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Iron Bridge Tools Has A New Tool In Its Belt – Chapter 11 Bankruptcy

Posted in Chapter 11, Creditors' Rights

Yesterday, Iron Bridge Tools, Inc., a full-service design, development, and distribution company serving the consumer and professional hand-tool market, filed for Chapter 11 bankruptcy protection in Fort Lauderdale (Case No. 16-17505-RBR).

tool belt

Among the 20 largest creditors are ZheJiang Everpower ($9,885,335.75), Everpower Group Co., Ltd. ($2,800,000), Meridian Int’l Co. ($1,274,057.43), True Value ($490,805.42), Retract-A-Bit ($396,658.22), Packaging Corporation of America ($200,948.57) and Southeast Computer Solutions ($156,193.75).

Iron Bridge as estimated that it has $1 – 10 million in assets and $10 – 50 million in liabilities.  As the Debtor has not filed its Schedules, Statement of Financial Affairs or Chapter 11 case summary yet, little other information is currently available.

As general unsecured creditors are generally the last-in-position to be paid according to the payment scheme provided under the Bankruptcy Code, they may benefit from monitoring the debtor’s case and/or consulting an attorney regarding their claim.

usnecured

Unsecured creditors in any Chapter 11 case, including Iron Bridge Tools, should know the answers to the following questions (among others) and take action where appropriate:

1) Is my claim affected by any “first-day motions”?

2) When is the “meeting of creditors” and should I attend?

3) Is my claim properly listed on the Debtor’s Schedules?

4) Has the Debtor listed my claim as disputed, unliquidated or contingent

5) Am I entitled to priority payment?

6) Do I have any reclamation rights?

7) When is the deadline to file a proof of claim?

8) Do I want to serve as a member on any creditors’ committee that is formed?

We will explore these issues further in my future blog posts.


Heather L. Ries is an attorney with the Financial Restructuring and Bankruptcy Department of the law firm of Fox Rothschild LLP.  Heather focuses her practice in matters related to bankruptcy, creditors’ rights, commercial workout and foreclosure disputes, and commercial litigation.  You can contact Heather at 561-804-4419 or hries@foxrothschild.com.

 

No Foreclosure Summary Judgment Without Refuting “Notice and Opportunity to Cure” Defense: Remember to “Say it Ain’t So”

Posted in Banking

In an opinion issued yesterday in Chester A. Brooks, et al. v. Bank of America, et al., Case No. 4D14-3337 (Fla. 4th DCA May 25, 2016), Florida’s Fourth District Court of Appeal made clear that, in order to obtain summary judgment of foreclosure, a lender must prove facts to refute a defense of failure to provide notice of default and opportunity to cure.

Evidence

In Brooks, the trial court granted summary judgment of foreclosure, even though the borrowers had asserted a legally sufficient affirmative defense of failure to comply with the requirements of paragraph 22 of the mortgage, which required notice of intent to accelerate and an opportunity to cure.  However, because the lender had failed to establish by summary judgment evidence that it had sent the required notice, the appellate court reversed the final judgment.

Affidavit

Brooks should serve as a reminder to lenders that they must submit correspondence that satisfies any notice requirement or state in an affidavit that any required notice was provided. Failure to do so leaves a disputed issue of material fact and precludes entry of summary judgment.

Don't Forget

When a borrower asserts an affirmative defense of failure to satisfy the condition precedent of providing notice and an opportunity to cure, a lender seeking summary judgment of foreclosure must remember to “Say it Ain’t So” …


David Greene is a commercial litigation partner in Fox Rothschild’s West Palm Beach office.  His practice focuses primarily on banking litigation, real estate litigation, title insurance litigation, and construction litigation. You can reach David at 561-804-4441 or dgreene@foxrothschild.com.

 

50 Cent On Top and Running Towards Confirmation Finish Line

Posted in Bankruptcy, Chapter 11, Creditors' Rights, Uncategorized

Since my April 15th blog post, Curtis James Jackson III, better known as rapper 50 Cent (“Jackson”), has made it past the disclosure statement approval phase of his bankruptcy case, and is running towards the plan confirmation finish line.

finish line sign

The confirmation hearing is scheduled for July 6th.  At that hearing, the Court will decide whether Jackson’s proposed plan of reorganization can be approved based on the ballots cast by creditors and the provisions of Section 1129 of Title 11.

vote

If you are one of Jackson’s creditors, keep a close watch on your mail box for the third amended disclosure statement, plan, notice of deadlines, and ballot!  Remember, if you don’t object and/or vote by June 27, 2016, you lose your right to complain later.

pig on top

The Debtors will include a list of executory contracts and cure amounts with service of the plan documents, but will not disclose which executory contracts are being assumed or rejected until June 17th.  Parties to contracts, when considering whether to vote in favor of the proposed reorganization plan, should assume their contract or lease is being rejected.

50 Cent

The Court thanked all the parties for their professionalism, actively participating in the case, and working to come to a compromise – making Jackson’s reorganization possible.  For more details about Jackson’s disclosure statement hearing, check out Law 360’s article – 50 Cent’s $23.4M Bankruptcy Exhibit Gets Initial Approval.


Heather L. Ries is an attorney with the Financial Restructuring and Bankruptcy Department of the law firm of Fox Rothschild LLP.  Heather focuses her practice in matters related to bankruptcy, creditors’ rights, commercial workout and foreclosure disputes, and commercial litigation.  You can contact Heather at 561-804-4419 or hries@foxrothschild.com.

P2P Leader Lending Club’s CEO Resigns: We’ve Seen the Last of Good King Renauld

Posted in Banking

The emerging Peer to Peer lending industry suffered a major shake-up this week, with Renaud Laplanche’s resignation as CEO of Lending Club. Lending Club’s founder resigned due to a “violation of the company’s business practices along with a lack of full disclosure during the review.”

Lying Salesman

It is being reported that $22 million in near-prime loans purchased by an institutional investor “failed to conform to the investor’s express instructions” and had altered application dates. Lending Club officials say that Laplanche was aware that the loans did not meet the investor’s requirements.

Microlending

Lending Club is an online peer to peer online marketplace lending service that allows retail investors to provide funding for consumer loans, including personal loans, small business loans, and loans to finance medical procedures. Lending Club reports that it has funded nearly 1.5 million loans worth over $18 billion to date.

P2P

Laplanche’s sudden resignation leaves many unanswered questions. Is there more bad news ahead for Lending Club?  What impact will Laplanche’s actions have on regulation of the P2P lending marketplace?  How will this situation impact the perception of the industry?

 

He “led the charge” and was credited with running the P2P lending town, but he “plundered far and wide”.  So, have we seen the last of Good King Renauld?


David Greene is a commercial litigation partner in Fox Rothschild’s West Palm Beach office.  His practice focuses primarily on banking litigation, real estate litigation, title insurance litigation, and construction litigation. You can reach David at 561-804-4441 or dgreene@foxrothschild.com.

 

Florida’s Banking Statute of Frauds: You’d Better [Have the Lender] Sign It

Posted in Banking

How does a bank defend against a claim that it failed to comply with an oral agreement to make a loan? Lenders in Florida are protected against such “he said, she said” claims by Florida’s Banking Statute of Frauds – Fla. Stat. § 687.0304.

6 or 9

Florida’s Banking Statute of Frauds prohibits a debtor from maintaining an action on a credit agreement unless the agreement:

  • is in writing,
  • expresses consideration,
  • sets forth the relevant terms and conditions, and
  • is signed by the creditor and the debtor.

A “credit agreement” is “an agreement to lend or forebear repayment of money, goods, or things, to otherwise extend credit, or to make any other financial accommodation.”

Credit Agreement

The Banking Statute of Frauds has consistently been held to bar not only contract claims, Puff ‘N Stuff of Winter Park, Inc. v. Bell, 683 So.2d 1176 (Fla. 5th DCA 1996), but also tort claims based upon oral agreements or promises to lend money. Dixon v. Countrywide Home Loans, Inc., 710 F. Supp. 2d 1325 (S.D. Fla. 2010) (negligent misrepresentation); Mark Andrew of Palm Beaches, Ltd. v. GMAC Commercial Mortgage Corp., 265 F. Supp. 2d 366 (S.D.N.Y. 2003) (promissory estoppel and negligent misrepresentation); University Creek Associates II, Ltd. v. Boston American Financial Group, Inc., 100 F. Supp. 2d 1345 (S.D. Fla. 2000) (promissory estoppel).

 

In Professional Vending Services, Inc. v. Firestone Financial Corp., U.S.D.C. S.D. Fla. Case No. 15-61852-CIV-ZLOCH (Apr. 29, 2016), the U.S. District Court for the Southern District of Florida recently confirmed that Florida’s Banking Statute of Frauds absolutely bars claims that are based on an alleged oral agreement to lend money.  In that case, the claimant alleged that a lender promised to loan a specific amount of money, but the loan closing documents reflected a much lower loan amount.  The Court found that the oral agreement to lend money was a “credit agreement” and that the claims were barred, even though they were styled as claims for negligent misrepresentation and promissory estoppel, because they flowed from the unenforceable oral credit agreement.

Sign Here

When seeking a loan, a borrower needs to remember to tell the lender:

So just sign – (You, you, you’d better sign it)

Right here on this dotted line – (You, you, you’d better sign it)

Where it says you’ll be mine, all mine – (You, you, you’d better sign it)

Until the end of time – (Sign it) (Sign it) (Sign it) (Sign it)

And when a lender is sued for not complying with an oral promise to make a loan, don’t forget about Florida’s Banking Statute of Frauds.


David Greene is a commercial litigation partner in Fox Rothschild’s West Palm Beach office.  His practice focuses primarily on banking litigation, real estate litigation, title insurance litigation, and construction litigation. You can reach David at 561-804-4441 or dgreene@foxrothschild.com.

Court’s Inherent Authority to Deem Motions Abandoned: Even the Non-Prevailing Party Gets Lucky Sometimes

Posted in Banking

HSBC Bank avoided a potential attorney’s fee judgment when the trial judge deemed abandoned a borrower’s post-dismissal motion for costs and attorneys’ fees. In an opinion released this morning, Florida’s Fourth District Court of Appeal affirmed that ruling in the case of Domenic Grosso a/k/a Domenic L. Grosso v. HSBC Bank USA, N.A., 4th DCA Case 4D14-3971 (Apr. 27, 2016).  Deutsche Bank received the same treatment in Felice Berenson v. Deutsche Bank National Trust Company, 4th DCA Case No. 4D14-3985 (Apr. 27, 2016) (borrower’s motion “languished” for 14 months), and Ramon Ramos and Miriam Ramos v. Deutsche Bank National Trust Company, 4th DCA Case No. 4D14-3981 (Apr. 27, 2016) (borrowers’ motion “languished” for 22 months).

 

HSBC sued its borrower for foreclosure, but filed a voluntarily dismissal and the case was closed. The borrower filed a motion for costs and attorneys’ fees, but did not file supporting affidavits, set the motion for hearing, or take any other record activity for 18 months.  After reviewing the docket, the trial judge, Judge Richard Oftedal, ordered that the case be administratively closed and that any post-trial motions that had not been set for hearing be deemed abandoned.

Get Lucky

The borrower argued on appeal that Judge Oftedal’s ruling constituted a dismissal for lack of prosecution, but without compliance with Florida Rule of Civil Procedure 1.420. The Fourth DCA disagreed, finding that Rule 1.420 applies only to “actions” and that the borrower’s motion was “simply a motion.”

 

The appellate court went on to confirm that the trial court did, in fact, have the inherent authority to deem the borrower’s motion abandoned under the circumstances. The Fourth DCA concluded that Judge Oftedal’s presumption was “not erroneous” and that it is not an abuse of discretion to deem abandoned a motion that “was left to languish on the docket for eighteen months.”

Abandoned Papers

Having taken a voluntary dismissal, HSBC was not the prevailing party and very well may have been liable for costs and attorneys’ fees. However, the borrower’s inaction prevented him from having any chance of making HSBC reimburse him for the costs and attorneys’ fees he incurred in defending the case.  So, time does mean something and it shouldn’t be that easy to forget about the fees.  But, “even the losers get lucky sometimes.”


David Greene is a commercial litigation partner in Fox Rothschild’s West Palm Beach office.  His practice focuses primarily on banking litigation, real estate litigation, title insurance litigation, and construction litigation. You can reach David at 561-804-4441 or dgreene@foxrothschild.com.

Foreclosure Standing – Another Evidentiary Trap for the Unwary Lender

Posted in Banking

It looks like standing is the flavor of the month in foreclosure defense and the issue that lenders need to make sure that they are addressing at trial. Two recent Florida appellate court decisions highlight this issue.

Assignment of Note

In Michael Sorrell v. U.S. Bank National Association, Fla. 2d DCA Case No. 2D14-3883 (Apr. 6, 2016), Florida’s Second District Court of Appeal reversed a final judgment of foreclosure based upon a finding that the lender’s “evidence was legally insufficient to prove that it had standing when it filed the Complaint.”  The note that was attached to the complaint (which was payable to the original lender, was not endorsed, and did not include an allonge) and the mortgage that was attached to the complaint were both in favor of the original lender.  The plaintiff filed an amended complaint with an assignment of the mortgage attached, but no additional documents related to the note, and the borrower asserted a defense of lack of standing.  The plaintiff then filed the original note and mortgage and a copy of the assignment of mortgage, along with an undated allonge, which was a separate document from and not affixed to the note.  No testimony or documentary evidence was offered at trial to establish the date that the plaintiff acquired the note and mortgage; specifically, that the plaintiff owned and held the note and mortgage on the date that the case was filed.  Similarly, no evidence was presented to prove when the allonge was created, signed or attached (if it ever was) to the note.  The trial court entered final judgment of foreclosure, but the appellate court reversed because the plaintiff had not established that it had standing to foreclose on the date that the complaint was filed.  The lack of documentary and testamentary evidence doomed the plaintiff’s case and the 2d DCA remanded with instructions for the trial court to dismiss the case.

Similarly, Florida’s Fourth District Court of Appeal reversed and remanded with instructions to enter judgment in favor of the borrowers in Susan Elman and Bruce Elman v. U.S. Bank, N.A., 4th DCA Case No. 4D14-2520 (Apr. 6, 2016).  In Elman, the plaintiff sought to enforce, as the “holder”, a note with an undated special endorsement allonge.  However, the note and the allonge referenced different loan numbers.  At trial, the plaintiff was not able to establish the date that the allonge was affixed to the original note and other evidence made it, at best, unclear as to who possessed the note when the complaint was filed.  The 4th DCA relied on the proposition that a plaintiff that is seeking to enforce a note, but is not the original payee, must “prove not only a blank or special endorsement in its favor, but also that the endorsement was placed on the note before it filed the original complaint.”  In Elman, the appellate court found that endorsement and allonge were undated and the evidence at trial did not establish that the plaintiff possessed the original note with the allonge affixed thereto as of the date that the complaint was filed.  Accordingly, the 4th DCA found that the plaintiff failed to prove that it had standing to foreclose.

Trial

These cases and others like them stand as a stark reminder to lenders of the importance of presenting sufficient evidence at trial to prove that they had standing at the time that they filed their foreclosure actions. When a lender seeks to enforce a note and mortgage to which it is not the original payee pursuant to an undated endorsement or allonge, it is crucial that it present evidence establishing that it had the right to enforce that note at the time that it filed its complaint.


David Greene is a commercial litigation partner in Fox Rothschild’s West Palm Beach office.  His practice focuses primarily on banking litigation, real estate litigation, title insurance litigation, and construction litigation. You can reach David at 561-804-4441 or dgreene@foxrothschild.com.

50 Cent – What’s the Plan?…and More About Disclosure

Posted in Bankruptcy, Chapter 11, Creditors' Rights, Uncategorized

$100 piggy

Since my April 8th blog post, Curtis James Jackson III, better known as rapper 50 Cent (“Jackson”), filed his proposed First Amended Plan and Disclosure Statement.  The deadline for creditors and parties-in-interest to object to Jackson’s Disclosure Statement is April 27th, followed by a May 18th hearing on approval.

Jackson’s Plan proposes to allow Sleek Audio, LLC’s, Suntrust Bank’s, and Lastonia Leviston’s unsecured claims in the amounts of $17,320.67, $3,890,000.00 and $6,000,000.00, respectively.  He will be contributing up to $23.4 million in cash over the proposed plan of 5 or less years, and will also contribute up to 70% of the net proceeds from his currently pending malpractice claim.  Jackson estimates that general unsecured creditors will receive between 74% and 92% of their allowed claims and each holder of an allowed unsecured claim under $10,000.00 will be paid in full.

What is a disclosure statement? 

A disclosure statement is a document that a Chapter 11 debtor or plan proponent files with the Court in conjunction with his proposed plan of reorganization (or liquidation).  The disclosure statement must provide “adequate information” to allow creditors to make an informed decision about whether to accept or reject the proposed plan.

The Court has broad discretion to determine whether the disclosure statement provides adequate information and that decision is often made based on the nature, history, and complexity of the finances of the Chapter 11 debtor.  Generally, a disclosure statement includes information about the debtor’s financial history, circumstances that resulted in the bankruptcy filing, description and value of the debtor’s assets and the amount and nature of his debts, description of his plan of reorganization and repayment to creditors as compared to a Chapter 7 liquidation.

Why would someone object to a disclosure statement?

Creditors and parties in interest may file an objection on the basis that the plan does not provide sufficient information or analysis which would allow the them to make a decision whether to vote for or against the proposed plan.  They may also object to statements in the plan they believe are incorrect.  Courts have denied approval of disclosure statements where statements contained there in were unsupported by factual information such that creditors were unable to independently evaluate the merits of the plan.

As to Jackson’s amended disclosure statement, upon a quick review, it appears to be quite comprehensive.  Moreover, since he has come to an agreement with his largest unsecured creditors, he may not receive any objections unless the U.S. Trustee’s office or perhaps a secured creditor takes issue with his disclosures.  Jackson is closer to the finish line and his happy ending.  More to report after April 27th!


Heather L. Ries is an attorney with the Financial Restructuring and Bankruptcy Department of the law firm of Fox Rothschild LLP.  Heather focuses her practice in matters related to bankruptcy, creditors’ rights, commercial workout and foreclosure disputes, and commercial litigation.  You can contact Heather at 561-804-4419 or hries@foxrothschild.com.

Beauvais Reversed – Statute of Limitations Does Not Bar Subsequent Foreclosure Action on Later Default

Posted in Banking

In a highly anticipated ruling, after rehearing en banc, Florida’s Third District Court of Appeal reversed its prior ruling in Deutsche Bank Trust Co. America v. Beauvais, 40 Fla. L. Weekly D1 (Fla. 3d DCA Dec. 17, 2014), and substituted a new opinion in its place.

U-Turn

Beauvais addressed the issue of whether the statute of limitations could defeat a second mortgage foreclosure action after a lender had previously exercised its right to accelerate all payments due under a loan and filed a prior foreclosure action that had been involuntarily dismissed. In December 2014, Judges Shepherd, Emas and Scales ruled that the “acceleration of the debt triggered the commencement of the statute of limitations, and because the installment nature of the loan payments was never reinstated following the acceleration, there were no ‘new’ payments due and thus could be no ‘new’ default following the dismissal without prejudice of the initial action.”  Based on that finding, the Court concluded that the statute of limitations began to run from the date that the loan was initially accelerated, had expired by the time the second foreclosure action was filed, and precluded the second foreclosure action.  In its initial opinion, the 3rd DCA distinguished the Florida Supreme Court’s ruling in Singleton v. Greymar Assocs., 882 So.2d 1004 (Fla. 2004), by noting that “Singleton involved an involuntary dismissal with prejudice of the initial action, whereas [Beauvais] involved an involuntary dismissal without prejudice,” and finding that the former “operated as an adjudication on the merits”, while the latter did not.  The Court noted a potential conflict with U.S. Bank Nat. Ass’n v. Bartram, 140 So.2d 1007 (Fla. 5th DCA 2014) review granted, Bartram v. U.S. Bank, Nat. Ass’n, Nos. SC14-1265, SC14-1266, SC14-1305 (Fla. Sept. 11, 2014); and certified conflict with Evergrene Partners, Inc. v. Citibank, N.A., 143 So.2d 954 (Fla. 4th DCA 2014).

Clock is Ticking

On August 3, 2015, the 3rd DCA ordered rehearing en banc and requested supplemental and amicus briefs from various organizations.  The 3rd DCA held oral argument in Beauvais on November 12, 2015.  Meanwhile, the Florida Supreme Court held oral argument in Bartram on November 4, 2015.

A new 5-4 opinion was issued in Beauvais yesterday, with the entire original panel (Shepherd, Emas and Scales) in the dissent.  Judge Wells, writing for the majority, found that Singleton controlled the outcome and allows for multiple actions for individual defaults with accompanying accelerations.  Specifically, the Court held that “the dismissal of a foreclosure action accelerating payment on one default does not bar a subsequent foreclosure action on a later default if the subsequent default occurred within five years of the subsequent default action.”  The 3rd District went on to clarify that it simply does not matter whether the initial foreclosure action was dismissed with or without prejudice.  The new opinion concludes that the parties were returned to the status quo that existed prior to the filing of the initial lawsuit and the subsequent lawsuit was not barred by the statute of limitations.

Restart

The 3rd DCA’s new opinion in Beauvais resolves the inter-district conflict and aligns the 3rd District with the other Florida courts that have addressed this issue.  This is a significant change of course for the 3rd DCA and provides much needed clarity to lenders.


David Greene is a commercial litigation partner in Fox Rothschild’s West Palm Beach office.  His practice focuses primarily on banking litigation, real estate litigation, title insurance litigation, and construction litigation. You can reach David at 561-804-4441 or dgreene@foxrothschild.com.

CFPB’s Constitutionality Questioned by D.C. Circuit Court in PHH Case

Posted in Banking

The Consumer Financial Protection Bureau is in the midst of what many see as its most serious challenge to date. After a CFPB administrative law judge fined PHH Corp. $6 million for allegedly violating RESPA by purportedly receiving kickbacks from mortgage insurers, CFPB Director Richard Cordray increased the penalty to $109 million.  PHH appealed that decision to the D.C. Circuit Court and, at oral argument yesterday, the judges on the panel sharply questioned CFPB’s attorneys about the constitutionality of CFPB’s structure.  The Court’s questions focused on the significant amount of power granted to Cordray, as the single director of CFPB who can be removed by the President only for cause.  Add to that the fact that CFPB is funded by the Federal Reserve and PHH argued that the agency is not accountable to the political branches and is, therefore, unconstitutional.  As an example what appears to be the Court’s view of the far-reaching extent of the power of CFPB’s director, Judge Brett Kavanaugh pointed to the fact that Cordray’s decision in the PHH case essentially outlawed an industry practice that had long been considered acceptable.

Angry Judge

The PHH case questions the very constitutionality of CFPB’s structure and authority. Whichever way the Court rules, it is expected that the losing party will seek further review by a full panel of the D.C. Circuit or the U.S. Supreme Court.  Of course, the Court could simply seek to fashion a remedy that would provide greater authority over the CFPB director.  Either way, at least for now, the hearing before the D.C. Circuit in the PHH case will encourage CFPB targets to continue to aggressively defend CFPB enforcement actions and, when doing so, include challenges to CFPB’s authority.

Constitution Flag and Gavel


David Greene is a commercial litigation partner in Fox Rothschild’s West Palm Beach office.  His practice focuses primarily on banking litigation, real estate litigation, title insurance litigation, and construction litigation. You can reach David at 561-804-4441 or dgreene@foxrothschild.com.