New Cases For the Week of October 16, 2000 - October 20, 2000

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October 19, 2000

Case

Court

Holding

In re Shahid
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10th Cir. BAP There is no statutory basis for an award of attorney fees to the prevailing party in a colorable nondischargeability action under 11 USC 727, and cases awarding legal fees on acontract theory in actions under 11 USC 523(a)(2), cannot be extended by analogy to actions under section 727.  The bankruptcy court erred by awarding legal fees to the the prevailing plaintiff in a section 727 action.

October 18, 2000

Case

Court

Holding

In re Rincon Island Limited
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Bankr. C.D. Cal. If applicable State law requires the filing of an action to enforce lien rights as a predicate element to perfection of such rights, a creditor claiming such rights against a debtor in bankruptcy must give notice to the debtor (in lieu of filing a lawsuit, which would violate the automatic stay) of the creditor's intention to claim such rights. 11 USC 546(b). However, the notice need  not be filed with the bankruptcy court or even be in writing.  An oral notification to a debtor that a statutory lien claimant intends to file suit and take the legal action necessary to perfect his lien is sufficient.
In re Worldcorp. Inc.
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Bankr. Del. When a bankruptcy court approves a settlement agreement providing for execution of a global mutual release (excluding obligations incorporated in the settlement agreement) by and between the debtor and a defendant in an adversary proceeding brought by the debtor, the defendant may not thereafter offset putative pre-agreement claims against the debtor against its obligations under the settlement agreement. 

October 17, 2000

Case

Court

Holding

In re Shubov 9th Cir. BAP A party who waits until after a frivolous motion has been denied cannot request sanctions under Fed. R. Bankr. P. 9011. By that time it is necessarily too late to send the "safe harbor" warning required by the Rule. Sanctions under Rule 9011 can only be awarded where the party requesting sanctions has sent a safe harbor warning and the alleged violator of Rule 9011 has refused to withdraw the offending pleading.

While a court, acting sua sponte, has the authority to impose certain sanctions under Rule 9011, the court, when acting sua sponte, does not have the authority to order a violator to pay the other party's attorneys' fees.

It is questionable whether Rule 9011 applies to an improper use of a subpoena for discovery.

When an attorney issues a subpoena under his own signature on behalf of a Court in which the attorney is authorized to practice (as allowed by Fed. R. Civ. P. 45), the attorney has a duty to take reasonable steps to avoid imposing undue burden or expense on the person subject to the subpoena. The Rule contemplates a liberal construction of what constitutes a breach. When a subpoena should not have been issued, literally everything done in response to it constitutes "undue burden or expense" within the meaning of Civil Rule 45(c)(1). It is similarly "undue" to have to contend with a motion to compel compliance with an illegitimate subpoena.

When an attorney in a bankruptcy case issued a third party subpoena seeking document discovery when no adversary proceeding or contested matter related to the subpoena, and no Rule 2004 examination had been requested, the attorney abused the subpoena power, warranting imposition on the attorney of the respondent's costs to quash the subpoena.

October 16, 2000

Case

Court

Holding

In re B.U.M. International 9th Cir. Recognizing that "there is no question that a bankruptcy court may not conduct a section 330 inquiry into the reasonableness of fees and their benefit to the estate if the court already has approved the professional's employment under 11 U.S.C. 328," the court holds that when a bankruptcy court specifically reserves the right to approve all fees and costs of a professional when it approves such professional's employment on a contingency fee basis, the court is not precluded from subsequently adjusting or denying such contingency fees based on reasonableness or benefit to the estate.
In re Vincze 7th  The Federal Rules of Bankruptcy Procedure do not require that a debtor/defendant served with process by mail actually receive such process.  Service is effective when the required documents are mailed to the address last listed by the defendant on documents filed with the court.

When debtors/defendants in a bankruptcy adversary proceeding were out of the country when they were served by mail,  such service was nevertheless effective, and defendants could not contest post-judgment collection on the grounds that  they were never effectively served with process.

 
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