Why Homeowners Must Know these Important Points of Bankruptcy Appeal

23 Wednesday Sep 2015

Posted by BNG in Appeal, Bankruptcy, Federal Court, Foreclosure Defense, Judicial States, Non-Judicial States

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Bankruptcy, bankruptcy appeal, bankruptcy court, homeowners, Plaintiff, Pro se legal representation in the United States

Every appeal requires an appellate advocate to understand and follow
a series of rules. When an appeal is from a decision by a federal
bankruptcy court, there is yet another layer of rules and complexity
to consider. This article briefly identifies a dozen important points
about bankruptcy appeals.

1. The Time for Filing a Notice of Appeal in a Bankruptcy Appeal Is Generally Shorter Than in Other Appeals.

Under 28 U.S.C. § 158(c)(2) and Federal Rule of Bankruptcy Procedure (“Bankruptcy Rule”) 8002(a), a party seeking to appeal a decision by a bankruptcy court has 14 days to file its appeal.1 This is 16 days less than the 30 days a party generally is given under the Federal Rules of Appellate Procedure (“F.R.A.P.”) to appeal from district court to a federal appellate court.2 As with F.R.A.P. 4(a)(5), the Bankruptcy Rules permit some leeway if an appellant misses its deadline. Under the Bankruptcy Rules, a bankruptcy court may allow an appellant who fails to timely file up to 20 additional days to file where that appellant can demonstrate “excusable neglect.”3 After 30 days, however, a bankruptcy appellant loses its right to appeal even if there is excusable neglect.4 Factors to be considered in determining whether there is excusable neglect include the danger of prejudice to the appellee; the length of delay and its impact on the judicial proceeding; the reason for the delay; whether the delay was in the movant’s control; and the movant’s good faith.5

2. An Appellant May Waive an Issue Not Raised at the Outset of its Bankruptcy Appeal.

Under Bankruptcy Rule 8006, within 14 days of filing its Notice of
Appeal, an appellant must file and serve a designation of the items to be
included in the record on appeal and a statement of issues to be presented
on appeal. If an appellant fails to include an issue in this Statement, the
issue is waived even if this had been raised and/or decided by the bankruptcy
court.6

3. Those Who Ignore Deadlines and Procedural Rules May Forfeit Their Appeal.

Bankruptcy Rule 8001(a) authorizes dismissal of a bankruptcy appeal when a party fails to take any required step other than filing its Notice of Appeal. Courts adjudicating bankruptcy appeals may dismiss appeals when a party fails to take a necessary step, such as filing its record designations, statement of issues or its brief.7
While the Bankruptcy Rules permit dismissal, however, certain circuits require the appellate court to weigh a series of factors before it dismisses a case in its entirety. For example, the Third Circuit requires the balancing of six factors before a case is dismissed. These are:
• The extent of the party’s personal responsibility;
• The prejudice to the adversary caused by the failure to meet scheduling
orders;

• A history of dilatoriness;
• Whether the conduct of the party or the attorney was willful or in bad
faith;
• The effectiveness of sanctions other than dismissal, which entails an
analysis of alternative sanctions;
• The meritoriousness of the claim or defense.8

4. In Five Circuits, Bankruptcy Appeals May Be Heard in the First Instance by Two Different Types of Courts.

Under 28 U.S.C. § 158(c)(1), an appellant in an appeal from bankruptcy court may choose in the first instance to appeal either to a district court acting as an appellate court or, if the relevant circuit provides for one, to a Bankruptcy Appellate Panel (“BAP”). Even if the appellant chooses a BAP, however, any other party to the appeal may, no later than 30 days after service of the notice of appeal, ask to have the appeal heard by the relevant district court. The First, Sixth, Eighth, Ninth and Tenth Circuits each have a BAP. If an appeal is to a BAP, then the Bankruptcy
judge’s decision will be reviewed by fellow sitting bankruptcy judges.
Usually a BAP consists of three sitting bankruptcy judges in the circuit who are assembled for a particular day of argument. By their very nature, BAPs will consist of judges who have special expertise regarding bankruptcy issues, while district courts may not. The BAP may sit in different places in the circuit. For example, the Eighth Circuit BAP conducts hearing in Omaha, St. Louis, Kansas City, and other locations where its bankruptcy courts sit.

5. BAP Rules Vary by Circuit.

Just like the individual federal circuit courts of appeal, the various BAPs each have their own rules. These vary between each circuit. Any party in a BAP appeal, therefore should know the specifics and particularities of the specific BAP’s rules and should follow these.
Among these specialized rules, for example, are that, in the Eighth Circuit BAP, parties are limited to opening briefs of 6500 words.9 The Ninth Circuit BAP Rules provide that only those portions of transcripts included in the excerpts of the record will be considered in an appeal and that these must include excerpts necessary for the BAP to apply the required standard of review to a matter.10 The First Circuit BAP Rules generally limit argument to 15 minutes per side.11 The Tenth Circuit BAP requires that a brief include a statement of related cases—i.e., one that includes the same litigants and substantially the same fact pattern or legal issues – that are
pending in any other federal court.12 The Sixth Circuit BAP Rules provide
for a possible pre-argument conference and mediation.13

6. The Bankruptcy Rules Generally Govern Appeals to the District Court.

As noted in the prior section, BAPs have elaborate rules that govern all aspects of appeals before them. By the terms of the Bankruptcy Rules, these specific rules can supersede conflicting terms in the Bankruptcy Rules. However, when an appeal is to the district court, the Bankruptcy Rules generally apply in the absence of a local rule or district court rule specifically addressing bankruptcy appeals, which are much less common.
While not as comprehensive as the F.R.A.P., the Bankruptcy Rules have 20 provisions governing all aspects of appeals.14 These rules addresses appellate issues, including, among others, the filing and service of appellate papers;15 the filing and service of briefs and appendices;16 the form of briefs and their length;17 motions;18 oral argument;19 disposition of the appeal;20 costs;21 and rehearing,22 among others. (These rules also provide for the accelerated filing of district court appeals, as an appellant is to serve and file its brief within 15 days after entry of the appeal on the docket; the appellant is to serve its brief within 15 days after service of the appellant’s brief and the appellant is to serve its reply within 10 days after service of the appellee’s brief.)23 In the absence of rules to the contrary, opening briefs may be up to 50 pages and reply briefs up to 25 pages.
Under Bankruptcy Rule 8012, oral argument is to be generally allowed in all cases. In practice, however, oral argument is much less common before district courts. When an appeal is before district court, there is some question about whether its decision has precedential effect.24

7. Bankruptcy Appeals Often Include an Extra Tier of Review.

Generally, before an appeal reaches a federal circuit court of appeals, it is adjudicated by either a BAP or a district court. The findings of these first tier courts are not binding on the circuit court of appeals and, the appellate court owes no deference to the decisions by the BAP or district court.
Review by the circuit court of appeals is plenary.25 Nonetheless, some circuit courts have noted that the first tier of appeal acts as a helpful filter.26
An appellate court may reach issues brought up before but not decided by the district court or BAP.27

8. Direct Appeal to the Circuit Court of Appeals Is Allowed in Limited Instances.

Pursuant to Section 1233 of the Bankruptcy Abuse Prevention and Consumer Protection Act (“BAPCPA”), a circuit court of appeals has discretion to permit a direct appeal frombankruptcy court where there is uncertainty in the bankruptcy court, either due to the absence of a controlling legal decision or a conflicting decision on the issue and the issue is of great importance, or where the court finds it is patently obvious that the bankruptcy court’s decision either was correct or incorrect, such that the first tier of review in the district court or BAP is less efficient and helpful.28

9. At Each Tier of the Appeal, The Bankruptcy Court Is Given the Same Level of Deference and Same Form of Scrutiny.

Courts in bankruptcy appeals review issues of law de novo and findings of fact for clear error.29 Courts of appeal apply the same standard of review as do BAPs and district courts.30 Courts of appeal generally review issues of procedure under an abuse of discretion standard. These include motions to compromise or to lift a stay, for example.31

10. This Is a Greater Threat of Mootness in Bankruptcy Appeals Than in Other Federal Appeals.

A bankruptcy appeal may become constitutionally moot where events may occur that make it impossible for the appellate court to fashion effective relief.32 Thus, for example, if, while an appeal is pending, a plan is confirmed pursuant to which all assets are distributed, all creditors with allowed claims are paid in full, and the bankruptcy case is closed such that the debtor no longer exists, an appeal against that debtor is moot because there is no meaningful relief that may be granted.33 An appeal may also be considered “equitably moot” where a change in circumstances makes it inequitable for a court to consider the merits of an appeal.34
However, if there remains any possibility that an appeal may result in a tangible benefit to the appellant, it is not moot.35

11. Only Those Persons Aggrieved Have Standing to Bring a Bankruptcy Appeal.

Only those whose rights or interests are directly and adversely affected pecuniarily by an order of the bankruptcy court have standing to bring an appeal.36

12. Appellate Courts Take a Broader Notion of “Finality” in Bankruptcy Appeals Than in Other Appeals.

Because of the length of many bankruptcy proceedings and the waste of time and resources that may result if the court denied immediate appeals, federal courts of appeal apply a broader concept of “finality” when considering bankruptcy appeals under 28 U.S.C. § 1291 than in considering non-bankruptcy appeals.37 Courts apply a number of factors in determining whether to assert appellate jurisdiction. These include:
1) the impact on the assets of the bankruptcy estate;
2) the necessity for further fact-finding on remand;
3) the preclusive effect of the court’s decision on the merits in further litigation,
and
4) the interest of judicial economy.38
Each of these issues, of course, could justify an article in itself. I hope
these provide some helpful thoughts and issues to consider when participating
in a bankruptcy appeal.

NOTE

1 Certain types of motions toll this time for filing until the last such motion
is disposed of. See Bankruptcy Rule 8002(b).
2 See F.R.A.P.4(a).
3 Bankruptcy Rule 8002(c)(2); Bankruptcy Rule 9006(b). Of course where
an appeal is from a district court to a federal circuit court on a bankruptcy
issue, F.R.A.P. 4’s 30-day rule applies.
4 See Shareholders v. Sound Radio, Inc., 109 F.3d 873, 879 (3d Cir. 1997).
The law is unsettled as to whether bankruptcy appellate deadlines are “jurisdictional,”
such that objections to untimeliness may be waived if not promptly
made. See In re Fryer, 2007 WL 1667198 (3d Cir. June 11, 2007) (citing
Kontrick v. Ryan 540 U.S. 443 (2004), and Eberhart v United States, 546 U.S.
12 (2005)).
5 See Pioneer Inv. Servs. Co. v. Brunswick Assocs. Ltd. P’Ship, 507 U.S. 380,
395 (1993).
6 See In re GGM, P.C., 165 F.3d 1026, 1032 (5th Cir. 1999). Of course, one
may not first raise new issues on appeal that were not presented before the
bankruptcy court. See In re Ginther Trusts, 238 F.3d 686, 689 & n.3. (5th Cir.
2001).
7 See, e.g., In re Lynch, 430 F.3d 600 (Cir. 2005); In re Braniff Airways, Inc.,
774 F.2d 1303, 1305 n.6 (5th Cir. 1985).

8 Poulis v. State Farm Fire & Cas. Co., 747 F.2d 863, 868 (3d. Cir. 1984).
See also In re Harris, 464 F.3d 263 (2d Cir. 2006) (failure to include required
transcript of oral argument did not warrant dismissal of appeal where lesser
sanctions were available); In re Beverly Mfg. Corp., 778 F.2d 666, 667 (11th
Cir. 1985) (“Dismissal typically occurs in cases showing consistently dilatory
conduct or the complete failure to take any steps other than the mere filing
of a notice of appeal.”).
9 8th Cir. BAP Rule 8010A.
10 9th Cir. BAP Rule 8006-1.
11 1st Cir. BAP Rule 8012-1.
12 10th Cir. BAP Rule 8010-1.
13 6th Cir. BAP Rule 8080-2.
14 Bankruptcy Rules 8001-8020.
15 Bankruptcy Rule 8008.
16 Bankruptcy Rule 8009.

17 Bankruptcy Rule 8010.
18 Bankruptcy Rule 8011.
19 Bankruptcy Rule 8012.
20 Bankruptcy Rule 8013.
21 Bankruptcy Rule 8014.
22 Bankruptcy Rule 8015.
23 Bankruptcy Rule 8009.
24 See In re Shattuck Cable Corp., 138 B.R. 557, 565 (Bankr. N.D. Ill. 1992).
25 See In re Best Prods. Co., 68 F.3d 26, 30 (2d Cir. 1995).
26 See Weber v. United States Trustee, 484 F.3d 154 (2d Cir. 2007) (“In many
cases involving unsettled areas of bankruptcy law, review by the district court
would be most helpful. Courts of appeal benefit immensely from reviewing
the efforts of the district court to resolve such questions”).
27 See Hartford Courant Co. v. Pellegrino, 380 F.3d 83, 90 (2d Cir. 2004).
28 See Weber, 484 F.3d at 157 (citing BAPCPA § 1233, 28 U.S.C.
§ 158(d)(2)(a)(i)-(iii)).
29 See In re ABC-Naco, Inc., 483 F.3d 470, 472 (7th Cir. 2007).
30 See In re Senior Cottages of Am., 482 F.3d 997, 1000-1001 (8th Cir. 2002)
31 See In re Martin, 222 Fed. Appx. 360, 362 (5th Cir. 2007).
32 See In re Focus Media Inc., 378 F.3d 916, 922 (9th Cir. 2004).
33 See In re State Line Hotel, Inc., 2007 WL 1961935 (9th Cir. July 5, 2007);
see also Gardens of Cortez v. John Hancock Mut. Life Ins. Co., 585 F.2d 975,
978 (10th Cir. 1978) (dismissal of bankruptcy petition moots appeal to lift
stay).

34 See Ederel Sport v. Gotcha, Int’l, L.P., 311 B.R. 250, 254 (9th Cir. BAP
2004).
35 See In re Howard’s Express, Inc., 151 Fed. Appx. 46 (Oct. 5, 2005) (conversion
from Chapter 11 to Chapter 7 did not moot appeal because liquidation
was not complete and preference actions remained to be tried, which
could generate assets to satisfy claims of appellants).
36 See In re PWS Holding Corp., 228 F.3d 224, 249 (3d Cir. 2000).
37 See In re Owens Corning, 419 F.3d 196, 203 (3d Cir. 2005).
38 Id.

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What Homeowners Must Know About Bankruptcy Appeals

23 Wednesday Sep 2015

Posted by BNG in Appeal, Bankruptcy, Federal Court, Foreclosure Defense, Pro Se Litigation, Your Legal Rights

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Tags

Bankruptcy Appeals, bankruptcy court, homeowners, Pro se legal representation in the United States

When challenging Bankruptcy dismissals or Adversary proceeding on appeal, homeowners should bear the following in mind.
A district court may dismiss a bankruptcy appeal for any of a number of procedural reasons having nothing to do with the merits of the appeal.

Is the appeal timely?

Bankruptcy Rule 8002(a) requires that a notice of appeal be filed within
14 days of the bankruptcy court order or judgment at issue. A district court lacks
jurisdiction over an untimely appeal.

Shareholders v. Sound Radio, Inc., 109 F.3d 873, 878-79 (3d Cir. 1997).

Did the appellant refer to the order or judgment at issue in its notice of appeal?

A district court lacks jurisdiction over a bankruptcy court order or judgment that is not directly or indirectly referred to in the notice of appeal. In re Smith, WL 1716684 at *2 (3d Cir. June 22, 2006).

Is the bankruptcy court order final?

Under 28 U.S.C. § 158(a), a district court may hear appeals only from
final judgments, orders and decrees of a bankruptcy court. Although district courts liberally construe finality in bankruptcy appeals, an order in a bankruptcy case may be considered interlocutory, and hence, subject to dismissal, if the order does not implicate a discrete issue which in and of itself will determine the rights and liabilities of the parties concerned. Thus, for example, in In re Elsinore Shore Assocs., a district court lacked jurisdiction over an appeal from an order approving a disclosure statement. 82 B.R. 339, 341-42 (D.N.J. 1988). Moreover, the general antipathy toward piecemeal appeals still prevails in individual bankruptcy adversary proceedings. Thus, for example, in Natale
v. French & Pickering Creeks Conservation Trust, Inc. (In re Natale), the
Third Circuit held that an order granting summary judgment regarding the priority of competing liens, but not deciding whether the debtor could avoid a particular lien, was not a final appealable order. 295 F.3d 375, 379-80 (3d Cir. 2002).

Does the appellant meet the standard for interlocutory review?

If the appellant seeks review of an interlocutory bankruptcy court order, a district court may grant leave to hear an appeal from the order only upon the satisfaction of three elements: (i) the appeal involves a controlling question of law; (ii) the question is one on which a substantial ground for difference of opinion exists; and (iii) an immediate appeal would materially advance the ultimate termination of the litigation. Orr v. Ameriquest Mortg. Co. (In re Hollis), 2010 WL 336132 at **1-4 (D.N.J. Jan. 22, 2010).

Does the appellant have standing to appeal?

Only a party whose rights or interests are directly and adversely affected
in a pecuniary fashion by a bankruptcy court order may appeal from the order.
In re PWS Holding Corp., 228 F.3d 224, 248-49 (3d Cir. 2000).

Is the appeal constitutionally moot?

Generally, a bankruptcy appeal, like an appeal in civil litigation, is dismissed as moot when events during the pendency of the appeal prevent the appellate
court from granting any effective relief.
So, for instance, in In re Highway Truck Drivers & Helpers Local Union No. 107,
the Third Circuit held that an appeal relating to an order granting relief from the
automatic stay to permit a debtor to move for reconsideration of a decision entered by a state court was rendered moot by an intervening state court judgment relieving the debtor of its liability to the appellants. 888 F.2d 293, 297-99 (3d Cir. 1989).

Is the appeal equitably moot?

A bankruptcy appeal is equitably moot when, even if the district court has jurisdiction to grant relief, implementation of such relief would result in an inequitable outcome. The doctrine usually applies in appeals involving a confirmed Chapter 11 plan of reorganization. In Nordhoff Invs. Inc. v. Zenith Elecs. Corp., the Third Circuit found an appeal from an order confirming a Chapter 11 plan equitably moot on the following grounds: (i) the plan had required 18 months of negotiation among several parties and implicated hundreds of millions of dollars, restructured debt, assets, and management of a major corporation; (ii) the plan had successfully rejuvenated the corporation; (iii) the appellants had not offered evidence that the plan could be reversed without great difficulty and inequity; (iv) the appellants had failed to seek a stay of the order; (v) third parties had relied on the order; and (vi) reversal would be contrary to the public policy of encouraging successful reorganizations. 258 F.3d 180, 184-91 (3d Cir. 2001).

Is the appeal moot under section 363(m)?

According to Bankruptcy Code section 363(m), a sale or lease to a good-faith purchaser or lessee under section 363(b) or (c), once consummated, cannot be reversed or modified on appeal absent a stay. In Krebs Chrysler-Plymouth, Inc. v. Valley Motors, Inc., the Third Circuit dismissed as moot a buyer’s appeal from an order approving a debtor’s sale of franchises because the buyer had failed to obtain a stay of the sale pending appeal, the sale had closed, and the relief sought would have impacted the validity of the sale. 141 F.3d 490, 499-500 (3d Cir. 1998).

Is the appeal moot under section 364(e)?

Under Bankruptcy Code section 364(e), an order authorizing a trustee or debtor to obtain credit or incur debt from, or granting a priority or lien to, a good-faith lender, once implemented, cannot be reversed or modified on appeal absent a stay. In Resolution Trust Corp. v. Swedeland Dev. Group, Inc. (In re Swedeland Dev. Group, Inc.), the Third Circuit held that an appeal from a post-petition financing order was moot because the proceeds of the loan had been immediately distributed to the debtor in possession, the district court had denied a stay of the order and the debtor in possession had apparently expended the loan proceeds. 16 F.3d 552, 559-63 (3d Cir. 1994).

Did the appellant fail to timely file a designation of record and statement of issues?

Bankruptcy Rule 8006 requires an appellant to file and serve, within 14 days after filing the notice of appeal or the entry of an order granting leave to appeal, a designation of items to be included in the appellate record and a statement of issues on appeal. Local Bankruptcy Rule 8006-1 requires the clerk to file and serve a certification of any failure to comply with the requirement. Such failure constitutes cause for dismissal of the appeal. In re Mondelli, 2009 WL 3358465 at **2-3 (3d Cir. Oct. 20, 2009).

Did the appellant fail to obtain a copy of the bankruptcy court hearing transcript?

If an appellant has designated a bankruptcy court hearing transcript as part of the record, Bankruptcy Rule 8006 requires the appellant to immediately deliver to the reporter and file with the clerk a written request for the transcript and to pay its cost. Failure to comply with this requirement constitutes cause for dismissal of the appeal. Orr v. Buccolo (In re Buccolo), 2009 WL 146528 at **1-2 (3d Cir. Jan. 22, 2009).

Did the appellant fail to designate any issues in its statement of issues?

An appellant waives its right to assert an issue on appeal if it fails to designate the issue in its statement of issues. Interface Group-Nevada, Inc. v. Trans World Airlines, Inc. (In re Trans World Airlines, Inc.), 145 F.3d 124, 132 (3d Cir. 1998).

Did the appellant fail to timely file its appellate brief?

Bankruptcy Rule 8009 requires an appellant to file its brief within 14 days after entry of the appeal on the docket. Failure to comply with this requirement constitutes cause for dismissal of the appeal. Nyholm v. Israel (In re Nyholm), 2009 WL 114884 at *2 (D.N.J. Jan. 12, 2009).

Did the appellant fail to raise its argument before the bankruptcy court?

A district court generally may not consider in a bankruptcy appeal an argument that was not raised before the bankruptcy court. Buncher Co. v. Off. Comm. of Unsecured Creditors of GenFarm Ltd. P’ship IV, 229 F.3d 245, 253 (3d Cir. 2000).

Did the appellant fail to make its argument in its appellate brief?

An appellant may waive its right to raise an argument before the district court if its fails to make the argument in its appellate brief. Interface Group-Nevada, Inc. v. Trans World Airlines, Inc. (In re Trans World Airlines, Inc.), 145 F.3d 124, 132-33 (3d Cir. 1998).

As a homeowner, once you follow these pointers, you’ll have a better chance of winning your Bankruptcy Appeal.

When Homeowner’s good faith attempts to amicably work with the Bank in order to resolve the issue fails;

What Homeowners Need to Know About Bankruptcy Automatic Stay

22 Tuesday Sep 2015

Posted by BNG in Bankruptcy, Federal Court, Foreclosure Defense, Litigation Strategies, Non-Judicial States, Pro Se Litigation, Your Legal Rights

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automatic stay, Bankruptcy, bankruptcy court, chapter 13 bankruptcy, Federal Court, Foreclosure, homeowners, Pro se legal representation in the United States

A. Scope.

1. Section 362(a) of the Bankruptcy Code (the “Code”) contains a broad
statutory stay of litigation and lien enforcement, effective automatically on the commencement of a bankruptcy case. 11 U.S.C. § 362(a) (“. . . a petition [commencing a case] . . . operates as a stay, applicable to all entities . . .”.)

2. Purpose – Time to Reorganize. This automatic stay gives a trustee or
chapter 11 debtor-in-possession1 a breathing spell from creditors by stopping all collection efforts, harassment, and all foreclosure actions, allowing a debtor to attempt a reorganization plan. See, e.g., In re Siciliano, 13 F.3d 748, 750 (3d Cir. 1994) (“[t]he purpose of the automatic stay provision is to afford the debtor a ‘breathing spell’ by halting the collection process. It enables the debtor to attempt a repayment or reorganization plan with an aim toward satisfying existing debt.”);
Maritime Electric Co., Inc. v. United Jersey Bank, 959 F.2d 1194, 1204 (3d Cir. 1991) (“automatic stay allows debtor breathing spell from creditors and stops collection efforts”); In re Peregrine Systems, Inc., 314 B.R. 31, 44 (Bankr. D. Del. 2004) aff’d in part, rev’d in part on other grounds, 2005 WL 2401955 (D. Del. Sept. 29, 2005) (automatic stay is a “fundamental protection provided to a debtor for the purpose of stopping all creditor collection efforts and harassment of the debtor and to provide … a fresh start.”); Shaw v. Ehrlich, 294 B.R. 260, 267 (W.D. Va. 2003), aff’d, 99 Fed. Appx. 466 (4th Cir. 2004) (“stay protects debtors, as well as creditors, by providing debtors a breathing spell from collection
efforts”).

3. Policy Rationale – Debtor Asset Protection. Behind the stay is a clear
policy rationale: “to grant complete, immediate, albeit temporary relief to the debtor from creditors, and also to prevent dissipation of the debtor’s assets before orderly distribution to creditors can be effected.” S.E.C. v. Brennan, 230 F.3d 65, 70 (2d Cir. 2000) (quoting Penn Terra Ltd. v. Department of Envtl. Resources, 733 F.2d 267, 271 (3d Cir. 1984)). See also Reliant Energy Services, Inc. v. Enron Canada Corp., 349 F.3d 816, 825 (5th Cir. 2003) (“purposes of the bankruptcy stay under 11 U.S.C. § 362 ‘are to protect the debtor’s assets, provide temporary relief from creditors, and further equity of distribution among the creditors by forestalling a race to the courthouse.'”) (quoting GATX Aircraft Corp. v. M/V Courtney Leigh, 768 F.2d 711, 716 (5th Cir. 1985)); Mann v. Chase
Manhattan Mortgage Corp., 316 F.3d 1, 3 (1st Cir. 2003) (“automatic stay
provision is designed to forfend against the disorderly, piecemeal dismemberment of the debtor’s estate outside the bankruptcy proceedings”).

__________________________________

1 Code § 1107(a) gives a chapter 11 debtor-in-possession the “rights,” “duties” and “powers” of a trustee. See NLRB v. Bildisco & Bildisco, 465 U.S. 513, 517 n. 2 (1984). See also Fed. R. Bankr. P. 9001(10) (“‘Trustee’ includes a debtor in possession in a Chapter 11 case.”).

4. Procedural Safeguards for Secured Creditors. The Code still imposes
procedural safeguards for the benefit of the secured creditor (e.g., “adequate protection” against erosion of collateral value; time limits on stay modification requests; limits on counterclaims against secured lender seeking stay modification). As shown below, it attempts to reconcile the rights of the secured creditor with the needs of the debtor and its unsecured creditors. See United Savings Assn. of Texas v. Timbers of Inwood Forest Associates, Ltd. (In re Timbers of Inwood Forest Associates, Ltd.), 484 U.S. 365, 376 (1988) (“ . . . lack of any realistic prospect of effective reorganization will require” modification of stay of lien enforcement”).

II. The Automatic Stay.

A. When Effective.

1. The stay is automatic upon filing of the petition commencing a case under Code chapters 7 (liquidation), 9 (municipal debt adjustment), 11 (reorganization), 13 (individual debt adjustment), or chapter 15 (cross-border cases) with respect to foreign main proceedings. See e.g. Eskanos & Adler, P.C. v. Leetien, 309 F.3d 1210, 1214 (9th Cir. 2002) (“the automatic stay requires an immediate freeze of the status quo by precluding and nullifying post-petition actions”); Rexnord Holdings, Inc. v. Bidermann, 21 F.3d 522, 527 (2d Cir. 1994) (“[a]utomatic stay is effective immediately upon filing of bankruptcy petition”) (citing Shimer v. Fugazy (In re Fugazy Express, Inc., 982 F.2d 769, 776 (2d Cir. 1992));

2. The stay acts as a specific and definite court order to restrain creditors
from continuing the judicial process or collection efforts against debtor. See e.g. In re San Angelo Pro Hockey Club, Inc., 292 B.R. 118 (Bankr. N.D. Tex. 2003) (automatic stay is self-executing injunction, constituting an order issuing from bankruptcy court); In re Bottone, 226 B.R. 290, 297 (Bankr. D. Mass. 1998) (“as long as the Chapter 13 case is pending . . . the automatic stay … restrains postpetition creditors from taking action against property of the estate”) (quoting In re Woodall, 81 B.R. 17, 18 (Bankr. E.D. Ark. 1987)).

3. Unless modified by the court, the stay is effective for the duration of a
bankruptcy case, and generally cannot be waived by the debtor. Maritime Elec. Co., Inc. v. United Jersey Bank, 959 F.2d 1194 (3d Cir. 1991) (held, because automatic stay serves interests of both debtors and creditors, it may not be waived and its scope may not be limited by debtor); In re Atrium High Point Ltd. Partnership, 189 B.R. 599 (Bankr. M.D.N.C. 1995) (before enforcing a debtor’s prepetition waiver of automatic stay bankruptcy court must look at circumstances under which prepetition waiver arose); but see In re Excelsior Henderson Motorcycle Mfg. Co., Inc., 273 B.R. 920 (Bankr. S.D. Fla. 2002) (court enforced prepetition agreement under which chapter 11 debtor waived automatic stay).

B. Jurisdictional Basis of Injunctive Power.

1. The district court has “exclusive jurisdiction of all of the property,
wherever located, of the debtor as of the commencement of [the] case.” 28 U.S.C. § 1334(d). A bankruptcy court is a “unit of the district court.” 28 U.S.C. § 151. Section 362 implements this jurisdiction and is supplemented by § 105(a), which authorizes a court to “issue any order, process, or judgment that is necessary or appropriate to carry out the provisions of the Code.

2. The broad jurisdictional base of Section 362 confirms the court’s inherent
power to protect property within its jurisdiction and to prevent any divestiture of that jurisdiction. Isaacs v. Hobbs Tie & Timber Co., 51 S. Ct. 270, 282 (1931) (held, jurisdiction of bankruptcy court respecting property of debtor’s estate having attached, actions brought in other courts could not affect it). See In re Mohawk Greenfield Motel Corp., 239 B.R. 15 (Bankr. D. Mass. 1999) (“the automatic stay protects the bankruptcy court’s exclusive jurisdiction over the debtor and its property”) (citing In re Soares, 107 F.3d 969, 975 (1st Cir. Mass. 1997)).

3. Section 362(a) stays, among other things:

a. a secured creditor from collecting accounts receivable of debtor.
Matter of Pernie Bailey Drilling Co., Inc., 993 F.2d 67 (5th Cir. 1993)
(account receivables were property of the estate; court must lift stay for
creditors to gain access to receivables);

b. a creditor’s dissolution of a debtor corporation. 11 U.S.C.
§ 362(a)(3); Hillis Motors, Inc. v. Hawaii Automobile Dealers’ Assoc.,
997 F.2d 581 (9th Cir. 1993) (held, dissolution proceeding constituted
exercise of control over debtor’s property);

c. foreclosure proceedings in other courts instituted against debtor’s
property prior to commencement of bankruptcy case. 11 U.S.C.
§ 362(a)(1); see In re Vierkant, 240 B.R. 317, 322 (B.A.P. 8th Cir. 1999)
(citing Kalb v. Feuerstein, 308 U.S. 433 (1940); In re Soares, 107 F.3d
969 (1st Cir. 1997)) (post-petition state court default order signed by judge two weeks after bankruptcy filing violated automatic stay);

d. a landlord’s proceeding to recover possession of leased premises.
11 U.S.C. § 363(a)(5); 48th St. Steakhouse, Inc. v. Rockefeller Group, Inc.
(In re 48th St. Steakhouse, Inc.), 835 F.2d 427 (2d Cir. 1987) (serving
notice of termination on assignee of restaurant lease rather than on debtor, which still had interest in the property, violated automatic stay); and e. an IRS sale of property seized prior to commencement of case. 11 U.S.C. § 362(a)(8); United States v. Whiting Pools, Inc., 462 U.S. 198 (1983) (IRS may also be compelled to turn over levied property under Code § 542).

f. arbitration proceedings that not only concern claims asserted
against the debtor, but also concern the debtor’s claims against a third
party. ACandS, Inc. v. Travelers Casualty and Surety Co., 425 F.3d 252
(3d Cir. 2006), cert. denied, 126 S. Ct. 2291 (2006). (although arbitration
was commenced by debtor, continuation of arbitration proceedings
violated automatic stay because, unlike trial, it is impossible in arbitration
to definitely classify arguments presented (i.e., claims and counterclaims);
arbitration award, which effectively terminated debtor’s insurance
coverage, is invalid because it diminishes estate property); In re Edwin
Epstein Jr. Operating Co., Inc., 314 B.R. 591 (Bankr. S.D. Tex. 2004)
(held, automatic stay applied, not only to prevent non-debtor party to
arbitration proceedings from asserting claims against debtor for tortious
interference and slander of title, but also to prevent arbitrators from
hearing debtor’s claims to replace this non-debtor party as operator of oil
and gas wells based on debtor’s asserted ownership interests therein).

III. Scope and Duration of Stay.

A. Scope of Section 362.

1. Property of Estate. The bankruptcy court’s injunctive power is ordinarily
limited to protecting property belonging to a debtor. Property of the estate is defined in Code § 541(a)(1) (“. . . all legal or equitable interests of the debtor in property as of the commencement of the case.”). See In re Lankford, 305 B.R. 297, 301 (Bankr. N.D. Iowa 2004) (“All recognizable interests of the debtors or the estate are afforded the protection of § 362(a)…This includes a mere possessory interest in real property without any accompanying legal interest.”).
See also In re Moffett, 356 F.3d 518 (4th Cir. 2004) (held, chapter 13 debtor’s statutory right of redemption was sufficient interest in automobile that was repossessed prepetition to be included in estate property). But see In re Jasper, 325 B.R. 50, 55 (Bankr. D. Me. 2005) (credit union’s policy of revoking membership benefits of members who caused credit union a loss does not violate automatic stay); In re Santangelo, 325 B.R. 874 (Bankr. M.D. Fla. March 22, 2005) (district court did not violate automatic stay by approving class action settlement for claims against mortgage lender; rather, court gave prospective class members, including debtor choice of remaining class members or opting out of class); In re Medex Regional Laboratories, LLC, 314 B.R. 716 (Bankr. E.D. Tenn. 2004) (proceeds of debtor’s directors’ and officers’ liability insurance policies were not property of estate and were not protected by automatic stay, even though policies also provided coverage to debtor for indemnification claims, because the debtor had not provided any indemnification to non-debtor insiders and such indemnification claims were merely hypothetical). Compare In re Arter & Hadden, L.L.P., 335 B.R. 666 (Bankr. N.D. Ohio 2005) (proceeds of debtor’s directors’ and officers’ liability insurance policies are property of estate because policies also provided coverage to debtor and there was no reason why direct suit against debtor is either practically or procedurally untenable).

a. Property Outside the Scope. The stay is not applicable to actions
against property that is neither the debtor’s nor the estate’s. Rodger v.
County of Munroe (In re Rodgers), 333 F.3d 64 (2d Cir. 2003) (debtor’s
mere possession of title to real property is not sufficient to find property to
be property of estate or to bar delivery of deed to purchaser by operation
of stay); Chugach Timber Corp. v. Northern Stevedoring & Handling
Corp. (In re Chugach Forest Prods., Inc.), 23 F.3d 241 (9th Cir. 1994)
(court refused to extend stay to boat that was not property of debtor’s
estate but on which assets of debtor had been transferred) (11 U.S.C.
§ 541(b)); In re Howell, 311 B.R. 173, 179 (Bankr. D. N.J. 2004)
(automatic stay does not preclude estranged spouse from seeking equitable distribution of non-estate property such as exempt property, postpetition earnings, property excluded from the estate, property abandoned by the trustee or debtor surplus); NLRB v. McDermott, 300 B.R. 40 (D. Col. 2003) (automatic stay did not protect property of debtor’s wife’s). Examples of property outside the stay’s scope are:

(i) Foreclosure. If a lender completes foreclosure before the bankruptcy filing, neither the debtor nor the estate has any interest in the property and the automatic stay does not apply. In re Theoclis, 213 B.R. 880 (Bankr. D. Mass. 1997) (held, foreclosure sale had terminated debtor’s interest in property.); In re Williams, 247 B.R. 449 (Bankr. E.D. Tenn. 2000) (when foreclosure sale of debtor’s residence became final prior to commencement of chapter 13 case, residence did not become property of estate and was not protected by automatic stay);

(ii) Abandonment. Abandonment terminates the stay as to abandoned property. In re Holly’s, Inc., 140 B.R. 643 (Bankr. W.D. Mich. 1992) (once abandonment of debtor’s property is effectuated, or foreclosure of real and personal property is completed, taxing entity is entitled to enforce its statutory in rem rights against property.). But see In re Thompson-Mendez, 321 B.R. 814, 819 (Bankr. D. Md. 2005) (trustee’s deemed rejection of debtor’s residential lease by failure to timely assume it did constitute abandonment such that lease was no longer protected by
automatic stay).

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2. Entities Affected by the Stay. Section 362(a) applies “to all entities,”
including any “person, estate, trust, governmental unit.” 11 U.S.C. § 101(15).

This broad definition of “entity” eliminates the need to define who is a “creditor,” “secured creditor” or other person affected by the stay.

B. Duration of the Stay. Unless the court orders otherwise (i.e., unless creditor gets automatic stay modified), the stay “continues until such property is no longer property of the estate.” 11 U.S.C. § 362(c)(1). The stay of all other acts continues until case is closed or dismissed, or, if debtor is an individual, until debtor is granted or denied a discharge. 11 U.S.C. §§ 362(c)(2)(A), (B) and (C). See also In re Allen, 300 F.3d 1055, 1059 (9th Cir. 2002) (automatic stay “prohibits action against the bankruptcy estate only until the bankruptcy court confirms a plan reorganizing the debtor’s property”); Middle Tennessee News Co., Inc. v. Charnel of Cincinnati, Inc., 250 F.3d 1077 (7th Cir. 2001) (automatic stay remains in effect until bankruptcy court disposes of case or grants relief from stay); In re Spirtos, 221 F.3d 1079, 1081 (9th Cir. 2000) (“So long as there are assets in the estate, then, the stay remains in effect”); Eastern Refractories Co. Inc. v. Forty Eight Insulations Inc., 157 F.3d 169 (2d Cir. 1998) (order “terminating” automatic stay operates from date of order’s entry); Lomagno v. Salomon Brothers Realty Corp., 320 B.R. 473, 481 (B.A.P. 1st Cir. 2005), aff’d, 429 F.3d 16 (1st Cir. 2005) (automatic stay not retroactively imposed when dismissal order set aside on due process grounds); In re Peregrine Systems, Inc., 314 B.R. 31, 44 (Bankr. D. Del. 2004), aff’d in part, rev’d in part on other grounds, 2005 WL 2401955 (D. Del. Sept. 29, 2005) (automatic stay “continues until the bankruptcy case is closed, dismissed, or discharge is granted or denied, or until the bankruptcy court grants some relief from the stay.”) (citing Maritime Elec. Co., Inc. v. United Jersey Bank, 959 F.3d 1194, 1206 (3d Cir. 1991)); U.S. v. White, 466 F.3d 1241 (11th Cir. 2006) (debtor discharged and automatic stay terminates on date of confirmation of debtor’s reorganization plan even when plan contains a later effective date). If a case is filed by or against a debtor who is an individual and a case of the debtor was pending within the preceding one year period but was dismissed, the automatic stay “with respect to any action taken with respect to a debt or property
securing such debt or with respect to any lease shall terminate with respect to the debtor on the 30th day after the filing of the later case.”

11 U.S.C. § 362(c)(3)(A). See Jumpp v. Chase Home Finance, LLC (In re Jumpp), 356 B.R. 789 (B.A.P. 1st Cir. 2006) (interpreting § 362(c)(3)(A) automatic stay terminates only in regard to debtor; stay continues, though, in regard to property of estate).

• As of October 17, 2005, automatic stay terminates 60 days after a request for relief from stay unless final decision on request is rendered by court within the 60-day period or period is extended by agreement or by court for specific period of time found necessary for good cause.2

2 The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 was enacted on April 20, 2005, and many of its provisions became effective on October 17, 2005.

IV. Acts Stayed. Section 362(a) is broad in scope, but specifically lists eight categories that are subject to its injunctive power.

1. “Commencement or continuation . . . of a judicial, administrative, or other proceeding against the debtor . . . to recover on a prepetition claim against a debtor.”3 Code § 362(a)(l) (emphasis added):

a. Appeals: stay covers all proceedings originally brought against the
debtor, regardless of whether the debtor is appellant or appellee.4 Halmar
Robicon Group, Inc. v. Toshiba Int’l Corp., 127 Fed. Appx. 501, 503 (Fed.
Cir. 2005) (automatic stay only operates as against actions in which debtor
is in defensive posture); Nielson v. Price, 17 F.3d 1276, 1277 (10th Cir.
1994) (“[t]he 362(a)(1) stay applies to actions that are ‘against the debtor’ at their inception, regardless of the subsequent appellate posture of the case”); Ellis v. Consolidated Diesel Elec. Corp., 894 F.2d 371, 373 (10th Cir. 1990) (operation of stay should not depend upon whether district
court finds for or against the debtor). But see In re Mid-City Parking,
Inc., 322 B.R. 798 (Bankr. N.D. Ill. 2005) (debtor may unilaterally waive
protections of automatic stay by pursuing appeal without first obtaining
bankruptcy court order lifting stay; debtor could not be held liable for
damages to creditor-appellee arising from debtor’s alleged “willful stay
violation).

b. Administrative proceedings: See In re Krystal Cadillac Oldsmobile
GMC Truck, Inc., 142 F.3d 631 (3d Cir. 1998) (postpetition
determinations by Pennsylvania’s Board of Vehicle Manufacturers,
Dealers and Salespersons, ordering termination of franchise agreement
violated automatic stay); In re Best Payphones, Inc., 279 B.R. 92 (Bankr.
S.D.N.Y. 2002) (administrative law judge’s post-petition decision in
proceeding commenced pre-petition ‘but concluded after debtor’s chapter
11 filing’ was void and without effect because it violated automatic stay).
But see Board of Governors of Federal Reserve System v. MCorp
Financial, Inc., 502 U.S. 32 (1991) (Section 362(a) does not apply to
ongoing, nonfinal administrative/regulatory proceedings, and action of
Board of Governors was excepted from the stay under Section 362(b)(4)
of the Code (the “governmental unit” exception)).

c. Partnerships. Actions against partners and their property are not
protected in first instance by the filing of a partnership petition. Bankers
Trust (Delaware) v. 236 Beltway Inv., 865 F. Supp. 1186 (E.D. Va. 1994)
(automatic stay does not protect partnership debtor’s individual general
partners); O’Neill v. Boden-Wert Real Estate USA Funds I, Ltd., 599
So.2d 1045 (Fla. App. 2d Dist. 1992) (held, automatic stay did not stop action against general partner in partnership debtor or against general partner’s general partner).

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3 “‘[C]laim against the debtor’ includes claim against property of the debtor.” 11 U.S.C. § 102(2).
4 Actions against non-debtors and against co-defendants are not stayed. See sub-section (e) infra.

d. Shareholders of corporate debtor. Bankruptcy court has no jurisdiction
over stock of corporate debtor that belongs to third party shareholders.
See e.g. In re Marvel Entertainment Group, Inc., 209 B.R. 832, 838 (D.
Del. 1997) (“automatic stay provisions of the Bankruptcy Code are not
implicated by the exercise of shareholders’ corporate governance rights.”).

e. Actions against surety, co-debtor, or guarantor are not stayed.5 See
e.g. Reliant Energy Services, Inc. v. Enron Canada Corp., 349 F.3d 816,
825 (5th Cir. 2003) (“[by its terms the automatic stay applies only to the
debtor, not to co-debtors under Chapter 7 or Chapter 11”); In re Third
Eighty-Ninth Associates, 138 B.R. 144 (S.D.N.Y. 1992) (suit against
guarantors of chapter 11 debtor was not a “back-door” attempt to acquire
assets of debtor); In re Rohnert Park Auto Parts, Inc., 113 B.R. 610
(B.A.P. 9th Cir. 1991) (automatic stay does not prevent creditors from
suing co-debtors).

f. Actions are not stayed against non-debtor co-defendants.6 See e.g.
Queenie, Ltd. v. Nygard Intl., 321 F.3d 282, 287 (2d Cir. 2003) (debtor’s
filing of bankruptcy petition stayed his appeal and that of his wholly owned corporation7, but not that of co-defendants); 555 M Mfg., Inc. v.
Calvin Klein, Inc., 13 F. Supp. 2d 719 (N.D. Ill. 1998) (automatic stay
protection not available to debtor’s solvent co-defendant in breach of
contract case). But see Woodell v. Ormet Primary Aluminum Corp., 808
N.E.2d 402, 407 (Ohio Ct. App. 2004) (automatic stay applies to claims
against debtor’s employee co-defendants only to the extent that the causes of action against them arise from their status as employees of the debtor).

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5 In limited circumstances, courts have asserted their equitable powers under 11 U.S.C. § 105(a) to enjoin the continuation of litigation against non-debtors when the debtor’s trustee demonstrates that continuation of litigation against non-debtors imminently and irreparably threatens the debtor’s reorganization prospects. E.g. In re United Health Care Org., 210 B.R. 228, 233 (S.D.N.Y. 1997) (staying action against non-debtor principals and officers of debtor when enforcement of judgment imminently and irreparably threatened non-debtors’ ability to fund debtor’s plan); North Star Contracting Corp. v. McSpeedon (In re North Star Contracting Corp.), 125 B.R. 368, 370-71 (S.D.N.Y.1991) (staying action against non-debtor president of debtor when, among other things, continuation of action would distract vital non-debtor and there was no distinct cause of action against him, but merely an action commenced solely to circumvent the stay).

6 Courts may stay actions against a non-debtor third-party defendant under “unusual circumstances” when “there is such identity between the debtor and third-party defendant that the debtor may be said to be the real party defendant and that a judgment against the third-party defendant will in effect be a judgment … against the debtor.” A.H. Robins Co. v. Piccinin, 788 F.2d 994, 999 (4th Cir. 1986). See also In re Nat’l Century Fin. Enter., 423 F.3d 567 (6th Cir. 2005) (commencement of civil action to recover accounts receivable held in collection account in debtor’s name violated automatic stay even though debtor was not named as defendant because action sought to recover estate property); Global Industrial Technologies, Inc. v. Ace Prop. & Cas. Ins. Co. (In re Global Industrial
Technologies), 303 B.R. 753 (W.D. Pa. 2004), vacated in part, modified in part on other grounds, 2004 WL 555418 (Bankr. W.D.Pa. Mar. 19, 2004) (held, state court action brought by insurers for declaratory judgment regarding non-debtor’s rights in insurance policies it shared with debtor violated automatic stay even though debtor was not named as defendant in state court action because outcome of state action could affect debtor’s rights in shared insurance); Teachers Ins. & Annuity Assoc. of America v. Butler, 803 F.2d 61, 65 (2d Cir. 1986) (referred to A.H. Robins decision as case with “unusual circumstances”). Compare In re Transervice Logistics, Inc., 304 B.R. 805 (Bankr. S.D. Ohio 2004) (declining to extend automatic stay to non-debtor co-defendants because, unlike situation in A.H. Robins, defendant-debtor only faced one suit, not thousands, and thus would not be barraged by discovery and litigation).

g. Proceedings or claims arising post-petition are not subject to automatic stay, although successful plaintiff must obtain relief from stay if it seeks to enforce judgment against estate.8 Bellini Imports, Ltd. v. Mason & Dixon Lines, Inc., 944 F.2d 199 (4th Cir. 1991) (automatic stay did not bar institution of action arising out of alleged postpetition breach of contract); Erickson v. Polk, 921 F.2d 200 (8th Cir. 1990) (lessor of farmland did not violate automatic stay when it retook possession of property following postpetition expiration of lease); In re Dominguez, 312 B.R. 499 (Bankr. S.D.N.Y. 2004) (prepetition lapse of debtor-taxpayer’s redemption period may constitute “cause” for lifting stay to allow tax authority to exercise its
rights in debtor’s real property; it did not relieve taxing authority’s obligation to move first for modification of stay).

h. Automatic stay does not apply to post-petition defensive actions in a
prepetition lawsuit brought by a debtor. Stanwyck v. Beilinson, 104 Fed.
Appx. 616 (9th Cir. 2004).

2. Enforcement of prepetition judgment against debtor or its property (11
U.S.C. § 362(a)(2)). See generally Delpit v. Commissioner, 18 F.3d 768 (9th Cir. 1994) (held, appeal to enforce pre-petition judgment was subject to the automatic stay).

3. “[A]ny act” to obtain possession of debtor’s property, or to exercise
control over such property. 11 U.S.C. § 362(a)(3).

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7 The court ignored its own precedent in coming to this bizarre result, but justified it by reasoning that adjudication of a claim against the wholly-owned corporation would have an “immediate adverse economic impact” on the debtor. But see Feldman v. Trustees of Beck Ind., Inc. (In re Beck Ind., Inc.), 725 F.2d 880 (2d Cir. 1973) (court cannot enjoin suit against solvent independent subsidiary of debtor merely because stock is held by debtor in reorganization); In re Unishops, Inc., 374 F.Supp. 424 (S.D.N.Y. 1974) (bankruptcy court lacks jurisdiction to grant a stay of court proceedings against subsidiaries).

8 Judiciary Code, 28 U.S.C. § 959(a), provides relief to holders of postpetition claims against a debtor from having to obtain leave from bankruptcy court to pursue claims arising from “acts or transactions in carrying on business connected with [estate] property.” 28 U.S.C. § 959. Section 959’s exception to the automatic stay is limited to postpetition claims arising from operation of the debtor’s business, and does not include acts associated with liquidation or administration of the bankruptcy estate. See In re Crown Vantage, Inc., 421 F.3d 963, 971-72 (9th Cir. 2005) (postpetition claim against trustee arising from liquidation of estate not subject to § 959 because not related to business operation); Carter v. Rogers, 220 F.3d 1249, 1254 (11th Cir. 2000); In re DeLorean Motor Co., 991 F.2d 1236 (6th Cir. 1993) (malicious prosecution claims against trustee arising from avoidance actions are not based on acts arising from business operation and thus not subject to § 959).

a. A credit union that accepts and retains postpetition deductions from
chapter 13 debtor’s salary violates automatic stay. See, e.g., Town of
Hempstead Employees Federal Credit Union v. Wicks, 215 B.R. 316
(E.D.N.Y. 1997) (credit union’s four-month-long administrative hold on
chapter 13 debtors’ savings accounts violated automatic stay).

b. Letters of Credit. See, e.g., In re Kmart Corp., 297 B.R. 525 (N.D. Ill.
2003) (letters of credit are not property of debtor’s estate subject to
automatic stay; beneficiary not prevented from drawing on letter of credit
when account party is in bankruptcy); In re A.J. Lane & Co., Inc., 115
B.R. 738 (Bankr. D. Mass. 1990) (held, payment by third party on letter of
credit not stayed because it did not involve a transfer of debtor’s assets).

c. Creditors’ actions against debtor to obtain property fraudulently
transferred by debtor prior to bankruptcy are barred by the automatic stay.
See, e.g. Constitution Bank v. Tubbs, 68 F.3d 685 (3d Cir. 1995) (bank’s
action against guarantors for fraudulent conduct triggered automatic stay
when each guarantor filed a bankruptcy petition during fraud action).

d. Mortgagees’ postpetition foreclosure against real property subject to
deed naming debtor’s spouse a sole owner violated automatic stay because, although debtor only had arguable interest in the property, the
determination should be made by bankruptcy court before mortgagees
foreclosed. In re Chesnut, 422 F.3d 298 (5th Cir. 2005).

e. Debtor’s Tax Benefits. Circuits apparently are split regarding whether
a debtor’s tax benefits (e.g., net operating losses) are property of the estate, thus subject to the automatic stay. See In re UAL Corp., 412 F.3d 775 (7th Cir. 2005) (finding bankruptcy court’s injunction restricting trading in debtor’s securities to protect tax benefits to be “problematic on the merits,” and questioning court’s reliance on Bankruptcy Code §§ 105(a) and 362 as basis for trading procedures order). Compare In Prudential Lines, Inc., 928 F.2d 565 (2d Cir. 1991) (finding debtor’s tax benefits to be estate property, and that automatic stay thus enjoined debtor’s parent from taking worthless stock deduction on parent’s tax return).

4. Any act to create, perfect, or enforce any lien against debtor’s property
(but not the perfection of mechanic’s lien9 — §§ 362(b)(3) and 546(b) — or when perfection occurs within the 10-day period after the time of effective transfer of the property, under §§ 362(b)(3), and 547(e)(2)(A)). 11 U.S.C. § 362(a)(4).

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9 The mechanic’s lienor will ordinarily be able to perfect its lien after bankruptcy for work performed prior to bankruptcy. See generally, In re Yobe Electric, Inc., 728 F.2d 207, 208 (3d Cir. 1984) (per curiam) (service of notice of intent to file mechanic’s lien did not violate stay since under state statute “perfection of mechanic’s lien ‘relates back’ to the installation of the first material”); In re Lionel Corp., 29 F.3d 88 (2d Cir. 1994) (held, no automatic stay violation resulted from mechanics’ lienors’ post-petition serving notice of lien upon lessors and chapter 11 debtor lessee, when New York law permitted perfection of filed mechanics’ lien after another entity had acquired rights to the property).

See In re Fuller, 134 B.R. 945 (B.A.P. 9th Cir. 1992) (held, automatic stay prevents creation or perfection of lien, even by operation of law).
a. Sections 362(b)(3) and 546(b)(1)(A), read together, set the
boundaries of this exception.

(i) Section 362(b)(3) subjects a creditor’s right to “perfect, or to maintain or continue the perfection of, an interest in property” to Section 546(b) of Code. 11 U.S.C. §362(b)(3).

(ii) In turn, Section 546(b) limits the trustee’s powers to avoid statutory liens by providing that they “are subject to any generally applicable law that permits perfection of an interest in property to be effective against an entity that acquires rights in such property before the date of perfection.” 11 U.S.C. §546(b)(1)(A) (emphasis added); see, e.g., In re AR Accessories Group, Inc., 345 F.3d 454, 458 (7th Cir. 2003) (held, priming statute need not contain language expressly providing for retroactive perfection in order to trigger exception provided in 11 U.S.C. §546(b)(1)(A)); In re Hayden, 308 B.R. 428 (B.A.P. 9th Cir. 2004) (held, towing operator did not violate automatic stay in refusing to surrender possession of debtor’s vehicle, which was towed prepetition, unless debtor first paid towing charges because towing operator was merely acting to maintain or continue possession of its lien, not to enforce it).

5. Any act to create, perfect, or enforce a lien against debtor’s property for
prepetition claims. 11 U.S.C. § 362(a)(5). See, e.g., In re Birney, 200 F.3d 225 227 (4th Cir. 1999) (Section 362(a)(5) prohibits “any act to create, perfect, or enforce against property of the debtor any lien to the extent that such lien secures a claim that arose before the commencement of the case under this title”).

6. “Any act to collect, assess, or recover a prepetition claim against the
debtor.” 11 U.S.C. § 362(a)(6). Pertuso v. Ford Motor Credit Co., 233 F.3d 417, 423 (6th Cir. 2000) (a course of conduct violates § 362(a)(6) if it “(1) could reasonably be expected to have a significant impact on the debtor’s determination as to whether to repay, and (2) is contrary to what a reasonable person would consider to be fair under the circumstances”) (quoting In re Briggs, 143 B.R. 438 453 (Bankr. E.D. Mich. 1992)); see also In re Diamond, 346 F.3d 224, 227-28 (1st Cir. 2003) (settlement negotiations challenging Chapter 7 debtor’s discharge do not violate the automatic stay per se, but creditor’s threat to seek revocation of debtor’s real estate license during negotiations was coercive, thus dismissal of
debtor’s complaint proper); In re Optel, Inc., 60 Fed.Appx. 390 (3d Cir. March 25, 2003) (sale agreement between creditor and debtor provided that debtor either pay $6 million lump sum payment or, if creditor requested, $10 million over time; held, automatic stay prohibited creditor from requesting the $10 million deferred payment, therefore creditor was only entitled to distribution on $6 million claim); In re Jamo, 283 F.3d 392, 399 (1st Cir. 2002) (“a creditor may engage in post petition negotiations pertaining to a bankruptcy-related reaffirmation agreement so long as the creditor does not engage in coercive or harassing tactics”).

7. Setoffs of any prepetition debt owing to the debtor. 11 U.S.C. § 362(a)(7). See Newbery Corp. v. Fireman’s Fund Ins. Co., 95 F.3d 1392 (9th Cir. 1996) (right of setoff is subject to automatic stay provisions of chapter 11); Citizens Bank of Maryland v. Strumpf, 516 U.S. 16 (1995) (temporary administrative freeze by bank not a stay violation or setoff; intent to settle accounts permanently is required for setoff within meaning of automatic stay provisions). Compare Jimenez v. Wells Fargo Bank, N.A., 335 B.R. 450 (Bankr. D. N.M. Dec. 21, 2005) (temporary administrative freeze by bank, without right of setoff, violated automatic stay); In re Calvin, 329 B.R. 589 (Bankr. S.D. Tex. 2005) (bank’s administrative freeze of debtor’s account violated automatic stay when bank was not creditor of debtor and thus had no right of setoff); In re Cullen, 329 BR. 52
(Bankr. N.D. Iowa 2005) (bank’s administrative freeze of account jointly held by debtor and debtor’s father violated automatic stay because freeze was intended to continue indefinitely until bankruptcy case was closed; bank did not have valid right of setoff because funds in account were property of debtor’s father and mutuality requirement for setoff thus was lacking).

a. N.B.: The automatic stay, however, does not prevent a creditor
from exercising its right of recoupment.10 See, e.g., In re Slater Health
Center, Inc., 398 F.3d 98 (1st Cir. 2005) (right of recoupment entitled
government to recoup prepetition overpayments to debtor-health care
provider by reducing postpetition payments to debtor); In re Holyoke
Nursing Home, 372 F.3d 1 (1st Cir. 2004) (same); In re Anes, 195 F.3d
177 (3d Cir. 1999) (held, doctrine of recoupment did not apply so as to
permit pension plans to deduct loan payments from debtors’ postpetition
paychecks because the payments were not part of the same transaction); In re Delicruz, 300 B.R. 669 (Bankr. E.D. Mich. 2003) (“recoupment reduces
or extinguish[es] a debt arising from the same transaction, and is not
stayed by the bankruptcy”). But see York Linings Int’l, Inc. v. Harbison-
Walker Refractories Co., 839 N.E.2d 766 (Ind. App. 2005) (although
automatic stay does not bar creditor from exercising right of recoupment,
stay does prevent creditor from asserting counterclaim for recoupment in
litigation because such a counterclaim seeks affirmative relief).

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10 “Recoupment” has been defined as follows: “. . . so long as the creditor’s claim arises out of the identical transaction as the debtor’s, that claim may be offset against the debt owed to the debtor, without concern” for the Code’s setoff limitations. In re University Medical Center, 973 F.2d 1065, 1080 (3d Cir. 1992). Recoupment in bankruptcy has been narrowly construed by courts because it violates the basic bankruptcy principle of equal distribution. In re B & L Oil Co., 782 F.2d 155, 158 (10th Cir. 1986) (“[a] fundamental tenet of bankruptcy law is that . . . [once] a petition is filed, debts that arose before the petition may not be satisfied through post-petition transactions. This is seen in bankruptcy restrictions on setoffs [and recoupment].”); In re McMahon, 129 F.3d 93, 97 (2d Cir. 1997) (“in light of the Bankruptcy Code’s strong policy favoring equal treatment of creditors, recoupment . . . should be narrowly construed”).

8. Commencement or continuation of a proceeding before the United States Tax Court concerning the debtor. 11 U.S.C. § 362(a)(8). See, e.g., Halpern v. C.I., 96 T.C. 895 (U.S. Tax Ct. 1991) (held, automatic stay bars commencement or continuation of any proceeding in Tax Court, regardless of whether claim relates to prepetition or postpetition tax year deficiencies).

• As of October 17, 2005, § 362(a)(8) is limited to proceedings
concerning corporate debtor’s tax liability for taxable period the
bankruptcy court may determine or, if debtor is individual, to tax
for taxable period ending before date of order for relief.

9. Only affirmative acts are stayed. Section 362 applies only to affirmative
acts against the debtor or its estate.

a. The automatic stay does not affect, and the court may not exercise
its equitable powers to stay or toll, the automatic transfer of rights such as
that occurring by the expiration of a statutory period of redemption.
Canney v. Merchants Bank (In re Frazer), 284 F.3d 362 (2d Cir. 2002)
(did not stay mortgagee’s act of recording a certificate of non-redemption;
held, expiration of statutory period is not an “affirmative act” and
automatic stay did not apply).

b. Omissions and waivers are not stayed by the Code because they
are not affirmative acts. See e.g. Mann v. Chase Manhattan Mortg. Corp.,
316 F.3d 1, 6 (1st Cir. 2003) (mortgagee’s failure to submit
preconfirmation request, pursuant to bankruptcy statute governing rights
of oversecured creditors, to have its postpetition attorney fees included in
its allowed secured claim was not sort of overt, affirmative act that
violates stay).

When Homeowner’s good faith attempts to amicably work with the Bank in order to resolve the issue fails;

How Homeowners Can Effectively Handle Subpoenas Duces Tecum

30 Thursday Oct 2014

Posted by BNG in Discovery Strategies, Fed, Federal Court, Foreclosure Defense, Judicial States, Litigation Strategies, Non-Judicial States, Pleadings, Pro Se Litigation, State Court, Trial Strategies, Your Legal Rights

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Pro se legal representation in the United States, Subpoena Duces Tecum

When homeowners fighting foreclosure are challenged with Foreclosure Mill Attorneys to produce him/herself for deposition or for production of documents via subpoenas, there are few things the homeowner should bear in mind concerning subpoenas.

Responding to Subpoenas

You’ve received a document that might be a subpoena. Your immediate reaction may be shock and a desire to immediately obey its request. As with anything legal, it’s best not to act on impulse but to carefully consider the options before you. While you will likely need to comply, there are times when a court will agree to modify the subpoena’s request or even to terminate it entirely. This guide cannot give you legal advice about your situation and you should contact a lawyer for specific legal advice. However, this post should be able to answer the preliminary questions you may have about how best to respond.

1. What is a subpoena?

A subpoena is a legal order commanding the person or organization named in the subpoena to give sworn testimony at a specified time and place about a matter concerned in an investigation or a legal proceeding, such as a trial. A subpoena duces tecum substitutes the requirement of your appearance to testify with a requirement that you supply specific physical material in your possession. A deposition subpoena means that your sworn testimony will be taken during a phase of the trial process known as discovery, and will likely occur at a lawyer’s office.

Subpoenas may be issued by the following people involved in the legal case associated with the subpoena:

the judge presiding over the legal proceedings
the clerk of the court where the lawsuit has been filed
a private lawyer representing one of the parties in the lawsuit
a government lawyer such as the Attorney General or District Attorney

(Note that the Attorney General and District Attorney can issue a subpoena during an investigation, before initiating a legal case).

Given that a subpoena is an order to produce yourself and/or tangible items in a very specific legal setting, it is imperative that you take it seriously. Failure to comply with a subpoena can have serious consequences. However, you do have certain options in how best to respond.

2. Did you receive a subpoena?

You’ll first want to determine precisely what you’ve received. Review the documents to see whether it is a subpoena duces tecum, to access material in your possession.

Subpoenas come in several flavors, and you may need someone trained in the law to help you determine what type of legal document you’ve received, if you are not quite familiar with legal documents. However, a subpoena contains certain distinguishing characteristics. Look carefully at the document for:

the full name of a court in the document’s title, or letterhead
the word “Subpoena” in bold in the top third of the document
the words “you are commanded to report,” or a similar variation
your name
a specific date, time and location for you to appear or for you to provide the requested materials
in some cases, the penalty for non-compliance will be included

Subpoenas are not necessarily filed with the court, so if you have doubts about the document you’ve received, ask a lawyer or call the person who signed the document and ask if they have in fact sent a subpoena. (An address and or telephone number should follow the signature.)

3. Accepting a Subpoena vs. Complying with a Subpoena

Once you’ve determined that you have received a subpoena, you may feel that you want to contest the subpoena because you believe that it is invalid or unreasonable. You can still do so despite having received the subpoena (which in most cases arrived by registered mail, or by a person delivering it to you and requesting your signature). Acceptance of the subpoena does not constitute your assent to comply with it. However, if you object to the terms of the subpoena, then you must inform the court about your decision to challenge it.

4. Inconvenient Date & Cost of Travel

As long as you are not one of the parties in the case and you have to travel an appreciable distance, your transportation costs should be covered and you should be given an attendance fee. The costs and fees are set according to the rules of the court named in the subpoena. Generally, in a civil case you should receive the cash or check before you have to appear. After you testify in a criminal case, you should receive an attendance fee and travel reimbursement.

If appearing at the time and place specified by the subpoena is of great inconvenience, call the person who issued the subpoena, and he may be able to reschedule your appearance to a more convenient date. However, keep in mind that postponement may not be an option because a court date has been set for the trial and cannot be moved. If so, and if you would suffer extreme hardship from having to appear, consult a lawyer who may be able to help.

5. Filing an Objection to a Subpoena

The subpoena will require that you either appear, or produce documents or other material, at a specific time and location. If you want to inform the court of your objections you will need to file a Motion to Quash. Typically, a Motion to Quash contains a request to the court asking to modify or terminate the subpoena based on certain objections, and a memorandum explaining how the law supports the objections.

You should not wait until the date specified to make your objection known to the court. There are many valid reasons to object, the most common being:

Improper service

The law requires that you receive (were “served”) with the subpoena in a specified way. Requirements for service vary according to jurisdiction, and the subject is too complicated to address in this guide. You may want to consult with an attorney or perform your own legal research to understand whether service was proper. However, this is usually not a strong objection because in all likelihood you will merely be served once again.

Scope of Request

If you believe the subpoena you’ve received requests information or material that would be difficult to gather, you may be able to challenge it. Should the court agree with your objections, it may nullify the subpoena. More likely, the court will limit the scope of the subpoena, set a more reasonable deadline for you to deliver the materials, and, if a voluminous amount of documents have been requested, the court may also require the other party to compensate you for making the necessary copies of each document. (Note: you should not have to create anything new for a subpoena request; the request should only be for existing material within your possession.)

It is important to note two things here: the court does not usually monitor who and what is subpoenaed, and under rules of trial procedure, a party to a lawsuit is permitted to send a subpoena to anyone he thinks might have material useful for his case. Additionally the material doesn’t even have to relate to the subject of the lawsuit. A party is entitled to request materials it thinks might have the potential to lead to relevant information concerning the subject matter of the case. Thus, unsurprisingly, many subpoenas are drafted to be broad in scope, and in some cases, to have a short deadline.

Confidential Material

If the subpoena requires that you turn over confidential documents, or testify about confidential matters, like the identity of an anonymous source, do not immediately comply with the request. The law recognizes the importance of protecting certain communications and grants them a privileged status for purposes of a lawsuit.

For example:

* Certain states have enacted “shield” laws protecting journalists and others from being compelled to testify about information collected during the newsgathering process, including the disclosure of anonymous sources.

* Both state and federal law prevents certain professionals, like doctors and lawyers, from being forced to testify or submit documents about their patients or clients.

* Both state and federal law grant close relatives immunity from testifying in certain situations.

* Certain provisions are designed to protect homeowners in foreclosure as well.

Because these protections vary according to each jurisdiction you will need to consult a lawyer, or perform your own legal research, to see whether any apply to your situation.

In matters involving criminal offenses you’ll need to be aware of:

Self-incrimination

The Fifth Amendment of the U.S. Constitution protects an individual from being forced to testify against himself when such testimony could result in criminal liability.

In some cases, law enforcement authorities use a subpoena to a build a case against the subpoena recipient before pressing charges. If you think that you may be the focus of a criminal investigation, or worry about incriminating yourself when you testify, do not comply with the subpoena without first consulting a lawyer.

6. Hiring a Lawyer

If you haven’t already made a decision at this point, you should decide whether you want to hire a lawyer. If the request is straightforward and you’re comfortable with supplying the requested information, you may not need a lawyer’s services. However, you will almost always be better off having a lawyer protecting your interests, even if you think you have nothing to hide. You may mischaracterize a situation and make yourself vulnerable to a lawsuit or criminal charges, and if so, will find it hard to rebut the testimony given under oath.

For homeowners without legal knowledge, before contacting a lawyer, write down everything you know about the situation, including: when and how you received the subpoena, the nature of the actions that triggered the subpoena, and any relevant interactions you’ve had with either party of the lawsuit. The act of writing the summary allows you to:

record events you may later forget
evaluate your position and figure out your next steps
focus your conversation with a lawyer (should you wish to consult with one)
launch your own legal research
potentially determine the subpoena’s validity

When Homeowner’s good faith attempts to amicably work with the Bank in order to resolve the issue fails;

How California Homeowners Can Technically Disqualify their Foreclosure Mill Attorney

09 Thursday Oct 2014

Posted by BNG in Banks and Lenders, Case Laws, Case Study, Federal Court, Foreclosure Defense, Fraud, Judicial States, Litigation Strategies, MERS, Non-Judicial States, Pleadings, Pro Se Litigation, State Court, Trial Strategies, Your Legal Rights

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California, Mortgage Electronic Registration System, Pro se legal representation in the United States

In this age of fraudulent foreclosures by foreclosure mills, homeowners should be in a position to effectively challenge and disqualify the foreclosure mill Attorneys, if for anything, that can effectively delay your foreclosure and ultimately save your home.

In most foreclosure cases, the existence of conflict of interest is obvious. If you look at your pleadings carefully, you will notice that in most cases, the pleadings will reflect that the Attorney who is representing your purported lender is “also” representing MERS. In other words the law firm is acting as counsel for the lender who initiated this foreclosure proceeding, in conjunction with MERS who is also a defendant in the case. Incredibly the lender’s counsel (who is like a plaintiff – for commencing and prosecuting the foreclosure proceeding), even though it has already acted as counsel for the defendant, MERS, in similar cases! OR representing both the lender and MERS in non judicial foreclosure cases where the homeowner is suing everyone involved in his mortgage loan transaction. By virtue of commencing foreclosure via a MERS purported assignment, the lender has trapped itself. It is only when a homeowner uses such opportunity to bring that to the court’s attention with a “motion to disqualify counsel” will the homeowner take advantage of the situation.

It is fundamental that the same law firm cannot represent a plaintiff and a defendant in the same case.

The purported lender may dispute its representation of MERS, but there is no other explanation for why the purported lender’s own employees prepared the purported assignment and executed it on behalf of MERS. In order words, if the Attorney representation of both parties was not a conflict, then why did the lender’s own employee prepare the purported assignment and sign it for MERS? Even if you case does not involve the an Attorney representing both the lender and MERS, If the homeowner research carefully within your region, you will notice that the same counsel had in the past became the counsel of record for MERS in many other cases active before courts. As such, the Attorney’s status as counsel for the defendant MERS is not reasonably in dispute.

Homeowners should make the arguments that calls into question
the fair administration of justice. To illustrate, the homeowner fear that MERS may institute legal proceedings against him in the future. After all, what is to stop MERS from taking the position, at some point in the future, that it is the owner and holder of the Note and deed of trust.
Where would that leave the homeowner Or the then-owner of the subject property? Or the title insurance company that writes title insurance based on the title that is derived from a foreclosure on the subject property (if a foreclosure is allowed)?

Homeowners should argue that under a myriad of cases, the conflict of interest by which lender’s counsel is operating, couple with the affect that conflict is having on the administration of justice requires its disqualification as counsel. See State Farm Mut. Auto. Ins. Co. v. KA.W., 575 So. 2d 630 (Fla 1991); Koulisis v Rivers, 730 So. 2d 289 (Fla. 4th DCA 1999); Campell v. American Pioneer Savings Bank, 565 So. 2d 417 (Fla. 4th DCA 1990).

To the extent that lender’s counsel disagree with the facts set forth herein, homeowner should argue that the court cannot simply accept the law firm’s version of events as true. Rather, in that event, an evidential hearing is required. To illustrate further, on February 12, 2010, the Second District reversed a summary judgment of foreclosure where the plaintiff bank did not show a proper assignment of mortgage. See BAC Funding Consortium, Inc. v. Jacques, Cas No 2D08-3553 (Fla. 2d DCA 2010). This ruling comes on the heels of the Florida Supreme Court’s recent rule change requiring that all mortgage foreclosure lawsuits be executed under oath.

Other jurisdiction have started noticing the fraud brought upon the Honorable courts, entertained motions to disqualify counsels and have also disqualified counsels based on facts as stated herein. After all, only in recent years have banks and their employees begun drafting assignments in mass quantities in an attempt to “push through” non-judicial and judicial foreclosures. Other jurisdictions, however, have begun catching on to these unseemly tactics. One New York court, for example, after discussing problems with an assignment of mortgage similar to those set forth above, ruled:
“Even if [plaintiff] is able to cure the assignment defect, plaintiff’s counsel then has to address the conflict of interest that exist with his representation of both the assignor of the instant mortgage, MERS as nominee for HSBC Mortgage, and the assignee of the instant mortgage, HSBC….”

HSBC Bank USA, N.A. v. Vazquez, 2009 N.Y. Slip. Op. 51814 (2009); see also Bank of N.Y. v. Mulligan, 2008 N.Y. Slip. Op. 31501 (2008) (The Court is concerned that [the person who signed the assignment] may be engaged in a subterfuge, wearing various corporate hats«´); Deutsche Bank National Trust Co. v. Castellanos, 2008 N.Y. Slip. Op. 50033 (2008) (If he is a Vice President of both the assignor and the assignee, this would create a conflict of interest and render the July 21, 2006 assignment void.´); HSBC Bank, N.A. v. Cherry, 2007 N.Y. Slip. Op.52378 (2007) (The Court is concerned that there may be fraud on the part of HSBC, or at least malfeasance. Before granting an application for an order of reference, the Court requires an affidavit from [the person who signed the assignment] describing his employment history for the past three years.)

The situation here is similar to that presented to the First District in Live and Let Live, Inc. v. Carlsberg Mobile Home Props., Ltd., 388 So. 2d 629 (Fla. 1st DCA 1980). In that case, plaintiff’s attorney was the escrow agent for the real estate transaction upon which the lawsuit was based. What he knew or was told at closing was relevant at trial. Id. Deeming him a central figure in the lawsuit, the First District required his disqualification. Id. In so ruling, the court cited ethical considerations promulgated by the Florida Supreme Court in In Re Integration Rule of The Florida Bar, 235 So. 2d 723 (Fla. 1970), including DR 5-102, which provides:

(A) If, after undertaking employment in contemplated or pending litigation, a lawyer learns or it is obvious that he or a lawyer in his firm ought to be called as a witness on behalf of his client, he shall withdraw from the conduct of the trial and his firm, if any, shall not continue representation in the trial. (B) If, after undertaking employment in contemplated or pending litigation, a lawyer learns or it is obvious that he or a lawyer in his firm ought to be called as a witness other than on behalf of his client, he may continue the representation until it is apparent that his testimony is or may be prejudicial to his client.

A potent weapon in any lawyer’s arsenal is a motion to disqualify opposing counsel. If used successfully, it stops the opposing party in its tracks and forces an adversary to start over with a new lawyer. And for those on the receiving end of such a motion, it is crucial to know whether it should be granted or rejected. Courts have developed a four-factor test to assess the merits of a disqualification motion, but before we discuss that test, consider the following example.

Assume “Attorney A” is long-time litigation counsel for Widgetco Inc. Widgetco is being sued, and the opposing party deposes one of Widgetco’s employees who is not named as a party in the suit but who has percipient knowledge of the underlying facts of the case. Attorney A defends the deposition of that employee and, at the start of the session, states on the record that he is appearing as counsel for the employee. A year later the employee steals company trade secrets and opens a competing business.

Widgetco then hires Attorney A to sue the former employee for misappropriation of trade secrets and unfair competition. Counsel for the former employee promptly files a motion to disqualify Attorney A on the ground that he has a conflict of interest because he was counsel for the employee during the deposition in the prior case. Is Attorney A out of luck and off the case? Not necessarily.

PERSONAL RELATIONSHIP REQUIRED
To win the disqualification motion, the former employee must first show that he or she was personally represented by Attorney A. In addition, the employee must show a “substantial relationship” between Attorney A’s current and previous representation of the former employee (Brand v. 20th Century Ins. Co., 124 Cal. App. 4th 594, 602 (2004)). An attorney representing a corporation does not automatically have an attorney-client relationship with the organization’s individual constituents (officers, directors, shareholders, employees) (Vapnek, Tuft, Peck & Wiener, California Practice Guide: Professional Responsibility, ¶ 3.90 (The Rutter Group, 2007)). Rather, courts distinguish between a corporate counsel’s representation of corporate officers, directors, and employees “in their representative capacities and the representation of those persons in their individual capacities.” (Koo v. Rubio’s Restaurants, Inc., 109 Cal. App. 4th 719, 732-33 (2003).) As one court has stated, “[G]enerally, there is no individual attorney-client privilege between a corporation’s attorney and individuals within the corporation unless there is a clear showing that the individual consulted the corporate counsel in the officer’s individual capacity.” (Tuttle v. Combined Ins. Co., 222 F.R.D. 424, 429 (E.D. Cal. 2004).)

The preeminent case explaining this distinction is Meehan v. Hopps (144 Cal. App. 2d 284 (1956)), in which long-time corporate counsel represented the corporation in a suit against Stewart Hopps, a former officer and chairman of the board. Hopps moved to disqualify the corporation’s counsel, arguing that he had spent many hours conferring with counsel, and had delivered to counsel memoranda and personal files relating to various legal matters in which the corporation was involved (144 Cal. App. 2d at 287, 290). The court of appeal affirmed the trial court’s denial of the motion to disqualify, holding that “[t]he attorney for a corporation represents it, its stockholders and its officers in their representative capacity” and in no way “represents the officers personally.” (144 Cal. App. 4th at 290; see also Talvy v. American Red Cross, 205 A.D. 2d 143, 150, 618 NYS 2d 25, 29 (N.Y. Ct. App. 1984) (“Unless the parties have expressly agreed otherwise in the circumstances of a particular matter, a lawyer for the corporation represents the corporation, not the employees”).) The court concluded not only that the attorney could act adversely to Hopps, but also that he could use against Hopps any information that Hopps “was required by reason of his position with the corporation to give to that attorney.” (144 Cal. App. 4th at 290.) Thus, as commentators have noted, “[t]he fact that counsel may have learned confidential information about [former officers now adverse to the company] does not disqualify counsel from continuing to represent the corporation.” (Friedman, California Practice Guide: Corporations at ¶ 6:3.2 (The Rutter Group, 2007).) The primary issue, then, on a motion to disqualify a lawyer who previously represented a client’s employee is whether the former employee can establish that he or she had a personal attorney-client relationship with the company’s litigation counsel (Koo, 109 Cal. App. 4th at 729). The rule against representation adverse to a former client does not apply when the relationship of attorney and client has never, in fact, been created between the attorney and the complaining party. (See 1 Witkin, California Procedure at § 151, p. 206 (4th ed. 1996).)

A formal contract is not necessary to establish that an attorney-client relationship exists (Waggoner v. Snow, Becker, Kroll, Klaris & Kravis, 991 F.2d 1501, 1505 (9th Cir. 1993) (applying California law)). On the other hand, the former employee’s mere subjective belief that he or she was personally represented by corporate counsel is not sufficient (Fox v. Pollack, 181 Cal. App. 3d 954, 959 (1986)). Rather, it is the former employee’s burden to prove that the totality of the circumstances reasonably implies an agreement by the company’s lawyer not to accept other representations adverse to the former employee’s personal interests (Responsible Citizens v. Superior Court, 16 Cal. App. 4th 1717, 1733 (1994)).

THE FOUR-FACTOR TEST
A federal court applying California law has cited four factors to use in assessing whether the totality of the circumstances reasonably implies an agreement of personal representation. The four factors are: (1) the nature and extent of the contacts between the attorney and the purported client; (2) whether the purported client divulged confidential information to the attorney; (3) whether the attorney provided the purported client with legal advice; and (4) whether the purported client sought or paid for the attorney’s services (Fink v. Montes, 44 F. Supp. 2d 1052, 1060 (C.D. Cal. 1999)).

Attorney contacts. The first factor of the Fink test involves the nature and extent of the contacts between the attorney and the former employee. California case law does not address whether a corporate lawyer whose sole contact with a corporate employee is to prepare him or her for deposition and/or to defend the employee at deposition is by reason of that contact alone disqualified from representing the corporation in a lawsuit against the employee. However, cases from other jurisdictions generally provide that the corporate attorney is not deemed to represent the employee personally in such circumstances.

For example, in Polin v. Kellwood Co. (866 F. Supp. 140 (S.D.N.Y. 1994)) a former officer of a company met with the company’s lawyers to prepare for his deposition in a lawsuit involving the company. In a later lawsuit against that same former officer, the district court held that the corporate lawyers were not automatically disqualified from representing the company because “[t]he mere fact that a corporate lawyer meets with an employee – or as here, an ex-employee – to prepare for a deposition, cannot make the employee the client of the lawyer.” (866 F. Supp. at 142.)

Also instructive is Spinello Cos. v. Metra Industries, Inc. (2006 Westlaw 1722626 (D. N.J. 2006)), in which the defendant (a former officer) sought to disqualify Spinello’s counsel because he had defended the officer at, and prepared him for, a deposition in a previous lawsuit involving Spinello. The court concluded that no personal attorney-client relationship existed between the company’s counsel and the former officer (2006 Westlaw 1722626 at *6).

Courts have reached a different conclusion when the attorney specifically identifies himself or herself on the record as “counsel for the individual employee” (or the attorney remains silent when the employee identifies the attorney as personal counsel). For example, in Advance Mfg. Technologies, Inc. v. Motorola, Inc. (2002 Westlaw 1446953 (D. Ariz. 2002)), a former employee of Motorola met with Motorola’s counsel to prepare for deposition. At the deposition, when asked by opposing counsel whether he was represented by an attorney, the former employee said he was represented by Motorola’s lawyer. Motorola’s lawyers “remained silent and did not deny or otherwise qualify [the former employee’s] affirmative response.” (2002 Westlaw 1446953 at *1.) The court determined that silence in the face of the potential client’s expressed belief of representation made the belief an objectively reasonable one and, indeed, manifested the attorney’s “implied consent to an attorney-client relationship.” (2002 Westlaw 1446953 at *5.)

Similarly, in E.F. Hutton & Co. v. Brown (305 F. Supp. 371 (D. Tex. 1969)), the district court held that corporate counsel who represented a corporate officer at an SEC investigative proceeding, and at a bankruptcy hearing at which the officer testified, had a personal attorney-client relationship with that officer. Critical to the district court’s finding in E.F. Hutton was the fact that in both proceedings the corporate lawyer made formal appearances as counsel for the individual officer (305 F. Supp. at 386-87). The court noted that though an attorney’s appearance in a judicial or semi-judicial proceeding “creates a presumption that an attorney-client relationship exists between the attorney and the person with whom he appears,” that presumption becomes “almost irrebuttable” when the attorney enters a “formal appearance” for that person (305 F. Supp. at 387, 391-92).

E.F. Hutton and Advance Manufacturing Technologies should be contrasted with Waggoner (991 F.2d at 1506), in which the Ninth Circuit found that no attorney-client relationship existed, in part, because the lawyer was identified as “corporate counsel” both at trial and during a deposition of his client’s former officer.

In addition, in today’s legal world it is not uncommon for depositions to be videotaped and for the videographer to ask for “appearances of counsel,” which are part of the video record (and sometimes part of the sten-ographic record as well). To avoid any confusion, then, corporate counsel defending an employee should always state that he or she is representing the witness in the witness’s capacity as an employee of the company, and not individually. Counsel must also be careful in objecting to document requests served with deposition notices for a client’s employee: Those objections should clearly indicate that they are made on behalf of the deponent as an employee, not as an individual.

Confidential information. The second Fink factor analyzes whether the former employee divulged confidential information to the attorney (44 F. Supp. 2d at 1060). The confidential information to which the Fink court refers concerns the individual employee; it is not confidential information relating to the business of the corporation.

A court will look at whether the confidential information was disclosed to the attorney in a situation in which the employee had an expectation of privacy. In the Spinello case noted above, the court held that the corporate employee had no expectation of privacy in conversations with a corporate lawyer about issues relating to the corporation. It acknowledged that the former employee had conversations with the company lawyer in preparation for his deposition, but observed that the confidential information exchanged was in regard to the company’s business plan. The court then noted that all exchanges were for the benefit of the company, concluding that the employee “had no reasonable expectation of privacy regarding these conversations to the exclusion of … Spinello Companies when they were made and cannot claim they are confidential now.” (See 2006 Westlaw 1722626 at *5.)

Accordingly, a company attorney may consider having a company officer present during preparation sessions for the deposition of a company employee; with the officer present, the employee can have no reasonable expectation of privacy.

Legal advice. The third Fink factor addresses whether the corporate lawyer provided the former employee with legal advice. Again, the court will be looking to see if personal legal advice has been given, apart from legal advice regarding company business. (See Tuttle, 222 F.R.D. at 429 (no attorney-client privilege because employee did not seek legal advice from corporate attorneys “in a personal capacity”); U.S. v. Keplinger, 776 F.2d 678, 700 (7th Cir. 1985), cert. denied, 476 U.S. 1183 (1986) (“Defendants do not dispute the attorney’s testimony that defendants never explicitly sought individual legal advice or asked about individual representation”).)

Obviously, explaining to a witness the rules of a deposition and general practices in responding to questions should not be considered personal legal advice (upon which a later disqualifying motion could be based). Such advice simply protects the company’s interests and is consistent with a finding that the law firm represented the person only as an employee of the company and not as an individual.

If the individual officer or employee is potentially a party to the case, it is much more likely that corporate counsel can be shown to have provided personal legal advice. In such a situation, in which the employee’s personal interests are at stake, a court could easily conclude that the lawyer’s representation of the employee was personal in nature.

Who paid? The fourth and final Fink factor is whether the former employee sought out or paid for the services of the corporation’s attorney. In the usual situation involving the deposition of a corporate employee, the company – not the employee-seeks out representation by the corporate attorney. This is often reflected in the retention agreement. Thus, one court found no attorney – client relationship between company counsel and a former CEO because the engagement letter limited the engagement to the company’s intellectual property matters (Synergy Tech & Design Inc. v. Terry, 2007 Westlaw 1288464 (N.D. Cal 2007)). Typically, the attorney will be compensated by the company and not by the individual. In the Synergy case, the court found no attorney-client relationship, based in part on the fact that the corporation was “billed for or paid for all of the filing fees and expenses” (2007 Westlaw 1288464 at *8). Lawyers representing a corporation should therefore take extra care when defending the deposition of a client’s employee.

Whenever an attorney enters an appearance – whether during a deposition or at the courthouse – care should be taken to make clear the identity of the client, especially if corporate entities and individual corporate employees are involved in the case. One never knows if a corporate client’s employee will turn into an adversary who might seek to have the company’s lawyer removed from a future case.

When Homeowner’s good faith attempts to amicably work with the Bank in order to resolve the issue fails;

How Pro Se Foreclosure Defense Litigants Can Effectively Defend & Save Their Homes

25 Thursday Jul 2013

Posted by BNG in Affirmative Defenses, Appeal, Case Laws, Case Study, Discovery Strategies, Federal Court, Foreclosure Defense, Judicial States, Legal Research, Litigation Strategies, MERS, Mortgage Laws, Non-Judicial States, Note - Deed of Trust - Mortgage, Pleadings, Pro Se Litigation, State Court, Trial Strategies, Your Legal Rights

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Courts of New York, HSBC Bank USA, Law, Mortgage loan, New York, Plaintiff, Pro se legal representation in the United States, standing, United States

I General Answer Issues

• Be sure to raise lack of standing as a defense in the homeowner’s answer if the plaintiff’s ownership of the note and mortgage is questionable. Standing/capacity to sue may be waived if not raised in the answer.

• Late Answers:

• Pro se homeowners often do not file answers and do not seek attorneys until they receive notice of the settlement conference. In these circumstances, homeowner attorneys should serve and file a late answer. If the plaintiff rejects the answer, file a motion to compel acceptance of the late answer.

• A court may permit a defendant to file a late answer “upon a showing of reasonable excuse for delay or default.” CPLR § 3012(d); Cirillo v.Macy’s, Inc., 61 A.D.3d 538, 540, 877 N.Y.S.2d 281, 283 (1st Dep’t 2009).

• Mortgagor’s belief that foreclosure action was stayed during ongoing settlement negotiations with mortgagee was reasonable excuse for filing late answer. HSBC Bank USA, N.A. v. Cayo, 2011, 34 Misc.3d 850, 934 N.Y.S.2d 792.

• Courts have routinely permitted service of a late answer where the delay was not willful, the defendant has meritorious defenses, and service of the answer does not unfairly prejudice the plaintiff. See, e.g., Nickell v. Pathmark Stores, Inc., 44 A.D.3d 631, 632, 843 N.Y.S.2d 177, 178 (2d Dep’t 2007); Jolkovsky v. Legeman, 32 A.D.3d 418, 419, 819 N.Y.S.2d 561, 562 (2d Dep’t 2006); Watson v. Pollacchi, 32 A.D.3d 565, 565-66, 819 N.Y.S.2d 612, 613 (3d Dep’t 2006); Nason v. Fisher, 309 A.D.2d 526, 526, 765 N.Y.S.2d 32, 33 (1st Dep’t 2003)

• Allowance of a late answer is consistent with New York’s strong public policy in favor of a determination of controversies on the merits. See, e.g., Jones v. 414 Equities LLC, 57 A.D.3d 65, 81, 866 N.Y.S.2d 165, 178 (1st Dep’t 2008);Hosten v. Oladapo, 52 A.D.3d 658, 658-59, 858 N.Y.S.2d 915, 916 (2d Dep’t 2008); Kaiser v. Delaney, 255 A.D.2d 362, 362, 679N.Y.S.2d 686, 687 (2d Dep’t 1998).

Where the defendant has answered but not asserted a standing defense, a motion for leave to amend to assert a standing defense should be granted if such amendment causes no prejudice to plaintiff. U.S. Bank Natl. Assn. v. Sharif, 89 A.D.3d 723, 933 N.Y.S.2d 293, 2011 N.Y. Slip Op. 07835 (2d Dep’t Nov. 1, 2011) (motions for leave to amend should be freely granted absent prejudice or surprise from the delay in seeking leave; reversing denial of leave and holding that trial court should have dismissed for lack of standing upon plaintiff’s failure to submit either written assignment of note or evidence of physical delivery).

• New York law permits reciprocal attorney’s fees for homeowner’s attorney in defending against foreclosure on residential mortgages: RPL § 282.

II. Affirmative Defenses and Counter Claims

A. Standing and Capacity To Sue

• Many documents needed to establish standing were “robo-signed”

• Sloppiness in assigning mortgages to mortgage securitization trusts often makes it difficult for plaintiff trusts (or servicers) to establish standing.

1. The Difference Between Standing and Capacity to Sue

a. Standing Is Jurisdictional

• U.S. Constitution Article III – Case and Controversy Requirement

• Siegel on New York Practice: “It is the law’s policy to allow only an aggrieved person to bring a lawsuit. One not affected by anything a would-be defendant has done or threatens to do ordinarily has no business suing, and a suit of that kind can be dismissed at the threshold for want of jurisdiction without reaching the merits. When one without the requisite grievance does bring suit, and it’s dismissed, the plaintiff is described as lacking “standing to sue” and the dismissal as one for lack of subject matter jurisdiction.”

• “Standing to sue is critical to the proper functioning of the judicial system. It is a threshold issue. If standing is denied, the pathway to the courthouse is blocked. The plaintiff who has standing, however, may cross the threshold and seek judicial redress….The rules governing standing help courts separate the tangible from the abstract or speculative injury, and the genuinely aggrieved from the judicial dilettante or amorphous claimant.” Saratoga County Chamber of Commerce, Inc. v. Pataki, 100 N.Y. 801, 766 N.Y.S.2d 654, 798 N.E.2d 1047 (2003)

• New York courts have treated standing as a common law concept, in contrast to federal approach, where it rests on constitutional and prudential grounds. New York case law tends to blend standing with capacity to sue.

b. Capacity to Sue v. Standing

• Capacity to sue goes to the litigant’s status, i.e., its power to appear and bring its grievance before the court. For example, a foreign corporation or LLC may not bring an action unless it is registered with the Secretary of State; minors lack legal capacity, etc.

• Standing requires an inquiry into whether the litigant has an interest in the claim at issue that the law will recognize as a sufficient predicate for determining the issue at the litigant’s request. Is the relief sought in the case properly sought by this plaintiff?

2. Standing in a Foreclosure Case

• Foreclosing plaintiff must own the note and the mortgage at the inception of the action. Deutsche Bank National Trust Co. v. Barnett, 88, A.D. 3d 636, 931 N.Y.S. 2d 630, 2011 WL 4600619 (2d Dep’t Oct. 4, 2011); Kluge v. Fugazy ,145 A.D. 2d 537, 536 N.Y. S. 2d 92 (2d Dep’t 1988)

• Note: represents contractual debt obligation Mortgage: represents collateral security for debt

• Assignment of the mortgage without assignment of the debt, i.e. the note, is a nullity.

• Assignment must be complete before foreclosure is commenced

• Assignment can be by written assignment or by physical delivery of note and mortgage.

• An indorsed note (to the plaintiff or in blank) is not sufficient: the plaintiff must prove physical delivery before the foreclosure was commenced.

• If a written assignment involved and has a date, the execution date generally controls.

• Back dated assignment are ineffective absent proof of prior physical delivery. Wells Fargo v. Marchione, 69 A.D. 3d 204, 887 N.Y. S. 2d 615 (2d Dep’t 2009)

3. Common Assignment Red Flags in Foreclosure Cases

Assignments that jump over links in the chain of title, including timing.

• Suspicious or contradictory endorsements and allonges.

• Assignments from MERS as nominee

• Robo-signing of assignment documents

• Mortgage-Backed Securities Investment Vehicles: Pooling and Servicing Agreements and non-compliance with trust closing dates and other terms

4. MERS and Standing

• Second Department: assignment from MERS when MERS is designated merely as nominee of lender, and never owned note, is ineffective to confer standing on its assignee.

Bank of New York v. Silverberg, 86 A.D. 3d 274, 926 N.Y.S. 2d 532 (2d Dep’t 2011). See also In re Lippold, 2011 WL 3890540 (SDNY Bkrtcy 2011)(MERS, as assignor, could not legally assign the note as prior holder of note and mortgage only conferred legal rights with respect to the mortgage); In re Agard, 444 B.R. 231 (SDNY Bkrtcy 2011) (mortgage naming MERS as nominee did not authorize it to assign)

• Issues concerning who executes assignments on behalf of MERS (plaintiff’s counsel, robo-signing servicer employees?)

5. Waiver of Standing Defenses

• CPLR 3211(e) only provides that capacity to sue is waived; no mention of standing.

• Wells Fargo Bank v. Mastropaolo, 42 A.D. 3d 239, 837 N.Y.S. 2d 247 (2d Dep’t 2007); HSBC v. Dammond, 59 A.D. 3d 679, 875 N.Y.S. 2d 490, 875 N.Y. S. 2d 490, (2d Dep’t 2009); Countrywide v. Delphonse, 64 A.D. 3d 624, 883 N.Y. S. 2d 135 (2d Dep’t 2009).

• Cf. Security Pacific Nat’l Bank v. Evans, 31 A.D. 2d 278, 820 N.Y.S. 2d 2 (1stDep’t 2006) (plaintiff lender commenced action after merging with anotherbank; lack of legal capacity waived; not an issue of standing)

• Some trial courts have held there is no waiver of standing defense where plaintiff had not appeared or answered altogether. Deutsche Bank v. McRae, 894 N.Y. S. 2d 720 (Allegheny Cty. 2010); Citigroup v. Bowling, 25 Misc. 3d 1244A, 906 N.Y. S. 2d 778 (Kings Cty. 2009).

6.Leave to Amend Answer to Assert Standing Defense

U. S. Bank, Natl. Assn. v. Sharif, 89 A.D. 3d 723,933 N.Y.S. 2d 293, 2011 NY Slip Op 07835 (2d Dep’t Nov. 1, 2011) (reversing denial of leave to amend to assert standing and denial of motion to dismiss for lack of standing where plaintiff demonstrated no prejudice and failed to establish its standing to foreclose). Aurora v. Thomas, 70 A.D. 3d 986, 897 N.Y.S.2d 140 (2d Dep’t 2010) (affirming grant of motion for leave to amend to assert standing and capacity to sue, finding no waiver where documents relied upon were revealed during discovery); HSBC v. Enobakhare, 2010 Slip Op 31925 (U) (Richmond Cty. 2010) (granting motion for leave to amend answer; amended answer could assert defenses that were arguably waived by failure to assert originally)

• Deutsche Bank v. Ramotar, 30 Misc. 3d 1208(A), 2011 WL 66041 (Kings Cty. 2011) (denying summary judgment and order of reference, granting defendant who had previously answered pro se leave to file amended answer asserting standing and robo-signing defenses)

7. Standing as a Meritorious Defense to Vacate Default Judgments/Plaintiff’s Motions for Default/Summary Judgment/Order of Reference and Absence of Standing

• Prima facie case in a foreclosure case requires showing of ownership of note and mortgage. Campaign v. Barba, 23 A.D. 3d 327, 805 N.Y.S. 86 ( 2d Dep’t 2005)

• Distinction between moving to dismiss for lack of standing when defense has arguably been waived and opposition to plaintiff’s motion for summary judgment and order of reference for failure to establish ownership of note (prima facie case)

8. Sua Sponte Dismissals on Standing Grounds/Robo-signing Concerns

• Financial Freedom v. Slinkosky, 28 Misc. 3d 1209(a) (Suffolk Cty. 2010) (denying summary judgment where plaintiff failed to submit note and mortgage and failed to demonstrate standing) HSBC Bank USA, N.A. v Taher, NY Slip Op 51208(U) (Sup. Ct. Kings Cty., July 1, 2011) (denying order of reference, making detailed analysis of robo-signed assignments and affidavits of merit and amounts due, questioning employment histories of individuals who signed papers on behalf of different entities, determining that plaintiff lacked standing to foreclose because, among other reasons, assignment of mortgage from MERS as nominee, which never owned note, was ineffective, and dismissing with prejudice. In light of frivolous motion for order of reference by HSBC and its counsel, court scheduled hearing on sanctions and ordered chief executive officer of HSBC to personally appear at hearing)

9. Standing as Meritorious Defense (for leave to file untimely answer or to vacate default)

• Deutsche Bank National Trust Co. v. Ibaiyo, 20910-08 (Queens Ct. 2009) (meritorious defense criteria for CPLR § 3012 motion to extend defendant’s time to answer)

• Maspeth Federal Av. & Loan Ass’n v. McGown, 77 A.D. 3d 890, 909 N.Y. S. 2d 642 (2d Dep’t 2010) (trial court has considerable discretion on applications to vacate default and extend time to answer when determining existence of meritorious defense and reasonable excuse for default)

10. True Capacity to Sue Issues

• BCL §1372 (prohibits lawsuits by foreign corporations not authorized to do business in NY)

• Exception for foreign banking corporations via BCL § 103(a) and Banking Law § 200(4).

• Sutton Funding LLC v. Parris, 24 Misc. 3d 889, 878 N.Y.S.2d 610 (Kings Cty. 2009) (dismissing foreclosure where plaintiff was not a foreign bank and was not authorized to do business in NY)

B. Federal Fair Debt Collection Practices Act (FDCPA), 15 U.S.C. § 1692-1692p

1. Scope of FDCPA Coverage

a. Who is covered

• Applies to debt collectors. § 1692a(6)

• Debt collector is any person who uses any instrumentality of interstate commerce or the mails in any business the principal purpose of which is the collection of any debts

• For §1692f(6) purposes it also includes any business the principal purpose of which is the enforcement of security interests.

• Or, any person who regularly collects, directly or indirectly, debts owed or due or asserted to be owed or due another.

• Includes debt buyers

• Includes attorneys who regularly collect consumer debts.

• There used to be an exemption for attorneys collecting on behalf of and in the name of a client. In 1986, Congress repealed this exemption.

b. Who is not covered

• Original creditors. § 1692a(6)(F)(ii)

• It does include any creditor who, in the process of collecting his own debts, uses any name other than his own which would indicate that a third person is collecting or attempting to collect such debts. § 1692a(6)

• Creditors employees or agents collecting in the name of the creditor. § §692a(6)(A)

• State and federal officials performing their duties, such as the IRS or U.S. Dept. of Education. § 1692a(6)(C)

• Persons collecting debts not in default, such as some servicers. §1692a(6)(F)(iii)

• Process servers. §1692a(6)(D)

• At least one court has held that they are covered if they are engaging in sewer service Mel Harris v. Sykes, 757 F.Supp.2d 413 (2010)

c. What transactions are covered Consumer debts

• Consumer is defined in § 1692a(3) as “any natural person obligated or allegedly obligated to pay any debt”

• Does not apply to artificial entities, such as corporations Debts are defined in § 1692a(5) as any obligation of a consumer to pay money

• underlying transaction must be for money, property, insurance, or services

• must be primarily for personal, family or household purposes

• no business debts or fines Communications – § 1692a(2)

• Means the conveying of information regarding a debt directly or indirectly to any person through any medium

• Also applies to statements and activities during the course of litigation. Heintz v. Jenkins , 514 U.S. 291 (1995)

• Recent amendments to FDCPA clarify that a legal pleading

cannot be considered an “initial communication” under FDCPA.

• Note that this is a narrow amendment; other provisions of FDCPA still apply.

2. Substantive Consumer Protections

• Cease communications. § 1692c

• Dispute/verification. § 1692g

• Notice within 5 days of initial communication

• Right to dispute within 30 days of receiving notice

• Once debt collector receives dispute in writing, must stop all debt collection activity (including filing a lawsuit) until it provides “verification” of the debt.

• NOTE: Local NYC law expands these dispute rights. Under local law, consumers can request verification at any time. NYC Admin Code § 20-493.2.

• Verification must include (1) copy of the contract or other agreement creating the obligation to pay (2) copy of final account statement (3) an accounting itemizing the total amount do, specifying principal, interest, and other charges.

For each additional charge, the debt collection must state the date and basis for the charge. See § 2-190 of the Rules of the City of New York.

3. Prohibited Activities

• Communications. §§1692b & 1692c

• Contacting consumer after consumer sends cease communication letter

• Contacting consumer who is represented by counsel

• Contacting third parties about a consumer’s debt

• Contacting consumer at work if debt collector has reason to know that consumer’s employer prohibits such communication

• Common scenario: Debt collector can’t reach consumer, so calls consumer’s neighbor/family member/employer and leaves telephone number and message for the consumer to call back about an important matter. This is a violation.

• Harassment or Abuse. § 1692d

• Debt collector may not engage in conduct the natural consequence of which is to harass, oppress, or abuse any person in connection with collection of debt

• Includes: threats of violence, use of profanity, repeated telephone calls for purpose of harassment, calling without disclosure of identity (e.g. threats to repossess property)

• False or Misleading Representations. § 1692e

• False representation of character, amount, or legal status of any debt (e.g., suing for more interest and fees than is actually owed)

• Threat to take any action that cannot legally be taken or is not intended to be taken

• Implying that consumer could be arrested or children taken away for nonpayment of debt

• Pretending to be attorney, marshal

• Making false or inaccurate reports to credit reporting agencies

• Unfair Practices. § 1692f

• Using unfair or unconscionable means to collect a debt

• Collection of any amount (including interest and fees) that is not actually owed

• Threatening to take or repossess property (a) without the right; (b) without the intent; (c) if property is exempt

4. FDCPA Litigation and Remedies

a. Statute of limitations

• one year from the date on which the violation occurs – § 1692k(d)

• No continuing violations doctrine

b. Jurisdiction

• May bring in either state or federal court

• May also bring as a counterclaim in a debt collection suit

c. Construction

• Strict liability statute – proof of the debt collector’s intent is not required

• intent is a factor that can be used when calculating damages

• Courts apply a “least sophisticated consumer” standard to analyze violations

d. Remedies

• Up to $1000 statutory damages

• A majority of courts hold that capped at $1,000 per action no matter how many violations are joined in the lawsuit

• Per Plaintiff

• Sometimes per Defendant, depending on the violation

• Factors used by courts in determining statutory awards:

• Intent to commit the violation or evade the protections

• Repetition of the violations

• Timely correction of the violations

• Multiple consumers affected by the violations

• Prior violations by the collector for similar acts

• Actual damages

• Attorney’s fees

• Declaratory relief

• No Injunctive relief

C. NYS Banking Law Defenses

1. Banking Law § 6-l

• Applies to loans made after April 1, 2003.

• Covers “high – cost home loans”: a first lien residential mortgage loan, not exceeding conforming loan size for a comparable dwelling as established by the Federal National Mortgage Association in which (1) the APR exceeds eight percentage points over the yield on Treasury securities having comparable periods of maturity; or (2) total points and fees exceed 5% of the total loan amount, excluding certain bona fide discount points if total loan is $50,000 or more.

• Prohibits, inter alia, (1) lending without regard to a borrower’s ability to repay; (2) points and fees in excess of 3% of the loan; (3) loan flipping; (4) kickbacks to mortgage brokers; (5) points and fees when lender refinances its own high-cost loan; (6) balloon payments, negative amortization, and default interest rates.

• Provides private right of action with 6-year statute of limitations (from origination); actual and statutory damages; attorney fees; possible rescission of the loan.

• Intentional violation may result in voiding of the loan.

2. Banking Law § 6-m

• Covers “sub-prime home loan”: a loan where the fully indexed APR for the first-lien loan exceeds by more than 1.75, or for a subordinate loan by more than 3.75, the average commitment rate for loans in the northeast region with a comparable duration as published in the Freddie Mac Primary Mortgage Market Survey (PMMS) in the week prior to the week in which the lender received a completed loan application.

• Lenders must take reasonable steps to verify that the borrower has the ability to repay the loan, including taxes and insurance.

• Prohibitions similar to those in Banking Law §6-l.

• Lenders must disclose charges for taxes and insurance and must escrow such payments after July 1, 2010.

If you are ready to take the battle to these interlopers, in order to defend and save the home that is rightfully yours, visit http://www.fightforeclosure.net

Pro Se Guide To Civil Litigation

16 Tuesday Jul 2013

Posted by BNG in Appeal, Discovery Strategies, Federal Court, Foreclosure Defense, Litigation Strategies, Pleadings, Pro Se Litigation, Trial Strategies, Your Legal Rights

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Civil Procedure Outline

I. The Adversarial System

A. Four Lessons

1. Doctrine

a. Formal rules of litigation (FRCP)

2. Strategy

a. Practical considerations (time, money principle)

3. Theory

a. Different frameworks for understanding the civil litigation system

4. Skills

a. Actual practice (drafting a complaint, answer, negotiation)

B. Theories of Adjudication − FRCP 1: Rules shall be construed and administered to secure the just, speedy and inexpensive determination of every action. FRCP 1 does not provide much guidance. Therefore, the three theories below are applied

1. Fair Fight

a. Judge is passive referee that simply follows and enforces the rules

b. The only interests are those party to the litigation.

c. Mitchell v. A&K − Truck on the premises

2. Justice Between the Parties

a. Judge is active and corrects for disparities between the parties

b. Only interests are those party to the litigation

c. Conley − Black workers’ complaint lacks sufficiency but is accepted because need discovery

3. Greater Good

a. Judge is active and considers larger interests of society

b. Takes into account third parties (other interest than just those before the court)

c. Band’s Refuse − Judge called own witnesses and introduced own evidence

II. Initiating the Lawsuit

A. Plaintiff’s Claim (Complaint)

1. Process

a. File − FRCP 3: Action is started by filing the complaint with the court

b. Serve − Complaint is given to the opposing party or parties

2. Rules for assessing a complaint

a. FRCP 8(a) − A pleading which sets forth a claim for relief shall contain

· 8(a)(1) − A short plain statement of the grounds upon with the court’s jurisdictions depends, unless the court already has jurisdiction and the claim needs no new grounds for jurisdiction to support it;

· 8(a)(2) − Short, plain statement of a claim showing pleader is entitled to relief; and

§ Flaws to avoid

§ Missing an element

i. Concerns include

· Δ cannot answer

· Notice to the court

· Flush out meritless claims

§ Negating an element

§ Establishing an affirmative defense

· When flawed − Subject to motion to dismiss

§ Particularity

§ Beyond reasonable doubt that plaintiff can prove no set of facts to establish claim Connely = Mere possibility

§ Particular enough that can draw fair inference
Sutliff = fair inference

· 8(a)(3) − a demand for judgment for the relief the pleader seeks; relief in the alternative or of several different types may be demanded

b. Background rules

· Allegations taken as true

· Allegations considered on their face (no evidence) Mitchell v. A&K

· No legal argument Sutliff

3. Notice Pleading − level of detail or specificity

a. FRCP 12(b)(6) − complaint should not be dismissed for failure to state a claim unless it appears beyond a doubt that plaintiff can prove no set of facts in support of claim

i. Mere possibility
Complaint should not be dismissed for failure to state a claim unless it appears beyond a doubt that the plaintiff can prove no set of facts in support of his claim that would entitle him to relief

1. Conely v. Gibson − Black union members sue for discrimination, defendant moves to dismiss for failure to state a claim, court holds for plaintiff

ii. Fair inference
Complaint must contain either direct allegations on every material point necessary to sustain a recovery or allegations from which an inference fairly may be drawn that evidence of material points will be introduced at trialSutliff v. Donovan

iii. Specific facts
Not good law Gillispie

b. FRCP 12(e) – Request for the Π to give a more definite statement of the allegations in the complaint

i. Board of Harbor Commissioners
Facts: Oil discharged into waterway. Unclear who did it. D moves for more definite statement in order to frame an appropriate response pursuant to Rule 7. Court held for P.
Rule: Leans toward the fair inference standard. Information is specific enough b/c all of the elements are addressed.
(If P gives more definite statement that is still not specific enough can follow up with motion to dismiss)

c. FRCP 12(f) − Motion to strike redundant, immaterial, impertinent and scandalous matter

4. Policy considerations for determining whether the complaint is specific enough (background policy considerations for borderline cases)

a. Sufficient notice to the D

b. Allows investigation

c. Provides early assessment of the merits

d. Prevents a fishing expedition

e. Who has access to the additional info

f. Harm is worthy of the litigation

5. Pleading in the alternative

a. FRCP 8(e)(2): A party may set forth 2 or more statements of claim or defense alternately or hypothetically

i. If by the nature of the circumstance the P would not know which allegations are right

ii. Lack of knowledge – pleading in alternative is OK

iii. If facts should be known – pleading in the alternative not OK

iv. Can only collect on one of the claims

b. McCormick v Kopmann (Car Crash Case)
Facts: McCormick dies in head on collision. Wife sues (1) bar owner (Huls) for over-serving alcohol and (2) driver (Koppman) for crossing over the center line, causing the collision with her husband. Koppmann moves to dismiss b/c of contradicting allegations. Denied.
Rule: Pleading in the alternative is allowed where the P lacks knowledge about the key facts in good faith
Policy: Look at the models of adjudication

i. Justice between the parties − Should not be able to plead in the alternative if she knows the truth

ii. Fair fight − Should be able to use the evidence b/c it could be used against her

6. Heightened Pleading Standard

a. FRCP 9(b)– In all averments of fraud or mistake, the circumstances constituting fraud or mistake shall be stated with particularity. Malice, intent, knowledge and other condition of the mind of a person may be averred generally

i. Strong inference standard

b. PSLRA(Private Securities Litigation & Reform Act) − State with particularity facts giving rise to a strong inference that D acted with required state of mind

i. 2nd Circuit – Strong Inference Standard (majority approach)

· P must show motive and opportunity to commit fraud

ii. 9th Circuit – Great Detail Standard

· P must plead with great detail for deliberately reckless OR conscious misconduct (allegations in detail of who, what, when, where, how)

c. Background policies for general particularity and heightened pleading

i. Giving notice to the D and the court

ii. Sometime giving the court the ability to assess the merits

iii. Preventing fishing expeditions

iv. Being attentive to who has the factual information

d. Ross v. Robins (Faulty Birth Control Case) – 2nd Circuit
Facts: Ross purchases shares of Robins. Robins did not report safety and efficiency problems with the Dalkon Shield, but knew about them. After FDA made a public disclosure of the problem, stock prices fell. D moves to dismiss under 12(b)(6) for failure to comply with 9(b). Move to dismiss granted. P appeals.
Rule: Cases involving the Private Securities & Litigation Reform Act must meet a heightened pleading standard. . . strong inference standard.

e. Cash Energy v. Weiner (Environmental Cleanup Case)
NOT GOOD LAW
Facts: Cash Energy engaged in storage and/or transfer of chemical solvents on a site adjacent to Weiner’s property. Weiner believes his land has been contaminated as a result of this activity. D moves to dismiss under 12(b)(6) for failure to comply with 9(b). Court grants motion to dismiss. P appeals.
Rule: Court holds cases involving CERCLA to heightened pleading standard, but this is not the law.

f. Leathermann v.Tarrant County (Drug Bust Case)
GOOD LAW
Facts: Tarrant Co. obtains search warrants. Homeowners claimed assault. Rule: Rule 9(b) only applies to cases involving fraud, mistake or PSLRA. Rule 8(a)(2) still stands otherwise. Cash Energy is NOT the law. Rely on Leatherman.

7. Voluntary dismissal

a. FRCP 41(a)(1) − P can dismiss the case unilaterally as long as it is before service of an answer or a motion for summary judgment. If after the answer or motion, must have stipulation of both parties.

b. FRCP 41(a)(2) − If parties are not in agreement, will need dismissal by order of the court

i. First time dismissed without prejudice

ii. Second time dismissed with prejudice

iii. If court doesn’t otherwise say, it is dismissed without prejudice.

c. Reasons for voluntary dismissal

i. To file in another jurisdiction (don’t like the judge)

ii. A way to avoid sanctions under Rule 11

iii. If judge may grant a motion to dismiss under Rule 12, might want to pre-empt the ruling

iv. The SOL may be running so just decide to go away quietly

B. Defendant’s Response

1. RULE 12 MOTIONS

a. Rule 12(a) − Timing to file responsive pleading

i. 12(a)(1)(A) − Answer complaint w/in 20 days

ii. 12(a)(4)(A) − After filing and serving 12(b)(6) motion, wait to hear back from court

iii. 12(a)(4)(A) − 12(b)(6) denied then must answer within 10 days

iv. 12(a)(4)(A) − If court postpones ruling on 12(b)(6), must answer withing 10 days

v. If court grants motion to dismiss do not need to answer

vi. 12(a)(1)(A) − Grants leave to amend, court will specify timing

vii. 12(a)(4)(A) − If court denies motion to strike then must answer within 10 days

viii. 12(a)(4)(B) − If court grants motion to strike then must answer within 10 days

Timing under 12(a)	Within 20 days	Within 10 days	Never
Answer complaint	12(a)(1)(A)
File and serve a 12(b)(6) motion			12(a)(4)(A) wait for court to rule
12(b)(6) motion is denied		12(a)(4)(A)
Court postpones ruling on 12(b)(6) motion		12(a)(4)(A) after notice by court
12(b)(6) motion is granted			Never
Grants leave to amend		12(a)(1)(A) Once P has amended, court will specify timing
Denies 12(e) motion for more definite statement		12(a)(4)(A)
Grants 12(e) motion for more definite statement		12(a)(4)(B) after P fixes complaint

b. Rule 12(b)
(b)(1) − Court lacks jurisdiction over the subject matter of the suit
(b)(2) − Court lacks proper jurisdiction over D
(b)(3) − Court is not the proper location for the suit; improper venue
(b)(4) − Insufficiency of process
(b)(5) − Insufficiency of service of process
(b)(6) − Failure to state a claim upon which relief may be granted

i. Motion to dismiss flaws

1. Missing an element

2. Negating an element

3. Establishing an affirmative defense

ii. Use Conely and Sutliff standards to assess whether 12(b)(6) should be granted

iii. Court is limited to the four corners of the complaint and must take all of the allegations as true

(b)(7) − Failure to join a party

c. Rule 12(c) − Motion for judgment on the pleadings (after the complaint and answer are done)

i. Vehicle for the D to answer

ii. For failure to state a claim

iii. Motion by the P if the Δ admits all of the relevant allegations

iv. Can be just like motion to dismiss for failure to state a claim, but is normally after the answer; same analysis

v. Must be brought forward without undue delay

d. Rule 12(e) − Motion for a more definite statement

i. Usually used b/c unintelligible, not for want of detail

ii. If you understand what the P is saying but want more detail, some courts grant the motion; others don’t (e.g. US v. Board of Harbors)

e. Rule 12(f) − Motion to strike

f. Rule 12(g) − All then available Rule 12 motions must be consolidated into one pleading. All defenses not brought are waived except as under 12(h)

g. Rule 12(h): Waiver or preservation of certain defenses

i. 12(h)(1) − Disfavored defenses

· Lack of personal jurisdiction – 12(b)(2)

· Improper venue – 12(b)(3)

· Insufficiency of process – 12(b)(4)

· Insufficiency of service of process – 12(b)(5)

ii. 12(h)(2) − Favored defenses

· Failure to state claim upon which relief can be granted – 12(b)(6)

· Failure to join a party – 12(b)(7)

iii. 12(h)(3) − Most favored defenses

· Lack of subject matter jurisdiction – 12(b)(1)

Rule	Rule Explanation	Defenses	Timing
12(b)(1)	Lack of subj matter jurisdiction	Most favored 12(g), 12(h)(3)	Bring at any time
12(b)(6)	Failure to state a claim upon which relief can be granted	Favored 12(g), 12(h)(2)	Can be made in any pleading or by motion for judgment on the pleadings or at trial on merits
12(b)(7)	Failure to join a party	Favored 12(g), 12(h)(2)	Can be made in any pleading or by motion for judgment on the pleadings or at trial on merits
12(b)(2)	Lack of personal jurisdiction	Disfavored 12(g), 12(h)(1)	Will be waived forever if you did not bring it with other Rule 12 motions
12(b)(3)	Improper venue	Disfavored 12(g), 12(h)(1)	Will be waived forever if you did not bring it with other Rule 12 motions
12(b)(4)	Insufficiency or process	Disfavored 12(g), 12(h)(1)	Will be waived forever if you did not bring it with other Rule 12 motions
12(b)(5)	Insufficiency of service or process	Disfavored 12(g), 12(h)(1)	Will be waived forever if you did not bring it with other Rule 12 motions

2. DEFAULT

a. FRCP 55(a) − Default entry by the clerk when the Δ has failed to respond

b. FRCP 55(b) − Default judgment by
(b)(1) − Clerk if the award amount is certain; have to give 3 days notice
(b)(2) − Court, P must show damages

c. FRCP 55(c) − Setting aside entry of default for good cause shown; if judgment has been entered, may likewise set aside under Rule 60(b)

d. FRCP 60(b) − relevant grounds for setting aside default judgment would be mistake, inadvertence, excusable neglect, surprise; this is more likely to not be set aside because it is that much more in the process

e. Three factors courts use to evaluate setting aside (Shepard Claims)

i. Non-defaulting party will not be prejudiced

· Witnesses, evidence, SOL

ii. Defaulting party has meritorious defense

iii. No culpable conduct by defaulting party

· If no prejudice and has meritorious defense, then culpable conduct must be willful for default to the set aside

f. Shepard v. Darrah
Facts: Shepard (independent claims adjuster) alleges that Darrah (insurance broker) failed to pay him for services rendered. After delivery of the complaint Darrah’s attorney misses filing date for answer due to confusion about extension
Rule: Default judgment will be set aside if P is not prejudiced, D has a meritorious defense and the conduct was not willful

3. ANSWER

a. Admitting or Denying

i. Admit an allegation as true

ii. Deny

iii. Lack knowledge or information sufficient to form a belief

iv. Hybrid- give more particular responses, combo of above

b. Rules

i. FRCP 8(b) − D shall respond to each averment by either (1) admit, (2) deny or (3) lack of knowledge or information sufficient to form a belief

· LKISFB is treated as a denial

· If it is found that you have sufficient knowledge or info, then LKISFB is treated as an admission (David v. Crompton & Knowles)

ii. FRCP 8(d) − Failure to deny – All averments are taken as admitted when not denied. All averment to which no responsive pleading is required or permitted shall be taken as denied or avoided

iii. FRCP 10(b) − Form of pleadings. Each claim or defense should be in a separate numbered paragraph; one allegation per paragraph

c. Purpose of the answer

i. Respond to the allegations

ii. Assert defenses

iii. Provide any counter or cross claims

d. David v. Crompton & Knowles
Facts: David was injured by a shredding machine in a factory. Δ says they don’t have sufficient knowledge to respond an allegation, then want to move to amend the answer to a denial. Motion to amend denied.
Rule: If you claim lack of knowledge and are found to have knowledge, could have acquired the knowledge (“Should have known”) or the info was within your control (“Only one who could have known”), then you have improperly used lack of knowledge answer and your answer will be deemed admitted instead of denied.

e. Affirmative Defenses (shield)

i. FRCP 8(c) − Affirmative Defenses (list is not exhaustive)

· D must include in answer, answer to amended complaint, or motion to dismiss or lose them FRCP 12(h)(1)

· D must raise the issue and the D must prove it

· SOL is a common affirmative defense

· 15(a) says you may amend an answer to insert affirmative defense

f. Counter Claim and Cross Claim (sword)

i. FRCP 13(a) − Compulsory Counterclaims must be brought or lost

· Must arise from same T&O weigh following factors

§ Logical relationship between the claims for them to be compulsory (liberal view)

§ Substantially the same evidence/facts – If the same evidence would substantially dispose of the issues raised by the opposing claims then the counterclaims are compulsory; if not, then they are permissive

§ Substantially same law applies

ii. FRCP 13(b) − Permissive Counterclaims may be brought but do not have to; different T&O

iii. FRCP 13(g) − Cross-Claim against Co-Party may be brought if same T&O as any of claims or counter-claims

iv. Purpose

· Judicial efficiency − same jury, same case load

· Consistency − Courts could rule differently on the same case or issue if raised at different times in different courts

· Destroys P’s image

Type of Claim	Against	Same T&O	Different T&O
Counter	Opposing Party	Compulsory 13(a) Must be brought	Permissive 13(b) May be brought
Cross	Co-party	13(g) May be brought	13(g) Cannot bring

v. Wigglesworth v. Teamster’s Union
Facts: During union meetings, Wigglesworth was prevented from exercising his free speech rights. After the complaint was filed, Wigglesworth holds a press conference at which he accused the union of being mafia run and that certain union elections had been fixed. Δ files counterclaim. Δ files motion to dismiss under 12(b)(1). Motion to dismiss granted.
Rule: Test for same Transaction and Occurrence:
Logical relationship between the claims for them to be compulsory (liberal view)
Substantially the same evidence/facts – If the same evidence would substantially dispose of the issues raised by the opposing claims, then the counterclaims are compulsory; if not, then they are permissive
Substantially same law applies
NOTE: All of the above factors do not need to be met for there to be same transaction and occurrence

C. Amended Pleadings

1. Process for amending

a. FRCP 15(a) − Party allowed to amend once as of right

i. Before a responsive pleading is served or

ii. If no responsive pleading is permitted, the party may amend within 20 days after it is served

Otherwise may only amend by:

(1) leave of the court or

(2) stipulation of the parties.

Leave shall be freely given as justice so requires

b. FRCP 15(b) − When issues not raised in the pleadings are tried by express or implied consent of both parties, they shall be treated as if they are part of the pleadings. Amended pleading allowed, but not required

c. If a disfavored Rule 12 motion is not brought in the answer, you can still amend the answer to include this Rule 12 motion so long as it is in the 20 day period

2. Standard for the court to allow a party to amend

a. Leave to amend will be given freely when justice so requires

3. Factors the court will take into account in denying leave to amend:

a. Undue delay

b. Bad faith

c. Prejudice to the opposing party

4. Relation back of an amended pleading

a. FRCP 15(c) − Relation back of amendment

i. 15(c)(2) − Relation back of a claim – amending to add a new claim when the statute of limitations has run from the original service of the pleading, must be same T&O (T&O test as above)

ii. 15(c)(3) − Relation back of a party − changing a party’s name or adding a party

· Change the D or the name of the D

· Name T&O (T&O test as above)

· Timing of notice – date of filing of original complaint + 120 days (Rule 4(m))

· Form of notice

§ Can be informal, just need to notify the party

· D is aware that but for a mistake of identity, he would have been named

§ Some jurisdictions say ignorance is not a mistake

iii. Swartz v. Gold Dust Casino
Facts: Swartz falls down stairs at the Gold Dust Casino. She alleges that the stair were thread bare, worn and slippery. Also, the stair violates the building code. Π files and serves a complaint against Gold Dust and Does I through V for negligence. Δ answers by denying the allegations. After discovery and interrogatories, Π discovered the true identity of Doe I and requests leave to amend their complaint. Δ files motion for summary judgment. Judge denies the motion for summary judgment. Motion for leave to amend is granted. Amended complaint is filed and served upon John Cavanaugh. Δ Cavanaugh raises 2-year statute of limitations as an affirmative defense in answer to amended complaint and moves for judgment on the pleadings.
Rule: Meets requirements for relation back

· Changing the party or changing the name of the party − Yes, Doe I becomes Cavanaugh

· Same transaction and occurrence − Yes, same day, same woman, same stairs (facts and evidence are the same); they are both negligence claims (doesn’t have to be the exact same claim)

· Timing of the notice − Notice (not filing) within 120 days of the filing of the complaint; ONLY NOTICE OF THE COMPLAINT IS REQUIRED, NOT FILING

· Form of notice − Cavanaugh got the amended complaint in the motion for leave to amend, also companies are so overlapped it is reasonable to assume that Cavanaugh would have known of the action

· But for a mistake about identity − Cavanaugh knew but for a mistake of identity that they would have been sued
Cavanaugh would argue wasn’t a mistake, it was ignorance

iv. David v. Crompton & Knowles
Rule: Meets the requirements for relation back

· Change the defendant − Yes, change Crompton to Hunter

· Same T&O − Yes, same accident, law, etc.

· Timing of notice − Maybe, Hunter is a division of Crompton (overlap of corporate entities)

· Form of notice − yes

· But for a mistake − Hunter would recognize that they would be on the hook for the machine; David thought Crompton was the manufacture. Maybe a mistake about ownership rights, not who is the manufacturer

D. Rule 11

1. FRCP 11(a) − Failure to sign a pleading, written motion or other written paper

2. FRCP 11(b) − In representations to the court attorney is certifying that he has made a reasonable inquiry and that to the best of his knowledge, information and belief

a. No improper purpose

b. Claims, defenses or other legal contentions are supported by existing law or by a non-frivolous argument for the extension of existing law

c. Allegations have evidentiary support

d. Denials of factual contentions are warranted on the evidence or are reasonably based on a lack of information or belief

3. FRCP 11(c) − Sanctions

4. FRCP 11(d) − Rule 11 sanctions do not apply to discovery (Rules 26-37)

5. Rule 11 Sanctions Process – 11(b)

a. Basis under 11(b)(1)-(4)

i. 11(b)(1) − Improper purpose, including delay

ii. 11(b)(2) − No basis in existing law
(two components, only have to meet one)

· Subjective − must believe had legal argument

· Objective − must actually have legal argument

iii. 11(b)(3) − No basis in evidence for the allegation or assertion

iv. 11(b)(4) − No basis in evidence for the denial

v. Creates standards/duty

vi. Notwithstanding your good faith if knowledge or information was not reasonably researched, subject to sanctions

b. Initiating Process − by motion or by court (no safe harbor when court initiates)

i. Serve motion on party who then has 21 days to correct problem or motion is filed in court

ii. Motion has to describe conduct

iii. Motion has to be separate from any other motion

c. Decision Process

i. Court has to give party chance to respond

ii. Describe conduct explicitly

iii. Describe basis for sanctions

d. Discretion

i. Can violate the basis and not be sanctioned

e. Type of Sanctions

i. Designed to deter not to compensate, because court was using as cost shifting mechanism

ii. Only strong enough sanction to deter conduct

iii. Court can refer to state bar, or to go to school, reprimand

iv. A represented party can be sanctioned

· Not monetary if basis is 11(b)(2) because client is not expected to know the law

v. Attorney’s fees and costs only available on motion

f. Target

i. Attorney

ii. Firm

iii. Party

Identify the action

Basis for sanction

Initiation

Decision

Process

Discretion

Types of Sanctions

Target of Sanction

Signing

11(a): Failure to sign paper

Notify party, court

N/A

Shall. 11(a)

No other option

Strike

N/A

Signing, filing, submitting, or later advocating position with…

-improper purpose (b)(1)

-no basis in law (b)(2)

-no basis in evidence for allegation or assertion (b)(3)

-no basis in evidence for denial (b)(4)

Sanctioned if frivolous either:

-subjectively (belief) or

-objectively (no reasonable inquiry; frivolous legal argument) 11(b)

Party’s motion:

-serve 21 days before filing (safe harbor)

-describe conduct

-only if not corrected

-not combine with other motion 11(c)(1)(A)

Court:

-order to show cause (OSC)

-describe conduct at issue 11(c)(1)(B)

Notice and opportunity to respond 11(c)

Order:

-describe conduct

-explain basis for sanction 11(c)(3)

May. 11(c) Can use discretion

Goal: Deter, not compensate 11(c)(2)

Options:

-nonmonetary directive (go to classes)

-monetary fine to court

pay other side’s attorney’s fees or costs 11(c)(2)

Restrictions:

-represented party not pay money under (b)(2). 11(c)(2)(A)

-attorney’s fees and costs only if on motion. 11(c)(2)

-no monetary sanction on court’s initiative unless OSC before voluntary dismissal or settlement. 11(c)(2)(B)

Party, attorney, law firm, or combination. 11(c)

6. Zuk
Facts: Zuk, psychologist, had EPPI record therapy sessions for rental. Writes books that has transcripts from session and gets copyright. Zuk furloughed (fired). Zuk requests copies of the tapes. EPPI ignores the requests. Requests them again 1994. Requests are denied.
Rule:

DISCOVERY

III. Discovery

A. Analyze

1. Proper use of device

a. Must be described with reasonable particularity

2. Responsive

a. Did the party ask for it?

3. Relevance − Rule 26(b)(1)

a. Reasonably calculated to lead to discovery of admissible evidence pertaining to claim or defense

i. Merits

ii. Background

iii. Impeach/Corroborate

iv. Clues

Ø If relevant to claim or defense do not need to make showing

Ø If relevant to subject matter, burden of proof shifts to party seeking discovery (need court order and good cause shown)

4. Protected

a. Privacy − Rule 26(c)

i. Annoyance, embarrassment

ii. Undue burden or expense − Rule 26(b)(2)

· Other means, source for same information

· Already been ample opportunity for discovery

· Rule 26(b)(2)(iii)

§ How much is it in controversy

§ What are parties’ resources

§ Needs of case

§ How relevant

§ What are important issues

§ Are there alternative sources of information

§ Consider models of adjudication

iii. Trade secrets − Rule 26(c)(7)

· Economic detriment

· Secret not generally known

· Injury has to be clearly defined, serious injury

· Competitive disadvantage

· Balance between harm of disclosure and necessity to litigation

b. Protective Order − Rule 26(c)

5. Privilege

a. Elements

i. With client (or prospective client)

· Upjohn − Modified control group test which stated that only those in corporation who are in a position to control or even take a substantial part in decision about any action which the corporation may take upon advice of attorney

§ Modification to protect parties (lower and mid-level employees) who disclose and in corporation will need lower level employees to disclose in order to find out what happened

ii. Legal advice

iii. Legal advisor

iv. Relate to advice

v. In confidence

6. Product − Rule 26(b)(3)

a. Prepared in anticipation of litigation or for trial

b. By or for another party, or by of for that other party’s representative (including attorney)

· Party may obtain discovery of ORDINARY WORK PRODUCT (but not opinion work product) if:

i. Substantial need

ii. Party cannot get the substantial equivalent without undue hardship

· In ordering discovery of such materials, court shall protect against disclosure of mental impressions, conclusions, opinions or legal theories of attorney or other representative (OPINION WORK PRODUCT)

§ Courts generally abide by this and protect against disclosure of opinion work product

§ 9th Circuit (minority view) − Allows discovery of opinion work product if (1) pivotal issue and (2) compelling need (not applied to attorney opinion work product)

v Must list in privilege log

B. Discovery Devices

1. Initial Disclosures − Rule 26(a)(1)

a. 26(a)(1)(A) − Party must disclose (provide or describe) what she is going to use to support her claim or defense (do not have to provide that which is harmful at this stage)

i. Potential witnesses (name, address, telephone)

ii. Documents

iii. Damages

iv. Insurance

2. Depositions − Rule 30

a. Testimony under oath that is recorded

b. Reasonable notice

c. Limited to 10 depositions

d. One day, seven hours per depositions

e. Only get to depose person once

f. Third parties can be deposed (special rules apply)

g. Rule 30(b)(6) − Describe in reasonable terms the category of person you want to depose, other side must provide the person that fits that category

h. Objections to form

i. Compound

ii. Confusing/Unintelligible

iii. Vague or ambiguous

iv. Misleading

v. Asked and answered

vi. Argumentative

vii. Mischaracterized witness testimony/Assumes facts not in evidence

· If objections not made at deposition, waive right for answer not to be admitted into evidence later

· Even after objection witness may answer, objections only serve to make answer inadmissible later

· Rule 30(d)(1)

§ Instruct not to answer

§ Privilege

§ Protective order in place or going to seek one

§ Any objection must be state concisely, speaking objections not permitted

3. Request for production (RFPs) − Rule 34

a. Describe a category with reasonable particularity

b. 30 days to respond (written response including objections)

c. Rule 34(b) − Produce those documents that are in producing party’s protection, control or custody (as kept or in categories, but not scrambled)

d. Rule 26(b)(5) − Privilege or work product

i. Materials that are attorney-client privilege

ii. Work product in preparation of litigation

· Privilege log − Must create a log of those items that are privileged, describe in general terms with objection

4. Interrogatories (Rogs) − Rule 33

a. Limited to 25 in number including subparts

b. 30 days to respond

i. Written answers by attorney and signed off by party

ii. Obligation to answer if reasonably obtainable

· Rule 33(d) − If have to look through a large amount of records can just give other party records in lieu of answering (shift burden to requesting party)

c. Contention interrogatories − Identify every fact (or all evidence) that supports your contention that X

i. Most courts will not allow early on

ii. Used to prove negative (to prove other side has no evidence of X)

5. Exams − Rule 35

a. Parties or those in care, custody or control of party (read narrowly)

b. Must be “in controversy”

c. Good cause shown

d. Must have stipulation by parties or court order

6. Request for admission (RFAs) − Rule 36

a. Extension of pleadings

C. Limitations on discovery

1. Rule 26(b)(2)(iii) − Undue burden

a. Outweighs likely benefits

b. Needs of case

c. Amount in controversy

d. Parties’ resources

e. Importance of the issue at stake

f. Importance of proposed discovery in resolving the issue

SUMMARY JUDGMENT

IV. Summary Judgment

A. Rule 56(a)

1. Claimant can move 20 days after commencement of action or after opposing party moves for summary judgment

B. Rule 56(b)

1. Defending party can move for summary judgment at any time

C. Rule 56(c)

1. Motion must be served at least 10 days before hearing (most courts require at least 21 days)

2. Standard − Summary judgment shall be granted if moving party makes showing that there is no genuine issue as to any material fact

a. What is fact at issue and why is it material?

i. Material if relevant to an element or affirmative defense

b. Is there a genuine issue about it?

i. Is it plausible that could come out either way?

· Adickes v. S.H. Kress & Co.

§ Key fact − Was there police officer in store?

§ Material to whether there was a conspiracy

§ D did not come up with enough evidence to initiate

§ D cannot do nothing in moving for SJ, must make some kind of showing (vague as to what this requires)

· Celotex v. Catrett

§ Key fact − Was P exposed to D’s product?

§ Material to causation

§ Rather than showing through affirmative evidence, D made showing that absence of evidence on other side (contention interrogatories often used)

§ Absence of evidence − Courts are split on moving party’s burden

Ø Point out there is no evidence (just state)

Ø Point to evidence in record to show lack of evidence

D. Rule 56(f)

1. Not enough chance for discovery on issue (premature)

E. Burden of production − Whether party has sufficient evidence to go to trial

F. Burden of persuasion − Which party must convince trier of fact

G. Party with burden of proof moves

1. Every reasonable jury would conclude that it is more likely than not that moving party is right

2. Ex. − Every reasonable jury would conclude that it is more likely than not that Jacques threw the rock

a. Required to make initial showing

b. Only if initial showing is strongly supported does opposing party have to respond

i. Burden of opposing party is to provide enough evidence to undermine moving party’s evidence sufficiently such that a reasonable jury could conclude that moving party is not more likely than not right

H. Party who does not have burden of proof moves

1. No reasonable jury would conclude that more likely than not that party opposing summary judgment is right

2. Ex. − No reasonable jury would conclude that it is more likely than not that Jacques threw the rock

a. Initial showing − Logically would make sense not to require initial showing, but if this were the case could be used as a weapon too easily

· Celotex − Ambiguous which of two standard applies

o Either merely point out that other side has no evidence

o Or must do discovery to show that other side has no evidence

i. Burden of opposing party is to provide enough evidence that a reasonable jury could conclude that it is more likely than not right

ii. Note that since party opposing summary judgment will have burden of persuasion at trial, if moving party has met its burden, simply attacking the moving party’s evidence will not suffice to survive summary judgment

For More information How You Can Use Some of These Pro Se Civil Litigation Guidelines To Effectively Challenge and Successfully Win Your Wrongful Foreclosure and Save Your Home Visit http://www.fightforeclosure.net

Pro Se Legal Representation

14 Tuesday May 2013

Posted by BNG in Foreclosure Defense, Litigation Strategies

≈ 1 Comment

Tags

Law, Legal Information, List of Latin phrases, Motion (legal), Plaintiff, Pro se legal representation in the United States, Se Legal Representation, Self-Help

Pro Se Legal Representation refers to the instance of a person representing himself or herself without a lawyer in a court proceeding, whether as a defendant or a plaintiff and whether the matter is civil or criminal. Pro se is a Latin phrase meaning “for oneself”. This status is sometimes known as propria persona (abbreviated to “pro per”).

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