REPORT FROM THE CHAIR

By Christine Hayes Hickey, Esq.

For the first time, you are receiving this newsletter electronically. Since Chicago, many people have worked fast and furiously to accomplish several goals that we set for the Section. This is one of them. Our hope is that you will find this format convenient, timely, and relevant in today’s electronic age. The ease with which you can read, save and print this version of the newsletter is remarkable, even for those who are not computer savvy. It was only through the dedication of the chairs of the Technology and Newsletter committees that this was accomplished so quickly. I extend my sincere thanks to John Plovie, Rob Morris, Nick Krawec and Brenda Majewski.

The electronic Free Press is just one step toward maximizing communication and keeping you informed via your desktop. Between editions of the Free Press, you also will hear from me or other Section officers about CRS developments and other matters of importance regarding your membership. We will do this via blast e-mails from the League office. We are striving to keep you informed and provide you a convenient method of conveying your requests and thoughts. Recently, you should have received an e-mail highlighting Section news from the Chicago convention, and giving you a preview of the plans for the year. So that you can be kept apprised of CRS matters between meetings, please make sure the League office has your current e-mail address. Our goal is to minimize bounce-backs and update records to insure you receive these communications in a timely manner.

I am excited to report other positive developments for the Section. The Uniform Laws Committee has made several key contacts to assist with launching “Practice Alerts” for members. Through the efforts of Kevin Posen and Mark Abrams, our ability to provide you with updates on changing laws, recent cases and other matters affecting your daily practice should be in place prior to the New York meeting. In addition, Ian Bardin has agreed to chair an ad hoc committee on Practice Groups. The response to the last Free Press article on Practice Groups was overwhelmingly positive, and we are working on developing and implementing this concept. Finally, through creation of the ad hoc Forms Committee, CRS will sponsor at the New York meeting an educational program dedicated to swapping and sharing helpful collection forms. Thereafter, we will make the forms available on the League Web site. The co-chairs of this committee are Bill Brosha and Gary Lewis, and CRS member Fred Pfenninger has agreed to assist with the program. They may be contacting you in the near future as they begin to compile these forms and I encourage you to participate. Watch for more updates on the progress of these committees in the months to come.

In other Section news, the CRS Executive Council approved co-sponsoring the 2004-2005 FDCPA Training video. CRS will work in conjunction with NARCA, and with the aid of Don Kramer and Manny Newburger. The video will include information about the Act itself, as well as pitfalls for the unwary. By participating in this project, CRS not only will assist in creating and marketing a quality product, but also will benefit from positive publicity associated with this undertaking.

In addition, shortly after Chicago, CRS took a formal position with respect to an exhibitor at several recent CLLA conventions. Commercial Credit Counseling Service (CCCS) is an organization that takes a fee and a security interest in a debtor’s assets in exchange for a promise to compromise legitimate debt. The settlement offers submitted to creditors are typically substantially less than the claim and are accompanied by correspondence advising that there are no unencumbered assets. When faced with a priority dispute with an executing creditor, CCCS will litigate its security interest, causing delay and increasing litigation costs. Because these business practices are contrary to the stated objectives of CRS, the Section relayed to the President, President-Elect and Executive Director of the League its objection to CCCS being permitted to exhibit at League conventions or advertise in League publications. It is our hope that a united voice on matters such as this will result in positive change for creditors’ rights.

Finally, please do not forget to consider a nomination for the CRS Award of Excellence. Nomination forms can be obtained from the League office and will be accepted through October 15, 2004.

A word of thanks to the members of the Executive Council for their participation in CRS matters between meetings and their timely votes on several key CRS issues. As we continue to move forward and explore ways to enhance your Section membership, please remember that your assistance is needed in a variety of areas, including writing for the Free Press, contributing to educational programming, offering feedback and expressing your desires for the Section. Contact me directly at ch@rubin-levin.net. In the meantime, the Section is moving onward and upward with an exciting momentum; watch for more to come.

Editor’s Note: Christine Hayes Hickey, Esq., CRS chair, is a partner in the law firm of Rubin & Levin, P.C., in Indianapolis, IN. She specializes in the areas of commercial collections and creditors’ rights law.

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Washington Legislative Report

By David P. Goch, Esq.

HR 975, the “big” Bankruptcy Reform bill, continues to sit in legislative limbo with little expectation that the Senate will find a way to resolve the outstanding issues or to find the time to consider the measure (and the expected, albeit unidentified, list of amendments). With the election cycle heating up, it is questionable which “non-essential” bills have a chance of making it to the President’s desk.

On one of the bill’s issues of interest, the current House-passed version includes language that, it is believed, would dramatically increase the liability and administrative burdens of bankruptcy debtor attorneys by requiring them to (1) certify the accuracy of the debtor’s bankruptcy schedules, under penalty of court sanctions (2) certify the debtor’s ability to make payments under a reaffirmation agreement and (3) identify and advertise themselves as “debt relief agencies” subject to new intrusive regulations.

The American Bar Association (ABA) recently took up the fight against this language and has offered legislative alternatives.

In other bankruptcy legislative news, on May 10, Senate Judiciary Committee Chairman Hatch, R-Utah, introduced S. 2396, a bill to make improvements to the operations and administration of the federal courts. Several sections of the bill deal with bankruptcy administration and privacy concerns (restricting disclosure of Social Security numbers).

On the regulatory side, on April 26, 2004, the U.S. Supreme Court approved the following amendments to the Federal Rules of Bankruptcy, with an effective date of December 1, 2004, unless Congress enacts legislation to reject, modify or defer them:

  • Rule 1011 (Responsive Pleading or Motion in Involuntary and Ancillary Cases) deletes a cross-reference to another bankruptcy rule [Rule 1004(b)].
  • Rule 2002 (Notices to Creditors, Equity Security Holders, United States, and United States Trustee) changes the address for mailing notices to the Internal Revenue Service to reflect that the service no longer has a district director.
  • Rule 9014 (Contested Matters) would limit the applicability of the mandatory disclosure provisions of Rule 26 of the Federal Rules of Civil Procedure (26(a)(1) (mandatory disclosure), 26(a)(2) (disclosures regarding expert testimony) and 26(a)(3) (additional pretrial disclosure), and 26(f) (mandatory meeting before scheduling conference/discovery plan). Bankruptcy Adversary Proceedings are resolved more quickly than other actions and hence the voluntary disclosure requirements.
  • New Official Form 21 (Statement of Social Security Number) implements amendments to Bankruptcy Rule 1007, restricting disclosure of a debtor’s social security number. It requires the debtor to submit a verified statement setting forth the full Social Security number to the clerk.

In debt collection news, on May 11, after a long delay and prolonged negotiations lasting more than two months, the Senate overwhelmingly passed S.1637, repealing the export tax, and also containing language allowing for the collection of federal tax debt by private collection professionals. The vote was 92-5.

According to House Ways and Means Committee Chairman Rep. Thomas, R-Calif., the vote pushes the House to act in a timely manner on its version (HR 2896). However, the House bill also has been the subject of much debate and is different than the Senate package (both containing their own “pork” benefits). It is uncertain how any difference would play out in a subsequent conference and impact the delicate balance of compromises made in the Senate (and likely to occur in the House).

Finally, in a bit of good news from the courts regarding privacy issues, on April 30, the U.S. District Court for the District of Columbia ruled the Federal Trade Commission overstepped its statutory authority when it subjected attorneys engaged in the practice of law to privacy notice requirements of the Gramm-Leach-Bliley (GLB) Act (New York State Bar Association v. FTC, D.D.C, Civ. No. 02-810, 4/30/04).

The court granted summary judgment to the ABA and the New York State Bar Association, stating Congress did not intend GLB’s privacy provisions to apply to attorneys who provide legal services in real estate settlement, tax planning or tax preparation.

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

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Treasurer's Report

By Robert A. Bernstein, Esq.

As CRS treasurer, I bring you good news and bad news. On the positive side, I am glad to report that the treasury is healthy, and our Section maintains a steady reserve to meet our financial needs. Through the foresight of our founding fathers such as Lenny Abrams, Richard Sugarmann and Tom Zide, a reserve fund for our Section was established and built for many years. It is through their foresight that we have been able to fund many of the beneficial projects, services and educational benefits we have provided to our members over the years.

Unfortunately, our Section is operating at a deficit in this fiscal year. In addition to our contributions toward unexpected CLLA expenses over the past few years, we have taken the forefront in the League in establishing our presence on the Web. We have also been proactive in providing additional benefits for our members (i.e., the directory and the development of our presence on the World Wide Web), as well as in providing first class professional educational opportunities. Our members have never received more value from their dues than they are receiving right now.

As the cost of providing quality education programming has risen and we have increased member benefits, however, we have held the line on dues. In budget discussions at the Executive Council meetings in Chicago, we tightened the purse strings to the best of our abilities, but we were still left with a budget printed with red ink. While our reserve can permit us to operate at a deficit for a short period of time, long-term fiscal responsibility demands that we must consider amending our dues structure in the near future. A nominal dues increase, while causing little pain to each individual member, would go a long way toward establishing the continued viability and vitality of our Section. I encourage all who care about our Section and League to attend the Executive Council and General Membership meetings in New York to participate in our budget process. With your support, our Section can continue to be a driving force in the pursuit of our common goals—the provision of quality member benefits, the promotion of our members, the preservation and promotion of the triadic system, and the preservation of the CLLA as the pre-eminent source of professional services to the credit industry.

Editor’s Note: Robert A. Bernstein, Esq., is a partner in the firm of Bernstein & Bernstein, P.A., in Charleston, SC, where he practices in the areas of collections, creditors’ rights, corporations, bankruptcy and personal injury litigation.

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Report From The Internet and Technology Committee

By John Plovie, Esq.

This edition of the Free Press marks a new chapter for this venerable publication. For the first time, it has been produced electronically and distributed to your desktop. The electronic version is easy to read on your computer monitor or you can print it out if you want to take it with you. The electronic version is also more economical since there are no printing or mailing expenses. In addition, we now have the ability to use the distribution network to send out “flash” bulletins of developing news or events of interest to CRS members. Our Chair, Chris Hickey deserves the credit for this advance in the distribution of the Free Press, as she saw the potential for other applications involving electronic distribution of CRS communications. Credit also goes to Nick Krawec and Brenda Majewski, co-chairs of the Newsletter Committee, who made it a reality.

In the future, I expect that we will see other changes in how the CRS uses technology to serve its members. Plans are being made to distribute alerts on issues affecting collection attorneys’ practices. In addition, past issues of the Free Press will be available on the CLLA Web site for anyone who wants to refer back to an article.

On the subject of the Web site, I hope you have had a chance to look at it recently. It has been completely revised, and I think you’ll find the changes a big improvement. Please take time to log on as a member. You can access attendance rosters for upcoming meetings as well as other useful information. The “directory” feature allows you to search for an attorney in another state. The listings also include an e-mail link to the attorney for efficient connection and communications.

And more changes are coming. Executive Council information soon will be added, as will a roster of committee chairs. For those of us who, like me, find that someone else’s interrogatories are sometimes better than our own, we plan to add a forms bank where various pleadings can be archived.

The Technology and Internet Committee is always looking for new ideas on how to add value to your CRS membership. Our committee meetings are open to anyone interested. You can also e-mail me at jplovie@plovielaw.com.

Editor’s Note: John Plovie, Esq., is an attorney practicing with the Plovie Law Firm, PS, in Redmond, WA. He is co-chair of the Internet and Technology Committee.

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Uniform Laws & Legislation Committee Report

By Kevin Posen, Esq.

The Uniform Laws & Legislation Committee has been charged with monitoring both legislative changes and cases interpreting uniform laws that have an impact on our commercial and retail collection practices, and then disseminating that information to members of the Creditors’ Rights Section on a regular basis. The substantive areas of law we are looking at include:

  • Uniform Commercial Code
  • Uniform Enforcement of Foreign Judgments Act
  • Uniform Fraudulent Transfer Act
  • Fair Credit Reporting Act
  • Fair Debt Collection Practices Act

We are exploring the possibility of hiring a freelance writer who on a daily basis would review publications and Web sites that might contain information concerning the above listed statutes. The writer would cull items of interest to us and put together a synopsis, along with a hyperlink to the full text of the case or article. The items would then be broadcast weekly to our members on a listserv as practice alerts. The Executive Council is considering the funding for the writer. Once approved, we expect the alerts to begin within 30 days.

If anyone would like other uniform laws added to the above list, please e-mail Kevin Posen at kposen@tellerlevit.com

Editor’s Note: Kevin Posen, Esq., chairs the Uniform Laws & Legislation Committee. He is a principal in Teller Levit and Silvertrust, P.C., Chicago, IL.

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Education Committee Report

By John S. Pucin, Esq.

Well, another Chicago meeting has gone by the wayside. It figures that the League gift this year was an umbrella, when we ended up experiencing some of the sunniest, warmest Chicago conference weather ever. Maybe next year the gift should be raincoats.

Anyway, we are pretty proud of the education programs that were presented at the meeting. All four of the seminars were well attended. We were especially pleased with the early morning attendance for the FDCPA workshop on “Office Procedures to Avoid Violations.” I guess anytime you talk about the Fair Debt Collection Practices Act with a group of commercial attorneys you are going to draw a crowd. The participation of all the attendees is what made that program work. In the future, we are going to try to concentrate on more programs where you are not just plopping yourself down and listening to one person speak about a subject for two hours. We all know that the more you are able to participate in something, the more you are likely to get out of it. It is the majority opinion of those of us involved with the Education Committee that with all the attorneys present at the conferences who have expertise in so many areas of creditors’ rights representation, we are sitting on a gold mine of information. We have decided that the best way to get everyone to open up and share their thoughts is to put on more programs like the FDCPA workshop. We already have something cooking for New York this fall.

As always my co-chair, Randy T. Slovin, Esq., of Mason, Slovin & Schilling Co., L.P.A., and I are open to suggestions and comments. You can e-mail Randy at rtslovin@fuse.net or me at jpucin@weltman.com.

Editor’s Note: John S. Pucin, Esq., co-chair of the Education Committee, is the partner in charge of the Philadelphia office of Weltman,Weinberg & Reis Co., L.P.A., concentrating in the areas of creditor representation in commercial and retail litigation.

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Membership Committee Report

By Joseph I. Terkell, Esq.

While there is little doubt that many worthy efforts and noble deeds have emanated from the Membership Committee in the past, from my vantage point as recently appointed co-chair, now is a time of rebirth for the committee.

Co-chair Arnie Dashoff and I came to the helm and chaired our first committee meeting in Chicago. We dreaded and feared that we would be the only ones in attendance, save the obligatory cameo appearance from Section Chair Chris Hickey. To say that we were pleasantly surprised to find the contrary to be true would be a gross understatement!

As the clock approached the hour of the Membership Committee meeting, several people began to drift into the room, indicating that they were either on the committee, or wished to become so.

By the time the clock struck three, the room was full, and the synergy was high. People had come enthusiastically armed with ideas of how to improve CRS membership.

In pre-meeting telephone conferences, Arnie and I explored various avenues of moving forward with our mandate for increasing membership. One of the concepts we toyed with was that of offering gifts and novelties as incentives to new CRS members, we shall be investigating the costs incident to this idea.

I opined that the triangular CRS pins, which we now sell for $10, might constitute a nice membership incentive. In response, Chris Hickey gave me a handful with marching orders to “go get ’em.”

David Franklin agreed to draft a letter fashioned after the solicitation for membership that is currently being disseminated to CLLA attorneys nationally and in Canada to be distributed internationally to prospective members.

Bill Brosha initiated a lively discussion as to the possibility of the creation of a CRS members only section on the CLLA Web site, and downloadable legal forms to be used in members’ respective practices would be available as well. The Bankruptcy Section, NARCA and other professional associations have successfully employed this concept in one degree or another. We encourage the Executive Council to explore the feasibility of such a potentially valuable resource with the national office and our Webmaster. Hopefully, prospective members will view this incentive as that little extra “nudge” they needed to do the right thing and join our ranks.

David Gamache suggested we explore the possibility of the CRS conducting joint educational programs with NARCA or other groups with interests similar to our own. The hope would be that such interaction would act as a vehicle for the generation of new membership in our section and the League. This is certainly a concept worthy of consideration in conjunction with the Education Committee and the Executive Council.

Speaking of that august body, I am pleased to announce that the Council unanimously passed my motion (upon recommendation of this committee) to provide a one-year complimentary CRS membership to any current member who brings in three or more new members during any given year. So, if you would like your next year’s membership fee “comp’d,” bring in those new members, and make sure they drop your name when applying.

At the risk of preaching to the converted, I would note that membership in the CRS is not only the best value in the League, but it may very well be the most bang for the buck we could hope to receive from any bar association or other professional organization.

Everybody knows that our CLE programs are top notch, and the networking opportunities are unparalleled. The trick is to get as many attorneys to join our ranks as is possible so that we can achieve even greater levels of excellence in the future. This is our mission and our mandate. I would implore all of you to join in this noble effort so that our preeminence in the field of creditors’ rights can remain without rival or peer.

Editor’s Note: Joseph I. Terkell, Esq., is a certified Creditors’ Rights Law specialist and a partner in the firm of Lubitz & Terkell, in White Plains, NY. His area of practice is almost exclusively creditors' rights. He is co-chair of the CRS Membership Committee, and a member of the CRS Executive Council and CLLA Eastern Region Executive Council.

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Letters to the Editor

Do you have a compliment, a suggestion, a constructive criticism or an observation to make about League or CRS issues? This is your forum for making your feelings known to the CRS leadership. They read the Free Press and appreciate your input and feedback. Send your “Letter to the Editor” via e-mail to Nick Krawec at nkrawec@bernsteinlaw.com. You need not wait to the last minute before a League meeting or just before an anticipated publication date of the Free Press. Send the letter whenever the spirit moves you, and they will be kept on file for publication in the Free Press.

Dear Mr. Krawec:

As an original member of the Creditor’s Rights Section, I applaud the current editors and previous editors for the continuing evolution of the Free Press into an interesting and attractive newsletter. I particularly enjoy the “Spotlight” column, the “chatty” news articles and information articles, and look forward to reading the letters to the editor for a healthy dialogue among our colleagues. With new awards such as “Best Feature Article Award” and “Award of Excellence,” the CRS continues to lead the way for the CLLA. We can all be proud to be a member of this section.

Very truly yours,

Sidney S. Friedman
Past Chair, CRS

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CRS Ad Hoc Committee On Forms

By Jeff E. Rubin, Esq.

Just as soon as we returned from Chicago, the summer was upon us. I’m sure many of you are grateful for the thaw out after some brutal winter months. I say this with the exclusion of a few of us (like me) who enjoy summer year round. As you begin your summer, I wish you and your families a safe, healthy and fun season.

As I prepare to assume the role of CRS chair in November, I have begun compiling a list of goals for the next year, one of which is to develop a forms library for the benefit of our members. During the CRS Education Committee meeting in Chicago, it was decided to have a program about forms at the upcoming New York meeting. Bill Brosha and Fred Pfenninger will present it. The idea behind the program is to establish a library of forms that we can share via the CLLA Web site. For example, I may have a great form “Notice to Produce” that I could share with others who may want to improve their form. Likewise, I may need a better “Request for Admissions,” and my friend in St. Louis may have one to share with me. The idea is to pool all these forms and ideas together so that anyone searching for a standard form can find one to use.

To put this program together, CRS Chairwoman Chris Hickey created an ad hoc Forms Committee, which will be co-chaired by Bill Brosha and Gary Lewis. They will be contacting members in an effort to collect a wide variety of forms. In the meantime, you can e-mail your forms to Bill at bbrosha@stark-stark.com.

It is ideas like these that make the CRS a strong Section. One simple form could save you hours of time and make you look like a hero to your firm and client. If you have any other ideas or educational programs you would like to see in the future, please contact us.

Editor’s Note: Jeff E. Rubin is the chair-elect of CRS. He is a partner in the Law firm of Talianoff Rubin & Rubin, in Miami, FL.

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Retail Collections Committee Report

By Stuart R. Blatt, Esq., and Richard Grant, Esq.

Our Committee, presently comprised of 16 members, would like to report on a successful Chicago meeting.

We created an Outreach Subcommittee to reach out to other organizations and associations. Arthur Sanders was appointed as its chairman. Relationships will begin with DBA, NARCA, IACC, NACM, ACA/MAP etc. A suggestion has been made to have a global meeting of outreach chairmen from all associations at the fall NARCA conference in Chicago. Further reports will follow.

We discussed the presentation of an educational program, and our esteemed member Manny Newburger suggested we hold a Mock Trial involving a typical FDCPA case. This Trial would follow what was a very informative and well-attended seminar on FDCPA in Chicago. It would include a judge, jury, plaintiff and defense counsel, and a complaining witness. The jury room would have mike and video so the attendees may hear the final jury deliberations. Chris Hickey has advised us that this function will take place in the spring in Chicago rather than during the fall meeting in New York. Our committee is seeking willing participants.

Other matters discussed in committee included debtor abuses (i.e. money protestors and debtors attempting to copyright their names and suing for violations), recent litigation involving pre-judgment interest and attorney fees, mediation/arbitration issues, professional liability insurance, legislation, and a collectors workshop given at a CLLA conference. Our intention is to grow the membership of this important committee and we are asking you to join us. Please e-mail Stuart Blatt at StuartBlatt@aol.com if you would like to join. New issues are constantly evolving in the retail/debt purchasing arena. Be with us at CLLA in New York this fall to contribute or hear about these new developments.

Editor’s Note: Stuart R. Blatt, Esquire serves on the Executive Council of the Creditors’ Rights Section of the CLLA and is Co-Chairman of the section's Retail Collections Committee. He is a partner in the law firm of Margolis, Pritzker, Epstein & Blatt, P.A., which specializes in retail and commercial collections, debt buying, business, real estate matters and general civil litigation throughout Maryland and Washington, D.C.

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Upcoming CLLA Meetings

July 9 - 14, 2004
110th Annual CLLA Convention
Newport Marriott
Newport, RI

September 30 - Oct. 3, 2004
43rd Southern Meeting
The Mills House Hotel
Charleston, SC

November 11 - 14, 2004
84th New York Meeting
Sheraton New York Hotel & Towers
New York, NY

April 7 – 10, 2005
Midwestern Meeting
Westin Hotel
Michigan Avenue
Chicago, IL

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Spotlight on the CLLA's President-elect

Interview by Nicholas D. Krawec, Esq.

 

Full Name: Mary Katherine Whitmer

  • Residence/Hometown: Cleveland, Ohio (I work in Cleveland, and live in Bath, Ohio, 23 miles south of downtown Cleveland).
  • Education: Case Western Reserve University, 1972, history and political science. Case Western Reserve University Law School, 1975. Certified Public Accountant, 1978.
  • Work History: I worked at Ernst & Ernst (now Ernst & Young) in the tax department. For the lion’s share of my career, I was a partner with Brouse McDowell, a 65-lawyer firm in Akron and Cleveland. I am now Of Counsel with Vorys, Sater, Seymour and Pease, LLP.
  • Family: Husband Stanley Brandt.
  • Areas of practice and specialties: Bankruptcy and commercial law—I do a fair amount of commercial litigation.

What year did you join CLLA?
 1986

What other offices have you held in the CLLA?
 Secretary, treasurer and chair of the Bankruptcy Section, chair of the Bankruptcy Section Newsletter Committee, Executive Council of the Bankruptcy Section, chair of the National Education Committee, attorney member of Board of Governors, co-chair of the Legislative Committee, co-chair of the Forwarders and Receivers Committee, and vice-chair of Patron Fund Board.

Tell us about your family/home life away from the office.
I have a great relationship with my husband, and we like to just hang out, watch the Indians and talk politics. We are huge Browns fans (you have to be a fan to watch them these days) and we avidly attend the theater. I also have several close friends, and I see each of them at least once a week. My mother is very active, and I make sure that we also see each other regularly. Basically, my life is about my close relationships, which are more important to me than anything else.

You will be the first woman President of the CLLA. Do you consider yourself a “pioneer” of sorts?
 I didn’t become a lawyer to be a pioneer. I did it because I had a burning desire to practice law. I see myself as lucky to be born at a time when women were able to have such a career. While others may see me as a pioneer, I don’t think of myself in that way.

Tell us about the path you followed within the League that helped to get you to this position.
I came up on the bankruptcy side of the League, and was chair of that Section. Before that, I had my first job on the Pamphlet Committee, and I spoke at some of the League seminars. When an opportunity came up to run for the Board of Governors, I took it. I loved serving on the Board of Governors. It gave me a great education in the issues confronting the League. Over time, I made many friends in the League, some of whom encouraged me to run for President. I thought about it, and decided that it would be a great opportunity to make a difference.

What qualities do you feel that you will bring to the job of President of the CLLA?
I hope to bring unrelenting positive energy and a creative approach.

What goals would you like to achieve for the League during your term in office?
I want to focus on member service, and becoming indispensable to the members because they need the service and the business opportunities. My highest priority is to establish the Commercial Law League Institute, an umbrella educational organization. The Institute will be the CLLA “brand” for all educational activities. It will oversee and supervise all educational programming at CLLA meetings, generate stand alone seminars relevant to our members, and create affordable educational programming for staff members of agencies and law firms, among other things. The goal is to become recognized as the pre-eminent provider of commercial and bankruptcy educational curricula. We also must provide good business opportunities to our members, through good, quality marketing, and attractive and well-attended meetings that provide networking opportunities. We need to be forward thinking, and we need to explore new business networking opportunities as well as carefully preserving and building on the foundation that we already have in place.

What advice would you give to young women attorneys who join the League, and who aspire to a leadership role such as yours?
Go for it! One of the great things about the League is that you can participate the day you walk in the door. We are always looking for volunteers, and at the CLLA, you don’t have to wait in line for an opportunity. Once you get on a committee, you will meet many great people who will help and guide you, as they did me. The more you learn, the more you grow. If you don’t know how to get started, call League headquarters. There are great volunteer positions available, and you could find yourself in leadership roles in a very short time.

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A new defense to preference litigation? An unordinary business defense

By Thomas S. Onder, Esq.

No one likes to give back money, especially if you had a hard time collecting it in the first place. For collection practitioners, this situation frequently occurs at the intersection of bankruptcy and collection law. It starts off with a bankruptcy trustee’s letter demanding that money previously collected must be returned as a “preferential transfer.” And it often ends with the collection practitioner telling a bewildered client that, through no fault of their own, the collected funds must be returned pursuant to Bankruptcy Code § 547(b).

Section 547(b) allows the trustee to avoid transfers of a debtor’s interest in property if the transfers are to or for the benefit of a creditor on account of an antecedent debt while the debtor was insolvent and made within 90 days before the bankruptcy petition was filed.

Although the bankruptcy trustee has great power to reclaim the property, there are a number of defenses to the trustee’s claim, including the usual defenses of ordinary course of business, transfers outside the 90-day preference period, contemporaneous exchange and new value.

A defense that has recently gained much discussion in a number of courts is based on whether the claim had previously been allowed through either settlement or the claims allowance process. Section 502(d) of the Bankruptcy Code provides that court shall: “disallow any claim of any entity from which property is...a transferee of a transfer avoidable under...Section 547…of the title, unless such entity or transferee has paid the amount, or turned over any such property, for which such entity is liable...”

This defense was explicated in In re LaRoche Industries, Inc., 284 B.R. 406 (Bankr. D. Del. 2002). In LaRoche, a creditor filed a lease rejection damage claim, and the debtor objected to the amount of the claim. The creditor did not respond to the objection, and the court allowed the claim in a lesser amount. After confirmation of the plan, the debtor brought a preference action against the creditor.

The creditor argued the allowance of the claim under Bankruptcy Code Section 502(d) bars the debtor from seeking to recover the preference claim. The LaRoche court agreed with the creditor and held that the preference claim should have been litigated as part of the claims process. The court held that: “§ 502(d) stands for the proposition that if a claim is allowed there is no longer a voidable transfer due from that claimant. In essence, a voidable transfer, such as a preference, must be determined, as part of the claims process and not at a later time, especially after distribution under the plan has been made.” Id., at 408-09.

The LaRoche court also noted that it would be inequitable to allow a creditor to object to a claim while concealing a cause of action. The court reasoned that creditors might approach the claims resolution process differently if they knew that a preference action were available even after resolution of certain claims. Id., at 410.

However, other courts have held § 502(d) should not be used to prohibit a preference action that is commenced after a claim is allowed by settlement or hearing. [e.g., In re Rhythms NetConnections, 300 B.R. 404 (Bankr. S.D.N.Y. 2003); In re TWA Inc. Post Confirmation Estate, 305 B.R. 221 (Bankr. D.Del. 2004)].

In Rhythms NetConnections, the debtor—a telecommunications broadband company—was struggling with an urgent sale of assets, termination of service and emergency petitions to the Federal Communications Commission, and generally trying to conserve what resources were being siphoned away. Only two months after the petition date, the debtor entered into a settlement agreement with a creditor in order to resolve issues related to an asset sale commenced simultaneously. The settlement also included no release of claims against the creditor. Two years later, the debtor then brought a preference action to recover property of the estate.

The Rhythms court stated that although § 502(d) was intended to coerce creditors to comply with judicial orders, it was designed to be triggered after a creditor had been afforded reasonable time to return property of the estate. The court concluded that § 502(d) is an affirmative defense to a creditor’s claim against the estate. Id., at 409. The court further distinguished the cases that had allowed § 502(d) to bar claims, from its own, reasoning that in other cases, debtors had been allowed ample time to negotiate claims and perform a preference claims analysis. Id., at 409-410. Whereas in the Rhythms case, the debtor had only two months from the petition date when it settled claims as part of a process to keep the company afloat. Thus, the court allowed the preference action.

The court in TWA Inc. Post Confirmation Estate reaffirmed the RhythmsNetConnections holding that allowing a preclusive effect of barring all claims under § 502(d) would be detrimental to large Chapter 11 cases. In TWA, the debtor had made payments to the City of San Francisco for airport operation payments such as gate rentals, security and parking, 90 days before filing. Eight months into the case, the debtor filed an objection to the city’s claim. The claim was resolved by a stipulation a few months later. Two months after the stipulation, the debtor filed a preference action to recover the transfer for airport operations.

The TWACourt held that, like Rhythms, its debtors were far from a point to be expected to commence an adequate preference analysis. Id., at 4. Further, in dicta, the court stated the practical side of most large Chapter 11 bankruptcies often puts preference analysis on the back burner to be handled by a claims administrator after a plan is confirmed. Id., at 4-5. Thus, the court concluded that to allow preference claims to be precluded based on § 502(d) would seriously affect case administration.

More courts have leaned toward these latter cases’ position that § 502(d) is not a bar to preference claims filed after settlement or allowance. However, neither LaRoche nor TWA, both Delaware cases, have been overruled. There still is plenty of room for interpretation, depending on the particular facts of your case and the court in which your case is commenced. For example, whether the size of a Chapter 11 proceeding, the number of creditors or the complexity of the case bears any weight on whether § 502(d) would be applicable, is still open to discussion.

No matter what your facts or where your case is heard, these three cases provide insight into a rather unordinary and often overlooked course for a possible preference defense.

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Why belong to a law list?…or business and tradition

By Mark V. Matz

First let’s revisit a bit of our collective history. Commercial law practices became increasingly important to American commerce in the last quarter of the 19th century.

The foundation of the Commercial Law League of America in 1895 was followed shortly thereafter by the formation of the Law Lists (including some that still serve the profession today). By 1935, The Association Of Law List Publishers (ALLP) was formed to encompass these specialized publishing companies that help the attorneys market their practice to collection agencies and other attorneys to better serve the industry. Seventy years later, this organization continues to enhance the creditors’ rights practices of its members along with supporting the CLLA.

Before the landmark 1978 U.S. Supreme Court ruling, which allowed the legal profession to advertise, these law lists provided the primary connection to secure business from agencies and other forwarding attorneys to what we now call a creditors’ rights practice. It took years after this ruling for many firms to even consider the possibility of independently advertising their practices. Well beyond 1978, many firms still continued to feel that marketing efforts beyond their traditional personal networking with other CLLA members was best left to others.

Let’s jump ahead to the 21st Century and into the age of the World Wide Web. What value does the law list practice, born in the age of the horse and carriage, play in today’s space age business procedures? Much more than it did a century ago.

Technology has made many of our business practices easier. Although, the luxury of just dictating a letter that a junior associate would type then mail to opposing counsel or to the debtor, who would then respond in a similar way a week later, does seem pleasantly nostalgic and civilized. But the core of what we provide remains to be personal service and in-depth knowledge of the credit industry. This knowledge cannot be replaced by modern technology, but in fact must support it. In a world where we have an increasing array of information and choices (remember when there were only three major television networks to choose from?), every successful practice needs the assistance of a specialist who will focus their efforts on securing new and increasingly profitable business for the firm.

So how do we make this happen? By using the collective knowledge of the past with the tools that modern commerce provides us with today. First, each ALLP member provides for every attorney on their list a bond of indemnity against acts of larceny, embezzlement, and fraudulent failure to remit or overcharge. Why is this important? The chivalrous notion of a handshake being the only bond has been supplanted by, amongst other things, Internet theft. Security is the common thread of our new age. Every attorney member of a law list provides that extra level of protection for their clients through the bond as an added level of safety and value in our increasingly security conscious world.

Service is more important in today’s world as that concept fades in intensity while our fast paced world moves forward. Remember when you pulled into a gas station and they not only pumped your gas, but also checked the fluids and cleaned your window, too? Each law list maintains an active customer service department providing its members with a myriad of options to help make their practices more profitable and efficient. When was the last time you contacted your list to ask how they could help you?

If you haven’t done this in a while, I suggest you call the service departments at all the lists that have your name on them and see what services await you. Let them know the specifics of the claims you want to handle or the experience you have in a particular industry. The more the list knows about you, the easier it is for them to find you business that you will be successful and profitable in resolving. One of the most valuable benefits provided are lists of forwarders to use when you embark upon a trip to solicit new business for your practice. Another advantage is the willingness to introduce you to new forwarders at credit industry functions like the CLLA’s meetings and conventions.

One change from the past is that the practice of law in which members of the CLLA and CRS engage, especially in those areas of collections and commercial litigation, has become more of a commercial enterprise. A law list publisher’s goal continues to be to help you supplement the marketing of your business and allow you to spend more time in the practice of law, that unique element in which you contribute the most to your firm.

As the future of the American and world economies unfolds ahead of us, there is one constant tenet that harkens back to the earliest days of commercial legal practices, agencies and law lists. That constant is that we are all much stronger working together toward a goal of increasing the flow of collectible business from forwarders to attorneys. This is one lesson from the past that resonates as loudly today as it will into the future.

Editor’s Note: Mark V. Matz, vice president of sales and marketing for the Columbia Law List (founded in 1905), has a wide-ranging background in the credit industry. He served as the CLLA’s Director of Marketing & Membership and CRS Staff Liaison, and has worked in management and sales for League-certified collection agencies. He also was a credit and association manager in the broadcasting and cable media industry, and was involved with his local NACM in Chicago. He currently serves on several CLLA national committees and has spoken at many industry events.

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Practice tip on finding debtor employment information

By Amy Baker, Esq.

Can’t find employment information for a debtor in Indiana? You may want to try the Department of Workforce Development. Our office did exactly that and has obtained great results.

In Indiana, if an attorney knows the social security number of a particular debtor, then the Indiana Department of Workforce Development can provide the name and address of the last known employer for that debtor. Indiana Code § 22-4-19-6 authorizes the Indiana Department of Workforce Development to provide the name and address of the employer of the judgment defendant upon receipt of a court order.

Accordingly, after judgment is obtained against an individual debtor, an attorney can file with the court a “Motion to Obtain Employment Information” from the Indiana Department of Workforce Development. The motion must contain the debtor’s name and social security number. While most courts in Indiana routinely grant such motions without service upon the debtor, some courts may require a certificate of service for the debtor before granting the motion. Also, the department does charge a small fee for processing the information and will bill the attorney’s office for the fee.

One thing to keep in mind, there is at least one Judge in Indiana ( Elkhart County) who is of the opinion that the motion must comply with Indiana Trial Rule 34 (C) regarding the production of documents as it relates to non-parties. If compliance with Trial Rule 34 (C) is necessary, the attorney has to serve a subpoena on the department no less than 15 days after service of the request upon all parties. Fortunately, most courts are of the opinion that the request for employment information, which is information that the plaintiff is entitled to, is not a request for production of documents and therefore Trial Rule 34 (C) does not apply. That means, a simple motion requesting the information, along with the order, will suffice.

Each state is different, but most states have a government department that collects and maintains employment data. It may be worth your time to check with your state’s department concerning its policies on employment information.

Editor’s Note: Amy Baker, Esq., is an associate with the firm of Pfenninger & Associates in Indianapolis, IN. The firm concentrates on statewide collections and creditors' rights law.

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Not-so-harmless error

By John P. Plovie, Esq.

Most of the readers of this column use computers to handle hundreds if not thousands of files. Most of us can remember the names of only a small percentage of the debtors whose names appear in our computer databases. We rely on our computer systems and our co-workers to keep track of the status of our cases. So what happens when an error is made and a debtor’s name is entered incorrectly or the software’s indexing system isn’t “smart” enough to sort out the names that we are trying to find? In most cases, not much happens. Eventually, we hope, the error is detected and no harm is done. However, a recent bankruptcy case shows how unforgiving the court can be when such errors happen and are not corrected in a timely manner.

The facts of In re Campion involve a willful violation of the automatic stay. In truth, the violation wasn’t willful at all. It was simply a case of a computer not recognizing the difference between “Mike P. Campion” and “Michael P. Campion.” It seems that the collection agency involved had software that would only check the last name and first three letters of the first name against notices of bankruptcy filings. Because of the shortcomings of this system, the computer did not link the debtor “Mike P. Campion” with bankruptcy notice for “Michael P. Campion.”

As a result, the bankruptcy notice was overlooked and the agency started a garnishment. The court found that the violation of the automatic stay was willful and awarded damages of $251 plus attorney fees of $6,735.

The court reasoned, “We perceive no difference as a practical matter between a computer program that does not perform tasks accurately and a clerical employee who does not perform tasks accurately. In either event, the employer bears the risk of the consequences.” [In re Campion, 294 B. R. 313, 9th Cir. BAP (WA), 2003]

Under the facts of this case, computer error was anything but harmless. Technology has its limits and the price of exceeding those limits can be expensive.

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John Adams as common lawyer

By Joseph A. Maker 1

John Adams (1735-1826), Patriot, first Vice President of the United States (elected 1788 and 1792) and our second President (elected 1796), was a prominent attorney in colonial Massachusetts prior to the outbreak of the Revolution and War for Independence (1775-1783). Adams was admitted to the Suffolk Bar in 1758 and admitted as a barrister in the Superior Court of Judicature in 1762. 2 His legal career is studied in the Legal Papers of John Adams,3 an impressive three-volume work, published by the Harvard University Press. The Legal Papers make for great reading. Adams’ most famous case is his defense of the British officers in the Boston Massacre trials. However, as I delved further into the past, I was pleased to learn that John Adams was a general practitioner, a litigator, who handled an interesting variety of cases including matters of commercial law and creditors’ rights.

Adams’ commercial litigation practice included actions that we commonly institute today: actions on promissory notes, bonds and accounts of merchants. 4 In 18th Century America, particularly Boston, commerce was robust, producing a vibrant merchant class. Their transactions generated wealth as well as litigation, which called for skilled lawyers and resulted in busy courts. John Adams strove to excel in the growing legal profession: “I swear I will push myself into business. I will watch my opportunity to speak in court, and will strike with surprise—surprise bench, bar, jury, auditors and all.” 5 His practice grew. In 1772, Adams appeared in 202 cases in the Superior Court, and in 1773 he prepared 262 writs in the Suffolk Inferior Court. 6

A sampling of commercial cases from his day is highlighted in the Legal Papers. In Paul Revere v. James Lowrie, 7 Adams represented the defendant against an allegation by Revere that Lowrie lured away his apprentice—what we would today claim as tortious interference with contractual relations. The appellate process from Inferior Court to Superior Court is tracked in Porter v. Steel, 8 in which Adams appeared for the defendant in a case claiming that the defendant received money of the plaintiffs to pay over to another (Rowell) and to procure an endorsement of the amount so paid on a note of the plaintiffs held by Rowell and payable to him. The second count of the declaration alleged indebitatus assumpsit for money had and received by the defendant for the use of the plaintiffs. The evidentiary issues were interesting, the defendant arguing that he did not sign the memorandum of contract and that the instrument proffered by the plaintiffs (which bore his signature) was altered. The plaintiffs prevailed.

In other cases, Adams represented London creditors of a Boston bookseller in two actions known as Longman v. Mein and Wright & Gill v. Mein, which involved another famous person,—John Hancock. 9 Hancock received powers of attorney from the London suppliers, to act as their agent and attorney-in-fact, to collect on accounts due to them from John Mein. Hancock retained Adams, who swiftly prepared writs of attachment for the sheriff to serve and seize Mein’s assets including his inventory of books and printing press equipment. 10 Subsequently, Mein, whose relations with Bostonians had soured so severely, fled to England. He was later imprisoned for debt in a proceeding commenced in the Court of King’s Bench by the London creditors. 11 Mein’s absence caused the Massachusetts action to be delayed, but it was eventually tried in the Suffolk Inferior Court. The defense objected to the documentary accounts, arguing that they were insufficient in detail. According to the editors, from the records examined, Adams also introduced depositions of the bookkeepers and testimony of local witnesses to prove receipt of the goods and the debts in question. In both cases, the court in its charge to the jury apparently directed them to find for the defendant. Nevertheless, the juries gave verdicts for the creditors.12

The case was appealed to the Superior Court and this creditor’s rights case took on a constitutional argument of the right of juries to return verdicts contrary to the instructions of courts. It was an age in which the boundaries of juries to determine questions of fact and law were vigorously debated. In his diary notes on the right of juries, Adams wrote: “While the People of all the other great Kingdoms in Europe have been insidiously deprived of their Liberties, it is not unnatural to expect that such as are interested to introduce Arbitrary Government should see with Envy, Detestation and Malice, the People of the British Empire, by their Sagacity and Valour defending theirs, to the present Times….” 13 Adams continued, “Now should the Melancholly Case arise, that the Judges should give their Opinions to the Jury, against one of these fundamental Principles, is a Juror obliged to give his Verdict generally according to this Direction, or even to find the fact specially and submit the Law to the Court. Every Man of any feeling or Conscience will answer, no. It is not only his right but his Duty in that Case to find the Verdict according to his own best Understanding, Judgment and Conscience, tho in Direct opposition to the Direction of the Court.” 14

In the Mein cases, the plaintiffs ultimately won the appeals, but unfortunately the liquidation of the assets taken on execution fell far short of satisfying the claims.

The editors of the Legal Papers also refer to two of Adams’ cases dealing with attachment and execution, which were reported in case reports of proceedings in the then Province of Massachusetts Bay. 15 The case of Richmond v. Davis 16 reviewed methods of execution available in Massachusetts during the 18th Century: levari facias, elegit, fieri facias, and addresses whether the writ of execution utilized in the case required the sheriff to levy and sell the property of the judgment debtor and remit the proceeds to the creditor, or merely to seize the property and turn the property over to the creditor in satisfaction of the judgment. The Hooten v. Grout 17 case presented an intricate and deeply researched analysis of the legal relationship between mortgagor and mortgagee and their respective interests in the mortgaged property. The issue in the case was whether the recording of an assignment of mortgage was good against an attachment issued by a creditor of the assignor. The assignment of mortgage was received in Boston by the register of deeds for Worcester. Five days after the receipt of said assignment, the attachment was made. Later, on the same day as the attachment, the deed of assignment was filed and recorded in the registry at Worcester. The court held that while the assignor’s interest in the real estate was subject to attachment, the recording of the assignment of mortgage was good against the attachment. 18

Of particular delight is the collection of documents described as John Adams’ Pleadings Book. The Legal Papers reproduce numerous forms of writs, complaints (or declarations, as styled in those days) and other pleadings that Adams compiled for his practice. Some of the pleadings we file today echo the language used in these old forms. Forms in his Pleadings Book were included in drafting guides published in the early 19th Century to assist practitioners in preparing pleadings.19 

John Adams declared, “It is my destiny to dig treasures with my own fingers.”20 Adams certainly did much digging throughout a long life of hard work and accomplishment. Indeed, his work left us with great treasures: Freedom and a nation founded on representative government and individual liberty, and a treasure of documents which provide precious insight to the past, legal history, and the workings of the law in colonial America. His desire to excel with integrity should inspire us to work hard for our clients with pride in our profession, to promote the greater good of our society. 

Editor’s Note: Joseph A. Maker, Esq., practices in Stamford, CT, in the areas of creditors’ rights, insurance defense litigation and real estate transactions. He is a member of the CLLA’s Creditors’ Rights and Bankruptcy sections.

1 Of the Connecticut Bar and Massachusetts Bar.

2 The Colonial Society of Massachusetts, Law in Colonial Massachusetts 1630-1800, at 339 (1984).

3 Legal Papers of John Adams (L. K. Wroth and H. Zobel eds. 1965). The three-volume study is part of a larger work, The Adams Papers, also published by the Harvard University Press.

4 1 Legal Papers of John Adams lx.

5 Bernard Bailyn, Faces of Revolution, at 6 (1990).

6 1 Legal Papers of John Adams lix.

7 1 Legal Papers of John Adams 47. The case was returnable in 0January 1773, about 2 years and 3 months before Revere’s famous midnight ride.

8 1 Legal Papers of John Adams 162-167.

9 1 Legal Papers of John Adams 199-230. The editors also detail how Mein engendered the enmity of Boston patriots by his opposition to non-importers.

10 1 Legal Papers of John Adams 202.

11 1 Legal Papers of John Adams 203.

12 1 Legal Papers of John Adams 205-206.

13 1Legal Papers of John Adams 228.

14 1 Legal Papers of John Adams 230.

15 1 Legal Papers of John Adams lxiv. The citation of the case reports referred to is Josiah Quincy, Jr. Reports o f Cases Argued and Adjudged in the Superior Court of Judicature of the Province of Massachusetts Bay Between 1761 and 1772 (Samuel M. Quincy ed. 1865). The editors refer to 19th century Massachusetts reports having printed these opinions of Judge Trowbridge, at 8 Mass. 554 and 14 Mass. 473.

16 Quincy Reports 279 (Suffolk SCJ, 1769); see 1 Legal Papers of John Adams lxiv.

17 Quincy Reports 343 (Worcester SCJ, 1772); see 1 Legal Papers of John Adams lxiv.

18 A note at the end of the case states that, “The law in this commonwealth has long been settled in opposition to the doctrines here laid down. 13 Mass.207. 16 Mass. 345. 3 Pick 484.” Quincy Reports 369.

19 1 Legal Papers of John Adams 29-30.

20 Bernard Bailyn Faces of Revolution at 3 (1990).

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