In difficult economic times, debtors’ attorneys closely review credit reports looking for potential legal claims against creditors. Long after a debtor has been discharged from bankruptcy, creditors can find themselves defending claims of improper credit reporting. A recent case from the Eastern District of North Carolina illustrates the trouble facing creditors who furnish incorrect reports of discharged debt. See In re Adams (Bankr. E.D.N.C. 2010).
In re Ebadi, No. 10-73702, 2011 WL 1257211 (Bankr. E.D.N.Y. March 30, 2011)
CASE SNAPSHOT
Introduction
On June 23, 2011, after fifteen years of hugely acrimonious litigation, the Supreme Court of the United States (the “Court”) issued a decision on a narrow legal issue that may end up significantly limiting the scope of bankruptcy courts’ core jurisdiction.
A recent court ruling highlights the need for robust governance practices for nonprofits, particularly those facing financial difficulties. The Third Circuit Court of Appeals affirmed a jury’s award of $2.25 million in compensatory damages against former directors and officers of a bankrupt nonprofit corporation - personal liability for breach of fiduciary duties and “deepening insolvency.”1 The court also affirmed punitive damages against the officer defendants, but vacated the award of punitive damages against the director defendants.
This week we present for your consideration two cases: (a) an Alabama Court of Civil Appeals decision setting aside a default judgment against a car dealership because the defendant’s delay in answering complaint was not unreasonable when defendants tendered complaint to attorney when served; and (b) an Eleventh Circuit decision regarding the classification of promissory notes from an involvement developer as senior debt in a bankruptcy.
Purcell brought a lawsuit seeking to recover $85,000 he had lent to Schweitzer. The parties settled, agreeing that Schweitzer would pay the sum of $38,000, along with interest at the rate of 8.5 percent, in installments over 24 months to Purcell. The agreement provided that if Schweitzer failed to pay on time, it would be a breach of the entire agreement and the original liability of $85,000 would be due. The agreement also contained the following language:
The liquidated damages provision does not constitute an unlawful "penalty" or "forfeiture."
Joe Francis built his Girls Gone Wild (GGW) empire (and the ego of an emperor) filming intoxicated college girls in various states of undress, putting that footage on VHS (and later DVDs and branded websites), and selling them to eager consumers across the globe. If you were alive and watching TV in the late 1990s and early aughts, those late-night infomercials undoubtedly made their way across your TV screen at some point, or you may have even purchased such classics as Girls Gone Wild: Mardi Gras Madness or Girls Gone Wild: Ultimate Spring Break.
Nearly 30 years after enactment of the Bankruptcy Amendments and Federal Judgeship Act of 1984 and establishment of the current bankruptcy court structure, courts are still struggling to understand the bounds of a bankruptcy court’s jurisdiction and power. Unfortunately for one recent appellant, a bankruptcy court’s power to enter punitive damages is not as great as it had hoped.
If you are, or have interest in becoming, a director of any organization, you should heed the May 17, 2013, decision in the United States District Court for the Western District of Pennsylvania in Official Comm. Of Unsecured Creditors ex rel. Lemington Home for the Aged, (the Lemington Home Case). The Lemington Home Case upheld a jury’s award to the plaintiff creditors’ committee of