Law on Rice

On this interview on American Public Media’s Marketplace, Mitchell Hartman gave an interview.  He said:

“[Filings] were up by more than a third just between February and March. But there’s actually two reasons why that is not quite so surprising. First off, believe it or not, spring is apparently bankruptcy season. It’s because people get refund checks, it can cost you $2,000 to $3,000 to pay for a bankruptcy lawyer, so you have the money, you look at your bills and you decide now’s the time to file.”

I have an idea that I got a few weeks ago, and now I’m finally getting a few free moments to spend on it.

It’s called Rule One Four, and yes, a few weeks ago I actually thought of it in the shower.  It solves an ancient problem: clients want more information from lawyers than lawyers can economically give.

So far I have the database modeled, and some screens ready to code up. Hopefully I can have it done in beta next week.

I was watching Ira Glass last night on Current.tv. He was giving would-be storytellers some tips on making good video. He had some of the best advice I think I’ve never heard before.

He said something like, “look, you want to make stories because you love good stories. And because you love good stories, you see and read a lot of them. And so, you’ve got good taste.” “But then you make your own story, and it’s not that good. And you think about giving up.” “There’s this gap–a gap between what you’re actually able to produce and what you know is good–that you can only get over if you just keep at it and don’t give up.”

I think I have that problem. Sometimes I don’t post very much because I read a bunch of great stuff, and I get frustrated with my own stuff. I read a lot. And I’m really picky.

Lately I’ve been reading a lot of Gerry Spence, and he just makes me feel so inferior–even though he’s trying to cause exactly the opposite effect.

I think Ira’s right though, the only way to really get over it is to keep on plugging away.

The Supreme Court released an opinion I’ve been waiting for for quite a while, United Student Aid Funds v. Espinosa. In its unanimous decision, it held that a chapter 13 plan is final judgement and that a disappointed creditor cannot upset the judgment by complaining that a court denied it due process protections when the creditor received a copy of the plan.

It was the result I hoped for, they affirmed the Ninth Circuit, and they overturned quite a few other circuits in the process.

My only complaint is that they never addressed an argument that I made for the creditor in my paper on the topic. That is that Mullane (which Justice Thomas relied on) is really a totality of the circumstances test. And one of those cirumstances in this case was that the creditor expected (quite reasonably) the debtor to serve it a complaint. Justice Thomas simply noted (like Judge Kozinski), that the creditor had actual notice through the plan, and that was the end of the matter.

Before going to law school,  I was in enterprise consulting for around ten years.  Having been in a technical world for so long, I was initially kind of surprised to find out that many people consider law a technical field too.

Then, I started interviewing with firms and meeting a lot of lawyers, and I found out that they were not a whole lot different than the technical corporate guys I used to hang out with.  The people were right.

So, for among many other reasons, I quickly ditched any notions of working in intellectual property.   For a minute there, I thought I would like tax law because, but that seemed just as geeky.  I wanted to be a “real” lawyer, not a geek.

Then I discovered bankruptcy and debtor-creditor work, which I absolutely love.  It’s a little technical, but it still feels like I get to be a lawyer.  That is, I get to do more than advise clients, I might actually get to go to court!

But lately I’ve been thinking it really would be a good idea to continue on an get something like an LLM in tax, or maybe take the CPA exam.  It seems like it would help me a great deal when I do advise clients. I feel like I can easily handle the technical aspects.

But how do I reconcile that sense of being a courtroom trial lawyer with the very technical and arcane tax code?  How does a tax lawyer become a charismatic and a powerful advocate?  How does one take the complex and arcane and make it compelling?

I’m jumping a little out of sequence on my review (see Rule 1001 and Rule 1002) of the Federal Rules of Bankruptcy Procedure because I was working with Rule 2004 quite a bit today.  Rule 2004 is a powerful one.  It’s full text is really too long to reproduce here, but the business end of Rule 2004 (subsection (a)) says, “On motion of any party in interest, the court may order the examination of any entity.”  Subsection (b)  purports to delineate Rule 2004’s scope, but it really doesn’t because there frankly isn’t much scope.  Rule 2004 examinations are exceptionally broad, and they’re far more broad that any discovery tool under the general Federal Rules of Civil Procedure.

While Norton’s seems to underplay its significance by referring to its use primarily by trustees, an oft-cited case Massachusetts case really spells out its power. In re GHR Energy Corp., 33 B.R. 451 (Bankr. D. Mass. 1983).  The Court in GHR Energy said:

It is clear that the scope of a Rule 2004 examination is unfettered and broad. “In general, a large latitude of inquiry should be allowed in the examination of persons connected with the bankrupt in business dealing, or otherwise, for the purpose of discovering assets and unearthing frauds, upon any reasonable surmise that they have assets of the debtor . . . The examination . . . is of necessity to a considerable extent a fishing expedition.” In re Foerst, 93 F. 190, 191 (S.D.N.Y 1899).  It may be “exploratory and groping.” Sachs v. Hadden, 173 F.2d 929, 931 (2d Cir. 1949).  “[T]he breadth of the language employed in the Rule so all emcompassing as semantically to include and encourage harassment on every human subject. ” In re Georgetown of Kettering, 17 B.R. 73, 75, 8 B.C.C. 934, 935 (Bankr. S.D. Ohio 1981).

33 B.R. 453-54. That’s some breathless, vivid, and non-politically correct language therein… “unfettered and broad,” “fishing expedition,”  “exploratory and groping,” and “harassment on every human subject.”

I took a peek around the internet to see what bloggers were saying about today’s Supreme Court decision in Milavetz, Gallop, & Milavetz, P.A. v. United States, no. 08-1119.

Bob Lawless at the popular Credit Slips blog seems satisfied that the decision came out the way he expected, and chastised early reports for their inaccuracies. By contrast, M. Jonathon Hayes at the BankruptcyProf Blog was “shocked” given his read of the oral argument.

On the other hand, Scott Riddle at the Georgia Bankruptcy Blog was surprised that lawyers could be called anything but debt relief agencies under BAPCPA. Stephen Sather, an Austin bankruptcy, lawyer yawned along with Riddle on the designation, but made the point that BAPCPA survived its first constitutional salvo.

Steve Jakubowski at Bankruptcy Litigation Blog took the opportunity to remind us that today would have been Holmes’ 169th birthday. While Washington State bankruptcy lawyer Jay Jump lamented the decision as a lose-lose proposition for lawyers and their clients alike and rings the free speech warning siren in the process (maybe rightly) at the National Bankruptcy Forum.

As for the McLeod Law Offices, they are probably too busy to read the opinion, at least until the weekend. After all, if you haven’t heard, bankruptcy firms debt relief agencies are a little busy these days–just a little.

I’m skimming one of the long-awaited Supreme Court bankruptcy cases, Milavetz, Gallop, & Milavetz, P.A. v. United States, no. 08-1119, a Justice Soyomayor opinion, for lunch at a Starbucks at Park Central Mall in Phoenix.

By now, far more intelligent pundits than I have surely commented on it. Hopeful they are not confused by one of it’s most important holdings like I am.

In ruling that BAPCPA prohibitions do not violate free speech, the Court argued that section 526(a) “prohibits a debt relief agency only from advising an assisted person to incur more debt when the impelling reason for the advice is the anticipation of bankruptcy.”

I’m still confused because I was hoping it would more clearly address the situation where a client says, “I’m thinking about filing for bankruptcy, should I pay my Visa bill considering they will charge a late fee and increased interest rates?”

Doesn’t that incur more debt?

One of the most important things a bankruptcy court offers is the so-called automatic stay.  One of my bankruptcy professors called it the most powerful tool any lawyer has in any field of law.

It stops almost everything, stops it immediately.  That collection company has to stop garnishing your wages. The county judge has to stop that lawsuit. The foreclosure sale on your house stops.  Visa cannot so much as dial the phone to call you.  Yet, if you owe a bank (or other creditor) for a payment on a car or house, the bank is likely going to be able to convince the bankruptcy court to lift the stay if they can convince the judge that they are not “adequately protected.”  Why?

At first, I thought “adequate protection” was Congress’s way of trying to throw creditors a bone.  That is, Congress gave a bankruptcy filers a lot of power, but Congress also wanted a way to protect a secured creditor’s collateral.

But when I looked at the legislative commentary, Congress didn’t mention that particular concern in 1978. Instead, it seems like Congress was more concerned about Fifth Amendment Takings issues.

Phoenix and I grew up together, and the Arizona Republic article about the GPEC reminded me that Phoenix is really built on marketing and sales.  While Arizona has some homegrown industries, Phoenix has perpetually relied on its salesmen to survive.  When surviving on growth and expansion, any business or state must have great salespeople.  And they’ve been great.  They have been selling Phoenix for decades.  Indeed, when I took a class on the history of Phoenix at Arizona State, the early marketing slogan was the “Three Cs”–cotton, climate, and citrus.

And those marketing efforts were critical to the growth and concentration of the majority of wealth and power in Phoenix in the real estate development industry, an industry with sophisticated sales forces.

So, I’m not surprised that the guys running GPEC focus primarily on attracting jobs from out of state employers.  Drawing a new Intel or Google campus with thousands of new jobs filled by people likely to qualify for mortgages is exactly the kind of high impact deal that real estate developers must have to keep growing.

But I think the salesmen are chasing a shrinking market of jobs and stagnating national salaries.  For every dream of a new Google campus comes ten realities of another call center.

What the rest of Arizona’s citizens–those of us who don’t own a real estate development company–need is to stop depending on finding jobs out of state, at least a little.  To really have a vibrant and robust economy, the state should focus on creating more locally owned businesses, so I’d rather see a “tax incentive” for in state entrepreneurs.

Don’t get me confused with one of those anti-growth guys.  I’m very pro-growth, and I’d love to see a new Wal-Mart born tomorrow.  I just think Phoenix would be smart if it tried to help start a new Wal-Mart here where the really high income corporate jobs can stay, rather than trying simply to attract yet another call center with low wages, subject to out of state interests.