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​ BANKRUPTCY BULLETIN Editors-in-Chief Karl Johnson, Hellmuth & Johnson, PLLC Jeffrey Klobucar, Bassford Remele, P.A.  Contributing Editor: Kesha Tanabe, Tanabe Law Cedar_Rapids_Lodge_v_Seibert_SRN_544b.pdf Cedar Rapids Lodge & Suites LLC et al. vs. John F. Seibert et al., No. 14-CV-04839 (D. Minn. Feb. 7, 2018). Plaintiffs sued the debtor for fraud related to a Cedar Rapids hotel development in 2009; they obtained a judgement in 2012. While the litigation was pending in Iowa state court, however, the debtor’s net worth decreased by over $5.4 million and plaintiffs were unsuccessful in collecting the judgment. They responded by commencing ...
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​ BANKRUPTCY BULLETIN Editors-in-Chief Karl Johnson, Hellmuth & Johnson, PLLC Jeffrey Klobucar, Bassford Remele, P.A.  Contributing Editor: Kesha Tanabe, Tanabe Law BAP___Charles_Gabus_Motors__Inc___v__Tirrell.pdf In Charles Gabus Motors, Inc. v. Martin J. Tirrell, No. 17-6009, (B.A.P. 8th Cir. Sept. 6, 2017), the BAP upheld a decision of the bankruptcy court denying the debtor a discharge of his debts in accordance with a default provision set forth in a court-approved stipulation.  Debtor entered into the stipulation with a creditor who had previously commenced an adversary proceeding seeking denial of the debtor’s discharge under § 727. ...
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​ BANKRUPTCY BULLETIN Editors-in-Chief Karl Johnson, Hellmuth & Johnson, PLLC Jeffrey Klobucar, Bassford Remele, P.A.  Contributing Editor: Kesha Tanabe, Tanabe Law Supreme_Court____Lamar__Archer___Cofrin__LLP_v__Appling.pdf In Lamar, Archer & Coffrin, LLP v. Appling, the Supreme Court held that a debtor’s statement about a single asset can be a “statement respecting the debtor’s financial condition” under § 523(a)(2). When the “fraud” at issue is effectuated by such a statement, however, the Appling court noted that the statute “plainly heightens the bar to discharge” because the creditor must also satisfy the requirements of Section ...
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BANKRUPTCY BULLETIN Editors-in-Chief Karl Johnson, Hellmuth & Johnson, PLLC Jeffrey Klobucar, Bassford Remele, P.A.  Contributing Editor: Karl Johnson, Hellmuth & Johnson, PLLC Judge_Kressel___In_re_The_Archdiocese_of_Saint_Paul_and_Minneapolis___Joint_Memo.pdf Judge_Kressel___In_re_The_Archdioces_of_Saint_Paul_and_Minneapolis____UCC_plan.pdf Judge_Kressel___In_re_The_Archdiocese_of_St__Paul_and_Minneapolis___debtors_plan.pdf             In two orders and a joint memorandum, the bankruptcy court denied confirmation of competing plans proposed by the committee of unsecured creditors and the debtor in In re The Archdiocese of Saint ...
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​ BANKRUPTCY BULLETIN Editors-in-Chief Karl Johnson, Hellmuth & Johnson, PLLC Jeffrey Klobucar, Bassford Remele, P.A. Contributing Editor: Amanda Schlitz, US Bank Eighth_Circuit___Marshall_v__Educational_Credit_Mgmt__Corp_.pdf In Marshall v. ECMC et al. (In re Marshall) , Nos. 18-1843, 18-1845 (8th Cir. May 23, 2018), the Eighth Circuit reviewed the BAP’s dismissal of an untimely appeal for lack of jurisdiction. In the underlying case, the bankruptcy court overruled the debtor’s objection to the proof of claim of ECMC and MOHELA, its successor, and denied the debtor’s emergency motion to invalidate the transfer of claim by ECMC ...
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There is a surprising gap in the law and literature about conflicts of interest.  Lawyers frequently provide advice and render opinions, both formal and informal.  However, leading authorities generally do not address when these legal services create a “directly adverse” conflict.  Advising and opining is not mentioned in the thirty-five comments to the current client conflict rule. [i]   The Office of Lawyers Professional Responsibility devoted an entire article to directly adverse conflicts, but did not mention advising and opining. [ii] A conflict arises when a law firm represents one client “directly adverse” to another.  Rule 1.7(a), Minn. R. Prof. Conduct. ...
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​ BANKRUPTCY BULLETIN Editors-in-Chief Karl Johnson, Hellmuth & Johnson, PLLC Jeffrey Klobucar, Bassford Remele, P.A. Contributing Editor: James Brand, Fredrikson & Byron, P.A. Eighth_Circuit___Paddock__LLC_v__Bennett.pdf In The Paddock, LLC v. Bennett (In re Bennett) , No. 17-6025 (8th Cir. B.A.P. April 19, 2018), the Eighth Circuit Bankruptcy Appellate Panel analyzed Iowa state law regarding fixtures and concluded that the debtors’ manufactured home was personal property, rather than real property.  As a result, the debtors were able to confirm a chapter 13 plan that treated an installment sale contract, secured by their manufactured ...
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​ BANKRUPTCY BULLETIN Editors-in-Chief Karl J. Johnson, Hellmuth & Johnson, PLLC Jeffrey D. Klobucar, Bassford Remele, P.A.  Contributing Editor: Natasha Wells, Dorsey & Whitney LLP Judge_Sanberg___Kelley_v__McDonald__In_re_Petters_Co___Inc__.pdf Judge_Sanberg___Kelley_v__Stapleton__In_re_Petters_Co___Inc__.pdf In companion cases, Kelley v. McDonald (In re Petters Co., Inc.) , Adv. No. 17-4107-KHS (Bankr. D. Minn. Jan. 17, 2018), and Kelley v. Stapleton (In re Petters Co., Inc.) , Adv. No. 17-4108-KHS (Bankr. D. Minn. Jan. 17, 2018), the bankruptcy court denied the defendants’ motions to dismiss the trustee’s fraudulent transfer actions, ...
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​ BANKRUPTCY BULLETIN Editors-in-Chief Karl J. Johnson, Hellmuth & Johnson, PLLC Jeffrey D. Klobucar, Bassford Remele, P.A.  Contributing Editor: Richard J. "Jay" Reding, ASK, LLP Fulmer_v__Fifth_Third_Equipment_Finan__Co___In_re_Veg_Liquidation__Inc__.pdf   In Fulmer v. Fifth Third Equip. Fin. Co., et al. (In re: Veg Liquidation, Inc.) , 2018 WL 1465496 (B.A.P. 8th Cir. Mar. 26, 2018), the Bankruptcy Appellate Panel for the Eighth Circuit affirmed the dismissal of an adversary proceeding on the basis that it was an impermissible collateral attack on a prior 363 sale order. Two years after the bankruptcy court approved the sale of the debtor’s ...
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​ BANKRUPTCY BULLETIN Editors-in-Chief Karl J. Johnson, Hellmuth & Johnson, PLLC Jeffrey D. Klobucar, Bassford Remele, P.A.  Contributing Editor: Charles E. Nelson, Ballard Spahr, LLP Judge_Sanberg___Snyder_v__Dykes.pdf In Snyder v. Dykes (In re Dykes) , Adv. No. 17-4022-KHS (Bankr. D. Minn. Feb. 26, 2018), the Court denied the debtors’ discharge because the debtors failed to maintain records related to purchasing, selling, and trading valuable, collectable watches; could not account for the disposition of at least four of those watches valued at over $145,000; and knowingly failed to disclose transfers made for the benefit of the debtors' ...
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​ BANKRUPTCY BULLETIN Editors-in-Chief Karl Johnson, Hellmuth & Johnson, PLLC Jeffrey Klobucar, Bassford Remele, P.A.  Contributing Editor: Phillip J. Ashfield, Stinson Leonard Street, LLP BAP___United_States_v__Austin.pdf   In United States v. Austin , No. 17-6024, 2018 WL 1702742 (B.A.P. 8th Cir. Apr. 9, 2018), the Bankruptcy Appellate Panel reversed the bankruptcy court’s finding that the debtors had presented “substantial evidence” sufficient to overcome the prima facie validity of the IRS’s proof of claim. The debtors listed two worker’s compensation claims in their bankruptcy schedules, assigning $0.00 or “unknown value” to the claims. ...
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​ BANKRUPTCY BULLETIN Editors-in-Chief Karl Johnson, Hellmuth & Johnson, PLLC Jeffrey Klobucar, Bassford Remele, P.A.  Contributing Editor: Karl Johnson, Hellmuth & Johnson, PLLC Supreme_Court____U_S__Bank__N_A__v__Village_at_Lakeridge__LLC.pdf In U.S. Bank Nat’l Assoc., Trustee, by and through CWCapital Asset Mgmt LLC v The Village at Lakeridge, LLC , ___ S.Ct. ____ (2018), the Supreme Court declared that the standard of review for a determination of non-statutory insider status under the Ninth Circuit’s “arm’s length” test is clear error. The Justices explicitly declined to endorse the Ninth Circuit's test.  The debtor owed $10 mm ...
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​ BANKRUPTCY BULLETIN Editors-in-Chief Karl Johnson, Hellmuth & Johnson, PLLC Jeffrey Klobucar, Bassford Remele, P.A.  Contributing Editor: Christopher Wilcox, Christensen Law Office, PLLC Eighth_Circuit___Allison_v__Centris_Federal_Credit_Union.pdf   In  Allison, et. al v. Centris Federal Credit Union , No. 16‑3923 (8th Cir. Mar. 29, 2018), the Eighth Circuit Court of Appeals determined that a successor bankruptcy judge did not exceed the BAP’s mandate on remand by re-visiting findings of fact that the BAP’s decision declined to resolve. The court further determined that the law-of-the-case doctrine did not require the successor judge to follow ...
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BANKRUPTCY BULLETIN Editors-in-Chief Karl Johnson, Hellmuth & Johnson, PLLC Jeffrey Klobucar, Bassford Remele, P.A. Contributing Editor: Ian Rubenstrunk, Winthrop & Weinstine, P.A. BAP___Dering_Pierson_Group_LLC_v__Kantos.pdf In In re Kantos for Cash Flow Management, Inc. , 579 B.R. 846 (B.A.P. 8th. Cir. 2018), the Bankruptcy Appellate Panel evaluated whether the bankruptcy court abused its discretion in finding that the plaintiff-creditor failed to establish willfulness or maliciousness under 11 U.S.C. § 523(a)(6). Plaintiff is a general contractor. The debtor worked for a debt collection company that prepared mechanic’s liens for clients ...
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​ BANKRUPTCY BULLETIN Editors-in-Chief Karl Johnson, Hellmuth & Johnson, PLLC Jeffrey Klobucar, Bassford Remele, P.A. Contributing Editor: Ben Gurstelle, Briggs and Morgan, P.A. Eighth_Circuit___Wigley_v__Wigley.pdf   In Wigley v. Wigley (In re Wigley) , No. 16-4075, 2018 WL 1525832 (8th Cir. Mar. 29, 2018), the Eighth Circuit considered whether a non-party to a bankruptcy proceeding has standing to appeal a bankruptcy court order that allows litigation to proceed against the non-party.   Prior to the bankruptcy case, a creditor sued the debtor for past-due and future accruing rent based on a personal guaranty. While the action ...
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​ BANKRUPTCY BULLETIN Editors-in-Chief Karl Johnson, Hellmuth & Johnson, PLLC Jeffrey Klobucar, Bassford Remele, P.A. Contributing Editor: Patrick Newman, Bassford Remele, P.A. Supreme_Court____Merit_Mgmt_Group__LP_v__FTI_Consulting__Inc_.pdf    In Merit Mgmt. Group, LP v. FTI Consulting, Inc. , __ U.S. __, 138 S. Ct. 883 (2018), the Supreme Court declared that the only relevant transfer for purposes of the trustee’s avoidance powers “is the transfer that the trustee seeks to avoid.” The fact that a transfer involves intermediate financial institutions does not implicate the financial settlement safe harbor of § 546(e) if the trustee seeks to ...
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Expert testimony is required in almost all professional malpractice cases.  But expert testimony is not offered in most lawyer discipline cases.  What explains this discrepancy?  Should experts testify more often in discipline cases? Experts may testify where they have “specialized knowledge that will assist the trier of fact to understand the evidence or to determine a fact in issue, . . ..”  Rule 702, Minn. R. Ev.  Except in rare and obvious cases, professional malpractice statutes and case law require expert affidavits and testimony.  Malpractice cases that are not settled are usually tried to juries.  Lay persons need help in learning professional practices ...
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​ BANKRUPTCY BULLETIN Editors-in-Chief Karl Johnson, Hellmuth & Johnson, PLLC Jeffrey Klobucar, Bassford Remele, P.A. Contributing Editor: Jackie Williams, Manty & Associates, P.A. BAP___Zahn_Law_Firm_P_A__v__Baker.pdf In Zahn Law Firm, P.A. v. Ronald Stuart Baker (In re Baker) , No. 17-6015 (B.A.P. 8th Cir. Nov. 16, 2017), the bankruptcy appellate panel considered whether the bankruptcy court abused its discretion by remanding a case to state court. Prior to filing, a law firm brought an action against the debtor in state court, alleging breach of contract and account stated. The debtor filed a counterclaim, alleging the representation ...
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​ BANKRUPTCY BULLETIN Editors-in-Chief Karl Johnson, Hellmuth & Johnson, PLLC Jeffrey Klobucar, Bassford Remele, P.A. Contributing Editor: Mary Sieling, Manty & Associates, P.A. MN_Court_of_Appeals____Forster_v__Theis.pdf   In Forster v Theis et al ., No. 86-CV-15-4902 (Minn. Ct. App. Dec. 18, 2017), the Minnesota Court of Appeals found the Minnesota state court had subject-matter jurisdiction to consider an unsecured creditor’s fraudulent transfer action because the bankruptcy action was closed and the bankruptcy trustee did not reopen the bankruptcy case to pursue the voidance action.  Plaintiffs successfully objected to discharge of ...
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​ BANKRUPTCY BULLETIN Editors-in-Chief Karl Johnson, Hellmuth & Johnson, PLLC Jeffrey Klobucar, Bassford Remele, P.A. Contributing Editor: James Brand, Fredrikson & Byron, P.A. BAP___CRP_Holdings__A-1__LLC_v__OSullivan.pdf In O’Sullivan v CRP Holdings, A-1, LLC , No. 17-6012 (8th Cir. B.A.P. Sept. 22, 2017), the Eighth Circuit Bankruptcy Appellate Panel came down strongly in favor of protecting a debtor’s fresh start.  It held that a creditor’s docketed judgment created a judicial lien on the debtor’s interest in his exempt homestead, even though such lien was not presently enforceable against the property under Missouri law; as ...
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