Statute of Limitations Waiver

n In re Bodenstein, 248 B.R. 808 (Bankr. W.D. Ark. 2000), the debtor's confirmed chapter 13 plan anticipated that all creditors would receive 100 percent payouts on their claims. The plan further provided that if any creditor did not receive a 100 percent payout, preference and/or other avoidance claims could be pursued by any party in interest with standing to pursue them. Following conversion, the chapter 7 trustee filed a complaint to avoid certain alleged preferential transfers. The defendant moved for summary judgment on limitations grounds, alleging that the two-year statute of limitations had expired. The court held that the statute of limitations began to run with the appointment of the chapter 13 trustee. Further, the court determined that the language in the debtor's plan was not sufficiently specific to constitute a waiver of the defense of the two-year statute of limitations, particularly since it was completely silent on the issue of limitations.

Quarterly Title Loan Payments

In an unusual twist, Cash Cow Services of Florida L.L.C., (Bankr. N.D. Fla. 2000), a company that operated a chain of stores that provided car title loans to its customers, filed chapter 11. As a debtor, it continued to make title loans in the ordinary course of business. The U.S. Trustee filed a motion to compel quarterly payments, basing its calculation in part on the "disbursements" made when the debtor made its ordinary course of business title loans and "disbursed" money to the borrowers. The bankruptcy court held that the title loans (disbursements) made in the ordinary course of the debtor's business indeed were "disbursements" that formed a valid basis for the U.S. Trustee's quarterly fee calculation. Based on the recalculation, the debtor was required to pay to the U.S. Trustee the sum of $57,250 for the last two quarters of 1999.

Working-interest Settlement

In In re Gibraltar Resources Inc., 210 F.3d 573 (5th Cir. 2000), the chapter 7 trustee obtained approval of a settlement that provided the bankruptcy estate with a 58.5 percent working interest in an oil and gas well. Creditors who claimed to own individual working interests pursuant to an unrecorded joint-venture agreement with the debtor objected to the settlement, but did not appeal the order approving the settlement. Thereafter, those creditors who claimed to own individual working interests in the well sued to recover on the same causes of action that had been settled by the trustee on behalf of the debtor corporation. The Fifth Circuit held that these creditors were bound by the res judicata effect of the unappealed order of the bankruptcy court approving the settlement. Therefore, these parties could not re-litigate the issues that had been resolved by the court-approved settlement.

General Contractor Set-off

In In re Davicter Enterprises Inc., 248 B.R. 794 (Bankr. S.D. Ill. 2000), prior to the filing of bankruptcy, the chapter 7 debtor entered into a contract with a general contractor regarding a public school project. The general contractor paid monies to the debtor pre-petition for the debtor to use to pay suppliers. The debtor then filed bankruptcy without paying the suppliers, and the general contractor became independently obligated to pay those suppliers who filed valid materialmen's liens. The general contractor paid the claims and successfully sought approval to set off those payments to suppliers against monies owed to the debtor for pre-petition work.

"Appearance of Impropriety"

In First Interstate Bank vs. Murphy, Weir & Butler, 210 F.3d 983 (9th Cir. 2000), local counsel for a secured creditor hired a bankruptcy judge's law clerk and failed to inform its client, lead counsel, any of the creditors, the debtor or the bankruptcy judge. Later, even without the suggestion of any actual impropriety, the bankruptcy judge recused herself based on an "appearance of impropriety." The case was reassigned; a new trial resulted in a less favorable decision for the secured creditor. The secured creditor then sued its local counsel for malpractice. The Ninth Circuit held that the result (recusal and a less-favorable decision) was not foreseeable nor preventable by the firm. Further, the firm had no duty to inform the creditors, creditors' lead counsel, the debtor or the bankruptcy judge that the judge's law clerk had accepted an offer of future employment. Thus, the law firm could not be liable to its client for malpractice.

Mandatory Pension Plan Payments

In In re Awuku, 248 B.R. 21 (Bankr. E.D.N.Y. 2000) Bankruptcy Judge Stan Bernstein addressed the issue of a debtor caught in the crossfire of a chapter 13 trustee objecting to mandatory payments to a pension plan as not "reasonably necessary" and a pension plan trustee for New York City employees who would not consent to a suspension of the mandatory payments. However, as the court recognized, this issue affects numerous cases handled by the chapter 13 trustee and the potentially thousands of cases that may involve city employees who found themselves in chapter 13 plans. The court refused to take the easy exit of ruling against the trustee due to the "mandatory" nature of the pension payments, but instead focused on the issue of whether the payment or contribution to a qualified pension plan was a prudent expenditure. The court found it oxymoronic that if such a contribution is indeed "prudent," then how can that not be "reasonably necessary" to the debtor and the debtor's dependents? In essence, although the court mandated the contributions as reasonable deductions from disposable income, the decision has broader ramifications with Judge Bernstein's discussion of the consideration of expenses incurred in connection with future obligations and expectations of debtors (and their dependents) rather than the "here-and-now" nature of expenses. Seven days later, in In re Taylor, 248 B.R. 37 (S.D.N.Y. 2000), District Judge Hellerstein held that while payroll deductions may be considered mandatory, the mandatory nature of such deductions may not "trump" creditors' entitlement to receive all of the debtor's disposable income under §1325(b)(1)(B). As a result, the court held that such "mandatory" payments cannot be a chapter 13 debtor.

Miscellaneous

• In re Longhenry, 246 B.R. 234 (Bankr. D. Md. 2000) (debtor's liability for judgment for loss of consortium fell within the discharge exemption for "personal injury" caused by driving while intoxicated);
• In re Digital Resource L.L.C., 246 B.R. 357 (8th Cir. BAP 2000) (sanctions were appropriate under Fed. R. Civ. P. 45(c) for imposing an undue burden where subpoena was issued to a mergers-and-acquisitions and non-party witness at the busiest time of his year, accompanied with a demand of production of documents requiring review under the attorney/client privilege with only 48 hours' notice);
• In re Boykin, 246 B.R. 825 (Bankr. E.D. Va. 2000) (objection to a proof of claim is a contested matter that must be served in the manner provided for service of a summons and complaint by Rule 7004 and thus must be served on a corporation's officer, corporation's managing and general partner or on an agent specifically authorized to accept service, and could not be served on a corporate employee, even on an employee designated in the corporation's proof of claim);
• Mitchell v. Chicago Partnership Board Inc., 246 B.R. 854 (N.D. Ill. 2000) (creditor who purchased limited partnership interest was not a "customer" under the Securities Investor Protection Act because such interests are not investment contracts protected as securities as they are not registered with the Securities Exchange Commission);
• In re Heimboch, 246 B.R. 895 (Bankr. D. Neb. 2000) (A 1984 corvette was not exempt as property "held for use" in a farming operation and could not be exempted as a tool of the trade); and
• In re Vickers, 247 B.R. 530 (Bankr. N.D. Fla. 2000) (Florida default judgment sustained on multiple independent grounds conclusively establishes between the parties the truth of all material allegations in the state court complaint for the purposes of dischargeability of a judgment debt).

Personal Note

Every holder of a law degree has some defining moment when they begin to feel like a "real" lawyer—not just someone with a piece of paper. For me, that moment came in the courtroom of Joseph C. Elliott. I lost, but he listened and continued to listen for almost 20 years, both on and off the bench. Unfortunately for many of us, he stopped listening on July 14, 2000. Judge Elliott was born Sept. 10, 1942, in Lewistown, Mont., and spent his formative years in Houston. He received both his undergraduate and law degrees from Tulane University. He moved to San Antonio in 1971 and served as senior briefing attorney for the late U.S. District Judge John H. Wood Jr. In 1975, he became one of the youngest federal judges in the United States when he was appointed a bankruptcy judge for the Western District of Texas. After 12 years, he joined his lifelong friend, Ronald Hornberger, at the firm of Plunkett & Gibson. These facts, while impressive, do not begin to convey the positive effect Judge Elliott had on young practitioners.

When Judge Leif M. Clark and I began practicing in San Antonio, it was very much a "closed" bar—and cocky young lawyers who did not know their place were not welcomed by many of the bankruptcy practitioners. However, in Judge Elliott's courtroom, all lawyers were treated equally. Those of us who knew Joe have an obligation to treat all young professionals as he treated us—with dignity and respect. This would be a lasting legacy and a fitting tribute to a mentor, role model, good friend, great judge and someone we will dearly miss.