Blogs

By:  Guillermo Martinez

St. John’s Law Student

American Bankruptcy Institute Law Review Staff

Two recent New York District Court cases disagree whether the principle established in the famous California Jewel v. Boxer[1] case applies to hourly matters upon the dissolution of New York law firms.

In Development Specialists, Inc. v. Akin Gump Strauss Hauer & Feld, LLP, et al.,[2] the United States District Court for the Southern District of New York held that unfinished client matters pending on the date of law firm’s, Coudert Brothers LLP (the “Firm”), dissolution remain property of the estate.[3] The Firm dissolved on August 16, 2005 and the remaining equity partners authorized the Firm’s executive board to sell all of its assets.[4] A number of the Firm’s partners were hired by other law firms, and subsequently took their unfinished hourly matters with them.[5] Development Specialists, Inc., the administrator of the Firm’s bankruptcy estate (the “Administrator”), sued a number of firms that had hired ex-Coudert Brothers partners in an attempt to recover the profits those firms made on unfinished Coudert client matters.[6] The court agreed with the Administrator and ordered the defendant law firms to turnover profits earned on old Firm matters.

By: Lauren Michalski

St. John’s Law Student

American Bankruptcy Law Review Staff

In In re Dunbar, the United States District Court for the District of Montana held that a creditor was not substantially justified in objecting to the debtor’s discharge where the creditor could not demonstrate that the debtor had acted in bad faith by incurring the debt in the first instance. Dunbar, the debtor, obtained a $9,000 cash advance against a credit card issued by FIA, which he used to pay off other credit card debt.[1] Later that year, Dunbar filed a Chapter 7 petition, and sought to discharge more than $43,000 in credit card debt, including the debt owed to FIA.[2]  FIA objected to the discharge of Dunbar’s debt pursuant to section 523(a)(2) of the Bankruptcy Code, arguing Dunbar had procured the loan under false pretenses because he never intended to repay FIA.[3] Dunbar counterclaimed for attorney’s fees and costs under section 523(d), claiming that FIA’s position was not substantially justified.[4] FIA’s complaint was dismissed and the court awarded Dunbar $5,595 in attorney’s fees and costs.[5] FIA appealed, alleging that it should not be forced to pay Dunbar’s attorney’s fees because (i) its position was substantially justified, and (ii) special circumstances existed that should bar the award. In the alternative, FIA argued that Dunbar had failed to mitigate his costs and therefore any attorney fee award should be reduced as a result.[6] The District Court disagreed with FIA and affirmed the bankruptcy court’s ruling.[7]

By: Shane Malone

St. John’s Law Student

American Bankruptcy Institute Law Review Staff

Despite failing to apply for an income-based loan repayment plan, the Bankruptcy Court for the Western District of New York (the “Court”) held in In re Bene[1], that Donne Bene (the “Debtor”) satisfied the “undue hardship”[2] test and discharged her student loans.  The Debtor was an elderly Chapter 7 debtor who owed $57,298.70 to Educational Credit Management Corp., a student loan lender (the “Lender”), for loans she took out between 1981 and 1987. The Debtor voluntarily withdrew from school in 1987 before earning a degree or any professional license in order to care for her incapacitated parents.[3]  Although she had recently received a termination notice from her employer,[4] at the time of her discharge, she worked—as she had for the last 12 years—on an assembly line earning $10.67 per hour.[5] Her impending job loss and minimal level of education left her with little hope of improving her financial situation.[6]  The Debtor had no other debts, and had made good faith efforts to repay her student loans, but those payments only totaled $2,400.[7]  The Lender argued that the Debtor should be ineligible for a discharge of her student loan debt because she had not enrolled in income-based repayment plans for which she was eligible, such as the William D. Ford Program (the “Program”).[8]

By: Erin Dempsey

St. John's Law Student

By: Erin Rieu-Sicart

St. John’s Law Student