The Free Press - Volume 1, Spring 2009

Report from the Chair

By Mark Sheriff, Esq.

All appears to be going well in the Creditors' Rights Section in these tough economic times. We are holding up well on our membership projections and numbers. Additionally, our finances are in good order. We also have some very excellent education programs scheduled for the Spring meeting of the CLLA to take place in Chicago. As a former Chairman of the Midwestern District, I would strongly urge and encourage all of you to attend the Chicago meeting. The CRS Executive Counsel will be holding its next scheduled meeting in Chicago and there will also be a general membership meeting.

By now everyone should have received a notification of the Bylaw changes which we will have an opportunity to vote on at the Chicago meeting. While most of the Bylaw changes are fairly routine, there is one significant change I would like to take the opportunity to discuss at this time. The general membership will have the opportunity to vote on changing the elections for the CRS Section so that they will be held in Chicago instead of at the New York meeting in November. All of our national elections have been moved to the Chicago meeting since we stopped having the national convention which typically took place in July. Additionally, all of the other sections and regions of the League other than the CRS hold their elections at the Chicago meeting. In conjunction with the thinking behind our Strategic Plan, to achieve more consistency and uniformity in the League, I would strongly urge all of those attending the meeting to vote for the change. If it passes, all of the current officers and members of the Executive Counsel, will continue to serve until the 2010 Chicago meeting. There will be an opportunity to discuss and comment on the proposed change before voting takes place at the general membership meeting in Chicago.

The Chair and the Executive Counsel are always open to any ideas or suggestions from the general membership. Additionally, I would urge all the members to participate in some fashion by joining and being active on one of the many CRS committees. Anyone interested in participating may contact me and I will be glad to consider making the appropriate appointment.

Looking forward and hope to see as many of you as possible at the Chicago meeting.

Editor's Note: Mark J. Sheriff, Chair of the Creditors' Rights Section, is a partner in the law firm of Wiles, Boyle, Burkholder & Bringardner Co., LPA

 Washington Legislative Report

Excerpts from recent Washington Hot News distributions

By David P. Goch, Esq.

Bankruptcy flings up 31% in 2008

According to the Administrative Office of the U.S. Courts. bankruptcy filings rose 31% in 2008; with 1,117,771 filings in 2008 (compared to 850,912 in 2007).
The majority of filings continue to be non-business with 1,074,225 in 2008 compared to 822,590 in 2007 (+31%).
Business filings in 2008 totaled 43,546 versus 28,322 in 2007 (+54%).

Editor's Note:  David P. Goch, Esq., is the CLLA Washington Legislative Counsel.

Why are you a CRS Member?

The objectives of the Creditors' Rights Section are:

  • To assist the CLLA in promoting the highest standards of integrity, honesty and performance among its various constituencies.
  • To advance the interests of creditors' rights in all proposed state and federal legislation.
  • To assist the business community in the preservation and advancement of its ethical standards, legal rights and interests.
  • To support the judicial process in securing fairness and uniformity.
  • To benefit the legal community by promoting elevated standards of integrity, honesty and competence in the practice of law through continuing legal education.

Why Do Creditors Retain Members of the Creditors' Rights Section?

  • Our members are comprised of competent attorneys whose practices are concentrated in the field of creditors' rights and who are involved with networks of peers dedicated to promoting high standards and excellence in service to their clients.
  • Our members are involved in the creation and dissemination of current changes in legislation and case law on a regional and national level.
  • Our members engage in continuing legal education in the areas of creditors' rights and bankruptcy.
  • Many of our members have achieved certification as a Creditors' Rights Specialist from the American Board of Certification (recognized by the ABA ).
  • Our members enjoy recognition for high professional standards from both the business and legal communities.

As stated at www.clla.org.

PRACTICE GROUPS - New Connections

By: Rick Johanson, Esq.

The Section recently established a number of Practice Groups to encourage members who are interested in particular areas of commercial law to interact. Each group will ultimately determine the nature and extent of its activity. We expect communication to be primarily via e-mail but conference calls or gatherings at CLLA meetings are possible.

We hope that you will want to join one or more groups to bring new ideas and energy. The groups may provide a basis for referral of work, to share knowledge of state laws and as a vehicle to establish new contacts. Their success depends on the members.

At present there are nine (9) groups:

  1. CLLA CRS Construction Law Practice Group
  2. CLLA CRS Foreclosure Practice Group
  3. CLLA CRS Insurance Practice Group
  4. CLLA CRS Landlord Tenant Practice Group
  5. CLLA CRS Leasing Practice Group
  6. CLLA CRS Medical Claim Practice Group
  7. CLLA CRS Retail Practice Group
  8. CLLA CRS Subrogation Practice Group
  9. CLLA CRS Transportation Practice Group

I am acting as the initial coordinator for each of the groups. You can join one or more of them by e-mailing me at rjohanson@ehjlaw.com.

Get involved - get connected. The CLLA is THE NETWORK for Commercial Law.

Editors Note: Rick Johanson is a partner in Engel, Hairston & Johanson, P.C. in Birmingham, AL.

Letters to the Editor

Election Day

On November 4, we experienced a historic election which was particularly special to me because my husband was on the ballot as a judicial candidate for Civil District Court Judge. I thought that it would be fun to share my experiences of that day with you, just in case someone is contemplating a future in politics! I was to be at our local elementary school polling site to campaign for my husband that day. From all accounts of early voting, I was certain that I was in for a brutal time, subject to foul looks, derogatory remarks, cold shoulders, and that is just from the members of our political party. I was incredibly nervous, expecting our opponent's supporters there along with crowds of people completely dismissing me. I parked a couple of streets over from the school and began taking out my box of goodies, campaign literature, signs, etc. A man stopped by and asked me if I needed help carrying my box and smiled. I probably would have declined his offer any other day, but that day, it made all the difference. His smile lifted a heavy weight off my heart as we walked to the school together. He was going to vote and I took the opportunity to speak about my husband to him. When we arrived, I immediately checked everyone out and found nobody there for our opponent, not even one sign. What a relief! In fact, there appeared to be more people campaigning than going to vote.

First, I saw the doctor who corrected my "deviated septum" come out of the poll. I did not catch him in time and he did not know whether he saw my husband's name. Right after him, our son's baseball coach came out who said that he only made an exception for the President and my husband, but otherwise voted for all other candidates of the opposing party. Later, an attorney who worked at Ross Banks more than a decade ago when I just started and whom I have not seen in many years, went to vote at my poll, remembered me, and wished us well. When passing out literature about my husband, I quickly learned that a brochure will not do. People will not read it. So I passed out small American flags with his cards on them or candy with his cards attached. Everyone thought that was brilliant.

While out there, I got to know my fellow campaigners. What a diverse group! One man turned out to be a son of a retired judge. I could not help but ask him about growing up as a son of a judge, just in case my children experience that. He said that he had to be extra cautious because his screw ups could have ended up in the paper. That perspective had not even occurred to me before then, but it does now, and you better believe I told my children about that. There was a yoga instructor in her mid-forties there who could do a hand stand. She told us all about the organic food market in town and other health food stores I will never patron. A family that we knew stopped by for their daughter to interview people on Election Day for scholastic news. Of course, I volunteered. An ex-judge was there for a friend seeking re-election. He told me not to take the results personally; it was only a matter of either R or D. Although I heard that many times before, it was hard to swallow after putting my life on hold for nearly two years and virtually becoming a single parent for the past six months while Michael campaigned nonstop, that it all just boiled down to R or D.

Another man out there, who was a real politico, was truly sweet to me seeing that I was a nervous wreck. It was clear that he did not need to work for a living and likely spent an indecent amount of money to support his chosen candidates. It seemed that if I knew half of the people entering the poll, he knew the rest, especially all the Jewish people in the area. He helped. In fact, when he saw my husband stop by, he told me that he was sure that I was Jewish, but certain that my husband was not. That gave me pause, since prior to the election, we realized that our last name did not sound Jewish, so we sent out numerous mailings to many synagogues and Jewish organizations in town introducing my husband. He was even endorsed by this man's father-in-law, a United Stated Ambassador. After all that effort, this man still had not heard of my husband.

Through the day, I felt that the momentum was building for us. I ate no breakfast, no lunch, no dinner, drank no water, and did not use the bathroom once. I just stuck my flags into everyone's face. I had a great clarity of mind. I seemed to remember everyone's mother, brother, son, daughter, mutual friend, anything for a personal connection. Another candidate's wife and I campaigned together into the evening hours, asking, in unison, for people to vote for our husbands. She was very impressed with me when I got her husband a vote from a Russian speaking friend of mine. The same candidate's brother and I closed down the polls waiting until the very last person left. The brother told me that after early voting, my husband will be ahead and then the lead will start shrinking and we will just have to wait and see if he pulls it out. He knew that because he went through a primary with his brother. My husband did not have a primary opponent. The brother's words turned out to be correct and a real lifeline since I simply had no idea what to expect.

I will never forget that day. In retrospect, for the forth time in my adult life (first three being my wedding and the births of my amazing two children), I felt really lucky and blessed. Standing there, watching all different people going to vote, I became teary eyed. I was so proud of our country. A short episode from my childhood in the old country, Russia, came to mind. My aunt was doting over my cousin, who was all dressed up in suit and tie with flowers in hand, going to vote for the first time, while she and he and even I (8 or 9 years old at the time) knew that the whole process was a sham and the outcome was a forgone conclusion. Here, we all waited in anticipation, certain that our voices would be heard. The outcome of the election should be no secret to any one at the Commercial Law League. I think that I boasted sufficiently to everyone at the New York meeting and in four short years, I get to do it all over again!

Eva Engelhart
Ross Banks May Cron & Cavin P.C.,
Houston, Texas

Editor's Note: Eva has been an associate with Ross Banks for 11 years.  She focuses her practice on commercial and business litigation, primarily commercial collections. Eva's practice includes representing clients through trial involving collection of business accounts, contract payments, note payments, and post-judgment collections. She received her J.D. from the University of Houston Law Center in 1996 and received her B.A. from Brandeis University in 1993, Magna Cum Laude.

Letters or comments can be sent to LVogel@salonmarrow.com or eengelhart@rossbanks.com. In case you haven't received the word, The Free Press has instituted a "Letters to the Editor" column. If you don't want to take time out of your busy schedule to do research for a scholarly article, if you have a suggestion, recommendation, or constructive criticism to direct to the Section leadership or the Free Press editorial board, or if you just want to "vent" (in a non-abusive manner, of course), you now have a forum. You can submit a letter any time it suits your fancy, and you need not wait until just prior to the publication of an edition of the Free Press. Submissions will be kept on file for future publication.

The demise of the carrot and the stick in California

By Robert L. Pollak
Glassberg, Pollak & Associates
San Francisco

Collection lawyers frequently rely on a settlement device informally known as the carrot and the stick - a stipulation for settlement or judgment providing for payment of a specified settlement amount, usually in installments, and containing a stipulation for judgment for a greater amount if the settlement amount is not paid. The stipulation usually includes a provision for acceleration and entry of judgment upon default and provides that the debtor can cure by making payment within a specified number of days after written notice of default. If the debtor pays as agreed, there is no judgment and the case is dismissed.

The advantages to both debtor and creditor are obvious: the debtor can settle by paying a reduced amount (often a substantially reduced amount), the likelihood of payment as promised is enhanced by the risk to the debtor of suffering a judgment for a substantially higher amount, and the creditor can save the time and expense of providing testimony and evidence and avoid the delay and risk associated with trial.

On May 6, 2008, the Fourth District Court of Appeal, Division Three, issued an opinion holding that if such a stipulation provides for a judgment amount substantially in excess of the settlement amount, the provision for that excess amount is an unenforceable penalty [Greentree Financial Group, Inc. v. Execute Sports, Inc. (2008) 163 Cal.App.4th 495]. In Greentree the plaintiff sued ESI for $45,000 due it for financial services. The settlement stipulation provided that ESI would pay a $20,000 settlement in two installments, and that if ESI defaulted judgment could be entered against ESI for the full $45,000 plus interest, attorneys' fees and costs, less credit for any amounts paid prior to default. ESI paid nothing at all. Upon default, plaintiff applied for judgment pursuant to the stipulation, and judgment was entered against ESI for $61,232.00 (the stipulated $45,000, plus interest, attorneys' fees and costs). ESI appealed on the grounds that the difference between the $20,000 settlement amount and the $61,232.00 judgment amount constituted an unenforceable penalty. The Appellate Court agreed with ESI and reversed, holding that the provision for a judgment amount substantially greater than the settlement amount was indeed an unenforceable penalty because the difference between the two amounts bore no reasonable relationship to the actual damages that could be anticipated to result from the breach. The court pointed out that the breach to be compensated for is the breach of the stipulation, not the breach of the underlying contract.

This decision has its genesis in California's liquidated damages statute, Civil Code section 1671, which provides in pertinent part:

"(b) Except as provided in subdivision (c), a provision in a contract liquidating the damages for breach of the
contract is valid unless the party seeking to invalidate the provision establishes that the provision was unreason-
able under the circumstances existing at the time the contract was made."

Notwithstanding that language, however, the California Supreme Court has said that "a liquidated damages clause will generally be considered unreasonable, and hence unenforceable under Section 1671(b), if it bears no reasonable relationship to the range of actual damages that the parties could have anticipated would flow from a breach. The amount set as liquidated damages "must represent the result of a reasonable endeavor by the parties to estimate a fair average compensation for any loss that may be sustained. [Citation omitted]." Ridgley v Topa Thrift & Loan Assn. (1998) 17 Cal.4th 970, 977. The result in Greentree stemmed from the fact that the parties did not attempt to anticipate the damages that might flow from the breach of their stipulation.

However, from the creditor's perspective, all may not be lost. In reaching its decision, the Greentree court cited and relied on the prior opinion in the Sybron case [Sybron Corp. v. Clark Hosp. Supply Corp. (1978) 76 CA3d 896]. In Sybron the settlement amount was $72,000 payable in installments and the stipulated judgment amount in case of default was $100,000. Defendant paid $42,000 leaving a settlement balance of $30,000, then defaulted. The trial court entered judgment for $58,000 ($100,00 less the $42,000 paid). The Appellate Court reversed, holding that the $28,000 difference between the settlement balance and the judgment amount was an unenforceable penalty because it far exceeded any actual damages that might result from the breach. In so commenting on Sybron, the Greentree court left the door somewhat ajar, suggesting that an additional amount payable upon default can be treated as liquidated damages and enforced if that additional amount is proportionate to the damages reasonably anticipated to result from breach of the settlement agreement. With artful draftsmanship, a creditor's attorney should be able to create some additional monetary incentive for a debtor to pay and some measure of added compensation to the creditor if promised payment is not made. For example, language could be included detailing the costs and expenses to be incurred by the creditor should it be necessary to enter judgment and pursue post judgment remedies to collect. Since these expenses are speculative in part (the time and effort that is going to be required to enforce a judgment is an unknown), courts may give creditors some leeway on the amount of the judgment to be entered.

It is also unclear whether the holding in Greentree would apply in a situation where the debtor acknowledges the full amount of the claim as due and owing, but the creditor accepts less due to the debtor's inability to pay the full amount. If the Stipulation were to recite these circumstances, then it is less clear that the Court's rationale in Greentree would apply because the Stipulation would incorporate and re-allege the undisputed underlying debt rather than recite what would appear to be the compromise of a disputed claim. It should also include an explanation as to why the creditor is willing to accept a lesser amount (e.g., "in view of the defendant's financial condition and in order to enable the defendant to remain in business"). Assuming debtor and/or its counsel are agreeable, the Stipulation would also include the usual provision allowing the creditor to recover the full prayer of its complaint less any amounts paid prior to default. If the amount of the judgment is challenged, creditor's counsel should argue that if the debtor made the payments as agreed, debtor would get the benefit of its bargain in the form of a dismissal. Because the debtor failed to pay, the creditor should receive a stipulated judgment for the entire amount of a validly owing claim and thus receive the benefit of its bargain.

As collection attorneys, this situation arises frequently in our practices and we should be aware of this issue even though the other side may not agree to the inclusion of these recitals in many instances. For now, the law in California seems to be that you can still use the stick as long as it is not too much longer than the carrot.

Editor's Note: Robert L. Pollak, Esq. is a partner in the firm of Glassberg, Pollak & Associates, in San Francisco, California.

Education Committee Report

By Lorna Walker, Esq.

The Education Committee is very pleased with the education programs that are planned for the 79th Annual Chicago Meeting scheduled for April 16-19, 2009. The CRS is continuing their litigation skills programming and will present a seminar called "Effective Cross Examination" by Terrence MacCarthy. Mr. MacCarthy is with the Federal Public Defender's Office in Chicago, Illinois and is known as one of the best trial advocacy teachers in the country. His program will address the ins-and-outs on how to handle effective cross examinations.

The CRS also has a full slate of commercial programs planned. Carmen H. Lonstein of Baker & McKenzie, LLP will present a program called "True Lease vs. Financing Arrangements in Chapter 11" and will discuss current trends and developments in case law addressing true lease versus financing arrangements and the impact on a creditor's rights in bankruptcy. Beau Hays of Hays & Potter will present Part 2 of his New York program called "Basic Bankruptcy for the Collection Attorney." This program is a basic primer on bankruptcy law for the collection attorney who does not currently practice in bankruptcy court. Finally, the CRS is co-sponsoring a program with the Young Member's Section called "Handling Freight Claims." The panel includes one attorney, Derek Blasker of Burton, Neil & Associates, PC, one agency representative, Mike Daughtery of Synter Resource, and one freight company representative, Wendy Belcher of Estes Express, Inc.. The program will provide an introduction to handling freight claims.

In addition to the commercial law seminars, the CRS will sponsor a program to address the benefits that a marketing professional can bring to a law firm's collection practice. Kay Bethel of Law Offices of Steven Booska, Mark Matz of Teller, Levit & Silvertrust, and Chad Pedersen of Fein, Such, Kahn & Shepard, PC will present the program called "Does My Law Firm Need a Dedicated Marketing Professional?"

We are in the planning stages right now for programs for the November meeting in New York and are currently looking for speakers and programs. As always, the Committee welcomes input on past, present and future education programs from all CRS members. We encourage you to approach us with an idea for a program or to volunteer to speak at an upcoming convention. Speaking at a convention is a great way to raise your profile in the League which can lead to more business for you and your firm. Please feel free to contact one of us with your ideas.

Last, we are currently looking for additional members to serve on the Education Committee. If you are interested in serving on this Committee, please contact Lorna Walker at lorna@sweetwalker.com.

Editor's Note: Lorna Walker, Esquire is Chair of the CRS Education Committee. Lorna Walker, Esq. is a principal in the firm of Sweet & Walker in San Francisco, CA, specializing in commercial collection. The firm handles all collection matters, including insurance premiums collections, trucking claims, etc.  Lorna has been practicing for 16 years and has specialized in collections litigation for the last 14 years. 

 Newsletter Committee Report

This newsletter is circulated three times per year electronically in the Spring, Summer and Fall (and via fax for those not online). Members are encouraged to submit articles of interest or letters to the editor for inclusion along with a short bio for publication. The annual Best Feature Article award is noted elsewhere in this issue. The award and gift will be presented at the CRS meeting in New York.

Current co-editors are Liviu Vogel, Esq., Salon Marrow Dyckman Newman & Broudy LLP, New York, New York, and Eva Engelhart, Esq., Ross Banks May Cron & Cavin P.C., Houston, Texas.

 SPOLIGHT ON THE CRS CHAIR: MARK J. SHERIFF

Interview by Liviu Vogel, Esq.

Name: Mark J. Sheriff

Residence/Hometown: Columbus, OH

Education: Graduated from The Ohio State University in 1967 with a Bachelor of Arts Degree and a Major in Economics. Graduated from The University of Cincinnati College of Law with Honors and a J.D. Degree in 1970. Was Editor of the Law Review and was Order of Coif.

Work History:Associate Attorney with the law firm of Berry & Kirk from September 1973 until May 1974. Attorney and Partner with the law firm of Luper, Sheriff & Neidenthal from May 1974 until August 2002. Partner in Charge of the Collection Group with the law firm of Wiles, Boyle, Burkholder & Bringardner Co., LPA from August 2002 until the present.

Family: I have been married to my wife Sonja for 35+ years. We have three children. Our son Kevin resides in Washington, DC and received his MBA from Georgetown University. My two daughters, Elizabeth and Sarah both live in Columbus, OH. My daughter Elizabeth is married and her and her husband have one child approximately 5 months old.

Areas of practice and specialties: My practice is exclusively concentrated in the area of Creditors' Rights Law and Collections along with complicated litigation.

What year did you join CLLA: I believe it was 1979.

What other offices have you held in the CLLA and Creditors' Rights Section: I am past President of the CLLA. I served as an Attorney Board Member for three years, served as President Elect for one year and immediate Past President for one year besides my year as President. I am a former Chairman of the Midwest District and held all the offices in that region. I have served on at least two separate occasions on the Executive Counsel for the Creditors' Rights Section. I am currently Chairman of the CLLA's Finance Committee and I am Co-Chair of the Marketing Committee with Robert Ingold. I previously chaired the CLLA's Specialization Committee which led to the certification program for both Creditors' Rights Attorneys and Bankruptcy Attorneys which we later merged with the ABI's certification program and formed the American Board of Certification.

Tell us about your family and family interests and activities: As indicated above, my son received his MBA from Georgetown University and resides in Washington, DC and works for a company by the name of Bearing Point. So far he has a very successful career. My daughter, Elizabeth is married to her husband, Tom, and they reside in Columbus, OH. Elizabeth previously worked for the largest law firm in Columbus and was in charge of all their desktop publishing and computer related matters. She later became the Event Coordinator for the firm. She recently left that job when she became pregnant with our first grandchild, a little girl by the name of Emery who was born October 3, 2008. Elizabeth is a graduate from The Ohio State University with a major in design and computer graphics. My daughter, Sarah, who is 28, graduated from The Ohio State University with a degree in design and currently works for a local retailer. My son, Kevin is 33. My daughter Elizabeth is 31 years old and my daughter Sarah is 28 years old. All of the family enjoys skiing and we have done many family ski trips with other members of the league over the years. My wife, Sonja is active in the Columbus Museum of Art and serves on the Womans Board. She is a jeweler/designer who designs, makes and sells jewelry.

What qualities do you feel that you bring to the Chair of the Creditors' Rights' Section: As past President of the CLLA and past Chairman of the Midwest District along with all of the various committees that I have chaired and served on, I have a great deal of experience and a good track record of getting things done and accomplished. I believe I have a very good relationship with all of the sections, regions and members of the CLLA.

What goals would you like to achieve during your term as Chair of the Creditors' Rights Section: First and most importantly I would like to try and create new business opportunities for members of the Section. Secondly, I would like to see us continue with our efforts and, perhaps, create a retail section. I would also like to make sure that we enhance our website and visibility on the internet. I would like for us to create recognition for the Section as the experts when it comes to collections on a national basis.

If a new attorney member of the CLLA is considering joint the CRS, what would you tell him or her about the benefits of Section membership: I would tell them that it is a great opportunity to get involved from a networking standpoint with other Creditors' Rights Attorneys. I would also let them know that we have great education programs and we are endeavoring to provide more and diverse business opportunities for the members of our Section.

When not practicing law, or tending to League matters, what do you do for fun and relaxation: I like to ski, fish and golf and watch sporting activities.

If you did not become a lawyer, what do you think would have become your life's work: If I had not chosen to be a lawyer, I probably would have decided to be a doctor or an engineer. When I graduated from high school, those were the three most promising respected professions at the time.

What one thing do you think we would be surprised to know about you that most people don't already know: I don't think there is anything that people do not already know and certainly nothing that would be surprising. I have voted for a Republican now and then.

What is your favorite quote, or words to live by: Satchel Paige once was quoted as saying "How old would you be if you did not know how old you were". I have always been intrigued by that, but do not really have any quote that I live by.

Did you have any role models when you were growing up and in your career in practicing law thus far: If so, who are they and why were they your role models: I would not say that I had any role model. However, I greatly admired such people as John F. Kennedy, Thurgood Marshall and several other well known Trial Attorneys and Civil Rights Activists and Attorneys.

What is your favorite:

  • Car: Any that I can't afford.
  • Food: Chocolate and pizza.
  • Vacation Spot: Any good ski resort.
  • Actress/Actor: None that I could say is a favorite; although I have always liked Julia Roberts
  • Movie:Can't say that I have a favorite.
  • Holiday: Halloween
  • Musical group/Singer: Rolling Stones
  • Book: Can't say that I have any one favorite.
  • Sports figure: Lebron James and my favorite team in any sport is the Ohio State Buckeyes.

Editor's Note: Liviu Vogel, Esq. is a partner in the New York City based law firm of Salon Marrow Dyckman Newman & Broudy LLP. He heads the commercial collection department of his firm and his practice includes civil and commercial litigation, construction, real estate, and corporate transactions as well as business formations.

Retail Collections Section

By: Stuart R. Blatt, Esq.
Margolis, Pritzker, Epstein & Blatt

During the last CLLA conference in Chicago, CRS and Retail Collections presented the successful educational program entitled Enforcing Civil Money Judgments featuring Stuart Blatt, Ron Canter and Bill Goldsmith. The Retail Collections section is proud of the perseverance of it committee members, along with CRS support, to make the presentation possible. Presenters Ron Canter and Bill Goldsmith deserve valued praise for their: a) research, b) power point and c) many hours they devoted to help produce a successful event. Congratulations are extended to all the CLLA Education and support staff who made contributions to the success of this event.

The program presented, along with questions from those attending, assisted the audience in a packed room with a vision of how civil judgments can be collected. This proved too be a valuable learning tool for all who attended.

Retail Collection Attorneys: The Results Are In

A recent study released by the Nilson Report (October, 2008), www.nilsonreport.com, revealed that collection attorney law firms collect a higher percentage of debt than collection agencies.

Laws, legislation and case law have drastically changed the nature of the collection process. Letter and phone call to cardholders over the past years are now severely restricted and used less frequently. Consequently the only effective legal remaining collection remedy is to file a law suit.

The benefits of using law firms to recover debt, rather than collection agencies, centers around the expertise of a lawyer skilled in the knowledge of creditor rights law and the use of legal tools such as attachments, garnishments and liens. Due to present economy, placements to collection law firms will increase as reflected in recent reports from financial institutions showing increased delinquencies.

Existing home equity lines of credit have been terminated by financial institutions in many areas of the country as equity in the existing properties disappeared during the real estate crisis. Financial institutions, reluctant to lend, have caused a major problem for consumers of how to access cash for tuition, health and medical reasons, emergencies and debt consolidation. Accordingly, more consumers are turning to their credit cards. When credit card balances are exhausted, delinquencies and difficulty with payback occur.

Debt collection plays a vitally important role in our system of consumer credit. It is time to stress the importance of debt collection. Collections are vital to the clients and individual creditors we represent. When consumers do not repay their bills, industry providers will increase prices of goods and services to cover lost revenues. Those losses will be reflected in higher prices to those 95% who pay their bills on time.

Non-payment of debt will cause lenders to be less willing to lend money to consumers, thereby decreasing the availability of loans for tuition or needed emergencies. Collecting debt returns needed cash to the stream of national commerce. Even our government is becoming more active in the debt industry with the recent announcement of our government acquiring "toxic" debt from financial institutions and the probable collection of it similar to the RTC that came into existence after the savings and loan scandal.

Practice Tip

Review your practice for financial stability with your banking institution, while at the same time, be prepared to handle a sudden influx of new placements during the coming year. As the year end comes to a close take the time to review the success of your practice during this past year and discuss ways to make your practice more efficient and profitable. Event though you may experience increased placements, times will be tougher to collect on those placements as the economy drastically affected consumers so as to cause them to lose their jobs, reduced or curtailed their salary and raises or caused a loss of housing. At the same time, these same consumers are subject to increased costs for fuel, electric, food etc. New re-payment methods should be explored and ready for implementation during this ongoing crisis.

Legislation

Legislation and case law developments remain a prominent concern during the year to come. Continued legislation monitoring exits in both federal and state legislatures where hundreds of bills are been introduced. Recent legislation introduced in Ohio, Michigan and New York bear close monitoring. Belong to your local creditors bar in addition to CLLA and contribute your time and make donations to opposing legislation that is harmful to the practice of law.

At the Federal Level, it is anticipated that the FTC report to Congress on the fall 2007 FTC workshop will be released before the end of the year. Also anticipated in the coming lame duck session of congress, after the elections, is a possible change in the bankruptcy rules allowing the bankruptcy courts to modify mortgages in order to stave off foreclosures and allow distressed home owners from losing their homes. CLLA is very active in following those developments as they occur and will report any changes to the membership.

I will look forward to seeing you in May at the annual CLLA conference in Chicago.

Editors' Note: The foregoing Retail Collections Section report was to have been published in the Fall 2008 issue. The editors apologize for the delay in getting this information to you.

Reprint of Official Notice of CRS proposed bylaws changes

The CRS membership will be voting on proposed bylaws changes at its General Membership Meeting in Chicago on April 18th, 2009.   A Bylaws Committee was appointed by CRS Chair, Mark Sheriff, to review the current CRS Bylaws with the goal of identifying areas where there are inconsistencies with other Section's Bylaws and make recommendations to the Executive Council.  The following is a summary of the recommended changes by this Committee as approved by the Executive Council. 

PROPOSED ADMINISTRATIVE CHANGES:

  • Article III Section 2.  The proposed change is related to eligibility in the Section for Associate membership.  The proposed change addresses the functions of the individual, rather than their title.
  • Article V Section 4.  The proposed change simplifies the process by which a former member can reinstate into the Section.
  • Article VI Section 9.  The proposed change revises the process that is followed when a member of the Executive Council misses Council meetings without notifying the Chair of the Section.

PROPOSED CHANGES RELATED TO CRS ELECTIONS

After reviewing the recommendations of the CRS Bylaws Committee, the Officers and Executive Council felt it appropriate to address the issue of consistency as it relates to the CRS Elections.  The bylaws state that the CRS elections will be held at their Annual Meeting, which is currently identified in the Bylaws as in conjunction with the Eastern District Meeting.  The CRS Executive Council feels that in order to have consistency across the League, this issue is important and should be reconsidered by the membership.  They approved the recommendation in order to allow the general membership the opportunity to discuss and vote, at the upcoming Midwestern Meeting, on whether the elections should be moved to the Midwestern meeting to coincide with all of the other Leagues elections. If these Bylaws changes are approved, it would move the CRS Officer and Executive Council elections to the Chicago meeting beginning in April 2010.  No elections would take place at the Eastern District Meeting  in 2009, thus extending the terms of the current Officers and Executive Council members to 18 months.  

The following are the Bylaws Changes necessary to move the Elections.

  • Article VII Section 1.  Change May 31 to November 30.
  • Article VII Section 3.  Change September 1 to March 1.
  • Article VIII Section 1.  Change Eastern District to Midwestern District and make effective in 2010.

All of the above items will be open for discussion and voting at the CRS General Membership Meeting. The Bylaws voting will take place immediately following the CRS General Membership meeting at the 79th Midwestern Meeting on Saturday, April 18, 2009.

Calendar of Events

May 1, 2008 - May 4, 2008
Chicago Annual Meeting: Westin Michigan Avenue Hotel, Chicago, IL

August 6 - 9, 2009
Leadership and Strategic Planning meeting and training

September 11, 2009
Western Region one day meeting

November 12 - 15, 2009
New York Eastern District Meeting: Sheraton New York Hotel and Towers

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