeability complaint by the Tennessee Dept. of Human Services for obtaining food stamp benefits by false statements to which the Debtor had consented to a nondischargeability judgment.  Upon dismissal of the 2nd case Mr. Walker filed a petition for criminal contempt and for a forced sale of the residence on 19 July 2018.  The state court ruled that only a court in the county where the property was located could enter an order forcing the sale.  On 12 September 2019 Mr. Walker filed a motion in the appropriate county seeking a sale of the property, and Mrs. Walker then filed her third chapter 13 on 30 September 2019.  Mrs. Walker had paid no timely mortgage payments between the 2nd and 3rd cases filed.  The court noted that in the 8 years between the initial divorce order and the 3rd bankruptcy case Mrs. Walker had purchased and financed at least 5 vehicles while she failed to pay Mr. Walker as required by the divorce order, or to refinance the mortgage as required by such order.  The court examined the requirements for confirmation of a chapter 13 plan.  11 U.S.C. §1325(a)(3) and (a)(7) require debtors to file and proceed in their cases in good faith, and propose plans in good faith.  Ultimately the courts are to examine whether the debtor's purpose in filing for chapter 13 relief is consistent with the underlying purpose and spirit of chapter 13 - ie financial rehabilitation through repayment of debt.1                A number of cases with fact patterns similar to this one have found a lack of good faith necessary for confirmation.  In In re Garzon, No. 18 B 26026, 2018 Bankr. LEXIS 3818, 2018 WL 6287986 (Bankr. N.D. Ill., Dec 3, 2018) the debtor owed his ex-wife $10,000 under a property settlement, and filed chapter 7 four months after entry of the decree without making any payments (subsequently filing a chapter 13 upon realizing chapter 7 would not discharge property settlements) and sold his home without paying anything to the ex wife prior to filing the new chapter 13.  The Garzon court concluded that the nature of the debt, his prepetition failure to pay his ex-wife, the contempt order by the divorce court, the concealment of the home sale, his payments to other creditors without paying the ex-wife, and an unfair plan proposing only minimal payments to the ex-wife commencing 20 months into the plan caused a failure to meet the good faith standard.   In In re Brandland, 570 B.R. 203 (Bankr. E.D. Va. 2017) the court denied confirmation and dismissed the case based on untruthful deposition testimony in the divorce case as to his ownership in a business that he had agreed to sell back to the original owners for $150,000  which he received 5 days prior to the divorce hearing.  Similarly in In re Bradley, 567 B.R. 231 (Bankr. D. Me. 2017) the court found a plan was not filed in good faith when the divorce decree required the debtor to pay her ex-spouse 15% of any lump sum workers compensation settlement, but the debtor failed to pay anything from the $155,000 settlement received, instead purchasing a new home, a new car, making home improvements, and paying $10,000 each to her three children.  Her 36 month plan provided to pay a total of $1,212 to unsecured creditors, the ex-spouse being the only such creditor.  Lastly, in In re Rippe, No. 12-10220, 2013 Bankr. LEXIS 4348, 2013 WL 5701605 (Bankr. N.D. Ind. Sept. 25, 2013) the court found a plan was not in good faith when the marital property settlement awarded the house and land to the debtor requiring that she refinance the property to remove the ex-spouse from the debt.  The Debtor had filed a notice of refinancing/sale of real estate which never closed an appeared not to be a bona fide arrangement.  Bankruptcy was filed on the day of the contempt hearing.  The plan provided payment in full of all creditors, but the the court found that given the debtor's conduct prior to filing, and her absolute right to dismiss this case the picture as a whole shows a lack of good faith.   These cases can be distinguished from a case finding good faith, In re O'Neal, No. 11-13535-WHD, 2012 Bankr. LEXIS 2412, 2012 WL 1940594 (Bankr. N.D. Ga., April 12, 2012) in which the debtor had been required to pay his ex-spouse $100,000 who was relieved of any responsibility for the mortgage on the home.  The debtor was entitled to any profit from the sale of the property so long as he paid the ex-spouse pursuant to the terms of the divorce order.  The debtor sold the home in a short sale and borrowed funds from his mother to make the first payment to his ex wife, but filed for chapter 13 prior to paying the balance.  The plan proposed a 10% dividend.  Despite such debt being nondischargeable in a chapter 7, the fact that the debtor paid $25,000 of the debt immediately after being ordered to do so by the divorce court, and was proposing to pay what he could afford for at least 3 years, and there being no evidence the debtor acted in any egregious manner in connection with the divorce proceeding or thereafter, the court found that the case and plan were filed in good faith.  Based on the above cases, the court in Walker found that the factors weighed against the debtor and Mrs. Walker's 3rd case and plan had not been filed in good faith.  The factors cited by the court were the frequency with which the debtor sought relief in bankruptcy; the circumstances under which the debt was incurred; the amount of payment offered by Mrs. Walker to Mr. Walker as indicative of her sincerity to repay the debt; Mrs. Walker's prepetition conduct as to this debt, including her intentional concealment and misrepresentation of facts to the divorce court and her spending the proceeds of the sale of the vacant property without complying with the divorce orders; her actions in electing to take on new debts in lieu of fulfilling her obligation to Mr. Walker; and her admitted motive in the timing of the filing of her 3 bankruptcy petitions.  The Court also took into account her admission in the Food Stamp adversary that she had obtained money by false pretenses, false representation, or actual fraud.   Based on such finding the court denied confirmation and dismissed the case, finding that the debtor could not propose a plan that would comply with the requirements of 11 U.S.C. §1325(a)(3) and (a)(7).1 Cusano v. Klein (In re Cusano), 431 B.R. 726, 735 (B.A.P. 6th Cir. 2010).↩Michael BarnettMichael Barnett, PA506 N Armenia Ave.Tampa, FL 33609-1703813 870-3100https://hillsboroughbankruptcy.com 

Third party releases have long been a controversial feature of certain chapter 11 plans. They are neither specifically allowed nor prohibited by the plain language of the Bankruptcy Code. This has led courts to reach differing results. There are two important principles at play in these cases. On the one hand, bankruptcy exists to provide relief to debtors. On the other hand, bankruptcy plans are intended to provide the greatest possible return to creditors. If granting releases makes the plan possible, this is in the best interest of creditors.The Third Circuit waded into this debate to answer a very limited question:  does Article III permit non-consensual third party releases? The Court's answer, at least in the specific case before it, was yes. In re Millenium Holdings II, LLC, 945 F.3d 126 (3rd Cir. 12/19/19). What HappenedMillenium was a lab testing company. It borrowed $1.8 billion to refinance certain debts and pay a $1.3 billion special dividend to its shareholders. The government decided to revoke the debtor's billing privileges under Medicare following an investigation. Millenium agreed to pay the government $256 million. However, this left it unable to pay its debts. When the lenders were asked to restructure their debts, they asked some hard questions about the related party transactions and the disclosures that were made in connection with the loans. (Editor's note: This was a $1.8 billion transaction. How did the lenders miss the weaknesses in the house of cards?). Most of the lenders reached a restructuring support agreement with the debtor and its affiliates. Under the deal, the affiliates would pay the debtor $325 million and transfer their equity to the lenders. In return, they would receive complete releases. The deal was the result of extensive adversarial negotiations over a period of time. The Third Circuit found that "the deal to avoid corporate destruction would not have been possible without the third-party releases." Opinion, p. 9.Although 93% of the lenders agreed to the deal, one did not. Millennium filed a Prepackaged Joint Plan of Reorganization. Voya, one of the the hold out lenders, objected. The Bankruptcy Court confirmed the Plan and Voya appealed. The District Court remanded the case to Bankruptcy Court for a determination of whether the plan violated Stern v. Marshall. The Bankruptcy Court said it did not and the District Court affirmed.The Issues on AppealThe Third Circuit limited its review to two issues: 1.  Did the Bankruptcy Court have constitutional authority to confirm the plan? 2.  If the Court had authority, was the appeal equitably moot?The Third Circuit answered yes to both questions and affirmed the lower courts.So why those two issues? If the Bankruptcy Court lacked constitutional authority to confirm the plan, jts order would not be a final judgment capable of being appealed. Instead, it would have had to be sent to the District Court for de novo review.  On the other hand, if the Bankruptcy Court had authority to enter the order and the appeal was equitably moot, there would be nothing remaining for the court to review.Constitutional AuthorityWhen the Supreme Court decided Stern v. Marshall, 564 U.S. 462 (2011), many commentators feared that it would imperil the functioning of the Article I Bankruptcy Courts. (Article I Courts are those established by the legislative branch and whose judges are not confirmed by the Senate and do not have life tenure). However, despite Chief Justice Roberts's desire to bring more control to the Article III Courts, the existing structure soldiered on with a few tweaks.The Debtors and Voya made absolutist arguments to the Court. The Debtors claimed that Bankruptcy Courts always have constitutional authority to confirm a plan. Voya, on the other hand, argued that the Bankruptcy Court only had constitutional authority to decide matters necessary to adjudicating claims. It argued that granting the third party releases constituted an adjudication of its RICO and fraud claims which could only be done by an Article III Court. The Court of Appeals cautioned in a footnote that the Debtors' argument may be too expansive and it explicitly rejected Voya's argument as putting the cart before the horse. The Court of Appeals stated that: To Voya, that point is irrelevant. Voya contends that Stern demands an Article III adjudicator decide its RICO/fraud claims because those claims do not stem from the bankruptcy itself and would not be resolved in the claims-allowance process. It asserts that the limiting phrase from Stern, i.e., "necessarily be resolved in the claims allowance process[,]" cannot be stretched to cover all matters integral to the restructuring. (Opening Br. at 31.) In that regard, Voya argues that an assertion that something is "integral to the restructuring" is really "nothing more than a description of the claims allowance process." (Reply Br. at 13.)That argument fails primarily because it is not faithful to what Stern actually says. Had the Stern Court meant its "integral to the restructuring" language to be limited to the claims-allowance process, it would not have said that a bankruptcy court may decide a matter when a "creditor has filed a claim, because then" — adding its own emphasis to that word — "the ensuing preference action by the trustee become[s] integral to the restructuring of the debtor-creditor relationship." 564 U.S. at 497 (alteration in original). That phrasing makes clear that the reason bankruptcy courts may adjudicate matters arising in the claims-allowance process is because those matters are integral to the restructuring of debtor-creditor relations, not the other way around. And, as the Appellees correctly observe, Stern is not the first time that the Supreme Court has so indicated. In Granfinanciera, S.A. v. Nordberg, 492 U.S. 33, 109 S. Ct. 2782,106 L. Ed. 2d 26 (1989) — a case that the Stern Court viewed as informing its Article III jurisprudence, 564 U.S. at 499 — the Court answered first whether an action arose in the claims-allowance process and only then whether it was otherwise integral to the restructuring of debtor-creditor relations. See Granfinanciera, 492 U.S. at 58 ("Because petitioners here ... have not filed claims against the estate, respondent's fraudulent conveyance action does not arise 'as part of the process of allowance and disallowance of claims.' Nor is that action integral to the restructuring of debtor-creditor relations."). If the first step in that analysis were all that was relevant, the second step would not have been taken. 945 F,3d at 137-139.  Reducing the issue to its most basic, Bankruptcy Courts have authority to enter final orders on matters integral to the restructuring of debtor-creditor relations. The fact findings of the Bankruptcy Court made clear that the third party releases were integral to the plan, which was a restructuring of the debtor-creditors relations. Therefore, the Bankruptcy Court had constitutional authority to confirm the plan and Voya's main argument failed. (Author's note: One thing that fascinates me about reading judicial opinions is how a few paragraphs out of a long opinion can carry the crux of the whole opinion. This is just such a case).Equitable Mootness Wraps Up the CaseThe Third Circuit made clear that it was not endorsing broad third party releases. However, it did not reach the issue of whether such releases were permissible under bankruptcy law due to equitable mootness. Basically, equitable mootness says that if a plan is confirmed and has been substantially consummated, it cannot be set aside where parties have acted in reliance upon it. Equitable mootness will not apply to a discrete part of a controversy which can be set aside and the parties placed back in their status quo position. However, if you can't unscramble the confirmed plan, you can't set it aside. What equitable mootness does is requires a party complaining about a plan to obtain a stay pending appeal or risk losing its appeal. Voya did not do so here and as a result, the court did not reach the merits. The key here is that the third party releases were essential to the plan. Without the third party releases, the insiders would not have funded the plan. Without the insiders funding the plan, there would be no plan.What It MeansBasically what this case means is take your best shot in the bankruptcy court because you may not have another shot on appeal. Stern v. Marshall is not a talisman which will fend off bankruptcy while equitable mootness makes it really hard to challenge a plan which, as here, was negotiated between multiple parties and involved a lot of moving pieces.What does this case say about nonconsensual third party releases in general? As a matter of law, it does not say much. However, what it says as a practical matter, is that it will be hard for one obstructive creditor to impede a deal that almost everyone else wants. I will talk about the status of third party releases in general in a subsequent post.Hat tip to Britt Suttell who pointed me to the opinion.  

We are happy to offer IMMEDIATE, Live Teleconferences via Zoom, Facetime, or telephone with Chris Wesner himself. Speak with an attorney immediately. Contact us by telephone or email, ASK FOR CHRIS and I’ll get in touch with you ASAP! (937) 339-8001! The post Immediate Live Teleconfernces via Zoom, Facetime, or telephone! appeared first on Chris Wesner Law Office.

April 1, 2020From: NY PostBy: Thornton McEneryA Brooklyn taxi operator who got his first medallion in the 1970s has filed for bankruptcy as the coronavirus ravages an already struggling industry, The Post has learned.Joe Pross, who started driving a taxi in 1975 and now runs a fleet of 42 cabs, filed for Chapter 11 bankruptcy protection for his Crown Heights-based medallion company, Walker Service Corp., on March 27, court papers show.Pross, 75, declined to be interviewed for this story. But his Brooklyn federal court bankruptcy filings underscore how vulnerable taxi operators were prior to the coronavirus crippling tourism and forcing thousands of New Yorkers inside. Walker Service Corp. appears to be the first medallion owner to file for bankruptcy protection since the pandemic shut down the city, but it’s not likely the last, industry experts say. “This industry was on the brink before this happened, and this virus has just pushed it totally over the edge,” said Matthew Daus, a former TLC commissioner who’s now a lawyer with Windels Marx. “I hope we don’t see more bankruptcies, but I’m afraid a lot of people might go under and file for bankruptcy protection. This will be worse than 9/11 economically, especially for the black cars and luxury livery.”In an affidavit filed with his bankruptcy papers, Pross says his medallions — “once worth millions” — plummeted in value as ride-hailing apps and Uber and Lyft grew in popularity, leaving him and his wife struggling to pay off loans they took out on their medallions to build the business.By 2019, before the coronavirus even hit, Pross’ fleet was pulling in $29,400 a month — far short of the $105,610 a month he needed to repay $18.7 million in medallion loans, court papers show.In late February, his lender, Virginia-based Pentagon Federal Credit Union, issued notices of default on six loans and demanded $158,186 within 30 days to rectify the situation.Pross says he tried to negotiate repayment. Then the coronavirus hit — slamming the brakes on taxi revenue even as drivers and operators continue to face expenses for parking, dispatchers, mechanics and administrative workers.“The current COVID-19 pandemic has now rendered the debtors with virtually no income to operate its businesses as the debtors have recently suspended operations during the COVID-19 pandemic for March, April and possibly May 2020,” Pross’ filing says.As The Post reported on March 15 - before Gov. Cuomo even ordered restaurants shut down and non-essential workers stay home — taxi drivers were making as little as $50 a week as people afraid of contagion avoided public spaces.“The drivers are coming back asking if I can pay their gas because their fares didn’t even cover it. We can’t go on like this,” a taxi operator who asked not to be named told The Post on Wednesday.Pross’s affidavit also blames Walker’s debt holder, PenFed, saying it has been playing hardball by “shockingly” refusing to extend its 30-day payment deadline.PenFed acquired $290 million worth of medallion loans, including Pross’s, as part of its 2019 merger with New York-based Progressive Credit Union, according to reports at the time.The credit union declined to comment on how many medallion loans it currently possesses, but insisted its working hard to keep taxi operators in business.  The credit union declined to comment on how many medallion loans it currently possess, but insisted it’s working hard to keep taxi operators in business.“PenFed actively works with our members experiencing financial hardships, including taxi medallion borrowers who have requested relief,” a PenFed spokesperson said in a statement. “PenFed has an extensive team in New York working to help members who need assistance during this challenging time.”Pross is hoping to come out of bankruptcy with reduced loans so he can continue to run the business through his main business, Utica Taxi, which operates the cars and garages and employs the dispatchers and other workers, filings show.But with coronavirus deaths in New York nearing 2,000 and growing, the main business also faces the threat of going under.“The proliferation of ride-sharing apps such as Uber and Lyft … combined with the economic devastation associated with the COVID-19 pandemic, may eventually render Utica Taxi bankrupt as well,” Pross’ affidavit said.

When a judge hears from multiple witnesses, he or she must make a decision on how much weight to give to what each witness says. Bankruptcy judges frequently make their credibility decisions a part of their opinions. This is both helpful to the parties and increases the likelihood that fact findings will not be found to be clearly erroneous on appeal.Judge H. Christopher Mott's opinion in Adv. No. 18-1091, Kansas City Southern Railway v. Chavez, which can be found here is a good illustration on how judges assess credibility. For more background on the case, you can read my prior post here.  During the trial, Judge Mott heard testimony from thirteen witnesses, some of whom testified live and some of whom testified by deposition.  I have listed the witnesses below and have quoted Judge Mott's credibility findings.The Witnesses and What The Judge FoundMr. Leonard Wagner, was associate general counsel of Kansas City Southern RailwayCompany.Mr. Leonard Wagner, associate general counsel of Kansas City Southern Railway Company, provided brief testimony at trial in person. The Court finds that Mr. Wagner isa credible witness.Merritt Clements was an attorney representing Kansas City Southern Railway Company.Clements was also a fact witness that testified in person at trial. As a result, Clements also acted in dual roles—as an attorney advocate for KCSR and a fact witness in this adversary proceeding. Clements’ testimony included background information regarding the litigation with the Chavez Family, as well as his role in negotiating the 2010 settlement for KCSR with Dean. Clements was candid, honest, and competent as a witness. Given his dual role as both advocate and witness in a bitter, lengthy dispute, theCourt gives his non-background testimony limited weight to the extent it was not supported by contemporaneous records.Stephen T. Dennis was another attorney representing Kansas City Southern Railway.Dennis provided brief testimony only by deposition, on a very tangential matter. The Court finds that the testimony of Dennis was credible, although the subject matter of his testimony had remote relevance to the disputes in this adversary proceeding.Luz Chavez was the matriarch of the Chavez family. She was the husband and mother of the two decedents. Luz was a key witness in this adversary proceeding. She testified at trial in person and by deposition. Luz suffers from legitimate memory problems and appears to have some cognitive difficulties. Some of her memory lapses are attributable to the stress of tragically losing a husband and son and the time that has passed since many critical events between 2007 and 2011. Portions of sworn statements signed and filed by Luz in State Court were shown to be incorrect (at best) and false (at worst) during the trial of this adversary proceeding. Her testimony was sometimes inconsistent, riddled with responses like “I don’t remember” and “I don’t recall,” and when pressed, she was easilyconfused. As a result, the Court gives limited weight to much of her testimony.Darlene Chavez and Allen Chavez were adult children of Luz Chavez.Darlene was an important witness in this adversary proceeding. She testified at trial in person and by deposition. Darlene appeared both honest and competent. The Court finds Darlene’s testimony to be credible on matters within her personal knowledge.Allen was also an important witness in this adversary proceeding. He testified at trial in person and by deposition. Allen appeared candid and forthright to the Court. The Court finds Allen’s testimony to be credible on matters within his personal knowledge.Juanita "Lynn" Watson was a partner in Rosenthal & Watson, the firm which represented the Chavez family in the underlying state court suit.Watson was a key non-party witness in this adversary proceeding. She testified at trial in person and by deposition. At trial, Watson appeared competent and straightforward to the Court. However, her testimony appeared intentionally vague and non-specific in certain critical areas, such as obtaining the approval of all adult Chavez Family members to the 2010 settlement with KCSR. To the extent that Watson provided specific testimony, the Court finds much of her testimony to be credible. On the other hand, Watson’s generalized and vague testimony about the approval of the entire Chavez Family to the settlement and the surrounding circumstances is given limited weight by the Court.Marc Rosenthal was the other partner in Rosenthal & Watson. He gave his testimony by deposition from prison. Rosenthal testified at trial only by deposition, taken at a federal prison where he is presently incarcerated. In 2013, Rosenthal was convicted for a criminal scheme that spanned four years. His crimes included conspiring with witnesses to provide false testimony, extortion, fabrication of evidence, bribery of a state court judge, and other actsof fraud by Rosenthal while an attorney with R&W. The conviction included actions taken by Rosenthal in several wrongful death suits filed against railroads, but do not appear to involve the suit filed for the Chavez Family against KCSR. See U.S. v. Rosenthal, 805 F.3d 523, 526-28 (5th Cir. 2015); (Ex. P-45). The Court gives Rosenthal’s testimony little weight.James Christopher Dean was an attorney who Rosenthal & Watson hired to try the underlying state court case.Dean was an important non-party witness. As Dean testified only by deposition, the Court was unable to assess his demeanor. Dean’s independent recollection of events appeared limited, and he had no direct contact with the Chavez Family regarding the 2010 settlement. In his testimony, Dean generally seemed cooperative and honest. The Court finds Dean’s testimony generally to be credible on matters within his personal recollection and knowledge.Mark Alvarado is an attorney who used to practice with Rosenthal & Watson and now represents the Chavez family.Alvarado was a fact witness and testified in person at trial. Alvarado has continued to wear multiple hats. At trial in this adversary proceeding, Alvarado was both the attorney advocate for the Chavez Family and a fact witness. Significant personal animosity exists between Alvarado (as counsel for the Chavez Family) and Merritt Clements (longtime counsel for KCSR in the disputes for the Chavez Family). Alvarado’s testimony to the Court covered primarily background information regarding the lengthy litigation between the Chavez Family and KCSR. Although Alvarado appeared (for the most part) straightforward, given his dual role as advocate and witness in a bitter, lengthy dispute, the Court gives his non-background testimony only limited weight.Adriana Maddox and Edward Maddox served as guardians ad litem for Joel Chavez, the minor son of Luz Chavez. Adriana played a peripheral role in this controversy. She testified at trial only by deposition. She only had a partial recollection of events. In her testimony, Adriana seemed straightforward and honest. The Court finds Adriana’s testimony to be credible on matters within her personal recollection.Like his spouse, Edward had a peripheral role in this controversy. He testified at trial only by deposition. Edward had a limited recollection of events. In his testimony,Edward seemed candid. The Court finds Edward’s testimony to be credible on matters within his personal recollection. Alphonso "Pancho" Gonzales was a private investigator hired by Rosenthal & Watson.Gonzales had a very limited role in this controversy. He testified at trial only by deposition. Gonzales appeared to have a good recollection of events and was candid. The Court finds the testimony of Gonzales to be credible on the limited matters that were the subject of his testimony.Lessons to be LearnedWhat to make of all these credibility decisions? First, it is interesting to note that nine out of thirteen witnesses who testified were attorneys.  This has a certain logic given that this was a trial about whether a binding settlement agreement had been reached in a state court lawsuit.There are some patterns. Witnesses who are found to be credible are described with words like candid, honest, and forthright. Candid and forthright are words that describe a witness who answers questions directly without beating around the bush.  They contrast with the generalized and vague testimony given by Juanita Watson and the inconsistent and confused testimony given by Luz Chavez.Competent is another word used to describe credible witnesses. It contrasts with the cognitive difficulties observed with Luz Chavez's testimony. However, it is also contrasted with the testimony of the guardians ad litem who were honest but had limited memory.It perhaps goes without saying but being a convicted felon who tampered with witnesses is not conducive to credibility.Bias and emotion also affect credibility. Merritt and Alvarado were both lawyers who represented parties and testified as fact witnesses. Despite having no problem with their honest, the court gave them little credibility beyond background information.  The court also used the phrase "within his/her personal recollection" several times. This qualifier states the obvious qualifier that witnesses only know what they know. While unobjected to hearsay does constitute evidence, it is not as strong as something the witness has personal knowledge of.Finally, there are major witnesses and minor witnesses. There were several witnesses like Stephen Dennis and Pancho Alvarado who were honest but whose testimony was just not that important.My final point is that lack of credibility does not mean that the witness's testimony cannot have a substantial impact. One of the more important scenes in the trial consisted of a phone call between Juanita Watson and Luz Chapa. These were two witnesses who both had credibility problems. Watson was vague and generalized about the family's approval of the settlement while Chapa had cognitive difficulties and was confused. Chapa's credibility problems actually appear to have helped the court conclude that she did not understand the settlement sufficiently to give informed consent.From this survey, we can develop the following rules for witnesses:Answer the question directly.Only answer the question being asked.Be cooperative. If asked about page 3 of Exhibit 2 don't repeatedly go to page 2 of Exhibit 3 or find other excuses to evade the question. Admit what you do not know.Do not testify about things you do not know.Don't contradict yourself.Do not have convenient memory, that is, memory which is clear and direct on points helpful to you and vague and fuzzy on points which hurt you.

Here, the Court grapples with an inheritance—the latest chapter of a litigation odyssey that began over a decade ago in a different domain.Adv. No. 18-1091, Kansas City Southern Railway Company vs. Luz Chavez vs. Rosenthal & Watson, P.C. (Bankr. W.D. Tex. 1/31/20), p.1.  The opinion can be found here.To the outsider, proceedings in bankruptcy court may seem like lawyers talking in incomprehensible jargon while the judge looks down from on high staring Sphinx-like until called upon to make a ruling. However, there is a part of trial work that applies to bankruptcy as well and that is telling stories. The lawyers each spin their tales through arguments, witnesses and exhibits. The judge then takes the raw material the lawyers have given him and fashions it into his own tale.  This case is a tragic tale of clients and some lawyers who failed to serve them well. Note: on the cold light of the digital page, as drafted by the judge and his clerks, the story takes on clear heroes and villains. In this post, I do not seek to judge the parties, the judge has already done that. Instead, I am re-telling a story that I heard from a judge and found compelling.The Prelude: How the Dispute Reached Bankruptcy Court Judge Mott succinctly lays out the dispute in his opening paragraphs before delving into a 106 page opinion. I can't tell the story better than he did, so here it is.The saga began in 2007, when a father and son were tragically killed in a train accident at a South Texas railroad crossing. Surviving family members hired a law firm that immediately filed a wrongful death suit against the railway in state court. Just before trial in 2009, the law firm (without the family’s knowledge) saw fit to associate a different attorney who tried the case to a jury. A unanimous defense verdict was rendered by the jury against the family in 2009, which appeared to end the saga. Fate then intervened, as the family was granted a new trial against the railway based on newly discovered evidence.In 2010, the railway made a seemingly reasonable settlement offer to the associated trial attorney hired by the family’s law firm. The associated attorney communicated the settlement offer to the family’s law firm, who relayed the settlement offer to one family member. The law firm obtained the disputed oral consent of one family member (the widow) to the railway’s settlement offer on the phone, but never discussed the settlement with the four other adult family members. After the associated attorney sent the railway a letter accepting the settlement offer for the whole family, the entire family denied authorizing any settlement.The litigation odyssey then restarted in earnest, this time with a complete role reversal. In 2011, the railway sued the family to enforce the settlement, winning temporary success twice through summary proceedings in state trial court. This spawned two journeys to the Texas Court of Appeals, one journey to Texas Supreme Court, and three written appellate opinions. Ultimately, in 2017, the settlement enforcement suit against the family was reversed and remanded for trial in state court.Meanwhile, the lead partner of the law firm was convicted of bribing witnesses and fabricating evidence in other railroad cases, resulting in a 20-year federal prison sentence. This twist in the voyage led the law firm to close operations and file Chapter 7 bankruptcy. The bankruptcy trustee then attempted to collect the law firm’s expenses owed by the family out of the still disputed settlement with the railway, by removing the settlement enforcement suit from the domain of the state court to this Court.Now, through this Opinion, the Court will deal with the inherited chapter of this litigation odyssey. Opinion, pp. 2-3.Proceedings in Bankruptcy CourtThe law firm, Rosenthal & Watkins, filed Chapter 7 in 2014. Ron Satija was appointed as Chapter 7 trustee. On October 1, 2018, the Trustee removed the state court action to bankruptcy court. After a bunch of pleadings and motions were filed and decided, the parties filed their joint pre-trial order and a trial was commenced. Judge Mott heard evidence over four days in December 2019. He heard from thirteen witnesses either in person or through deposition or both.He made extensive findings about credibility of the witnesses. I am going to do a separate post looking at how judges examine credibility. Where Things Went WrongRosenthal & Watson (R & W) made critical mistakes at several junctures. The first was that they hired another lawyer to actually try the case and entered into a fee sharing agreement with him without obtaining the consent of their clients.  James Christopher Dean was the trial attorney hired by the firm. The engagement agreement signed by the members of the Chavez family referred to "such other attorneys or law firms as Attorneys in their sole discretion shall employ or associate with in my behalf." This certainly allowed R & W to hire Dean to assist with the case. However, it did not allow them to do so and not tell their clients.  Importantly Texas Rule of Disciplinary Conduct 1.09(f) states that no fee sharing may take place unless the client consents to both the fee sharing and the identity of the person with whom the fees would be shared.Things really went south when Dean and R & W succeeded in getting the initial take-nothing judgment thrown out and a new trial date was set. At this point, the firm had expended hundreds of thousands of dollars pursuing the case and it was facing financial difficulties due to the criminal investigation of Rosenthal, one of its partners. The railroad saw some risk in a re-trial as well since newly discovered evidence showed the engineer using his cell phone.  Dean began engaging in settlement negotiations with Merritt Clements, the railroad's attorney. The engagement agreement entered into by R & W with the five members of the Chavez family allowed the attorneys to engage in settlement negotiations but reserved the sole authority to settle to the clients (as it necessarily must have). Clements did not know that Dean was negotiating without the authority of his clients or for that matter, without any communication with them.Clements made a global settlement offer to Dean covering all five members of the Chavez family.  Rosenthal, the soon to be disgraced partner of R & W, came up with an allocation of the settlement proceeds between the law firm and his clients. The lion's share of the funds were to go to R & W to cover its expenses. Other funds would go to reimburse worker's comp insurers who had subrogation rights and some would go to the family members. Rosenthal had one conversation with Luz Chavez, the matriarch of the family. She did not agree to the settlement in this conversation. In fact, she began refusing to return phone calls from R & W. Eventually R & W grew desperate and hired a private investigator to contact Luz. Luz eventually did contact Watson, the other partner of R & W. After a brief phone call which was not followed up with anything in writing, Luz agreed to the settlement. However, Judge Mott found that the phone call was not sufficient to gain her informed consent to the settlement and that she did not understand what she had agreed to.  Among other things, the settlement included a confidentiality agreement with a 10% liquidated damages clause and required the Chavez family to indemnify the railroad.Watson then informed Dean that the family had approved the settlement even though she had not communicated with four out of five of the adult family members. In the meantime, the railroad increased its offer by $25,000 which R & W added to their share of the proceeds. They then added $1,000 per plaintiff as compensation for the confidentiality clause that the plaintiffs had not been informed of.Dean sent a letter to Merritt accepting the offer.  Merritt accepted subject to the confidentiality and indemnity provisions he had requested. Dean sent a copy of this letter to Watson but neither Dean nor Watson sent a copy to the family. Merritt then prepared a formal settlement agreement. This document was never provided to the family.  Dean informed the court that the parties had reached a settlement and to take the case off the docket.The court appointed a guardian ad litem to represent the interest of one plaintiff who was a minor. The ad litem negotiated some improvements to the agreement for the minor and ultimately recommended that it be approved.  The railroad's attorney filed a motion to approve the settlement with the minor. The ad litem met with Luz who did not voice any objection to the settlement. However, shortly before the hearing, Luz told Alvarado, a former attorney with R & W, that she did not want to go through with the settlement. She then told the state court that she did not want to go through with the settlement and that she wanted three months in which to find another lawyer because she had become dissatisfied with R & W.Several weeks later, the railroad filed a motion to enforce settlement agreement. The trial court granted the motion. The case went up on appeal and was reversed because the settlement letter had not been filed with the court and therefore could not be enforced as a Rule 11 agreement. The railroad then filed with settlement letter (signed by Dean) with the court and the court approved it a second time. This time the court of appeals affirmed but the Texas Supreme Court reversed and remanded, leading to the trial before Judge Mott.Judge Mott's RulingJudge Mott's ruling is really, really long. However, I will convey the high points. He found that the Chavez family was not bound by the settlement agreement. The family had never done anything to clothe Dean with apparent authority. Indeed, they did not even know that he was their attorney. A principal cannot be bound by a person purporting to act on its behalf. Additionally, the family did not actually agree. Luz agreed verbally but was not given sufficient information to understand what she was agreeing to and the lawyer did not go out of their way to fully explain. The four other family members were not even told about the settlement so that they could not have consented. Finally, the settlement agreement violated what is known as the aggregate settlement rule. If an attorney represents multiple clients, he must negotiate separately on behalf of each client. If he does not, the settlement is void as against public policy. Here, Rosenthal decided the allocation and there was never any negotiation on behalf of the individual plaintiffs.  Thus, Judge Mott found that the settlement was unenforceable.Next, Judge Mott concluded that R & W breached its fiduciary duty to the Chavez family. An attorney owes his client a fiduciary duty. However, breach of fiduciary duty is different than malpractice. Malpractice consists of negligence in representing the client.  Breach of fiduciary duty by an attorney most often involves conflicts of interest, failure to deliver funds, placing an attorney’s interests over a client’s interest, improper use of client confidences, taking advantage of a client’s trust, engaging in self-dealing, and making misrepresentations.Opinion, p. 75. Judge Mott found that R & W breached its fiduciary duty by entering into a fee sharing agreement without the consent of the clients, by misrepresenting that the family had agreed to the settlement, and by entering into an aggregate settlement.As a remedy, Judge Mott applied the equitable remedy of forfeiture of fees. A fiduciary who breaches his duty can be forced to forfeit all fees. Judge Mott ruled that R & W should forfeit all fees and 50% of its expenses. Thus, the Trustee was left with a claim for $208,811. Judge Mott found that this amount was secured by a valid attorney's lien against any settlement or judgment based on the contractual language.Where Does This Leave the Parties?The railroad spent a ton of money trying to enforce a settlement which was ultimately denied. It faces re-trial on a case based on an accident which occurred thirteen years ago. R & W is in chapter 7 and its trustee will not recover anything for it unless the Chavez family recovers an award. The Chavez family succeeded in voiding the settlement. However, it faces a new trial and must obtain new counsel. There are several obscene terms for this situation which I will leave to the reader's imagination.Recognizing the legal carnage which had been inflicted on the parties, Judge Mott counseled settlement. He said: If history repeats itself, this Opinion (effectively Chavez IV) will not be the last written chapter in this litigation odyssey. But after a full-blown trial in this Court followed by this full-length Opinion, perhaps the Chavez Family will agree to end their litigation marathon with KCSR now, without further expense and delay. Failing that, the Court is concerned that history may repeat itself during the next phase of the journey—a second jury trial of the wrongful death suit in state court. Opinion, p.  106.Why Write About This Case?The short answer is that I am under a shelter in place order and have time to write. However, there is another reason. Early in my blogging career, I was accused of placing Texas lawyers in a bad light by writing articles which explored ethical lapses. That is not and was not my intent. I practice with and against some great lawyers (including the trustee in this case). However, while this case demonstrates the deepest levels of legal perfidy, the issues here are ones that any lawyer can be faced with. In the midst of hearings, conference calls and meetings, it is hard to slow down and have good, solid communication with the client, especially if the client is a challenging one. It is also tempting that an attorney wanting to avoid a bad result for his client will focus on getting the deal done no matter what. Joe Martinec refers to this as placing your loyalty to the deal instead of the client. This case, by showing what lawyers should not do, highlights what they should do. Lawyers should communicate with their clients. Lawyers should take the time to educate their clients. Lawyers should put things in writing.  By writing about this train wreck of a case, I hope that lawyers will be reminded, as I have been reminded, to "be best" as the saying goes.

Can I File for Bankruptcy Even Though I Can’t Leave My House Due to COVID-19? Filing Bankruptcy From Home in Arizona Even though it feels like the entire world is shut down, debt and its collection attempts are not. Whether you were struggling financially before the pandemic, or quarantining has sent you into a state of immediate financial peril, you may need the protections provided by filing bankruptcy. Once your bankruptcy is filed, you have an automatic stay of protection. When the stay is in effect, your wages can’t be garnished, and repossession and foreclosure efforts will be halted. The stay remains in effect until your case is discharged or dismissed. If you are in need of bankruptcy protection, you may be wondering how the spread of coronavirus will affect your ability to file File Bankruptcy From Home On March 30, 2020, Arizona Governor Doug Ducey recently asked Arizonans to stay home unless they need to perform essential functions. Many bankruptcy attorneys offer telephonic consultations so you can avoid going into the office. Our office offers telephonic consultations free of charge. We can scan or e-mail any documents needed.  Our COVID-19 safe bankruptcy law firm is here to assist. Steps to Filing Your Bankruptcy During COVID-19 in Arizona Once you have retained a bankruptcy attorney, you will have to send them to your attorney so they can draft your petition. While some offices may have drop-off still available, you will likely need to remotely submit your documents. Besides filing bankruptcy from home, other options your attorney may have available include: fax, email, and an online client portal system.  Our Arizona debt relief lawyers are currently offering a bankruptcy by phone option. Your attorney will draft your petition once they have all of your documents. They should be able to email it to you before going over it with the attorney. Offices will vary on the procedure used to sign your petition. Your attorney will then file your petition electronically. If you are considering filing pro se, or on your own, check with your courthouse to make sure that electronic filing isn’t restricted to attorneys only. You will also need to complete a credit counseling course before filing, which can be done online. 341 Hearings Being Held Telephonically Bankruptcy filers typically only need to attend one hearing in person- the 341 Meeting of Creditors. These hearings have been temporarily suspended, and your Phoenix bankruptcy attorney will inform you on how the hearing will be handled once they hear from your trustee. You will also need to take one more online credit counseling course within 60 days of your 341 Meeting of Creditors. Once these steps have been completed, you can remain quarantined in your home waiting for your case to be discharged. If your 341 Meeting of Creditors is delayed by coronavirus, the automatic stay will protect you in the meantime. Don’t wait until it is too late to begin the bankruptcy process- call and schedule a consultation today. You can begin your journey towards a financial clean slate without leaving your home.  Contact our experienced Arizona bankruptcy attorneys today, in this ever-changing COVID-19 climate, our attorneys and staff are here to assist. The post Can I File for Bankruptcy Even Though I Can’t Leave My House Due to COVID-19? appeared first on My AZ Lawyers.