Friday, June 02, 2017

bankruptcy - Ch. 13 - grace period to cure arrearage shortly after expiration of plan term

In re Klaas – 3d Cir. – June 1, 2017

The Bankruptcy Code sets certain limits on the amount of time that debtors may be required to remain in Chapter 13 proceedings and make payments on their debts. This case presents two questions of first impression among the Courts of Appeals:

            - whether bankruptcy courts have discretion to grant a brief grace period and discharge debtors who cure an arrearage in their payment plan shortly after the expiration of the plan term, and if so,
            - what factors are relevant for the bankruptcy court to consider when exercising that discretion.

Because we conclude the Bankruptcy Code does permit a bankruptcy court to grant such a grace period and the Bankruptcy Court did not abuse its discretion in granting one here, we will affirm the rulings of the District Court, which in turn affirmed the relevant order and judgment of the Bankruptcy Court.

Wednesday, May 24, 2017

UC - fault - overpayment - wrongful state of mind - finding on

Holmes v. UCBR – Cmwlth. Court – May 23, 2017 – unreported* memorandum decision

The Court reaffirmed its recent decision in Fugh v. UCBR, 153 A.3d 1169, 1176 (Pa. Cmwlth. 2017), holding that in order for an overpayment to be a fault OP, the claimant must have had a wrongful state of mind, about which the UCBR must make a specific finding.

The Fugh court held that finding that a “blameworthy act requires a showing of the actor’s state of mind, or mens rea” and “embodies … knowing recklessness or gross negligence.” We reasoned that a finding of fault “requires conduct ‘of such a degree or recurrence as to manifest culpability, wrongful intent, or evil design, or show an intentional and substantial disregard of the employer’s interest or of the employee’s duties and obligations to the employer.’” Id. (citing Reading Area Water Authority v. UCBR, 137 A.3d 658, 662 (Pa. Cmwlth. 2016)). Further, “[a] negligent act alone does not constitute willful misconduct; rather, the conduct must be of ‘an intentional and deliberate nature.’” Id. (citing Grieb v. UCBR, 827 A.2d 422, 426 (Pa. 2003)).

*An unreported Commonwealth Court case may not be cited binding precedent but can be cited for its persuasive value.  See 210 Pa. Code § 69.414(b) and Pa. R.A.P.  3716

If the case is old, the link may have become stale and may not work, but you can use the case name, court, and date to find the opinion in another source (e.g., Westlaw, Lexis, Google Scholar)

Monday, May 15, 2017

arbitration - FAA - nursing home - state constit. right of access to courts - FAA pre-emption

Kindred Nursing Centers v. Clark – May 15, 2017 – U.S. Supreme Court

Respondents Beverly Wellner and Janis Clark—the wife and daughter, respectively, of Joe Wellner and Olive Clark—each held a power of attorney affording her broad authority to manage her family member’s affairs. When Joe and Olive moved into a nursing home operated by petitioner Kindred Nursing Centers L. P., Beverly and Janis used their powers of attorney to complete all necessary paperwork.

As part of that process, each signed an arbitration agreement on her relative’s behalf providing that any claims arising from the relative’s stay at the facility would be resolved through binding arbitration. After Joe and Olive died, their estates (represented by Beverly and Janis) filed suits alleging that Kindred’s substandard care had caused their deaths. Kindred moved to dismiss the cases, arguing that the arbitration agreements prohibited bringing the disputes to court.

The trial court denied Kindred’s motions, and the Kentucky Court of Appeals agreed that the suits could go forward. The Kentucky Supreme Court consolidated the cases and affirmed. The court initially found that the language of the Wellner power of attorney did not permit Beverly to enter into an arbitration agreement on Joe’s behalf, but that the Clark document gave Janis the capacity to do so on behalf of Olive. Nonetheless, the court held, both arbitration agreements were invalid because neither power of attorney specifically entitled the representative to enter into an arbitration agreement.

Because the Kentucky Constitution declares the rights of access to the courts and trial by jury to be “sacred” and “inviolate,” the court determined, an agent could deprive her principal of such rights only if expressly provided in the power of attorney.

Held:  The Kentucky Supreme Court’s clear-statement rule violates the Federal Arbitration Act by singling out arbitration agreements for disfavored treatment.

(a) The FAA, which makes arbitration agreements “valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract,” 9 U. S. C. §2, establishes an equal-treatment principle: A court may invalidate an arbitration agreement based on “generally applicable contract defenses,” but not on legal rules that “apply only to arbitration or that derive their meaning from the fact that an agreement to arbitrate is at issue,” . . . . The Act thus preempts any state rule that discriminates on its face against arbitration or that covertly accomplishes the same objective by disfavoring contracts that have the defining features of arbitration agreements. The Kentucky Supreme Court’s clear-statement rule fails to put arbitration agreements on an equal plane with other contracts. By requiring an explicit statement before an agent can relinquish her principal’s right to go to court and receive a jury trial, the court did exactly what this Court has barred: adopt a legal rule hinging on the primary characteristic of an arbitration agreement. Pp. 4–7.

(b) In support of the decision below, respondents argue that the clear-statement rule affects only contract formation, and that the FAA does not apply to contract formation questions. But the Act’s text says otherwise. The FAA cares not only about the “enforce[ment]” of arbitration agreements, but also about their initial “valid[ity]”—that is, about what it takes to enter into them. 9 U. S. C. §2. Precedent confirms the point. In Concepcion, the Court noted the impermissibility of applying a contract defense like duress “in a fashion that disfavors arbitration.” 563 U. S., at 341. That discussion would have made no sense if the FAA had nothing to say about contract formation, because duress involves “unfair dealing at the contract formation stage.” Morgan Stanley Capital Group Inc. v. Public Util. Dist. No. 1 of Snohomish Cty., 554 U. S. 527, 547. Finally, respondents’ view would make it trivially easy for States to undermine the Act. Pp. 7–9.

(c) Because the Kentucky Supreme Court invalidated the ClarkKindred arbitration agreement based exclusively on the clearstatement rule, the court must now enforce that agreement. But because it is unclear whether the court’s interpretation of the Wellner document was wholly independent of its rule, the court should determine on remand whether it adheres, in the absence of the rule, its prior reading of that power of attorney. Pp. 9–10. 478 S. W. 3d 306, reversed in part, vacated in part, and remanded.

KAGAN, J., delivered the opinion of the Court, in which ROBERTS, C. J., and KENNEDY, GINSBURG, BREYER, ALITO, and SOTOMAYOR, JJ., joined. THOMAS, J., filed a dissenting opinion. GORSUCH, J., took no part in the consideration or decision of the case.

FDCPA - bankruptcy - proof of claim - old credit card debt

Midland Funding LLC v. Johnson – U.S. Supreme Court – May 15, 2017

Petitioner Midland Funding filed a proof of claim in respondent Johnson’s Chapter 13 bankruptcy case, asserting that Johnson owed Midland credit-card debt and noting that the last time any charge appeared on Johnson’s account was more than 10 years ago. The relevant statute of limitations under Alabama law is six years.

Johnson objected to the claim, and the Bankruptcy Court disallowed it. Johnson then sued Midland, claiming that its filing a proof of claim on an obviously time-barred debt was “false,” “deceptive,” “misleading,” “unconscionable,” and “unfair” within the meaning of the Fair Debt Collection Practices Act, 15 U. S. C. §§1692e, 1692f. The District Court held that the Act did not apply and dismissed the suit. The Eleventh Circuit reversed.

Held: The filing of a proof of claim that is obviously time barred is not a false, deceptive, misleading, unfair, or unconscionable debt collection practice within the meaning of the Fair Debt Collection Practices Act. Pp. 2–10.

(a) Midland’s proof of claim was not “false, deceptive, or misleading.” The Bankruptcy Code defines the term “claim” as a “right to payment,” 11 U. S. C. §101(5)(A), and state law usually determines whether a person has such a right, see Travelers Casualty & Surety Co. of America v. Pacific Gas & Elec. Co., 549 U. S. 443, 450–451. The relevant Alabama law provides that a creditor has the right to payment of a debt even after the limitations period has expired.

Johnson argues that the word “claim” means “enforceable claim.” But the word “enforceable” does not appear in the Code’s definition, and Johnson’s interpretation is difficult to square with Congress’s intent “to adopt the broadest available definition of ‘claim,’ ” . . . .Other Code provisions are still more difficult to square with Johnson’s interpretation.   For example, §502(b)(1) says that if a “claim” is “unenforceable” it will be disallowed, not that it is not a “claim.”   Other provisions make clear that the running of a limitations period constitutes an affirmative defense that a debtor is to assert after the creditor makes a “claim.” §§502, 558. The law has long treated unenforceability of a claim (due to the expiration of the limitations period) as an affirmative defense, and there is nothing misleading or deceptive in the filing of a proof of claim that follows the Code’s similar system.

Indeed, to determine whether a statement is misleading normally “requires consideration of the legal sophistication of its audience,” . . . . .which in a Chapter 13 bankruptcy includes a trustee who is likely to understand that a proof of claim is a statement by the creditor that he or she has a right to payment that is subject to disallowance, including disallowance based on untimeliness. Pp. 2–5.

(b) Several circumstances, taken together, lead to the conclusion that Midland’s proof of claim was not “unfair” or “unconscionable” within the terms of the Fair Debt Collection Practices Act.

Johnson points out that several lower courts have found or indicated that, in the context of an ordinary civil action to collect a debt, a debt collector’s assertion of a claim known to be time barred is “unfair.” But those courts rested their conclusions upon their concern that a consumer might unwittingly repay a time-barred debt. Such considerations have significantly diminished force in a Chapter 13 bankruptcy, where the consumer initiates the proceeding, see §§301, 303(a); where a knowledgeable trustee is available, see §1302(a); where procedural rules more directly guide the evaluation of claims, see Fed. Rule Bkrtcy. Proc. 3001(c)(3)(A); and where the claims resolution process is “generally a more streamlined and less unnerving prospect for a debtor than facing a collection lawsuit,” . . . . .

Also unpersuasive is Johnson’s argument that there is no legitimate reason for allowing a practice like this one that risks harm to the debtor. The bankruptcy system treats untimeliness as an affirmative defense and normally gives the trustee the burden of investigating claims to see if one is stale. And, at least on occasion, the assertion of even a stale claim can benefit the debtor.

More importantly, a change in the simple affirmative-defense approach, carving out an exception, would require defining the exception’s boundaries. Does it apply only where a claim’s staleness appears on the face of the proof of claim? Does it apply to other affirmative defenses or only to the running of the limitations period? Neither the Fair Debt Collection Practices Act nor the Bankruptcy Code indicates that Congress intended an ordinary civil court applying the Act to determine answers to such bankruptcy-related questions. The Act and the Code have different purposes and structural features. The Act seeks to help consumers by preventing consumer bankruptcies in the first place, while the Code creates and maintains the “delicate balance of a debtor’s protections and obligations”. . . .. Applying the Act in this context would upset that “delicate balance.”

Contrary to the argument of the United States, the promulgation of Bankruptcy Rule 9011 did not resolve this issue. Pp. 5–10. 823 F. 3d 1334, reversed.

BREYER, J., delivered the opinion of the Court, in which ROBERTS, C. J., and KENNEDY, THOMAS, and ALITO, JJ., joined. SOTOMAYOR, J., filed a dissenting opinion, in which GINSBURG and KAGAN, JJ., joined. GORSUCH, J., took no part in the consideration or decision of the case.

Thursday, May 11, 2017

MERS - recorder of deeds

MERS et al. v. Recorder of Deeds, et al. – Cmwlth. Court (en banc) – May 4, 2017

Preliminary objections of MERS sustained in action by various recorders of deeds to collect filing fees under 21 P.S. 351 (Failure to record conveyance)

“[W]e agree with the court’s conclusion in Montgomery County that, “Section 351 does not issue a blanket command that all conveyances must be recorded; it states that a conveyance ‘shall be recorded’ in the appropriate place, or else the party risks losing his interest in the property to a bona fide purchaser.” 795 F.3d at 377. While the plain language of Section 351 “informs property owners of what steps they must take in order to safeguard their interests [it] does not in any way state or imply that failure to record constitutes [an enforceable] violation of the statute . . . .” 795 F.3d at 377-78.  Our conclusion is grounded in the clear language of the statute, and it also is supported by a body of case law interpreting Pennsylvania recording laws that specifically addresses the purpose of those statutes and the effect of a failure to record an interest in land.

“[We are not called upon to evaluate how MERS impacts various constituencies or to adjudicate whether MERS is good or bad.” 795 F.3d at 379. To the extent that public policy matters are implicated in this appeal, there is no question that matters of public policy are solely committed to the legislature, and not this Court.”

Dissent (Brobson, McCullough, Covey)
Although I may ultimately adopt the majority’s view on the merits, a whiff of doubt remains. I, therefore, would prefer to see this matter mature past the pleadings stage before rendering a final judgment on either the proper
construction of Section 1 of the Act of May 12, 1925, P.L. 613, as amended, 21 P.S. § 351, or the authority of the Recorders to maintain their declaratory judgment actions.

Thursday, April 13, 2017

bankruptcy - automatic stay - willful violation - emotional distress damages

In re Landsaw – 3d Cir. – April 10, 2017

The filing of a bankruptcy petition operates as an automatic stay of debt collection activities outside of bankruptcy proceedings. 11 U.S.C. § 362(a).  If “an individual [is] injured by any willful violation of [the] stay,” that individual “shall recover actual damages, including costs and attorneys’ fees, and, in appropriate circumstances, may recover punitive damages.” Id. § 362(k)(1).

In the present case, a creditor committed several willful violations of the automatic stay arising from the debtors’ bankruptcy petition. Because of these violations, the Bankruptcy Court awarded the debtors  emotional-distress damages as well as punitive damages under § 362(k)(1).  The District Court affirmed the awards.

We conclude that § 362(k)(1) authorizes the award of emotional-distress damages and that the debtors presented sufficient evidence to support such an award. We also conclude that the debtors were properly awarded punitive damages.

If the case is old, the link may have become stale and may not work, but you can use the case name, court, and date to find the opinion in another source (e.g., Westlaw, Lexis, Google Scholar)

Tuesday, April 11, 2017

UC - late appeal - misleading information

Greene v. UCBR – Cmwlth. Court – March 10, 2017

Claimant denied nunc pro tunc late appeal in spite of the fact that he was incorrectly advised that he could not collect UC benefits while receiving severance pay, since there were “no statements attributable to compensation authorities that address the availability, timing or need for an appeal.”  The Court held that “not every misstatement by an apparently authoritative person will justify a nunc pro tunc appeal; rather, the misinformation must relate to the availability, timing or need for an appeal. “

The question of whether permission to appeal nunc pro tunc should be granted is one which lies in equity. See Bass v. Bureau of Corrections, 401 A.2d 1133 (Pa. 1979); see also, Schofield v. Department of Transportation, Bureau of Driver Licensing, 828 A.2d 510, 512 (Pa. Cmwlth. 2003).

This case involved a simple matter of fairness. There is no question that misleading information by a governmental entity was provided to Claimant. This information, at the very least, influenced (if not outright controlled) Claimant's decision-making process about whether and when to appeal, and created an impediment to the timely filing of the appeal. Submitting the equitable question to the standard employed by the Majority places such a noose around it as to choke it of all sense of fairness.

Thursday, March 09, 2017

mortgage insurance - HAMP modification - extension of insurance premiums not proper

Fried v. JP Morgan Chase – 3d Cir. – March 9, 2017

Ginnine Fried bought a home in 2007 for $553,330. It was near high tide in the real estate market, but she had to believe she was getting a bargain, as an appraisal estimated the home’s value to be $570,000.

Fried borrowed $497,950 at a fixed interest rate to make her purchase and mortgaged the home as collateral. Because the loan-to-purchase-price ratio ($497,950 / $553,330) was more than 80%, JPMorgan Chase Bank, N.A. (“Chase”), the servicer for Fried’s mortgage (that is, the entity who performs the day-to-day tasks for the loan, including collecting payments), required her to obtain private mortgage insurance. Fried had to pay monthly premiums for that insurance until the ratio reached 78%; in other words, the principal of the mortgage loan needed to reduce to $431,597, which was projected to happen just before March 2016.

We now know that the housing market crashed in 2008, and the value of homes dropped dramatically. Fried, like many homeowners, had trouble making mortgage payments. Help came when Chase modified Fried’s mortgage under a HAMP, a federal aid program, by reducing the principal balance to $463,737. The rub was that Chase extended Fried’s mortgage insurance premiums an extra decade to 2026.

Whether it could do this depends on how we interpret the Homeowners Protection Act (“Protection Act”), 12 U.S.C. § 4901 et seq. Does it permit a servicer to rely on an updated property value, estimated by a broker, to recalculate the length of a homeowner’s mortgage insurance obligation following a modification or must the ending of that obligation remain tied to the initial purchase price of the home? We conclude the Protection Act requires the latter.

due process - impartial tribunal - actual bias v. unacceptable risk of bias - US SCt

Rippo v. Baker – US SCt – March 6, 2017

Criminal conviction reversed where defendant moved to disqualify judge, who was subject of federal investigation in with the state DA’s office had participated.

State supreme court’s use of actual bias standard was improper.  Under U.S. Supreme Court precedents “the Due Process Clause may sometimes demand recusal even when a judge “ ‘ha[s] no actual bias.’ ” Aetna Life Ins. Co. v. Lavoie, 475 U. S. 813, 825 (1986). Recusal is required when, objectively speaking, “the probability of actual bias on the part of the judge or decisionmaker is too high to be constitutionally tolerable.” Withrow v. Larkin, 421 U. S. 35, 47 (1975); see Williams v. Pennsylvania, 579 U. S. ___, ___ (2016) (slip op., at 6) (“The Court asks not whether a judge harbors an actual, subjective bias, but instead whether, as an objective matter, the average judge in his position is likely to be neutral, or whether there is an unconstitutional potential for bias” (internal quotation marks omitted)).

The decision in Bracy v. Gramley, 520 U. S. 899 (1997) is not to the contrary:   Although the Court explained that the petitioner there had pointed to facts suggesting actual, subjective bias, it did not hold that a litigant must show as a matter of course that a judge was “actually biased in [the litigant’s] case,” . . . . much less that he must do so when, as here, he does not allege a theory of “camouflaging bias.” The Nevada Supreme Court did not ask the question that the  SCt precedents require: whether, considering all the circumstances alleged, the risk of bias was too high to be constitutionally tolerable.