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September 2019 Archives

Ninth Circuit Decision Makes Virtually All Attorneys' Fees Incurred by Debtors in the Enforcement of the Automatic Stay Recoverable

In Easley v. Collection Serv. Of Nev., 910 F.3d 1286 (9th Cir. 2018), the Ninth Circuit Court of Appeals clarified a prior holding about the scope of attorneys' fees recoverable for enforcing the automatic stay. In particular, the court decided in In re Schwartz-Tallard, 803 F.3d 1095 (9th Cir. 2015) that reasonable attorneys' fees and costs incurred in defending a judgment rendered pursuant to Bankruptcy Code Section 362(k). Instead of defending a judgment, Easley successfully appealed an incorrect judgment in his favor. In reaching its decision, the court noted that Section 362(k) operates as a fee-shifting statute and that a fee award should not be diluted by "the time and effort spent on the claim itself," including successfully challenging an award or defending the same. Accordingly, it appears that virtually all reasonable attorneys' fees incurred by debtors in the enforcement of the automatic stay may be recoverable damages under 11 U.S.C. § 362(k).

A Release of Potential Claims Can Constitute a Fraudulent Conveyance

In Potter v. Alliance United Ins. Co., 2019 Cal. App. LEXIS 666, the California Court of Appeal considered whether a "Release and Settlement Agreement" releasing an insurance company from any claims for negligence, delay, bad faith, etc. and an agreement to forego any assignment of such claims constituted a fraudulent conveyance.

Debtor Does Not Have to Pay For Exempt Property to Comply With Absolute Priority Rule

In Todeschi v. Juarez (In re Juarez), BAP No. AZ-19-1028-FLB, published on August 21, 2019, the Ninth Circuit Bankruptcy Appellate Panel ("BAP") decided a split in the lower courts concerning whether a debtor must pay for its exempt property in order to comply with the absolute priority rule (Bankruptcy Code Section 1129(b)(2)(B)). The BAP said no. The BAP reasoned that exempt property is not property of the bankruptcy estate and as such, exempt property is not included in the phrase "any property" in the requirement of Section 1129(b)(2)(B)(ii) that a debtor (or a junior class of claims) "will not receive or retain any property." Put simply, a debtor may retain exempt property without having to make a new value contribution. Good news for Chapter 11 debtors, but not a surprising decision.

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