On November 15, 2018, the Florida Supreme Court held that “an allegation that a trial judge is a Facebook ‘friend’ with an attorney appearing before the judge, standing alone, does not constitute a legally sufficient basis for disqualification.”

The statute which governs a motion to disqualify requires that the moving party file an affidavit in good faith stating fear that he or she will not receive a fair trial…on account of the prejudice of the judge as well as the facts and the reasons for the belief that any such bias or prejudice exists.

In finding that Facebook “friendship” alone falls below the threshold for disqualification, the Court reasoned, that the mere fact that a Facebook “friendship” exists provides no significant information about the nature of any relationship between the Facebook ‘”friends.”  The Court further noted that “[n]o reasonably prudent person would fear that she could not receive a fair and impartial trial based solely on the fact that a judge and an attorney appearing before the judge are Facebook “friends” with a relationship of an indeterminate nature.”

Florida courts, including the Supreme Court, have long recognized the general principle of law that an allegation of mere friendship between a judge and a litigant or attorney appearing before the judge, standing alone, does not constitute a legally sufficient basis for disqualification.  Why should Facebook “friendships” be any different?


  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.

 

In the case of Mantiply v. Horne (In re Horne), 876 F.3d 1076 (11th Cir. 2017) the Eleventh Circuit decided an issue of first impression in the Circuit: Whether the Bankruptcy Code authorizes payment of attorneys’ fees and costs incurred by debtors in successfully pursuing an action for damages resulting from the violation of the automatic stay and in defending the damages award on appeal.

The stay violator argued on appeal that the debtors were not entitled to appellate fees as a matter of law under Section 362(k)(1) of the Bankruptcy Code because the statute only provides for mandatory fees for damages and attorneys’ fees incurred in ending a stay violation, not incurred in pursuing a damages award nor fees incurred in defending a damages award on appeal.

The Eleventh Circuit disagreed with the stay violator and held that Section 362(k)(1) of the Bankruptcy Code specifically departs from the American Rule and authorizes costs and attorneys’ fees incurred by the debtor in ending a willful violation of an automatic stay, prosecuting a damages violation, and defending those judgements on appeal.

Specifically, the Court reasoned that, unlike Section 330, Section 362(k) specifically and explicitly provides for the recovery of “costs and attorneys’ fees” in the measure of damages arising from a willful violation of the automatic stay, allowing for a departure from the American Rule.  Moreover, nothing in the text of Section 362(k)(1) limits the scope of attorneys’ fees to solely ending a stay violation.  Instead, Section 362(k)(1) speaks to full recovery of damages including fees and cost incurred from violating the stay.  The Court noted that this result makes sense in the context of bankruptcy litigation where the lion’s share of damages from violations of the automatic stay are attorneys’ fees and the debtors are least able to afford them.

The Takeaway?  While there are always exceptions to the rule, it is generally best to attempt to settle “willful” stay violations early on.  The damages in what may seem like a simple matter, escalate quickly.  If you choose to litigate and lose, you could be responsible for paying “actual damages, including costs and attorneys’ fees” to the debtor(s) for all the proceedings related to the stay violation dispute and, to add insult to injury, your own attorneys’ fees and costs.


 

  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.

In my November post, I discussed the basics regarding protection of your Florida Homestead from forced sale by creditors and alluded to exceptions to the rule.  Let’s discuss some of those exceptions as it relates to a bankruptcy filing.

If you have acquired an ownership interest in your Florida Homestead within 1,215 of the date you file for bankruptcy, your exemption is subject to a homestead exemption cap under section 522(p) of Title 11 (the “Bankruptcy Code”).  If you bought a house for the first time within the 1,215 day period, your Florida Homestead exemption is limited the amount of $160,375.00 for single debtors and $320,750.00 for married Debtors.  If you bought a new residence within the 1,215 day period, you may add any equity transferred to the previous residence to the exemption limit.  For instance, if you are a single Debtor, sold your home, and used $100,000.00 of equity from your old home to buy your new one, your allowed exemption would be $260,375.00.  As you can see, if you have more than the exemption limit in your Florida Homestead, it is important to consider and calculate the length of time you have owned your home before contemplating a bankruptcy filing.  In addition, if you have been chased by one or more creditora for several years prior to contemplating bankruptcy, you should consider what, if any, funds you have used to purchase the property, prepay your mortgage or improve the property.  Creditors may look to 522(o) of the Bankruptcy Code to attempt to recover those funds based on your intent to hinder, delay or defraud them.

Another risk to your Florida Homestead exemption is the dreaded “Ponzi Scheme”.  In a June, 2017 decision from the Middle District of Florida Bankruptcy Court, the Court awarded an equitable lien and constructive trust on the homestead of a Ponzi scheme investor’s Florida Homestead.  The Ponzi scheme investor, who had filed for bankruptcy and was not involved in or aware of the fraud, “passively received the fraudulent transfers” which he used to purchased the Florida Homestead.  The Court held that the Ponzi scheme investor’s lack of participation in the fraud was not determinative; the focus must be on the fraudulent nature of the funds and unjust enrichment.  The Ponzi scheme investor had been unjustly enriched by the receipt of the fraudulent transfers that he and his wife invested in their home.  Accordingly, the Court determined that an equitable lien and constructive trust should be imposed on the Florida Homestead to the extent the Ponzi scheme distributions were traceable into the Florida Homestead.   The take away – be wary of investment schemes (if it is too good to be true, it probably is) and be thoughtful about the source of funds you invest in your homestead.


  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.