By Jacob SonenshineUber and Lyft drivers in New York City are demanding higher pay — and they're going straight to the city to get it. The Independent Driver's Guild (IDG) is petitioning the New York City's Taxi and Limousine Commission (TLC), which implements and enforces New York City transit rules and also regulates the market for yellow cab medallions, "to enact a livable minimum wage for app-based for-hire vehicle drivers." The petition has accrued more than 15,000 supporters. Ride-hailing companies, most notably Uber and Lyft, have been cutting pay for the last several years, and their drivers have reached their threshold. "We are making much less than we were just a few years ago -- and companies like Uber and Lyft are pocketing more," the petition said. This isn't the first time drivers have complained. In 2017, the IDG petitioned for better pay using a New York City law enforced through a TLC rule, which then obliged ride-hailing services to add a tipping option for customers. But now the drivers want a real wage. They're demanding a 37% pay increase, and they want the ride-hailing companies to stop "price gouging." The petition proposes customers do not get charged more than 25% over the driver's profit on each ride. Uber, specifically, has been cutting pay since 2013. Back then, a five-mile, 30-minute Uber ride in New York City cost $28.50 and the driver made $20.25. In 2018, for that same ride, the driver makes $14.68, while the customer fare varies, and could surpass $28. IDG is requesting that the ratio for that length of a ride be set to $20.11 for drivers and $27.42 charged to the customer. Here's a visual of that request. IDG "Gone are the days of a fat 20 percent Uber fee," the petition said. "Riders are being gouged with fees like 143 percent, as in this example." IDG Of course an increase in driver pay would impact Uber's bottom line unless that cost was passed on directly to the consumer. The ride-hailing company posted a net loss and negative cash flow in 2017.Uber CEO Dara Khosrowshahi said the company could turn a profit right now but it doesn't want to because doing so would sacrifice growth and innovation. New York City is required to respond to the petition within sixty days.Copyright © 2018 Business Insider Inc. All rights reserved.
By Molly Crane-Newman, Dan Rivoli and Graham BaymanA Queens cabbie who drove a yellow taxi for three decades hanged himself in his garage after suffering massive financial woes in the era of Uber, officials and friends said Wednesday. Nicanor Ochisor, 65, was found hanging from a wooden beam in his garage on 58th Road near 69th Lane in Maspeth Friday morning, police said. Taxi advocates quickly blamed the Romanian immigrant’s suicide on the glut of drivers working for app-driven, for-hire companies like Uber and Lyft taking money from medallion drivers. “He could no longer bear the strain of the impending loss of everything he had worked for in his life in America,” the Taxi Medallion Owner and Driver Association said in a statement. The organization pointed out that in 2014, medallions were selling for more than $1 million. Now, the value has dropped to about $175,000. The group said Ochisor is the fourth cab driver, and first medallion owner, to take his own life over the last few months. “We have been begging the mayor and the Taxi and Limousine Commission to act, and all we have gotten is either lip service or meaningless gestures that don’t get to the root of the problem: There are way too many cars on the streets,” taxi industry group spokesman Nino Hervias said. TLC Commissioner Meera Joshi said the agency was “deeply distressed” by Ochisor’s death. “To all that he has left behind, his family, friends and his brothers and sisters in the industry, our heartfelt condolences — we mourn with you,” Joshi said. Ochisor had his medallion for nearly 30 years after purchasing it in 1989, officials said. He never rented out his medallion, but shared the driving duties with his wife, longtime friend Dan Nitescu said. “His wife was driving in the morning, he was driving in the afternoon to midnight,” said Nitescu, 64.“Since Uber came to town … the whole taxi business was almost destroyed. The medallion value went to almost zero.” As the price of a taxi medallion continued to tumble, Ochisor “got into a deep depression,” Nitescu said. “He was telling me all the time that the value of the medallion is not going to be like it used to be anymore, ever,” he said. “Now, he told me, for the last six, seven months that whatever he makes together with his wife, he was making by himself alone, before the Uber. “He's gotta pay his mortgage on the medallion,” Nitescu added. “He was making the payments, but it was very hard. He struggled himself. It was bothering him all the time.” Councilman Ruben Diaz Sr. (D-Bronx) has proposed a bill that would more tightly regulate the online for-hire industry. The bill would establish an annual $2,000 fee on each vehicle, and any new services would have to do an environmental study. It would cap the number of vehicles per base at 250. Currently any Uber driver can respond to a call from any Uber base.© Copyright 2018 NY DailyNews.com. All rights reserved.
A California district court granted a $13,050 default judgment against a creditor for six calls to an individual who had filed bankruptcy after being advised that he had retained counsel and requesting that all communications be sent to counsel. Adriano Mabeza, Plaintiff, v. Ashfield Mgmt. Servs., Inc. & Lenny Credit, Inc. Defendants., No. 17-CV-1946-AJB-KSC, 2018 WL 1400778, (S.D. Cal. Mar. 20, 2018). Rule 55(b) of the Fed. R. of Civ. Proc. permits the court to enter a default judgment after entry of a default. In determining whether to grant default, the court considers 7 factors set out in Eitel v. McCool, 782 F.2d 1470 (9th Cir. 1986). These factors are 1) the possibility of prejudice to the plaintiff, 2) the merits of the plaintiff's substantive claims, 3) the sufficiency of the complaint, 4) the sum of money at stake in the action, 5) the possibility of a dispute concerning the material facts, 6) whether the default was due to excusable neglect, and 7) the strong policy underlying the Fed. R. of Civ. Proc. favoring decisions on the merit. Id. 782 F.2d. 1471-72. Once a default is entered, the factual allegations in the complaint are taken as true, except those related to damages. Here it is possible that denying a default judgment would leave the plaintiff without an alternative recourse for recovery, leaving him unable to receive compensation for the unlawful conduct he has been subject to. The complaint adequately pled the facts necessary under each cause of action. As to the Telephone Consumer Protection Act (TCPA) plaintiff must establish 1) the phone calls were made using an automatic telephone dialing system (ATDS), 2) that he was the 'called party', and 3) that the creditor did not have his prior consent to make the calls. 47 U.S.C. §227(b)(1)(A)(iii). While the complaint set forth general allegations that the calls were made using an ATDS, such complaint still supports a reasonable inference to that effect. He met the second requirement by alleging he was the 'called party' because the number called was assigned to a cellular telephone service for which he incurrs a charge for incoming calls pursuant to 47 U.S.C. §227(b)(1). The third requirement is met by his allegation that he never gave consent, and that any consent was expressly revoked during at least two calls. As to the FDPCA, a plaintiff must show 1) his is a 'consumer' under 15 U.S.C. §1692a(3); 2) the debt arises out of a transaction entered into for personal purposes; 3) the defendant is a 'debt collector' under 15 U.S.C. §1692a(6); and 4) the defendant violated one of the provisions contained in 15 U.S.C. §§1692a-1692o. The plaintiff also sued under the California statute: the Rosenthal Fair Debt Practices Collection Act that has the same standards. The plaintiff adequately alleged he is both a debtor and a consumer, satisfying the first standard. He alleged that the debt was incurred primarily for personal, family or household purposes, and is therefore a consumer debt. The 3rd element was met by alleging the creditor was a debt collector as defined by the statute. The final requirement was satisfied by alleging the creditor violated §1692(c)(a)(2) which forbids contact with consumers who are known to be represented by an attorney; §1692c(c) by contacting the plaintiff after such consent was revoked; §1692d for engaging in any conduct the natural consequence of which is to harass, oppress, or abuse any persona in connection with the collection of a debt; and §1692f which makes it unlawful to use unfair or unconscionable means to collect a debt. Default judgment is disfavord where the sum of money at stake is too large or unreasonable in light of defendant's actions. The plaintiff sought $7,500 for the TCPA violations. This statute allows $500 for each violation, but can be trebled when the creditor acts 'willfully or knowingly. 47 U.S.C. §227(b)(3)(B). Taking the allegations as true, the court finds that the creditor has sufficient knowledge of the revocation of any consent to call when the plaintiff so advised them on the phone, and through the service of the bankruptcy notice through an attorney. The creditor then made five more calls, constituting a willful violation of the TCPA, and supporting the request for $7,500 in damages. Plaintiff also sought $1,000 in damages under the FDPCA. This statute requires the court to consider the frequency and persistence of noncompliance by a debt collector, the nature of such compliance, and the extent to which such noncompliance was intentional. 15 U.S.C. §1692k(b)(1). The Court found that the creditor's actions were not egregious enough to warrant the maximum penalty (citing other cases allowing $250 for a single violation, and $350 for 3 voicemail violations) the court granted damages of $600. The court also granted $4,950 in attorneys fees and costs under the FDPCA, based on the lodestar method at 12 hours at $400/hour for lead counsel and $300/hour for associate counsel supported by declarations and a detailed timesheet. The court find that since the creditor failed to participate in litigation, and the plaintiff adequately pled facts to support its claims, there is no dispute of material facts. There is no allegation of excusable neglect given the defendant's failure to respond or participate in defending itself. The defendants failure to respond overcomes the general preference for a resolution on the merits. Therefore the default judgment is granted with damages to plaintiff of $13,050.Michael Barnett www.hillsboroughbankruptcy.com
The District Court denied a debtor's request for interlocutory appeal of a contempt and civil incarceration order for failure to produce discovery in TIMOTHY MCCALLAN, Appellant, v. CARLY B. WILKINS, as Tr. for Debtors Allegro Law, LLC & Allegro Fin. Servs., LLC, Appellee., No. 2:18-CV-117-WKW, 2018 WL 1384107 (M.D. Ala. Mar. 19, 2018). The Debtor had been held in civil contempt by the Bankruptcy Court in October 2016 for willful failure to comply with a previous order to compel post-judgment discovery. Some detail on the basis for the contempt finding is helpful. The Bankruptcy Court found that the debtor perpetrated a fraud upon the court by misrepresentation the reasons (a hurricane and death of a nephew) that he had failed to purge himself of contempt, instead seeking additional time in order to move, hide, or otherwise dispose of assets that could be used to satisfy the judgment against him. The Court directed the debtor to comply with additional discovery requests, provide an accounting of $498,000 in a Wells Fargo account, and refrain from making additional transfers from such account. The Court warned that if he did not comply with all discovery obligations within the next seven days, the Bankruptcy Court would order him arrested and brought before it. After numerous attempts to obtain compliance, the Court denied a request for a further extension request, again based on another hurricane, in September 2017, based in part of the absence of any affidavit or specifics as to the difficulties caused by the hurricane, the the Debtor's history of misrepresenting the effects of natural disasters on his ability to prepare discovery. When the Debtor still did not comply, in October 2017 the Bankruptcy Court ordered his arrest and incarceration. The Court provided that in order to purge himself of the contempt, the Debtor must demonstrate that he has fully disclosed all the matters requested to the best of his ability, and, given his long history of lying to the Court and flouting its orders, he was cautioned that he must be candid with the court and creditor. The Debtor still had not produced additional documents as of a November 6 hearing but asserted he had downloaded documents to 'dropbox', the same assertion he had made at an October 23 hearing, which was proven to be inaccurate. The Bankruptcy Court found this to be a maneuver by the Debtor to claim compliance just prior to hearings without actually complying with the court orders. Despite this, the Debtor again performed another dropbox document dump 2 days before a continued November 16 hearing, but the Debtor's attorney admitted the submissions were not complete. Another deadline was set for December 15 to produce, with a status conference set for January 9, 2018. On 23 December 2017 the Debtor filed a motion to quash the contempt finding and to be released from custody, arguing that he had purged himself from contempt. The Bankruptcy Court entered an order on the January 9 hearing detailing the history of the case and noting that Debtor's lawyers at the time of trial and early discovery had been disbarred in conjunction with his conduct during the case, including efforts to thwart discovery. In an order of February 6, 2018 the Court expressly rejected Debtor's assertion that he had purged himself of contempt. The Court set specific conditions, including providing updated responses to specific discovery requests, and updated accounting of the $498,000, and amendment of the bankruptcy schedules and statement of financial affairs, to purge himself of contempt. The Debtor filed a notice of appeal of this order, or in the alternative a motion for leave to file an interlocutory appeal on February 15, 2018. Initially, the District Court found that the February 6 order was not a final order under 28 U.S.C. §1291 appealable as of right under 28 U.S.C. §158(a)(1) because it does not end the litigation on the merits, leaving nothing for the trial court to do but execute on the decision. Rather, the February 6 order requested briefs by March 19, 2018 and indicated it would enter written findings of fact and conclusions of law then regarding the determination that the Debtor has not yet purged himself of contempt. Further, the Debtor does not allege that after the entry of the prior October 2017 orders he took adequate steps to purge himself of contempt, or that new circumstances had arisen to render him unable to comply. By allowing Debtor to challenge the October 2017 contempt finding so long after the time to appeal that order had passed, without either 1) taking further meaningful steps to purge himself of contempt; or 2) presenting evidence of changed circumstances that render compliance newly impossible would undermine the concept and purpose of the finality requirement. The District Court also declined to treat the February 6 2018 order as a motion for relief under Rule 60(b) of the Federal Rules of Civil Procedure, and Rule 9024 of the Federal Rules of Bankruptcy Procedure both because the Debtor did not request this, and because an appeal from such an order would be fruitless because the Debtor's motion did not assert that grounds for relief from incarceration that were unavailable at the time of the October 2017 order imposing sanction. The District Court also declined to grant permissive appeal from an interlocutory order. as permitted under 28 U.S.C. 158(a)(3) and Rule 8004 of the Federal Rules of Bankruptcy Procedure. District Courts have adopted the standard under 28 U.S.C. §1292(b) for interlocutory appeals from district court orders which requires 1) a controlling issue of law must be involved; 2) the question must be one where there is a substantial ground for difference of opinion; and 3) an immediate appeal must materially advance the ultimate termination of the litigation. The Court also noted that a finding of civil contempt is not ordinarily subject to an interlocutory appeal, but is reviewable only upon appeal from a final order. While an order that imposes a fine or penalty for contempt that must be obeyed within a certain time period and may not be avoided by some other form of compliance is immediately appealable, but if the party can avoid contempt by complying with the earlier order it is interlocutory and not appealable. The 11th Circuit has indicated that the key in determining whether a contempt order is appealable is whether the contempt penalties imposed are conditional or subject to modification. The goal is to avoid the risk of disrupting a continuing, orderly course of proceedings below. Order that representing a continuing effort to prod the party into compliance have been held to not be appealable. To be appealable a contempt order must both make a finding of contempt, and a noncontingent order of sanction. Since the February order was part of an ongoing effort to prod a recalcitrant contemnor into compliance, and the order merely found that 1) he had not purged himself of contempt, and 2) did not impose new sanctions, and 3) provided instructions of what needed to be done to lift the sanctions it is not appropriate to grant an interlocutory appeal. In order to get review the Debtor must first comply with the February 6 order and file a certification of compliance. This will allow the bankruptcy court to to determine the extent to which his submissions are deficient. Even then an appeal of the February 6 order may not be timely, but other remedies would be available such as a motion for appropriate relief from the bankruptcy court, such as a motion for release on bond or new motion to purge contempt based on additional disclosures made in compliance with the order, or writs of habeas corpus or mandamus. Michael Barnett www.hillsboroughbankruptcy.com
Taxi Limousine Commission (TLC) Medallion Sales Data from February 2018The February 2018 sales data is out from the TLC. When we filter out sales from foreclosure and estate sales, sales for New York City taxi medallions ranged from $195,000 to $400,000, with sales between those figures. In this author’s opinion, the median sales price and fair market value of taxi medallions appears to be $197,500. It will be interesting to review the next few months of TLC sales data to see if $197,500 is a new floor or merely a pause in the continuing decline of the price of taxi medallion. This author believes that the new laws and fees that have been proposed by various elected officials, if enacted, will negatively impact Uber and other ride hailing services and potentially increase the value of future taxi medallion sales. Jim Shenwick Price Type of Sale Number of Medallions $750,000 Foreclosure 2 $750,000 Foreclosure 2 $750,000 Foreclosure 2 $750,000 Foreclosure 2 $750,000 Foreclosure 2 $700,000 Foreclosure 2 $420,000 2 $400,000 2 $400,000 Foreclosure 1 $400,000 1 $375,000 Estate 2 $360,000 2 $350,000 2 $195,000 1 $180,000 Foreclosure 1 $170,000 Foreclosure 1 $160,000 Estate 1 $125,000 Foreclosure 1 $0 Family 1 $0 Estate 1
As many of you know, the representation of taxi medallion owners has become a sizeable portion of our practice. This month, we’d like to discuss chapter 13 bankruptcy as a potential option for “underwater” taxi medallion owners (where the value of the taxi medallion securing the loan is less than the balance outstanding on the loan).In contrast to a chapter 7 (liquidation) bankruptcy, a chapter 13 bankruptcy is intended to provide an adjustment of debts, and is best suited to individuals who want to keep property (such as a house and/or a taxi medallion) after their bankruptcy case is concluded. However, chapter 13 cases are more complex than chapter 7 and less expensive and less complex than chapter 11 and come with some important limitations that potential debtors should be aware of:1. 1. There is a limit on how much debt a chapter 13 debtor may have. Under §109(e) of the Bankruptcy Code, only an individual with regular income that owes, on the date of the filing of the petition, noncontingent, liquidated, unsecured debts of less than $394,725 and noncontingent, liquidated, secured debts of less than $1,184,200 may be a debtor under chapter 13. These debt limits are adjusted every three years and will be adjusted again in April 2019. 3 2. Most chapter 13 repayment plans are between three years and five years in length. The length (or commitment period) of a chapter 13 plan depends on a potential debtor’s income and the amount of time needed to pay off the debts included in the plan. Since BAPCPA was enacted in 2005, all debtors above the median income for their state and family size must complete a “means test” to determine their eligibility for bankruptcy. Chapter 13 debtors need to complete two forms, the “Statement of Your Current Monthly Income and Calculation of Commitment Period” (to determine the debtor’s current monthly income and the length of the plan) and “Chapter 13 Calculation of Your Disposable Income.” (to determine how much disposable income the debtor has to make plan payments). 3. The proposed plan must be feasible. Feasibility is a requirement for plan confirmation. Section 1325(a)(6) of the Bankruptcy Code provides that "the court shall confirm a plan if ... the debtor will be able to make all payments under the plan and to comply with the plan." In other words, can the debtor make all the proposed payments to creditors over the length of the plan? This standard can usually be satisfied if the debtor has a regular source of income such as a job or benefit payments. 3 4. The chapter 13 debtor must perform a “liquidation analysis” to ensure that creditors are treated fairly. Section 1325(a)(4) of the Bankruptcy Code provides that the court shall confirm a plan if “the value, as of the effective date of the plan, of property to be distributed under the plan on account of each allowed unsecured claim is not less than the amount that would be paid on such claim if the estate of the debtor were liquidated under chapter 7 of this title on such date.” This is also known as the “best interests of creditors” test. The proposed chapter 13 plan must pay unsecured creditors (i.e. credit card accounts and loans with no collateral) one dollar more than they would receive in chapter 7. 5. Finally, chapter 13 bankruptcy can also be used to transfer an underwater taxi medallion back to the bank that financed it and allow the debtor to keep his or her house and other property. If the taxi medallion owner’s unsecured or secured debt exceed the limits discussed in item 1 above, then an out of court workout, settlement (negotiation with the creditor) or a chapter 7 bankruptcy case are other options. For more information about chapter 13 and other ways to settle your debts AND keep your taxi medallion, please contact Jim Shenwick.
The 6th Circuit rejected a creditor's appeal of a chapter 12 confirmation in In re Perkins, No. 17-8001, 2018 WL 1279252, (B.A.P. 6th Cir. Mar. 13, 2018). The debtor farmed 200 acres in southern Kentucky, and had expanded to cultivate 9500 acres in partnerships with their son. After running into financial difficulties due to high input prices and low crop prices, the partnerships filed chapter 11 bankruptcy in April 2015, which were subsequently dismissed after liquidating substantially all of the partnerships' assets paying $4 million to BB&T. In April 2016 Debtor filed for relief under chapter 12 scheduling $3,513,803.72 in secured and unsecured debts. As of the date of the confirmation hearing claims filed totaled $4,012,908.72 for debts owed when the case was filed. In the preceding tax year Debtor received $279,000 gross income from her farm, $764,472 from the farm partnership with her son, $161,571 of capital gains from sale of farm equipment, and $132,360 from wages, social security and pension. BB&T was the only creditor objecting to confirmation of the plan. The plan as confirmed over the objection projected $784,137 income from crops, rent on leasing land, and outbuildings, supplemented by $84,000 of retirement income. The plan would make annual payments of $184,000 to secured creditors leaving $18,950 annually to unsecured creditors over the plans 5 year term. The liquidation analysis provided showed no dividend to unsecured creditors if the case were liquidated in chapter 7. The debtor and her son testified at the confirmation hearing as to feasibility. BB&T presented no witnesses. The court confirmed the plan. BB&T appealed but assigned its claims to SummitBridge which prosecuted the appeal and asserts seven grounds for reversal. 1. Aggregate Debt §109(f) provides that only a family farmer or family fisherman with regular annual income can be a debtor under chapter 12. §101(18)(A) defines family farmer as an Individual or individual and spouse engaged in a farming operation whose aggregate debts do not exceed $4,153,150 and not less than 50 percent of whose aggregate noncontingent, liquidated debts (excluding a debt for the principal residence of such individual or such individual and spouse unless such debt arises out of a farming operation), on the date the case is filed, arise out of a farming operation owned or operated by such individual or such individual and spouse, and such individual or such individual and spouse receive from such farming operation more than 50 percent of such individual's or such individual and spouse's gross income for—(i) the taxable year preceding; or(ii) each of the 2d and 3d taxable years preceding the taxable year in which the case concerning such individual or such individual and spouse was filed[.] The three requirements under this provision is 1) the individual's aggregate debt may not exceed $4,153,150; 2) more than 50% of the aggregate noncontingent, liquidated debt (excluding a debt for the principal residence unless such debt arises out of a farming operation) must be for farm debt; and 3) more than 50% of the individual's income must be farm income. SummitBridge asserts neither the 1st or 3rd ground have been met. SummitBridge requests that the court follow In re Labig, 74 B.R. 507 (Bankr. S.D. Ohio 1987) which required courts in chapter 12 to look at both the schedules and the claims filed in determining whether the aggregate debt meets the debt limit requirement. The bankruptcy court instead simply took evidence at the confirmation hearing that the schedules were filed in good faith in determining that the debt limit was met. SummitBridge notes that if a tax debt for $113,071 from the liquidation of the partnership's property, and all filed claims as well as $640,048 of unsecured debts for which no claims were filed were added, the debtor would have failed the aggregate debt test. Instead the B.A.P. followed Comprehensive Accounting Corp. v. Pearson (In re Pearson), 773 F.2d 751, 757 (6th Cir. 1985), a chapter 13 case finding that eligibility should normally be determined by the debtor's schedules, only checking to see if the schedules were made in good faith. Given the similar eligibility requirements for chapter 12 and chapter 13 and similar policy concerns the B.A.P. found that the same standard should apply in chapter 12. This conclusion is supported by the limited debtor resources and short deadlines in chapter 12 and 13. Also the legislative history suggests that the same rule should govern under §109(e) and (f): the Code provisions are very similar, and both are unique in having a debt cap as an eligibility requirement. Next the B.A.P. determined what is included in aggregate debt. The court rejected SummitBridge's view that it includes the aggregate of the face value of all filed claims and scheduled debts for which no claims were filed. The logical reading of the term aggregate is to include the debtor's non-farm and farm debts, clarifying that the §101(18) requirement 'individual...engaged in a farming operation whose aggregate debts to not exceed $4,153,150' is not ambiguous as to whether such debt is limited to the farm debt. The B.A.P. also rejected SummitBridge's argument that the claims filed showed that the schedules were not filed in good faith. The bankruptcy court rejected this, noting that even if the tax debt had been included the Debtor would still have qualified for relief, and there was no legal certainty at the time of filing that the debtor owed that amount to the IRS.2. Income Requirement §101(18A) requires that more than 50% of the debtor's total income for a particular time period be from 'such farming operation.' The 2015 tax return shows $279,000 in farm income, and $132,360 in non-farm income, as well as $764,472 from her farm partnerships and S corporation and $161,571 of capital gains from sale of farm equipment. Her gross income from the farm partnerships and S Corporation make up a large enough portion that the income from capital gains would not affect the outcome. SummitBridge argues that the income from the partnerships and S Corporation were not from 'such farming operation' to qualify under §101(18A), and only income from the operation conducted under the chapter 12 plan should be included. The court found that such a construction would be impossible to administer. §101(21) defines farming operation to include farming, tilling of soil, dairy farming, ranching, production or raising of crops, poultry, or livestock, and production of poultry or livestock products in an unmanufactured state. The definition is entirely based on the type of activity performed, not by delineating one farming operation from another. The term 'such farming operation' rather refers to the preceding clause 'a farming operation owned or operated by such individual). Ownership is not required. Congress intended to define 'family farmer' and 'farming operation' so as to exclude tax shelters and large corporate entities. The debtor must actually be engaged in farming rather than be a passive investor. The bankruptcy court found that the debtor was involved in the farming operations.3. Feasibility SummitBridge argued that the plan's projections were hopelessly optimistic depending on changing prices and above-average yields, based on the prior year's crop. However the prior year 750 acres were planted, whereas the plan calls for 990 acres to be planted going forward. The fact that harvesting was going forward at the time of the confirmation hearing shows that this increase in the acreage was feasible. Also, while the average farm in the county only grew 135-142 bushels of corn per acre, the debtor presented testimony that according to the debtor's crop insurance the farm produced 180-190 bushels per acre over the past 10 years. The debtor also testified as to the basis for an increase in yield for soy beans going forward as depending on whether soy beans are planted as a double crop with wheat. Also the prior year reflected reduced yield due to the weather. The final argument by SummitBridge was that the plan depends on unenforceable oral leases of land. However, the court found that since the lease did not exceed one year, it was enforceable. As feasibility is fundamentally a finding of fact, the B.A.P. found SummitBridge did not carry the burden to overcome the bankruptcy court's finding that the debtor showed a reasonable assurance of success. The debtor is not required to show a guaranty of success.4. Treatment of BB&T's claim §1225(a)(5)(B) permits confirmation of a chapter 12 plan over a secured creditor's objection so long as:(i) the plan provides that the holder of such claim retain the lien securing such claim; and(ii) the value, as of the effective date of the plan, of property to be distributed by the trustee or the debtor under the plan on account of such claim is not less than the allowed amount of such claim;The plan had provided to amortize the secured claim over 20 years at 4.5% interest. The issue raised by SummitBridge is whether the distribution under the plan is not less than the allowed amount of its secured claim, specifically complaining that the interest rate for the amortized stream of payments is too low. The bankruptcy court employed the formula approach endorsed by Till v. SCS Credit Corp., 541 U.S. 465, 479–80, 124 S.Ct. 1951, 1961–62, 158 L.Ed.2d 787 (2004) requiring by taking the prime rate and adding a risk adjustment generally set at 1-3%. The bankruptcy court found that a 1% risk adjustment is reasonable, and made numerous findings as to the risk posed to the creditor, including Debtor's long history of successful farming, the richness of the land, and the fact that the creditor is over-secured on an appreciating asset and the payments are reducing the principal over the life of the plan. The bankruptcy court also was asked to take judicial notice that a 20 year loan at 4.5% was a typical market rate. No evidence was presented by the secured creditor. The B.A.P. found no clear error by the lower court, given the evidence presented. While the appellate panel found that the higher interest rate of the original notes by the creditor was one piece of evidence regarding the market rate, the other factors supported the bankruptcy court's decision to allow a 4.5% rate. 5. Best Interest of Creditors§1225(a)(4) requires that the value, as of the effective date of the plan, of property to be distributed under the plan on account of each allowed unsecured claim is not less than the amount that would be paid on such claim if the estate of the debtor were liquidated under chapter 7 of this title on such date. The Debtor provided a liquidation analysis projecting the proceeds which would have been received upon liquidation. SummitBridge argued that this analysis was inaccurate due to failing to account for the value of crops currently on the land. The B.A.P. noted a disagreement among the circuits as to whether the critical date to value the debtor's property is the date the case is filed or whether it includes property acquired subsequently. However, the debtor included the value of the crops in the liquidation analysis, and testified as to the analysis at the confirmation hearing. There was ample evidence before the bankruptcy court to support the liquidation analysis showing that the best interests of creditors was met.Michael BarnettTampabankruptcy.com
A bankruptcy court in New Mexico denied ECMC's motion to dismiss the §523(a)(8) complaint filed by the debtor about six and one half years after the chapter 7 discharge was entered. In re: Jonathan P. Gimbel, Debtor. JONATHAN P. GIMBEL, Plaintiff, v. U.S. DEPARTMENT OF EDUCATION, SALLIE MAE, NAVIENT SOLUTIONS, INC., AND EDUCATIONAL CREDIT MANAGEMENT CORPORATION, Defendants., No. 11-12802-J7, 2018 WL 1229718, (Bankr. D.N.M. Mar. 8, 2018). The chapter 7 discharge was entered on 1 November 2011. The court granted his request to reopen the case to file a 523(a)(8) complaint asserting an undue hardship to discharge the student loan on 16 May 2017. The complaint was filed shortly thereafter. The debtor is 63 years years old, and scheduled $110,497 in student loan debts on the original bankruptcy schedules. No request was made in the initial case to seek dischargeability of the student loan debts. Since 2009 the debtor asserts his income has varied from $2,219/yr to $9,152/yr based on his work as a fitness instructor or in his acupuncture business. The chapter 7 petition showed his income in 2009 and 2010 as $2,219 and $3,860 respectively, with current income on schedule I shown at $100/mo for 2011. His 1040 returns showed income subsequently at $7,639, $525, $4,382, $9,154 and $8,125, respectively for 2012 - 2016. He owns no real estate, renting an apartment for $450/mo; and pays $326/mo toward a 2010 Honda CR-V. He has had to borrow to meet his personal and business expenses. He has sought deferment on the student loans since filing. The court concluded that the debtor does not have realistic prospects of obtaining employment enabling him to pay the student loans while providing himself with adequate nutrition, shelter, and health care. In ruling on a motion to dismiss, the court determines whether the complaint states a claim plausible on it's face. This requires not only a "reasonable prospect of success, but also [informs] the defendants of the actual grounds of the claim against them.” Christensen v. Park City Mun. Corp., 554 F.3d 1271, 1276 (10th Cir. 2009). The court assumes the specific factual allegations in the complaint to be true (though not legal conclusions couched as factual assertions). In determining the dischargeability of student loans, the 10th Circuit follows the standard enunciated in In re Brunner, 46 B.R. 752 (S.D.N.Y. 1985), aff'd sub nom. Brunner v. New York State Higher Educ. Servs. Corp., 831 F.2d 395 (2d Cir. 1987)). This requires a showing that:(1) that the debtor cannot maintain, based on current income and expenses, a “minimal” standard of living for herself and her dependents if forced to repay the loans; (2) that additional circumstances exist indicating that this state of affairs is likely to persist for a significant portion of the repayment period of the student loans; and (3) that the debtor has made good faith efforts to repay the loans. Id. 46 B.R. 756. The initial basis for dismissal is that the complaint seeks to discharge post-petition loans. While the Court agreed that no post-petition disbursements could be discharged, it concluded that the complaint did not seek discharge of post-petition loans and denied to dismiss the case on such ground. The second basis for dismissal was that the hardship alleged must have existed at the time the original discharge was entered. The Court concluded that the complaint adequately alleged a hardship at the time of the discharge. The third argument by the creditor led to a more interesting analysis. The creditor alleged that the debtor did not properly assert that the hardship suffered after the discharge related to the hardship the debtor was suffering when the chapter 7 discharge was entered. The court determined that post-discharge hardships, even if of a different nature than the hardship at the time the discharge was entered, could be considered in meeting the Brunner test. The Brunner test looks to whether the debtor's future circumstances may be such as to enable repayment of the student loans while maintaining minimal living standards. The debtor's allegations of minimizing his expenses, and showing of income for 6 years following the discharge were sufficient to state a claim for continuing hardship under Brunner. The final basis for dismissal asserted was that the six year delay in filing the complaint for dischargeability is unreasonable as a matter of law and will prejudice the creditor due to stale evidence. The court found this to be essentially asserting a laches defense. To prove laches a defendant must show there has been an unreasonable delay in asserting the claim, and that the defendant was materially prejudiced by such delay. United States v. Rodriguez-Aguirre, 264 F.3d 1195, 1208 (10th Cir. 2001). Laches is an affirmative defense that must be pled and proved by the defendant, and is not a basis for dismissal prior to such proof. Further, the court finds that six years is not necessarily too long to wait to seek discharge of student loan debts. There is no express deadline to seek such dischargeability determinations. Rule 4007(b) permits a complaint to seek dischargeability (other than under §523(c)) may be filed at any time. Michael Barnett, hillsboroughbankruptcy.com
When a case is heard at the Supreme Court, the docket is filled with briefs of amicus curiae trying to say something that will catch the court's attention. With so many briefs filed, they sometimes cancel each other out in a flutter of pdf files sounding variations on the same themes. However, amicus briefs are much less common at the Court of Appeals level. Recently I was part of an effort where a panel of the Fifth Circuit reversed itself in one instance and reversed a district court in another. The cases are Hawk v. Engelhart (In re Hawk), 871 F.3d 287 (5th Cir. 2017) and Lowe v. DeBerry (In re DeBerry), 2018 U.S. Appl LEXIS 5772 (5th Cir. 3/7/18). In this post, I would like to share how our amicus briefs came together as well as some tips on amicus practice before the Fifth Circuit.A Split Arises The issue in Hawk and DeBerry was whether a chapter 7 debtor who disposed of exempt property post-petition could lose that exemption if the proceeds were not reinvested within the period allowed by state law. Outside of bankruptcy it is clear that proceeds that are not reinvested lose their exempt status and become subject to claims of creditors. However, under the Bankruptcy Code, if there is not a timely filed objection to exemption, the exemption is allowed, even if it was frivolous. Taylor v. Freeland & Kronz, 503 U.S. 638 (1992). This result was clouded by a Fifth Circuit decision which suggested that an "esssential element of the exemption must continue in effect even during the pendency of the bankruptcy case." Zibman v. Tow (Matter of Zibman), 268 F.3d 298, 301 (5th Cir. 2001). This led the Fifth Circuit to hold that if a Texas homestead was sold during a chapter 13 case and the proceeds were not exempted within six months as provided by Texas law, they would lose their exempt status. Viegelahn v. Frost (In re Frost), 744 F.3d 384 (5th Cir. 2014).Following Frost, there was a split between Texas bankruptcy courts as to whether Frost's logic would apply in a chapter 7 case. Two cases made their way to the Fifth Circuit at about the same time. In Lowe v. DeBerry (In re DeBerry), 2017 U.S. Dist LEXIS 113203 (W.D. Tex. 2017), Bankruptcy Judge Craig Gargotta had ruled that proceeds from post-petition sale of a homestead could not be recaptured once the exemption became final. However, he was reversed by U.S. District Judge Royce C. Lamberth. In Hawk v. Engelhart (In re Hawk), 556 B.R. 788 (S. D. Tex. 2016), Bankruptcy Judge Jeff Bohm had ruled that proceeds from an IRA lost their exempt status if they were not reinvested within sixty days notwithstanding failure to object to the original exemption. He was affirmed by U.S. District Judge Melinda Harmon. Thus, there was two cases proceeding to the Fifth Circuit where the District Court had ruled that property could lose its exempt status in a chapter 7 case.An Amicus Brief Takes Shape I was approached by Professor Christopher Bradley to see if I would be interested in participating in an amicus brief in the DeBerry case. Chris had more than an academic interest in the issue (pun intended). He had clerked for Bankruptcy Judge Tony Davis. Judge Davis had written an opinion, In re D'Avila, 498 B.R. 150 (Bankr. W. D. Tex. 2013) holding that Frost did not apply in chapter 7. After finishing his clerkship and working in private practice, Chris had obtained an appointment at the University of Kentucky School of Law. I had written at least five blog articles on the disappearing exemption issue, including one which strongly criticized the Frost decision. Michael Baumer, who is a homestead expert within the consumer bar, agreed to join our group. We hastily filed our brief in the DeBerry case and waited.A few days later, a different panel of the Fifth Circuit handed down an opinion in Hawk v. Engelhart (In re Hawk), 864 F.3d 364 (5th Cir. 2017) finding that un-reinvested proceeds lost their exemption and became property of the estate. This posed a huge problem for us because under the rule of orderliness, one panel of the Fifth Circuit could not overrule another. Thus, we fashioned a second amicus brief arguing that the en banc Fifth Circuit should reconsider the Frost decision, or, in the alternative, limit it to the chapter 13 context. Retired Bankruptcy Judge Leif Clark joined our group of collaborators for this second brief. Judge Clark had presciently written about the issue in In re Bading, 376 B.R. 143 (Bankr. W.D. Tex. 2007) in which he had tolled the period for the debtor to reinvest homestead proceeds out of a concern that Zibman could be applied even in the absence of a timely exemption. (In the interest of telling a compact story, I am not explaining all of the legal arguments in detail. However I did discuss these issues in more depth in my article for the ABI Journal, "Fifth Circuit Walks Back Disappearing Exemption Decision,"American Bankruptcy Institute Journal (Jan. 2018)).Success The Hawk panel vacated its prior opinion and substituted an opinion limiting Frost to chapter 13 cases. One of the points that the panel relied upon was part of the ruling by Judge Ronald King in the Frost case that the case would have come out differently in a chapter 7 proceeding. Since we did not cite these comments in our brief, it is possible that our brief did not change the result. A few months later, the Fifth Circuit released its opinion in DeBerry in which it reversed the District Court and affirmed Judge Gargotta. The DeBerry opinion cited our brief which was gratifying.A Few Notes on Amicus Practice in the Fifth Circuit Amicus practice before the Fifth Circuit is a specialized area with strict time limits. An amicus brief must be filed within seven days after the brief of the party it supports. Fed.R.App. P. 29(a)(6). This means that the decision to file should be made well before the party being supported has filed its brief. Otherwise, there is not sufficient time to compose a credible brief. Unless a brief is filed with the consent of both parties, it must be accompanied by a motion for leave to file the brief with a copy of the proposed brief. Fed.R.App. P. 29(a)(2). In my experience, parties rarely consent to filing an amicus brief in support of their opponent, so the proposed amicus should be prepared to file a motion for leave. The proposed brief must state the interest of the amicus. Generally it is better to have an organization with an interest in the point of law sponsor an amicus brief. In our case, we were not able to find a sponsoring organization. However, having a professor and a retired judge among our collaborators certainly did not hurt.An amicus brief is limited to half the length of the brief it is supporting. Fed.R.App. P. 29(a)(5). This is particularly tricky on a petition for rehearing or rehearing en banc. Under Fed.R.App. P. 35(b)(2)(A), a petition for en banc hearing or rehearing is limited to 3,900 words. This means that the maximum length of an amicus in support of en banc hearing or rehearing is 1,950 words. This post is 1,401 words long which gives an idea of just how short 1,950 words is. A merits brief may run up to 13,000 words, Fed.R.App. P. 32(a)(7)(B), which allows for an amicus of up to 6,500 words. While the rule states that the length of an amicus brief is based on the maximum amount allowed for a principal brief, we had the clerk limit us to one-half of the actual brief filed which required some last minute cutting.One final note is that the Fifth Circuit is a forum where strict compliance with format is enforced. I have had to resubmit briefs on multiple occasions to correct technical issues. There are two pieces of advice here. The first is to adhere strictly to the time limit for resubmitting a brief. The second is to be nice to the clerk's office. While it is frustrating to have to revise a brief for format issues, the clerk's office is uniformly willing to walk practitioners through how to make it right. Staying friendly with the clerk's office will avoid a world of unpleasantness.
Fifteen years later, Lilly is still getting garnished! Lilly came to see me in my Sterling office last Friday. When she was much younger, she got a high interest car loans from Ford Motor Credit. The car got repossessed, and in 2003, Ford got a judgment against her for $8,051.35. Plus $1,207.70 for Ford’s lawyer […] The post Still garnished after 15 Years! by Robert Weed appeared first on Robert Weed.