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Lead Them Not Into Temptation

The problem for many big corporations, insurance companies, financial institutions and even consumers to a lesser degree is that it is easy for a lawyer to lead them into temptation.  To the lawyer it is the means of getting paid more per case.  To the entity it is the feeling of feeling vindicated, even if the final result does not necessarily turn out that way (kind of like the last act of defiance).

We all know lawyers that do this.  Not only do we know who they are, they know who they are.  They probably live a little better than the rest of us, they are never in their offices because they are always in depositions somewhere, and they probably have the best hourly and collection rates around.  In East Texas we say that they are "Board Certified in Billing".

From my perspective typically representing the Plaintiffs, it comes at me this way.  "My client does not think it did anything wrong".  Or, their client wants to argue that a 1949 decision out of Puerto Rico represents a line of cases that represents good law, even if it goes against every decision in the circuit in which the suit resides.  Or, the one I love the best, is that the attorney is concerned not for his client, but what message this sends if he allows his client to settle this claim.  There is of course the so-called "Wal-Mart Defense" in which not only will there be no settlement, they will try to bury you regardless of the costs, for the principal of the thing.  It has to be the delight of those attorneys who think to highly of themselves to convince their clients that this is a viable option.

The problem for many big corporations, insurance companies, financial institutions and even consumers to a lesser degree is that it is easy for a lawyer to lead them into temptation.  To the lawyer it is the means of getting paid more per case.  To the entity it is the feeling of feeling vindicated, even if the final result does not necessarily turn out that way (kind of like the last act of defiance).

We all know lawyers that do this.  Not only do we know who they are, they know who they are.  They probably live a little better than the rest of us, they are never in their offices because they are always in depositions somewhere, and they probably have the best hourly and collection rates around.  In East Texas we say that they are "Board Certified in Billing".

From my perspective typically representing the Plaintiffs, it comes at me this way.  "My client does not think it did anything wrong".  Or, their client wants to argue that a 1949 decision out of Puerto Rico represents a line of cases that represents good law, even if it goes against every decision in the circuit in which the suit resides.  Or, the one I love the best, is that the attorney is concerned not for his client, but what message this sends if he allows his client to settle this claim.  There is of course the so-called "Wal-Mart Defense" in which not only will there be no settlement, they will try to bury you regardless of the costs, for the principal of the thing.  It has to be the delight of those attorneys who think to highly of themselves to convince their clients that this is a viable option.

Barrett Burke Wilson Castle Daffin & Frappier (BBWCDF)

At what point does the law firm of Barrett Burke Wilson Castle Daffin & Frappier become toxic?

Let me say that I have known Mary Daffin for years.  She is one of the most gracious and upstanding people that I know.  She has achieved wonders helping this firm grow into the powerhouse that it is.  She has always been open, honest and above board with me.  The problem is, due to the size of the law firm, and the enormous duties undertaken, we do not get to deal with Mary Daffin.  So we have to say, despite Mary Daffin, that with every hit the firm takes and with sanction it receives, BBWCDF seems to redesign itself into some organization that is more discordant, more shrill, more mischievous, more authoritarian, and more impervious in its approach.

This now is nowhere more evident than in how it has decided to handle its adversary proceedings.

Why?

I get this question a lot from bankruptcy attorneys and from clients.  Why, for example, does a creditor who repossesses a vehicle in violation of the automatic stay fail to return it immediately upon demand?  Or, why does a collection agency or creditor continue to send and make demands after being told of the bankruptcy?  Are they intentionally violating the automatic stay?

Well, the answer is often no.  They are not intending to violate the stay.  It is usually based upon institutional arrogance.  No one person is handling the entire matter, the person who is confronted with the issue does not have the complete authority, training, experience, or will to stop what is happening.  The person taking the demand to stop hears so many complaints and explanations it just goes in one ear and out the other.  One cog is given instructions on how to perform and it dare not do anything else.  Sometimes it is based upon a misunderstanding of the law or the remedies available to the creditor or collector, the creditor or collector dares to rely on its own instincts and not consult a bankruptcy attorney as to whether it is right in its assumptions.  A creditor or collector too often finds it is fine to rely on its own opinion that requires you or your attorney to prove them wrong.

What does not help is that many of the misconceptions harbored by creditors and collectors are not as a result of bad legal advice.  It is a result of bankruptcy attorneys continually letting them off the hook for past indiscretions.  I cannot tell you how many times, especially from carry-the-note car lots, I have heard the refrain that I have always done this in the past and I never got sued.

The good news is that an aggrieved debtor does not have to prove (or for that matter disprove) the intend to the creditor or collector who violated the automatic stay.  This is the willfulness standard, and it is followed by nearly every jurisdiction in the country.  Under 11 U.S.C. § 362(h) of the pre-BABCPA Code, or 11 U.S.C. § 362(k) of the post-BABCPA Code, damages are mandatory, including attorneys' fees and costs upon the finding that (1) one or more of the automatic stay provisions of 11 U.S.C. § 362(a) were violated, (2) there is not an exception for the action pursuant to 11 U.S.C. § 362(b), (3) the creditor or collector had notice of the bankruptcy filing, and (4) the creditor intended the action it undertook to violated the automatic stay.

There are two important distinctions in regard to these elements.  The first, is that if a creditor or collector repossessed a car, for example, you only have to show it intended to repossess the car.  You do not have to prove it knew or believed they were or were not violating the automatic stay.  This just does not matter.

The second issue is that there are NO GOOD FAITH DEFENSES allowed to explain the conduct.  Le me repeat that.  There are NO GOOD FAITH DEFENSES allowed to explain the conduct.  So, for example, it does not matter if the creditor or collector thought it was not violating the stay, or thought it had a right to violate the stay, or was advised by legal counsel that it was okay to do what it did, or had gotten away with the conduct before.

Many courts simply do not like to admit it, but 11 U.S.C. § 362(h) or (k) are strict liability statutes.  You only have to prove  up the objective facts related to the elements stated above.  You do not have to prove up or disprove why it happened.  The Courts should not be concerning themselves with why something happened for the determination of actual damages, including attorneys' fees and costs.

My Wish: Quit Modifying The Stay

I have to admit that when I represented consumers in bankruptcy years ago that I was guilty of too often allowing my consumers to modify the automatic stay to resolve a matter.  But, my wish today would be that bankruptcy attorneys would stop this practice, at least past the time the debtor has curred the arrearage or whatever problem that existed has been curred.

When this practice began in the 80s that is what we debtor attorneys initially agreed to do.  The client would get behind on their mortgage payments, we would agree to an order allowing then to catch up by making additional payments, and if they did not make those payments the automatic stay would lift after providing a 10 day notice.  The famous drop dead provision.  Then as we bankruptcy attorneys and the bankruptcy courts got acclimated to it, we began to agree to allow those drop dead provisions to extend throughout the remaining term of the bankruptcy regardless of the whether the original default had been curred.

I remember the creditor attorneys going to seminars and explaining how they tell their clients not to fight over an arrearage, and that all the creditor needs to do is get a drop dead provision and they will eventually get the collateral back.  In other words, set the trap and wait.  And, we are not necessarily speaking of waiting for there to be another major default as much as just a misunderstanding, a glitch, as the creditor looks to issue its notice that the stay no longer exists.

For some reason we allowed ourselves to be buffaloed into allowing this to go on.  I remember one particular creditor always asking the question, "Why should my client have to come back in with another motion if this happens in the future?"  Well, there are many reasons why they should do this that I will not go into here.  But, with debtor attorneys handling too many cases in order to make a living and bankruptcy courts trying to cut back on their 362 motion dockets, these question have become all too convenient.

From my standpoint, the drop dead provision makes little sense.  First, it is the point of too many stay litigation matters in  which there is a dispute as to whether or not the stay lifted per the terms of the order modifying the stay.  Designed to save time, these provisions are actually causing the attorneys' staff to spend more time counseling the debtor or trying to reconcile the lift stay notice when it comes in than the time it was intended to save.  Large creditors, matched with their mass practice law firms, simply handle too many cases to understand, or appreciate, or to properly reinforce the nuisances of these orders.  If these organizations have trouble guarding against the simple task of not violating the stay after notice, it is difficult to understand how they navigate thousands of different order, with thousands of different provisions and terms effectively.  The truth is they cannot, they do not, and their inability is increasing leading to litigation.  So, it is not in the creditor's best interest to do this, but that is what their law firms have convinced them to do over time.

Second, I did not understand then, and I do not understand now, the argument that a creditor should not have to file a second motion in the future if their is an unrelated default of some kind.  Why not?  Why should the bankruptcy attorney and possibly the court not review what particular problem the debtor faces at some time in the future?  No process is perfect.  After all, if the debtor has curred the past default (and presumably paid the attorneys' fees for the default), it is truly hard to see the harm in having the court review a future presumably unrelated matter or alleged default.  It presents no greater loss than what the creditor would have had to incur if the stay had lifted on the first motion filed.

Third, it makes little sense to issue an order, except under the most limited circumstances, that allows the very creditor that has professed that it wants the automatic stay to lift so it can take its collateral, to be placed in a position of determining in the future if the automatic stay has lifted.  Is that not like putting Orson Wells in charge of the Twinkies? 

Give the creditor this, if the debtor and the court agrees, that the debtor will make four catch up payments and become current, and does not fulfill this obligation, then the stay ought to lift, with some minor provision to insure there is not a mistake.  Why should the creditor have to come back on the exact same violation if the agreement to cure is not fulfilled?  It needs to end there, however.  If the cure is met, there should be no ongoing drop dead provision.  After that an independent third party should decide these issues.  Who could this independent third party be?  I know, the bankruptcy court.

Why Does Not Matter

We all remember those obnoxious Enron ads on TV in which behind the crooked "E" logo the announcer kept repeating "why?  why?  why?"  This was played by some with great satisfaction after Enron filed bankruptcy and its executives were indicted.

1 + 1 = 1 ?

Law school tries to teach you spin.  Big Law tries to teach you to make a ridiculous argument while keeping a straight face.  It is done by taking two disparate facts or terms or precedents, and combining them to draw a desperate conclusion.  In my line of work I am confronted with this tactic every single day.  My typical reaction is that I am either so stupid that I am missing something or the other side is just crazy.  The truth of the matter is that neither conclusion is true.  I know better.  The court knows better.  For that matter, the other side knows better.  (I think).  The other side is just desperate to find a claim or defense.  The problem is that under Rule 11 of the Federal Rules, and various state rules, this is probably sanctionable conduct.

THE INTENTIONAL LAWYER THAT STOLE CHRISTMAS

I have written about Bob Sutton before and his book The No Asshole Rule: Building A Civilized Workplace and Surviving One That Isn't.  You can read my prior posts by clicking here, here and here.

Bob Sutton is Professor of Management Science and Engineering in the Stanford Engineering School, where he is Co-Director of the Center for Work, Technology, an active member of the Stanford Technology Ventures Program, and a cofounder of the new Hasso Planter Institute of Design, a multi-disciplinary program at Stanford that teaches and spreads "design thinking."  In short, he is not a foul mouth sailor or bar room brawler.  He is an intellectual.

He uses this crude term to describe a generic (and nameless) group of people because he argues that, in fact, there is no other word that really captures how devastating these abusers are to others.  In fact, in the past I have tried to adopted other phrases to describe these undesirables.  See this post by clicking here. I think Bob Sutton's position on the word is true, but this East Texas country boy still tends to feel the need to apologize before using this term before hand.

In any event, Bob Sutton recently blogged about there being two varieties of assholes.  These are "Intentional" assholes who want to leave others feeling demeaned and de-energized, and "Clueless" assholes who damage people without realizing how much harm they are doing.

I have found in my line of work that many large organizations possess the "Clueless" variety that cause trouble for consumer, their employees, their customers and others.  However, usually with some well thought out litigation you can reform this type.

Further, in the practice of law many of us have had "Clueless" moments that we regret, I am sure.

The difference is that the "Clueless" are often well intentioned but occasionally misguided (read we are "just human" or "we are all just sinners"), while the "Intentional" have a plan, a strategy, a philosophy, a way of life (and in law a way of practice) that is truly and unnecessarily hurtful, harmful, costly and demeaning to others.  I have had asshole moments in the past, but am generally sorry and repentant.  The "Intentional" is proud and unapologetic.  Negative attention is better than no attention.  The means justifies the ends. The fact they get away with their conduct (and are rewarded for their conduct) teaches them to do it again, again, and again.  There are no ethical and moral boundaries.  You cannot call the "Intentional" on it because such an act alone reinforces their ego and, hence, their bad behavior.  The fact that somebody believes I am an asshole would make me feel bad.  It provides "Intentional" their net worth in the practice of law.

I knew an attorney once who had a bumper sticker on his car that stated, "The meek might inherit the earth, but not the mineral rights".  Cute, but I think it defines the philosophy of those we speak.

There are just too many law firm, and especially Big Law firms, in which the "Intentional" variety prevail.  They are often referred to as "Rambo Lawyer", although I think that is probably too popular of term to use.  It is this "Intentional" type of lawyer that brings displeasure to us Third Wave attorneys in our practice of law.  These "Intentional" lawyers are too costly in time and money for no particular benefit but their own.  That is the objective they seek.

I have been on a rant about it lately because the problem seems to be getting worse.  Maybe it just manifests itself during this holiday season as the "Intentionals", let's call them, enjoy using and abusing the holiday season to disrupt the lives of Third Wave attorneys, debtors and other ones aggrieved by their "Clueless" client's actions. They cannot win a case legally or ethically so their tactic is to be so disruptive, so costly, so obnoxious and vile that the aggrieved cave in and go away demoralized.  What better place to play Grinch than during the Christmas holiday.

A few years ago one of the "Intentionals" served an unannounced subpoena on me, as the Plaintiff's attorney in the case, two days before Christmas to show up the day after Christmas for my deposition to be taken.  I was also suppose to produce all of the prior cases files I had handled of the same type as being litigated in that instance.  I was to deliver my work product in this case, as well as all of my research notes, all papers I had ever published and seminars were I had lectured.  I was also to deliver my client's legal file for copying.  I called the attorney upon receiving the subpoena to express how much I disagreed with it, but to also suggest that we needed an agreement to put it off until after the holidays so the judge could decide this issue.  The lawyer fell into an unrelenting yelling fit so bad I just had to ask if he was on medication.

Not only did I believe this to be inappropriate on so many levels (which is an understatement), but so did the federal judge involved. The Judge had to disrupt his Christmas vacation as well to quash the subpoena.  I got to spend Christmas Eve drafting motions and engaging in telephonic hearings.  The Judge had to hold a hearing before New Years to deal with the issue after he quashed the subpoena.  The lawyer himself was unrepentant, priding himself on his litigation prowess that unnerves the opposition, and the case was settled only because the lawyer's partner thought it was the only way to avoid sanctions for the law firm.  (A settlement put the cost of this bad behavior on the lawyer's client as opposed to him, and he got paid for his time in all of this to boot).

It is important to note that this attorney acts this way in almost every case and is marketed by the law firm as a litigation attack dog to its Fortune 500 companies.  He is not only an "Intentional", but he is intentional in being an "Intentional" -- the worst kind of asshole.

I have run into this problem this Christmas season, if not on this scale.  What has amazed me over the years is that the "Intentionals" tend to grow and thrive in the same Big Law litigation departments. Unfortunately, they take these kids out of law school, over work them (or work them over), and teach them to be wholly dedicated and intelligent lawyers, but also irresponsible, demoralizing asses.  It is truly unfortunate.  With the law firm's move up or move out policy on associate retention, only those who pass the "Intentional" test seem to win out.

I have often wondered what percentage of Rule 11 sanction motions are tactically filed, or at least threatened, by the "Intentionals" between the Thanksgiving and Christmas holidays.  My guess is a lot. The "Intentionals" try to use personal attacks on attorneys and holiday schedules to de-energize the other side.  It is that "Intentional" strategy in motion.  (Pun intended).

The other issue of course is billing.  Is there any doubt that the "Intentionals" among us, and their law firms, get paid more per case because they whip their hourly paying clients into a frenzy and spend hundreds of hours on these frivolous personal attacks.  That is what I suspect.  After all, there has to be a quantifiable benefit to being an "Intentional".  My guess is that it is marketing as being overly zealous and billing because you are a strategist instead of a moralist.  (As a side note, one would think that unit billing and fix fee billing would help cure this beast).

I wonder if these attorneys know they are assholes.  I am sure they rationalize their inappropriate conduct in some way.  I think the practice is more prevalent in Big Law because if the environment is ripe for this type of thing, there is a lot of moral support (although that term seems inopposite of what I want to say) among their peers in their firm.  In other words, as my Mother says, "birds of a feather flock together".  "Intentionals" flock with "Intentionals".

Most attorneys get along and play well with others.  Most have a group bond (if not a friendship) and a group ethic to which they at least try to adhere.  For example, attorneys meet at bar functions and they visit in Court.  They have disagreements, but they do not act out badly.  Yet, it is funny, during these functions all of these attorneys know who the "Intentionals" are.  The courts and judges know who they are.  One judge that I knew classified these attorneys as being "board certified in billing".  That is their reward and motivation for being bad.  And because we are nicer than they are, we keep it to ourselves. I think, however, the time is coming when we will need to orchestrate "Intentional Interventions" to help these attorneys and firms become better citizens.

In the meantime, maybe we should produce a movie of the "Intentional" lawyer who stole Christmas.

As I have said in the past, all of us have bad moments.  The difference is that when the smoke clears we do not overly try to rationalize it.  We feel sorry and try to apologize or at least make amends.  I guess that is because we had a "Clueless" moment.

Here is what I have learned as an attorney.  Sometimes we are right, and should be proud of it.  Sometimes we turn out to be wrong.  That is the reason they pay the judges the big money to figure this out. However, in either case, it is just not a good idea to be arrogant.  I think, ultimately, arrogance is the factor that distinguishes the "Intentional" from us "Clueless".  The "Intentionals" are assholes but they are proud of it.

CABLE TV SERVICE IS NOT A UTILITY SUBJECT TO REESTABLISH SERVICE

In a decision yet to be published, the United States Court of Appeals, Fifth Circuit, has issued a decision in Darby v. Time Warner Cable, Inc. (Matter of Darby), No. 05-20931 (5th Cir. Nov. 14, 2006), which states that cable TV provider is not a utility governed by 11 U.S.C. § 366.  In a case of first impression appealed from the United States Bankruptcy Court of the Southern District of Texas, the 5th Circuit found:

The word “utility” as it is used in § 366 is not defined within the statute, but some guidance is provided by the legislative history of the provision. Both the House Judiciary Report and the Senate Report on the provision state in relevant part: “This section gives debtors protection from a cut-off of service by a utility because of the filing of a bankruptcy case. This section is intended to cover utilities that have some special position with respect to the debtor, such as an electric company, gas supplier, or telephone company that is a monopoly in the area so that the debtor cannot easily obtain comparable service from another utility”…We must decide if Time Warner stands in a “special position” with respect Because § 366 is a restriction on the general right of a creditor to cease doing business with a debtor for any reason, it seems logical that a strong justification, such as the need for continued access to essential services, underlies the provision…The services mentioned in the legislative history are considered “necessary to meet minimum standards of living,” and we hold that the necessity of a service is what creates a “special” relationship between a debtor and a utility…“cable television is not a necessity as millions of Americans continue to exist without such a service”… Therefore, cable service is not covered by § 366, and Time Warner is not required to reinstate Darby’s service despite his offer of adequate assurances of future payment …Because cable television is neither a necessity nor would Darby be faced with crippling inconvenience in obtaining alternate service, Time Warner is not a utility as contemplated by § 366.

COURT UPHOLDS RULE THAT IT IS THE RESPONSIBILITY OF THE CREDITOR TO COMPLY WITH THE AUTOMATIC STAY AND NOT THE DUTY OF THE DEBTOR TO INFORM IT OF ITS VIOLATION

In what is still an unpublished case, Idaho Bankruptcy Judge Jim Pappas upholds the basic tenant of law that says that a creditor is responsible for its own compliance with the automatic stay (or injunction of the court), and it is not the responsibility of the debtor to figure out how to prevent the violation.

In In re Gorring, 05-42291 (Bankr. Idaho 7/7/2006) the creditor garnished a bank account of the debtors containing $13.00.  As a result the bank closed the debtor's account.  The bankruptcy attorney then notified the creditor and informed it of the bankruptcy, but did not inform the creditor of the stay violation.  Thereafter, the creditor sent a letter to the debtor advising him that the he could dispute the validity of the debt, and the letter attempted to collect the remaining balance owed.  The Court found these acts to constitute willful violations of the automatic stay.  The debtor then sought compensatory damages, including attorneys' fees, and punitive damages.  The Court denied the punitive damages but awarded all compensatory damages over the objection of the creditor which argued that any stay violation could have been prevented if the debtor, or debtor's counsel, had notified it first that it was violating the automatic stay.  The Court ruled:

"Creditor argues much of these damages could have been avoided had Debtor's attorney more promptly contacted Creditor about thestay violations. While Debtor is obliged to mitigate his damages,the Court will not penalize Debtor under these facts. It is Creditor's responsibility to properly respond to its receipt of a notice about a bankruptcy filing. It can not complain the Debtor did not act more promptly in pointing out Creditor's own errors".