Gambling Fever...in Bankruptcy Court

When a person files bankruptcy, all of his property is transferred into a theoretical pot known as the bankruptcy estate. The bankruptcy trustee can then sell items from the bankruptcy estate to pay back the creditors, subject to certain limitations and exemptions.

A 73-year-old man from Michigan recently filed bankruptcy. One of his assets at the time was his right to receive $1,000 per month for life pursuant to a Michigan Lotto "Cash for Life" jackpot that he won back in 1984. The cash payments for life became part of the bankruptcy estate and were subsequently auctioned by the trustee. The catch, however, is that as soon as the debtor dies, the payments will stop

How much would you pay to receive $1,000 per month for the rest of a 73-year-old bankruptcy debtor's life? The winning bid was $40,026. It's kind of ironic that gambling is probably what lead the old dude into bankruptcy to begin with, but then his creditors had to gamble in an attempt to get their money back. If he lives for another 20 years, the winning bidder will have hit the jackpot.

HERE is a link to a news article about the bankruptcy sale.

Husemans Usually Win Big Cases

Most people have probably googled their own name at some point. But I took it one step further. I did a nationwide Lexis search for published court opinions involving Husemans. It turns out that three Husemans have had their cases heard before state supreme courts, two in Illinois and one in Indiana. 

We're two out of three and we're on a hot streak considering that we won the last two. It has been a while though ... our last victory before the Illinois Supreme Court came in 1914.

Here are the three cases:

Huseman v. Sims, Supreme Court of Indiana, December 30, 1885: 

This case originated out of Dearborn County, Indiana. Mr. Huseman (his first name was not identified), due to unfortunate circumstances that were probably outside of his control but which were not explained in the court's ruling, had apparently fallen behind on his rent. His landlord obtained a judgment against him for $1,059.25. Mr. Sims was the county sheriff. At the instruction of the landlord, Mr. Sims, as sheriff, seized Mr. Huseman's property in order to sell it and pay off the judgment. 

Mr. Huseman contended that the seized property was exempt from execution, so he sued the sheriff. Huseman lost at trial and then appealed. The Indiana Supreme Court found that Mr. Huseman did not properly raise his exemptions at trial, so the sheriff's execution was proper. 

Huseman loses on a technicality. 

Sassenberg v. Huseman, Supreme Court of Illinois, October 16, 1899:

This case originated out of Bureau County, Illinois. The Sassenbergs were the heirs of a man who had once owned a farm in Bureau County consisting of 120 acres. John and Anna Huseman claimed to be the rightful owners of the farm, having purchased it prior to the decedent's passing. The Sassenbergs challenged the Husemans' deed as a forgery and attempted to acquire title to the farm. 

The trial court believed that the Husemans were honest people who had legally acquired the farm. The Strassbergs appealed. The Illinois Supreme Court found that the witnesses who testified at trial were credible, including the decedent's daughter who witnessed the execution of the deed and the notary public. 

The Supreme Court affirmed that the Husemans were honest, trustworthy people. Big win for the Husemans, not that it was ever really in doubt.

Bruns v. Huseman, Supreme Court of Illinois, December 16, 1914:

This case originated out of Whiteside County, Illinois. Anna Mary Huseman, who was 80 years old at the time, owned a farm consisting of 157 acres. Ms. Huseman verbally authorized a man named Vernon C. Freeman to sell her farm. Mr. Freeman allegedly sold the farm to Mr. Bruns for $8,500 and took $500 down. Mr. Freeman presented a deed to Ms. Huseman, which she signed, but it was never delivered to Mr. Bruns or recorded with the county. Mr. Bruns sued Ms. Huseman for specific performance in order to force the sale of the farm for the remaining $8,000. Testimony at trial indicated that the farm may have been worth up to $125 per acre, or $19,625. Ms. Huseman resisted the specific performance of the alleged contract due to an allegedly fraudulent scheme between Mr. Freeman and Mr. Bruns to obtain title to the farm for a grossly inadequate price.

The trial court ruled that an agent's authority to bind the owner to a sale of real estate must be in writing pursuant to the statute of frauds. Therefore, Mr. Freeman did not have authority to sell the farm for $8,500. The Supreme Court affirmed.

Another big win for the Huseman family. Hopefully we can keep the streak alive if we find ourselves before the Supreme Court again. 

Defendant’s Name Must Appear on Face of Summons

The sample summons in Illinois Supreme Court Rule 101(d) requires “naming all defendants.” Illinois Supreme Court Rule 131(c) states that in multiple party cases, “it is sufficient in entitling documents, except a summons, to name the  . . . the first-named defendant with the usual indication of other parties (emphasis added).” So, what happens when a plaintiff files an action against several defendants, naming one defendant and adding the “et al” designation to each summons? Is the failure to include a defendant’s name in the caption of the summons a barrier to obtaining personal jurisdiction over that defendant even if the defendant is served? Arch Bay Holdings v. Perez (here), provides the answer.

Arch Bay filed a foreclosure action against a husband, wife, and other defendants. Each summons listed the husband by name followed by “et al.” The wife was served but did not appear. The court entered a default judgement against her. The trial court rejected the wife’s 2-1401 petition which claimed a lack of personal jurisdiction because her name did not appear on the summons. The Appellate Court, Second District, reversed.

The appellate court held that the model summons in Rule 101(d) requires that the names of all defendants appear in the caption of the summons. The fact that the wife’s name appeared on an attached list of defendants to be served did not cure the defect. And even thought the wife was served, “the missing name from the face of the summons was a barrier to obtaining personal jurisdiction” over her.

Financial Exploitation of an Elderly Person or a Person with a Disability

Effective January 1, 2016, the Illinois Criminal Code will be amended to include a new crime called "financial exploitation of an elderly person or a person with a disability." The new crime is a Class 4 felony if the value of the property is $300 or less and goes up to a Class 1 felony if the value is greater than $50,000.  

The new statute also creates a civil cause of action with the same name. The civil cause of action is available whether or not the defendant has been charged or convicted of a criminal offense under this section.  The civil cause of action provides for treble damages plus attorneys' fees to the victim or the estate of the victim.

A person commits financial exploitation of an elderly person or a person with a disability when he or she "stands in a position of trust or confidence with an elderly person or a person with a disability and he or she knowingly and by deception or intimidation obtains control over property of an elderly person or a person with a disability or illegally uses the assets or resources of an elderly person or a person with a disability."  

The statute defines "elderly" as someone over 60 years of age. The statute also provides that a person stands in a position of trust or confidence with an elderly person or person with a disability when he (i) is a parent, spouse, adult child or other relative by blood or marriage of the victim; (ii) is a joint tenant or tenant in common with the victim; (iii) has a legal or fiduciary relationship with the victim; (iv) is a financial planning or investment professional; or (v) is a paid or unpaid caregiver for the victim.

The new statute is located at 720 ILCS 5/17-56.

Child Representatives Enjoy Absolute Immunity

In Davidson v. Gurewitz (October 20, 2015) (here), the Appellate Court, Second District, held that a child representative appointed under section 506(a) of the Marriage and Dissolution of Marriage Act enjoys absolute immunity from malpractice liability.

Pursuant to section 506(a)(3), the trial court appointed Thomas Gurewitz as the child representative of the divorcing parent’s minor child. After the trial court entered the judgment of dissolution, the mother sued Gurewitz for malpractice. The mother claimed that Gurewitz completed his duties as a child representative on October 1, 2012, when the parties entered into a parenting agreement that settled all issues relating to the best interests of the child. The plaintiff further alleged that instead of withdrawing from the case after completing his duties, Gurewitz participated in the trial by cross-examining the plaintiff and making a closing argument. According to the malpractice complaint, Gurewitz’s unauthorized actions resulted in the entry of a judgment “replete and filled with vindictiveness relating to [plaintiff].”

Gurewitz moved to dismiss the malpractice action arguing that it was barred by the doctrine of absolute immunity. The appellate court acknowledged that section 506(a) does not, by its terms, immunize child representatives. But the court determined that the common law affords immunity to court-appointed child representatives. Thus, the Second District aligned itself with the First District’s decision in Vlastelica v. Brend (here), finding that absolute immunity is necessary so that a child representative can “fulfill his obligations without worry of harassment and intimidation from dissatisfied parents.”

Peter Rogan Will Plead Guilty to Perjury for Lying During a Citation

Peter Rogan was on the wrong side of one of the most famous "collections" cases of all time. I wrote a five-part blog post about Dexia v. Rogan back in 2011. The Dexia case involved more than $100 million and the resulting opinion from the 7th Circuit contained nearly that many tips for commercial litigators. My original post can be found HERE.

I was fortunate enough to attend a seminar given by the plaintiff's lawyers about this case. It was absolutely fascinating. These guys literally traveled the globe to recover Rogan's assets. He had established trusts that were located in multiple foreign countries around the world. His current perjury charges stemmed from his denials under oath about those trusts during a citation to discover assets.

Mr. Rogan was back in the news this week because he finally returned to Chicago after fighting extradition from Canada for the last several years. He is expected to plead guilty to perjury this week and could be sentenced immediately. All "collections" lawyers will smile when the cell door closes behind this guy.

Returning Client Papers upon Termination of the Attorney-Client Relationship

Rule 1.16(d) of the Illinois Rules of Professional Conduct requires that a lawyer “surrender papers and property to which the client is entitled” upon the termination of a representation. As recognized in ABA Formal Opinion 471 (2015), the trick is determining the precise papers “to which the client is entitled.” In Opinion 471, the ABA recognized two approaches to the issue: (1) the “entire file” approach which dictates the return of every page of the client’s file unless a specific exception applies and (2) the “end product” approach, which requires surrender of the lawyer’s final product but not drafts or memos reflecting a lawyer’s legal or factual research.

Which approach does Illinois take? In adopting the “end product” approach, Illinois State Bar Opinion 94-13 (1995, affirmed 2010), identified seven categories of documents maintained in the course of representing a client. Opinion 94-13 then applied the “end product” test to each category of documents with the following results.

1.     Documents furnished by the client. Rule 1.15(b) requires that these materials be returned “promptly” upon the client’s request.

2.     Correspondence between the lawyer and client. Rule 1.4(a) entitles the client to reasonable access to this correspondence. But since by definition the client has previously received or sent these letters or emails, the lawyer can charge a reasonable amount to provide copies.

3.     Correspondence between the lawyer and third parties. Rule 1.4(a) entitles clients to copies of “significant correspondence” with third parties. If the lawyer previously provided copies of these documents, the lawyer may charge for additional copies. The client is also entitled to copies of “routine administrative correspondence” if the client agrees to pay for the copies.

                                                                                                                                                                  

4.     Pleadings, briefs, and other documents filed with a tribunal or agency. Rule 1.4(a) entitles clients to copies of “significant” pleadings and other filings. Although a lawyer is not required to provide routinely filed papers such as service certificates, a client is entitled to routine filings upon reimbursement of reproduction costs.

5.     Contracts, wills, corporate records, and similar documents. Rule 1.4(a) entitles a client to the final version (not drafts or working copies) of these documents. If the client received copies of the documents during the course of the representation, the lawyer may charge a reasonable sum for supplying additional copies.

6.     Administrative materials such as memos concerning conflicts, a client’s credit status, and time records. These documents are usually prepared for internal use and so are not relevant to the status of a client’s case. Thus, neither Rule 1.4(a) nor Rule 1.15(b) requires production of these administrative materials.

7.     Notes, drafts, internal memos, and legal and factual research. Illinois Opinion 94-13 concludes that since these items are the property of the lawyer, not the client, they need not be produced.  

Of course, an Illinois lawyer is free to supply all documents of whatever type or category to a client and many lawyers do so.

50 Cent is Broke

As most of you know, Curtis James Jackson, III a/k/a 50 Cent filed Chapter 11 bankruptcy on July 13, 2015. He filed what's commonly known as a skeleton petition, which is a bare-bones filing used to get a case on file quickly and which does not contain the required disclosures regarding assets and liabilities. He then filed a motion to extend the timeline to file his actual disclosures, which was granted. On August 3, 2015, he finally filed the rest of his schedules.

To make a long story short, he was almost $8M underwater on the day he filed bankruptcy. I have attached the relevant documents below. Here is a brief explanation of the interesting documents: Schedule A contains his real estate holdings; Schedule B contains all of his other personal property and assets; Schedule D lists the mortgage on his house; Schedule F lists all other unsecured debts, except child support; Schedule I lists monthly income; and Schedule J lists monthly expenses.

Here are the highlights:

• Total Assets: $24,823,899.18
• Total Debts: $32,509,549.91
• Monthly Income: $184,969.58
• Monthly Expenses:  $108,000
• Cash in the bank: $10,554,486.13
• Ownership interests in his companies: $4,412,712.24
• Total value of his automobiles: $500,618
• Monthly child support: $14,600
• Monthly household expenses/utilities: $72,000
• Monthly meals and entertainment: $3,000
• Monthly wardrobe: $3,000

Here are the complete schedules. Take a look and let me know if you have any questions about anything in here.

  50 Cent - Schedules A-J

Amendments to Illinois Pro Hac Vice Rules

The Supreme Court of Illinois amended Rule 707 (renamed as Permission for an Out-of-State Attorney to Provide Legal Services in Proceedings in Illinois) and made related amendments to Rules 756(a) and (a)(1) and 718(e) and (f), all effective for appearances filed in proceedings on or after July 1, 2013. The amendments do not require any action by an out-of-state attorney who obtained permission to enter an appearance in an Illinois proceeding prior to July 1, 2013.

Amended Rule 707 permits an out-of-state attorney to enter an appearance in a proceeding in Illinois before a court, a court-annexed alternative dispute resolution body, or a agency or administrative tribunal of the State of Illinois or of a local government unit, if the attorney: 

• meets licensure and other eligibility requirements
• associates with an Illinois attorney who files an appearance in the proceeding
• files a verified Statement with the tribunal

No order of the tribunal permitting the appearance is required. However, the attorney must serve the verified Statement on the ARDC, register annually with the ARDC, and pay fees to the ARDC.

Amended Rule 707 does not affect the longstanding practice under which an out-of-state attorney authorized to practice law in another United States jurisdiction is permitted to provide legal services at a deposition in an Illinois proceeding without need of separate Rule 707 permission, if the out-of-state attorney is assisting an attorney whose appearance in the proceeding is authorized, regardless of the location of the deposition. The out-of-state attorney is subject to the disciplinary jurisdiction of the Supreme Court of Illinois (Supreme Court Rules 751(a), 752(a) and (b), 779(a) and Rule 8.5 of the Illinois Rules of Professional Conduct). The longstanding practice is consistent with Rule 5.5 of the Illinois Rules of Professional Conduct. This practice does not permit an out-of-state attorney to file an appearance or to provide legal services before the tribunal, including the filing of any pleading, motion, or other document,  without obtaining Rule 707 permission.

Click here for instructions for a Rule 707(d) statement and for a listing of fees and requirements.