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Congratulations to Judge Bruce W. Black, who will become Chief Judge of the Bankruptcy Court for the Northern District of Illinois, replacing current Chief Judge Carol Doyle. Chief Judge Black will continue to hear all matters assigned to the Joliet Call on Fridays, which includes cases filed in Will, Grundy, Kendall and LaSalle counties. His chambers will be moving from the 6th to the 7th floor of the Dirsken Federal Building in Chicago. Likewise, his Courtroom will be changing to Room 719 and Chambers will be located in Room 756. All pending, previously assigned Eastern division cases (with a few exceptions) that do not include the four counties making up the Joliet call will be re-assigned to other judges in the Eastern Division immediately. If your case is affected, you will receive a notice from the Court.
Click here to view this information on the Bankruptcy Court’s website.
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In re Outboard Marine Corporation, et al., 00-037405
Issued: June 23, 2011
Judge: John H. Squires

Click here to view and download the opinion in .pdf format.

The Upshot: When sanctions are requested upon a party’s motion pursuant to Bankruptcy Rule 9011(c)(A), two requirements must be met: the motion must be made separate and apart from other motions or requests and “[must] describe the specific conduct alleged to violate subdivision (b)[,]” and “the motion may not be presented to the court unless, within twenty-one days of service, the non-movant has not withdrawn or corrected the challenged behavior.” The Trustee argues that the Statement of Interest filed by Counsel on behalf of NAEIR warrants sanctions under Rule 9011 because theStipulation released any right NAEIR had to assert a claim against the proceeds of the ACE GL Policies and, as such, the Statement of Interest is not reasonably based in law or fact. Next, the Trustee seeks sanctions against Counsel pursuant to 28 U.S.C. § 1927, which provides as follows: Any attorney or other person admitted to conduct cases in any court of the United States or any Territory thereof who so multiplies the proceedings in any case unreasonably and vexatiously may be required by the court to satisfy personally the excess costs, expenses, and attorneys’ fees reasonably incurred because of such conduct.

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In re Equipment Acquisition Resources, Inc., 09-039937
Equipment Acq. Resources, Inc. v. IRS, etc., 10 A 00099
Issued: June 22, 2011
Judge: John H. Squires

Click here to view and download the opinion.

The Upshot: The Bankruptcy Code was amended to remove the concept of sovereign immunity and get around 2 US Supreme Court cases: Hoffman v. Connecticut Dept. of Income Maintenance, 492 U.S. 96 (1989) and U.S. v. Nordic Village, Inc., 503 U.S. 30 (1992). Those cases held that the former §106(c) of the Code did not express with sufficient clarity Congress’s intent to abrogate sovereign immunity as to the federal government and states. But here the United States chose to focus its argument on §544(b) and maintain that sovereign immunity bars Debtor‘s claims because Illinois law does not allow unsecured creditors to maintain fraudulent transfer actions against the United States. The Court noted that “applicable law” generally means state law and that “[t]o require a trustee to demonstrate that the United States has waived sovereign immunity in every instance in which the trustee seeks to rely on state law for the purpose of §544 would render the general abrogation of sovereign immunity under §106 almost meaningless.”
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A New York bankruptcy court ruled that a same sex married couple can file a joint bankruptcy case, just the same as a heterosexual married couple, regardless of the existence of the federal Defense of Marriage Act. This case, In re Somers and Caggiano, No. 10-38296 (Bky.S.D.N.Y. May 4, 2011), and the rulings in In re Balas and Morales, No. 2:11-bk-17831 (Bky.C.D.Cal, June 13, 2011), and In re Ziviello-Howell, No. 11-22706 (Bky.E.D.Cal. May 31, 2011), are the first instances where U.S. bankruptcy courts have approved the filing of joint bankruptcy petitions by same sex married couples.

The bankruptcy court in In re Somers and Caggiano turned aside a motion by the U.S. Trustee to dismiss the joint chapter 7 filing by the debtors, who had been legally married in Vermont in 2010. The U.S. Trustee pointed out that although section 302(a) of the bankruptcy code allows a joint bankruptcy case to be filed by debtors who are legally married, the Defense of Marriage Act, 1 U.S.C. section 7, defines a married couple as consisting only of opposite sex married couples.

The court was not persuaded by the U.S. Trustee”s argument that the Defense of Marriage Act mandated dismissal of the case. It noted that the U.S. Attorney General had announced in a letter dated February 23, 2011, sent to House Speaker John Boehner, that the Justice Department would cease defending the Defense of Marriage Act in federal court proceedings, due to concerns about DOMA”s constitutionality.

The court also noted that the U.S. Trustee had not argued the issue of DOMA”s constitutionality in its brief to the court. The U.S. Trustee had merely quoted the language of DOMA. The court found that “the mere existence of DOMA is not sufficient to remove the duty imposed on this Court” to find “cause” under section 707(a) of the bankruptcy code before dismissing a case under that section.

The court found that the U.S. Trustee had not met its burden of proving that dismissal would be in the best interests of the debtors or their creditors. There were no allegations of bad faith, hidden assets, “stalling” or other bad faith on the part of the debtors. Additionally, if the pending joint bankruptcy case were severed, the chapter 7 trustee would have to administer a “single pool of assets for a single pool of creditors over two cases.” This would be inconvenient and pointless.

The New York bankruptcy court”s refusal to dismiss this same sex joint bankruptcy case has been viewed as good news by those advocating for equal treatment in federal bankruptcy courts for married same sex couples. However, as noted by Virginia bankruptcy attorney Dan Press in a recent Bankruptcy Law Network article, due to the vagaries of the bankruptcy law”s means test, same sex couples are usually better off filing separate bankruptcy cases rather than joint cases, on the theory that DOMA prevents them from filing joint cases even if they are legally married.

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MetroWest Building (Naperville, Illinois)

By David Sharos for The Naperville Sun

The 10-story MetroWest building, known for the N-shaped facade designed by Chicago architect Helmut Jahn in 1986, is regarded by many passing motorists as an unofficial insignia for the city of Naperville. But Crain”s Chicago Business says that the building defaulted on a $23.5 million loan that came due May 1, which means that foreclosure may be looming down the road. Interestingly, a former tenant said there was no evidence that the building or its owners were in financial trouble.