Thoughts on To Kill A Mockingbird

This year is the 50th Anniversary of the publication of To Kill A Mockingbird. There was an entire program devoted to it at the State Bar Convention this summer and my daughter was assigned the book for her summer reading project. I decided to give the book another look. I was struck by the following passage. To me, it captures the ideal of what it means to be a lawyer and man of honor.

“Do you defend *******, Atticus?” I asked him that evening.

“Of course I do. Don’t say ******, Scout. That’s common.”

“’s what everybody at school says.”

“From now on it’ll be everybody less one—“

“Well if you don’t want me to grow up talkin’ that way, why do you send me to school?”

My father looked at me mildly, amusement in his eyes. Despite our compromise, my campaign to avoid school had continued in one form or another since my first day’s dose of it. . . .

But I was worrying another bone. “Do all lawyers defend n-Negroes, Atticus?”

“Of course they do, Scout.”

“Then why did Cecil say you defended ******? He made it sound like you were runnin’ a still.”

Atticus sighed. “I’m simply defending a Negro—his name’s Tom Robinson. He lives in that little settlement beyond the town dump. He’s a member of Calpurnia’s church, and Cal knows his family well. She say’s they’re clean-living folks. Scout, you aren’t old enough to understand some things yet, but there’s been some high talk around town to the effect that I shouldn’t do much about defending this man. It’s a peculiar case—it won’t come to trial until summer session. John Taylor was kind enough to give us a postponement. .. .”

“If you shouldn’t be defendin’ him, they why are you don’ it?”

“For a number of reasons,” said Atticus. “The main one is, if I didn’t, I couldn’t hold up my head in town, I couldn’t represent this county in the legislature, I couldn’t even tell you or Jem not to do something again.”

“You mean if you didn’t defend that man, Jem and me wouldn’t have to mind you any more?”

“That’s about right.”

“Why?”

“Because I could never ask you to mind me again. Scout, simply by the nature of the work, every lawyer gets at least one case in his lifetime that affects him personally. This one’s mine, I guess. You might hear some ugly talk about it at school, but do one thing for me if you will; you just hold your head high and keep those fists down. No matter what anybody says to you, don’t let ‘em get your goat. Try fighting with your head for a change …. it’s a good one, even if it does resist learning.”

“Atticus, are we going to win it?”

“No, honey.”

Harper Lee, To Kill A Mockingbird, pp. 99-101.

There is so much in this passage. I agree that every lawyer gets one case in his lifetime that affects him personally. For me, it was the case of a little girl who was in foster care and whose grandmother and uncle would not give up on her. I also like the idea that a person’s right to respect depends upon doing the right thing, even when it’s hard. Finally, I like the idea of fighting with your head.

Few of us, myself included, live up to the ideal of Atticus Finch. However, if you have an ideal, at least you can try to aim in that general direction. Sometimes you might get close.

This is a book worth reading and re-reading.

Do Not Hide Assets From the Trustee. You Will Get Caught and Go to Jail.

Most of us have heard cocktail party talk about someone who had a lot of assets but managed to file bankruptcy and keep all of their stuff. Usually, the explanation has to do with exemptions and fully encumbered property. However, every once in a while, someone tries to play fast and loose with the trustee. As a public service, I would suggest that anyone contemplating this scheme talk to Donovan Lindhorst.

Donovan Lindhorst was a roofing contractor. He got in trouble with the union for using non-union workers and for not accurately reporting his workers' time or appropriately funding their benefits. That was a bad idea because the union filed an involuntary bankruptcy petition against him. No. 07-34117, Donovan Louis Lindhorst (Bankr. Ore. 2007).

During the run-up to his bankruptcy, he withdrew money from his accounts in the form of cash, cashier's checks or checks payable to cash in an amount exceeding $800,000. However, when he filed his schedules and statement of financial affairs, he neglected to mention the money that he had transferred to his son, his wife and his wife's trust and the vehicles, real estate, cash and gold and silver coins that he still owned. He testified that his schedules and statements were true and correct at his creditors' meeting and on the first day of his Rule 2004 exam. On the second day of the exam, he refused to answer any additional questions.

The alert and diligent trustee secured an ex parte order to search the debtor's property. Here is just a sample of what they found:



As of February 25, 2010, the Trustee had recovered assets totaling $643,022.31 and had cash on hand of $283,591.81. The U.S. Trustee filed an action objecting to the Debtor's discharge. The Debtor agreed to waive his discharge.

The U.S. Attorney obtained a five count indictment against Lindhorst. No. 3:09-cr-00303, United States v. Donovan Lindhorst (D. Ore. 2009). On August 23, 2010, he agreed to plead guilty to two counts. As part of his plea agreement, he had to write in his own handwriting that he was guilty of the two counts.




He is now subject to a five year prison sentence, supervised release after completion of his sentence, a $250,000 fine and restitution.

Anyone thinking about pursuing a similar scheme should keep this in mind. Assets leave a paper trail. Just because you withdraw the money from your account and give it to your wife and son or hide it in a safe does not mean that it doesn't exist.

Don't do it. You can get caught. You can lose your discharge. You can go to jail. Just like Donovan Lindhorst.

Bad News for the Non-Filing Spouse

Frequently it makes sense for only one spouse to file bankruptcy. Where the husband has wracked up large business debts in his name only and the wife has significant separate property or sole management property, the husband can file bankruptcy without bringing the wife's non-joint assets into the estate. This allows a certain amount of double-dipping. The husband can claim his assets and the joint assets as exempt and the wife can keep her non-estate assets as well. While this will benefit the couple 99% of the time, two recent cases show a downside for the non-filing spouse.

In Kim v. Kim, No. 3:09-CV-1082-N (N.D. Tex. 8/11/10), which can be found here(PACER registration required), creditors filed an involuntary bankruptcy petition against Mr. Kim and then sought to limit his homestead exemption under 11 U.S.C. Sec. 522(p) for the reason that the property had been acquired within 1,215 days before bankruptcy. As a result, the debtor's homestead exemption was limited to $136,875. Had the spouse joined in the bankruptcy, the couple would have been entitled to double this amount. Instead, Mr. Kim filed a declaratory judgment action against Mrs. Kim to determine whether her homestead interest in the property (1) precluded sale of the property by the estate and (2) whether she was entitled to compensation for her interest. The Petitioning Creditor intervened and opposed the relief.

The Bankruptcy Court granted summary judgment in favor of the Petitioning Creditor and the District Court affirmed. The District Court found that bankruptcy law preempted Texas state homestead law. Because the homestead was joint community property, it became property of the estate. Because it became property of the estate, bankruptcy law determined the extent to which it could be exempted. The result for Mrs. Kim was that the involuntary bankruptcy petition, to which she was not a party, diminished her homestead rights. Not only that, but because she remained outside of the bankruptcy proceeding, the couple received only half of the homestead protection they would have otherwise had under Sec. 522(p).

One of the cases relied upon by the Kim court was In re Douglass, 2008 WL 2944568 (Bankr. W.D. Tex. 2008)(a case that I am intimately familiar with because I was on the losing side). In that case, the husband filed chapter 13. He made a tactical decision not to claim the homestead as exempt. Instead, he argued that the house was contaminated and was worth no more than the value of the land. Because the house was not being occupied as a residence, he was successfully able to cram down the value on the house. Had the case proceeded to discharge, the couple would have been able to retain the house. However, mid-way through the case, the wife moved back into the house and the husband sought to sell the home and pay off his chapter 13 plan early. The parties agreed to allow the sale of the home and to fight over the proceeds. The Bankruptcy Court ruled that (1) the wife was not entitled to any compensation for her homestead rights under Texas law and (2) the wife had failed to establish a separate property interest in the home. (She had provided the down payment for the home from her separate property).

Had the husband not filed bankruptcy, he could not have sold the property without the wife's consent. Therefore, the husband's filing divested the wife of a valuable right without her consent. Of course, if the husband had not filed bankruptcy, the property would have been foreclosed upon and the wife would have lost her interest.

These two cases are a powerful cautionary that sometimes the decision to remain outside of the bankruptcy can have negative consequences for the non-filing spouse. While it may seem unfair, it is a simple matter of reading Sec. 541(a)(2) which includes all joint management community property in the estate.

Hat Tip to Howard Mac Spector for sending me the Kim case.

Seventh Circuit Upholds Attorney's Bankruptcy Fraud Conviction

Circuit level opinions dealing with bankruptcy fraud are none too common, so that when one appears, it is worth taking note. This week, the Seventh Circuit affirmed the conviction of attorney Thomas O'Connell Holstein on nine counts of bankruptcy fraud. United States v. Holstein, No. 09-2822 (7th Cir. 8/18/10). The opinion can be found here.

This was not a high dollar case involving hidden assets or Ponzi schemes, but rather, something more mundane. It was about an attorney who wanted to keep practicing after his license was suspended. In September 2005, Thomas Holstein agreed to an 18 month suspension of his license.

Even though he knew that his suspension would take effect within a few weeks, he continued to take on new clients. Holstein would answer the phone and set up the consultations, but the clients would meet with his paralegal. She would help them fill out the forms and would accept payment from them. His paralegal would then black out the attorney's signature block and indicate that the case was being filed pro se. Since the clients were ostensibly filing pro se, there was no disclosure of fees being paid. The clients usually did not find out that they had filed pro se until they arrived at the first meeting of creditors and there was no lawyer there to represent them. The paralegal testified that she did all this on Holstein's instructions.

After a bench trial, Holstein was convicted on nine counts of bankruptcy fraud and sentenced to a year and a day.

In order to establish bankruptcy fraud it is necessary to show: (1) that he engaged in a fraudulent scheme; (2) that he made misrepresentations to the bankruptcy court; (3) in order to further the scheme. To be found guilty of falsifying documents before the bankruptcy court, the government had to show that he "falsified . . . any document with the intent to impede, obstruct or influence" a bankruptcy matter.

On appeal, Holstein made the following arguments:

Holstein argues that the government failed in its proof because he had no involvement in any of the consultations with the clients or in filing the fraudulent bankruptcy petitions. For almost the entire time, according to Holstein, he was drunk and secluded at his summer home. He claims the evidence showed that Vega acted alone. Vega met with the clients, filled out the petitions and accepted the fees. Holstein was rarely if ever in the office. He points to several possible motives Vega may have had for filing the petitions pro se, including keeping her job and retaliating against Holstein for a failed romance. If Vega acted alone, she would be solely responsible for the misrepresentations.

As a sort of alternative argument, Holstein claims the government failed to prove he could have intended to mislead the bankruptcy court about whether the debtors in question were represented by counsel. Even if he directed Vega’s actions in filing the pro se petitions, the fact that he paid the debtors’ filing fees with Lawline
checks precludes any inference that he intended to defraud the court. Lawline was “universally associated” with Holstein, he argues, and he would never have used the checks bearing his firm’s name if he wanted to mislead the court. Other lawyers did appear on the clients’ behalf in some of the cases, which Holstein claims is further proof that he never intended to conceal the fact that the clients were represented by counsel. (emphasis added)

Slip Op., pp. 4-5.

The Court was not impressed. Among other things, it found that his argument that use of the Lawline checks indicated that the clients were represented by counsel undercut his argument that his paramour paralegal acted alone.

With no evidence in the record to cast doubt on the district court’s findings, Holstein’s appeal boils down to challenging the Judge determinations as to the credibility of the witnesses. Such a tactic is “doomed at the outset.” (citation omitted).

Slip Op., p. 6.

On the one hand, this case should prompt a monumental "Well duh!" Taking money from clients to represent them in a bankruptcy proceeding and then sending them into court on a pro se basis is one of the worst ethical violations an attorney can commit. The petition preparer rules were intended to remedy just this type of misconduct. What makes this case astonishing is that the attorney was willing to run this risk to bring in a few thousand dollars more once his suspension took effect. The scheme was bound to unravel once the clients started showing up at creditors' meetings wondering where there lawyer was. His defense of I was drunk at my summer home was not likely to arouse much sympathy. Similarly, his attempt to throw his paralegal under the train by attributing the scheme to a spurned lover was similarly doomed to fail.

While it shouldn't be necessary to make the point, this case illustrates that consumer bankruptcies are serious business and that bad things can happen to people who cut corners and try to make a fast buck.

Hat-Tip to Manny Newburger who alerted me to this case.

Judge Isgur Takes on the "Absolute" Assignment of Rents

The absolute assignment of rents was a trendy lender's argument during the 1980s. The lender could claim that its loan documents granted it ownership of the rents to be received by the debtor. The lender would magnanimously allow the debtor to use its rents so long as the debtor was not in default. However, upon default, the lender would take back "its" rents. Without ownership of the rents, the debtor would have nothing to fund a plan of reorganization with and thus no hope of reorganization.

The absolute assignment of rents was largely discredited during the 1980s. However, like Jason or Freddy Krueger in a cheap horror movie, it keeps coming back. In a thoughtful opinion, Judge Marvin Isgur explains why it might work outside of bankruptcy, but that the mighty Code has the power to unravel the assignment, no matter how absolute it might claim to be. In re Amaravathi Limited Partnership, 416 B.R. 618 (Bankr. S.D. Tex. 2009).

What Happened

In Amaravathi Limited Partnership, the Debtors owned four apartment properties in the Greater Austin area. They were supposed to pay their rents into a lock box. The lender would make the debt payments and remit the balance to the debtors. This did not leave the debtors with enough money to operate their properties, so the debtors stopped sending their money to the lock box. The lender filed suit and obtained appointment of a receiver. The debtors then filed bankruptcy and asked for permission to use cash collateral. The lender objected contending that the absolute assignment of rents meant that they were not property of the estate.

Section 541(a)(6) Spells It Out

Judge Isgur (in a lengthy opinion) found an elegantly simple answer. Under Section 541(a)(6), property of the estate includes "proceeds, product, offspring, rents or profits of or from property of the estate. . . " Therefore, regardless of whether you have a collateral assignment of rents or an absolute assignment of rents, the post-petition rents are property of the estate.

Judge Isgur found that this straightforward reading of the Code would control unless it would lead to an absurd result. He found that it did not.

The Code provisions dealing with post-petition rents maintain a balance. Section 541(a)(6) brings the rents into the estate; Sec. 552(b) extends the lender's lien to post-petition rents and Sec. 363 requires adequate protection in order to use rents. This structure "incentivizes debtors and creditors to behave efficiently."

C1 Trust seeks to seprate the rental income from the assets and individuals that produce the rental income. Permitting such separation creates inefficient incentives that could greatly impede any debtor's ability to successfully reorganize. It is a fundamental principal of a capitalist society that when the owners of productive assets cannot benefit from the income produced by the assets , the incentive to produce income is eliminated. Without any prospect to generate rental income, the business's prospects for success are minimal at best.

In re Amavarathi Limited Partnership, at 624.

In concluding his statutory reading, he said:

The Court therefore follows the unambiguous text of Sec. 541(a)(6) and declines C1 Trust's request to choke the Debtors out of bankruptcy.

Id. at 626.

You Can Call It Mickey Mouse But It's Still a Lien

Having decided the issue, he went on to offer several additional rationales. First, he argued that the term "absolute" assignment of rents is a misnomer. Regardless of what you call it, it is still a security device. He quoted In re Foundry of Barrington Partnership, 129 B.R. 550, 557 (Bankr. N.D. Ill. 1991) for the proposition that:

The lender can call this arrangement an "absolute" assignment or, more appropriately "Mickey Mouse." It's still a lien.

Id. at 631.

The Court noted that the Fifth Circuit used the term "contingent present assignment" to describe the so-called absolute assignment of rents.

Why It's Different Outside Bankruptcy

Judge Isgur further explained that under Texas law, an absolute assignment of rents grants the lender legal but not equitable title to the rents. Outside of bankruptcy, the lender's legal title to the rents controls. However, inside bankruptcy, the retained equitable interest passes to the estate.

Synthesizing Whiting Pools with International Property leads to the conclusion that the post-petition rents at issue in this case are property of the estate. This conclusion is unmistakable despite the fact that the International Property lender was was permitted to retain the "absolutely" assigned rents. They key difference between the ostensibly inconsistent outcomes in this case and International Property is the bankruptcy framework. Outside of bankruptcy, International Properties stands for the proposition that once default occurs, the lender immediately has rights to the "absolutely" assigned rents. The debtor cannot keep rents received post-default. Upon receiving the rents, the lender must then take the cash from those rents and apply it to the mortgage debt. In doing so, the lender becomes both the equitable and the legal title holder of the cash from the rents. It is not until the cash is applied to the debt that the equitable title transfers from the debtor to the lender.

This case would follow the outcome of International Property if the Debtors had not filed bankruptcy. Upon the Debtors' bankruptcy filing, however, Sec. 541(a)(1) brings all property in which the Debtors hold an equitable interest into the estate. At the time of the filing of the bankruptcy petition, the Debtors held equitable title to all future rents, despite the lender's right to the rents under the "absolute" assignment.

Id. at 633.

This is a thoughtful opinion and well worth the time to read it. Judge Isgur has done an admirable job of reconciling the labels, the state court doctrine and the Bankruptcy Code's effect on these rights. Not only that, his opinion is based on basic capitalist principles.

All About Emails, Texts, Blogs and Non-Dischargeability

On February 3, 2010, Judge Jeff Bohm released his opinion in Wallace v. Perry, 423 B.R. 215 (Bankr. S.D. Tex. 2/3/10), opinion available with PACER access here. Following a twelve day trial, the court penned a 118 page opinion. The opinion is an interesting study in how to try a dischargeability case and just how bizarre relations between partners can get. I was going to do several short posts on this opinion. However, the subject matter is so inter-related that I am going to do it in one long article. The topics that I will be focusing on are getting the right parties, creative use of Sec. 523(a)(6) and dischargeability in the electronic age.

Background

Judge Bohm made extensive fact findings, some of which are summarized here.

Will Perry, Costa Bajjali and the Wallace Trusts became partners in W.C. Perry Partners, L.P. in 2004 and 2005. The Wallace Trusts were two trusts formed for the daughters of David Wallace. Perry, Bajjali and Wallace all worked in different aspects of the partnership. Wallace also served as mayor of Sugar Land. The partnership received substantial investments from third parties, including the clients of a talk radio host.

The relationship between the partners did not go well. Bajjali and Wallace were unhappy that Perry would spend his afternoons at the movies instead of working and that he often made decisions without consulting them. Perry complained that Wallace's political activities had become a liability to the partnership and accused Bajjali of lurching at him in the office kitchen. Perry decided that he needed a bodyguard to protect him from his partner. Perry sent an email canceling all partnership meetings.

In an attempt to smoke out his partners, who he thought were secretly reading his emails, he sent his assistant an email stating that he intended to file bankruptcy and leave them with nothing.

Subsequently, he agreed to buy out his partners and indemnify them from any liabilities. He also agreed to a liquidated damages clause if he did not use his best efforts to get them released from their guarantees.

Having parted ways with his partners, Mr. Perry started a smear campaign against them. He told others that he had removed them from the partnership because they were dishonest and incompetent. He also asserted that they were receiving kickbacks and stealing funds from the partnership. Perry sent a mass email to the Sugarland Rotary Club telling them not to associate with Bajjali or Wallace. Perry also had his assistant print out copies of a blog accusing Wallace of unethical conduct and distribute them anonymously.

The allegations took a toll on Wallace who was then running for Congress. The Fort Bend Republican Party returned a contribution he made and forbade him from introducing the speaker at the Lincoln-Reagan Dinner. He was also asked not to speak at the Gathering of Men, a faith-based men's group. Wallace was unsuccessful in his Congressional race.

After Perry Properties crashed and burned, Bajjali and Wallace spent $3.78 million to restructure the debts they had guaranteed.

Perry filed for chapter 11 bankruptcy and a non-dischargeability action ensued.

It's Hard to Party Without the Right Parties

David Wallace, Costa Bajjali and the Wallace Trusts each brought non-dischargeability claims based upon failure to honor the indemnification and non-disparagement clauses of the Purchase Agreement. However, Wallace and the Trusts found themselves in a catch-22 situation.

The Trusts were parties to the Purchase Agreement. However, Judge Bohm ruled that under Texas law, a trust lacks capacity to sue or be sued. Instead, only the trustee may sue or be sued on behalf of the trust. If the trustee abrogates his duty, a beneficiary may sue. However, David Wallace, the only natural person named was neither the trustee of the trusts nor a beneficiary. Thus, he could not sue on behalf of the trusts and the trusts could not sue on their own behalf.

Wallace also was unable to recover under the non-disparagement clause. The clause applied to the parties to the agreement and their "affiliates." The Court found that an affiliate was a person who controlled or was controlled by a party or an officer, director, partner, employee or relative of a party. Wallace did not control the trusts nor was he controlled by them. While he was a relative of the beneficiaries of the trusts, he was not a relative of the trusts themselves. Therefore, he was not an affiliate and could not recover.

The problems with parties here raise several important points. When the Purchase Agreement was drafted, it referred to the "Sellers," being Bajjali and the Trusts. However, despite the fact that the trusts were the partners, Wallace had a very direct involvement in the partnership. Careful drafting could have prevented this problem.

The difficulty with the trusts is more baffling. While the capacity of a trust to sue or be sued is not obvious, it must have been raised in the pleadings in order for the court to have addressed it in the opinion. If the issue was raised prior to trial, it should have been possible to substitute the trustee in as the real party in interest.

Creative Use of Section 523(a)(6)

Section 523(a)(6) allows non-dischargeability of debts for willful and malicious injury. While the language used suggests physical injury or at least tort claims, the statute is much broader and can be applied to a wide variety of injuries, including injuries arising from breach of contract.

In this case, the plaintiffs brought suit under Sec. 523(a)(2), (a)(4) and (a)(6). However, the court struck the claims under 523(a)(2) and (4) based on misconduct of the plaintiff's original counsel, leaving them to proceed solely under Sec. 523(a)(6).* The plaintiffs had two types of claims: claims for failure to honor the indemnification clause and claims for defamation. While it is easy to see how defamation can fall under Sec. 523(a)(6), a claim for willful and malicious breach of a contractual obligation to indemnify seems like more of a reach.

*Note: The Court was quick to point out that Plaintiff's trial counsel Johnnie Patterson was not responsible for the conduct that led to the pleadings being struck. The court stated, "Mr. Patterson's conduct throughout his representation of the plaintiffs was exemplary, as was the conduct of counsel for the defendant, John W. Wauson."

In this case, the plaintiff provided the defendants with evidence that his breach of contract was not just inadvertent, but was intended to harm the defendants.

In the "trick" email which Perry sent to his administrative assistant prior to execution of the Purchase Agreement, he stated:

I wanted to let you know that I am going filing bankruptcy per my attorneys advice. Please do not worry as this is part ofmy big plan I am going to be hatching this week. Dave [Wallace] and Costa [Bajjali] think they can pull the wool over my eyes they have no idea what is about to happen and I just love it. They [Wallace and Bajjali] will walk away with nothing after this week and oh Dave [Wallace] can kiss his political career goodbye. Costa [Bajjali] will be getting all the blame plus a hell of a lot of debt. The master is at work and I have them by there balls. Costa should have never sided with Dave.

While Perry later claimed that he sent this email in order to catch his partners reading his email, the court found that it betrayed his true intentions.

He also told another business associate "don't **** with me, I will destroy you like I did David Wallace."

He also stated that he wanted to cause Bajjali to incur a lot of debt and did not intend to pay him a dime.

Based on this evidence, the court found that Perry had actual subjective intent to harm Bajjali and knew with substantial certainty that his actions would cause harm. As a result, Bajjali was entitled to recover $3.78 million in damages incurred with regard to the indemnification clause.

The plaintiffs also brought defamation claims which were a more traditional use of Sec. 523(a)(6). The most interesting facet of the defamation claims concerned Perry's distribution of a blog written by someone else. The Rhymes With Right blog (www.rhymeswithright.mu.nu) wrote a post about Wallace which described him as "unethical, corrupt and not fit to represent the GOP." The blog post amounted to disorganized ramblings which imputed that Wallace was involved in arms dealing and attempts to overthrow governments. The Court found that the blog posting was defamatory. However, the Court also found that Perry did not write the blog or contribute to it.

However, the Court found that under Texas law, a person is liable for defamation if he "publishes" the defamatory statement. A statement in an email constitutes a publication. The Court found that emailing a link to the blog to a third party and instructing his assistant to print out the blog and distribute it constituted publication.

The court also found that statements with regard to kickbacks, "gross fraud," "serious crimes" and extortion were defamatory.

The Court found that the statements constituted defamation per se. As a result, the plaintiffs were able to recover without proof of specific damages. The Court awarded both actual and exemplary damages.

A Few Thoughts About Evidence in the Electronic Age


In this case, Will Perry got into trouble by shooting off his mouth. However, the evidence included texts, emails and blogs. The risk posed by electronic communications is that (i) the speaker will unleash his raw, unvarnished thoughts without any self-censorship and (ii) there will be a tangible record of those statements.

The "trick" email was probably the most damaging piece of evidence against Perry. This was an act of macho boasting to his administrative assistant. If it hadn't been sent in email form, there would not have been any record of it. The Court's extensive discussion of the credibility of the witnesses (discussed here) illustrates the fallibility of human memory. However, by incriminating himself in an email, Perry placed himself in the position of having to invent an unbelievable rationalization for his words.

The blog also deserves some discussion. Rhymes With Right is written by "Greg," a 40-something teacher from Seabrook, Texas according to his profile. Much of it consists of right-wing rants. However, for some reason, "Greg" developed a deep dislike for Dave Wallace. According to Judge Bohm, his writings were defamatory. When Perry distributed it, he probably didn't think that he was making a defamatory statement. Instead, he was merely providing third party confirmation. The irony here is that the anonymous blog poster escaped liability while the passer-on did not. However, Perry would not have been held liable were it not for the raft of other evidence concerning his irrational hatred toward his former partner. The lesson here is that just because you read something on the internet doesn't make it safe for publication.

Final Thoughts

It is said that the most dangerous cases are those with Exes, ex-spouses, ex-partners and so on. A bad break-up triggers enough negative emotions to overwhelm rational thought. That is not a good thing when the person on the other side knows where the bodies are buried. This was just such a case. Despite the other side's failure to name the right parties and failure to cooperate in discovery, the defendant still ended up with a non-dischargeable judgment for $4 million give or take. The debtor's self-righteous anger fueled by excessive testosterone ultimately proved to be destructive for him.

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