Bankruptcy as an Impregnable Shield to Enforcement? Not So Fast.

June 10, 2011




A quick hypothetical: A debtor isn’t paying. You’ve unleashed your full arsenal of enforcement allowed under the law, bank levies,  a motion for the appointment of a receiver, motion for sale of a dwelling house, etc. The whole gamut.

Everything is going along well enough, until your fax machine coughs out a friendly notice from your local bankruptcy court that your debtor filed Chapter 13.

That’s funny, you were sure that your debtor had deep pockets. Bankruptcy? This debtor could write you a check tomorrow if he weren’t still bitter that you had the sheriff sell his Lamborghini. No, this time it’s personal. Your debtor just doesn’t want to pay.

Your debtor then sets forth a plan which purports to pay his creditors (You) 100 cents on the dollar, but in monthly payments spread out over 5 years and with no interest.  This doesn’t sound appealing at all.

The court in the case of  In re Steven Allan Korn (CAEB, Case No: 11-91339) rejected precisely such a plan, finding that when bankruptcy is filed for the sole purpose of frustrating the enforcement attempts of a single creditor the filing was in bad faith.

Read the full opinion here.

Checks and Wire Transfers to Counsel are not Privileged: Discovery Reveals Clients’ Accounts.

May 31, 2011
In the case of Garza v. ACL the judgment creditors sought to obtain a corporate debtor's financial records through a subpoena targeted at the debtor's attorneys.  In answering the question of  "Are canceled checks  protected by attorney client privilege?" the court, Hon. John K. Stewart, Judge Presiding, answered with a resounding No.

“THE COURT: I think the difference is that a check or a money transfer, these have lives of their own. They are not communications. They are instruments of commerce. They are negotiable instruments. A letter accompanying a check would be a communication, but a check is really a communication to a bank. It’s telling the bank to pay a certain amount of money on behalf of a client. So I think the Harris analysis, to me, is the most appropriate and on point. And that’s the Ninth Circuit Court of California — Ninth Circuit Court in California. It’s 413 F.2d 316. But they say, and they are quoting another case, but they say “The canceled checks and bank statements are not within the attorney-client privilege. These items were negotiable instruments in commerce and were never confidential from the time of their creation.Their transfer from the client to the attorney did not constitute a confidential communication.”In those cases, they were trying to subpoena those records from a bank.And again, if those documents ultimately end up in a bank, and they do, when the check comes into your firm, you endorse it, and it goes back to the bank. The original sometimes is referred to the person who signed the check. Now, for example, my own bank account, I get little microfiche reprints and the originals are either in my bank or else they are kept on microfiche somewhere. But they are ultimately in the bank.”

(See attached transcript, Pg. 13)

Read the full transcript here.

A Blast From the Past

May 25, 2011

Circa 1985

The 1980’s was a good decade for a lot of things:  new wave music, cheesy movies, nuclear proliferation, and apparently hair.

California Court of Appeal Affirms: No Attorney Fees in Anti-SLAPP Cases Where Law Firm is Represented by an Associate

May 17, 2011


Court of Appeals of California, Second District, Division Five.

Filed May 10, 2011.

         The trial court in granting defendants’ request to strike plaintiffs’ memorandum of costs seeking attorney fees incurred as the prevailing parties in a prior appeal, a law firm and its two partners, by using an associate in the law firm, had, in effect, represented themselves in the prior appeal. In this appeal, plaintiffs contend that the trial court erred in granting the motion to tax costs because the attorney who represented them on appeal was not a partner and otherwise had no financial interest in their law firm. Also, plaintiffs contend that, even if the law firm plaintiff cannot recover fees for the legal services of the associate, the individual plaintiffs can recover fees attributable to that associate’s services rendered on their behalf.

        In affirming the order denying plaintiffs’ request for attorney fees for services rendered by the associate to the firm and its partners, we hold that (1) substantial evidence supports the trial court’s finding that the attorney who represented plaintiffs in the prior appeal was doing so as an associate of the law firm and not as an independent contractor, and, therefore, plaintiffs legally are not entitled to an award of attorney fees; and (2) the trial court was justified in concluding that based on the record, the individual plaintiffs could not recover attorney fees in connection with the appeal because there was no showing of any distinction between the cross-claims against the law firm plaintiff and those against the individual plaintiffs.

Read the full opinion here.

Foreign Manufacturers are Offshore But Not Out of Reach

May 2, 2011

Pratt’s Journal of Bankruptcy Law May/June 2011

By David J. Cook

This article discusses post judgment strategies to reach the assets of uncooperative, distant, or reclusive judgment debtors.

Read the full article here.

Disentitlement of the Debtor from Judicial Proceedings Defiant to the End

May 2, 2011

Debt3 March/April 2011

By David Cook

Ray Charles taught us disentitlement: “Hit the road, Jack, and don’t you come back no more, no more, no more, no more.” Disentitlement offers the nuclear remedy to compel payment, if possible, from the recalcitrant debtor — and, like “Jack” in Ray Charles’ wonderful song, hits the road. This article is a primer on civil disentitlement.

Read the full article here.

The Discretionary Stay Against Enforcement of a Judgment

May 2, 2011

Los Angeles Lawyer, April 2011
by David J. Cook

The race to enforcement begins as soon as a judgment creditor wins a lawsuit. While typically the plaintiff, a judgment creditor can also be the defendant in an anti-SLAPP suit. In either situation, the judgment creditor can begin enforcement procedures immediately upon entry of judgment and can go so far as to direct the sheriff to appear at the defendant’s front door, break it down, and seize the contents from floor to ceiling, including the family dog. Only settlement, posting of an expensive appeal bond, or entry of a discretionary stay of enforcement by the trial court can prevent enforcement.
Continue reading the full article here.