“A very unusual case, this.” – Judge Posner

Ct: Mr. Hart, you are representing yourself and claiming Amazon sold counterfeit copies of your 2 self-published books written about your experiences as a homeless man? And they damaged you to the tune of millions of dollars, and you would have been able to “end homelessness” if they had been legitimate copies?
Mr. Hart: Yes.
Ct: How do you know?
Mr. Hart: My cousin ordered a copy, and I saw it did not have my fingernail indentations on the cover. That’s how mark my copies, so I know his copy was counterfeit. Look, here’s two indistinguishable pictures to help you distinguish the counterfeit.
Ct: Amazon has offered evidence that shows they had no books. According to them, they helped third party vendors sell a total of 6 copies, none of which Amazon ever directly touched. It seems likely to the court that the third party venders had copies you sent them, rather than that Amazon itself undertook the significant expense to duplicate and print hard copy counterfeits of your books. Based on that, your implausible valuation of damages, and your unfortunately indistinguishable method of identifying the “counterfeits”, your case is below the threshold of plausibility. Dismissed.

The post heading is the opening line by Judge Posner. I like Judge Posner.

Don’t Lie to the Bankruptcy Court.

Paul Hansmeier was a wealthy, but unscrupulous, attorney.  5 years ago, he was making hundreds of thousands of dollars “porn trolling,” i.e. getting courts to issue broad John Doe subpoenas to internet service providers for users suspected of downloading copyrighted pornography.  Subpoena requests are routinely granted without evidentiary hearings.  Paul would then send threatening letters to pressure the thousands of suspected users to settle by paying hundreds or thousands of dollars or risk “public exposure” in litigation, when he had no actual proof that the users were the actual downloaders. When the courts found out he was abusing the subpoena process, they sanctioned him repeatedly, totaling $576,000 as of 2014.  Paul dissolved that firm and moved on to filing ADA (Americans with Disabilities Act) claims against small, family-owned businesses with non-compliance issues such as improper signage or doors with round knobs instead of levers.  Most small businesses would settle (or authorize their insurer to do so) rather that engage in a protracted federal case. Business was lucrative, but the pesky 1/2 million dollars worth of sanctions kept following him.

With multiple courts coming after him to collect the sanctions he had been ordered to pay, Paul decided to file a chapter 13 bankruptcy.  Perhaps not coincidentally, he did so immediately before he was to turn over significant financial disclosure in response to a judge’s request. Paul made just over $10,000 worth of payments to the bankruptcy court over a 4 month period before things fell apart. The trustee found he had been less than honest in his filing and his subsequent conduct. The trustee also asked the court to change the case to a chapter 7 and sell Paul’s assets, instead of letting Paul pay the equivalent value over a 5 year period. Paul fired his attorney and filed his own response saying, “Actually, can I have the $10,000 back? I’ve got this plan to repay everybody. And the Trustee’s a crook, he buys a new Mercedes every Christmas.” The court sided with the trustee. Paul appealed.

The appellate court cited some of the findings of the bankruptcy court. It noted that Debtor had been found by a federal district court judge in the Southern District of Illinois to have exhibited “a serious and studied disregard for the orderly process of justice and a relentless willingness to lie to the court on paper and in person”; he had been found by a state court judge in Minnesota to have “intentionally given inconsistent testimony” throughout the proceedings; he had filed his bankruptcy petition to avoid disclosing financial information to the state court; he had failed to disclose numerous transfers totaling over $500,000.00 on his statement of financial affairs; he moved to a rental property and failed to amend his schedules to reflect the resulting reduction in his monthly living expenses; and “numerous courts had entered findings and conclusions that he had engaged in fraud and misrepresentations to the courts regarding his assets and his use of various entities to hide his assets” to misrepresent his financial condition.

Paul is going to lose everything (including his licence to practice law if it has not been revoked already.) Don’t lie to the court, and don’t lie or leave stuff out of your bankruptcy paperwork. Don’t think you won’t get caught. It will not end well.

“Do I have a Case?”

I receive a number of calls and consults each month that end with the question “You’re the lawyer, do I have a case?”  Often, to my caller’s disappointment, the answer is “No.”  Typically, the potential client doesn’t like this answer, so another 5-10 minutes is spent answering the “but what about…” or “even though…” followup questions.  In many cases, the reason the potential client does not have a case is not lack of liability on the part of the wrongdoer (though sometimes that is also questionable): it is lack of definable damages.  Take the recent case of Hancock v. Urban Outfitters, (D.C. Ct App. 2016).

Whitney Hancock and Jamie White made purchases with credit cards at Urban Outfitters LLC and Anthropologie, Inc.  At the register, the credit card was scanned, then the sales clerks asked for Whitney or Jamie’s zip code, which they entered into their registers (not the card machines).  “My zip code!” cried Jamie and Whitney.  “That’s part of my address, and is protected consumer information!  That violates consumer protection law!”  (*Actual exclamation marks may vary.)

So they hired a lawyer, who said “Yep, it’s right here in this federal statute, asking for an address or other personal identification information breaks the law.  Let’s make this a class action suit.” and sued.  And quickly lost on a motion to dismiss, with the court saying “A zip code, without more, is not protected.”  Their lawyer appealed.  The conversation went something like this:

Appellate court: I know you want to talk about whether a zip code is a prohibited part of an address or not under consumer protection law.  But first, what are your clients’ damages?

Lawyer: “The only injury … that the named plaintiffs suffered was that they were asked for their zip code when under the law they should not have been.”

Appellate Ct: Hmm, I guess the court below erred.

Lawyer: Hooray!

Appellate Court: This should have been dismissed for lack of standing because there is no real injury, not on the merits of whether a zip code is or isn’t an address.  Without an actual injury, the complaint here does not get out of the starting gate.

Lawyer: Awww…

So at the end of the day, I turn away some clients who, admittedly, have been wronged.  Why?  Because they have damages that are either non-existent, or are minimal enough that hiring me makes no sense.  The court is not going to “punish” the other side in the manner the potential client wants, and I think it’s a disservice to let people hire me because they believe otherwise.  So I don’t.

Bankruptcy, Probate, and Invalid Wills, Oh My!

In the case of Brown v. Sommers, No. 15-20034 (5th Cir. 2015), we look at how probate and bankruptcy interact. Michael Brown was a successful surgeon, accumulating a great deal of money for many years.  Unfortunately, he was not as successful in keeping his marriage together, and ended up moving from Texas to Florida while acrimonious divorce and child custody proceedings were pending.  In Florida, he filed a chapter 11 “with assets” bankruptcy.  He did not disclose what he should, however, and his case was dismissed for “significant misconduct,” with the court taking the unusual step of assigning a Chief Restructuring Officer (“CRO”) outside of the bankruptcy to operate Dr. Brown’s business and oversee his personal affairs.  Dr. Brown did not cooperate with the CRO, and the bankruptcy was reinstated and transferred to Texas (where most of the assets were held).

Dr. Brown died shortly thereafter.  He had numerous wills, but none of them appeared to be valid.  And since the divorce was not final, it was dismissed, leaving his wife as his lawful intestacy heir.  His chapter 11 was converted into a “sell everything” chapter 7 liquidation.

The rest of the case (here) deals with the wife’s efforts to get the bankruptcy court to pay several probate allowances from Dr. Brown’s estate: ultimately the court declined to give her the money, though she is entitled to any money left over after creditors are paid.  Can Wife still go through the Texas probate court to get her probate claims recognized?  Probably.  Will the Bankruptcy court then give her claims priority?  Maybe.  Will it cost a lot in legal fees?  Yep.

Let’s review: there is a stereotype that some surgeons believe they know everything and can do no wrong, sometimes called a God complex.  Dr. Brown thought he knew better than the bankruptcy court, better than his wife, better than the court assigned CRO, and better than any estate planning attorney (since he apparently drafted his own defective wills).  At the end of the day, he was wrong several times over.  He didn’t get a bankruptcy discharge, he didn’t get a divorce, he didn’t get control of his business or finances back, and he didn’t have his final wishes acknowledged or enforced by the probate court.  If only he could go back in time, perhaps he could fix it, but it appears he did not have a Delorean among his many assets.  Sorry, Doc Brown.

Help! My Stepdad Took my Inheritance!

I have had more than one client visit me with inheritance situations like the one described in the title.  In Arizona, a valid Last Will (or a trust, or survivorship or beneficiary designations) controls who is entitled to property when someone dies.  If none of these things were set up, then after bills are paid, Stepdad (or Stepmom) is entitled to 1/2 the estate, stepkids (children of the deceased) split the other half.  Stepparent also gets certain amounts as priority payments (I.e. before the stepkids or most creditors get paid).  They do not get to hide or take stepkid’s share, though they can hold it for a while in some cases if stepkid is a minor or incompetent.

If Stepdad wrongfully takes a stepkid’s share of the estate, the stepkid can file a probate and get double the value of the property wrongfully withheld.  Today’s case happened in California, but Arizona has a similar law.

In a nutshell, Mr. Staggers kept all his wife’s assets when she died, and did not give his two stepkids the share they were entitled to get.  They sued.  During the suit, Mr. Staggers died, and his son was appointed as his personal representative to resolve the lawsuit.   Son filed a motion to terminate the double damages claim, citing a 2008 case and arguing that since Mr. Staggers is dead, his estate can’t be punished with double damages under a specific California code section eliminating “punitive or exemplary damages” against estates.  He also wanted to throw out the requested attorney’s fees, which he argued were also punitive.  Stepkids argued the 2008 case was dicta, a non-applicable ruling about a different issue, and cited an 1866 case (issued a year after the Civil War ended) arguing the opposite.

The trial court found the 1866 case did not apply because the current code section didn’t exist in 1866, and entered summary judgment against stepkids.  Stepkids appealed, and got the summary judgment reversed.  The Appellate court said “Yes, the double damages and attorney’s fees are demonstrative and punitive in nature, but they are statutory damages, rather than punitive damages which have to be proved by clear and convincing evidence along with evidence of defendant’s bad faith and his net worth.  So attorney’s fees and double damages can be awarded against the estate.”

So now the case goes back to the trial court for an actual trial (not just summary judgment, i.e. trial by motion) against a dead man’s estate over a dead woman’s estate.  Meanwhile, years have passed and attorneys on both sides have been paid lots of money.  Stepdad’s estate may have to come up with the stepkids’ share of Mom’s estate, plus double damages, plus attorney’s fees to repay the stepkids.  Someday. If they win. And if there is any money left.  It is unlikely that Mr. Staggers contemplated any of this when he took his wife’s assets for himself.  For all we know, his wife wanted him to have everything, but didn’t write up a will to make that clear.  On the other hand, maybe he deliberately ignored her wishes.  Either way, unless his son beats this lawsuit, Mr. Staggers’ estate will eventually be asked to pay the price.  The Feb 18, 2016 appellate decision in the case (Hill v. Superior Court) is here.

Moral of the story: 1) Mr. Staggers should have talked to an attorney before making asset distributions to himself; and 2) Mrs. Staggers should have used proper estate planning such as Wills, life estates, beneficiary designations, and beneficiary deeds to avoid this kind of fight and make sure her estate automatically went to the people she wanted it to go to.  A good attorney now can help save tens or hundreds of thousands of dollars later.  At least that’s the moral I got.

Probate can dredge up issues better left buried

Probate can dredge up issues better left buried
Posted on March 6, 2015
Robert was 17, and in love with 19 year old Margaret. Margaret got pregnant, but his parents wouldn’t let him marry her, and without parental consent, the age to marry in Arkansas was 18. Margaret gave birth to a daughter, Joyce, in January 1949, but a birth certificate was not immediately issued. In 1951 Robert (now 19) and Margaret married, and a delayed birth certificate was issued in July of 1952 listing Robert as the father. The family moved to Vegas, and stayed together until Margaret died in 1990 and Robert died in 2012 at age 80. His obituary identified Joyce as his sole heir, and Joyce paid for his funeral services. Joyce did not immediately file for probate / intestacy.

There was no Will, which could have made it clear Robert wanted Joyce to inherit from him whether she was his daughter or not. In the absence of a Will, Robert’s sister Polly and nephew Gary filed a probate court petition for special appointment claiming 1) Joyce was not Robert’s real daughter, 2) “You knew you were never his child, the birth certificate is invalid, we want a DNA test.” Oh, and 3) Polly should inherit everything as next of kin.

The Nevada court opinion does not say how close Robert and his sister/nephew were. You can draw your own conclusions based on who arranged for the obituary and the funeral. The court did not force a paternity test. Instead, the Probate Commissioner held that the birth certificate was presumptively valid, Robert and Margaret had lived as if it were valid, which reinforced the validity of the birth certificate. Even if that were not the case, paternity contests are generally barred three years after the child reaches majority. Polly and Gary were out of luck.

Polly and Gary appealed, and asked for discovery (expensive) and an evidentiary hearing (essentially a trial). The court said no, your case does not even get to the discovery stage because you do not have standing and are time barred, so they appealed again. And lost again, with a Supreme Court of Nevada issuing an opinion citing cases from all over the US saying that siblings do not get to contest paternity by virtue of being siblings, as they are not “directly interested parties.” Getting a potential inheritance in a probate case does not convert them into an interested party in a “related” paternity case. Plus, you are time barred. Opinion here: http://law.justia.com/cases/nevada/supreme-court/2015/63284.html

A just result? Yes, albeit after years of litigation. But the court seemed to gloss over the second part of the 3 year time bar statute, which says “This section does not alter the time within which a right of inheritance or a right to a succession may be asserted beyond the time provided by law relating to distribution and closing of decedents’ estates or to the determination of heirship, or otherwise.” I would have liked to see more analysis on why this pretty specific language doesn’t apply. I suppose that will come down the road when someone else tries to litigate the issue.

Posted in probate, Uncategorized | Tagged heir, intestacy, probate