Law on Rice

I don’t know enough about all this yet to really know what I’m posting (recall that BLJ is just my journey). Still, I thought this article on the American Lawyer Daily was interesting enough to tell you about.

It says that since there is insufficient liquidity in the market right now, companies like BearingPoint (I used to work for PriceWaterhouseCooper’ consulting arm) are turning to Section 363 to sell off some configuration of their assets.

Click here to read the rest of it. I find all of this to be fascinating.

I’ve been listening to a lot of Gerry Spence’s audiobook on my iPhone lately.

Of course, my professors do a pretty good job of going beyond the black letter rules to talk about “what’s right” or “what’s wrong” with the law. I do go to a social justice school, after all. But Spence is a lawyer who has lived and breathed “justice” in a way that I have yet to. I’ve spent most of my professional career either sitting a classroom, or sitting in a comfy office chair just thinking about things, but not feeling a lot.

Spence tells me that “justice is a feeling.” Relying on Gerry makes a lot more intuitive sense to me than dusting off my old copies of Plato’s Republic. He says how can you know what it’s like to be a paraplegic victim of a car accident until you’ve lived with the man for at least 24 hours? How can you feel injustice if you haven’t spent at least 24 hours in the jail cell where your innocent client sleeps? He warns that lawyers are bookish by trade and by habit.

At first blush, it seems easy to dismiss Spence–he’s dealing with concrete, easy to recognize issues. So how can I do this with my work as a law clerk… with, say, patent law? I gave this a lot of thought on the bus ride home from the office last night. It turns out to not be that hard.

After all, justice for innovators is pretty simple too: our country promises innovators that they will be rewarded for their innovation. Indeed, the way the patent laws are written, there is an outright presumption that they’ll be rewarded. But too often, that promise is illusory–justice in this context is denied.

So, when a client looks at me, and says “can this be patented,” I can feel the uncertainty in their question. Despite their hard work, they aren’t sure if they get the benefit of what our country promised them. I can feel the irritation in myself when I see an office action from the patent office that seems poorly reasoned. A sloppy, careless, or poorly reasoned response was not what we promised them.

So, yeah, I’m starting to get it.

One of the stops over my Spring Break vacation was (of course) a special trip to the bankruptcy court in Tucson. Tucson is a stunningly beautiful city, but I’ll let you decide for yourself: here’s what it looks like to be there (even though this particular picture doesn’t show much city):

We stopped and had lunch at a great cafe on Fourth Avenue, the B-Line. While walking along Fourth, I noticed a bumper sticker for one of my favorite radio stations, KXCI:

And, finally (drum roll please)… here’s the outside of the court:

But can you believe it? The court was closed! Thus, this is the best picture I can offer you.

I’m “borrowing” another book: The Quotable Lawyer. Here’s a sample quote from Hugo Black in a 1971 New York Times article: “The layman’s constitutional view is that which he doesn’t like is unconstitutional.”

I thought you might enjoy this picture. I took it a little over a year ago on a big road trip from Seattle to Tucson with my Saint Bernard. This billboard was outside a sea (I mean a SEA) of new housing developments a little west and a little south of Tuscon proper. Few of them sold at the time. I wonder what it looks like today. Maybe I’ll find out: I’m getting on a plane back to Arizona tomorrow. That is, after a short layover in Las Vegas–hopefully I’ll manage to get on my connection despite the temptation.

By the way, the semi in the background is on the Great Interstate 10. By further way, I’ve been getting into an Arizona state of mind tonight by listening to the Also Great (and unknown) KXCI. Give ‘em a call, and give ‘em 10 bucks if you can!

Griffin v. Wardrobe, No. 07-16635 (9th Cir. Mar. 16, 2009)

Griffin sued Wardrobe for breach of contract arising out of an allegedly faulty home repair. Three days before trial, Wardrobe filed for Chapter 13 bankruptcy. Griffin then filed a motion with the bankruptcy court to lift the automatic stay triggered by the bankruptcy filing. She represented to the court that she wanted to pursue her state court complaint against Wardrobe’s insurers and wanted to be able to call Wardrobe as a witness. The bankruptcy judge granted the motion.

Griffin later settled with the insurers, but proceeded to trial against Wardrobe. Before trial, she amended her complaint to allege intentional fraud. Griffin obtained a default judgment against Wardrobe in excess of $200,000. She then filed an adversary petition in bankruptcy court to object to the discharge of the state court judgment pursuant to 11 U.S.C. 523(a)(2)(A).

The bankruptcy court granted Griffin’s motion. The Bankruptcy Appellate Panel (the “BAP”) overturned that ruling, and in this recently published opinion, the Ninth Circuit affirmed the BAP.

It ruled that “an order granting limited relief from an automatic stay to allow a creditor to proceed to judgment in a pending state court action is effective only as to those claims actually pending in the state court at the time of the order modifying the stay issues, or that were expressly brought before to the attention of the bankruptcy court during the relief from stay proceedings.”

Opinion of Judge Goodwin.

I don’t know anything about the Pakistani legal system. But I know enough to know that Pakistan’s lawyers and the public believe in the rule of law.

They believe strongly enough to take to the streets. I think it’s because they know how important the rule of law is to democracy.

Sometimes I spend so much time studying the noodling details of the law, that I lose the bigger picture. I lose the forest for the trees, so to speak.

Interestingly, in the same Wall Street Journal, I read a letter from Terry L. Anderson of Bozeman’s Political Economy Research Center. He was pointing out that one major cause of poverty on American reservations is a failure of the Department of the Interior to create a strong rule of law–especially for property rights. Right here in America.

The Bankruptcy Law Journal is very much a work in progress. I think of it as just one man’s journal through America’s bankruptcy laws. If you’ve not really been exposed to bankruptcy and restructuring laws, you’re missing out on an important part of America’s journey. According to one treatise:

One function of bankruptcy laws is to serve as a safety valve for the pressures generated by the conflicts which develop where the exchange of goods and services takes place through multiple extensions of credit from a number of unconnected sources.

This is logically correct, but fails to really capture the point for me. Bankruptcy, for a society like ours, is both critical and good. I’m not saying that we should all go out and declare bankruptcy tomorrow. What I am saying, however, is that our society today is light years ahead of where it was just a few hundred years ago at least in part because we have this safety valve–because we have a legal regime that encourages risk taking.

By the way, for now I’m just focusing on cases in the Ninth Circuit and news in the Southwest. When I have more time, I’ll start covering more.

I just installed Wordpress for the first time on Bankruptcy Law Journal. Wish me luck.

I’ve mentioned this to friends and family for the past year, and it was big in the news last Thursday. I think it was a major mistake for FASB to go to market to market accounting in the first place. After all, that’s what Enron did, right?

Maybe I should back up first, however. FASB is the Financial Accounting Standards Board that governs the accounting rules for financial reporting by accountants. For decades, the financial statements reflected the historical cost of assets, and they didn’t try to reflect the “market” value.

I preferred it that way. Even though the balance sheets of companies were always “wrong” (because the value of the assets are “wrong”) at least they were based upon real numbers (i.e, what they paid for them). Now I don’t know what they’re based on.

The reason the financial crisis hasn’t been solved yet is because nobody can figure out how to price the “toxic” assets. That’s why there’s no RTC. So, if nobody knows what they are worth, then what’s the point of speculating about their value on a balance sheet? Put more directly, if the accounting statements were right, then the government could just buy up the toxic assets based on what the accountants say they’re worth, no?

Put even more simply, I’m highly skeptical of anyone being able to “value” an asset. The only time you really know what something is worth is when you find a buyer.