A district court in Pennsylvania ruled on a motion to dismiss a FDPCA claim against LVNV and Resurgent Capital by plaintiffs who allege that in 4 separate chapter 13 bankruptcy cases LVNV Funding, LLC and Resurgent Capital Services, LP (hereinafter 'LVNV' filed false proofs of claims by including interest and fees in the principal balance, without checking a box on the claim stating that such claims included interest and fees.  Howard v. LVNV Funding, Inc., 2020 U.S. Dist. LEXIS 34697, Case No 3:19-cv-93 (W.D. PA, 28 February 2020).  Plaintiffs alleged that the inaccurate claims violated 15 U.S.C. §1692e prohibiting the making of false or misleading representations in collecting debts, and §1692f barring use of unfair or unconscionable debt collection practices.  The claims ranged from $309.36 to $1,148.62.  The Court found that LVNV knew the amounts included interest and fees based on the records of the debts it received when it purchased the claims, but that it is their regular practice to either withdraw the claim after the debtor objects, permit the court to disallow the claim by default, or to provide correct information after the bankruptcy court orders it to do so.  LVNV initially argued that the Bankruptcy Code preempts the FDPCA.   The Court disagreed, finding that in this instance both the provisions of the FDPCA and the Code are enforceable without any conflict.  The Code and FDPCA would conflict only where they impose conflicting obligations upon a debt collector.  The availability of separate and overlapping remedies does not necessitate preclusion.1  The obligations under Bankruptcy Rule 3001 require a creditor to fill out Form 410, which requires a creditor to state whether the amount owed includes interest or other charges.  The FDPCA has similar requirements, prohibiting collectors from falsely representing the character or amount of debts they seek to collect.  15 U.S.C. §1692e, as well as barring use of false or misleading representations in debt collection activities, 15 U.S.C. §1692f.  The Court also noted that while the filing of a proof of claim is an attempt to collect a debt under the FDPCA, such filing does not violate the automatic stay provision, which only bars debt-collection activity that occurs outside the bankruptcy proceeding.  The Court denied LVNV's motion to dismiss as to §1692e.  In order to state a claim under FDPCA, a plaintiff must show 1) he or she is a debtor; 2) the defendant is a debt collector; 3) the defendant's acts constitute an attempt to collect a debt under the FDPCA; and 4) those acts violate an FDPCA provision.2   LVNV only disputes the 3rd and 4th elements.  The Court previously found that the filing of a claim is an attempt to collect a debt covered by the FDPCA, so the only remaining issue is whether the filing of the claims in these cases violated an FDPCA provision.   Collectors are required to make truthful, nonmisleading representations to debtors.  15 U.S.C. §1692e.   The making of false, deceptive, or misleading representations while collecting a debt is a FDPCA violation.  The 3rd Circuit follows the 'least sophisticated debtor' standard: ie if plaintiff can show that the least sophisticated debtor would be misled by the representation they can support the FDPCA claim.3  The claim also must be material, in that it has the potential to affect such least sophisticated debtor's reasoning.  The allegations in the complaint give rise to a plausible claim that LVNV made materially false or misleading representations in attempting to collect these debts.  It represented that the amount sought was solely principal when it was not.  Even if the total debt was correct, the least sophisticated consumer could have been mislead by such representation.  Accordingly the motion to dismiss the §1692e claim is denied.  The Court granted the request to dismiss the §1692f claim, finding that the conduct was neither unfair nor unconscionable.  While the claims did not break down the interest, principal, and fees; the proof of claim is the only permissible form of communication with a debtor in the bankruptcy process.  Communicating the existence of a debt through an approved method is neither unfair nor unconscionable.  A claim under §1692f requires the same elements as §1692e.  Again, the only element remaining in dispute is the fourth, whether LVNV violated the FDPCA's prohibition on unfair or unconscionable debt collection practices.  The Second Circuit had held that to meet this standard, the debt collection practices must be 'shockingly unjust or unfair, or affronting the sense of justice, decency, or reasonableness'.4   The filing of a false or misleading claim by itself does not rise to this standard.  The allegations do not support the inference that LVNV filed the claims primarily to harass the plaintiffs.    Also, plaintiffs cannot rely on the same conduct to establish violations of two separate FDCPA provisions.1 Simon v. FIA Card Servs., N.A., 732 F.3d 259, 278-79 (3d Cir. 2013).↩2 Douglass v. Convergent Outsourcing, 765 F.3d 299, 303 (3d Cir. 2014).↩3 Jensen v. Pressler & Pressler, 791 F.3d 413, 418-19 (3d Cir. 2015).↩4 Arias v. Gutman, Mintz, Baker, & Sonnenfeldt LLP, 875 F.3d 128, 135 (2d Cir. 2017).↩Michael BarnettMichael Barnett, PA506 N Armenia Ave.Tampa, FL 33609-1703813 870-3100https://hillsboroughbankruptcy.com

Yes, but you must consider all of the ramifications of filing bankruptcy upon your unique financial situation before you file. What is a reverse mortgage? Seniors over the age of 62 who own their home outright or have significant equity in their home often tap into that equity by taking out a reverse mortgage. A reverse mortgage provides those homeowners with monthly income from their lender, typically for their lifetime, and they can stay in their home If you are one of these seniors, what happens if your bills become too much to handle, or you fall behind on your car or utility payments? It might occur to you that filing bankruptcy is an option. However, there are some situations in which bankruptcy and a reverse mortgage are compatible, and many situations where they are absolutely not. Following are the primary considerations when you have a reverse mortgage and are considering bankruptcy in PA. 1. Why do you think you need to file bankruptcy in PA? What type of debt do you have? Credit card bills? Medical debt? Personal loans? These can easily be taken care of in a Chapter 7 bankruptcy filing, however, there will be an effect on your reverse mortgage. Most people have the type of reverse mortgage that flips equity in the home into a monthly payment to the homeowner from the lender. The thing is, the lender cannot make those monthly payments to you while your bankruptcy case is active. If you wanted to file a Chapter 7 bankruptcy case, you would have to have about 6 months’ worth of expenses saved up to survive that period. Now, if you are behind on a car loan and you need a way to pay the arrears to the lender and keep that car, filing Chapter 13 bankruptcy is the way to go as long as you can make the regular monthly car payment outside the Chapter 13 plan, and pay a monthly amount to the Chapter 13 Trustee to pay your car lender.  However, a Chapter 13 case lasts either three or five years – few people have that amount of money saved up and could go without their monthly reverse mortgage payment. 2. What is your property worth, and what is the reverse loan balance? This information is crucial, as you are likely asking this question because you want to protect your home! Typically, when you take out a reverse mortgage there must be at least 50% equity in the home – meaning, you only owe half of what the property is worth. Depending upon the value of your home, it may be difficult to protect that amount of equity from seizure by the Chapter 7 Trustee with any applicable exemptions. The timing of a bankruptcy filing matters. If you took that reverse mortgage out some time ago, the loan balance will have increased and the amount of equity decreased, making it easier to protect your home in bankruptcy. If home values increased since you took the reverse mortgage out, you could run into the same problem – too much equity to protect. But if home values have decreased, then it might be easier to file bankruptcy and protect your home with a bankruptcy exemption. Property value and reverse mortgage loan balance – these are two of the crucial bits of information you’ll need to determine whether bankruptcy is for you. Ask your lender for a document called a “10-day pay-off,” which give you your loan balance to take to your attorney consultation. 3. What type of reverse mortgage is it? Look at your Reverse Mortgage – What are the Terms? Depending upon the type of reverse mortgage you have and its terms, you may be able to protect your home in Chapter 7 bankruptcy even if it looks like the amount of equity you have in it exceeds available exemptions. How is this done?  Your lender files a document called a “proof of lien” and you may be able to reaffirm the mortgage debt and keep the house in your Chapter 7 filing. Some reverse mortgage agreements require you to surrender your home to your lender if you file bankruptcy in PA. Other agreements provide that the lender can end the reverse mortgage and retain the lien on your property. You are your attorney should review your reverse mortgage documents very carefully to determine the effect bankruptcy will have on your reverse mortgage. What is the Amount of Your Monthly Reverse Mortgage Payment? If you are considering filing under Chapter 7, you will need to determine if you will pass the means test.  This is the test that weighs your income with some designated expenses and assets and determines if you are eligible to file Chapter 7. The monthly reverse mortgage payments you receive are considered income for the purposes of the means test. Do you receive too much to qualify?  Perhaps on it face your income is too high to file under Chapter 7, but the means test also takes into consideration certain necessary expenses – medically necessary expense included.  Your attorney can look at all aspects of your financial situation and determine whether you are eligible to file Chapter 7. In some cases, the Reverse Mortgage Company will dispense the money to you in one lump sum. How We Recently Saved a Client’s Home An older gentlemen came into see us. He had taken out a reverse mortgage. As part of the agreement, he remained responsible for paying the property taxes and homeowner’s insurance on the home, but he failed to do so. After 2 years, the mortgage company started a foreclosure proceeding on the reverse mortgage. The homeowner had no savings and the mortgage company refused to allow him any time to get together the past-due monies, which totaled over $11,000.00. During his initial consultation with us, he indicated that he wanted to spend the rest of his living years in this house and asked what his options were. We advised him that we could help him file a Chapter 13 bankruptcy case to give him time to make up the missed real estate tax and homeowner’s insurance payments. We filed a Chapter 13 case for him and gave him five years to get caught up on the missed  and real estate tax and homeowner insurance payments. The homeowner’s Chapter 13 plan proposed that he make a payment every month to a Chapter 13 Trustee and he resumed paying the real estate taxes and the homeowner’s insurance as those bills became due. Our client’s plan was approved by the court and he was able to save the house, which he had owned for many years prior to taking out the reverse mortgage. An unexpected benefit for our client was that several personal loans he had taken out were discharged as unsecured debt! Every situation is unique – get help in making this decision before filing bankruptcy with a reverse mortgage in PA. Consult with a Philadelphia reverse mortgage attorney who can help you weigh your options and make the right decision for you and your financial situation and goals. Your initial consultation is free! We will look at your reverse mortgage documents, your other income, your expenses, your assets, the value of your home, and the loan balance and discuss bankruptcy options as well as alternatives to bankruptcy in PA with you. Let us help you get a fresh start!   The post Can I File Bankruptcy with a Reverse Mortgage in Philadelphia? appeared first on David M. Offen, Attorney at Law.

New York taxi drivers and politicians are raising alarms after a secretive hedge fund this week quietly became the city’s largest owner of taxi-medallion loans.Marblegate Asset Management — a tight-lipped investment firm that has already scooped up some 300 medallions and 1,000 loans, many of them previously owned by disgraced “Taxi King” Gene Freidman — has taken over loans tied to an additional 3,000 New York medallions, sources told The Post.The deal — valued at about $350 million with the inclusion of an additional 1,500 loans from Chicago, Philadelphia and other cities, according to sources — makes Marblegate New York City’s biggest-ever owner of medallion loans, with nearly a third of the total of 13,500 issued.The Greenwich, Conn.-based hedge fund didn’t respond to requests for comment, even as critics raised fears that the deal could spell more bad news for cab drivers.The market value of a New York City taxi medallion — which had topped $1 million in late 2013 — has since tanked below $200,000 with the rise of ride-sharing startups like Uber and Lyft. With passengers defecting in droves, New York’s yellow-cab drivers are facing mounting debts, with nine suicides reported in the last two years.Some industry sources said they were skeptical whether Marblegate would be interested in taking a haircut on the loans to help out taxi drivers.“[Marblegate] is happy owning these assets because they want to own a superfleet and build economies of scale,” according to one industry insider. “The idea is to keep buying the loans, keep foreclosing on them and keep gobbling up medallions until you control the market.”About 60 members of the New York Taxi Workers Alliance had driven down to Virginia on Wednesday in a last-ditch effort to stop Marblegate’s purchase of the loans from the National Credit Union Administration, a federal agency that had taken on the New York loans after the collapse of two local credit unions in 2018.“It’s ridiculous,” said Bhairavi Desai, the taxi driver group’s executive director. “We’re pretty pissed off.”Letitia James preps suit against city over medallion debt crisisDesai says the group met with NCUA reps two weeks ago to discuss letting the Taxi Workers Alliance find a private partner that would help the nonprofit buy the loans. The alliance has said it wants to restructure the loans at uniform values of $150,000 and freeze monthly payments on those debts at $900.Instead, Desai said that the NCUA — which said in a Wednesday announcement it has lost $760 million holding onto the debt — simply turned around and sold the medallions to the highest bidder.“We are fiduciaries for the share insurance fund. We are not some hedge fund selling assets,” NCUA board member J. Mark McWatters told the 60 visiting New Yorkers at the regulator’s monthly board meeting in Virginia. “We needed to take this offer.”The NCUA has assured the Taxi Workers Alliance that Marblegate is open to talking debt relief with medallion owners and that a meeting between the parties to start those talks has been set for “sometime next week,” Desai said.City officials are equally concerned about what putting an outsize share of taxi medallions in the hands of a hedge fund means for taxi operators on the brink.“People will read this story and think about committing suicide,” said City Council Member Ydanis Rodriguez, chair of the Transportation Committee. “We cannot wait for the city to create a public-private partnership to buy medallions in foreclosure and hold the medallions so that the debt on them can be reduced. We need to act yesterday on fixing this.”

The state’s attorney general is seeking $810 million from the city to compensate financially struggling taxi medallion owners. New York State’s attorney general on Thursday accused New York City of committing fraud by artificially inflating the value of yellow taxi medallions, and she demanded $810 million from the city to compensate the thousands of cabdrivers who are now saddled with enormous debt.The city’s Taxi and Limousine Commission marketed the medallions — city-issued permits required to own a yellow cab — as “a solid investment with steady growth” and reaped a profit from the sale of thousands of them at auction at exorbitant prices from 2004 to 2017, according to an investigation by the attorney general’s office. The attorney general, Letitia A. James, said the city must provide financial relief to the debt-ridden taxi medallion owners within 30 days or she would sue for fraud, unlawful profit and other violations of state law. “These taxi medallions were marketed as a pathway to the American dream, but instead became a trapdoor of despair for medallion owners harmed by the T.L.C.’s unlawful practices,” Ms. James said. “The very government that was supposed to ensure fair practices in the marketplace engaged in a scheme that defrauded hundreds of medallion owners, leaving many with no choice but to work day and night to pay off their overpriced medallions.’’Bhairavi Desai, the executive director of the New York Taxi Workers Alliance, which represents cabdrivers, said she welcomed Ms. James’s action and saw it as a validation of the city’s culpability in the taxi crisis. “The devastation that has happened across the taxi industry has been a deep betrayal by the city,” she said. “Not only did they close their eyes to predatory practices and directly engage in inflating the prices but they then allowed in Uber and Lyft completely unregulated.” Freddi Goldstein, a spokeswoman for Mayor Bill de Blasio, said that although the taxi crisis began under Michael R. Bloomberg’s administration, city officials since then have taken steps to provide financial help to taxi drivers and tighten oversight of Uber and other ride-hailing companies. The attorney general began her inquiry in response to an investigation by The New York Times, which found that a handful of taxi industry leaders earned hundreds of millions of dollars by deliberately inflating the price of a medallion to more than $1 million from about $200,000. The Times found that thousands of drivers, many of them immigrants, thought they were safe taking out loans to buy medallions because of the taxi commission’s assurances of their high value. City, state and federal officials exacerbated the problems by exempting the industry from regulations, The Times revealed. The city also filled in budget gaps by selling medallions and running ads promoting the permits as “better than the stock market.” Ms. James said that the city continued to market the medallions at inflated prices even after internal warnings were raised. During the last auction for medallions in 2014, the city sold 350 new medallions at the height of the market, generating $359 million in revenue. Since then, medallion prices have cratered, selling for a fraction of the record $1.3 million price in 2014. In many cases, they are worth far less than what their owners borrowed to buy them. In 2018, New York became the first major American city to adopt a one-year moratorium on issuing new vehicle licenses for Uber, Lyft and other ride-hail services. It came three years after Mr. de Blasio attempted to adopt a similar cap but abandoned the effort after Uber waged a fierce campaign against him. Since then, the city has extended the moratorium. “This crisis has been ours to solve — working tirelessly to clean up the carelessness and greed of others,” Ms. Goldstein said. “If the attorney general wants to launch a frivolous investigation into the very administration that has done nothing but work to improve the situation, this is what she’ll find.” But Ms. Desai said the city’s response has been slow and its efforts so far have generally been underwhelming. She noted that the city waived some small fees for taxi owners even as they drowned under huge debts. “There has been no substantial financial relief — this restitution would be the first,” she said.The city comptroller, Scott M. Stringer, said Ms. James had made “significant allegations” and that his office “takes these issues very seriously.” The city controls the number of medallions — currently capped at just under 13,600 — to prevent an oversupply of cabs like what happened in the 1930s when concerns over congestion, reckless driving and cut-rate fares led the city to step in. As medallion prices soared, drivers were steered into taking out loans totaling billions of dollars that they could never repay, plunging many into bankruptcy. A spate of suicides by taxi owners and professional drivers in recent years underscored the severity of their plight and has spurred city legislation to try to improve their working conditions. A spokesman for Ms. James said that while Thursday’s action was focused on the city’s role in the taxi crisis, their ongoing investigation continued to examine “all aspects of the taxi industry.” The United States Attorney’s office in Manhattan has also launched a criminal investigation. Taxi industry leaders have denied doing anything wrong, characterizing their actions as normal business practices. They have sought to blame the taxi meltdown entirely on the rise of competing ride-app services such as Uber and Lyft. Last month, a city panel appointed by the New York City Council and Mr. de Blasio proposed a bailout of up to $600 million for taxi drivers, but most of that money would come from private investors. Ms. James is seeking $810 million directly from the city. It is unclear how her demand would affect the bailout plans. City Councilman Ydanis Rodriguez, who was the co-chairman of the panel, said he believed the city did bear some responsibility for creating the taxi crisis, and as a result, it had an obligation to provide financial relief to taxi owners. He added that the city should consider all proposals, including Ms. James’s demand for compensation as well as the private-public bailout proposed by the panel. “What I know is this crisis is so huge and the medallion owners are so desperate that they cannot wait any longer,” Mr. Rodriguez said. Ms. James said the payment from the city would be used to pay restitution to taxi medallion owners, which could include paying off loans, and compensating them for damages resulting from the city’s actions. She also plans to take additional measures to prevent the Taxi and Limousine Commission and the city from inflating taxi prices in the future.Nino Hervias, a taxi owner and spokesman for the Taxi Medallion Owner Driver Association, which represents many immigrant taxi owners, said that it was time that the city was held directly liable for destroying the yellow taxi industry and pushing so many drivers into bankruptcy.

  The Bankruptcy Court for the Western District of New York issued two decisions on 19 February 2020 setting aside real property tax foreclosure sales on the homes of chapter 13 debtors.  In re Hampton,  2020 Bankr. LEXIS 447, Case No 17-20459-PRW, Adv No. 17-2009-PRW (Bankr. W.D. N.Y. 19 Feb 2020) and In re Gunsalus, 2020 Bankr. LEXIS 446, Case No. 17-20445-PRW, Adv. No 17-2008-PRW (Bankr. W.D. N.Y. 19 Feb 2020).  Both debtors filed adversary proceedings under 11 U.S.C. 550(a) to set aside the prepetition tax sales.      The Hamptons, who filed chapter 13 on 2 May 2017 stipulated that the unpaid taxes totaled $5,157.73 vs. a fair market value of the property between $60,000 and $87,000 as of the date the county was awarded title to the home, 7 March 2017.  The county subsequently conducted a post-foreclosure auction sale of the property, netting the county over $21,000 after payment of all taxes, which the county was entitled to keep under state law.   The Gunsaluses filed chapter on 28 April 2017.  The taxes owed on their property was $1,290.29, and the county obtained a final judgment of foreclosure on 9 June 2016.  The value of the Gunsaluses' home was  between $28,000 and $30,000 on that date.  The county conducted a post-foreclosure auction sale on this property on 17 May 2017.  The court found both debtors were insolvent on the date of the transfer of the property (the date of the final judgment of foreclosure).  Under 11 U.S.C. 548(a)(1)(B) a trustee may set aside a constructively fraudulent conveyance if 1) the debtor had an interest in property; 2) a transfer of the property occurred within two years of the filing of the bankruptcy; 3) the debtor was insolvent at the time of the transfer or became insolvent as a result of the transfer, and 4) the debtor received less than reasonably equivalent value in exchange for the property transfer.  Under §522(g)(1) and (h) the debtor may avoid such transfer if 1) the transfer was not voluntary; 2) the property was not concealed by the debtor; and 3) the trustee did not attempt to avoid the transfer.   While the party seeking to avoid the transfer has the burden of proving each element by a preponderance of the evidence, there is no dispute in these cases that all the elements of §522(h) are met.  The only dispute in these cases is whether the last element under §548(a)(1)(B) is met, whether the debtors received reasonably equivalent value in exchange for the transfer of the title to their home.  In making this determination the court must determine whether the debtors' economic position immediately after the tax foreclosure was equivalent to their economic position before the tax foreclosure.1   Examining either the appraised value of the properties at the time of the tax foreclosure sale, or the amount received by the county at the subsequent post-seizure auction, reflects a purchase price between 4.6% and 19.1% of the fair market of the property.  The court finds that a price of 19.1% of the fair market value is not reasonably equivalent to the value of the property.  The fact that the debtors may have been able to exempt the excess value of the property, resulting in no benefit to creditors does not prevent the setting aside of the transfer.  The case cited by the county, In re Murphy2 is distinguishable as it had been converted to a chapter 7 liquidation.  Further, the $10,000 New York homestead exemption in that case, unlike the federal homestead exemption, is subordinated to and effectively eliminated by a tax lien for purposes of §522(g)(1).  Third, the trustee in Murphy did commence an action to avoid the transfer of the property.  These differences allowed the Murphy court to find that the debtor there was not legally harmed by the forfeiture of the property.  The debtors in the cases at bar do have the right to avoid the transfer because 1) they claimed the federal homestead exemption; 2) the transfer of the property was not voluntary; 3) the property was not concealed; 4) the transfer is avoidable by the trustee under §548; and 5) the trustee did not attempt to avoid the transfer.    The fraudulent transfer provisions are intended not only to ensure a fair distribution to creditors but also a fresh start to debtors.   The bankruptcy court had enjoined the transfer of title to the third party bidder at the post-foreclosure auction.  The court found that requiring return of title to the debtors would provide in indirect but important benefit to the estate by greatly increasing the probability of a successful reorganization under chapter 13.  Thus, the court ordered the county to restore the debtors ownership and possessory rights to the property, and voided the post-foreclosure auction; requiring a refund by the county to the third party bidder at such auction.  The court kept the tax lien in place until the tax debt is repaid through the chapter 13 plan.  The court also overruled the county's objection to the debtors' homesteads, finding that under §522(c)(2)(B) the property exempted remains liable for any debt secured by the tax lien until the lien is satisfied. 1 In re Clay, 2015 Bankr. LEXIS 2039 at 7, (Bankr. E.D. Wis. 2015).↩2 331 B.R. 107 (Bankr. S.D. N.Y. 2005).↩Michael BarnettMichael Barnett, PA506 N Armenia Ave.Tampa, FL 33609-1703813 870-3100https://hillsboroughbankruptcy.com

UNITED STATES BANKRUPTCY COURT FOR THE SOUTHERN DISTRICT OF OHIO WESTERN DIVISION AT DAYTON In re: GYPC, INC., Debtor Case No. 17‐31030 Adv. No. 19‐3032 GYPC, INC., Plaintiff v. MINDSTREAM MEDIA, LLC, Defendant / Third‐Party Plaintiff v. CHRISTOPHER CUMMINGS ERIC WEBB, Third‐Party Defendants Judge Humphrey Chapter 7 Decision Denying Motion of Third‐Party Defendants, Christopher Cummings and Eric Webb, to Dismiss the Third‐Party Complaint of Mindstream Media, LLC (Doc. 18) This decision addresses whether, in a preference action, a third‐party complaint for indemnification should be dismissed for failure to state a claim. This court has jurisdiction This document has been electronically entered in the records of the United States Bankruptcy Court for the Southern District of Ohio. IT IS SO ORDERED. Dated: February 10, 2020 Case 3:19-ap-03032 Doc 34 Filed 02/10/2 d 02/11/20 12:09:51 Desc Main Document f 9 Case 3:19-ap-03032 Doc 34 Filed 02/10/20 Entered 02/11/20 12:09:51 Desc Main Document Page 2 of 9 pursuant to 28 U.S.C. § 1334(b) and the Standing Order of Reference, Amended General Order No. 05‐02 (S.D. Ohio Sept. 16, 2016). I. Factual and Procedural Background GYPC, Inc., a Chapter 11 debtor, filed a complaint against Mindstream Media, LLC (“Mindstream”) for the avoidance and recovery of certain preferential transfers. Following the conversion of the estate case from Chapter 11 to Chapter 7, Donald F. Harker, III was appointed as the Chapter 7 Trustee, and substituted as the proper party plaintiff in this adversary proceeding. Mindstream filed an answer and a third‐party complaint (the “Third Party Complaint”) against Christopher Cummings and Eric Webb (collectively, the “Third‐Party Defendants”). The Third‐Party Complaint alleges that the Third‐Party Defendants are required, jointly and severally, to indemnify Mindstream for any preferential transfers it may be required to return to the bankruptcy estate. The Third‐Party Defendants have moved to dismiss the Third‐Party Complaint as failing to state a claim for which relief can be granted. The genesis for the Third‐Party Complaint and the Defendants’ motion to dismiss is a July 12, 2016 Asset Purchase and Sale Agreement (the “Agreement”). The parties to the Agreement were General Yellow Pages Consultants, Inc. (“GYPC”), as seller; the Third‐Party Defendants, as principals; Mindstream, as the buyer; and Eastport Holdings, LLC (“Eastport”) as the parent company of Mindstream. Through the Agreement, GYPC sold substantially all of its assets to Mindstream. The Agreement provided, in section 6.1(c), that the Third‐Party Defendants are required to indemnify Mindstream from, among other things, any Excluded Liabilities. The transfers, made in January and February 2007 in the total amount of $53,153.60, were reimbursements for Excluded Liabilities which GYPC apparently made to Mindstream pursuant to § 10.1 of the Agreement. However, in seeking dismissal of the third‐party complaint, the Third‐Party Defendants argue that before pursuing indemnification under section 6.1, Mindstream, through its parent Eastport, is required to offset any such damages or liability against GYPC’s Preferred Membership Interest in Eastport, which GYPC acquired through the Agreement. See Section 2 Case 3:19-ap-03032 Doc 34 Filed 02/10/20 Entered 02/11/20 12:09:51 Desc Main Document Page 3 of 9 6.6 of the Agreement. In addition, the Third‐Party Defendants assert that under ¶ 10.1 of the Agreement, GYPC, and not the Third‐Party Defendants, are responsible for any Excluded Liabilities. II. Standard of Review A motion to dismiss an adversary proceeding for “failure to state a claim upon which relief can be granted” is governed by Federal Rule of Civil Procedure 12(b)(6) (applicable by Federal Rule of Bankruptcy Procedure 7012(b)). The factual allegations must put the defendant on notice as to the claims being alleged and provide a sufficient factual predicate to make the allegations plausible, and not merely possible. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). Federal courts are not obligated to accept as true legal conclusions couched as factual allegations. Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007). While detailed factual allegations are not necessary, the allegations must be sufficiently detailed to create more than speculation of a cause of action. Id. A claim is plausible if the factual allegations are sufficient to allow “the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” HDC, LLC v. Ann Arbor, 675 F.3d 608, 611 (6th Cir. 2012) (citations and internal quotation marks omitted). See Fed. R. Civ. P. 8(a)(2) (applicable by Fed. R. Bankr. P. 7008, which requires “a short and plain statement of the claim showing that the pleader is entitled to relief[.]”). III. Analysis The legal issue before the court is a narrow one. The Agreement addresses all the key terms between the parties and no party has requested that the court consider extrinsic evidence in making its determination. See Individual Healthcare Specialists, Inc. v. BlueCross Blue Shield of Tenn., Inc., 566 S.W.3d 671, 695 (Tenn. 2019) (noting Tennessee law has a “strong strain” of textualism “to keep the written words as the loadstar of contract interpretation.”). First, ¶ 6.1 of the Agreement1 provides that GYPC, as seller, and the Third‐Party Defendants, 1 Paragraph 6.1 of the Agreement states: Indemnification by the Seller and Principals. Subject to the terms of conditions of this ARTICLE VI, from and after the Closing, the Seller and the Principals, jointly and severally, shall indemnify the Parent, the Buyer, and their Affiliates, successors, assigns, stockholders, partners, members, managers, agents, 3 Case 3:19-ap-03032 Doc 34 Filed 02/10/20 Entered 02/11/20 12:09:51 Desc Main Document Page 4 of 9 as the principals, shall indemnify Mindstream for any Excluded Liability. Second, Paragraph 10.1 states that if Mindstream pays any Excluded Liability, it should be reimbursed by GYPC. Finally, ¶ 6.6 of the Agreement2 requires that Eastport must first offset any damages it is entitled to against GYPC’s Preferred Membership Interest. representatives, officers, directors or employees (each, a “Buyer Party”) and save and hold each Buyer Party harmless against, Damages incurred or suffered by such Buyer Party resulting from or constituting: (a) any breach of a representation or warranty of the Seller contained in this Agreement or the Seller Certificate; (b) any failure by the Seller or any of the Principals to perform any covenant or agreement contained in this Agreement; (c) any Excluded Liabilities, Excluded Assets, and any liabilities arising under any Employee Benefit Plans; (d) any liabilities and obligations arising or accruing from the operation of the Business or the Acquired Assets prior to the Closing Date, except for the Assumed Liabilities, and with respect to any of the Business Employees with respect to their employment prior to the Closing Date or any termination of the Business Employees by the Seller; (e) any Environmental Matter that existed or arose prior to the Closing Date with respect to the Business or any of the Acquired Assets; (f) any liabilities and obligations resulting from or arising out of any bulk sales Law, bulk transfer Law, or any other similar Laws with respect to the transactions contemplated by this Agreement; and (g) (i) any and all Taxes due with respect to the Business accruing prior to the Closing, including without limitation (i) any and all amounts which may be required to be paid to obtain all Tax Clearance Certificates and (ii) any claims or other liabilities arising out of the Seller’s failure to obtain all such Tax Clearance Certificates. 2 Paragraph 6.6 of the Agreement states: Offset. (a) Except as otherwise provided for in Section 1.3(b) and Section 6.6(c), in pursuing the collection of any Damages to which a Buyer Party may be entitled under Section 6.1, other than based on fraud or willful misconduct, the Parent shall first offset such Damages against the Preferred Membership Interest issued to the Seller by a reduction and cancellation of Preferred Membership Interest (together with the elimination of any corresponding Preferred Return accrued, but unpaid on the reduced amount of Preferred Capital Contribution), in the aggregate (but excluding any eliminated accrued Preferred Return) equal to any amount of such Damages. In pursuing the collection of any Damages to which a Buyer Party may be entitled to under Section 6.1 based on fraud or willful misconduct, the Parent shall have a right of offset, in its sole discretion, of such Damages against the Preferred Membership Interest issued to the Seller in the manner described in the preceding sentence. In the event of any offset against the Preferred Membership Interest under this Section, the portion of the Preferred Capital Contribution attributable to the Seller as a Preferred Member shall be automatically reduced by an amount equal to any such Damages subject to such offset (as if the same had never been conveyed to the Seller under this Agreement, without any 4 Case 3:19-ap-03032 Doc 34 Filed 02/10/20 Entered 02/11/20 12:09:51 Desc Main Document Page 5 of 9 The payments to Mindstream appear to have been based on post‐closing adjustments required by ¶ 10.1 of the agreement.3 Since those funds are alleged to be preference payments, GYPC seeks the return of those pre‐petition payments. If those payments were returned to the bankruptcy estate, there is no question that under ¶ 6.1 the Third‐Party Defendants must indemnify Mindstream. It is also beyond debate that such indemnification has a condition precedent. Mindstream (and its parent Eastport) must first offset any claim it has against the Third‐Party Defendants against GYPC’s Preferred Membership Interest4 under the indemnification provisions in Section 6.6 of the Agreement, since those provisions create primary liability as to the Preferred Membership Interest and secondary liability against the Third‐Party Defendants. The Third‐Party Defendants argue that ¶ 10.1 absolves them from liability for these damages, but that section just provides that if either the buyer or seller parties receive any funds post‐closing belonging to the other, they have an obligation to remit requirement for payment therefor) and the Seller shall pay promptly to the Parent the amount of any Preferred Return actually paid to the Seller thereon since the Closing Date. (b) In the event of any offset, the Seller shall surrender any and all certificates representing the Preferred Membership Interest, to the extent offset against, and the Parent shall reissue, if applicable, new certificates representing any remaining Preferred Membership Interest to which the Seller may be entitled and/or otherwise amend the Operating Agreement. (c) Upon final determination of any Damages due and owing by the Seller pursuant to this ARTICLE VI, in lieu of any offset provided for in Section 6.6(a) Seller and/or the Principals may elect to remit payment in immediately available funds to the Buyer Party in the full amount equal to such Damages, provided that such payment is made within ten (10) days following the determination of such Damages. In the event the Seller or any of the Principals fail to remit such payment within such ten (10) days, the Buyer shall have the right to offset otherwise provided for in Section 6.6(a). 3 Paragraph 10.1 of the Agreement states: Payment of Certain Monies. In the event that the Seller (or an affiliate thereof) pays or discharges, after the Closing, any Assumed Liabilities, the Buyer shall reimburse the Seller for the amount so paid or discharged within 30 days of being presented with written evidence of such payment or discharge. In the event that the Buyer (or an Affiliate thereof) pays or discharges, after the Closing, any Excluded Liabilities, the Seller shall reimburse the Buyer for the amount so paid or discharged within 30 days of being presented with written evidence of such payment or discharge. The Buyer shall promptly forward to the Seller all monies received by the Buyer or its Affiliates following the Closing with respect to any Excluded Asset, and the Seller shall promptly forward to the Buyer all monies received by the Seller or its Affiliates following the Closing with respect to any Acquired Asset. 4 The Preferred Membership Interest is defined in ¶ 1.5(b)(iv)(A) of the Agreement. 5 Case 3:19-ap-03032 Doc 34 Filed 02/10/20 Entered 02/11/20 12:09:51 Desc Main Document Page 6 of 9 those funds to the counter‐party within 30 days. Paragraph 10.1 does not release The Third‐ Party Defendants from their indemnification obligations under ¶ 6.1. The Third‐Party Defendants’ other argument is that the claim is contingent and must be dismissed, but this argument conflates the establishment of damages and the remedies available to collect those damages. If the GYPC bankruptcy estate is able to prevail against Mindstream and recover on its preference claims, under the indemnification provisions of the Agreement, Mindstream’s damages against The Third‐Party Defendants will have been established. If Eastport and Mindstream are then successful in establishing a setoff against GYPC’s Preferred Membership Interest in Eastport, the Third‐Party Defendants’ liability to Mindstream will be eliminated. GYPC and The Third‐Party Defendants are all jointly and severally liable for damages caused by Eastport’s or Mindstream’s payment of Excluded Liabilities. Mindstream appropriately has brought the Third‐Party Defendants into the adversary proceeding under Federal Rule of Civil Procedure 14 so that all rights between the parties with respect to the establishment of the damages can be litigated in one proceeding with all affected parties. See also § 6.6(c) of the Agreement (“Upon final determination of any Damages due and owing by the Seller pursuant to ARTICLE VI, in lieu of any offset provided for in Section 6.6(a) Seller and/or the Principals may elect to remit payment in immediately available funds to the Buyer Party in the full amount equal to such Damages[.]”). Specifically, Rule 14 allows Mindstream to join the Third‐Party Defendants into the preference action because the Third‐Party Defendants may be liable to Mindstream if the plaintiff prevails. Under Rule 14, a third‐party defendant’s liability to a third‐party plaintiff on the original plaintiff’s claims does not have to be definite, but only possible. Otherwise, Rule 14 would provide that joinder through a third‐party complaint only can occur if a third‐party defendant is liable to a third‐party plaintiff. But the purpose of Rule 14 is to allow all parties with an interest in the litigation to be joined in one action and avoid piecemeal litigation. Specifically, Rule 14(a)(2) has the salutary function of allowing the Third‐Party Defendants to assert any defenses which Mindstream has against GYPC, such as the setoff affirmative defense. See Kansas Pub. Emps. Retirement Sys. v. Reimer & Koger Assocs., Inc., 4 F.3d 614, 619‐ 20 (8th Cir. 1993) (“Because a third‐party defendant cannot relitigate the question of a third‐ 6 Case 3:19-ap-03032 Doc 34 Filed 02/10/20 Entered 02/11/20 12:09:51 Desc Main Document Page 7 of 9 party plaintiff’s liability to the original plaintiff, this provision protects the third‐party defendant against any prejudice that might result from the third‐party plaintiff’s failure to assert a particular defense against the original plaintiff.”). Mindstream need not exhaust the setoff remedy prior to suing the Third‐Party Defendants. The Third‐Party Complaint seeking indemnification is an appropriate contingent third‐party claim for indemnification under Federal Rule of Civil Procedure 14. Rule 14(a)(1) provides, in pertinent part: A defending party may, as third‐party plaintiff, serve a summons and complaint on a nonparty who is or may be liable to it for all or part of the claim against it. Fed. R. Civ. P. 14(a)(1). Further, Rule 14(a)(2) provides, in pertinent part (emphasis added): The person served with the summons and third‐party complaint—the “third‐ party defendant”: (A) must assert any defense against the third‐party plaintiff’s claim under Rule 12; (B) must assert any counterclaim against the third‐party plaintiff under Rule 13(a), and may assert any counterclaim against the third‐party plaintiff under Rule 13(b) or any crossclaim against another third‐party defendant under Rule 13(g); (C) may assert against the plaintiff any defense that the third‐party plaintiff has to the plaintiff’s claim; and (D) may also assert against the plaintiff any claim arising out of the transaction or occurrence that is the subject matter of the plaintiff’s claim against the third‐party plaintiff. Fed. R. Civ. P. 14(a)(2) (emphasis added). The contingent indemnification claim based upon the bankruptcy estate’s initial claims against Mindstream is the precise type of claim envisioned by Rule 14(a). Rule 14(a) allows “additional parties whose rights may be affected by the decision in the original action to be joined so as to expedite the final determination of the rights and liabilities of all the interested parties in one suit.” American Zurich Ins. Co. v. Cooper Tire & Rubber Co., 512 F.3d 800, 805 (6th Cir. 2008). As the Sixth Circuit explained: 7 Case 3:19-ap-03032 Doc 34 Filed 02/10/20 Entered 02/11/20 12:09:51 Desc Main Document Page 8 of 9 Underlying Rule 14 is a desire “to promote economy by avoiding the situation where a defendant has been adjudicated liable and then must bring a totally new action against a third party who may be liable to him for all or part of the original plaintiff’s claim against him.” 6 Wright, Miller, Kane, Fed. Prac. & Proc.: Civ.2d § 1441 at 289‐90 (2d ed.1990)). The third‐party complaint is in the nature of an indemnity or contribution claim. Id. CSX Transp., Inc. v. Columbus Downtown Dev. Corp. elaborated on the purpose of Rule 14: “A defendant may implead a party, even though a cause of action has not yet accrued, provided the claim is contingent upon the success of plaintiff’s claim, and will accrue when defendant is found liable in the main action.” New Mkt., 154 F.Supp.2d at 1228 n.13 (citing Community Fed. Sav. & Loan Ass’n v. Transamerica Ins. Co., 559 F. Supp. 536, 537 (E.D. Mo. 1983) (“The fact that defendant is not yet ‘out of pocket’ is not fatal to his third‐party complaint.”)). 307 F.Supp.3d 719, 735 (S.D. Ohio 2018). See also Starnes Family Office, LLC v. McCullar, 765 F. Supp. 2d 1036, 1058 (W.D. Tenn. 2011) (“A claim for indemnification is proper under Rule 14(a).”); Wells Fargo Bank v. Gilleland, 621 F. Supp. 2d 545, 547 (N.D. Ohio 2009) (“By its own language, Rule 14 requires an indemnity claim in order to bring in a third‐party defendant whereby the defendant is attempting to transfer liability from himself to a third‐party defendant in the event he is found to liable to the plaintiff.”); Trane U.S. Inc. v. Meehan, 250 F.R.D. 319, 321‐22 (N.D. Ohio 2008) (internal quotation marks and citation omitted) (“A third‐ party claim is viable only when the third party’s liability is in some way dependent on the outcome of the main claim or when the third party is secondarily liable to defendant.”); Aviva Life Insurance Co. v. Burton (In re Burton), No. 08‐50104, 2009 Bankr. LEXIS 630, at *18‐19 (Bankr. E.D. Tenn. Feb. 20, 2009) (denying a Rule 12(c) motion on a contingent right of subrogation or indemnification relating to a nondischargeability proceeding against the debtor). If Mindstream is liable to GYPC, its claim is that it is entitled to be indemnified under the Agreement by the Third‐Party Defendants. The Third‐Party Defendants may assert any affirmative defense they have against the plaintiff or the third‐party plaintiff, such as the failure to satisfy the condition precedent of the setoff of the Preferred Membership Interest. See Fed. R. Civ. P. 14(a)(2)(A) & (C) (allowing the third‐party defendant to assert Rule 12 defenses to a third‐party complaint, or any defense the third‐party plaintiff has against the plaintiff’s claim). See Laethem Equip. Co. v. Deere & Co., 485 8 9 Fed. Appx. 39, 51 (6th Cir. 2012) (citing First Nat’l Bank of Louisville v. Hurricane Elkhorn Coal Corp. II, 763 F.2d 188, 190 (6th Cir. 1985)) (“Entitlement to a setoff is an affirmative defense which must be pled and proven by the party asserting it.”).5 See also Doug Smith, Inc. v. Freedom Elec. Contractors, Inc., 133 B.R. 617, 620 n.2 (Bankr. S.D. Ohio 1991) (“Typically, a setoff occurs when a creditor: i) decides to exercise the right to setoff, ii) takes some action to accomplish the setoff, and iii) prepares some record, usually in the creditor’s financial books, which evidences the setoff.”). These are the precise type of claims envisioned by Rule 14. In summary, the offset is a condition precedent to the collection of any damages, but it is not a condition precedent to the establishment of the Third‐Party Defendants’ underlying liability for those damages, which can be accomplished through this adversary proceeding and the Third‐Party Complaint. IV. Conclusion The motion to dismiss the Third‐Party Complaint is denied. The Third‐Party Defendants shall file an answer pursuant to Federal Rule of Bankruptcy Procedure 7012(a). A separate order will be entered consistent with this decision. Copies to: Patricia J. Friesinger (Counsel for the Plaintiff) Zachary B. White (Counsel for the Plaintiff) Matthew T. Schaeffer (Counsel for the Defendant and Third‐Party Plaintiff) Casey M. Cantrell Swartz (Counsel for Third‐Party Defendants) W. Timothy Miller (Counsel for Third‐Party Defendants) 5 But see ITS Fin., LLC v. Advent Fin. Servs., LLC, 823 F. Supp. 2d 758, 771 (S.D. Ohio 2011) (holding that setoff can only be based upon a liquidated debt and that an unliquidated claim must be pursued through affirmative claim, such as a counterclaim rather than via setoff.). Case 3:19-ap-03032 Doc 34 Filed 02/10/2 d 02/11/20 12:09:51 Desc Main Document f 9 The post GYPC – Third Party Complaint in Bankruptcy appeared first on Chris Wesner Law Office.

UNITED STATES BANKRUPTCY COURT FOR THE SOUTHERN DISTRICT OF OHIO WESTERN DIVISION AT DAYTON In re: TAGNETICS INC., Case No. 19‐30822 Judge Humphrey Chapter 7 Decision Granting Petitioning Creditors’ Motion for Contempt (Doc. 145) and Determining Additional Interest as a Remedy to Enforce Compliance This matter is before the court on the Motion to Hold Tagnetics in Indirect Contempt (doc. 145) (the “Motion”), filed by petitioning creditors Jonathan Hager, Ronald E. Earley and Kenneth W. Kayser (the “Petitioning Creditors”). For the reasons explained below, the court finds Tagnetics, Inc. (“Tagnetics”) in civil contempt of this court’s Order Granting in Part Tagnetics’ Motion to Enforce Settlement Agreement (Doc. 101) and Ordering Other Matters entered on October 25, 2019 (doc. 119) (the “Settlement Enforcement Order”). This document has been electronically entered in the records of the United States Bankruptcy Court for the Southern District of Ohio. IT IS SO ORDERED. Dated: February 11, 2020 Case 3:19-bk-30822 Doc 168 Filed 02/11/2 d 02/11/20 12:27:16 Desc Main Document f 9 Case 3:19-bk-30822 Doc 168 Filed 02/11/20 Entered 02/11/20 12:27:16 Desc Main Document Page 2 of 9 As a remedy for Tagnetics’ contempt, the court is ordering that Tagnetics pay, in addition to the federal judgment rate of interest on all amounts owed to the Petitioning Creditors under the Settlement Enforcement Order which have already become due, an additional 5% per annum, simple interest, compounded monthly, (the “additional interest”) on all sums which previously became due the Petitioning Creditors under the Settlement Enforcement Order, and on all future sums which become due to the Petitioning Creditors to the extent that those sums are not paid as due under the Settlement Enforcement Order. The purpose of that additional interest on sums that have become due and or become past‐ due in the future is to coerce Tagnetics’ compliance with the Settlement Enforcement Order. However: 1) Tagnetics shall have 30 days from the date of the entry of the separate order to be entered to pay all sums currently due to the Petitioning Creditors under the Settlement Enforcement Order, with interest pursuant to 28 U.S.C. § 1961 commencing three business days following the date of entry of the Settlement Enforcement Order; 2) The additional 5% interest shall only commence to accrue 31 days from the date of the entry of this order; and 3) While all sums due under the Settlement Enforcement Order shall collect interest at the federal judgment rate of interest provided by 28 U.S.C. § 1961 from the time they first become due until those sums are paid, the additional 5% interest shall not accumulate during the pendency of any stay pending appeal ordered by a court of competent jurisdiction. Procedural and Factual Background Through the Settlement Enforcement Order, the court granted, in part, Tagnetics’ motion to enforce a settlement reached between it, as the putative Chapter 7 debtor in this case, and the Petitioning Creditors who filed an involuntary bankruptcy petition against Tagnetics.1 The integral terms of the Settlement Enforcement Order are as follows: 1 The original petitioning creditors who filed the involuntary petition against Tagnetics included the Petitioning Creditors, plus Kayser Ventures Ltd, Robert Strain, and S‐Tek Inc. Kayser Ventures, Strain, and S‐Tek previously settled with Tagnetics and are no longer serving as petitioning creditors. 2 Case 3:19-bk-30822 Doc 168 Filed 02/11/20 Entered 02/11/20 12:27:16 Desc Main Document Page 3 of 9 • Payment Schedule Payments Timing Earley Kayser Hager First Within 3 business days of the entry of this order $30,000 $30,000 $30,000 Second 12 months from entry of this order $30,000 $30,000 $30,000 Third 18 months from entry of this order $30,000 $30,000 $30,000 Balance Upon next liquidity event2 $96,980 $61,582 $58,144 Total $186,980.00 $151,582.00 $148,144.00 • Excepting the payments required by [the Settlement Enforcement] Order as defining the terms of the settlement reached by the parties, the parties are mutually released from any past obligation to each other arising out of any contract or claim of any nature, including as to any salary, benefits, loans or other similar obligations owed to the Remaining Petitioning Creditors. This release shall not affect any equity interest, including shares of stock, held by the Remaining Petitioning Creditors, except that it shall release any past dividends or other monetary obligations arising of any such equity or stock ownership. • Within 7 days after the Remaining Petitioning Creditors’ receipt of the initial $30,000 payments, Tagnetics shall file with the court and serve, by email, upon on each of the Remaining Petitioning Creditors a notice of payment. • Upon the filing with the court of the notice of payment, the court will, after a 24‐hour waiting period, dismiss the Involuntary Petition against Tagnetics. Settlement Enforcement Order at 2. Tagnetics has appealed the Settlement Enforcement Order to the United States District Court for the Southern District of Ohio (the “District Court”), stating one issue on appeal: “The Bankruptcy Court erred when it held that the parties’ settlement agreement did not include a release of Tagnetics’ affiliates, subsidiaries, parent corporation, officers, and directors.” Tagnetics sought a stay pending appeal from this court, which the court denied through an order entered on November 15, 2019 (doc. 2 Liquidity event is defined as follows: (a) when one person or entity directly or indirectly becomes the beneficial owner of more than 50% of the outstanding securities of Tagnetics, provided that the one person or entity does not directly or indirectly own more than 50% of the outstanding securities of Tagnetics on the date that the agreement becomes valid; (b) the consummation of a merger, sale, or consolidation of Tagnetics with/to another company; (c) a sale of substantially all of the assets of Tagnetics; or (d) completion of a plan to liquidate, dissolve, or wind up Tagnetics that was approved by Tagnetics’ shareholders or Board of Directors. Settlement Enforcement Order at n.1. 3 Case 3:19-bk-30822 Doc 168 Filed 02/11/20 Entered 02/11/20 12:27:16 Desc Main Document Page 4 of 9 138).3 The Petitioning Creditors filed the Motion on November 22, 2019 and the court held a telephonic hearing on the Motion on January 28, 2020 (doc. 156 & 161). Positions of the Parties The Petitioning Creditors assert through the Motion that Tagnetics is in contempt of the Settlement Enforcement Order in failing to pay them the sums of money due to them under the Settlement Enforcement Order, particularly the payments which were due to them within three business days after the entry of the Settlement Enforcement Order ($30,000 to each of the Petitioning Creditors).4 Tagnetics asserts that it is not in contempt because it has appealed the Settlement Enforcement Order to the United States District Court for the Southern District of Ohio (the “District Court”). However, the Petitioning Creditors note that Tagnetics has not obtained a stay pending appeal and they argue that, absent obtaining a stay pending appeal, Tagnetics must comply with the terms of the Settlement Enforcement Order even though Tagnetics appealed the Settlement Enforcement Order. As a remedy for Tagnetics’ alleged contempt, the Petitioning Creditors request the court to add interest on to the sums they are due under settlement agreement and to order that the payments due under the settlement agreement be expedited. 3 On January 30, 2020 Tagnetics filed a motion with the District Court seeking a stay of the enforcement of the Settlement Enforcement Order on the condition of the posting of a supersedeas bond. As of the date of the issuance of this order, the District Court had not ruled on that motion. 4 The Petitioning Creditors seek an order finding Tagnetics in “indirect contempt.” “Indirect contempt” is generally viewed as a person’s violation of a court’s order which occurs outside the courtroom and presence of the judge or contemptuous acts against parties to the litigation as opposed to the court. See Codispoti v. Pa., 418 U.S. 506, 5‐34 (1974) (Rehnquist, J., dissenting); Hanner v. O’Farrell, 1998 U.S. App. LEXIS 5551 at *9‐10 (6th Cir. Mar. 18, 1998); and Dayton Newspapers, Inc. v. Teamsters Local Union No. 957, 176 F. Supp. 2d 765, 770 (S.D. Ohio 2001). Direct contempt is generally viewed as a person’s violation of a court order in the presence of the judge or conduct tending to disrupt ongoing judicial proceedings. See Dayton Newspapers at 767 n.1. Direct and indirect contempt can be either criminal or civil contempt. Regardless, the court is construing the Petitioning Creditors’ Motion as seeking a determination from the court that Tagnetics is in civil contempt of the Settlement Enforcement Order. There is no dispute that any alleged violation of the Settlement Enforcement Order has occurred outside the presence of the judge and is directed against the parties as opposed to the court and, thus, to the extent Tagnetics violated the Settlement Enforcement Order and is held in contempt, any such contempt would constitute indirect contempt. 4 Case 3:19-bk-30822 Doc 168 Filed 02/11/20 Entered 02/11/20 12:27:16 Desc Main Document Page 5 of 9 Law on Civil Contempt “The purpose of contempt proceedings is to uphold the power of the court, and also to secure to suitors therein the rights by it awarded.” Bessette v. W. B. Conkey Co., 194 U.S. 324, 327 (1904). The contempt power is an inherent power which the federal courts “must have and exercise in protecting the due and orderly administration of justice and in maintaining the authority and dignity of the court[.]” Roadway Express v. Piper, 447 U.S. 752, 764 (1980) (citation omitted). “Civil contempt is the power of the court to impose sanctions to coerce compliance with its orders.” United States v. Tenn., 925 F. Supp. 1292, 1301 (W.D. Tenn. 1995) (citing Hicks v. Feiock, 485 U.S. 624, 632 (1988)); Shillitani v. United States, 384 U.S. 364, 370 (1966); Gompers v. Buck’s Stove & Range Co., 221 U.S. 418, 442 (1988)). Contempt may be categorized as either “criminal contempt” or “civil contempt.” The difference between civil contempt and criminal contempt in large part lies in the purpose of the remedy imposed by the court. A finding of criminal contempt is generally remedied through a sanction ordered by the court intended to penalize or punish the contemnor. The remedy for civil contempt, on the other hand, is intended to either compensate the aggrieved party for its damages or losses incurred as a result of the contemnor’s violation of the court’s order or to coerce the contemnor’s compliance with the order. Ahmed v. Reiss Steamship Co. (In re Jaques), 761 F.2d 302, 305 (6th Cir. 1985) (citations omitted). Thus, as described by the Supreme Court: It is not the fact of punishment but rather its character and purpose, that often serve to distinguish between the two classes of cases. If it is for civil contempt the punishment is remedial, and for the benefit of the complainant. But if it is for criminal contempt the sentence is punitive, to vindicate the authority of the court. It is true that punishment by imprisonment may be remedial, as well as punitive, and many civil contempt proceedings have resulted not only in the imposition of a fine, payable to the complainant, but also in committing the defendant to prison. But imprisonment for civil contempt is ordered where the defendant has refused to do an affirmative act required by the provisions of an order which, either in form or substance, was mandatory in its character. Imprisonment in such cases is not inflicted as a punishment, but is intended to be remedial by coercing the defendant to do what he had refused to do. The decree in such cases is that the defendant stand committed unless and until he performs the affirmative act required by the court’s order. Gompers, 221 U.S. at 441‐42. 5 Case 3:19-bk-30822 Doc 168 Filed 02/11/20 Entered 02/11/20 12:27:16 Desc Main Document Page 6 of 9 In order for a court to hold a person in contempt, the court must find by clear and convincing evidence that the person “violated a definite and specific order of the court requiring him to perform or refrain from performing a particular act or acts with knowledge of the court’s order.” Elec. Workers Pension Trust Fund of Local Union #58 v. Gary’s Elec. Serv. Co., 340 F.3d 373, 379 (6th Cir. 2003) (quoting NLRB v. Cincinnati Bronze, Inc., 829 F.2d 585, 591 (6th Cir. 1987) (citation omitted)); In re Franks, 363 B.R. 839, 843 (Bankr. N.D. Ohio 2006) (similar). Corporations may be held in civil contempt. See McComb v. Jacksonville Paper Co., 336 U.S. 187 (1949); NLRB v. Aquabrom, Div. of Great Lakes Chemical Corp., 855 F.2d 1174, 1186 (6th Cir. 1988). Bankruptcy courts have the authority to find persons in civil contempt. In re Franks, 363 B.R. 839, 842 (Bankr. N.D. Ohio 2006); Elder‐Beerman Stores Corp. v. Thomasville Furniture Indus. (In re Elder‐Beerman Stores Corp.), 197 B.R. 629, 632 (Bankr. S.D. Ohio 1996). As the Sixth Circuit has emphasized, “[c]ontempt is serious” and “courts must exercise the contempt sanction with caution and use ‘[t]he least possible power adequate to the end proposed.’” Gascho v. Global Fitness Holdings, LLC, 875 F.3d 795, 799 (6th Cir. 2017) (internal citation omitted). The “drastic nature of contempt sanctions” requires that the court use those powers “only in clear and urgent instances.” Lucas v. Telemarketer Calling from 407 (476‐5680), 2015 U.S. Dist. LEXIS 151077 (S.D. Ohio Nov. 6, 2015) (quoting in part Springfield Bank v. Caserta, 10 B.R. 57, 59 (Bankr. S.D. Ohio 1981)). Consistent with the mandate to use its contempt powers sparingly, a court’s civil contempt authority should not be used when the movant is merely seeking to collect on a money judgment.5 Aetna Cas. & Sr. Co. v. Markarian, 114 F.3d 346, 349‐50 (1st Cir. 1997); Ecopetrol S.A. v. Offshore Exploration & Prod. LLC, 172 F. Supp. 3d 691, 697 (S.D.N.Y. 2016); Jou 5 A money judgment, as that term is used in Federal Rule of Civil Procedure 69, has been referred to as a judgment which includes two elements: “(1) an identification of the parties for and against whom judgment is being entered, and (2) a definite and certain designation of the amount which plaintiff is owed by defendant.” Penn Terra, Ltd. v. Department of Environmental Resources, 733 F.2d 267, 275 (3d Cir. 1984); Fox v. Nat’l Oilwell Varco, 602 Fed. Appx. 449, 452 (10th Cir. 2015) (citing Ministry of Def. & Support for the Armed Forces of the Islamic Republic of Iran v. Cubic Def. Sys., Inc., 665 F.3d 1091, 1101 (9th Cir. 2011)) (similar). Federal Rule of Civil Procedure 54(a), incorporated into the Federal Rules of Bankruptcy Procedure by Rule 7054, defines “judgment” as “a decree and any order from which an appeal lies.” See also Associated Gen. Contrs. Of Ohio, Inc. v. Drabik, 250 F.3d 482, 485 (6th Cir. 2001) (discussing “money judgment” in the context of determining whether an award of attorney fees was a money judgment entitled to interest under 28 U.S.C. § 1961.). . 6 Case 3:19-bk-30822 Doc 168 Filed 02/11/20 Entered 02/11/20 12:27:16 Desc Main Document Page 7 of 9 v. Adalian, 2015 U.S. Dist. LEXIS 13786 at *16‐17 (D. Haw. Feb. 5, 2015). Rather, in those circumstances, the aggrieved party must use the tools provided under and through Federal Rule of Civil Procedure 69 to enforce and collect upon the money judgment. Analysis of this Case Tagnetics has neither asserted nor argued that it has complied with the Settlement Enforcement Order. Nor has it asserted that the Settlement Enforcement Order is not clear and specific, nor that it was not aware of the Settlement Enforcement Order. Rather, it has only asserted that it has appealed the Settlement Enforcement Order and does not want to pay sums due under the settlement as found through the Settlement Enforcement Order in the event that the District Court determines that there “was no meeting of the minds” as to the settlement.6 The Settlement Enforcement Order has many attributes of being a money judgment. It is a final, appealable order and, in fact, has been appealed. See Fed. R. Civ. P. 54(a). And more importantly, it requires Tagnetics to pay definite sums of money to the Petitioning Creditors. However, due to the unique and special circumstances of this case, including the specific requirement in the parties’ settlement of an initial payment as consideration for dismissal of the petition, the court’s civil contempt power is the only remedy available to enforce Tagnetics’ compliance with the Settlement Enforcement Order, including its obligation to pay the Petitioning Creditors the sums they are due. The collection tools provided by Rule 69 are not presently available to collect the sums due the Petitioning Creditors because the Tagnetics’ bankruptcy case initiated through the involuntary bankruptcy petition remains pending, along with the stay provided by the Bankruptcy Code. 11 U.S.C. § 362(a). The automatic stay applies in all bankruptcy cases, including those commenced through the filing of an involuntary petition. In re Nicole Gas Prod. Ltd., 502 B.R. 6 Tagnetics’ only “Statement of Issue on Appeal” included with its Designation Of Record And Statement Of Issues To Be Presented On Appeal Submitted By Tagnetics, Inc. (doc. 137) was that “[t]he Bankruptcy Court erred when it held that the parties’ settlement agreement did not include a release of Tagnetics’ affiliates, subsidiaries, parent corporation, officers, and directors.” That document did not include an alternative argument or statement of issue on appeal that there was no meeting of the minds as to the settlement agreement. 7 Case 3:19-bk-30822 Doc 168 Filed 02/11/20 Entered 02/11/20 12:27:16 Desc Main Document Page 8 of 9 508, 514 (Bankr. S.D. Ohio 2013); In re Epstein, 314 B.R. 591, 594 (Bankr. S.D. Tex. 2004); In re C.W. Mining Co., 2008 Bankr. LEXIS 4840 at *9 (Bankr. D. Utah Aug. 7, 2008). Thus, the Petitioning Creditors may not simply enforce their rights under the Settlement Enforcement Order through the collection mechanisms provided by Rule 69.7 An appeal of an order by itself does not stay a party’s duty to comply with the court’s order. A party’s obligation to comply with a court order exists pending an appeal absent a stay issued by an appropriate court staying enforcement of that order. Maness v. Meyers, 419 U.S. 449, 458‐59 (1975); United States v. Fesman, 781 F. Supp. 511, 514 (S.D. Ohio 1991). Similarly, without a stay pending appeal, the trial court retains the authority to enforce the order. Williamson v. Recovery Ltd. P’ship, 731 F.3d 608, 626 (6th Cir. 2013); City of Cookeville, Tenn. v. Upper Cumberland Elec. Membership Corp., 484 F.3d 380, 394 (6th Cir. 2007). Thus, since a stay has not been issued by this court or the District Court, Tagnetics is not in compliance with the Settlement Enforcement Order, and the Settlement Enforcement Order is definite and specific and Tagnetics at all times has been aware of the Settlement Enforcement Order, the court finds by clear and convincing evidence that it is in contempt. Since Tagnetics is in contempt of the Settlement Enforcement Order, the court is left with the issue of how to compensate the Petitioning Creditors for their damages incurred as a result of Tagnetics’ contempt and how to coerce Tagnetics’ compliance with the Settlement Enforcement Order. The Petitioning Creditors’ damages are a loss of money – the failure to be paid the sums they are due under the Settlement Enforcement Order. The Petitioning Creditors may be adequately compensated for those damages through the interest to which they are entitled under federal law, that being the federal judgment rate of interest provided by 28 U.S.C. § 1961. However, in addition to compensatory damages, this court may also include in any civil contempt sanction a monetary component intended to coerce the contemnor into compliance with its order. Any such coercive component, however, must be prospective only and not retroactive. See Shillitani v. United States, 384 7 Once the initial payments are made to the Petitioning Creditors, pursuant to the terms of the settlement and the Settlement Enforcement Order, the involuntary bankruptcy petition can be dismissed and the Rule 69 collection remedies may be available to collect any additional sums due under the Settlement Enforcement Order. 8 9 U.S. 364, 369‐370 (1966); Jaques, 761 F.2d at 308. Accordingly, Tagnetics shall have 30 days from the date of the entry of this order to pay all past‐due sums due to the Petitioning Creditors under the Settlement Enforcement Order ($30,000 to each Petitioning Creditor), with interest at the rate provided by 28 U.S.C. § 1961 commencing three business days after the Settlement Enforcement Order was entered. To coerce Tagnetics’ compliance with the Settlement Enforcement Order, in the event those sums are not paid to the Petitioning Creditors within 30 days of this order, the court finds that it is appropriate to add on to that federal judgment rate of interest, additional interest at the rate of 5% per annum, simple interest, compounded monthly, commencing on the 31st day following the entry of this order and continuing until all such sums are paid. In addition, interest shall accrue on all sums due under the Settlement Enforcement Order in the future at the federal judgment rate of interest, plus the 5% per annum, compounded monthly, until all such sums are paid. This additional interest shall be on all sums previously due that are not paid to the Petitioning Creditors within 30 days of the entry of separate order to be entered, plus any additional sums that become due in the future, from the time that those sums first become due under the settlement agreement as found by the court through the Settlement Enforcement Order. The additional 5% interest shall not be due or accumulate during the pendency of any stay pending appeal, from the time the stay first becomes effective until the stay terminates. Conclusion For the foregoing reasons, the court finds that Tagnetics is in civil contempt of the Settlement Enforcement Order. Accordingly, the Petitioning Creditors’ motion to hold Tagnetics in contempt is granted. A separate order will be entered consistent with this decision. IT IS SO ORDERED. Copies to: All Creditors and Parties in Interest, Plus Douglas S. Draper, 650 Poydras Street, Suite 2500, New Orleans, Louisiana 70130 Leslie A. Collins, 650 Poydras Street, Suite 2500, New Orleans, Louisiana 70130 Case 3:19-bk-30822 Doc 168 Filed 02/11/2 d 02/11/20 12:27:16 Desc Main Document f 9 The post Tagnetics – A case of Involuntary Bankruptcy appeared first on Chris Wesner Law Office.

From: nypost.com  By: Thornton McEneryhttps://nypost.com/2020/02/20/cabbies-worry-as-hedge-fund-snaps-up-taxi-medallions/

How to File Chapter 7 Bankruptcy with No Money in PA Do you need to file bankruptcy but have no money? We can help. Take advantage of our affordable fees and payment plans and let the bankruptcy lawyers at the Law Office of David M. Offen Esq. put their over 20 years’ experience to work for you. Our Philadelphia bankruptcy attorneys have helped over 11,000 clients get a financial fresh start. Does it cost money to file bankruptcy? Usually, yes. There are three things in bankruptcy that cost money: The court filing fee of $335 for Chapter 7, $310 for Chapter 13 The cost of the credit counseling and financial management courses (varies) Your attorney fee (varies) Read on to find out how to file for bankruptcy in Pennsylvania without any money. How Can I File for Bankruptcy with No Money? Many clients come to us because they are struggling financially, and they wonder how to file for bankruptcy without any money. If you are filing under Chapter 13, you may need only very little money up front – much of your attorney fee can be paid over the course of your Chapter 13 plan and we have been successful in applying to the court to allow our clients to pay the court’s filing fee through their plan as well. We will work with you to make sure you can afford to file bankruptcy under Chapter 13. Schedule your free, no-obligation bankruptcy consultation with us by filling out the contact from on the right, and we will be happy to explain how this works when we meet with you. You have nothing to lose but your debts. How to File Bankruptcy in PA Without a Lawyer Remember, there are three things in bankruptcy that cost money – the attorney fee, the court filing fee, and the fee to take the two required credit counseling courses. But here are ways to file Chapter 7 with little or no money spent on these things: Avoiding Paying an Attorney fee:  It is possible to file Chapter 7 with no money, but you will have to file yourself because an attorney must charge something for representation unless he or she is working “pro se” as part of some legal aid program. When people file bankruptcy without an attorney, it is called filing “pro se.” Having the court filing fee waived: If you prepare your Chapter 7 filing yourself, you can also file an application for waiver of the court filing fee. If the court approves your application, you do not have to pay the $335 court filing fee. In the alternative, the court may order that you pay the filing fee in installments. Low-cost credit counseling courses:  if you take the time to search, you can find the two online courses you need to take for $20 or $30 for both when you use the same provider. How to File Bankruptcy without a Lawyer in PA The court provides a detailed Chapter 7 checklist online, but here are the steps you will need to take to file a bankruptcy case in Pennsylvania pro se: Print out the PA bankruptcy documents you need; Gather all of the required financial information and documents; Complete the PA bankruptcy documents; Complete your means test analysis to show you are income-qualified to file Chapter 7; Take your credit counseling course and get the Certification of Completion; Fill out the Application for Waiver of Filing Fee; Go to the Court to file all of your forms; Mail the required documents to the Chapter 7 Trustee; Take the Financial Management Course and get the Certification of Completion; Attend your 341a Meeting of Creditors; Supply any additional information or documents that the Trustee requests; Wait to receive your discharge and then your case closes. Required Documents for filing Chapter 7 in PA: Paystubs/proof of income for the 6 months prior to filing; Most recent two years of federal income tax returns; Most recent three months of bank statements for all bank accounts; Deed, if you own real property; Titles, if you own motor vehicles; Copies of all of your bills including creditors’ names and addresses; Credit report. Circumstances Under Which the Court Filing Fee for Chapter 7 Can Be Waived The court will approve a waiver of the $335 court filing fee for Chapter 7 if your income is less than 150% of the federal poverty line. How to File Bankruptcy with No Money to Pay an Attorney Between applying for waiver of the court fee and attorney fee payment plans over time, filing bankruptcy in PA is possible with very little or no money. We always work with our clients to make our representation affordable for them. One way we get around our clients’ tight money situation is to instruct them to stop paying their credit cards as soon as they decide they are going to file bankruptcy, as that credit card debt will be discharged at the end of their bankruptcy case. The money they previously allocated to credit card bills can then be applied to the attorney fee. If you are considering filing your bankruptcy pro se to avoid paying attorney fees, be warned that this may be an exercise in false economy. Very few pro se debtors are successful in getting their fresh start because they fail to follow the complex document and information disclosure requirements, and/or they fail to accurately apply available exemptions to protect their assets from seizure by the Trustee. Trust the Philadelphia Bankruptcy Attorneys with over 20 Years of Experience You only get one chance to make a first impression with the bankruptcy court and Trustee – let an experienced PA bankruptcy attorney make sure your filing makes you look like the honest but unfortunate debtor that you are, and ensure that your personal property is protected from seizure by the Trustee. Why put your fresh start at risk? You don’t need to go it alone. If you need to file bankruptcy but have no money, call us today to schedule your free consultation – we will discuss all of your options with you, including attorney fee payment plans and court fee waiver options as well as alternatives to filing bankruptcy, such as debt settlement. We are looking forward to working with you to help you get a fresh start! The post How to File Chapter 7 Bankruptcy With No Money in PA appeared first on David M. Offen, Attorney at Law.

From: sfchronicle.comBy: Nanette Asimovhttps://www.sfchronicle.com/bayarea/article/Ex-students-blame-for-profit-Academy-of-Art-15061438.php