NCBJ 2021: Minority Banks and Lending

This panel, including Judge Christopher Lopez from the Southern District of Texas and Josiah Lindsay from Fortress Investment Group, contained a wealth of information. The panel generally covered the economic health of the African American community, the disparate impact of Covid on the African American community and how Minority Deposit Institutions (MDIs) and Community Financial Development Institutions (CFDI) can help to alleviate those conditions. 

NCBJ 2021: CLLA Luncheon: Ethics Goes to the Movies

Larry Cohen, a lawyer from Vermont and adjunct faculty member at multiple law schools used movie clips to teach legal and judicial ethics. Trying to describe movie clips without being able to play them may be a fool's errand but I will do my best.  I am sure that I didn't capture everything possible but at least this is some ethical food for thought.

In Anatomy of a Murder (1959), Jimmy Stewart is defending a serviceman accused of murder. The prosecutor effectively cross-examines Stewart's expert witness doctor, getting him to concede that the defendant may have known right from wrong. The prosecution then calls for a conference in chambers and asks Jimmy Stewart if he wants to change his client's plea from not guilty to guilty. The prosecutor is really obnoxious. However, Jimmy Stewart pulls out a law book and hands it to the judge. The opinion he wants is marked by an object which the judge recognizes as a frog gig. The judge and Jimmy Stewart talk about the joys of hunting frogs and Stewart offers to let the judge keep the frog gig. The chastened prosecutor realizes that he has been outfoxed by Stewart and says "We're hooked."

 MPRC 3.5(a): A lawyer shall not:

(a) seek to influence a judge, juror, prospective juror or other official by means prohibited by law;

While we normally think of Jimmy Stewart as the good guy, here he is improperly trying to influence the judge. 

In And Justice for All (1979), there is a funny scene where there is a recess in a case. The defendant, who is on trial for selling fake lottery tickets, walks over to the prosecution table and begins eating the tickets. Someone points this out to the prosecutor and pandemonium ensues. The judge walks in and fires a gun to restore order.

MPRC 3.4 A lawyer shall not: (a) unlawfully obstruct another party' s access to evidence or unlawfully alter, destroy or conceal a document or other material having potential evidentiary value. A lawyer shall not counsel or assist another person to do any such act;

The way the scene plays out, the defense lawyer does not notice his client eating the lottery tickets. However, if he observed this and didn't say anything, he would violate Rule 3.4(a).

MPRC 8.3(b) A lawyer who knows that a judge has committed a violation of applicable rules of judicial conduct that raises a substantial question as to the judge's fitness for office shall inform the appropriate authority.

Arguably the lawyers would have an obligation to report the gun-toting judge. 

I can't find a specific rule that says that a judge should not fire a gun in open court to maintain order. However, I have to think there must be one.

In The Verdict (1982), a lawyer is examining a witness. The judge takes over and begins cross-examining the witness. The judge gets the expert to admit a point unfavorable to the plaintiff and cuts off the examination. The exasperated lawyer says something to the effect of if you're going to try my case for me, I wish you wouldn't lose it for me.

Fed.R.Evid. 611- Mode and Order of Examining Witnesses and Presenting Evidence (a) Control by the Court; Purposes. The court should exercise reasonable control over the mode and order of examining witnesses and presenting evidence so as to: (1) make those procedures effective for determining the truth; (2) avoid wasting time; and (3) protect witnesses from harassment or undue embarrassment.

Model Code of Judicial Conduct Canon 1

A judge shall uphold and promote the independence, integrity, and impartiality of the judiciary, and shall avoid impropriety and the appearance of impropriety.

The court is allowed to exercise "reasonable" control over examining witnesses. Taking over the examination does not seem to be reasonable. Certainly cutting off the examination and undercutting the lawyer's case violates the duty to maintain the integrity and impartiality of the judiciary.

MRPC 3.5 is titled Impartiality and Decorum of the Tribunal. However, there is nothing in the rule which prohibits counsel from impugning the court other than Rule 3.5(d) which prohibits a lawyer from engaging in conduct designed to disrupt a tribunal. I think this one probably falls within the court's inherent ability to preserve the dignity of the proceedings.  

Snow Falling on Cedars (1999) involves a murder trial. The context is an island in the Pacific Northwest where Japanese Americans were interned during World War II. The prosecutor is aggressively cross-examining the Japanese American defendant and his examination goes over the line. The defense attorney makes a mild objection which the judge sustains. The Judge then lectures the prosecutor and tells him to ask a proper question. When the prosecutor hesitates, the Judge says "Shame on you" and tells him to sit down.

This would also invoke Judicial Canon 1 since the Court is making a personal attack on the prosecutor. 

There are so many teachable moments in My Cousin Vinny (1992). In the scene we watched, the judge calls Vincent Gambini back into chambers and tells him that the New York Bar has no record of a Vincent Gambini ever having tried a case. Vinny says that Vincent Gambino is just his stage name and that his real name is the name of a prominent lawyer. When he recounts this to Mona Lisa Vito, she asks him if he is stupid, because the lawyer's name he gave died the week before.

MRPC 3.3(a) A lawyer shall not knowingly: (1) make a false statement of fact or law to a tribunal or fail to correct a false statement of material fact or law previously made to the tribunal by the lawyer;

MPRC 3.5(b): A lawyer shall not:

(b) communicate ex parte with (a judge) during the proceeding unless authorized to do so by law or court order;

MPRC 5.5(a) A lawyer shall not practice law in a jurisdiction in violation of the regulation of the legal profession in that jurisdiction, or assist another in doing so.

The interesting point here is that although Vinny Gambino has an ex parte communication with the court, he was invited to do so by the judge. Thus, he was arguably authorized to do so. Obviously, making a false representation to the judge and practicing without permission in a jurisdiction are bad. 

There is a scene from an episode of Law and Order where a defense lawyer attempts to do an impromptu demonstration that an Asian American witness cannot distinguish between European Americans. The judge calls the lawyers into chambers. The judge tells him he cannot do the demonstration and asks if he has an expert. The lawyer says that he does. The prosecution objects that the witness has not been disclosed. The defense lawyer says he just thought of it. The judge then tells him that he thinks he is lying and that if he can ever prove it, there will be consequences.

The impromptu demonstrate may violate Rule 3.5(d) about not engaging in conduct intended to disrupt a tribunal.

Under Rule 8.3 (a),  

A lawyer who knows that another lawyer has committed a violation of the Rules of Professional Conduct that raises a substantial question as to that lawyer's honesty, trustworthiness or fitness as a lawyer in other respects, shall inform the appropriate professional authority." However, here it is the judge who believes the lawyer has engaged in conduct raising a substantial question about his honesty. Perhaps the prosecutor, having heard the judge's admonition might be under a duty to report his counterpart. 

In Inherit the Wind (1960), the jury is just about to come back in. Someone comes up to the judge and says "Let this thing simmer down. Don't forget November's not too far off." Also, there is a radio reporter broadcasting live from in front of the bench.

MRPC 3.5:  A lawyer shall not:

(a) seek to influence a judge, juror, prospective juror or other official by means prohibited by law;

(b) communicate ex parte with such a person during the proceeding unless authorized to do so by law or court order;

Assuming that the person who approaches the judge is a lawyer, he has violated Rule 3.5(a). If he is a lawyer in the proceeding, he has violated Rule 3.5(b) as well. 

Model Code of Judicial Conduct Canon 3:  

A judge shall conduct the judge’s personal and extrajudicial activities to minimize the risk of conflict with the obligations of judicial office.

In this case, the Judge has complied with Canon 3 by not letting the appeal to his re-election affect his ruling. 

I think there must be something wrong with letting the radio broadcaster do so from right in front of the bench but I can't find the rule. 

If anyone has additional suggestions for ethical violations in these scenarios, please send them to me and I will be happy to give you credit. 

NCBJ 2021: Even the Circuits Can't Agree

 ABI Editor at Large Bill Rochelle hosted a group of three panels discussing three different legal issues. The issues included one legitimate circuit split, a dispute between lower courts and a divided state court panel.

Recharacterization

Issue one was whether recharacterization of debt is an issue of state or federal law. Recharacterization is where an obligation nominally characterized as a debt is recharacterized to be an equity contribution.  Recharacterization was first recognized in the Supreme Court case of  Pepper v. Litton, 308 U.S. 295 (1938). The Third, Fourth, Sixth, Tenth and Eleventh Circuits all state that the issue is one of federal law while the Fifth and Ninth Circuits hold that it is a matter of state law.  

Rembrandt van Rijn - The Bankruptcy of 1656 - The Art, Loves and Insolvency of a Great Artist

Judge Scott Clarkson (Bankr. C.D. Cal.) gave a fascinating talk on the art, loves and insolvency of Rembrandt van Rijn. While this talk may not have a lot of practical import, Judge Clarkson tells a great story.

Introduction

Rembrandt van Rijn was born in Leyden in the Dutch Republic in 1603. The Dutch Republic dates back to the late 1500s and is the oldest continuous republican government in Europe. The town of Leyden, where he was born, was besieged by the Spanish and held them off. In return, William of Orange offered them ten years free from taxes but they asked for a university instead. 

The young Rembrandt attended Latin school where, among other things, he learned Bible stories that would form some of his later work. He was apprenticed to an artist and also attended university. To be a painter and a printmaker, he had to understand chemistry to work with oil paints and the properties of metal to work with copper plates.

As an artist, he was known as a hyper realist because he painted what he saw. It was said of him "he seeks the ugly." He learned to create depth in his art by using light and shadow in a technique called chiaobscuro. In his paintings, the light is generally shown on the left hand side of the canvas because he was right handed and didn't want to smudge the art. About 10-20% of his paintings were self portraits so that he wouldn't have to pay a model.

Rembrandt was originally quite an astute businessman. He would sell an oil painting for 400 guilders plus materials, which was a years' wage for a workman. He also did commercial art. Different guilds would pay him to do a painting including their members to be hung in their guild hall. If someone didn't pay his share, he would be painted out of the picture. One of these corporate paintings might sell for 1,000 guilders.  His painting The Night Watch, done for a local militia, was controversial because it showed the figures in action instead of rigorously posed. While this made for a more exciting painting, it did not showcase his patrons who were paying for the work.

He also developed printmaking as a business. Unlike other artists, he would etch directly onto the copper. A print was more affordable to the general public, going for 20-30 guilders each but he could make many copies. His etching of Christ Healing the Sick was so popular that prints went for 100 guilders a piece.  

Bankruptcy of Rembrandt

Rembrandt filed bankruptcy in 1656. One cause was his complicated tragic personal life. His first wife died from disease shortly after their son was born. Under Dutch law, he was required to pay half of his assets to his son. His lawyer convinced the wife's family to delay this payment. He brought in a wet nurse named Gertie to feed the child and she became his lover. Later, he took up with his much younger housekeeper and sent Gertie away. She took him to court and was awarded an allowance of 200 guilders per year. However, with the connivance of Gertie's family, she was sent to an asylum and he only had to pay the cost of her confinement. 

His house was also a cause of his downfall. While many scholars thought that buying the house caused his losses, Judge Clarkson concluded otherwise. He bought the house with a Consol or perpetual bond. He only paid one-fourth of the cost of the home down and then had to pay 5% interest on the bond without the principal ever coming due except in the event of default. This was essentially an annuity and was a common financial vehicle. Thus, although the purchase of the house did not lead to his bankruptcy, the fact that the house was sinking and tilting did. All of the neighbors agreed to jointly pay to stabilize the row of houses. However, Rembrandt did not pay his share.

He also lost money as his art went out of fashion. He was sued by purchasers of his art who felt that they did not get what was promised or did not receive anything in the case of a painting lost during a time of war.  He also was a profligate spender. He would go to sales and buy up whatever he thought he could use in his paintings, such as a suit of armor.

Realizing that he was in dire financial straits, he went to Orphans Court and got an order to transfer the house to his son. However, to do that, he had to clear the mortgage from the property. To do this, he borrowed 7,000 guilders from the Mayor, which he did not pay back. 

Facing pressure from lawsuits, his neighbors and the Mayor, he filed a cessio bonorum, which means a cessation of goods. He could not receive a discharge but he would avoid jail. Under the cessio bonorum, he surrendered his goods and agreed to pay all of his future earnings to his creditors above the amount of bare necessities. This combined the most burdensome elements of today's Chapter 7 and Chapter 13. 

His trustee sued his son to get the house back under Amsterdam's recently passed fraudulent transfer law. The trustee won but the judgment was reversed before the funds could be disbursed because the fraudulent transfer law was not retroactive. Although he lost the house, the money that he and his son received back was more than the total of what he had paid on the house. Thus, he achieved what many debtors today seek--a free house--although he did not get to keep it.

To avoid the requirement that he pay his future earnings to his creditors, his mistress and son formed a corporation and Rembrandt worked for it, receiving only enough pay to cover his necessities. After his bankruptcy, he had new financial success. In 1658, he painted Phoenix Rising. It was said that the Phoenix represented Rembradt. He died in 1669 at the age of 63.

It is clear that Judge Clarkson is passionate about art and history and he told a good yarn. It also had enough bankruptcy content to (I hope) qualify for CLE credit.

 

Random Thoughts from the National Conference of Bankruptcy Judges

I have attended and blogged about this conference for a number of years. I remember being captivated by Paul Begala talking about Barack Obama's belief in American Exceptionalism and Gene Wedoff being honored for his service as a judge. This made me realize that NCBJ is a conference where really interesting people talk about important stuff. 

NCBJ 2021: Jeopardy, the Broken Bench Edition

 The National Conference of Bankruptcy Judges is back this year in Indianapolis with a hybrid format for in person and virtual attendees. About 750 in person attendees helped to prop up the local hospitality industry. Every year the conference kicks off with the Broken Bench presentation, an overview of hot issues in the bankruptcy world. This year's program was done in a Jeopardy format with host Chief Judge Pamela Pepper (E.D. Wis.). This was a fun presentation of bankruptcy trivia. While this post may not help your day to day practice, I hope you enjoy it.

In the section introducing the contestants, we learned that Demetra Liggins once struck up a conversation with Tyne Daly on a New City bus. Nancy Rapoport is a competitive ballroom dancer. She experienced a wardrobe malfunction when her helper failed to secure the clasp on her gown and it started slipping down while she danced. Judge Catherine Furay (Bankr. W.D. Wisc.) both collects and designs bobbleheads.

Sens. Warren and Cornyn Tackle Bankruptcy Venue Again

 The bipartisan duo of Sen. John Cornyn from Texas and Sen. Elizabeth Warren from Massachusetts have introduced a new bill tackling bankruptcy venue. The Bankruptcy Venue Reform Act of 2021, which can be found here, is the latest attempt by the Senators to level the bankruptcy playing field. The new bill, which is supported by the Commercial Law League of America and a national network of insolvency professionals, expands upon the Senators prior work.

A Renewed Sense of Purpose

The bill contains a new set of findings and statement of purpose.

Sanctions in the Michigan Election Case and in Bankruptcy Court (Pt. 4)

This is the final installment of our investigation into the Michigan elections case and the three forms of sanctions awarded as well as how the same principles apply in Bankruptcy Court. This installment discusses sanctions under the court's inherent authority.

The Court’s Inherent Authority

The final type of sanction available arises under the Court’s inherent authority. In Chambers v. NASCO, Inc., 501 U.S. 32, 49-50 (1991), the Supreme Court held that courts have an inherent authority to sanction bad faith conduct in litigation. In the Sixth Circuit (where the Michigan elections case was pending), the test is: (i) the claims advanced were meritless; (ii) counsel knew or should have known this; and (iii) the motive for filing the suit was for an improper purpose such as harassment. Opinion, p. 42.

Sanctions in the Michigan Elections Case and in Bankruptcy Court (Pt. 3)

This is part 3 of our discussion of sanctions in the Michigan elections case and in Bankruptcy Court. This installment examines 28 U.S.C. §1927.

Introduction to Section 1927

A second basis for sanctions is found in 28 U.S.C. §1927, which provides that:

Any attorney or other person admitted to conduct cases in any court of the United States or any Territory thereof who so multiplies the proceedings in any case unreasonably and vexatiously may be required by the court to satisfy personally the excess costs, expenses, and attorneys’ fees reasonably incurred because of such conduct.

Section 1927 is different than Rule 11 in several important respects. First, it only applies to attorneys or any “other person admitted to conduct cases.” Next, the conduct covered is limited to vexatiously and unreasonably multiplying proceedings, although this may be accomplished by submitting frivolous pleadings. Additionally, there is no safe harbor letter required. Lastly, the remedy is limited to satisfying excess costs and fees incurred.