tag:blogger.com,1999:blog-58985360865718384892024-02-02T02:17:46.910-08:00A.M. Santos Law, Chtd.Securities Law; and Litigation: Articles and Summaries
by AM SantosAnonymoushttp://www.blogger.com/profile/02507643510494938178noreply@blogger.comBlogger16125tag:blogger.com,1999:blog-5898536086571838489.post-15533362104952923272017-02-09T22:19:00.002-08:002017-02-09T23:59:19.873-08:00Constitution Versus Trump<div class="separator" style="clear: both; text-align: center;">
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<a href="https://www.whitehouse.gov/the-press-office/2017/01/27/executive-order-protecting-nation-foreign-terrorist-entry-united-states"><span style="font-family: "arial" , "helvetica" , sans-serif;">EXECUTIVE ORDER: PROTECTING THE NATION FROM FOREIGN TERRORIST ENTRY INTO THE UNITED STATES</span></a><b></b><i></i><u></u><sub></sub><sup></sup><strike></strike></div>
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<a href="https://drive.google.com/file/d/0ByaJVCt8_1PCUnV3Ry1HLUUydFE/view?usp=sharing" target="_blank"><span style="font-family: "arial" , "helvetica" , sans-serif;">Ninth Circuit Denial of Trump Motion for Stay of an Order</span></a></div>
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<a href="https://drive.google.com/open?id=0ByaJVCt8_1PCbFU2RElJUXB3TUk"><span style="font-family: "arial" , "helvetica" , sans-serif;">ACLU Amicus Brief Supporting Washington State Response</span></a></div>
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<a href="https://drive.google.com/open?id=0ByaJVCt8_1PCOGdzakwzWFZxUTQ"><span style="font-family: "arial" , "helvetica" , sans-serif;">State of Hawaii Joinder and Brief opposing Trump Motion</span></a></div>
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<a href="https://drive.google.com/open?id=0ByaJVCt8_1PCX3lPS2dJc0ROaDQ"><span style="font-family: "arial" , "helvetica" , sans-serif;">State of Washington Response to Trump Motion to Stay TRO</span></a></div>
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<a href="https://drive.google.com/open?id=0ByaJVCt8_1PCNEFYU1ltVExCS3M"><span style="font-family: "arial" , "helvetica" , sans-serif;">Trump Emergency Petition and Brief Seeking Stay of TRO</span></a></div>
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<a href="https://drive.google.com/open?id=0ByaJVCt8_1PCNWxELTc5RjRJcUE"><span style="font-family: "arial" , "helvetica" , sans-serif;">Ninth Circuit Appellate Court Case No: 17-35105 Docket</span></a></div>
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<span style="font-family: "arial" , "helvetica" , sans-serif;">On February 3, 2017, a federal judge granted a temporary restraining order (TRO) blocking (nationwide) U.S. President Trump’s recent </span><a href="https://www.whitehouse.gov/the-press-office/2017/01/27/executive-order-protecting-nation-foreign-terrorist-entry-united-states"><span style="font-family: "arial" , "helvetica" , sans-serif;">Executive Order</span></a><span style="font-family: "arial" , "helvetica" , sans-serif;"> (signed January 27, 2017) effectively banning nationals from </span><a href="http://i2.cdn.turner.com/cnnnext/dam/assets/170129104738-trump-travel-ban-map-super-169.jpg"><span style="font-family: "arial" , "helvetica" , sans-serif;">seven</span></a><span style="font-family: "arial" , "helvetica" , sans-serif;"> (predominantly Muslim) countries from entering the United States. The Trump team requested that the Judge stay the order whilst they file an appeal. The judge refused. As a result, the travel restrictions (trump himself has repeatedly referred to the </span><b><i><span style="font-family: "arial" , "helvetica" , sans-serif;">Muslim Ban</span></i></b><span style="font-family: "arial" , "helvetica" , sans-serif;">)</span><b><i><span style="font-family: "arial" , "helvetica" , sans-serif;"> </span></i></b><span style="font-family: "arial" , "helvetica" , sans-serif;">which would have impacted hundreds of thousands in the first few weeks alone, was lifted effective immediately.</span><br />
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<a name='more'></a><span style="font-family: "arial" , "helvetica" , sans-serif;"> </span><span style="font-family: "arial" , "helvetica" , sans-serif;">The states of Washington and Minnesota filed the Complaint based on Constitutional grounds and survived early standing challenges (at least for now). The judge found sufficient legal standing in favor of Plaintiffs.<span id="more-430"></span> The state of Hawaii also joined Washington and Minnesota in challenging Trump's order, and the lawsuit alleging that the order is unconstitutional and asking the court to block the order across the country.</span></div>
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<span style="font-family: "arial" , "helvetica" , sans-serif;">Many believe Trump's order to be flagrantly unconstitutional; a thinly veiled, blatant targeting of individuals based on religious beliefs. Opponents of the Executive Order argue that it is a direct violation of the First Amendment’s Establishments Clause because it operates in a manner favoring Christians over Muslims. Aside from barring persons from listed countries, the order suspended the US Refugee Admissions Program for one hundred and twenty days, no matter a refugees country of origin. After this timeframe, the executive order directs the secretary of state, in consultation with the Secretary of Homeland Security to </span><strong><em><span style="font-family: "arial" , "helvetica" , sans-serif;">“</span></em></strong><em><span style="font-family: "arial" , "helvetica" , sans-serif;">make changes to the extent permitted by law, to priorities refugee claims made by individuals on the basis of religion based persecution, </span><strong><span style="font-family: "arial" , "helvetica" , sans-serif;">provided that the religion of the individual is a minority religion in the individuals country of nationality”. </span></strong></em><span style="font-family: "arial" , "helvetica" , sans-serif;">The limitation in the clause is arguably biased when viewed against the back drop of the Muslim-majority countries. This is because the religion of an individual (</span><em><span style="font-family: "arial" , "helvetica" , sans-serif;">who practices a minority religion in a Muslim-majority country</span></em><span style="font-family: "arial" , "helvetica" , sans-serif;">) will most likely be a Christian (or other non-Muslim religion). </span><b><span style="font-family: "arial" , "helvetica" , sans-serif;">Thus the ban is </span></b><em><b><span style="font-family: "arial" , "helvetica" , sans-serif;">designed</span></b></em><b><span style="font-family: "arial" , "helvetica" , sans-serif;"> to favor Christian refugees and disadvantage Muslim refugees in Muslim countries facing persecution. The ban constitutes a blatant violation of the first amendment establishment clause because it helps Christian refugees because they are Christian but does not help Muslim refugees because they are Muslim.</span></b></div>
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<span style="font-family: "arial" , "helvetica" , sans-serif;">Above you will find links to the key documents in this ongoing battle. This post will be updated as the fight progresses. Stay tuned.</span></div>
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<br />Anonymoushttp://www.blogger.com/profile/02507643510494938178noreply@blogger.com0tag:blogger.com,1999:blog-5898536086571838489.post-22903399866973003082017-02-07T22:05:00.000-08:002017-02-07T22:05:36.636-08:00Nevada’s One Action Rule (NRS 40.430)<div style="text-align: justify;">
<span style="font-family: "arial" , "helvetica" , sans-serif; font-size: large;"><b>Nevada’s One Action Rule (NRS 40.430)</b></span></div>
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<b>(i) In General</b></div>
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Nevada’s One Action Rule (NRS 40.430). As codified in NRS 40.430, the one-action-rule, dictates the following:</div>
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<i>There may be but one action for the recovery of any debt, or for the enforcement of any right secured by a mortgage or other lien upon real estate.... In that action, the judgment must be rendered for the amount found due the plaintiff, and the court, by its decree or judgment, may direct a sale of the encumbered property, or such part thereof as is necessary, and apply the proceeds of the sale as provided in NRS 40.462.<a href="https://www.blogger.com/blogger.g?blogID=5898536086571838489#_ftn1">[1]</a></i></div>
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Nevada’s one-action rule requires a creditor seeking recovery on a debt (in the same foreclosure action):</div>
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a) to judicially foreclose on all real property encumbered as security for the debt;</div>
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b) to sue on the entire debt;</div>
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c) to and obtain a deficiency judgment against the debtor. </div>
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The statute contemplates a creditor’s action to exhaust the security before recovering from the debtor personally.<a href="https://www.blogger.com/blogger.g?blogID=5898536086571838489#_ftn2">[2]</a> As a general matter, should the creditor fail to follow the single action procedure by bringing a separate action directly on the obligation, the one-action rule dictates the creditor’s loss of rights in the real estate collateral securing the debt in question.<a href="https://www.blogger.com/blogger.g?blogID=5898536086571838489#_ftn3">[3]</a></div>
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<b>(ii) Exceptions: Actions not deemed duplicative</b></div>
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There are, however, a few exceptions to this rule. Specifically, NRS 40.430(6) Nevada proffers these exceptions by enumerating 16 acts (claims or proceedings) that do not constitute a duplicative action under the statute. So, for purposes of the one-action-rule, an “action” does not include any act or proceeding:</div>
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a) To appoint a receiver for, or obtain possession of, any real or personal collateral for the debt or as provided in NRS 32.015.</div>
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b) To enforce a security interest in, or the assignment of, any rents, issues, profits or other income of any real or personal property.</div>
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c) To enforce a mortgage or other lien upon any real or personal collateral located outside of the State which does not, except as required under the laws of that jurisdiction, result in a personal judgment against the debtor.</div>
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d) For the recovery of damages arising from the commission of a tort, including a recovery under NRS 40.750, or the recovery of any declaratory or equitable relief.</div>
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e) For the exercise of a power of sale pursuant to NRS 107.080.</div>
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f) For the exercise of any right or remedy authorized by chapter 104 of NRS or by the Uniform Commercial Code as enacted in any other state, including, without limitation, an action for declaratory relief pursuant to chapter 30 of NRS to ascertain the identity of the person who is entitled to enforce an instrument pursuant to NRS 104.3309.</div>
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g) For the exercise of any right to set off, or to enforce a pledge in, a deposit account pursuant to a written agreement or pledge.</div>
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h) To draw under a letter of credit.</div>
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i) To enforce an agreement with a surety or guarantor if enforcement of the mortgage or other lien has been automatically stayed pursuant to 11 U.S.C. § 362 or pursuant to an order of a federal bankruptcy court under any other provision of the United States Bankruptcy Code for not less than 120 days following the mailing of notice to the surety or guarantor pursuant to subsection 1 of NRS 107.095.</div>
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j) To collect any debt, or enforce any right, secured by a mortgage or other lien on real property if the property has been sold to a person other than the creditor to satisfy, in whole or in part, a debt or other right secured by a senior mortgage or other senior lien on the property.</div>
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k) Relating to any proceeding in bankruptcy, including the filing of a proof of claim, seeking relief from an automatic stay and any other action to determine the amount or validity of a debt.</div>
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l) For filing a claim pursuant to chapter 147 of NRS or to enforce such a claim which has been disallowed.</div>
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m) Which does not include the collection of the debt or realization of the collateral securing the debt.</div>
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n) Pursuant to NRS 40.507 or 40.508.</div>
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o) Pursuant to an agreement entered into pursuant to NRS 361.7311 between an owner of the property and the assignee of a tax lien against the property, or an action which is authorized by NRS 361.733.</div>
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p) Which is exempted from the provisions of this section by specific statute.</div>
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q) To recover costs of suit, costs and expenses of sale, attorneys' fees and other incidental relief in connection with any action authorized by this subsection.</div>
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<b>(iii) The Right of Conversion: Amending the Pleadings or Claims</b></div>
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To the extent that any act, action or claim as may be included in the counterclaim(s) or construed by the Court in a manner suggesting a violation of the one-action-rule, Liberty Village submits that it is entitled to conversion (or the right to amend the counterclaims) so as to conform to the one-action rule. Conversion (or leave to amend) is allowed under NRS 40.435 when the initial action has not yet been concluded. </div>
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The statute<a href="https://www.blogger.com/blogger.g?blogID=5898536086571838489#_ftn4">[4]</a> provides that the commencement of, or participation in, a judicial proceeding, in violation of NRS 40.430, does not forfeit any of the rights of a secured creditor in any real or personal collateral, or impair the ability of the creditor to realize upon any real or personal collateral, if the judicial proceeding is: (a) stayed or dismissed before entry of a final judgment; or (b) converted into an action which does not violate NRS 40.430. </div>
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If the provisions of NRS 40.430 are timely interposed as an affirmative defense in such a judicial proceeding, upon the motion of any party to the proceeding the court shall: (a) dismiss the proceeding without prejudice; or (b) grant a continuance and order the amendment of the pleadings to convert the proceeding into an action which does not violate NRS 40.430.<a href="https://www.blogger.com/blogger.g?blogID=5898536086571838489#_ftn5">[5]</a>,<a href="https://www.blogger.com/blogger.g?blogID=5898536086571838489#_ftn6">[6]</a></div>
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<a href="https://www.blogger.com/blogger.g?blogID=5898536086571838489#_ftnref1">[1]</a> NRS 40.462 governs the distribution of the proceeds of a foreclosure sale.</div>
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<a href="https://www.blogger.com/blogger.g?blogID=5898536086571838489#_ftnref2">[2]</a> See Keever v. Nicholas Beers Co., 96 Nev. 509, 513 (1980); see also Nevada Wholesale Lumber v. Myers Realty, 92 Nev. 24, 28, (1976)</div>
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<a href="https://www.blogger.com/blogger.g?blogID=5898536086571838489#_ftnref3">[3]</a> Nevada Wholesale Lumber, 92 Nev. at 30, 544 P.2d at 1208</div>
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<a href="https://www.blogger.com/blogger.g?blogID=5898536086571838489#_ftnref4">[4]</a> NRS 40.435(1)</div>
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<a href="https://www.blogger.com/blogger.g?blogID=5898536086571838489#_ftnref5">[5]</a> NRS 40.435(2)</div>
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<a href="https://www.blogger.com/blogger.g?blogID=5898536086571838489#_ftnref6">[6]</a> Bonicamp v. Vazquez, 120 Nev. 377 (2004)</div>
</span>Anonymoushttp://www.blogger.com/profile/02507643510494938178noreply@blogger.com4tag:blogger.com,1999:blog-5898536086571838489.post-90207091093395520182014-05-08T20:19:00.000-07:002015-09-26T06:37:52.152-07:00Third Party Intermediaries and the Distribution of Unregistered Securities under Sections 5(a) and (c).<div class="MsoNormal" style="text-align: justify;">
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<span style="font-family: Arial, sans-serif; font-size: 12pt;">Third parties or intermediaries not otherwise directly selling securities they own may find themselves the target of the Securities and Exchange Commission for violations of Sections 5(a) and (c) of the Securities Act, namely the distribution of unregistered securities. This is particularly troublesome because violations thereof are subject to a strict liability standard, that is, intent is not element requisite to the claim.<o:p></o:p></span></div>
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<i><span style="font-family: Arial, sans-serif; font-size: 12pt;"><a href="http://openjurist.org/626/f2d/633/securities-and-exchange-commission-v-murphy"><span style="color: blue;">SEC v. Murphy</span></a><a href="https://www.blogger.com/null" name="_ftnref1"> </a></span></i><a href="https://www.blogger.com/blogger.g?blogID=5898536086571838489#_ftn1" title=""><span style="color: blue; font-family: "Arial",sans-serif; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">[1]</span></a><span style="font-family: Arial, sans-serif; font-size: 12pt;"> stood for the proposition that a participant must be "both a 'necessary participant' and 'substantial factor' in the sales transaction." But as a result of a 1988 the case, <i><a href="http://openjurist.org/486/us/622/bj-pinter-v-dahl"><span style="color: blue;">Pinter v. Dahl</span></a><a href="https://www.blogger.com/null" name="_ftnref2"> </a></i><a href="https://www.blogger.com/blogger.g?blogID=5898536086571838489#_ftn2" title=""><span style="color: blue;">[2]</span></a> the SEC took the position that <i>Murphy’s</i> substantial factor analysis had been overruled by a “but for” or proximate cause analysis. As a result, in many instances, the SEC applied this “but for” standard to intermediaries or participants in assessing whether or not, for purposes of Section 5, they might be deemed to be “sellers”.<o:p></o:p></span></div>
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<span style="font-family: Arial, sans-serif; font-size: 12pt;">But in 2011, the Ninth Circuit clarified the matter distinguishing <i>Pinter</i> from <i>Murphy</i>. As a result, an individual’s facing allegations of Section 5 violations are subject to a calculus measuring whether or not they were in fact a substantial factor in the transaction. This is almost always a question of fact for the fact finder (jury or judge) and is not typically matter disposed of by summary judgment.<o:p></o:p></span></div>
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<span style="font-family: Arial, sans-serif; font-size: 12pt;">The following is a brief summary of the import of <i><a href="http://cdn.ca9.uscourts.gov/datastore/opinions/2013/09/10/11-17021.pdf"><span style="color: blue;">SEC v. Bagley</span></a></i> in the context of Section 5 and the relevant standards for imposing liability on a third party intermediary or participant.<o:p></o:p></span></div>
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<span style="font-family: Arial, sans-serif; font-size: 12pt;">1. Sections 5(a) and (c) of the Securities Act<a href="https://www.blogger.com/null" name="_ftnref3"> </a><a href="https://www.blogger.com/blogger.g?blogID=5898536086571838489#_ftn3" title=""><span style="color: blue;">[3]</span></a>, make it unlawful to offer or sell a security through interstate commerce if a registration statement has not been filed as to that security, unless the transaction qualifies for an exemption from registration.<a href="https://www.blogger.com/null" name="_ftnref4"> </a><a href="https://www.blogger.com/blogger.g?blogID=5898536086571838489#_ftn4" title=""><span style="color: blue;">[4]</span></a><o:p></o:p></span></div>
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<span style="font-family: Arial, sans-serif; font-size: 12pt;">2. Section 5(a)(1) "broadly prohibits sales of securities irrespective of the character of the person making them." <i>SEC v. Chinese Consol. Benevolent Ass'n</i>, 120 F.2d 738, 741 (2d Cir. 1941).<o:p></o:p></span></div>
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<span style="font-family: Arial, sans-serif; font-size: 12pt;">3. To establish a prima facie case for violation of Section 5, the SEC must show that<a href="https://www.blogger.com/null" name="_ftnref5"> </a><a href="https://www.blogger.com/blogger.g?blogID=5898536086571838489#_ftn5" title=""><span style="color: blue;">[5]</span></a>:<o:p></o:p></span></div>
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<span style="font-family: Arial, sans-serif; font-size: 12pt;">a) no registration statement was in effect as to the securities;<o:p></o:p></span></div>
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<span style="font-family: Arial, sans-serif; font-size: 12pt;">b) the defendant directly or indirectly sold or offered to sell securities; and<o:p></o:p></span></div>
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<span style="font-family: Arial, sans-serif; font-size: 12pt;">c) the sale or offer was made through interstate commerce.<o:p></o:p></span></div>
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<span style="font-family: Arial, sans-serif; font-size: 12pt;">4. Once the SEC introduces evidence that a defendant has violated the registration provisions, the defendant then has the burden of proof in showing entitlement to an exemption.<a href="https://www.blogger.com/null" name="_ftnref6"> </a><a href="https://www.blogger.com/blogger.g?blogID=5898536086571838489#_ftn6" title=""><span style="color: blue;">[6]</span></a> Section 5 is a strict liability statute.<o:p></o:p></span></div>
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<span style="font-family: Arial, sans-serif; font-size: 12pt;">6. Scienter is not an element of Section 5 liability.<a href="https://www.blogger.com/null" name="_ftnref7"></a><a href="https://www.blogger.com/blogger.g?blogID=5898536086571838489#_ftn7" title=""><span style="color: blue;">[7]</span></a> This is true for the most part.<a href="https://www.blogger.com/null" name="_ftnref8"></a><a href="https://www.blogger.com/blogger.g?blogID=5898536086571838489#_ftn8" title=""><span style="color: blue;">[8]</span></a><o:p></o:p></span></div>
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<span style="font-family: Arial, sans-serif; font-size: 12pt;">7. Good faith reliance on counsel may not preclude liability under the statute. Indeed, "neither a good faith belief that the offers or sales in question were legal, nor reliance on the advice of counsel, provides a complete defense to a charge of violating Section 5 of the Securities Act.<a href="https://www.blogger.com/null" name="_ftnref9"></a><a href="https://www.blogger.com/blogger.g?blogID=5898536086571838489#_ftn9" title=""><span style="color: blue;">[9]</span></a><o:p></o:p></span></div>
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<span style="font-family: Arial, sans-serif; font-size: 12pt;">8. Because Section 5 imposes strict liability for violations of its registration requirement, it is particularly important that the necessary participant and substantial factor test be carefully applied to each case so as not to subject defendants with a <i>de minimis</i> or insubstantial role in a securities scheme to strict liability.<o:p></o:p></span></div>
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<span style="font-family: Arial, sans-serif; font-size: 12pt;">9. Although Section 5 provides that it is unlawful for any person to sell or offer to sell an unregistered security, 15 U.S.C. § 77e(a), (c), liability under Section 5 is not limited to the person or entity who ultimately passes title to the security. See <i>Murphy</i>, 626 F.2d at 649.<o:p></o:p></span></div>
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<span style="font-family: Arial, sans-serif; font-size: 12pt;">10. Instead, courts have established the concept of 'participant' liability to bring within the confines of § 5 persons other than sellers who are responsible for the distribution of unregistered securities." Id.<o:p></o:p></span></div>
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<span style="font-family: Arial, sans-serif; font-size: 12pt;">11. With respect to Section 5, a defendant's role in the transaction must be a significant one before liability will attach. Id. at 648.<o:p></o:p></span></div>
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<span style="font-family: Arial, sans-serif; font-size: 12pt;">12. Defendants play a significant role when they are "both a 'necessary participant' and 'substantial factor' in the sales transaction." <i>Phan</i>, 500 F.3d at 906 (quoting <i>Murphy</i>, 626 F.2d at 648, 652).<o:p></o:p></span></div>
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<span style="font-family: Arial, sans-serif; font-size: 12pt;">13. The substantial factor test requires more than a finding of "but for" causation. Prior to the issuance of a security, numerous persons perform mechanical acts without which there could be no sale. For example, a printer may prepare key documents or a bank may advance cash to a customer upon the customer's presentation of an instrument and then pass the instrument to another person. Both would satisfy a "but for" causation test, but these acts nonetheless do not render the defendants sellers.<o:p></o:p></span></div>
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<span style="font-family: Arial, sans-serif; font-size: 12pt;">14. Before a person's acts can be considered the proximate cause of a sale, said acts must also be a substantial factor in bringing about the transaction. <i>Murphy</i>, 626 F.2d at 650 (citations omitted); see also <a href="http://openjurist.org/677/f2d/1289/securities-and-exchange-commission-v-seaboard-corporation-admiralty-fund"><span style="color: blue;">SEC v.Seaboard Corp., 677 F.2d 1289</span></a>, 1294 (9th Cir. 1982).<o:p></o:p></span></div>
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<span style="font-family: Arial, sans-serif; font-size: 12pt;">15. The proximate cause analysis required by <i>Murphy</i> almost always results in a question of fact for the fact finder."<a href="https://www.blogger.com/null" name="_ftnref10"></a><a href="https://www.blogger.com/blogger.g?blogID=5898536086571838489#_ftn10" title=""><span style="color: blue;">[10]</span></a><o:p></o:p></span></div>
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<span style="font-family: Arial, sans-serif; font-size: 12pt;">16. Prior to <i><a href="http://cdn.ca9.uscourts.gov/datastore/opinions/2013/09/10/11-17021.pdf"><span style="color: blue;">SEC v. Bagley</span></a></i>, the SEC had successfully argued that Pinter v. Dahl, (486 U.S. 622, 108 S. Ct. 2063, 100 L. Ed. 2d 658 (1988)) applied. In Pinter, the Supreme Court overruled the use of the "substantial factor" test for purposes of imposing liability <b><u>under Section 12 of the Securities Act</u></b>. 486 U.S. at 654.<o:p></o:p></span></div>
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<span style="font-family: Arial, sans-serif; font-size: 12pt;">17. This is because Section 12 provides that "any person who—(1) offers or sells a security in violation of [Section 5] . . . shall be liable . . . to the person purchasing such security from him." 15 U.S.C. § 77l(a). The Pinter court explained that "[t]he <b><u>'purchase from'</u></b> requirement of § 12 <b><u>focuses on the defendant's relationship with the plaintiff-purchaser</u></b>.<o:p></o:p></span></div>
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<span style="font-family: Arial, sans-serif; font-size: 12pt;">18. The substantial-factor test, on the other hand, focuses on the defendant's <b><u>degree of involvement in the securities transaction and its surrounding circumstances</u></b>." Pinter, 486 U.S. at 651.<o:p></o:p></span></div>
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<span style="font-family: Arial, sans-serif; font-size: 12pt;">19. Section 5 <b><u>does not</u></b> contain a similar "<b><u>purchase from</u></b>" requirement, therefore Pinter does not overrule use of the substantial factor test for purposes of imposing Section 5 liability. See Phan, 500 F.3d at 906 n.13; see also Geiger v. SEC, 363 F.3d 481, 487-88, 361 U.S. App. D.C. 45 (D.C. Cir. 2004).<o:p></o:p></span></div>
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<b><span style="font-family: Arial, sans-serif; font-size: 12pt;">THE APPLICATION OF THE NECESSARY PARTICIPANT AND SUBSTANTIAL FACTOR TEST</span></b><span style="font-family: Arial, sans-serif; font-size: 12pt;"><o:p></o:p></span></div>
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<span style="font-family: Arial, sans-serif; font-size: 12pt;">20. A participant's title, standing alone, cannot determine liability under Section 5, because the mere fact that a defendant is labeled as an issuer, a broker, a transfer agent, a CEO, a purchaser, or an attorney, does not adequately explain what role the defendant actually played in the scheme at issue.<o:p></o:p></span></div>
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<span style="font-family: Arial, sans-serif; font-size: 12pt;">21. Instead, whether a defendant is a substantial factor in the distribution of unregistered securities is <b><u>a question of fact</u></b> requiring a case-by-case analysis of the nature of the securities scheme and the defendant's participation in it. See Anderson, 774 F.2d at 930.<o:p></o:p></span></div>
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<span style="font-family: Arial, sans-serif; font-size: 12pt;">22. This does not mean that summary judgment will <i>never</i> be appropriate.<a href="https://www.blogger.com/null" name="_ftnref11"></a><a href="https://www.blogger.com/blogger.g?blogID=5898536086571838489#_ftn11" title=""><span style="background: white; color: black;">[11]</span></a><o:p></o:p></span></div>
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<a href="https://www.blogger.com/null" name="_ftn1"></a><a href="https://www.blogger.com/blogger.g?blogID=5898536086571838489#_ftnref1" title=""><span style="color: blue; font-family: "Arial",sans-serif; font-size: 10.0pt; mso-fareast-font-family: "Times New Roman";">[1]</span></a><span style="font-family: Arial, sans-serif; font-size: 10pt;"> 626 F.2d 633, 641 (9th Cir. 1980)<a href="https://www.blogger.com/null" name="_ftn2"> </a><a href="https://www.blogger.com/blogger.g?blogID=5898536086571838489#_ftnref2" title=""><span style="color: blue;">[2]</span></a> <span style="background: white;">(486 U.S. 622, 108 S. Ct. 2063, 100 L. Ed. 2d 658 (1988)). </span><a href="https://www.blogger.com/null" name="_ftn3"></a><a href="https://www.blogger.com/blogger.g?blogID=5898536086571838489#_ftnref3" title=""><span style="color: blue;">[3]</span></a> <span style="background: white;">15 U.S.C. § 77e(a), (c).</span><a href="https://www.blogger.com/null" name="_ftn4"></a><a href="https://www.blogger.com/blogger.g?blogID=5898536086571838489#_ftnref4" title=""><span style="color: blue;">[4]</span></a> </span><span style="background: white; color: #333333; font-family: "Arial",sans-serif; font-size: 10.0pt; mso-fareast-font-family: "Times New Roman";"> </span><span style="font-family: Arial, sans-serif; font-size: 10pt;"><a href="https://www.lexis.com/research/buttonTFLink?_m=6947530a4337686a1c2cca38f4997280&_xfercite=%3ccite%20cc%3d%22USA%22%3e%3c%21%5bCDATA%5b729%20F.3d%201248%5d%5d%3e%3c%2fcite%3e&_butType=3&_butStat=2&_butNum=84&_butInline=1&_butinfo=%3ccite%20cc%3d%22USA%22%3e%3c%21%5bCDATA%5b617%20F.3d%201072%2c%201085%5d%5d%3e%3c%2fcite%3e&_fmtstr=FULL&docnum=2&_startdoc=1&wchp=dGLbVzB-zSkAb&_md5=5f87d89328f7d07ec241c8fa89b02997"><i><span style="background: white; color: #004b91;">SEC v. Platforms Wireless Int'l Corp</span></i><span style="background: white; color: #004b91;">., 617 F.3d 1072, 1085 (9th Cir. 2010)</span></a><a href="https://www.blogger.com/null" name="_ftn5"> </a><a href="https://www.blogger.com/blogger.g?blogID=5898536086571838489#_ftnref5" title=""><span style="color: blue;">[5]</span></a> <span style="background: white;">See <i>SEC v. Phan</i>, 500 F.3d 895, 902 (9th Cir. 2007); see also <i>SEC v. Calvo</i>, 378 F.3d 1211, 1214 (11th Cir. 2004) (per curiam).</span><a href="https://www.blogger.com/null" name="_ftn6"></a><a href="https://www.blogger.com/blogger.g?blogID=5898536086571838489#_ftnref6" title=""><span style="color: blue;">[6]</span></a> <i><span style="background: white;">SEC v. Murphy</span></i><span style="background: white;">, 626 F.2d 633, 641 (9th Cir. 1980) (citing <i>SEC v. Ralston Purina Co</i>., 346 U.S. 119, 126, 73 S. Ct. 981, 97 L. Ed. 1494 (1953)).</span><a href="https://www.blogger.com/null" name="_ftn7"></a><a href="https://www.blogger.com/blogger.g?blogID=5898536086571838489#_ftnref7" title=""><span style="color: blue;">[7]</span></a> <i><span style="background: white;">Phan</span></i><span style="background: white;">, 500 F.3d at 905-06. <i>Calvo</i>, 378 F.3d at 1215; <i>SEC v. Holschuh</i>, 694 F.2d 130, 137 n.10 (7th Cir. 1982); <i>Swenson v. Engelstad</i>, 626 F.2d 421, 424 (5th Cir. 1980).</span><a href="https://www.blogger.com/null" name="_ftn8"></a><a href="https://www.blogger.com/blogger.g?blogID=5898536086571838489#_ftnref8" title=""><span style="color: blue;">[8]</span></a> <span style="background: white;">See <i>Kane v. SEC</i>, 842 F.2d 194, 199 (8th Cir. 1988) (holding that Section 5 liability "extends to those persons who are uniquely positioned to ask relevant questions, acquire material information, or disclose their findings").</span><a href="https://www.blogger.com/null" name="_ftn9"></a><a href="https://www.blogger.com/blogger.g?blogID=5898536086571838489#_ftnref9" title=""><span style="color: blue;">[9]</span></a> <i><span style="background: white;">SEC v. Friendly Power Co</span></i><span style="background: white;">., 49 F. Supp. 2d 1363, 1368 (S.D. Fla. 1999) (citing <i>Holschuh</i>, 694 F.2d at 137).</span><a href="https://www.blogger.com/null" name="_ftn10"></a><a href="https://www.blogger.com/blogger.g?blogID=5898536086571838489#_ftnref10" title=""><span style="color: blue;">[10]</span></a> <i><span style="background: white;">Anderson v. Aurotek</span></i><span style="background: white;">, 774 F.2d 927, 930 (9th Cir. 1985) </span><a href="https://www.blogger.com/null" name="_ftn11"></a><a href="https://www.blogger.com/blogger.g?blogID=5898536086571838489#_ftnref11" title=""><span style="color: blue;">[11]</span></a> <span style="background: white;">For example, in Murphy we affirmed the district court's grant of summary judgment in the SEC's favor regarding defendant's Section 5 liability because Murphy participated heavily in the offerings He devised the corporate financing scheme for [the issuer] . . . . He prepared and reviewed offering memoranda; he met personally with broker-dealers, investors and their representatives; and he spoke at broker-dealer sales seminars. There can be no gainsaying the importance of these acts: Murphy's extensive role in facilitating the transactions clearly was a substantial factor in the sales of unregistered securities. Murphy, 626 F.2d at 638, 652. Similarly, in Phan we affirmed summary judgment holding the defendant liable under Section 5 where the defendant chose the date to call in the investor's [**26] $1.25 million obligation to the issuer, directed the investor to sell the shares in order to repay her obligation, provided the investor with a buyer, directed the issuer's lawyer to draft a contract for the stock sale, and instructed the investor where to send the proceeds. 500 F.3d at 906. Because of those facts we concluded that Phan "was both a 'necessary participant' and a 'substantial factor in' Wu's resale." Id.; see also Calvo, 378 F.3d at 1215 ("[T]he undisputed material facts amply support the district court's determination that, as a matter of law, Calvo illegally sold unregistered securities" where "Calvo negotiated and signed the contract with [the issuer] SOE pursuant to which [the brokerage] received the unregistered shares as compensation; he extended that contract on behalf of [the brokerage]; he signed the documents that opened the . . . brokerage account into which all of the unregistered SOE shares were deposited; he signed stock transfer authorization and stock powers for sales or transfers of stock out of [the] brokerage account; and he received proceeds—albeit through [the brokerage]—from the sale of SOE shares. Clearly, Calvo was a necessary participant and [**27] a substantial factor in the illegal sale of unregistered SOE stock.").</span><o:p></o:p></span></div>
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Anonymoushttp://www.blogger.com/profile/02507643510494938178noreply@blogger.com4tag:blogger.com,1999:blog-5898536086571838489.post-83178430941936106522014-04-24T22:32:00.000-07:002014-05-08T20:33:28.034-07:00Setting Aside a Default in Federal Court<div class="MsoNormal" style="margin: 6pt 0in;">
<div style="text-align: justify;">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">Federal Rule of Civil Procedure <a href="http://www.law.cornell.edu/rules/frcp/rule_55" target="_blank">Rule 55</a> governs defaults
and default judgments. It provides in pertinent
part the following:<o:p></o:p></span></div>
</div>
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<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><a href="https://www.blogger.com/null" name="rule_55_a"></a>(a) <span style="font-variant: small-caps;">Entering a Default.</span> When a party against whom a
judgment for affirmative relief is sought has failed to plead or otherwise
defend, and that failure is shown by affidavit or otherwise, the clerk must
enter the party's default.<o:p></o:p></span></div>
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<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><a href="https://www.blogger.com/null" name="rule_55_b"></a>(b) <span style="font-variant: small-caps;">Entering a Default Judgment.</span><o:p></o:p></span></div>
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<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">(1) <i>By the Clerk.</i> If
the plaintiff's claim is for a sum certain or a sum that can be made certain by
computation, the clerk—on the plaintiff's request, with an affidavit showing
the amount due—must enter judgment for that amount and costs against a
defendant who has been defaulted for not appearing and who is neither a minor
nor an incompetent person.<o:p></o:p></span></div>
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<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">(2) <i>By the Court.</i> In
all other cases, the party must apply to the court for a default judgment. A
default judgment may be entered against a minor or incompetent person only if
represented by a general guardian, conservator, or other like fiduciary who has
appeared. If the party against whom a default judgment is sought has appeared
personally or by a representative, that party or its representative must be
served with written notice of the application at least 7 days before the
hearing. The court may conduct hearings or make referrals—preserving any
federal statutory right to a jury trial—when, to enter or effectuate judgment,
it needs to:<o:p></o:p></span></div>
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<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">(A) conduct an accounting;<o:p></o:p></span></div>
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<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">(B) determine the amount of damages;<o:p></o:p></span></div>
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<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">(C) establish the truth of any
allegation by evidence; or<o:p></o:p></span></div>
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<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">(D) investigate any other matter.<o:p></o:p></span></div>
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<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><a href="https://www.blogger.com/null" name="rule_55_c"></a>(c) <span style="font-variant: small-caps;">Setting Aside a Default or a Default Judgment.</span> The
court may set aside an entry of default for good cause, and it may set aside a
default judgment under<a href="http://www.law.cornell.edu/rules/frcp/rule_60" target="_blank"> <span style="color: windowtext;">Rule 60(b)</span></a>.</span><br />
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"></span><br />
<a name='more'></a><span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><br /></span><br />
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><br /></span></div>
<h1 style="margin-bottom: 6.0pt; margin-left: 0in; margin-right: 0in; margin-top: 6.0pt; text-align: justify;">
<span style="font-weight: normal;"><span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif; font-size: small;">FRCP
Rule 60 entitled, “Relief from a
Judgment or Order at 60(b) specifies those grounds for relief from a final
judgment, order or proceeding(s) including default and default judgment. It reads as follows:</span></span></h1>
<br />
<br />
<article about="/rules/frcp/rule_60" class="node-4940140 node node-frcp view-mode-full clearfix" style="line-height: 21px;" typeof="sioc:Item foaf:Document">
<div class="statutory-body" style="margin: 6pt 0in 6pt 12pt; text-align: justify; vertical-align: baseline;">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><a href="https://www.blogger.com/null" name="rule_60_a"></a><a href="https://www.blogger.com/null" name="rule_60_b"></a> (b)<span class="apple-converted-space"> </span><span class="smallcaps"><span style="font-variant: small-caps;">Grounds for Relief from a Final Judgment,
Order, or Proceeding.</span></span><span class="apple-converted-space"> </span>On
motion and just terms, the court may relieve a party or its legal
representative from a final judgment, order, or proceeding for the following
reasons:<o:p></o:p></span></div>
<div class="statutory-body-1em" style="margin: 6pt 0in 6pt 60pt; text-align: justify; text-indent: -0.25in; vertical-align: baseline;">
<!--[if !supportLists]--><span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">1)<span style="line-height: normal;">
</span><!--[endif]-->mistake, inadvertence, surprise, or excusable neglect;<o:p></o:p></span></div>
<div class="statutory-body-1em" style="margin: 6pt 0in 6pt 60pt; text-align: justify; text-indent: -0.25in; vertical-align: baseline;">
<!--[if !supportLists]--><span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">2)<span style="line-height: normal;">
</span><!--[endif]-->newly discovered evidence that, with reasonable
diligence, could not have been discovered in time to move for a new trial under<span class="apple-converted-space"> </span><a href="http://www.law.cornell.edu/rules/frcp/rule_60#rule_59_b"><span style="color: windowtext;">Rule 59(b)</span></a>;<o:p></o:p></span></div>
<div class="statutory-body-1em" style="margin: 6pt 0in 6pt 60pt; text-align: justify; text-indent: -0.25in; vertical-align: baseline;">
<!--[if !supportLists]--><span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">3)<span style="line-height: normal;">
</span><!--[endif]-->fraud (whether previously called intrinsic or
extrinsic), misrepresentation, or misconduct by an opposing party;<o:p></o:p></span></div>
<div class="statutory-body-1em" style="margin: 6pt 0in 6pt 60pt; text-align: justify; text-indent: -0.25in; vertical-align: baseline;">
<!--[if !supportLists]--><span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">4)<span style="line-height: normal;">
</span><!--[endif]-->the judgment is void;<o:p></o:p></span></div>
<div class="statutory-body-1em" style="margin: 6pt 0in 6pt 60pt; text-align: justify; text-indent: -0.25in; vertical-align: baseline;">
<!--[if !supportLists]--><span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">5)<span style="line-height: normal;">
</span><!--[endif]-->the judgment has been satisfied, released, or
discharged; it is based on an earlier judgment that has been reversed or
vacated; or applying it prospectively is no longer equitable; or<o:p></o:p></span></div>
<div class="statutory-body-1em" style="margin: 6pt 0in 6pt 60pt; text-align: justify; text-indent: -0.25in; vertical-align: baseline;">
<!--[if !supportLists]--><span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">6)<span style="line-height: normal;">
</span><!--[endif]-->any other reason that justifies relief.</span></div>
<div class="statutory-body" style="margin: 6pt 0in; text-align: justify; vertical-align: baseline;">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">FRCP Rule
60(c) addresses timing issues with respect to setting aside a judgment, order
or proceeding as follows:<o:p></o:p></span></div>
<div class="statutory-body" style="margin: 6pt 0in 6pt 12pt; text-align: justify; vertical-align: baseline;">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">(c)<span class="apple-converted-space"> </span><span class="smallcaps"><span style="font-variant: small-caps;">Timing and Effect of the Motion.</span></span><o:p></o:p></span></div>
<div class="statutory-body-1em" style="margin: 6pt 0in 6pt 1in; text-align: justify; text-indent: -0.25in; vertical-align: baseline;">
<!--[if !supportLists]--><span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">1)<span style="line-height: normal;">
</span><!--[endif]--><em>Timing.</em><span class="apple-converted-space"> </span>A
motion under<span class="apple-converted-space"> </span><a href="http://www.law.cornell.edu/rules/frcp/rule_60#rule_60_b"><span style="color: windowtext;">Rule 60(b)</span></a><span class="apple-converted-space"> </span>must be made within a reasonable
time—and for reasons (1), (2), and (3) no more than a year after the entry of
the judgment or order or the date of the proceeding.<o:p></o:p></span></div>
<div class="statutory-body-1em" style="margin: 6pt 0in 6pt 1in; text-align: justify; text-indent: -0.25in; vertical-align: baseline;">
<!--[if !supportLists]--><span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">2)<span style="line-height: normal;">
</span><!--[endif]--><em>Effect on Finality.</em><span class="apple-converted-space"> </span>The motion does not affect the
judgment's finality or suspend its operation.<o:p></o:p></span></div>
<div class="statutory-body-1em" style="margin: 6pt 0in; text-align: justify; vertical-align: baseline;">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><em><span style="font-style: normal; mso-bidi-font-style: italic;">Finally, Rule 60(d)
addresses other powers bestowed upon the court with respect to relief.</span></em><o:p></o:p></span></div>
<div class="statutory-body" style="margin: 6pt 0in 6pt 12pt; text-align: justify; vertical-align: baseline;">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><a href="https://www.blogger.com/null" name="rule_60_d"></a>(d)<span class="apple-converted-space"> </span><span class="smallcaps"><span style="font-variant: small-caps;">Other Powers to Grant Relief.</span></span><span class="apple-converted-space"> </span>This rule does not limit a court's
power to:<o:p></o:p></span></div>
<div class="statutory-body-1em" style="margin: 6pt 0in 6pt 78pt; text-align: justify; text-indent: -21pt; vertical-align: baseline;">
<!--[if !supportLists]--><span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">1)<span style="line-height: normal;">
</span><!--[endif]-->entertain an independent action to relieve a party from
a judgment, order, or proceeding;<o:p></o:p></span></div>
<div class="statutory-body-1em" style="margin: 6pt 0in 6pt 78pt; text-align: justify; text-indent: -21pt; vertical-align: baseline;">
<!--[if !supportLists]--><span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">2)<span style="line-height: normal;">
</span><!--[endif]-->grant relief under<span class="apple-converted-space"> </span><a href="http://www.law.cornell.edu/jureeka/index.php?doc=U.S.C.&title=28&sec=1655&sec2=undefined&year=undefined"><span style="color: windowtext;">28 U.S.C. §1655</span></a><span class="apple-converted-space"> </span>to a defendant who was not personally
notified of the action; or<o:p></o:p></span></div>
<div class="statutory-body-1em" style="margin: 6pt 0in 6pt 78pt; text-align: justify; text-indent: -21pt; vertical-align: baseline;">
<!--[if !supportLists]--><span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">3)<span style="line-height: normal;">
</span><!--[endif]-->set aside a judgment for fraud on the court.<a href="https://www.blogger.com/null" name="rule_60_e"></a><o:p></o:p></span></div>
<div class="Style1" style="line-height: normal; margin: 6pt 0in; text-align: justify; text-indent: 0.5in; vertical-align: baseline;">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">Under Rule 55(c),
the court may set aside an entry of default for good cause, and it may set
aside a default judgment under Rule 60(b).” “The ‘good cause’ standard that
governs vacating an entry of default under Rule 55(c) is the same standard that
governs vacating a default judgment under Rule 60(b).” <a href="http://openjurist.org/375/f3d/922/franchise-holding-ii-llc-v-huntington-restaurants-group-inc-p" target="_blank">Franchise Holding II,LLC. v. Huntington Restaurants Group, Inc., 375 F.3d 922</a>, 925 (9th Cir.
2004).<o:p></o:p></span></div>
<div class="Style1" style="line-height: normal; margin: 6pt 0in; text-align: justify; text-indent: 0.5in; vertical-align: baseline;">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">Notwithstanding, courts
have broader discretion in evaluating relief from an entry of default. <i>See
<a href="http://scholar.google.com/scholar_case?case=17321123130044597495&q=Brady+v.+United+States,+211+F.3d+499&hl=en&as_sdt=6,29&as_vis=1" target="_blank">Brady v. United States</a></i><a href="http://scholar.google.com/scholar_case?case=17321123130044597495&q=Brady+v.+United+States,+211+F.3d+499&hl=en&as_sdt=6,29&as_vis=1" target="_blank">, 211 F.3d 499</a>, 504 (9th Cir. 2000) (“[A] district
court’s discretion is ‘especially broad’ when . . . it is entry of default that
is being set aside, rather than a default judgment.”). The standard is applied
generously and more liberally where only a default has been entered with no
accompanying default judgment. <i>See Cracco v. Vitran Exp., Inc.</i>, 559 F.3d
625, 630-31 (7th Cir. 2009); <i>In re OCA, Inc.</i>, 551 F.3d 359, 370 (5th
Cir. 2008).<o:p></o:p></span></div>
<div class="Style1" style="line-height: normal; margin: 6pt 0in; text-align: justify; text-indent: 0.5in; vertical-align: baseline;">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;"><span style="letter-spacing: -.05pt;">The Ninth Circuit has held that there are three
factors to be considered when weighing whether or not there is good cause: (1)
whether the defendant’s culpable conduct led to the default; (2) whether the
defendant has a meritorious defense; or (3) whether reopening the default
judgment would prejudice the plaintiff. <i>Franchise Holding </i></span><span class="CharacterStyle2"><i>II</i></span><span class="CharacterStyle2">, 375 F.3d at 925. “Where timely relief is
sought from a default . . . and the movant has a meritorious defense, doubt, if
any, should be resolved in favor of the motion to set aside the [default] so
that cases may be decided on their merits.” <i>Mendoza v. Wight Vineyard Mgmt</i>.,
783 F.2d 941, 945-46 (9th Cir. 1996).</span><i><span style="letter-spacing: -.05pt;"><o:p></o:p></span></i></span></div>
<div class="Style1" style="line-height: normal; margin: 6pt 0in 6pt 0.05in; text-align: justify; text-indent: 0.5in; vertical-align: baseline;">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">However, “judgment by default is a drastic
step appropriate only in extreme circumstances; a case should, whenever
possible, be decided on the merits.” <i>Mesle</i>, 2010 WL 3025014, at *3
(citing <i>Falk v. Allen</i>, 739 F.2d 461, 463 (9th Cir. 1984)).</span></div>
<div class="Style1" style="line-height: normal; margin: 6pt 0in 6pt 0.05in; text-align: justify; text-indent: 0.5in; vertical-align: baseline;">
<b><span style="letter-spacing: .2pt;"><span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">Culpable Conduct.</span></span></b></div>
<div class="Style1" style="line-height: normal; margin: 6pt 0in 6pt 0.05in; text-align: justify; text-indent: 0.5in; vertical-align: baseline;">
<span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">A defendant’s conduct is culpable “if he has
received actual or constructive notice of the filing of the action and <i>intentionally
</i>failed to answer.” <i>TCI Group Life Ins. Plan v. Knoebber</i>, 244 F.3d
691, 697 (9th Cir. 2001) (emphasis in original). As the Ninth Circuit has
explained, in the context of a motion to set aside default, the term
“intentionally” means that “a movant cannot be treated as culpable simply for
having made a conscious choice not to answer; rather, to treat a failure to
answer as culpable, the movant must have acted with bad faith, such as an
intention to take advantage of the opposing party, interfere with judicial
decision making, or otherwise manipulate the legal process.” <i>Mesle</i>, at
*4. “Neglectful failure to answer as to which the defendant offers a credible,
good faith explanation...is not intentional.” <i>TCI Group</i>, 244 F.3d at
697. Typically, a defendant's conduct is culpable for purposes of the good
cause factors “where there is no explanation of the default inconsistent with a
devious, deliberate, willful, or bad faith failure to respond." <i>Id. </i>Simple
carelessness is not sufficient to treat a negligent failure to reply as
inexcusable, at least without a demonstration that other equitable factors,
such as prejudice, weigh heavily in favor of denial of the motion to set aside
a default. <i>Id</i>.</span><span style="font-family: Lucida Sans Unicode, Lucida Grande, Verdana, Arial, Helvetica, sans serif; font-size: 14px;"><o:p></o:p></span></div>
</article>Anonymoushttp://www.blogger.com/profile/02507643510494938178noreply@blogger.com2tag:blogger.com,1999:blog-5898536086571838489.post-18571544147270358922013-12-07T22:47:00.000-08:002013-12-07T22:49:44.268-08:00Vacating an Order as Void Ab Initio Pursuant to NRCP 60(b)<div class="MsoNormal" style="margin: 0in -17.3pt 0.0001pt 0in; text-align: right;">
<div style="text-align: center;">
<b><span style="font-family: Georgia, Times New Roman, serif;">Excerpted from a
Brief in Support of a Motion<span style="font-size: small;"><o:p></o:p></span></span></b></div>
</div>
<div class="MsoNormal" style="margin: 0in -17.3pt 0.0001pt 0in; text-align: right;">
<div style="text-align: center;">
<b><span style="font-family: Georgia, Times New Roman, serif;">to Vacate
Partial Summary Judgment</span></b></div>
</div>
<div align="center" class="MsoNormal" style="margin: 6pt 0in; text-align: center; text-indent: 31.5pt;">
<span style="font-family: Georgia, Times New Roman, serif;"><b><i>Introduction</i></b><o:p></o:p></span></div>
<div class="MsoNormal" style="margin: 6pt 0in; text-align: justify; text-indent: 31.5pt;">
<span style="font-family: Georgia, Times New Roman, serif;">Three and half
years ago, Plaintiff filed a Motion for Partial Summary Judgment seeking
findings of fact, conclusions of law and judgment against Defendant Vandelay
Industries and Jerry Seinfeld. This
Court and the sitting Judge at the time (Judge Dredd) granted Plaintiff’s
motion in its entirety.<a href="file:///C:/Users/Tony/Desktop/Blog%20Articles/Vacating%20an%20Order%20as%20Void%20Ab%20Initio%20Pursuant%20to%20NRCP%2060(b).doc#_ftn1" name="_ftnref1" title=""><span class="MsoFootnoteReference"><!--[if !supportFootnotes]--><span class="MsoFootnoteReference"><span style="line-height: 107%;">[1]</span></span><!--[endif]--></span></a> Before the proposed order was presented to
the judge for review and execution, before it was filed and entered, Vandelay
filed for bankruptcy and removed this matter to bankruptcy court. Plaintiff sought remand and secured from the
bankruptcy court an order remanding the case back to this Court on the express condition
that any and all claims against Vandelay (now a bankruptcy debtor) be
relinquished and dismissed (the “Bankruptcy Order”). Indeed, the Bankruptcy Order modified the
automatic stay for the express and singular purpose of allowing Plaintiff to
amend her complaint accordingly.<o:p></o:p></span></div>
<div class="MsoNormal" style="margin: 6pt 0in; text-align: justify; text-indent: 31.5pt;">
<span style="font-family: Georgia, Times New Roman, serif;">After a two-year
hiatus<a href="file:///C:/Users/Tony/Desktop/Blog%20Articles/Vacating%20an%20Order%20as%20Void%20Ab%20Initio%20Pursuant%20to%20NRCP%2060(b).doc#_ftn2" name="_ftnref2" title=""><span class="MsoFootnoteReference"><!--[if !supportFootnotes]--><span class="MsoFootnoteReference"><span style="line-height: 107%;">[2]</span></span><!--[endif]--></span></a>
subsequent to securing remand, Plaintiff revisited this case and in an effort
to salvage partial summary judgment as to Seinfeld as rendered by this Court
against Vandelay and Seinfeld, fashioned an order that: (1) fails to reflect
the motion for judgment that she actually filed and the relief requested
therein; (2) mischaracterizes the nature and subject of the proceedings at the
hearing on the motion; and (3) fails to reflect the actual decision of the
Court resulting from the motion, opposition, affidavits, evidence, exhibits,
oral argument, and deliberation on the matter.<o:p></o:p></span></div>
<div class="MsoNormal" style="margin: 6pt 0in; text-align: justify; text-indent: 31.5pt;">
<span style="font-family: Georgia, Times New Roman, serif;">Instead,
Plaintiff endeavored to whitewash the Order in a futile effort to avoid running
afoul of the provisions of §362 and the automatic stay. Plaintiff did not succeed. Indeed, the Order as filed and entered,
directly violates the mandate of the Bankruptcy Court’s Order for Remand and is
void <i>ab initio</i> pursuant to NRCP
60(b)(4). It is an impermissible continuance of a proceeding against Debtor.<o:p></o:p></span></div>
<div class="MsoNormal" style="margin: 6pt -2.4pt 6pt 0in; text-align: justify; text-indent: 0.25in;">
<span style="font-family: Georgia, Times New Roman, serif;">If
the Belated order stands in its present form, despite Plaintiff’s superficial
efforts to avoid affecting the Debtor and its estate, the net result would be
that the Deed of Trust on the Pueblo Property must be revised and rerecorded rescinding
Plaintiff’s pro rata interest in same.
As a result the Debtor’s Note in favor of Plaintiff must be reinstated
and reflected by the Debtor obliging it to amend Debtor’s bankruptcy schedules
to the detriment of Debtor’s estate and Plaintiff would be obliged to return to
the Debtor’s estate the $61,033.01 she received as part of the transaction <i>she now claims she rescinded</i>. Such a result is not consistent with the
Bankruptcy Order on Remand which presumed that any and all claims against
Debtor were to be dismissed <i>prior</i> to
Plaintiff proceeding on remand in state court.<a href="file:///C:/Users/Tony/Desktop/Blog%20Articles/Vacating%20an%20Order%20as%20Void%20Ab%20Initio%20Pursuant%20to%20NRCP%2060(b).doc#_ftn3" name="_ftnref3" title=""><span class="MsoFootnoteReference"><!--[if !supportFootnotes]--><span class="MsoFootnoteReference"><span style="color: black; line-height: 107%;">[3]</span></span><!--[endif]--></span></a><o:p></o:p></span></div>
<div class="MsoNormal" style="margin: 6pt 0in; text-align: justify; text-indent: 31.5pt;">
<span style="font-family: Georgia, Times New Roman, serif;">Moreover,
Plaintiff’s efforts to re-characterize the nature of her motion for partial
summary judgment, the proceedings at the hearing and the Judge’s decision,
result in plain misstatements of facts not otherwise in dispute, and as a
consequence, must be vacated pursuant to NRCP 60(b)(1). Plaintiff’s contortion of findings in an
effort to superficially comply with the Bankruptcy Court Order does not comport
with the facts and constitutes fraud, misrepresentation or other misconduct as
contemplated by <a href="http://www.trucounsel.com/index.php/vii-judgment/rule-60-relief-from-judgment-or-order" target="_blank">NRCP 60(b)(3)</a>.</span></div>
<div class="MsoNormal" style="margin: 6pt 0in; text-align: justify; text-indent: 31.5pt;">
<span style="font-family: Georgia, Times New Roman, serif;"></span></div>
<div class="MsoNormal" style="margin: 6pt 0in; text-align: justify; text-indent: 31.7pt;">
</div>
<a name='more'></a><br />
<br />
<div align="center" class="MsoNormal" style="margin: 6pt -17.4pt 6pt 0in; text-align: center; text-indent: 0in;">
<!--[if !supportLists]--><span style="font-family: Georgia, Times New Roman, serif;"><b>I.<span style="font-weight: normal;">
</span></b><!--[endif]--><b><u>FACTUAL SUMMARY<o:p></o:p></u></b></span></div>
<div class="MsoNormal" style="margin: 6pt 0in; text-align: justify; text-indent: 31.5pt;">
<span style="font-family: Georgia, Times New Roman, serif;">On May 6, 2010,
Plaintiff filed a Motion for Partial Summary Judgment (attached hereto as
Exhibit “A”) seeking an order from this Court that Debtor/Defendant breached
the terms and conditions of certain loan agreement(s) and failed to perform in
accordance with the terms of certain promissory notes where the debtor was to
repay the loan proceeds together with interest to Plaintiff. As result of these alleged breaches and
non-payment, or non-performance, Plaintiff likewise sought judgment against
Jerry Seinfeld based on a guaranty that in the event Debtor/Defendant Vandelay
Industries (“Debtor” or “Vandelay”) breached or otherwise failed to perform, he
would be obliged. <i>See</i>, Exhibit “A”, <i>See also, </i>Exhibit “E”<o:p></o:p></span></div>
<div class="MsoNormal" style="margin: 6pt 0in; text-align: justify; text-indent: 31.5pt;">
<span style="font-family: Georgia, Times New Roman, serif;">On May 19, 2010,
Defendants filed an opposition to Plaintiff’s Motion for Partial Summary
Judgment (attached hereto as Exhibit “B”).
On June 8, 2010, the Court held a hearing on the matter. The Court granted Plaintiff’s motion in its <u>entirety</u>.<a href="file:///C:/Users/Tony/Desktop/Blog%20Articles/Vacating%20an%20Order%20as%20Void%20Ab%20Initio%20Pursuant%20to%20NRCP%2060(b).doc#_ftn4" name="_ftnref4" title=""><span class="MsoFootnoteReference"><!--[if !supportFootnotes]--><span class="MsoFootnoteReference"><span style="line-height: 107%;">[4]</span></span><!--[endif]--></span></a> In so doing, the Court held that the claims
against Debtor/Defendant Vandelay as made by Plaintiff in her motion for
summary judgment were supported by facts not in dispute that as a matter of
law, Debtor/Defendant must be held liable on the judgment as requested by
Plaintiff and as a consequence, so too must Seinfeld. The Court further ordered Mr. Kramer to prepare the order reflecting this
outcome and to submit same to opposing counsel for approval as to form and
content. <i>See</i>, Exhibit “E”<o:p></o:p></span></div>
<div class="MsoNormal" style="margin: 6pt 0in; text-align: justify; text-indent: 31.5pt;">
<span style="font-family: Georgia, Times New Roman, serif;"><i>But</i>, before the order was signed (by the
then sitting Judge) and entered; before it went into effect; Vandelay filed for
bankruptcy on June 11, 2010. On August
26, 2010, a Notice of Removal was filed with the U.S. Bankruptcy Court,
District of Nevada. On January 30, 2011,
Plaintiff filed a Motion for Remand. On
August 19, 2011 an Order granting remand was filed (Exhibit “C”). The order for remand was <b><i>limited
explicitly to non-debtor defendants</i></b> such that the Plaintiff was obliged
to relinquish any and all claims against Debtor/Defendant Vandelay and dismiss
it as a party from the suit. <o:p></o:p></span></div>
<div class="MsoNormal" style="margin: 6pt 0in; text-align: justify; text-indent: 31.7pt;">
<span style="font-family: Georgia, Times New Roman, serif;">Two years later,
on September 9, 2013, Plaintiff’s counsel took it upon himself to whitewash,
rehash, edit or amend the former Judge’s Order for Partial Summary Judgment
against Debtor/Defendant Vandelay Industries and non-debtor Defendant Jerry
Seinfeld (without conferring with <i><u>each</u></i> of Defendants’ Counsel in
contravention of the order as contemplated, and as reflected in the minutes of
the hearing)<a href="file:///C:/Users/Tony/Desktop/Blog%20Articles/Vacating%20an%20Order%20as%20Void%20Ab%20Initio%20Pursuant%20to%20NRCP%2060(b).doc#_ftn5" name="_ftnref5" title=""><span class="MsoFootnoteReference"><!--[if !supportFootnotes]--><span class="MsoFootnoteReference"><span style="line-height: 107%;">[5]</span></span><!--[endif]--></span></a>. Counsel for Plaintiff metaphorically <i>scratched out</i> references to the Debtor
Defendant then submitted the order as edited (the “Belated Order” (Exhibit
“D”)). Judge Dredd appears to have
signed the order nonetheless. It is
unknown whether or not Judge Dredd reviewed the Order on Remand so as to ensure
the Belated Order complied therewith.
The Order for Remand is not referenced in the Belated Order.<o:p></o:p></span></div>
<div class="MsoNormal" style="margin: 6pt 0in; text-align: justify; text-indent: 31.7pt;">
<span style="font-family: Georgia, Times New Roman, serif;">On September 17,
2013 Plaintiff entered the Belated Order as modified, <i><u>prior</u></i> to complying with the Order of Remand which
necessitated the dismissal of Debtor <i><u>first</u></i>
in the form of an amended complaint duly filed.
At no point in time did Plaintiff seek to lift the automatic stay with
respect to Debtor/Defendant Vandelay. From the moment Debtor/Defendant Vandelay
<o:p></o:p></span></div>
<div class="MsoNormal" style="margin: 6pt 0in; text-align: justify;">
<span style="font-family: Georgia, Times New Roman, serif;">filed for bankruptcy through today’s
date, the automatic stay is still in effect as to Debtor/Defendant Vandelay
modified only to permit dismissal.<o:p></o:p></span></div>
<div class="MsoNormal" style="margin: 6pt 0in; text-align: justify;">
<br /></div>
<div align="center" class="MsoNormal" style="margin: 6pt 9pt 6pt 0in; text-align: center; text-indent: 0in;">
<!--[if !supportLists]--><span style="font-family: Georgia, Times New Roman, serif;"><b>II.<span style="font-weight: normal;">
</span></b><!--[endif]--><b><u>LEGAL ARGUMENT<o:p></o:p></u></b></span></div>
<div class="MsoNormal" style="margin: 6pt 0in 6pt 22.3pt; text-indent: -0.25in;">
<!--[if !supportLists]--><span style="font-family: Georgia, Times New Roman, serif;"><b>A.<span style="font-weight: normal;">
</span></b><!--[endif]--><b>PLAINTIFF’S
MOTION FOR PARTIAL SUMMARY JUDGMENT<o:p></o:p></b></span></div>
<div class="MsoNormal" style="margin: 6pt 0in 6pt 0.75in; text-align: justify; text-indent: -0.25in;">
<!--[if !supportLists]--><span style="font-family: Georgia, Times New Roman, serif;"><b><i>1.<span style="font-style: normal; font-weight: normal;">
</span></i></b><!--[endif]--><b><i>In the MSJ, Plaintiff sought adjudication of facts
and law against debtor and as a consequence a judgment against debtor.<o:p></o:p></i></b></span></div>
<div class="MsoNormal" style="margin: 6pt 0in; text-align: justify; text-indent: 0.25in;">
<span style="font-family: Georgia, Times New Roman, serif;">The order
Plaintiff sought from the court was an order for partial summary judgment <b><u>against</u></b> Debtor/Defendant
Vandelay and given this, a tandem order for relief against Seinfeld as
well. She asked the Court to deliberate
on, and adjudicate her claims against the Debtor and sign off on findings of
facts and conclusions of law with respect to the Debtor. The very first paragraph of her motion makes
this abundantly clear. It reads as
follows:<span class="CharacterStyle2"><o:p></o:p></span></span></div>
<div class="MsoNormal" style="margin: 6pt 49.5pt 6pt 31.7pt; text-align: justify;">
<span class="CharacterStyle2"><span style="font-family: Georgia, Times New Roman, serif;">Plaintiff moves this Honorable Court for Partial
Summary Judgment in her favor against Defendants Jerry Seinfeld <i>("Mr.
Seinfeld" </i>or <i>"Defendant Seinfeld") </i>and Vandelay
Industries Corporation <i>("Vandelay Industries" </i>or <i>"Defendant
Vandelay") </i>on a limited issue regarding certain promissory notes,
because there exists no genuine issue as to any material fact and Plaintiff is
entitled to judgment as a matter of law. This Motion is supported by the
attached Memorandum of Points and Authorities, the Affidavits of Elaine Benes
and Cosmo Kramer, Esq., the deposition transcript of Jessica Rabbit, all papers
and pleadings on file herein, and any oral argument that this Honorable Court
chooses to hear. <o:p></o:p></span></span></div>
<div class="MsoNormal" style="margin: 6pt 0in; text-align: justify; text-indent: 31.7pt;">
<span style="font-family: Georgia, Times New Roman, serif;">The entire focus
of Plaintiff’s motion and the proceeding in Court at the hearing focused first
on alleged loans made to
debtor/defendant and then on the alleged
breach or nonperformance by
Debtor/Defendant in Plaintiff’s efforts to secure a finding against
Debtor. (This, despite the fact that the parties had reached an agreement in
full accord and satisfaction for Debtor to provide Plaintiff with collateral
and cash thereby relinquishing Seinfeld’s obligations under the guaranty.) These findings were a necessary precursor to
her claims against the Guarantor (Seinfeld) such that in the event
Debtor/Defendant was found to have breached or failed to perform, that
triggered Plaintiff’s claims under the guaranty against Seinfeld. Plaintiff’s motion for partial summary
judgment is <i>replete</i> with arguments
and claims as to Debtor/Defendant Vandelay, the loans, and the alleged breach
or nonperformance by Debtor/Defendant. For example:<span class="CharacterStyle2"><o:p></o:p></span></span></div>
<ol start="1" style="margin-top: 0in;" type="1">
<li class="MsoNormal" style="margin-bottom: 6pt; margin-top: 6pt; text-align: justify;"><span class="CharacterStyle2"><span style="font-family: Georgia, Times New Roman, serif; font-size: x-small;">The overall case is a collection action related
to various loans and other business relations made by Benes and/or the
Trust <b><u>with Vandelay Industries</u></b> and other related entities
that were all personally guaranteed by Vandelay's principal, Jerry
Seinfeld. <i>See,</i> Exhibit “A” Page
4, lines 3-5. <o:p></o:p></span></span></li>
<li class="MsoNormal" style="margin-bottom: 6pt; margin-top: 6pt; text-align: justify;"><span class="CharacterStyle2"><span style="font-family: Georgia, Times New Roman, serif; font-size: x-small;">By way of background, Plaintiff made five (5)
loans <b><u>to Vandelay Industries</u></b>, collectively totaling over
Seven Million Dollars ($7,000,000.00), with each loan documented by a
separate Promissory Note . . . Defendant Seinfeld executed the Notes in
2006 as President/CEO and majority stockholder of Vandelay Industries. Id.
Page 4 lines 5-10<o:p></o:p></span></span></li>
<li class="MsoNormal" style="margin-bottom: 6pt; margin-top: 6pt; text-align: justify;"><span style="font-family: Georgia, Times New Roman, serif; font-size: x-small;"><span class="CharacterStyle2">For purposes of this Motion, <b><u>Plaintiff is
seeking Summary Judgment on the issues of the Notes</u></b> only. Id. Page
4, lines 26-27.</span><o:p></o:p></span></li>
<li class="MsoNormal" style="margin-bottom: 6pt; margin-top: 6pt; text-align: justify;"><span class="CharacterStyle2"><span style="font-family: Georgia, Times New Roman, serif; font-size: x-small;">As stated in Elaine's Affidavit, on or about
March 15, 2006, <b><u>she loaned Vandelay Industries the sum of One
Million Two Hundred Twenty-Five Thousand Dollars</u></b> ($1,225,000.00)
(the "First Loan"), documented with a Promissory Note. Id. Page
6, lines 3-5.<o:p></o:p></span></span></li>
<li class="MsoNormal" style="margin-bottom: 6pt; margin-top: 6pt; text-align: justify;"><span class="CharacterStyle2"><span style="font-family: Georgia, Times New Roman, serif; font-size: x-small;">On or about March 15, 2006, <b><u>Elaine loaned
Vandelay Industries</u></b> the sum of Two Million Dollars ($2,000,000.00)
(the "Second Loan"), documented with a Promissory Note. Id. Page
6, lines 6-8. <o:p></o:p></span></span></li>
<li class="MsoNormal" style="margin-bottom: 6pt; margin-top: 6pt; text-align: justify;"><span class="CharacterStyle2"><span style="font-family: Georgia, Times New Roman, serif; font-size: x-small;">On or about March 15, 2006, Elaine <b><u>loaned
Vandelay Industries</u></b> the sum of Three Million Dollars
($3,000,000.00) (the "Third Loan"), documented with a Promissory
Note. Id. Page 6, lines 8-10.<o:p></o:p></span></span></li>
<li class="MsoNormal" style="margin-bottom: 6pt; margin-top: 6pt; text-align: justify;"><span class="CharacterStyle2"><span style="font-family: Georgia, Times New Roman, serif; font-size: x-small;">On or about April 7, 2006, <b><u>Elaine loaned
Vandelay Industries</u></b> the sum of One Hundred Thirty-Five Thousand
Dollars ($135,000.00) (the "Fourth Loan"), documented with a
Promissory Note. Id. Page 6, lines 11-12.<o:p></o:p></span></span></li>
<li class="MsoNormal" style="margin-bottom: 6pt; margin-top: 6pt; text-align: justify;"><span class="CharacterStyle2"><span style="font-family: Georgia, Times New Roman, serif; font-size: x-small;">On or about April 7, 2006, <b><u>Elaine loaned
Vandelay Industries</u></b> the sum of Seven Hundred Thousand Dollars
($700,000.00) (the "Fifth Loan"), documented with a Promissory
Note. Id. Page 6, lines 13-15.<o:p></o:p></span></span></li>
<li class="MsoNormal" style="margin-bottom: 6pt; margin-top: 6pt; text-align: justify;"><span style="font-family: Georgia, Times New Roman, serif; font-size: x-small;"><span class="CharacterStyle2">Plaintiff performed all conditions required of
her under the Notes and has never been in breach as her only obligation
was to provide the funds. Id. Page 6, lines 16-17. </span><o:p></o:p></span></li>
<li class="MsoNormal" style="margin-bottom: 6pt; margin-top: 6pt; text-align: justify;"><span style="font-family: Georgia, Times New Roman, serif; font-size: x-small;"><span class="CharacterStyle2"><b><u>Summary judgment Is Appropriate Because Elaine Benes
and Vandelay Industries Entered
into Valid Enforceable Contracts Whereby Plaintiff Loaned Defendants
Several Million Dollars Which Defendants Have Not Repaid.</u></b></span><span class="CharacterStyle2"> Id. Page 11, lines 18-20. <b><u><o:p></o:p></u></b></span></span></li>
<li class="MsoNormal" style="margin-bottom: 6pt; margin-top: 6pt; text-align: justify;"><span style="font-family: Georgia, Times New Roman, serif; font-size: x-small;"><span class="CharacterStyle2"><b><u>Each of the
Notes between Plaintiff and Vandelay Industries constitutes a valid
contract</u></b></span><span class="CharacterStyle2"> as each
contains an offer, acceptance, and bargained-for consideration. Id. Page
12, lines 1-3.<o:p></o:p></span></span></li>
<li class="MsoNormal" style="margin-bottom: 6pt; margin-top: 6pt; text-align: justify;"><span class="CharacterStyle2"><span style="font-family: Georgia, Times New Roman, serif; font-size: x-small;">Defendants Seinfeld and <b><u>Vandelay
Materially Breached All Contracts by Failing to Re-pay Plaintiff.</u></b>
Id. Page 15, lines 1-2.<b><u><o:p></o:p></u></b></span></span></li>
<li class="MsoNormal" style="margin-bottom: 6pt; margin-top: 6pt; text-align: justify;"><span class="CharacterStyle2"><span style="font-family: Georgia, Times New Roman, serif; font-size: x-small;">Seinfeld and <b><u>Vandelay have repeatedly
failed and continue to fail to perform their obligations by refusing to
repay the oustanding principal and accrued interest, thus breaching the
contracts</u></b>. Vandelay's failure to timely re-pay the Notes, and
Seinfeld's failure to re-pay pursuant to his written, personal
unconditional Guaranty, constitute separate breaches of contract. Id. Page
15, lines 21-25.</span></span></li>
</ol>
<ol start="14" style="margin-top: 0in;" type="1">
<li class="MsoNormal" style="margin-bottom: 6pt; margin-top: 6pt; text-align: justify;"><span class="CharacterStyle2"><span style="font-family: Georgia, Times New Roman, serif; font-size: x-small;">Accordingly, both Defendants Vandelay and
Seinfeld materially breached their contracts to repay. Id. Page 15, line
28.<o:p></o:p></span></span></li>
<li class="MsoNormal" style="margin-bottom: 6pt; margin-top: 6pt; text-align: justify;"><span style="font-size: x-small;"><span class="CharacterStyle2" style="font-family: Georgia, 'Times New Roman', serif;"><b><u>Plaintiff's Remedy For the Material Breaches Is
Money Damages from Defendants Seinfeld and Vandelay. Jointly and
Severally.</u></b></span><span class="CharacterStyle2" style="font-family: Georgia, 'Times New Roman', serif;"> Id. Page 16, lines 1-2.</span></span></li>
<li class="MsoNormal" style="margin-bottom: 6pt; margin-top: 6pt; text-align: justify;"><span style="font-family: Georgia, Times New Roman, serif; font-size: x-small;"><span class="CharacterStyle2"><b><u>According to the Notes, Elaine is entitled to
recover attorneys' fees and costs to collect and/or enforce the Loans.
Therefore, Defendants Seinfeld and Vandelay Industries owe Elaine the
amount of Two Million Seven Hundred Seventy-Three Thousand One Hundred
Seventy and 66/100 Dollars ($2,773,170.66) for accrued unpaid principal
and interest.</u></b></span><span class="CharacterStyle2"> Id. Page 17, lines 1-5.<o:p></o:p></span></span></li>
<li class="MsoNormal" style="margin-bottom: 6pt; margin-top: 6pt; text-align: justify;"><span class="CharacterStyle2"><span style="font-family: Georgia, Times New Roman, serif; font-size: x-small;">Accordingly, Plaintiff seeks summary judgment
against Defendants Seinfeld and <b><u>Vandelay Industries</u></b> in the
total amount of Three Million One Hundred Forty-Three Thousand, Eight
Hundred Ninety-Eight and 95/100 Dollars ($3,143.898.95). Id. Page 17,
lines 9-11.<o:p></o:p></span></span></li>
<li class="MsoNormal" style="margin-bottom: 6pt; margin-top: 6pt; text-align: justify;"><span style="font-family: Georgia, Times New Roman, serif; font-size: x-small;"><span class="CharacterStyle2">It is clear that no issues of material fact
exist with respect to each of Plaintiff's claims against Defendants
Seinfeld and Vandelay Industries for breach of contract and non-payment of
Notes in the principal amount of $2,300,000.00, plus interest and costs.
Therefore, Plaintiff is entitled to judgment as a matter of law as: 1) Elaine,
Seinfeld and Vandelay Industries entered into five (5) Notes, an
unconditional personal Guaranty by Defendant Seinfeld, individually, to
repay the Loans, and a Modification to Seinfeld's unconditional Guaranty,
all of which were and are valid, enforceable contracts; 2) Defendants
Seinfeld and Vandelay Industries materially breached all of these valid,
enforceable contracts; and 3) due to the material breaches of both
Seinfeld and Vandelay Industries, Plaintiff Elaine has incurred
substantial damages in excess of Three Million Dollars ($3,000,000.00).
Accordingly, Plaintiff respectfully requests this Court enter a partial
summary judgment against Defendants Seinfeld and Vandelay Industries,
jointly and severally, in the</span></span><span style="font-family: Georgia, Times New Roman, serif;"><span class="CharacterStyle2"><span style="font-size: x-small;"> </span></span><span class="CharacterStyle2"><span style="font-size: x-small;">amount of
Three Million One Hundred Forty-Three Thousand, Eight Hundred Ninety-Eight
and 95/100 Dollars
($3,143.898.95), as more particularly set forth above. Id. Page 17 - 18, lines 13-23, 1-2.</span><o:p></o:p></span></span></li>
</ol>
<div class="MsoNormal" style="margin: 6pt 0in; text-align: justify; text-indent: 0.25in;">
<span style="font-family: Georgia, Times New Roman, serif;">It is clear then
that Plaintiff sought adjudication on her claims against Debtor/Defendant and
rescission of her valid and binding agreements with Debtor, which included cash
and property transfers between Plaintiff and Debtor. This is so notwithstanding the plain fact
that Plaintiff’s claims have been relinquished and must be dismissed by virtue
of the bankruptcy court order).<o:p></o:p></span></div>
<ol start="2" style="margin-top: 0in;" type="A">
<li class="MsoNormal" style="margin-bottom: 6pt; margin-top: 6pt;"><b><span style="font-family: Georgia, Times New Roman, serif;">THE
MINUTES OF THE HEARING ON PARTIAL SUMMARY JUDGMENT.<o:p></o:p></span></b></li>
</ol>
<div class="MsoNormal" style="margin: 6pt 0in; text-align: justify; text-indent: 0.25in;">
<span style="font-family: Georgia, Times New Roman, serif;">Apparently no
court reporter was present; no video is available; and no audio is available
with respect to the proceedings of the hearing on partial summary
judgment. We are left with the party’s
filings with respect to the matter and the minutes as posted by the clerk. Those minutes appear as follows:<o:p></o:p></span></div>
<div class="MsoNormal" style="margin: 6pt 0in; text-align: justify; text-indent: 0.5in;">
<span style="font-family: Georgia, Times New Roman, serif; font-size: x-small;">06/08/2010<o:p></o:p></span></div>
<div class="MsoNormal" style="margin: 6pt 0in 6pt 0.5in; text-align: justify;">
<span style="font-family: Georgia, Times New Roman, serif; font-size: x-small;"><b>Motion for Partial Summary Judgment</b> (9:00 AM) (Judicial Officer Dredd, Kathleen E.) <i>Plaintiffs'
Motion for Partial Summary Judgment Against Defendants, Jerry Seinfeld and
Vandelay Industries Corporation</i><o:p></o:p></span></div>
<div class="MsoNormal" style="margin: 6pt 0in 6pt 0.5in; text-align: justify;">
<span style="font-family: Georgia, Times New Roman, serif;"><span style="font-size: x-small;">Arguments
by counsel regarding securities, "pay downs," structured payouts, and
Personal Guarantee being continuing obligation. Mr. Kramer advised he is not fighting $7.5 million
part of case this day as it is a separate issue; only the $4.5 million assets
are being sought at this time. Mr. Kramer further advised he did not receive the
Deeds of Trust. Further arguments by counsel regarding Appraisal Waiver and
whether section 17.11 of Guarantee is applicable. Colloquy regarding deposition
transcript of Jessica Rabbit. As there are no genuine issues of material fact
and as securities are a nullity, <b><u>COURT
ORDERED, motion GRANTED</u></b>. Mr. Kramer to prepare Findings of Fact and
Conclusions of Law, and Mr. Gewerter to approve as to form and content. COURT
NOTED counsel may submit competing Orders for Court to determine.</span><o:p></o:p></span></div>
<div class="MsoNormal" style="margin: 6pt 0in; text-align: justify; text-indent: 0.5in;">
<span style="font-family: Georgia, Times New Roman, serif;">The Court simply
granted Plaintiff’s Motion for Partial Summary <b><u>in its entirety</u></b>.<o:p></o:p></span></div>
<ol start="3" style="margin-top: 0in;" type="A">
<li class="MsoNormal" style="margin-bottom: 6pt; margin-top: 6pt;"><b><span style="font-family: Georgia, Times New Roman, serif;">THE
BANKRUPTCY FILING, REMOVAL AND REMAND<o:p></o:p></span></b></li>
</ol>
<div class="MsoNormal" style="margin: 6pt 0in 6pt 0.75in; text-indent: -0.25in;">
<!--[if !supportLists]--><span style="font-family: Georgia, Times New Roman, serif;"><b><i>1.<span style="font-style: normal; font-weight: normal;">
</span></i></b><!--[endif]--><b><i>The Bankruptcy Filing<o:p></o:p></i></b></span></div>
<div class="MsoNormal" style="margin: 6pt 0in; text-align: justify; text-indent: 0.5in;">
<span style="font-family: Georgia, Times New Roman, serif;">On June 10, 2010
Debtor/Defendant Vandelay filed for bankruptcy.
This triggered the provisions of <a href="http://www.law.cornell.edu/uscode/text/11/362" target="_blank">11 USC. §362</a>, (automatic stay). To date, Plaintiff has never sought to lift
the stay and it remains in effect as to the Debtor.<o:p></o:p></span></div>
<div class="MsoNormal" style="margin: 6pt 0in 6pt 0.75in; text-indent: -0.25in;">
<!--[if !supportLists]--><span style="font-family: Georgia, Times New Roman, serif;"><b><i>2.<span style="font-style: normal; font-weight: normal;">
</span></i></b><!--[endif]--><b><i>The Removal<o:p></o:p></i></b></span></div>
<div class="MsoNormal" style="margin: 6pt 0in; text-align: justify; text-indent: 0.5in;">
<span style="font-family: Georgia, Times New Roman, serif;">After the Debtor
filed its bankruptcy petition, several individual Non-Debtor Defendants,
Michael Seinfeld, Judith Seinfeld, Marlon Steele, Jr., and Shawn Wright,
removed the State Court Action to the bankruptcy court pursuant to <a href="http://www.law.cornell.edu/uscode/text/28/1452" target="_blank">Section1452(a)</a>.<o:p></o:p></span></div>
<div class="MsoNormal" style="margin: 6pt 0in 6pt 0.75in; text-indent: -0.25in;">
<!--[if !supportLists]--><span style="font-family: Georgia, Times New Roman, serif;"><b><i>3.<span style="font-style: normal; font-weight: normal;">
</span></i></b><!--[endif]--><b><i>The Motion for Remand<o:p></o:p></i></b></span></div>
<div class="MsoNormal" style="margin: 6pt 0in; text-align: justify; text-indent: 0.5in;">
<span style="font-family: Georgia, Times New Roman, serif;">On January 30,
2011, Plaintiff filed a Remand Motion to
return the matter to State Court. In the Remand Motion, she represented that
she would amend her complaint in the State Court Action to <b><u>relinquish all claims asserted against the Debtor</u></b>.<a href="file:///C:/Users/Tony/Desktop/Blog%20Articles/Vacating%20an%20Order%20as%20Void%20Ab%20Initio%20Pursuant%20to%20NRCP%2060(b).doc#_ftn6" name="_ftnref6" title=""><span class="MsoFootnoteReference"><!--[if !supportFootnotes]--><span class="MsoFootnoteReference"><span style="line-height: 107%;">[6]</span></span><!--[endif]--></span></a><o:p></o:p></span></div>
<div class="MsoNormal" style="margin: 6pt 0in; text-align: justify; text-indent: 0.5in;">
<span style="font-family: Georgia, Times New Roman, serif;">In her motion
for remand, Plaintiff asserts to the Bankruptcy Court the following: “<span class="CharacterStyle2">Benes argues that
remand is appropriate because her claims against the Seinfeld Defendants have
little relationship to the Debtor’s case and that liquidation of the claims in
State Court will not interfere with the Trustee’s administration of the
bankruptcy estate. <b><u>She also maintains
that because she will be amending her complaint to relinquish any claims
against the Debtor, there also would be no
“core matters” pending before the court, much less any “related matters”
affecting the estate</u></b>.”</span><a href="file:///C:/Users/Tony/Desktop/Blog%20Articles/Vacating%20an%20Order%20as%20Void%20Ab%20Initio%20Pursuant%20to%20NRCP%2060(b).doc#_ftn7" name="_ftnref7" title=""><span class="MsoFootnoteReference"><!--[if !supportFootnotes]--><span class="MsoFootnoteReference"><span style="line-height: 107%;">[7]</span></span><!--[endif]--></span></a><b><u><o:p></o:p></u></b></span></div>
<div class="MsoNormal" style="margin: 6pt 0in 6pt 0.75in; text-indent: -0.25in;">
<!--[if !supportLists]--><span style="font-family: Georgia, Times New Roman, serif;"><b><i>4.<span style="font-style: normal; font-weight: normal;">
</span></i></b><!--[endif]--><b><i>The Bankruptcy Court Order <o:p></o:p></i></b></span></div>
<div class="MsoNormal" style="margin: 6pt 0in; text-align: justify; text-indent: 0.5in;">
<span style="font-family: Georgia, Times New Roman, serif;">As a result of
this assertion, on July 20, 2011, the Bankruptcy Court ordered (attached hereto
as Exhibit “C”) in favor of remand on the condition that Benes would in fact
relinquish all claims against the Debtor/Defendant Vandelay reiterating the
assertion as follows:<o:p></o:p></span></div>
<div class="MsoNormal" style="margin: 6pt 0.25in 6pt 31.5pt; text-align: justify;">
<span style="font-family: Georgia, Times New Roman, serif;">However, in this case <b><u>Benes has agreed to amend her complaint
in the State Court Action to dismiss all claims against the Debtor</u></b>.<o:p></o:p></span></div>
<div class="MsoNormal" style="margin: 6pt 0in; text-align: justify; text-indent: 31.5pt;">
<span style="font-family: Georgia, Times New Roman, serif;">Specifically the
bankruptcy Court ordered as follows:<o:p></o:p></span></div>
<div class="MsoNormal" style="margin: 6pt 0.25in 6pt 31.5pt; text-align: justify;">
<span style="font-family: Georgia, Times New Roman, serif;"><span style="font-size: x-small;">[T]hat Elaine Benes, Individually
and as Trustee of the Elaine Benes Family Trust Dated 3/11/85 shall take <b><u>all necessary steps to amend her
complaint</u></b> in Case No. A578385, pending in the Eighth Judicial District
Court for Clark County, Nevada, <b><u>to
dismiss the above-captioned Debtor as a defendant in the proceeding</u></b>.
The automatic stay under 11 U.S.C. § 362(a) is modified for cause pursuant to
11 U.S.C. § 362(d)(1) to permit the plaintiff to amend her complaint consistent
with this order.</span><o:p></o:p></span></div>
<ol start="4" style="margin-top: 0in;" type="A">
<li class="MsoNormal" style="margin-bottom: 6pt; margin-top: 6pt;"><b><span style="font-family: Georgia, Times New Roman, serif;">THE
BELATED ORDER ON PARTIAL SUMMARY JUDGMENT<o:p></o:p></span></b></li>
</ol>
<div class="MsoNormal" style="margin: 6pt 0in; text-align: justify; text-indent: 0.25in;">
<span style="font-family: Georgia, Times New Roman, serif;">Plaintiff was
then free to pursue her claims against the non-debtor/Defendants provided she
comply with the Bankruptcy Court Order to relinquish her claims and dismiss
same against Debtor/Defendant Vandelay.
She waited two years and did nothing in the interim.<o:p></o:p></span></div>
<div class="MsoNormal" style="margin: 6pt 0in; text-align: justify; text-indent: 0.25in;">
<span style="font-family: Georgia, Times New Roman, serif;">Then, before
complying with her obligation to amend the complaint to dismiss Vandelay,
Plaintiff revisited her partial summary judgment motion granted to her against
Vandelay and Seinfeld and engaged in some clever (or not so clever) redrafting
of a proposed order contorting her motion and the subject of the hearing as
held by Judge Dredd back in 2010 so as to create the impression or illusion
that somehow, someway, it was not an adjudication and finding against Vandelay;
rather it was simply and solely an adjudication and finding against Seinfeld
alone.<a href="file:///C:/Users/Tony/Desktop/Blog%20Articles/Vacating%20an%20Order%20as%20Void%20Ab%20Initio%20Pursuant%20to%20NRCP%2060(b).doc#_ftn8" name="_ftnref8" title=""><span class="MsoFootnoteReference"><!--[if !supportFootnotes]--><span class="MsoFootnoteReference"><span style="line-height: 107%;">[8]</span></span><!--[endif]--></span></a> That was not the result. The thrust of the motion and the Judge’s
ruling was partial summary judgment against Vandelay and as a result, against
Seinfeld. Plaintiff’s liberal use of
metaphoric white-out results in a number of contortions and misrepresentations,
for example:<o:p></o:p></span></div>
<div class="Style1" style="margin: 6pt 0.25in 6pt 31.7pt; text-align: justify; vertical-align: baseline;">
<span style="font-family: Georgia, Times New Roman, serif;"><span style="font-size: x-small;">Having considered all
of the documents on file, the pleadings, evidence and arguments of counsel,
this Honorable Court finds that Plaintiff s Motion for Partial Summary Judgment
against Defendant Seinfeld shall be GRANTED. (<i>See, </i>Exhibit “D” at page 2).</span><o:p></o:p></span></div>
<div class="MsoNormal" style="margin: 6pt 0in; text-align: justify; text-indent: 0.25in;">
<span style="font-family: Georgia, Times New Roman, serif;">The plain facts
of what transpired together with the very language in the order betray this
effort. For example, the first paragraph
of the Belated Order reads in part as follows:<o:p></o:p></span></div>
<div class="Style1" style="margin: 6pt 49.5pt 6pt 31.7pt; text-align: justify; vertical-align: baseline;">
<span style="font-family: Georgia, Times New Roman, serif;"><span style="font-size: x-small;">On
May 6, 2010, Plaintiff, ELAINE BENES (hereinafter
"Benes'), individually and as Trustee of THE ELAINE BENES FAMILY
TRUST DATED 3/11/85 (hereinafter
"the Trust"), (collectively "Elaines"), by and
through her attorneys, COSMO P. KRAMER
& ASSOCIATES, LTD., filed Plaintiff's Motion for Partial Summary Judgment (hereinafter "the Motion"), Against
Defendants, Jerry Seinfeld ("Defendant
Seinfeld') <b><u>and Vandelay
Industries Corporation</u></b> ("Defendant
Vandelay"). (<i>See, </i>Exhibit “D”)</span><o:p></o:p></span></div>
<div class="MsoNormal" style="margin: 6pt 0in; text-align: justify; text-indent: 0.5in;">
<span style="font-family: Georgia, Times New Roman, serif;">What is more
disturbing is that in attempting to straddle the mandate of the Bankruptcy
Order to relinquish and dismiss any and all claims against Vandelay, yet
salvage her pending order for partial summary judgment, Plaintiff has
mischaracterized the facts by subtly suggesting that the breaching borrower on the Notes at
issue was Jerry Seinfeld <i>not</i>
Vandelay.<o:p></o:p></span></div>
<div class="Style1" style="margin: 6pt 0.25in 6pt 31.7pt; text-align: justify; vertical-align: baseline;">
<span style="font-family: Georgia, Times New Roman, serif;"><span style="font-size: x-small;">[D]ocuments, consisting
primarily of the five original Notes ("the Notes" and/or "the
Loans"); the Agreement of Unconditional Guaranty executed by Defendant
Seinfeld ("the Seinfeld Guaranty)), and <b><u>the new Notes executed by Defendant Seinfeld</u></b> in March 2007
and April 2007.</span><o:p></o:p></span></div>
<div class="MsoNormal" style="margin: 6pt 0in; text-align: justify; text-indent: 31.7pt;">
<span style="font-family: Georgia, Times New Roman, serif;">The fact is that
any and all Notes that were the subject of this litigation may have been
executed by Seinfeld, <b><u>but only in his
capacity as an officer of the borrower, Vandelay</u></b>. It has always been the case that Vandelay was
the party responsible for any repayment on the Notes. If and only if Vandelay breached in its
performance under the agreement(s) Seinfeld would be obliged under his
guaranty(s). Plaintiff’s efforts to
obscure this fact and mislead this Court do not change the dynamic, namely: <b><u>the threshold issue before this Court
could reach a finding that results in rescission of Plaintiff’s agreements with
the Debtor, reversing transfers of cash and property with the Debtor, so as to
secure a judgment against Seinfeld is clearly adjudication and findings
affecting the Debtor’s estate.</u></b>
This is the very thing that the Bankruptcy’s order for remand
effectively prohibits.<o:p></o:p></span></div>
<div class="Style1" style="margin: 6pt 0in; text-align: justify; text-indent: 31.7pt; vertical-align: baseline;">
<span style="font-family: Georgia, Times New Roman, serif;">The Belated Order on partial summary judgment as
drafted by Mr. Kramer, goes on to state
on its first page:<o:p></o:p></span></div>
<div class="Style1" style="margin: 6pt 40.5pt 6pt 31.7pt; text-align: justify; vertical-align: baseline;">
<span style="font-family: Georgia, Times New Roman, serif;"><span style="font-size: x-small;">On June 8, 2010, this
Court heard the motion and arguments from counsel. Plaintiff was represented by
COSMO P. KRAMER, ESQ., of the law firm, COSMO
P. KRAMER & ASSOCIATES LTD., and
HAROLD P. GEWERTER, ESQ., appeared on behalf of Defendants Seinfeld and
Vandelay. Having considered all of the
documents on file, the pleadings, evidence and arguments of counsel, this
Honorable Court finds that Plaintiffs <b><u>Motion
for Partial Summary Judgment against Defendant Seinfeld</u></b> shall be
GRANTED. (<i>See,</i> Exhibit “D”)</span><o:p></o:p></span></div>
<div class="MsoNormal" style="margin: 6pt 0in; text-align: justify; text-indent: 31.7pt;">
<span style="font-family: Georgia, Times New Roman, serif;">This is nothing
more than blatant, revisionist history.
Plaintiff simply attempted to whitewash the Belated Order so as to
remove what she hoped were merely <i>superficial</i>
references to the Debtor in a futile effort to comport with the Bankruptcy
Order on remand. But any finding against
Seinfeld cannot stand alone absent a result that affect the bankruptcy estate
contrary to the import of the Order on Remand.
The matter should have been re-motioned (without claims against debtor)
and reheard and adjudicated (without findings of fact and conclusions of law as
to debtor adversely impacting or touching upon property of its estate).<o:p></o:p></span></div>
<div class="MsoNormal" style="margin: 6pt 0in; text-align: justify; text-indent: 31.7pt;">
<span style="font-family: Georgia, Times New Roman, serif;">And this should
have been addressed only <i>after</i> leave
to amend the pleadings to comport the Bankruptcy order had been filed and
granted; after an order reflecting same had been entered; and finally, after
the complaint as amended had been filed and served on Defendants.<o:p></o:p></span></div>
<div class="MsoNormal" style="margin: 6pt 0in; text-align: justify; text-indent: 0.5in;">
<span style="font-family: Georgia, Times New Roman, serif;">Indeed in a
futile effort to contort even the basic facts not otherwise at issue, Plaintiff
crafts an order and secures Judge Dredd’s signature based on <b><i>patently
false findings</i></b>. For example, on
page 3 of the order at paragraph 2, Plaintiff endeavors to suggest that
Seinfeld <i>not </i>Vandelay defaulted under
the Note and that under the Note, Seinfeld <i>not</i>
Vandelay owed Plaintiff money. This section reads as follows:<o:p></o:p></span></div>
<div class="Style1" style="margin: 6pt 4.5pt 6pt 31.5pt; text-align: justify; vertical-align: baseline;">
<span style="font-family: Georgia, Times New Roman, serif;"><span style="font-size: x-small;">As of November 14,
2008, <b><u>Defendant Seinfeld was in
default under the note an owed Plaintiff outstanding principal of $2,361,033.01</u></b>,
plus interest at a rate of sixteen percent (16%) interest per annum and costs,
on the unpaid Loans.</span><o:p></o:p></span></div>
<div class="MsoNormal" style="margin: 6pt 4.5pt 6pt 0in; text-align: justify;">
<span style="font-family: Georgia, Times New Roman, serif;">At best, this is certainly
misleading.<o:p></o:p></span></div>
<div class="MsoNormal" style="margin: 6pt 4.5pt 6pt 0in; text-align: justify; text-indent: 31.5pt;">
<span style="font-family: Georgia, Times New Roman, serif;">The Motion for
Summary Judgment included findings of facts and conclusions of law barred by or
necessarily void in the face of the Bankruptcy Order and constituting
violations of of 11 USC §362.</span></div>
<div class="MsoNormal" style="margin: 6pt 4.5pt 6pt 0in; text-align: justify; text-indent: 31.5pt;">
<span style="font-family: Georgia, 'Times New Roman', serif;">Section 17.11 of the
Seinfeld Guaranty contains a condition precedent to any assignment and/or
release of the Seinfeld Guaranty. </span><b style="font-family: Georgia, 'Times New Roman', serif;"><u>Plaintiff
never agreed to any assignment of collateral by Vandelay. </u></b><span style="font-family: Georgia, 'Times New Roman', serif; text-indent: 31.7pt;">This Court is
effectively barred (by the Bankrupcty Order and by Section 362) from entering
findings of fact or otherwise adjudicating on claims against the Debtor
particularly adjudication which my touch upon or effect the Debtor’s estate.</span><span style="font-family: Georgia, 'Times New Roman', serif; text-indent: 31.7pt;"> </span><span style="font-family: Georgia, 'Times New Roman', serif; text-indent: 31.7pt;">This Court therefore cannot adjudicate that
Vandelay entered into a loan agreement, that Vandelay breached same or
otherwise failed to perform, or that Plaintiff never agreed to any assignment
of collateral by Vandelay, the debtor in such a manner that would result in
transfer of property and cash of the Debtor’s estate.</span><span style="font-family: Georgia, 'Times New Roman', serif; text-indent: 31.7pt;"> </span><b style="font-family: Georgia, 'Times New Roman', serif; text-indent: 31.7pt;"><u>Plaintiff
secured her remand with the understanding that any such claims would be
relinquished and dismissed</u></b><span style="font-family: Georgia, 'Times New Roman', serif; text-indent: 31.7pt;">.</span></div>
<div class="MsoNormal" style="margin: 6pt 0in; text-align: justify; text-indent: 0.5in;">
<span style="font-family: Georgia, Times New Roman, serif;">Pursuant to the
Belated Order, Plaintiff is now somehow entitled to enforce the Notes as
executed by the debtor and secure attorney’s fees in so doing. This is simply impossible in light of the
Order on Remand and 11 USC §362. The
erroneous provision at page 3 paragraph 9 reads in part as follows:<o:p></o:p></span></div>
<div class="Style1" style="margin: 6pt 0in 6pt 31.5pt; text-align: justify; vertical-align: baseline;">
<span style="font-family: Georgia, Times New Roman, serif;"><span style="font-size: x-small;">Pursuant to the Notes
and the Seinfeld Guaranty, Elaine is entitled to recover<br />
attorneys' fees and costs for collecting <b><u>and/or
enforcing the Notes</u></b>.</span><o:p></o:p></span></div>
<div class="Style1" style="margin: 6pt 0in; text-align: justify; vertical-align: baseline;">
<span style="font-family: Georgia, Times New Roman, serif;">Such a finding is void
as contemplated by NRCP 60(b). </span><span style="font-family: Georgia, 'Times New Roman', serif; text-indent: 31.7pt;">The Order as crafted by Plaintiff obscures the facts
and as written, is simply erroneous.</span><span style="font-family: Georgia, 'Times New Roman', serif; text-indent: 31.7pt;"> </span><span style="font-family: Georgia, 'Times New Roman', serif; text-indent: 31.7pt;">At page
5-6 paragraph 5, it reads as follows:</span></div>
<div class="Style1" style="margin: 6pt 0.25in 6pt 31.5pt; text-align: justify; vertical-align: baseline;">
<span style="font-family: Georgia, Times New Roman, serif;"><span style="font-size: x-small;">IT IS FURTHER ORDERED,
ADJUDGED AND DECREED, that there exists no genuine issues of material fact
regarding the amounts Defendant Seinfeld owes Plaintiff <b><u>under the Notes</u></b> and/or the Seinfeld Guaranty.</span><o:p></o:p></span></div>
<div class="Style1" style="margin: 6pt 0in; text-align: justify; text-indent: 0.25in; vertical-align: baseline;">
<span style="font-family: Georgia, Times New Roman, serif;">Again, the fact is that Debtor Vandelay is alleged to
owe money to Plaintiff not Seinfeld.
Plaintiff’s flippant use of “and/or” does not comport with the facts nor
does it satisfy the mandate of the Bankrupcty Order and 11 USC §362. The fact that Plaintiff agreed to waive or
relinquish all her claims against the Debtor upon remand <i>must</i> include ratification of her agreement with Debtor and her cash
and collateral assignment from the Debtor, which renders the decision a
nullity. Not to do so violates the
conditions of the Order on Remand and would result in cash and property
transfers with the Debtor<o:p></o:p></span></div>
<ol start="5" style="margin-top: 0in;" type="A">
<li class="MsoNormal" style="margin-bottom: 6pt; margin-top: 6pt;"><b><span style="font-family: Georgia, Times New Roman, serif;">NRCP
60(b)<o:p></o:p></span></b></li>
</ol>
<div class="MsoNormal" style="margin: 6pt -2.4pt 6pt 0in; text-align: justify; text-indent: 0.5in;">
<span style="font-family: Georgia, Times New Roman, serif;"><span class="CharacterStyle4">Nevada
Rule of Civil Procedure ("NRCP") Rule 60 allows for a party to seek
relief from a judgment, including a default judgment. NRCP 60(b)(1) allows a
party to seek relief from a final judgment for "mistake, inadvertence,
surprise, or excusable neglect." NRCP 60(b)(1) (2005). Such relief must be
applied for within six (6) months from the occurrence of certain events. “The
motion shall be made within a reasonable time, and for reasons (1), (2), and
(3) not more than 6 months after the proceeding was taken or the date that
written notice of entry of the judgment or order was served.” NRCP
60(b) (2005). <i>See also</i>, </span><a href="https://www.lexis.com/research/buttonTFLink?_m=aeca3fab195f0a2ff19ca3ce0bb3eea3&_xfercite=%3ccite%20cc%3d%22USA%22%3e%3c%21%5bCDATA%5b2013%20NV%20S.%20Ct.%20Briefs%2060846%5d%5d%3e%3c%2fcite%3e&_butType=3&_butStat=2&_butNum=5&_butInline=1&_butinfo=%3ccite%20cc%3d%22USA%22%3e%3c%21%5bCDATA%5b110%20Nev.%20509%5d%5d%3e%3c%2fcite%3e&_fmtstr=FULL&docnum=2&_startdoc=1&wchp=dGLbVzk-zSkAz&_md5=22a94e46fee33bbcda6af83b056dd3b3"><span class="CharacterStyle4"><span style="color: windowtext; mso-ansi-font-size: 12.0pt;">Deal
v. Baines</span></span><span class="CharacterStyle4"><span style="color: windowtext; mso-ansi-font-size: 12.0pt; text-decoration: none; text-underline: none;">, 110
Nev. 509, 874 P.2d 775 (Nev. 1994)</span></span></a><span class="CharacterStyle4"> holding
“Rule 60(b) states that a motion under subsection (b)(1) must be brought ‘not
more than six months after judgment, order, or proceeding was entered or
taken.’<o:p></o:p></span></span></div>
<div class="MsoNormal" style="margin: 6pt -2.4pt 6pt 0in; text-align: justify; text-indent: 0.5in;">
<span style="font-family: Georgia, Times New Roman, serif;"><span class="CharacterStyle4">For
a judgment to be void, there must be a defect in the court's
authority to enter judgment through either lack of personal jurisdiction or
jurisdiction over subject matter in the suit.” </span><a href="https://www.lexis.com/research/buttonTFLink?_m=aeca3fab195f0a2ff19ca3ce0bb3eea3&_xfercite=%3ccite%20cc%3d%22USA%22%3e%3c%21%5bCDATA%5b2013%20NV%20S.%20Ct.%20Briefs%2060846%5d%5d%3e%3c%2fcite%3e&_butType=3&_butStat=2&_butNum=7&_butInline=1&_butinfo=%3ccite%20cc%3d%22USA%22%3e%3c%21%5bCDATA%5b111%20Nev.%201416%2cat%201419%5d%5d%3e%3c%2fcite%3e&_fmtstr=FULL&docnum=2&_startdoc=1&wchp=dGLbVzk-zSkAz&_md5=1aafe9a9e84ec200c84be5cacb0ea0aa"><span class="CharacterStyle4"><span style="color: windowtext; mso-ansi-font-size: 12.0pt;">Gassett
v. Snappy Car Rental</span></span><span class="CharacterStyle4"><span style="color: windowtext; mso-ansi-font-size: 12.0pt; text-decoration: none; text-underline: none;">, 111 Nev. 1416, 1419, 902 P.2d 258, 261 (Nev. 1995).</span></span></a><span class="CharacterStyle4"> In <u>Gassett</u>, the
judgment was found to be void because of a lack of service on the
defaulted defendant, leaving the district court with no personal jurisdiction. <o:p></o:p></span></span></div>
<div class="MsoNormal" style="margin: 6pt -2.15pt 6pt 0in; text-align: justify; text-indent: 0.5in;">
<span style="font-family: Georgia, Times New Roman, serif;"><span class="CharacterStyle4">Other
grounds for finding a judgment void include the failure to comply
with necessary procedures. In </span><a href="https://www.lexis.com/research/buttonTFLink?_m=aeca3fab195f0a2ff19ca3ce0bb3eea3&_xfercite=%3ccite%20cc%3d%22USA%22%3e%3c%21%5bCDATA%5b2013%20NV%20S.%20Ct.%20Briefs%2060846%5d%5d%3e%3c%2fcite%3e&_butType=3&_butStat=2&_butNum=8&_butInline=1&_butinfo=%3ccite%20cc%3d%22USA%22%3e%3c%21%5bCDATA%5b110%20Nev.%20493%5d%5d%3e%3c%2fcite%3e&_fmtstr=FULL&docnum=2&_startdoc=1&wchp=dGLbVzk-zSkAz&_md5=bccc216c09e2f152c6004ca47b0939f8"><span class="CharacterStyle4"><span style="color: windowtext; mso-ansi-font-size: 12.0pt;">Garcia
v. Ideal Supply Co., Inc</span></span><span class="CharacterStyle4"><span style="color: windowtext; mso-ansi-font-size: 12.0pt; text-decoration: none; text-underline: none;">.,110 Nev. 493, 874 P.2d 752 (Nev. 1994)</span></span></a><span class="CharacterStyle4">, a default
judgment was entered when the defendant had not actually been defaulted from
the case. “The default judgment entered against Garcia without benefit of a
prior default is void.” </span><a href="https://www.lexis.com/research/buttonTFLink?_m=aeca3fab195f0a2ff19ca3ce0bb3eea3&_xfercite=%3ccite%20cc%3d%22USA%22%3e%3c%21%5bCDATA%5b2013%20NV%20S.%20Ct.%20Briefs%2060846%5d%5d%3e%3c%2fcite%3e&_butType=3&_butStat=2&_butNum=9&_butInline=1&_butinfo=%3ccite%20cc%3d%22USA%22%3e%3c%21%5bCDATA%5b110%20Nev.%20493%2cat%20494%5d%5d%3e%3c%2fcite%3e&_fmtstr=FULL&docnum=2&_startdoc=1&wchp=dGLbVzk-zSkAz&_md5=7c6b91d1eaaf7f9329c3558700f34d97"><span class="CharacterStyle4"><span style="color: windowtext; mso-ansi-font-size: 12.0pt;">Id</span></span><span class="CharacterStyle4"><span style="color: windowtext; mso-ansi-font-size: 12.0pt; text-decoration: none; text-underline: none;">. at 494, 753.</span></span></a><span class="CharacterStyle4"> In </span><a href="https://www.lexis.com/research/buttonTFLink?_m=aeca3fab195f0a2ff19ca3ce0bb3eea3&_xfercite=%3ccite%20cc%3d%22USA%22%3e%3c%21%5bCDATA%5b2013%20NV%20S.%20Ct.%20Briefs%2060846%5d%5d%3e%3c%2fcite%3e&_butType=3&_butStat=2&_butNum=10&_butInline=1&_butinfo=%3ccite%20cc%3d%22USA%22%3e%3c%21%5bCDATA%5b125%20Nev.%20728%5d%5d%3e%3c%2fcite%3e&_fmtstr=FULL&docnum=2&_startdoc=1&wchp=dGLbVzk-zSkAz&_md5=789ef6d781e9ed500ea444dfc7c2de8f"><span class="CharacterStyle4"><span style="color: windowtext; mso-ansi-font-size: 12.0pt;">Fierle
v. Perez</span></span><span class="CharacterStyle4"><span style="color: windowtext; mso-ansi-font-size: 12.0pt; text-decoration: none; text-underline: none;">, 125
Nev. 728, 219 P.3d 906 (Nev. 2009),</span></span></a><span class="CharacterStyle4"> the
Court found that a claim
was void <i>ab initio</i> for
failure to comply with a statutory requirement for bringing the action, albeit
not pursuant to NRCP Rule 60. In </span><a href="https://www.lexis.com/research/buttonTFLink?_m=aeca3fab195f0a2ff19ca3ce0bb3eea3&_xfercite=%3ccite%20cc%3d%22USA%22%3e%3c%21%5bCDATA%5b2013%20NV%20S.%20Ct.%20Briefs%2060846%5d%5d%3e%3c%2fcite%3e&_butType=3&_butStat=2&_butNum=11&_butInline=1&_butinfo=%3ccite%20cc%3d%22USA%22%3e%3c%21%5bCDATA%5b94%20Nev.%20651%2cat%20654%5d%5d%3e%3c%2fcite%3e&_fmtstr=FULL&docnum=2&_startdoc=1&wchp=dGLbVzk-zSkAz&_md5=e5cd75002bd847e1e33c76130badf069"><span class="CharacterStyle4"><span style="color: windowtext; mso-ansi-font-size: 12.0pt;">Christy
v. Carlisle</span></span><span class="CharacterStyle4"><span style="color: windowtext; mso-ansi-font-size: 12.0pt; text-decoration: none; text-underline: none;">, 94
Nev. 651, 654, 584 P.2d 687, 689 (1978),</span></span></a><span class="CharacterStyle4"> the Court
found a judgment to be void where the defendant made an appearance
and the other party failed to give the required three day notice pursuant to
NRCP 55 before taking a default.<o:p></o:p></span></span></div>
<div class="MsoNormal" style="margin: 6pt -2.15pt 6pt 0in; text-align: justify; text-indent: 0.5in;">
<span style="font-family: Georgia, Times New Roman, serif;"><span class="CharacterStyle4">In </span><a href="https://www.lexis.com/research/buttonTFLink?_m=aeca3fab195f0a2ff19ca3ce0bb3eea3&_xfercite=%3ccite%20cc%3d%22USA%22%3e%3c%21%5bCDATA%5b2013%20NV%20S.%20Ct.%20Briefs%2060846%5d%5d%3e%3c%2fcite%3e&_butType=3&_butStat=2&_butNum=13&_butInline=1&_butinfo=%3ccite%20cc%3d%22USA%22%3e%3c%21%5bCDATA%5b83%20Nev.%20180%2cat%20182%5d%5d%3e%3c%2fcite%3e&_fmtstr=FULL&docnum=2&_startdoc=1&wchp=dGLbVzk-zSkAz&_md5=f0de6b653c64a05f4e0894218f95a1c7"><span class="CharacterStyle4"><span style="color: windowtext; mso-ansi-font-size: 12.0pt;">Misty
Management Corp. v. 1st Judicial District Court</span></span><span class="CharacterStyle4"><span style="color: windowtext; mso-ansi-font-size: 12.0pt; text-decoration: none; text-underline: none;">, 83 Nev. 180, 182, 426 P.2d
728, 729 (Nev. 1967),</span></span></a><span class="CharacterStyle4"> the Court stated “That provision
[60(b)(4)] <b><u>is normally invoked
(either by motion, or by independent action) in a case where the court entering
the challenged judgment was itself disqualified from acting, or did not have
jurisdiction over the parties, or of the subject matter of the litigation.” </u></b>Internal
citations omitted.<o:p></o:p></span></span></div>
<div class="MsoListParagraph" style="margin-bottom: 6.0pt; margin-left: .5in; margin-right: -2.15pt; margin-top: 6.0pt; mso-add-space: auto; mso-list: l1 level1 lfo7; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: Georgia, Times New Roman, serif;"><span class="CharacterStyle4"><b>1.<span style="font-weight: normal;">
</span></b></span><!--[endif]--><span class="CharacterStyle4"><b><u>Orders or actions taken in Violation of
§362 are void <i>ab initio</i></u></b></span><span class="CharacterStyle4"><b>.<o:p></o:p></b></span></span></div>
<div class="MsoNormal" style="margin: 6pt -2.4pt 6pt 0in; text-align: justify; text-indent: 0.5in;">
<span style="font-family: Georgia, Times New Roman, serif;"><span class="CharacterStyle4">In
the Ninth Circuit, actions taken in violation of the automatic stay, including
judicial proceedings, are void <i>ab initio</i>.
<u>Gruntz</u>, 202 F.3d at 1082 n.6; <u>Schwartz v. United States</u> (In re
Schwartz), 954 F.2d 569, 571 (9th Cir. 1992) ("[V]iolations of the
automatic stay are void, not voidable."); <u>Phoenix Bond & Indem. Co.
v. Shamlin</u> (<u>In re Shamlin</u>), 890 F.2d 123, 125 (9th Cir. 1989)
("Judicial proceedings in violation of th[e] automatic stay are
void."). Actions in violation of the stay are void for all purposes and
are not validated by dismissal of the bankruptcy case. <i>See</i>, <u>40235 Washington Street Corp. v. Lusardi</u>, 177 F.Supp.2d
1090, 1104 (S.D. Cal. 2001), [*21] aff'd on other grounds, 329 F.3d
1076 (9th Cir. 2003), cert. denied, 540 U.S. 983, 124 S. Ct. 469, 157 L. Ed. 2d
374 (2003)(“The violations remain ineffective even if the underlying bankruptcy
case is dismissed.”); <u>Richard v. City of Chicago</u>, 80 B.R. 451, 454 (N.D.
Ill. 1987) (holding that a debtor's voluntary dismissal of his chapter 13
petition did not “resurrect a sale that [was] legally void” as having been
conducted in violation of the automatic stay</span><o:p></o:p></span></div>
<ol start="6" style="margin-top: 0in;" type="A">
<li class="MsoNormal" style="margin-bottom: 6pt; margin-top: 6pt;"><span style="font-family: Georgia, Times New Roman, serif;"><b>11
U.S.C. Section 362(a)</b><sup> <a href="file:///C:/Users/Tony/Desktop/Blog%20Articles/Vacating%20an%20Order%20as%20Void%20Ab%20Initio%20Pursuant%20to%20NRCP%2060(b).doc#_ftn9" name="_ftnref9" title=""><!--[if !supportFootnotes]--><sup><span style="line-height: 107%;">[9]</span></sup><!--[endif]--></a></sup><b><o:p></o:p></b></span></li>
</ol>
<div class="CounselInformation" style="margin: 6pt 0in 6pt 40.5pt; text-align: justify; text-indent: -0.25in;">
<!--[if !supportLists]--><span style="font-family: Georgia, Times New Roman, serif;"><span class="CharacterStyle4"><b>1.<span style="font-weight: normal;">
</span></b></span><!--[endif]--><b><u>The
Automatic Stay precludes this Court from adjudicating any claims against or
affecting Defendant Debtor or it estate.<span class="CharacterStyle4"><o:p></o:p></span></u></b></span></div>
<div class="MsoNormal" style="margin: 6pt -2.4pt 6pt 0in; text-align: justify; text-indent: 31.5pt;">
<span class="CharacterStyle4"><span style="font-family: Georgia, Times New Roman, serif;">On
July 7, 2010, Vandelay filed a bankruptcy petition in a Chapter 7 proceeding
that is pending in United States Bankruptcy Court for Las Vegas, Nevada. As a result, an automatic stay went into
effect halting all pending proceedings in other courts (including this one)
against the Debtors, pursuant to 11 U.S.C. Section 362(a). An automatic stay is designed to effect an
immediate freeze of the status quo by precluding and nullifying post-petition
actions, judicial or non-judicial, in non-bankruptcy for or against the debtor
or affecting the property of the debtor, <u>Hillis Motors, Inc. v. Hawaii
Automobile Dealers' Association</u>, 997 F.2d 581, 585 (9th Cir. 1993).<o:p></o:p></span></span></div>
<div class="MsoNormal" style="margin: 6pt -2.4pt 6pt 0in; text-align: justify; text-indent: 0.5in;">
<span class="CharacterStyle4"><span style="font-family: Georgia, Times New Roman, serif;">The
filing of a bankruptcy petition automatically stays the commencement or
continuation, of a judicial proceeding against the debtor who filed the
petition, to recover a claim against the debtor that arose before the
commencement of the bankruptcy petition. 11 U.S.C. § 362(a)(1); <u>In re Keen</u>
(2004) 301 B.R. 749, 753 (Bankruptcy S.D. Fla. 2003).<o:p></o:p></span></span></div>
<div class="MsoNormal" style="margin: 6pt 0in; text-align: justify; text-indent: 0.5in;">
<span style="font-family: Georgia, Times New Roman, serif;"><span class="CharacterStyle4">Vandelay’s
bankruptcy petition was filed on July 7, 2010 and is still in effect. Therefore the Court’s order of judgment on
Plaintiff’s Motion for partial summary judgment against debtor is void.
It is undisputed that on at the time the Belated Order was executed and
entered Plaintiff had not yet complied with the Bankruptcy Court’s mandate to
amend the pleadings and dismiss the Debtors.
The Bankruptcy Court did not <i>lift</i>
the stay, it <i>modified</i> the stay solely
for purposes of allowing Plaintiff to amend her pleadings in State Court so as
to dismiss the debtor and any and all claims against same. Again, the relevant provision of the
bankruptcy Court order reads as follows:</span><o:p></o:p></span></div>
<div class="MsoNormal" style="margin: 6pt 0.25in 6pt 31.7pt; text-align: justify;">
<span style="font-family: Georgia, Times New Roman, serif;"><span style="font-size: x-small;">[T]hat Elaine Benes, Individually
and as Trustee of the Elaine Benes Family Trust Dated 3/11/85 shall take <b><u>all necessary steps to amend her complaint</u></b>
in Case No. A578385, pending in the Eighth Judicial District Court for Clark
County, Nevada, <b><u>to dismiss the
above-captioned Debtor as a defendant in the proceeding</u></b>. The automatic
stay under 11 U.S.C. § 362(a) is modified for cause pursuant to 11 U.S.C. §
362(d)(1) to permit the plaintiff to amend her complaint consistent with this
order.</span><span class="CharacterStyle4"><o:p></o:p></span></span></div>
<div class="MsoNormal" style="margin: 6pt 0in; text-align: justify; text-indent: 31.7pt;">
<a href="http://www.blogger.com/blogger.g?blogID=5898536086571838489" imageanchor="1" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img align="left" border="0" height="551" src="file:///C:/Users/Tony/AppData/Local/Temp/msohtmlclip1/01/clip_image007.png" style="cursor: move;" v:shapes="Straight_x0020_Connector_x0020_14" width="2" /></a><span style="font-family: Georgia, Times New Roman, serif;"><span class="CharacterStyle4">This
order does not allow Plaintiff to proceed with her Motion for partial summary
judgment on the Debtor as though it has magically transformed into a motion for
partial summary judgment <b><i>solely</i></b> against Seinfeld.</span><o:p></o:p></span></div>
<div class="CounselInformation" style="margin: 6pt 0in 6pt 40.5pt; text-align: justify; text-indent: -0.25in;">
<!--[if !supportLists]--><span style="font-family: Georgia, Times New Roman, serif;"><b>2.<span style="font-weight: normal;">
</span></b><!--[endif]--><b><u>Plaintiffs
is effectively precluded securing the Belated Order in its present form against
Seinfeld alone because a condition precedent to adjudicating the claims against
Seinfeld as motioned by Plaintiff is findings of fact and conclusions of law
necessarily affecting Debtor Vandelay or its estate which is outside the scope
of this Court’s jurisdiction or power.<o:p></o:p></u></b></span></div>
<div class="MsoNormal" style="margin: 6pt -2.15pt 6pt 0in; text-align: justify; text-indent: 31.7pt;">
<span style="font-family: Georgia, Times New Roman, serif;">A
precursor to holding Seinfeld liable for the debts and liabilities of Vandelay
as intended in Plaintiff’s motion would necessarily be a finding or
adjudication against the Debtor Vandelay, which Defendants argue is the very
thing this Court is precluded from doing in the face of the automatic stay and
the Order for Remand. Absent such a
finding, the findings of fact and conclusions of law in the Belated Order as
motioned by Plaintiff and as heard by Judge Dredd cannot stand.<o:p></o:p></span></div>
<div class="MsoNormal" style="margin: 6pt -2.15pt 6pt 0in; text-align: justify; text-indent: 31.7pt;">
<span style="font-family: Georgia, Times New Roman, serif;">Counsel
for Seinfeld argued in the opposition to Plaintiff’s Motion against Debtor and
Seinfeld in part as follows:</span></div>
<div class="Style2" style="margin: 6pt 0.25in 6pt 0.45in; text-align: justify; text-indent: -0.9pt; vertical-align: baseline;">
<span style="font-family: Georgia, Times New Roman, serif; font-size: x-small;"><span class="CharacterStyle2">Prior to 2007,
Defendant VANDELAY INDUSTRIES CORPORATION ("VANDELAY") had borrowed
Seven Million Sixty Thousand Dollars ($7,060,000.00) from Plaintiff ELAINE BENES
("BENES"), and in February 2007, Defendant JERRY SEINFELD
("SEINFELD") signed a guarantee of these amounts and the due dates
were extended. One of the conditions of the</span></span><span class="CharacterStyle2"><span style="font-family: Georgia, Times New Roman, serif; font-size: x-small;"> guarantee (see section 17.11 of Guarantee
attached hereto as Exhibit "1") was that <b><u>the guarantee would be released if the notes were eventually secured
with collateral</u></b>. By November 2008, the balance due to Plaintiff BENES
was paid down to Two Million Three Hundred Sixty One Thousand Thirty Three
Dollars and One Cent ($2,361,033.01). Plaintiff BENES scheduled a lunch with Jessica
Rabbit, and demanded an immediate meeting with Defendant SEINFELD to secure her
notes with collateral. <b><u>Plaintiff BENES
signed all of the documents to place her Two Million Three Hundred Thousand
Dollars ($2,300,000.00) in unsecured promissory notes to a secured 1<sup>st</sup>
trust deed position in the Pueblo property, along with an assignment of the
Deed of Trust</u></b>. (See Exhibit "2" attached hereto). <b><u>Plaintiff BENES was also paid the
remaining funds due of $61,033.01 per her instructions, which Plaintiff BENES
cashed</u></b>.<o:p></o:p></span></span></div>
<div class="Style2" style="margin: 6pt 0.25in 6pt 30.25pt; text-align: justify; text-indent: 1.25pt; vertical-align: baseline;">
<span style="font-family: Georgia, Times New Roman, serif; font-size: x-small;">Plaintiff BENES released the guarantee by Defendant
SEINFELD when she took the assignment of the note and deed of trust from
Vandelay in the Pueblo loan in November 2008.<span class="CharacterStyle2"><o:p></o:p></span></span></div>
<div class="Style2" style="margin: 6pt 0.25in 6pt 31.5pt; text-align: justify; vertical-align: baseline;">
<span style="font-family: Georgia, Times New Roman, serif; font-size: x-small;">Plaintiff BENES does
not deny that she signed paperwork extending the terms of the Notes until
November 1, 2012 but claims that this extension is invalid due to failure to be
delivered an appraisal on the property. The problems with this argument are
multifold. First, Plaintiff BENES produced the supposed missing appraisal
during discovery. <o:p></o:p></span></div>
<div class="Style2" style="margin: 6pt 0.25in 6pt 31.5pt; text-align: justify; text-indent: 18.9pt; vertical-align: baseline;">
<span style="font-family: Georgia, Times New Roman, serif; font-size: x-small;"> If she never
received the appraisal how is it that she was able to produce it? Secondly,
Plaintiff BENES waived her rights to the appraisal in two (2) standard Mortgage
Lending Division forms. See Exhibit "3" attached hereto. Therefore,
the due date on the Notes is November 1, 2012 and thus the Notes have not yet
come due making summary judgment inappropriate on this claim. The central
factual issues of this claim remain unresolved, and therefore, this matter is
not a proper subject for summary judgment.<o:p></o:p></span></div>
<div class="Style2" style="margin: 6pt 0.25in 6pt 31.5pt; text-align: justify; text-indent: 18.9pt; vertical-align: baseline;">
<span style="font-family: Georgia, Times New Roman, serif; font-size: x-small;">Plaintiff BENES released the guarantee by Defendant
SEINFELD when she transferred to Collateralized Notes in 2008. Section 17.11 of
the Guarantee (See Exhibit 1 attached hereto) states as follows:<o:p></o:p></span></div>
<div class="Style2" style="margin: 6pt 0.25in 6pt 0.55in; text-align: justify; text-indent: -2.15pt; vertical-align: baseline;">
<span style="font-family: Georgia, Times New Roman, serif; font-size: x-small;">17.11 Security. In the event <b><u>Lender and Debtor mutually agree</u></b>, which agreement may not be
unreasonably withheld, to an assignment of collateral in a performing
Promissory Note and Deed of Trust in the same form as Lender has invested in
the past with Vandelay Mortgage, Lender shall hold all right, title, and
benefit of such assignment and <b><u>release
Debtor</u></b> and Guarantor from the unsecured promissory note(s) and
guarantee to the monetary extent of such assignment.<o:p></o:p></span></div>
<div class="Style2" style="margin: 6pt 0.25in 6pt 31.5pt; text-align: justify; text-indent: 18.9pt; vertical-align: baseline;">
<span style="font-family: Georgia, Times New Roman, serif; font-size: x-small;"> In November of
2008, Plaintiff BENES signed all of the documents to place her Two Million
Three Hundred Thousand Dollars ($2,300,000.00) in unsecured promissory notes
into a secured 1st trust deed position in the Pueblo property, along with an
assignment of the Deed of Trust. (See Exhibit "2" attached hereto).
Plaintiff BENES was also paid the remaining funds due</span><span style="font-family: Georgia, Times New Roman, serif;"><span style="font-size: x-small;"> of Sixty One
Thousand Thirty Three Dollars and One Cent ($61,033.01) per her instructions,
which Plaintiff BENES cashed. Plaintiff BENES released the guarantee by
Defendant SEINFELD when she took the assignment of the note and deed of trust
in the Pueblo loan in November 2008. Therefore, Defendant SEINFELD disputes
that there is any guarantee for Plaintiff BENES to attempt to enforce. The
central factual issues of this case remain unresolved, and therefore, this
matter is not a proper subject for summary judgment.</span><o:p></o:p></span></div>
<div class="Style2" style="margin: 6pt 0.25in 6pt 0in; text-align: justify; vertical-align: baseline;">
<span style="font-family: Georgia, Times New Roman, serif;">This Court must have
adjudicated the following in order to give rise to the Belated Order:<o:p></o:p></span></div>
<div class="MsoNormal" style="margin: 6pt -2.15pt 6pt 49.5pt; text-align: justify; text-indent: -0.25in;">
<!--[if !supportLists]--><span style="font-family: Georgia, Times New Roman, serif;">(1)
<!--[endif]--> That the Debtor entered
into a legally binding loan agreement with Plaintiff;<o:p></o:p></span></div>
<div class="MsoNormal" style="margin: 6pt -2.15pt 6pt 49.5pt; text-align: justify; text-indent: -0.25in;">
<!--[if !supportLists]--><span style="font-family: Georgia, Times New Roman, serif;">(2)
<!--[endif]-->Debtor failed to perform;<o:p></o:p></span></div>
<div class="MsoNormal" style="margin: 6pt -2.15pt 6pt 49.5pt; text-align: justify; text-indent: -0.25in;">
<!--[if !supportLists]--><span style="font-family: Georgia, Times New Roman, serif;">(3)
<!--[endif]-->That Collateral proffered by Debtor to Plaintiff was not duly
accepted by Plaintiff;<o:p></o:p></span></div>
<div class="MsoNormal" style="margin: 6pt -2.15pt 6pt 49.5pt; text-align: justify; text-indent: -0.25in;">
<!--[if !supportLists]--><span style="font-family: Georgia, Times New Roman, serif;">(4)
<!--[endif]-->Lender and Debtor did not therefore mutually agree; or that
Plaintiff had some unilateral right to partially rescind her acceptance of the
collateral yet somehow keep the $61,033.01 at the
expense of Debtor;<o:p></o:p></span></div>
<div class="MsoNormal" style="margin: 6pt -2.15pt 6pt 49.5pt; text-align: justify; text-indent: -0.25in;">
<!--[if !supportLists]--><span style="font-family: Georgia, Times New Roman, serif;">(5)
<!--[endif]-->That the recordation of the Deed of Trust in favor of Plaintiff on
the Pueblo property is null and void given her unilateral rescission.<a href="file:///C:/Users/Tony/Desktop/Blog%20Articles/Vacating%20an%20Order%20as%20Void%20Ab%20Initio%20Pursuant%20to%20NRCP%2060(b).doc#_ftn10" name="_ftnref10" title=""><span class="MsoFootnoteReference"><!--[if !supportFootnotes]--><span class="MsoFootnoteReference"><span style="color: black; line-height: 107%;">[10]</span></span><!--[endif]--></span></a><o:p></o:p></span></div>
<div class="MsoNormal" style="margin: 6pt -2.15pt 6pt 49.5pt; text-align: justify; text-indent: -0.25in;">
<!--[if !supportLists]--><span style="font-family: Georgia, Times New Roman, serif;">(6)
<!--[endif]-->Therefore Debtor is not released from the unsecured
promissory note(s); and<o:p></o:p></span></div>
<div class="MsoNormal" style="margin: 6pt -2.15pt 6pt 49.5pt; text-align: justify; text-indent: -0.25in;">
<!--[if !supportLists]--><span style="font-family: Georgia, Times New Roman, serif;">(7)
<!--[endif]-->Seinfeld is subject to the Guaranty/<o:p></o:p></span></div>
<div class="MsoNormal" style="margin: 6pt -2.15pt 6pt 0in; text-align: justify; text-indent: 0.25in;">
<span style="font-family: Georgia, Times New Roman, serif;">If
the Belated order stands in its present form, despite Plaintiff’s superficial
efforts to avoid affecting the Debtor and its estate, the net result would be
that the Deed of Trust on the Pueblo Property must be revised and rerecorded
rescinding Plaintiff’s pro rata interest in same. As a result the Debtor’s Note in favor of
Plaintiff must be reinstated and reflected by amending Debtor’s bankruptcy
schedules; and Plaintiff would be obliged to return to the Debtor’s estate the
$61,033.01 she received as part of the transaction she now claims she
rescinded. Such a result is not
consistent with Bankruptcy on Remand which presumed that any and all claims
against Debtor were to be dismissed prior to Plaintiff proceeding on remand in
state court.<o:p></o:p></span></div>
<div class="MsoNormal" style="margin: 6pt -2.15pt 6pt 0in; text-align: justify; text-indent: 0.25in;">
<span style="font-family: Georgia, Times New Roman, serif;">In <u>Dean
v. TWA</u>, 72 F.3d 754 (9th Cir. Wash. 1995) the Court discussed as an
example, similar circumstances at issue here.<o:p></o:p></span></div>
<div class="MsoNormal" style="margin: 6pt 67.5pt; text-align: justify;">
<span style="font-family: Georgia, Times New Roman, serif;">Suppose a <u>defendant</u>
moves for summary judgment on law-of-the-case grounds before filing for
bankruptcy. <u>If the court grants this motion after the filing</u>, then one
could argue, in retrospect, that the court did not violate the purpose of
debtor protection because it has lightened the debtor's litigation burden
and protected the debtor's estate. If, however, the court denies the motion,
then it has violated the debtor protection purpose and <u>impermissibly
continued the proceeding</u>. A court must be able to know whether its
consideration of a matter will violate the stay before it considers the matter,
such as in IUFA, not after. <o:p></o:p></span></div>
<div class="MsoNormal" style="margin: 6pt -2.4pt 6pt 0in; text-align: justify; text-indent: 31.5pt;">
<span style="font-family: Georgia, Times New Roman, serif;"><a href="http://www.lexis.com/research/xlink?app=00075&view=full&searchtype=le&search=72+F.3d+754%2520at%2520756" target="x" title="Clicking this link retrieves the full text document in another window"><span style="color: black;">Dean v. TWA</span><span style="color: black; text-decoration: none; text-underline: none;">, 72 F.3d 754, 756 (9th Cir. Wash. 1995)</span></a>.<o:p></o:p></span></div>
<div class="MsoNormal" style="margin: 6pt -2.15pt 6pt 0in; text-align: justify; text-indent: 31.7pt;">
<span style="font-family: Georgia, Times New Roman, serif;">The
plain fact is that despite Plaintiff’s whitewashing of the Belated Order it
nonetheless constitutes <u>an impermissible continuance of a proceeding against
Debtor</u>. No amount of whiteout or
contorted or clever crafting can succeed in transforming her motion for partial
summary judgment against the Debtor into something else. <o:p></o:p></span></div>
<div class="CounselInformation" style="margin: 6pt 0in 6pt 40.5pt; text-align: justify; text-indent: -0.25in;">
<!--[if !supportLists]--><span style="font-family: Georgia, Times New Roman, serif;"><b>3.<span style="font-weight: normal;">
</span></b><!--[endif]--><b><u>This
Court lacks subject matter jurisdiction to adjudicate those matters in the
Belated Order specifically referencing Debtor Defendant and any claims against
Seinfeld which claims are necessarily dependent upon adjudicating claims
against Debtor Defendants.<o:p></o:p></u></b></span></div>
<div class="MsoNormal" style="margin: 6pt -2.15pt 6pt 0in; text-align: justify; text-indent: 31.7pt;">
<span style="font-family: Georgia, Times New Roman, serif;">The
Defendant Debtor invoked bankruptcy court subject matter and<span class="apple-converted-space"> </span><i>in personam</i><span class="apple-converted-space"> </span>jurisdiction by filing a voluntary
petition in bankruptcy. With the commencement of the bankruptcy cases, the
bankruptcy court acquired exclusive<span class="apple-converted-space"> </span><i>in
rem</i><span class="apple-converted-space"> </span>jurisdiction over all the
debtor's legal or equitable interests in property wherever located and by
whomever held. 28 U.S.C. § 1334(e);<span class="apple-converted-space"> </span><u>Commodity Futures Trading Comm'n v. Co Petro
Mktg. Group, Inc</u><i>.,</i><span class="apple-converted-space"> </span>700
F.2d 1279, 1282 (9th Cir.1983). Moreover the Defendant Debtor is entitled to
the full protection of Section 362. Any
claims against the Debtor in this matter before this Court must be abandoned or
dismissed. Plaintiff promised as much before the Bankruptcy Court. Those claims as against Debtor Defendant
cannot be adjudicated by this Court.
Indeed this was the very basis by which Plaintiff secured remand in the
first place. She cannot have her cake
and eat it too.<o:p></o:p></span></div>
<div class="MsoNormal" style="margin: 6pt -2.15pt 6pt 0in; text-align: justify; text-indent: 31.7pt;">
<span style="font-family: Georgia, Times New Roman, serif;">Section 362(d) of the Bankruptcy Code provides
that a party may be entitled to relief from the automatic stay under certain
circumstances. 11 U.S.C. § 362(d); <u>In re Eclair Bakery Ltd</u><i>.</i>, 255 B.R. 121, 132 (Bankr. S.D.N.Y.
2000). Specifically, on request of a party in interest and after notice and a hearing,
the court shall grant relief from the stay provided under subsection (a) of
this section, such as by terminating, annulling, modifying, or conditioning
such stay—<a href="http://www.blogger.com/blogger.g?blogID=5898536086571838489" name="d_1"></a>(1) for cause, including the lack of adequate
protection of an interest in property of such party in interest. Such a request must be made before the
bankruptcy court. To date, <b><u>Plaintiff has made no such request.</u></b> The remand of this matter back to this Court,
merely put the parties back in the same position they were in prior to removal
pointedly, <b><u>subject to relinquishing
any and all claims against Vandelay and the fullest measure of the benefit of
the automatic stay</u> </b>The automatic
stay under 11 U.S.C. § 362(a) was modified by the Bankruptcy only in so far as
may be required to permit the Plaintiff to amend her complaint consistent with
the mandate that she relinquish and dismiss any and all claims against
Debtor. The means by which Plaintiff
secured the Belated order is an impermissible continuance of a proceeding that
violates both the Bankruptcy Order and 11 USC §362. It is therefore void and, pursuant to NRCP
60(b) it must be vacated.<o:p></o:p></span></div>
<div align="center" class="MsoNormal" style="margin: 6pt -17.4pt 6pt 0in; text-align: center; text-indent: 0in;">
<!--[if !supportLists]--><span style="font-family: Georgia, Times New Roman, serif;"><b>III.<span style="font-weight: normal;">
</span></b><!--[endif]--><b><u>CONCLUSION<o:p></o:p></u></b></span></div>
<div class="MsoNormal" style="margin: 6pt 0in;">
<span style="font-family: Georgia, Times New Roman, serif;"><span class="CharacterStyle5">In light of the
foregoing, Defendants request that the order for Partial Summary Judgment be
vacated pursuant to NRCP 60(b) (1), (3), and (4) and for such other and further
relief as the Court deems just and proper.</span><o:p></o:p></span></div>
<br />
<div>
<!--[if !supportFootnotes]--><span style="font-family: Georgia, Times New Roman, serif;"><br clear="all" />
</span><br />
<hr align="left" size="1" width="33%" />
<!--[endif]-->
<br />
<div id="ftn1">
<div class="MsoFootnoteText" style="text-align: justify;">
<span style="font-family: Georgia, Times New Roman, serif;"><a href="file:///C:/Users/Tony/Desktop/Blog%20Articles/Vacating%20an%20Order%20as%20Void%20Ab%20Initio%20Pursuant%20to%20NRCP%2060(b).doc#_ftnref1" name="_ftn1" title=""><span class="MsoFootnoteReference"><!--[if !supportFootnotes]--><span class="MsoFootnoteReference"><span style="line-height: 107%;">[1]</span></span><!--[endif]--></span></a> If or when the Order is deemed to be a final order as
contemplated by the Supreme Court, Defendants intend to file an appeal based on
the prior Judges’ misapplication of the law and errors or omission in the
findings underlying the order in the face of the evidence presented at the
hearing.<o:p></o:p></span></div>
</div>
<div id="ftn2">
<div class="MsoFootnoteText" style="text-align: justify;">
<span style="font-family: Georgia, Times New Roman, serif;"><a href="file:///C:/Users/Tony/Desktop/Blog%20Articles/Vacating%20an%20Order%20as%20Void%20Ab%20Initio%20Pursuant%20to%20NRCP%2060(b).doc#_ftnref2" name="_ftn2" title=""><span class="MsoFootnoteReference"><!--[if !supportFootnotes]--><span class="MsoFootnoteReference"><span style="line-height: 107%;">[2]</span></span><!--[endif]--></span></a> Plaintiff’s Counsel represented to this Court that
this delay was due to his belief at the time
that the matter was tolled and that as a result, he had up until
December of 2014 to bring the matter to trial <i>and </i>that he was conducting “research” during this two-year period.<o:p></o:p></span></div>
</div>
<div id="ftn3">
<div class="MsoFootnoteText" style="text-align: justify;">
<span style="font-family: Georgia, Times New Roman, serif;"><a href="file:///C:/Users/Tony/Desktop/Blog%20Articles/Vacating%20an%20Order%20as%20Void%20Ab%20Initio%20Pursuant%20to%20NRCP%2060(b).doc#_ftnref3" name="_ftn3" title=""><span class="MsoFootnoteReference"><!--[if !supportFootnotes]--><span class="MsoFootnoteReference"><span style="line-height: 107%;">[3]</span></span><!--[endif]--></span></a> See Section III(F)(2) at pages 17-18, below.<o:p></o:p></span></div>
</div>
<div id="ftn4">
<div class="MsoNormal" style="text-align: justify; text-indent: 4.5pt;">
<span style="font-family: Georgia, Times New Roman, serif;"><a href="file:///C:/Users/Tony/Desktop/Blog%20Articles/Vacating%20an%20Order%20as%20Void%20Ab%20Initio%20Pursuant%20to%20NRCP%2060(b).doc#_ftnref4" name="_ftn4" title=""><span class="MsoFootnoteReference"><!--[if !supportFootnotes]--><span class="MsoFootnoteReference"><span style="line-height: 107%;">[4]</span></span><!--[endif]--></span></a> Apparently no
court reporter was present; no video is available; and no audio is available
with respect to the proceedings of this hearing.<o:p></o:p></span></div>
</div>
<div id="ftn5">
<div class="MsoFootnoteText" style="text-align: justify;">
<span style="font-family: Georgia, Times New Roman, serif;"><a href="file:///C:/Users/Tony/Desktop/Blog%20Articles/Vacating%20an%20Order%20as%20Void%20Ab%20Initio%20Pursuant%20to%20NRCP%2060(b).doc#_ftnref5" name="_ftn5" title=""><span class="MsoFootnoteReference"><!--[if !supportFootnotes]--><span class="MsoFootnoteReference"><span style="line-height: 107%;">[5]</span></span><!--[endif]--></span></a> While it is true that Plaintiff’s Counsel submitted
the whitewashed order to George Costanza and secured his consent as to form and
content, Mr. Costanza had not seen the Order for remand. In any event, Plaintiff’s counsel never
submitted the order as proposed to counsel for the Movants herein.<o:p></o:p></span></div>
</div>
<div id="ftn6">
<div class="MsoFootnoteText" style="text-align: justify;">
<span style="font-family: Georgia, Times New Roman, serif;"><a href="file:///C:/Users/Tony/Desktop/Blog%20Articles/Vacating%20an%20Order%20as%20Void%20Ab%20Initio%20Pursuant%20to%20NRCP%2060(b).doc#_ftnref6" name="_ftn6" title=""><span class="MsoFootnoteReference"><!--[if !supportFootnotes]--><span class="MsoFootnoteReference"><span style="line-height: 107%;">[6]</span></span><!--[endif]--></span></a> See, Exhibit “C”. <span class="CharacterStyle2"><span style="letter-spacing: .2pt; mso-ansi-font-size: 12.0pt;">Case 10-01321-mkn Doc 52
Entered 08/19/11 16:42:53 Page 2 of 8</span></span><o:p></o:p></span></div>
</div>
<div id="ftn7">
<div class="MsoFootnoteText" style="text-align: justify;">
<span style="font-family: Georgia, Times New Roman, serif;"><a href="file:///C:/Users/Tony/Desktop/Blog%20Articles/Vacating%20an%20Order%20as%20Void%20Ab%20Initio%20Pursuant%20to%20NRCP%2060(b).doc#_ftnref7" name="_ftn7" title=""><span class="MsoFootnoteReference"><!--[if !supportFootnotes]--><span class="MsoFootnoteReference"><span style="line-height: 107%;">[7]</span></span><!--[endif]--></span></a> See, Exhibit “C”. <span class="CharacterStyle2"><span style="letter-spacing: .2pt; mso-ansi-font-size: 12.0pt;">Case 10-01321-mkn Doc 52
Entered 08/19/11 16:42:53 Page 3 of 8</span></span><o:p></o:p></span></div>
</div>
<div id="ftn8">
<div class="MsoFootnoteText" style="margin-right: -12.9pt; text-align: justify;">
<span style="font-family: Georgia, Times New Roman, serif;"><a href="file:///C:/Users/Tony/Desktop/Blog%20Articles/Vacating%20an%20Order%20as%20Void%20Ab%20Initio%20Pursuant%20to%20NRCP%2060(b).doc#_ftnref8" name="_ftn8" title=""><span class="MsoFootnoteReference"><!--[if !supportFootnotes]--><span class="MsoFootnoteReference"><span style="line-height: 107%;">[8]</span></span><!--[endif]--></span></a> The very fact that Plaintiff filed and entered the
Belated Order <b><i>before</i></b> seeking leave to amend and before filing an amended
complaint dismissing debtor, is a violation of the Bankruptcy Court order and a
violation of §362.<o:p></o:p></span></div>
</div>
<div id="ftn9">
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: Georgia, Times New Roman, serif;"><a href="file:///C:/Users/Tony/Desktop/Blog%20Articles/Vacating%20an%20Order%20as%20Void%20Ab%20Initio%20Pursuant%20to%20NRCP%2060(b).doc#_ftnref9" name="_ftn9" title=""><span class="MsoFootnoteReference"><!--[if !supportFootnotes]--><span class="MsoFootnoteReference"><span style="line-height: 107%;">[9]</span></span><!--[endif]--></span></a> Under <a href="http://www.westlaw.com/Find/Default.wl?rs=dfa1.0&vr=2.0&DB=1000546&DocName=11USCAS362&FindType=L"><span style="color: blue;">Section 362(a)</span></a>, the
filing of a bankruptcy petition operates as a stay, applicable to all entities,
of- (1) the commencement or continuation .... of a judicial, administrative, or
other action or proceeding against the debtor .... [and] (3) any act to obtain
possession of property of the estate or of property from the estate or to
exercise control over property of the estate.<o:p></o:p></span></div>
<div class="MsoFootnoteText" style="text-align: justify;">
<br /></div>
</div>
<div id="ftn10">
<div class="MsoFootnoteText" style="text-align: justify;">
<a href="file:///C:/Users/Tony/Desktop/Blog%20Articles/Vacating%20an%20Order%20as%20Void%20Ab%20Initio%20Pursuant%20to%20NRCP%2060(b).doc#_ftnref10" name="_ftn10" title=""><span class="MsoFootnoteReference"><span style="font-family: Georgia, Times New Roman, serif;"><!--[if !supportFootnotes]--><span class="MsoFootnoteReference"><span style="line-height: 107%;">[10]</span></span><!--[endif]--></span></span></a><span style="font-family: Georgia, Times New Roman, serif;"><span style="font-size: small;"> To date, Plaintiff has not returned the $61,033.01 nor has she reassigned her $2.3 million,
pro-rata, recorded interest in the Pueblo Property in furtherance of executing
on her </span><i>so-called </i>rescission.</span><span style="font-size: small;"><o:p></o:p></span></div>
</div>
</div>
Anonymoushttp://www.blogger.com/profile/02507643510494938178noreply@blogger.com5tag:blogger.com,1999:blog-5898536086571838489.post-5369156461463968382013-12-07T00:26:00.000-08:002013-12-07T00:44:14.322-08:0011 USC § 541 in the Context of Alter Ego Claims<div align="right" class="CM20" style="margin-bottom: .0001pt; margin-bottom: 0in; text-align: right;">
<b><span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">Excerpted
from a Brief in Support of Defendant’s <o:p></o:p></span></b></div>
<div align="right" class="CM20" style="margin-bottom: .0001pt; margin-bottom: 0in; text-align: right;">
<b><span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">Opposition
to a Motion for Leave to File a Second Amended Complaint<o:p></o:p></span></b></div>
<div class="CM20" style="margin-bottom: 6.0pt; margin-left: 0in; margin-right: 0in; margin-top: 6.0pt; text-align: justify;">
<b><i><span style="font-family: Helvetica Neue, Arial, Helvetica, sans-serif;">Introduction<o:p></o:p></span></i></b></div>
<div class="Default" style="margin-bottom: 6.0pt; margin-left: 0in; margin-right: 0in; margin-top: 6.0pt; text-align: justify; text-indent: .5in;">
<span style="font-family: Georgia, Times New Roman, serif;"><a href="http://www.law.cornell.edu/uscode/text/11/541" target="_blank">Section 541(a)</a> sets forth what constitutes property
of a bankruptcy estate. Any claims which the
debtor could make that might inure to the benefit of the estate and therefore
its creditors are claims belonging to the trustee. In the present case, Plaintiff claims that
the Debtor and the Non/Debtor co-defendants engaged in certain contractual
breaches and tortious conduct including but not limited to fraud, resulting in
financial loss and injury to her. She
filed her claims pre-petition.
Ordinarily, the provisions of <a href="http://www.law.cornell.edu/uscode/text/11/362" target="_blank">§362</a> might apply so as prevent or preclude
her from pursuing her claims at least against the debtor absent a lifting of
the stay. But in this case, one or more
of the Non/Debtor co-defendants removed this action to the bankruptcy court affording
plaintiff free reign to pursue her claims there, without hindrance. The nature of the claims is not such that a
trustee would or could bring on behalf of the estate or on behalf of its
creditors as they are claims against the Debtor. A Debtor does not sue itself. Alter-ego lawsuits may be pursued against the
debtor in bankruptcy court, without lifting the automatic stay. Despite the
apparent silence of the Code on this point, the Code implicitly permits the
filing of suit in the bankruptcy court against a<span style="background-color: white;">
debtor without violating the automatic stay.
The action as removed to bankruptcy court was nothing more or less than
any other adversary claim. Instead of
hanging their hats on what, if any, protection the provisions of the automatic
stay might have afforded them, the Defendants in this case removed the
action. They opened the door and laid
out the red carpet for the Plaintiff to pursue her claims. Instead of doing so, she waited five months,
and filed for remand and in so doing looked the proverbial gift horse in the mouth
and kicked it. Then, after waiting
around for two years, she now seeks the benefit of a tolling period so as to
avoid the mandate of <a href="http://www.trucounsel.com/index.php/vi-trials/rule-41-dismissal-of-actions" target="_blank">NRCP 41(e)</a>. No such
tolling period is warranted.</span><o:p></o:p></span></div>
<div class="CM20" style="margin-bottom: 6.0pt; margin-left: 0in; margin-right: 0in; margin-top: 6.0pt; text-align: justify;">
<b><span style="font-family: Georgia, Times New Roman, serif;"><i></i></span></b></div>
<a name='more'></a><span style="font-family: Georgia, Times New Roman, serif;"><br />
</span><br />
<div class="CM20" style="margin-bottom: 6.0pt; margin-left: 0in; margin-right: 0in; margin-top: 6.0pt; text-align: justify;">
<span style="font-family: Georgia, Times New Roman, serif;"><b><i>Section 541</i></b><a href="file:///C:/Users/Tony/Desktop/Blog%20Articles/11%20USC%20%C2%A7%20541%20in%20the%20Context%20of%20Alter%20Ego%20Claims.docx#_ftn1" name="_ftnref1" title=""><span class="MsoFootnoteReference"><b><i><!--[if !supportFootnotes]--><span class="MsoFootnoteReference"><b><span style="line-height: 107%;">[1]</span></b></span><!--[endif]--></i></b></span></a><b><o:p></o:p></b></span></div>
<div class="CM5" style="margin: 6pt 0in; text-align: justify; text-indent: 0.5in;">
<span style="font-family: Georgia, Times New Roman, serif;">Filing a bankruptcy petition,
whether done voluntarily or involuntarily, begins a case in the bankruptcy
court.<sup><span style="mso-text-raise: 2.5pt; position: relative; top: -2.5pt;"> </span></sup> The bankruptcy court where the case is started
is the appropriate tribunal for the bankruptcy case’s administration and the
disposition of motions and adversary proceedings which are brought by or against
the debtor, the debtor-in-possession or the trustee, and third parties in
regards to property of the debtor or the debtor’s estate.<a href="file:///C:/Users/Tony/Desktop/Blog%20Articles/11%20USC%20%C2%A7%20541%20in%20the%20Context%20of%20Alter%20Ego%20Claims.docx#_ftn2" name="_ftnref2" title=""><span class="MsoFootnoteReference"><!--[if !supportFootnotes]--><span class="MsoFootnoteReference"><span style="line-height: 107%;">[2]</span></span><!--[endif]--></span></a><sup><span style="mso-text-raise: 2.5pt; position: relative; top: -2.5pt;"><o:p></o:p></span></sup></span></div>
<div class="CM20" style="margin-bottom: 6.0pt; margin-left: 0in; margin-right: 0in; margin-top: 6.0pt; text-align: justify;">
<b><i><span style="font-family: Georgia, Times New Roman, serif;">Property of the Estate<o:p></o:p></span></i></b></div>
<div class="CM5" style="margin: 6pt 0in; text-align: justify; text-indent: 0.5in;">
<span style="font-family: Georgia, Times New Roman, serif;">Once a bankruptcy case is begun, §
541 establishes the parameters of the estate’s property and identifies what
actually is property of the estate.<a href="file:///C:/Users/Tony/Desktop/Blog%20Articles/11%20USC%20%C2%A7%20541%20in%20the%20Context%20of%20Alter%20Ego%20Claims.docx#_ftn3" name="_ftnref3" title=""><span class="MsoFootnoteReference"><!--[if !supportFootnotes]--><span class="MsoFootnoteReference"><span style="line-height: 107%;">[3]</span></span><!--[endif]--></span></a> The applicable provision is §
541(a)(1), which states that property of a debtor’s estate includes “[e]xcept
as provided in subsections (b) and (c)(2) of this section, all legal or
equitable interests of the debtor in property as of the commencement of the
case.”<a href="file:///C:/Users/Tony/Desktop/Blog%20Articles/11%20USC%20%C2%A7%20541%20in%20the%20Context%20of%20Alter%20Ego%20Claims.docx#_ftn4" name="_ftnref4" title=""><span class="MsoFootnoteReference"><!--[if !supportFootnotes]--><span class="MsoFootnoteReference"><span style="line-height: 107%;">[4]</span></span><!--[endif]--></span></a><o:p></o:p></span></div>
<div class="CM5" style="margin: 6pt 0in; text-align: justify; text-indent: 0.5in;">
<span style="font-family: Georgia, Times New Roman, serif;">A limitation on the property of
the estate is that it is comprised of only the legal and equitable interests of
the debtor and not of any other party.<a href="file:///C:/Users/Tony/Desktop/Blog%20Articles/11%20USC%20%C2%A7%20541%20in%20the%20Context%20of%20Alter%20Ego%20Claims.docx#_ftn5" name="_ftnref5" title=""><span class="MsoFootnoteReference"><!--[if !supportFootnotes]--><span class="MsoFootnoteReference"><span style="line-height: 107%;">[5]</span></span><!--[endif]--></span></a> <o:p></o:p></span></div>
<div class="CM20" style="margin-bottom: 6.0pt; margin-left: 0in; margin-right: 0in; margin-top: 6.0pt; text-align: justify;">
<span style="font-family: Georgia, Times New Roman, serif;">If
a debtor had a cause of action when its bankruptcy case began, that cause of
action or claim constitutes an interest which is included within § 541(a)(1)
and therefore constitutes property of the estate.<a href="file:///C:/Users/Tony/Desktop/Blog%20Articles/11%20USC%20%C2%A7%20541%20in%20the%20Context%20of%20Alter%20Ego%20Claims.docx#_ftn6" name="_ftnref6" title=""><span class="MsoFootnoteReference"><!--[if !supportFootnotes]--><span class="MsoFootnoteReference"><span style="line-height: 107%;">[6]</span></span><!--[endif]--></span></a><sup><span style="mso-text-raise: 2.5pt; position: relative; top: -2.5pt;"> </span></sup> But if a cause of action, under state law, is
an asset of the corporate creditors personally, instead of to the corporation,
those causes of action are not assets of the estate under § 541(a).<a href="file:///C:/Users/Tony/Desktop/Blog%20Articles/11%20USC%20%C2%A7%20541%20in%20the%20Context%20of%20Alter%20Ego%20Claims.docx#_ftn7" name="_ftnref7" title=""><span class="MsoFootnoteReference"><!--[if !supportFootnotes]--><span class="MsoFootnoteReference"><span style="line-height: 107%;">[7]</span></span><!--[endif]--></span></a> <o:p></o:p></span></div>
<div class="CM20" style="margin-bottom: 6.0pt; margin-left: 0in; margin-right: 0in; margin-top: 6.0pt; text-align: justify;">
<b><i><span style="font-family: Georgia, Times New Roman, serif;">The Automatic Stay<o:p></o:p></span></i></b></div>
<div class="CM5" style="margin: 6pt 0in; text-align: justify; text-indent: 9pt;">
<span style="font-family: Georgia, Times New Roman, serif;">If, under state law, an alter-ego
claim is property of the estate, then the automatic stay under § 362(a)(3)
applies to prevent a creditor from bringing that claim. In this way, the
automatic stay will increase the assets that are available for distribution to
all creditors and the automatic stay will protect all creditors from distribution
to the few on a first-come first-served basis and limit standing to the trustee
who can then assert that claim on behalf of all creditors.<sup><span style="mso-text-raise: 2.5pt; position: relative; top: -2.5pt;"> </span></sup><o:p></o:p></span></div>
<div class="CM5" style="margin: 6pt 0in; text-align: justify; text-indent: 9.35pt;">
<span style="font-family: Georgia, Times New Roman, serif;"><b><u>Alter-ego
lawsuits may be pursued against the debtor in bankruptcy court, without lifting
the automatic stay</u></b>.<o:p></o:p></span></div>
<div class="CM5" style="margin: 6pt 0in; text-align: justify; text-indent: 9pt;">
<span style="background-color: white; background-position: initial initial; background-repeat: initial initial; font-family: Georgia, Times New Roman, serif;">Despite
the apparent silence of the Code on this point, the Code implicitly permits the
filing of suit in the bankruptcy court against a debtor without violating the
automatic stay. <u>Arneson v. Farmers Ins. Exch</u>. (<u>In re Arneson</u>),
282 B.R. 883, 893 (BAP 9th Cir. 2002); <u>Rein v. Providian Fin. Corp</u>., 252
F.3d 1095, 1101-02 (9th Cir. 2001); <u>In re Briarwood Hills Associates</u>,
237 B.R. 479, 480 (Bankr. W.D.Mo. 1999); <u>Armco Fin. Servs. Corp. v. North
Atl. Ins. Co</u>. (<u>In re Bird</u>), 229 B.R. 90, 94-5 (Bankr. S.D.N.Y.
1999); <u>Sobel Bldg. Devel. Partners v. Broach</u> (<u>In re Sexton</u>), 166
B.R. 421, 428 (Bankr. N.D. Cal. 1994); <u>Civic Ctr. Square v. Ford</u> (<u>In
re Roxford Foods</u>), 12 F.3d 875, 878 (9th Cir. 1993); <u>Prewitt v. North
Coast Village, Ltd</u>. (<u>In re North Coast Village. Ltd</u>.), 135 B.R. 641,
643 (BAP 9th Cir. 1992); <u>United States v. INSLAW</u>,<u> Inc</u>., 289 U.S.
App. D.C. 383, 932 F.2d 1467, 1474 (D.C.Cir. 1991); <u>In re Opti-Gage, Inc</u>.,
130 B.R. 257, 258-59 (Bankr. S.D. Ohio 1991); <u>Moran Fin. Corp. v. American
Consol. Fin. Corp</u>. (<u>In re J. T. Moran Fin. Corp</u>.), 124 B.R. 931, 940
(S.D.N.Y. 1991); <u>Lighthouse Bluffs Corp. v. Atreus Enters., Ltd</u>. (<u>In
re Atreus Enters., Ltd</u>.), 120 B.R. 341, 346 (Bankr. S.D.N.Y.
1990); [**24] <u>Citicorp N. Am., Inc. v. Finley</u> (<u>In re Washington
Mfg. Co</u>.), 118 B.R. 555, 561 (Bankr. M.D. Tenn. 1990); <u>In re American
Sports Innovations</u>, 105 B.R. 614, 617 (Bankr. W.D. Wash. 1989); <u>Teerlink
v. Lambert</u> (<u>In re Teerlink Ranch, Ltd</u>.), 886 F.2d 1233, 1237 (9th
Cir. 1989); <u>In re American Spinning Mills, Inc</u>., 43 B.R. 365, 367
(Bankr. E.D. Pa. 1984). <u>Contra, Shugrue v. Air Line Pilots Ass'n Int'l</u> (<u>In
re Ionosphere Clubs, Inc</u>.), 922 F.2d 984, 993 (2d Cir. 1990), cert. denied,
502 U.S. 808, 112 S. Ct. 50, 116 L. Ed. 2d 28 (1991). <o:p></o:p></span></div>
<div class="CM5" style="margin: 6pt 0in; text-align: justify;">
<span style="font-family: Georgia, Times New Roman, serif;"><b><u><span style="background-color: white; background-position: initial initial; background-repeat: initial initial;">Such suits are the equivalent to the filing of claims against
the estate and allowable under <a href="http://www.law.cornell.edu/uscode/text/11/501" target="_blank">11 U.S.C.§ 501</a>, despite the automatic stay</span></u></b><span style="background-color: white; background-position: initial initial; background-repeat: initial initial;">. <u>Moran</u>,
124 B.R. at 940. <b><u><o:p></o:p></u></b></span></span></div>
<div class="CM5" style="margin: 6pt 0in; text-align: justify; text-indent: 9pt;">
<span style="font-family: Georgia, Times New Roman, serif;">For example, in the case of <u>In re Transcolor Corp.,</u><a href="file:///C:/Users/Tony/Desktop/Blog%20Articles/11%20USC%20%C2%A7%20541%20in%20the%20Context%20of%20Alter%20Ego%20Claims.docx#_ftn8" name="_ftnref8" title=""><!--[if !supportFootnotes]--><span class="MsoFootnoteReference"><u><span style="line-height: 107%;">[8]</span></u></span><!--[endif]--></a><sup><span style="mso-text-raise: 2.5pt; position: relative; top: -2.5pt;"> </span></sup> a judgment creditor-indenture trustee filed an
adversary complaint against, among others, a chapter 7 debtor-corporation and
its parent corporation, as issuers of debentures in the parent’s bankruptcy
case, an individual who owned or controlled the companies, as their insider,
asserting claims for misrepresentation, concealment by a breach of duty to
disclose, and fraudulent conveyance, and seeking to pierce the corporate veil.
The court held, among other things, that the judgment creditor did not violate
the automatic stay by filing the complaint. The court went on to rule that if a
debtor can be sued in the bankruptcy court without violating the automatic
stay, then, by definition the automatic stay would not be violated if a lawsuit
was filed against a nondebtor in the bankruptcy court.<sup><span style="mso-text-raise: 2.5pt; position: relative; top: -2.5pt;"> </span></sup> This is true even if the nondebtor is a
guarantor of an obligation of the debtor or the debtor’s codefendant.<o:p></o:p></span></div>
<div class="CM5" style="margin: 6pt 0in; text-align: justify; text-indent: 9pt;">
<span style="font-family: Georgia, Times New Roman, serif;">If a debtor may be sued in the
bankruptcy court without violating the automatic stay, then the stay is not
violated when suit is filed against a nondebtor in the bankruptcy court.
Non-Debtors would not then enjoy the protection of the automatic stay, <u>Fidelity
Nat. Title Assur. Co. of New York v. Bozzuto</u>, 227 B.R. 466, 470 (E.D.Va.
1998); <u>In re Venture Properties, Inc</u>., 37 B.R. 175 (Bankr. D.N.H. 1984);
<u>In re Nashville Album Prods., Inc</u>., 33 B.R. 123 (M.D. Tenn. 1983),
either as guarantor of an obligation of the debtor, <u>Credit Alliance Corp. v.
Williams</u>, 851 F.2d 119 (4th Cir. 1988), or as the debtor's codefendant, <u>Collier
v. Eagle-Picher Indus., Inc</u>., 86 Md.App. 38, 585 A.2d 256 (1991).<o:p></o:p></span></div>
<div class="CM20" style="margin-bottom: 6.0pt; margin-left: 0in; margin-right: 0in; margin-top: 6.0pt; text-align: justify;">
<b><i><span style="font-family: Georgia, Times New Roman, serif;">Standing to Sue<o:p></o:p></span></i></b></div>
<div class="CM5" style="margin: 6pt 0in; text-align: justify; text-indent: 9pt;">
<span style="font-family: Georgia, Times New Roman, serif;">The distinction between suits
brought by a corporation against its officers and those brought by defrauded
parties against a corporation and its officers is the decisive factor in
determining questions of standing to sue. <u>In Drabkin v. L & L Constr.
Assocs</u>. (<u>In re Latin Inv. Corp</u>.), 168 B.R. 1 (Bankr. D.D.C. 1993),
Judge S. Martin Teel, Jr., held that the bankruptcy trustee had standing to sue
third parties who aided and abetted the corporate debtor's insiders in a
conspiracy to damage the corporation. In so holding, Judge Teel made the
essential decision regarding the trustee's standing to sue, namely that the
cause of action was property of the estate which belonged to the corporate
debtor and to the debtor's trustee who succeeded to the debtor's property: The
trustee succeeds to the property of the debtor's estate. <i>See</i>, 11 U.S.C. §§ 704(1), 541(a)(1). This property includes all
causes of action the debtor could have brought outside bankruptcy. Among these
causes of action are suits arising from breaches of fiduciary duty by the
corporate debtor's principals that could have been brought directly by the
debtor or indirectly through shareholder derivative suits. <u>Pepper v. Litton</u>,
308 U.S. 295, 307, 60 S.Ct. 238, 245-46, 84 L.Ed. 281 (1939); <u>Delgado Oil
Co. v. Torres</u>, 785 F.2d 857, 860 (10th Cir.1986). But the trustee cannot
allege causes of action belonging to individual creditors. <u>Caplin v. Marine
Grace Trust Co.</u>, 406 U.S. [416] at 434, 92 S.Ct. at 1688. Thus, at issue
here is whether at state law the debtor could have brought counts 8 and 9
against the defendants or whether the causes of action alleged in those counts
belong to individual creditors.<o:p></o:p></span></div>
<div class="CM20" style="margin-bottom: 6.0pt; margin-left: 0in; margin-right: 0in; margin-top: 6.0pt; text-align: justify;">
<b><i><span style="font-family: Georgia, Times New Roman, serif;">The Nature of Plaintiff’s Alter
Ego Claim<o:p></o:p></span></i></b></div>
<div class="CM5" style="margin: 6pt 0in; text-align: justify; text-indent: 9pt;">
<span style="font-family: Georgia, Times New Roman, serif;">In the present case, Plaintiff is
not arguing that Debtor/Defendant(s) is/are the alter ego of any of the other
defendant entities. Instead, Plaintiff seeks a determination that
Debtor/Defendants and the other entity defendants are the alter egos of Francis
Drake, i.e. Francis Drake is the hub and the entities are merely the spokes on
a wheel of abuse of the corporate formality. Thus, the nature of the very
claims she has made is that what is purported to be the so-called <b><i>property
of the estate</i></b> is in fact property of Francis Drake. This is a claim she is entitled to make and
pursue as such a claim could not be made by the trustee.<o:p></o:p></span></div>
<div class="Style3" style="margin-bottom: 6.0pt; margin-left: .05in; margin-right: 0in; margin-top: 6.0pt; mso-line-break-override: restrictions; punctuation-wrap: simple; text-align: justify; text-autospace: ideograph-numeric ideograph-other; text-indent: .5in; vertical-align: baseline;">
<span style="font-family: Georgia, Times New Roman, serif;">“In the absence of special circumstances, stays
pursuant to section 362(a) are limited to debtors and do not include non<sup>-</sup>bankrupt
co<sup>-</sup>defendants.”<i> </i><u>Ingersoll-Rand
Financial Corporation v. Miller Mining Company, Inc.</u><i>, </i>817
F.2d 1424, 1427 (9th Cir. 1987) (<i>citing</i>,
<u>Teachers Ins. And Annuity Ass'n of
Am. V. Butler</u><i>, </i>803 F.2d 61, 65 (2d Cir. 1986)); <i>see also, </i><u>In re Arrow Huss, Inc</u><i>., </i>51
B.R. 853, 856 (Bankr. D. Utah 1985) (“It is well settled that Section 362 of
the Bankruptcy Code, which stays actions against the debtor and against
property of the estate, does not forbid actions against its nondebtor
principals, partners, officers, employees, co<sup>-</sup>obligors, guarantors,
or sureties.”). Debtor’s bankruptcy filing did have the effect of staying any
proceedings against Debtor at least prior to removal. <i>See, </i>11 U .S.C. §<i> </i>362(a)(1). The
filing, however, had no such force or effect with respect to the remaining
non-bankrupt co-defendants. <u>Id</u><i>.<o:p></o:p></i></span></div>
<div class="Style3" style="margin-bottom: 6.0pt; margin-left: .05in; margin-right: 0in; margin-top: 6.0pt; mso-line-break-override: restrictions; punctuation-wrap: simple; text-align: justify; text-autospace: ideograph-numeric ideograph-other; text-indent: .5in; vertical-align: baseline;">
<span style="font-family: Georgia, Times New Roman, serif;">The non-debtor defendants in this case could have
sought relief from the Court under §105(a) to extend the automatic stay to the
remaining defendants. <i>See, </i><u>In
re All Seasons Resorts, Inc</u><i>., </i>79 B.R. 901, 903 (Bankr. C.D.
Cal. 1987); <i>see also, </i><u>Ingersoll
Rand</u><i>, </i>817 F.2d at 1427; <u>In re Arrow Huss</u><i>, </i>51 B.R. at 856. However, they did
not. Instead they opted to remove this
matter affording Plaintiff the opportunity to pursue her claims because they
believed that they would carry the day and prevail against those claims.<o:p></o:p></span></div>
<div class="CM5" style="margin: 6pt 0in; text-align: justify;">
<b><u><span style="font-family: Georgia, Times New Roman, serif;">Plaintiff could
have prosecuted her claims of reverse Alter Ego Against Drake without
hindrance in Bankruptcy court subsequent to removal.<o:p></o:p></span></u></b></div>
<div class="Style3" style="margin-bottom: 6.0pt; margin-left: .05in; margin-right: 0in; margin-top: 6.0pt; mso-line-break-override: restrictions; punctuation-wrap: simple; text-align: justify; text-autospace: ideograph-numeric ideograph-other; text-indent: .5in; vertical-align: baseline;">
<span style="font-family: Georgia, Times New Roman, serif;">The nature of the State Court Action is that Plaintiff
the entity defendants including the debtors are the alter egos of Francis Drake.
Accordingly, the only parties that benefit from the determination that the
entities are the alter ego of Francis Drake are <u>his</u> creditors. Thus
there is no claim related to the State Court Action upon which the trustee in
the bankruptcy could act to benefit bankruptcy estate. <u><a href="http://www.leagle.com/decision/1997589211BR378_1521" target="_blank">Inre Folks</a></u><i>, </i>211 B.R. at 386. Accordingly, Debtor’s Chapter 7
trustee is not entitled to bring the sort of alter ego action that Plaintiff
seeks to prosecute in the State Court Action. Moreover, Francis Drake is not a
debtor in a separate individual bankruptcy, and therefore, there is no trustee
that could pursue the claim on his behalf. Thus, there is simply no basis upon
which any bankruptcy estate of any of the entities would benefit from the State
Court Action.<o:p></o:p></span></div>
<div class="Style3" style="margin-bottom: 6.0pt; margin-left: .05in; margin-right: 0in; margin-top: 6.0pt; mso-line-break-override: restrictions; punctuation-wrap: simple; text-align: justify; text-autospace: ideograph-numeric ideograph-other; text-indent: .5in; vertical-align: baseline;">
<span style="font-family: Georgia, Times New Roman, serif;">Even if somehow, the alter ego action was considered
property of the estate, the Chapter 7 Trustee opted not to pursue such
claims. Debtor filed the petition for
bankruptcy more than three years ago.
Presumably, the trustee reviewed the claims asserted in the State Court
Action and any other potential claims by now, which debtor’s schedules
disclosed. It is clear that the Trustee does not intend to pursue any further
actions, including any alter ego action. Further, the Chapter 7 Trustee was
given notice of the Removal and Motion to Remand, and did not file an objection
or appearance in either. It seems clear
that the Chapter 7 Trustee did not believe this to be an action of the estate.<o:p></o:p></span></div>
<div class="Style3" style="margin-bottom: 6.0pt; margin-left: .05in; margin-right: 0in; margin-top: 6.0pt; mso-line-break-override: restrictions; punctuation-wrap: simple; text-align: justify; text-autospace: ideograph-numeric ideograph-other; text-indent: .5in; vertical-align: baseline;">
<span style="font-family: Georgia, Times New Roman, serif;">Plaintiff could have sought
to deny discharge in the context of the removed action and had the standing to
do so. Under § 727(c), standing to
pursue denial of a discharge is limited to “[t]he trustee, a creditor, or the
United States trustee.” Neither the chapter7 trustee nor the United States
trustee joined in removed complaint, so Plaintiff’s ability to pursue this
action turns on her status as a “creditor.” Section 101(10)(A) states that
“[c]reditor means an entity that has a claim against the debtor that arose at
the time of or before the order for relief concerning the debtor. . .” Without
a doubt, Plaintiff had a claim, as used in Section 101(5), against the Debtor. She was not precluded from pursuing that
claim whether by virtue of § 541(a) or § 362.
As a result no tolling period is warranted.<o:p></o:p></span></div>
<div>
<!--[if !supportFootnotes]--><span style="font-family: Georgia, Times New Roman, serif;"><br clear="all" />
</span><br />
<hr align="left" size="1" width="33%" />
<!--[endif]-->
<br />
<div id="ftn1">
<div class="Default" style="text-align: justify;">
<span style="font-family: Georgia, Times New Roman, serif;"><a href="file:///C:/Users/Tony/Desktop/Blog%20Articles/11%20USC%20%C2%A7%20541%20in%20the%20Context%20of%20Alter%20Ego%20Claims.docx#_ftnref1" name="_ftn1" title=""><span class="MsoFootnoteReference"><!--[if !supportFootnotes]--><span class="MsoFootnoteReference"><span style="color: black; line-height: 107%;">[1]</span></span><!--[endif]--></span></a> <span style="color: windowtext;">All
statutory references, unless otherwise indicated, are to title 11 of the United
States Code, 11 U.S.C.A.A. §§ 101-1330, as amended (the “Bankruptcy Code”). <o:p></o:p></span></span></div>
<div class="MsoFootnoteText" style="text-align: justify;">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
</div>
<div id="ftn2">
<div class="Default" style="text-align: justify;">
<span style="font-family: Georgia, Times New Roman, serif;"><a href="file:///C:/Users/Tony/Desktop/Blog%20Articles/11%20USC%20%C2%A7%20541%20in%20the%20Context%20of%20Alter%20Ego%20Claims.docx#_ftnref2" name="_ftn2" title=""><span class="MsoFootnoteReference"><!--[if !supportFootnotes]--><span class="MsoFootnoteReference"><span style="color: black; line-height: 107%;">[2]</span></span><!--[endif]--></span></a> <u><span style="color: windowtext;">In
re Transcolor Corp</span></u><span style="color: windowtext;">., 296 B.R. 343, 353-54, 41 Bankr. Ct. Dec. (CRR) 174 (Bankr.
D. Md. 2003). <o:p></o:p></span></span></div>
<div class="MsoFootnoteText" style="text-align: justify;">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
</div>
<div id="ftn3">
<div class="CM7" style="text-align: justify;">
<span style="font-family: Georgia, Times New Roman, serif;"><a href="file:///C:/Users/Tony/Desktop/Blog%20Articles/11%20USC%20%C2%A7%20541%20in%20the%20Context%20of%20Alter%20Ego%20Claims.docx#_ftnref3" name="_ftn3" title=""><span class="MsoFootnoteReference"><!--[if !supportFootnotes]--><span class="MsoFootnoteReference"><span style="line-height: 107%;">[3]</span></span><!--[endif]--></span></a> <u>In re
Buildings by Jamie, Inc</u>., 230 B.R. 36, 41 (Bankr. D. N.J. 1998). <u>In re
Icarus Holding, LLC</u>, 391 F.3d 1315, 1319, 43 Bankr. Ct. Dec. (CRR) 273
(11th Cir. 2004), certified question answered, 279 Ga. 288, 612 S.E.2d 296
(2005). <u>In re Ozark Restaurant Equipment Co., Inc</u>., 816 F.2d 1222, 1224,
16 Bankr. Ct. Dec. (CRR) 134, 16 Collier Bankr. Cas. 2d (MB) 1148, Bankr. L.
Rep. (CCH) P 71780 (8th Cir. 1987) (“Ozark”). <u>In re Mattress N More, Inc</u>.,
231 B.R. 104, 107, 41 Collier Bankr. Cas. 2d (MB) 1062 (Bankr. N.D. Ga. 1998). <u>In
re Adam Furniture Industries, Inc</u>., 191 B.R. 249, 255, 28 Bankr. Ct. Dec.
(CRR) 433, Bankr. L. Rep. (CCH) P 76911 (Bankr. S.D. Ga. 1996). <o:p></o:p></span></div>
<div class="Default" style="text-align: justify;">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
</div>
<div id="ftn4">
<div class="MsoFootnoteText" style="text-align: justify;">
<span style="font-family: Georgia, Times New Roman, serif;"><a href="file:///C:/Users/Tony/Desktop/Blog%20Articles/11%20USC%20%C2%A7%20541%20in%20the%20Context%20of%20Alter%20Ego%20Claims.docx#_ftnref4" name="_ftn4" title=""><span class="MsoFootnoteReference"><!--[if !supportFootnotes]--><span class="MsoFootnoteReference"><span style="line-height: 107%;">[4]</span></span><!--[endif]--></span></a> 11
U.S.C.A. § 541(a)(1). <i>See also</i>, <u>In
re Folks</u>, 211 B.R. 378, 384, 31 Bankr. Ct. Dec. (CRR) 324 (B.A.P. 9th Cir.
1997).<o:p></o:p></span></div>
<div class="MsoFootnoteText" style="text-align: justify;">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
</div>
<div id="ftn5">
<div class="Default" style="text-align: justify;">
<span style="font-family: Georgia, Times New Roman, serif;"><a href="file:///C:/Users/Tony/Desktop/Blog%20Articles/11%20USC%20%C2%A7%20541%20in%20the%20Context%20of%20Alter%20Ego%20Claims.docx#_ftnref5" name="_ftn5" title=""><span class="MsoFootnoteReference"><u><!--[if !supportFootnotes]--><span class="MsoFootnoteReference"><u><span style="color: black; line-height: 107%;">[5]</span></u></span><!--[endif]--></u></span></a><u> </u><u><span style="color: windowtext;">In
re Schuster</span></u><span style="color: windowtext;">, 132 B.R. 604, 608, 22 Bankr. Ct. Dec. (CRR) 236, 25 Collier
Bankr. Cas. 2d (MB) 1611 (Bankr. D. Minn. 1991). In re Ozark Restaurant
Equipment Co., Inc., 816 F.2d 1222, 1224, 16 Bankr. Ct. Dec. (CRR) 134, 16
Collier Bankr. Cas. 2d (MB) 1148, Bankr. L. Rep. (CCH) P 71780 (8th Cir. 1987).
<o:p></o:p></span></span></div>
<div class="MsoFootnoteText" style="text-align: justify;">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
</div>
<div id="ftn6">
<div class="Default" style="text-align: justify;">
<span style="font-family: Georgia, Times New Roman, serif;"><a href="file:///C:/Users/Tony/Desktop/Blog%20Articles/11%20USC%20%C2%A7%20541%20in%20the%20Context%20of%20Alter%20Ego%20Claims.docx#_ftnref6" name="_ftn6" title=""><span class="MsoFootnoteReference"><!--[if !supportFootnotes]--><span class="MsoFootnoteReference"><span style="color: black; line-height: 107%;">[6]</span></span><!--[endif]--></span></a> <u><span style="color: windowtext;">In
re Adam Furniture Industries, Inc.,</span></u><span style="color: windowtext;"> 191 B.R. 249, 255, 28
Bankr. Ct. Dec. (CRR) 433, Bankr. L. Rep. (CCH) P 76911 (Bankr. S.D. Ga. 1996).
<u>In re Ozark Restaurant Equipment Co</u>., Inc., 816 F.2d 1222, 1225, 16
Bankr. Ct. Dec. (CRR) 134, 16 Collier Bankr. Cas. 2d (MB) 1148, Bankr. L. Rep.
(CCH) P 71780 (8th Cir. 1987). <u>In re Icarus Holding, LLC</u>, 391 F.3d 1315,
1319, 43 Bankr. Ct. Dec. (CRR) 273 (11th Cir. 2004), certified question
answered, 279 Ga. 288, 612 </span><span style="color: windowtext;">S.E.2d 296 (2005). Towe v. Martinson, 195 B.R. 137, 140, 77
A.F.T.R.2d 96-1099 <o:p></o:p></span></span></div>
<div class="MsoFootnoteText" style="text-align: justify;">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
</div>
<div id="ftn7">
<div class="Default" style="text-align: justify;">
<span style="font-family: Georgia, Times New Roman, serif;"><a href="file:///C:/Users/Tony/Desktop/Blog%20Articles/11%20USC%20%C2%A7%20541%20in%20the%20Context%20of%20Alter%20Ego%20Claims.docx#_ftnref7" name="_ftn7" title=""><span class="MsoFootnoteReference"><!--[if !supportFootnotes]--><span class="MsoFootnoteReference"><span style="color: black; line-height: 107%;">[7]</span></span><!--[endif]--></span></a> <u><span style="color: windowtext;">In
re Ozark Restaurant Equipment Co., Inc</span></u><span style="color: windowtext;">., 816 F.2d 1222, 1225,
16 Bankr. Ct. Dec. (CRR) 134, 16 Collier Bankr. Cas. 2d (MB) 1148, Bankr. L.
Rep. (CCH) P 71780 (8th Cir. 1987). In re Inland Shoe Mfg. Co., Inc., 90 B.R.
981, 985 (Bankr. E.D. Mo. 1988). <o:p></o:p></span></span></div>
<div class="MsoFootnoteText" style="text-align: justify;">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
</div>
<div id="ftn8">
<div class="CM5" style="text-align: justify; text-indent: 9.0pt;">
<span style="font-family: Georgia, Times New Roman, serif;"><a href="file:///C:/Users/Tony/Desktop/Blog%20Articles/11%20USC%20%C2%A7%20541%20in%20the%20Context%20of%20Alter%20Ego%20Claims.docx#_ftnref8" name="_ftn8" title=""><span class="MsoFootnoteReference"><!--[if !supportFootnotes]--><span class="MsoFootnoteReference"><span style="line-height: 107%;">[8]</span></span><!--[endif]--></span></a> <u>Nat'l City Bank of Minneapolis v.
Lapides (In re Transcolor Corp.),</u> 296 B.R. 343, 358-359 (Bankr. D. Md. 2003)<o:p></o:p></span></div>
<div class="MsoFootnoteText" style="text-align: justify;">
<br /></div>
</div>
</div>
Anonymoushttp://www.blogger.com/profile/02507643510494938178noreply@blogger.com1tag:blogger.com,1999:blog-5898536086571838489.post-44250222893991906472013-08-05T15:46:00.002-07:002013-10-21T10:54:32.310-07:00Filing a Lis Pendens in Nevada.<div class="MsoNormal" style="margin-bottom: 6.0pt; margin-left: 0in; margin-right: 0in; margin-top: 6.0pt; text-align: justify; vertical-align: baseline;">
<span style="font-family: Georgia, Times New Roman, serif; font-size: 12pt; letter-spacing: -0.05pt;">A <i>lis pendens</i>,
in Latin, means "pending lawsuit." In modern usage, it means a notice
of a pending lawsuit that is recorded in county real estate records. It is a public recording against subject real
property giving notice to any purchasers of a pending court dispute potentially
effecting title. It requires no decision or action by the court to file and merely
entails filing the document with the court and recording it against the real property
at the County Recorder’s Office. In Nevada,
a <i>lis pendens</i> can be filed against real
property only certain circumstances.<span class="MsoFootnoteReference"><!--[if !supportFootnotes]--><span class="MsoFootnoteReference"><span style="color: black; font-size: 12.0pt; letter-spacing: -.05pt; mso-ansi-language: EN-US; mso-bidi-font-family: "Times New Roman"; mso-bidi-language: AR-SA; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-US;"><a href="http://www.blogger.com/blogger.g?blogID=5898536086571838489#_ftn1" name="_ftnref1" title="">[1]</a></span></span><a href="http://www.blogger.com/blogger.g?blogID=5898536086571838489#_ftn1" name="_ftnref1" title=""><!--[endif]--></a></span><o:p></o:p></span><br />
<span style="font-family: Georgia, Times New Roman, serif; font-size: 12pt; letter-spacing: -0.05pt;"><span class="MsoFootnoteReference"><span class="MsoFootnoteReference"><br /></span></span></span></div>
<div class="MsoNormal" style="margin-bottom: 6.0pt; margin-left: 0in; margin-right: 0in; margin-top: 6.0pt; text-align: justify; vertical-align: baseline;">
<span style="font-family: Georgia, Times New Roman, serif; font-size: 12pt; letter-spacing: -0.05pt;">The action must involve some legal interest in the challenged
real property, such as title disputes or lien foreclosures. NRS 14.010 (a party to a civil action “for the
foreclosure of a mortgage upon real property or affecting title or possession of
real property” may record a <i>lis pendens</i>);
<u>In re Bradshaw</u>, 315 B.R. 875 (Bkrtcy.D.Nev.2004). <o:p></o:p></span><br />
<span style="font-family: Georgia, Times New Roman, serif;"><span style="font-size: 12pt; letter-spacing: -0.05pt;"></span><br /></span>
<br />
<a name='more'></a></div>
<div class="MsoNormal" style="margin-bottom: 6.0pt; margin-left: 0in; margin-right: 0in; margin-top: 6.0pt; text-align: justify; vertical-align: baseline;">
<span style="font-family: Georgia, Times New Roman, serif; font-size: 12pt; letter-spacing: -0.05pt;">A <i>lis pendens</i> may
not be used to obtain a type of pre-judgment writ of attachment which can later
be used in the eventual collection of a judgment. <u>Levinson v. Eighth Judicial District Court</u>,
1109 Nev. 747, 857 P.2d 18, 20-21 (1993).
If a plaintiff merely has a suit for monetary damages against a defendant,
the plaintiff cannot record a <i>lis pendens</i>
against that the defendant’s real property to secure payment for any judgment the
plaintiff might eventually obtain. <o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 6.0pt; margin-left: 0in; margin-right: 0in; margin-top: 6.0pt; text-align: justify; vertical-align: baseline;">
<span style="font-family: Georgia, Times New Roman, serif; font-size: 12pt; letter-spacing: -0.05pt;">As a general proposition, a <i>lis pendens</i> is not an appropriate instrument for use in promoting recoveries
in actions for personal or money judgments; rather, their office is to prevent the
transfer or loss of real property which is the subject of dispute in the action
that provides the basis for the <i>lis
pendens</i>.” <u>Levinson</u>, 857 P.2d at
20. Although the doctrine of <i>lis pendens</i> may be applied to actions other
than foreclosures, its use is restricted to avoid abuse. <u>Levinson</u>, 857 P.2d 18. <o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 6.0pt; margin-left: 0in; margin-right: 0in; margin-top: 6.0pt; text-align: justify; vertical-align: baseline;">
<span style="font-family: Georgia, Times New Roman, serif; font-size: 12pt; letter-spacing: -0.05pt;">The Levinson Court re-iterated the holding of Burger v. Superior
Court of Santa Clara County, 151 Cal.App.3d 1013, 199 Cal.Rptr. 227, 230 (1984),
which pointed out the difficulties presented when a <i>lis pendens</i> is improperly utilized:<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 6.0pt; margin-left: .5in; margin-right: 0in; margin-top: 6.0pt; text-align: justify; vertical-align: baseline;">
<span style="font-family: Georgia, Times New Roman, serif; font-size: 12pt; letter-spacing: -0.05pt;">It is one thing to say that there may be a colorable claim
against real property and another to conclude that the claim is such as to affect
the title or right to possession of the property within the meaning of the <i>lis pendens</i> statute. [The petitioner’s] contention
that [the real party in interest] is seeking simply to avoid the complexities of
California’s attachment procedure contains the germ of a more general concern. Lis pendens is one of the few remaining provisional
remedies available at its inception without prior notice to the adversary. Due process is said to be provided for by subsequent
notice and an expungement procedure which casts the burden upon the proponent of
the <i>lis pendens</i>, but a <i>lis pendens</i> may cause substantial hardship
to the property owner before relief can be obtained. A commentator has expressed reservations as to
... broad endorsement of <i>lis pendens</i> in
claimed constructive trust actions on the ground that it tends “to create a right
substantially similar to an ex parte prejudgment writ of attachment of the defendant’s
assets, a remedy disfavored in California and severely limited because of its due
process problems.” (Cal. Lis Pendens Practice,
§2.7, p. 32 (citations omitted)). Overbroad
definition of “an action ... affecting the title or right of possession of real
property” would invite abuse of <i>lis
pendens</i>.<o:p></o:p></span><br />
<span style="font-family: Georgia, Times New Roman, serif; font-size: 12pt; letter-spacing: -0.05pt;"><br /></span></div>
<div class="MsoNormal" style="margin-bottom: 6.0pt; margin-left: 0in; margin-right: 0in; margin-top: 6.0pt; text-align: justify; vertical-align: baseline;">
<span style="font-family: Georgia, Times New Roman, serif; font-size: 12pt; letter-spacing: -0.05pt;">When a <i>lis pendens</i>
is improperly filed, the remedy is to file a “Motion to Expunge Lis Pendens” Improper
filing could result in sanctions, usually in the form of an award of attorney’s
fees to the opposing side. <o:p></o:p></span></div>
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span>
<br />
<div>
<!--[if !supportFootnotes]--><span style="font-family: Georgia, Times New Roman, serif;"><br clear="all" /></span>
<br />
<hr align="left" size="1" width="33%" />
<!--[endif]-->
<br />
<div id="ftn1">
<div class="MsoFootnoteText" style="text-align: justify;">
<span style="font-family: Georgia, Times New Roman, serif; font-size: x-small;"><a href="http://www.blogger.com/blogger.g?blogID=5898536086571838489#_ftnref1" name="_ftn1" title=""><span class="MsoFootnoteReference"><!--[if !supportFootnotes]--><span class="MsoFootnoteReference">[1]</span><!--[endif]--></span></a> <span style="letter-spacing: -0.05pt;">In some instances, attorneys might file a <i>lis pendens</i> so as to avoid having to seek
and obtain a pre-judgment writ of attachment through the court, which has with it,
a stringent requirement of having to post a monetary bond. If done so improperly, sanctions may result.</span></span></div>
</div>
</div>
Anonymoushttp://www.blogger.com/profile/02507643510494938178noreply@blogger.com3tag:blogger.com,1999:blog-5898536086571838489.post-58185012177656306992013-07-30T19:26:00.001-07:002013-10-21T10:51:53.582-07:00SEC targets Bitcoin -Denominated Ponzi Scheme<div class="MsoNormal" style="margin-bottom: 6.0pt; margin-left: 0in; margin-right: 0in; margin-top: 6.0pt; text-align: justify;">
<span style="font-family: Georgia, Times New Roman, serif;">The Securities
and Exchange Commission announced late last week that it has filed an action involving
what it claims is a Bitcoin investment scam. The case involves the alleged fraudulent
offers and sales of securities in a Bitcoin-denominated alleged Ponzi scheme
founded and operated by a 30-year old Trendon T. Shavers from Texas.</span></div>
<span style="font-family: Georgia, Times New Roman, serif;">
</span>
<div class="MsoNormal" style="margin-bottom: 6.0pt; margin-left: 0in; margin-right: 0in; margin-top: 6.0pt; text-align: justify;">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal" style="margin-bottom: 6.0pt; margin-left: 0in; margin-right: 0in; margin-top: 6.0pt; text-align: justify;">
<span style="font-family: Georgia, Times New Roman, serif;">The complaint
alleges Shavers was the founder and operator of BTCST (formerly known as First
Pirate Savings & Trust) an unincorporated entity with physical “brick and
mortar” operating presence or location. On
or about November 3, 2011, Shavers, under the Internet name <i>pirateat40</i>, posted a general
solicitation for BTCST, entitled “Looking for Lenders,” on the Bitcoin Forum<a href="file:///C:/Users/Tony/Desktop/bt2.docx#_ftn1" name="_ftnref1" title=""><span class="MsoFootnoteReference"><!--[if !supportFootnotes]--><span class="MsoFootnoteReference">[1]</span><!--[endif]--></span></a> an
online forum dedicated to BTC where, among other things, numerous
BTC-denominated investment opportunities were posted. Shavers continued to post
what the SEC alleges was martially false or misleading statements as to the
purported investment opportunity. <o:p></o:p></span><br />
<span style="font-family: Georgia, Times New Roman, serif;"></span><br />
<a name='more'></a></div>
<div class="MsoNormal" style="margin-bottom: 6.0pt; margin-left: 0in; margin-right: 0in; margin-top: 6.0pt; text-align: justify;">
<span style="font-family: Georgia, Times New Roman, serif;">According to the
SEC’s complaint filed in U.S. District Court for the Eastern District of Texas,
Shavers sold BTCST investments over the Internet to investors in such states as
Connecticut, Hawaii, Illinois, Louisiana, Massachusetts, North Carolina, and
Pennsylvania. Shavers posted general solicitations on a website dedicated
to Bitcoin discussions, and he misled investors with such false assurances
about his investment opportunity as “It’s growing, it’s growing!” and “I have
yet to come close to taking a loss on any deal,” and “risk is almost 0.”
Contrary to the representations made to investors, BTCST was not in the
business of buying and selling Bitcoin at all.<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 6.0pt; margin-left: 0in; margin-right: 0in; margin-top: 6.0pt; text-align: justify;">
<span style="font-family: Georgia, Times New Roman, serif;"> According to the SEC, from at least September
2011 to September 2012, Shavers, operating under the Internet name
“pirateat40,” offered and sold BTCST investments over the Internet, raising
more than 700,000 BTC in principal investments from BTCST investors, or more
than $4.5 million based on the daily average price of BTC when the BTCST
investors purchased their BTCST investments.
<o:p></o:p></span><br />
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal" style="margin-bottom: 6.0pt; margin-left: 0in; margin-right: 0in; margin-top: 6.0pt; text-align: justify;">
<span style="font-family: Georgia, Times New Roman, serif;">The SEC claims
that Shavers falsely promised investors up to 7% interest weekly based on
BTCST’s purported BTC market arbitrage activity, including selling BTC to
individuals who wished to buy BTC “off the radar,” quickly, or in large
quantities. But as the SEC argues, in reality, the BTCST offering was a sham
and a Ponzi scheme whereby Shavers used new BTCST investors’ BTC to pay the
promised returns on outstanding BTCST investments and misappropriated BTCST
investors’ BTC for his personal use.<o:p></o:p></span><br />
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal" style="margin-bottom: 6.0pt; margin-left: 0in; margin-right: 0in; margin-top: 6.0pt; text-align: justify;">
<span style="font-family: Georgia, Times New Roman, serif;">During the
relevant period, Shavers obtained at least 700,467 BTC in principal investments
from BTCST investors, or $4,592,806 when converted to U.S. dollars based on the
daily average price of BTC when the BTCST investors purchased their BTCST
investments.<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 6.0pt; margin-left: 0in; margin-right: 0in; margin-top: 6.0pt; text-align: justify;">
<span style="font-family: Georgia, Times New Roman, serif;">Shavers returned
at least 507,148 BTC to BTCST investors as withdrawals or purported interest
payments. He also transferred at least 150,649 BTC to his personal account at
an online BTC currency exchange which, among other things, he then sold or used
to day-trade (converting BTC to U.S. dollars and vice versa). As a result of
this activity, Shavers suffered a net loss from his day-trading, but realized
net proceeds of $164,758 from his net sales of 86,202 BTC.<o:p></o:p></span><br />
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal" style="margin-bottom: 6.0pt; margin-left: 0in; margin-right: 0in; margin-top: 6.0pt; text-align: justify;">
<span style="font-family: Georgia, Times New Roman, serif;">The SEC further
claims that Shavers transferred $147,102 from his personal account at the
online BTC currency exchange to accounts he controlled at an online payment
processor and his personal checking account, which he then used for, among
other things, his personal expenses, including rent, car-related expenses,
utilities, retail purchases, casinos, and meals.<o:p></o:p></span><br />
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal" style="margin-bottom: 6.0pt; margin-left: 0in; margin-right: 0in; margin-top: 6.0pt; text-align: justify;">
<span style="font-family: Georgia, Times New Roman, serif;">The SEC’s
complaint charges Shavers and BTCST with offering and selling investments in
violation of the anti-fraud and registration provisions of the securities laws,
specifically Sections 5(a), 5(c) and 17(a) of the Securities Act of 1933,
Section 10(b) of the Securities Exchange Act of 1934 and Exchange Act Rule
10b-5. The SEC is seeking a court order to freeze the assets of Shavers
and BTCST in addition to other relief, including permanent injunctions,
disgorgement of ill-gotten gains with prejudgment interest, and financial
penalties.<o:p></o:p></span><br />
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal" style="margin-bottom: 6.0pt; margin-left: 0in; margin-right: 0in; margin-top: 6.0pt; text-align: justify;">
<b><span style="font-family: Georgia, Times New Roman, serif;">What are Bitcoins?<o:p></o:p></span></b></div>
<div class="MsoNormal" style="margin-bottom: 6.0pt; margin-left: 0in; margin-right: 0in; margin-top: 6.0pt; text-align: justify;">
<span style="font-family: Georgia, Times New Roman, serif;">In 1998, Wei Dai,
a so-called “Cypherpunk” proposed the concept of an anonymous digital currency. A cypherpunk<span style="text-align: start;"> </span>is an activist advocating widespread
use of strong <a href="http://en.wikipedia.org/wiki/Cryptography" title="Cryptography"><span style="color: windowtext; text-decoration: none;">cryptography</span></a><span style="text-align: start;"> </span>as a route to social and political
change. Originally communicating through the Cypherpunks <a href="http://en.wikipedia.org/wiki/Electronic_mailing_list" title="Electronic mailing list"><span style="color: windowtext; text-decoration: none;">electronic
mailing list</span></a><span style="text-align: start;">, informal groups
aimed to achieve privacy and security through proactive use of cryptography.
Cypherpunks have been engaged in an active movement since the late 1980s.</span>
Dai described "untraceable
pseudonymous entities utilizing a medium of exchange and the creation a
currency where government involvement "is not temporarily destroyed but
permanently forbidden and permanently unnecessary."<a href="file:///C:/Users/Tony/Desktop/bt2.docx#_ftn2" name="_ftnref2" title=""><!--[if !supportFootnotes]-->[2]<!--[endif]--></a><o:p></o:p></span><br />
<span style="font-family: Georgia, Times New Roman, serif;"><a href="file:///C:/Users/Tony/Desktop/bt2.docx#_ftn2" name="_ftnref2" title=""><br /></a></span></div>
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<span style="font-family: Georgia, Times New Roman, serif;">With this in
mind, in 2009, Satoshi Nakamoto<a href="file:///C:/Users/Tony/Desktop/bt2.docx#_ftn3" name="_ftnref3" title=""><!--[if !supportFootnotes]-->[3]<!--[endif]--></a> developed bitcoin, the world's first decentralized digital
currency, a peer-to-peer Electronic Cash System. Bitcoin is an online digital currency that
relies on peer-to-peer technology for transaction management and distribution. <o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 6.0pt; margin-left: 0in; margin-right: 0in; margin-top: 6.0pt; text-align: justify;">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal" style="margin-bottom: 6.0pt; margin-left: 0in; margin-right: 0in; margin-top: 6.0pt; text-align: justify;">
<span style="font-family: Georgia, Times New Roman, serif;"> Bitcoins are computer files. They may be stored on a personal computer or
entrusted to an online service. Since the coins are simple files stored on a
computer, spending them is as easy as sending an e-mail over the Internet. In order to spend and accept bitcoins, all
transactions must be logged on a public ledger. This public ledger is a decentralized network
operated and maintained by thousands of home computers - similar to a
peer-to-peer music-sharing network - rather than a central server. Once the transaction has been cleared by
another bitcoin user on the network, the transaction is complete, and the
bitcoins have transferred from one user to another.<o:p></o:p></span><br />
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal" style="margin-bottom: 6.0pt; margin-left: 0in; margin-right: 0in; margin-top: 6.0pt; text-align: justify; text-indent: .25in;">
<span style="font-family: Georgia, Times New Roman, serif;">Bitcoin
transactions are supposedly: (1) secure; (2) efficient; and (3) free of third
party presence - whether that third party is a government, bank, payment
network, or clearinghouse. Security is accomplished through "cryptographic
proof," which allows parties to the transaction to deal directly with one
another without a third party authorizing the transaction. n32 <o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 6.0pt; margin-left: 0in; margin-right: 0in; margin-top: 6.0pt; text-align: justify; text-indent: .25in;">
<span style="font-family: Georgia, Times New Roman, serif;">Bitcoin
relies on the use of public-key encryption to secure the parties' privacy n34
and a widely-published "peer-to-peer distributed timestamp server" to
verify that the digital coins have not been double spent.<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 6.0pt; margin-left: 0in; margin-right: 0in; margin-top: 6.0pt; text-align: justify; text-indent: .25in;">
<span style="font-family: Georgia, Times New Roman, serif;">As
of this writing, more than eleven million <a href="https://blockchain.info/charts/total-bitcoins" target="_blank">bitcoins</a> have been created and
circulated.</span></div>
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</div>
<div>
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<span style="font-family: Georgia, Times New Roman, serif;"><a href="file:///C:/Users/Tony/Desktop/bt2.docx#_ftnref1" name="_ftn1" title=""><span class="MsoFootnoteReference"><span style="font-size: 11.0pt;"><!--[if !supportFootnotes]--><span class="MsoFootnoteReference"><span style="font-size: 11pt;">[1]</span></span><!--[endif]--></span></span></a><span style="font-size: 11.0pt;"><a href="https://www.bitcoinforum.com/index.php?PHPSESSID=b6jpo8nkhni1hjvi7s052uc6m7;wwwRedirect"><span style="color: windowtext;">https://www.bitcoinforum.com/index.php?PHPSESSID=b6jpo8nkhni1hjvi7s052uc6m7;wwwRedirect</span></a><o:p></o:p></span></span></div>
</div>
<div id="ftn2">
<div class="MsoFootnoteText" style="margin-bottom: 6.0pt; margin-left: 0in; margin-right: 0in; margin-top: 6.0pt; text-align: justify;">
<span style="font-family: Georgia, Times New Roman, serif;"><a href="file:///C:/Users/Tony/Desktop/bt2.docx#_ftnref2" name="_ftn2" title=""><span class="MsoFootnoteReference"><span style="font-size: 11.0pt;"><!--[if !supportFootnotes]--><span class="MsoFootnoteReference"><span style="font-size: 11pt;">[2]</span></span><!--[endif]--></span></span></a><span style="font-size: 11.0pt;"> <a href="http://www.weidai.com/bmoney.txt"><span style="color: windowtext;">http://www.weidai.com/bmoney.txt</span></a><o:p></o:p></span></span></div>
</div>
<div id="ftn3">
<div style="background: white; margin-bottom: 6.0pt; margin-left: 0in; margin-right: 0in; margin-top: 6.0pt; text-align: justify;">
<span style="font-family: Georgia, Times New Roman, serif;"><a href="file:///C:/Users/Tony/Desktop/bt2.docx#_ftnref3" name="_ftn3" title=""><span class="MsoFootnoteReference"><span style="font-size: 11.0pt;"><!--[if !supportFootnotes]--><span class="MsoFootnoteReference"><span style="font-size: 11pt;">[3]</span></span><!--[endif]--></span></span></a><span style="font-size: 11.0pt;"> </span><span style="font-size: 11.0pt; mso-bidi-font-family: Arial;">Satoshi Nakamoto is a pseudonym for the person or group of people who
designed the original Bitcoin protocol in 2008 and launched the network in
2009. Except in connection with Bitcoin, the individual or individuals behind
this pseudonym remains publicly unknown. Nakamoto was responsible for creating
the majority of the Bitcoin software and was active in making modifications and
posting technical information on the BitcoinTalk Forum.</span><span style="font-size: 11.818181991577148px;"> </span><span class="apple-converted-space"><span style="font-size: 11.0pt; mso-bidi-font-family: Arial; mso-fareast-font-family: "Times New Roman"; mso-fareast-theme-font: minor-fareast;"> </span></span></span></div>
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<span class="apple-converted-space"><span style="font-family: "Candara","sans-serif"; font-size: 11.0pt; mso-bidi-font-family: Arial; mso-fareast-font-family: "Times New Roman"; mso-fareast-theme-font: minor-fareast;"><br /></span></span></div>
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Anonymoushttp://www.blogger.com/profile/02507643510494938178noreply@blogger.com1tag:blogger.com,1999:blog-5898536086571838489.post-59312380221207696282013-07-15T09:58:00.001-07:002013-10-21T10:59:43.801-07:00A Lender’s Duty To Produce Sufficient Documentation In Forcelosure Mediation Proceedings: Nevada Foreclosure Mediation Rules (FMR)<div class="MsoNormal" style="line-height: 11.75pt; margin-top: 25.7pt; mso-line-height-rule: exactly; text-align: justify; text-justify: inter-ideograph; vertical-align: baseline;">
<b><u><span style="font-family: Georgia, Times New Roman, serif;">The Deed of Trust<span style="font-size: small;"><o:p></o:p></span></span></u></b></div>
<div class="MsoNormal" style="margin-bottom: 6.0pt; margin-left: 0in; margin-right: 0in; margin-top: 6.0pt; text-align: justify; text-justify: inter-ideograph; vertical-align: baseline;">
<span style="font-family: Georgia, Times New Roman, serif; letter-spacing: -0.05pt;">A
deed of trust is an instrument that "secure[s] the performance of an
obligation or the payment of any debt." NRS 107.020. The Nevada Supreme
Court has previously held that a deed of trust "constitutes a conveyance
of land as defined by NRS 111.010."<a href="file:///C:/Users/Antony/Desktop/new%20article.docx#_ftn1" name="_ftnref1" title=""><span class="MsoFootnoteReference"><!--[if !supportFootnotes]--><span class="MsoFootnoteReference"><span style="color: black; letter-spacing: -0.05pt;">[1]</span></span><!--[endif]--></span></a><i> Ray
v. Hawkins</i>, 76 Nev. 164, 166, 350 P.2d 998, 999 (1960). The statute of
frauds governs when a conveyance creates or assigns an interest in land: No
estate or interest in lands, . . . nor any trust or power over or concerning
lands, or in any manner relating thereto, shall be created, granted, assigned,
surrendered or declared . . . , unless ... by deed or conveyance, in writing,
subscribed by the party creating, granting, assigning, surrendering or
declaring the same, or by the party's lawful agent thereunto authorized in
writing. NRS 111.205(1) (emphases added). Thus, to prove that WAMU properly
assigned its interest in land via the deed of trust to Wells Fargo, Wells Fargo
needs to provide a <b><i>duly </i></b>signed writing from WAMU demonstrating that transfer of
interest (and each subsequent transfer). If no such assignment(s), <b><i>duly
executed</i></b>, is/are provided at the mediation, Wells Fargo lacks would
lack standing to pursue foreclosure proceedings against ________.<o:p></o:p></span><br />
<span style="font-family: Georgia, Times New Roman, serif;"><span style="letter-spacing: -0.05pt;"></span><br /></span>
<a name='more'></a><span style="font-family: Georgia, Times New Roman, serif; letter-spacing: -0.05pt;"><br /></span></div>
<div class="MsoNormal" style="margin-bottom: 6.0pt; margin-left: 0in; margin-right: 0in; margin-top: 6.0pt; text-align: justify; text-justify: inter-ideograph; vertical-align: baseline;">
<b><u><span style="font-family: Georgia, Times New Roman, serif;">The Mortgage Note<o:p></o:p></span></u></b></div>
<div class="MsoNormal" style="margin-bottom: 6.0pt; margin-left: 0in; margin-right: 0in; margin-top: 6.0pt; text-align: justify; text-justify: inter-ideograph; vertical-align: baseline;">
<span style="font-family: Georgia, Times New Roman, serif;"><span style="letter-spacing: -0.05pt;">The
proper method of transferring the right to payment under a mortgage note is
governed by Article 3 of the Uniform Commercial Code—Negotiable Instruments,
because a mortgage note is </span><span style="letter-spacing: 0.1pt;">a negotiable instrument.<a href="file:///C:/Users/Antony/Desktop/new%20article.docx#_ftn2" name="_ftnref2" title=""><span class="MsoFootnoteReference"><!--[if !supportFootnotes]--><span class="MsoFootnoteReference"><span style="color: black; letter-spacing: 0.1pt;">[2]</span></span><!--[endif]--></span></a><sup>
</sup><i> Birkland
v. Silver State Financial Services, Inc</i>., No. 2:10-CV-00035 KJD-LRL, 2010
U.S. Dist. LEXIS 88471, 2010 WL 3419372, at page 4 (D. Nev. Aug. 25, 2010). The
obligor on the note has the right to know the identity of the entity that is
"entitled to enforce" the mortgage note under Article 3, see NRS
104.3301, <b><u>"[o]therwise, the
[homeowner] may pay funds to a stranger
to the case</u></b><u>."</u><i> In re
Veal </i>450 B.R. 897, 920, 921, 2011 Bankr. LEXIS 2359, 2011 WL 2304200, at
*16 (B.A.P. 9th Cir. 2011) (holding, in a bankruptcy case, that AHMSI did not
prove that it was the party entitled to enforce, and receive payments from, a
mortgage note because it "presented no evidence as to who possessed the
original Note. It also presented no evidence showing [e]ndorsement of the note
either in its favor or in favor of Wells Fargo, for whom AHMSI allegedly was
servicing the [bankrupt party's] Loan."). If the homeowner pays funds to a
"stranger to the case," then his or her obligation on the note would
not be reduced by the payments made. See <i>id</i>.
at 910, 2011 Bankr. LEXIS 2359, [WL] at page 7 ("if a[n obligor on a
mortgage note] makes a payment to a 'person entitled to enforce,' the
obligation is satisfied on a dollar for dollar basis, and the [obligor] never
has to pay that amount again").</span><span style="letter-spacing: -0.05pt;"><o:p></o:p></span></span></div>
<div class="MsoNormal" style="margin-bottom: 6.0pt; margin-left: 0in; margin-right: 0in; margin-top: 6.0pt; text-align: justify; text-indent: .5in; text-justify: inter-ideograph; vertical-align: baseline;">
<span style="font-family: Georgia, Times New Roman, serif;">Wells Fargo may argue
that, under Nevada law, possession of the original note allowed it to enforce
the note. The Nevada Supreme Court would disagree.<a href="file:///C:/Users/Antony/Desktop/new%20article.docx#_ftn3" name="_ftnref3" title=""><span class="MsoFootnoteReference"><!--[if !supportFootnotes]--><span class="MsoFootnoteReference"><span style="color: black;">[3]</span></span><!--[endif]--></span></a> It has concluded that Article 3 clearly
requires Wells Fargo to demonstrate <b><u>more
than mere possession of the original note to
be able to enforce a negotiable instrument</u></b> under the facts of
this case. This of course assumes that Wells Fargo actually possesses the
original note.<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 6.0pt; margin-left: 0in; margin-right: 0in; margin-top: 6.0pt; text-align: justify; text-justify: inter-ideograph; vertical-align: baseline;">
<span style="font-family: Georgia, Times New Roman, serif;">Article 3 is codified in
NRS 104.3101-.3605.
Pursuant to NRS
104.3102(1), Article 3 applies to negotiable instruments. Negotiable
instruments are defined as an unconditional promise or order to pay a fixed
amount of money, with or without interest or other charges described in the
promise or order, if it:<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 6.0pt; margin-left: .75in; margin-right: 0in; margin-top: 6.0pt; mso-list: l0 level1 lfo1; tab-stops: decimal .75in; text-align: justify; text-indent: -.25in; text-justify: inter-ideograph; vertical-align: baseline;">
<!--[if !supportLists]--><span style="font-family: Georgia, Times New Roman, serif;">(a)
<!--[endif]-->Is payable to bearer or
to order at the time it is issued or first comes into possession of a holder;<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 6.0pt; margin-left: .75in; margin-right: 0in; margin-top: 6.0pt; mso-list: l0 level1 lfo1; tab-stops: decimal .75in; text-align: justify; text-indent: -.25in; text-justify: inter-ideograph; vertical-align: baseline;">
<!--[if !supportLists]--><span style="font-family: Georgia, Times New Roman, serif;">(b) <!--[endif]-->Is payable on demand or at a definite time; and<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 6.0pt; margin-left: .75in; margin-right: 0in; margin-top: 6.0pt; mso-list: l0 level1 lfo1; tab-stops: decimal .75in; text-align: justify; text-indent: -.25in; text-justify: inter-ideograph; vertical-align: baseline;">
<!--[if !supportLists]--><span style="font-family: Georgia, Times New Roman, serif;">(c)
<!--[endif]-->Does not state any other
undertaking or instruction by the person promising or ordering payment to do
any act in addition to the payment of money. NRS 104.3104(1). Thus, a mortgage
note is a negotiable instrument, and any negotiation of a mortgage note must be
done in accordance with Article 3<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 6.0pt; margin-left: 0in; margin-right: 0in; margin-top: 6.0pt; text-align: justify; text-indent: .5in; text-justify: inter-ideograph; vertical-align: baseline;">
<span style="font-family: Georgia, Times New Roman, serif;">A note can be made
payable to bearer or payable to order. NRS 104.3109. If the note is payable to
bearer, that "indicates that the person in possession of the promise or
order is entitled to payment." NRS 104.3109(1)(a). However, "[a]
promise or order that is not payable to bearer is payable to order if it is
payable to the order of an identified person .... A promise or order that is
payable to order is payable to the identified person." NRS 104.3109(2).<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 6.0pt; margin-left: 0in; margin-right: 0in; margin-top: 6.0pt; text-align: justify; text-indent: .5in; text-justify: inter-ideograph; vertical-align: baseline;">
<span style="font-family: Georgia, Times New Roman, serif;">For a note in order form
to be enforceable by a party other than to whom the note is originally payable,
the note must be either negotiated or transferred.<sup> </sup> A "'[n]egotiation' means a transfer of
possession, whether voluntary or involuntary, of an instrument by a person
other than the issuer to a person who thereby becomes its holder." NRS
104.3201(1). "[I]f an instrument is payable to an identified person,
negotiation requires transfer of possession of the instrument and its
endorsement by the holder."<a href="file:///C:/Users/Antony/Desktop/new%20article.docx#_ftn4" name="_ftnref4" title=""><span class="MsoFootnoteReference"><!--[if !supportFootnotes]--><span class="MsoFootnoteReference"><span style="color: black;">[4]</span></span><!--[endif]--></span></a> NRS 104.3201(2) (emphasis
added). An "endorsement" is a signature that is "made on an
instrument for the purpose of negotiating the instrument." NRS
104.3204(1). Thus, if the note is payable to the order of an identifiable
party, but is then sold or otherwise assigned to a new party, it must be endorsed
by the party to whom it was originally payable for the note to be considered
properly negotiated to the new party. Once a proper negotiation occurs, the new
party, or "note holder," with possession is entitled to enforce the
note. [*1281] NRS 104.1201(2)(u)(1) ("Holder means...[t]he person in
possession of a negotiable instrument that is payable either to bearer or to an
identified person that is the person in possession.")<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 6.0pt; margin-left: 0in; margin-right: 0in; margin-top: 6.0pt; text-align: justify; text-indent: .5in; text-justify: inter-ideograph; vertical-align: baseline;">
<span style="font-family: Georgia, Times New Roman, serif;">If a party cannot attain
"holder" status by showing a valid negotiation, the party may establish
its right to enforce the note by showing that the note has been validly
transferred. NRS 104.3203(2). The only distinction between a negotiation and a
transfer is that, in the case of a transfer, the note need not be endorsed by
the party who is relinquishing enforcement rights. Because a transferred note
is not endorsed, however, the party seeking to establish its right to enforce
the note "must account for possession of the unendorsed instrument by
proving the transaction through which the transferee acquired it." U.C.C.
§3-203 cmt. 2 (explaining the effect of §3-203(b), codified in Nevada as NRS
104.3203(2)). In other words, because the party seeking to enforce the note
cannot "prove" its right to enforce through the use of a valid
endorsement, the party must "prove" by some other means that it was
given possession of the note for the purpose of enforcing it.<a href="file:///C:/Users/Antony/Desktop/new%20article.docx#_ftn5" name="_ftnref5" title=""><span class="MsoFootnoteReference"><!--[if !supportFootnotes]--><span class="MsoFootnoteReference"><span style="color: black;">[5]</span></span><!--[endif]--></span></a><o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 6.0pt; margin-left: 0in; margin-right: 0in; margin-top: 6.0pt; text-align: justify; text-justify: inter-ideograph; vertical-align: baseline;">
<span style="font-family: Georgia, Times New Roman, serif;"><span style="letter-spacing: 0.35pt;">In
this case, the mortgage note provides: "In return for a loan that I have
received, I </span>promise to pay U.S.
$_____ plus interest, to the order of Lender. Lender is<span style="letter-spacing: .35pt;"> </span>_________(emphasis added). Because the mortgage note is payable
to the order of a specific<span style="letter-spacing: .35pt;"> </span>party, ______,
to negotiate the note to a new party, in this case Wells Fargo, Wells<span style="letter-spacing: .35pt;"> </span>Fargo must have possession of the note and
the note must be properly endorsed by _____________. See NRS 104.3201(2). If no
such endorsement is included in the documents produced at mediation, or if
Wells fargo fails to produce a <b><i>valid </i></b>assignment as proof of the
note's transfer, Wells Fargo is not entitled to enforce the note. (Mere
possession does not entitle Wells Fargo to enforce the note assuming they can
even produce the original note.) Therefore,<span style="letter-spacing: .35pt;"> </span>because
the mortgage note is payable to ,
unless Wells Fargo can prove that the note was properly endorsed or validly
transferred, thereby making it the party entitled to enforce the note, it has
not demonstrated authority to mediate the note.<span style="letter-spacing: .35pt;"><o:p></o:p></span></span></div>
<div class="MsoNormal" style="margin-bottom: 6.0pt; margin-left: 0in; margin-right: 0in; margin-top: 6.0pt; text-align: justify; text-justify: inter-ideograph; vertical-align: baseline;">
<span style="font-family: Georgia, Times New Roman, serif; letter-spacing: 0.05pt;">As
the Nevada Supreme Court has concluded in <i>Pasillas<a href="file:///C:/Users/Antony/Desktop/new%20article.docx#_ftn6" name="_ftnref6" title=""><span class="MsoFootnoteReference"><!--[if !supportFootnotes]--><span class="MsoFootnoteReference"><b><span style="color: black; letter-spacing: 0.05pt;">[6]</span></b></span><!--[endif]--></span></a></i>,
a foreclosing party's failure to bring the required documents to the mediation
is a sanctionable offense under NRS 107.086 and the FMRs.</span></div>
<div>
<!--[if !supportFootnotes]--><span style="font-family: Georgia, Times New Roman, serif;"><br clear="all" /></span>
<hr align="left" size="1" width="33%" />
<!--[endif]-->
<br />
<div id="ftn1">
<div class="MsoNormal" style="line-height: 13.85pt; margin-top: 5.95pt; mso-line-height-rule: exactly; text-align: justify; text-justify: inter-ideograph; vertical-align: baseline;">
<span style="font-family: Georgia, Times New Roman, serif;"><a href="file:///C:/Users/Antony/Desktop/new%20article.docx#_ftnref1" name="_ftn1" title=""><span class="MsoFootnoteReference"><!--[if !supportFootnotes]--><span class="MsoFootnoteReference">[1]</span><!--[endif]--></span></a> "'Conveyance' shall be construed to embrace
every instrument in writing, except a last will and testament, whatever may be
its form, and by whatever name it may be known in law, by which any estate or
interest in lands is created, aliened, assigned or surrendered." NRS
111.010(1).<o:p></o:p></span></div>
</div>
<div id="ftn2">
<div class="MsoNormal" style="line-height: 13.65pt; margin-top: 6.2pt; mso-line-height-rule: exactly; vertical-align: baseline;">
<span style="font-family: Georgia, Times New Roman, serif;"><a href="file:///C:/Users/Antony/Desktop/new%20article.docx#_ftnref2" name="_ftn2" title=""><span class="MsoFootnoteReference"><!--[if !supportFootnotes]--><span class="MsoFootnoteReference">[2]</span><!--[endif]--></span></a> Article 3 is codified in NRS 104.3101-.3605.<o:p></o:p></span></div>
</div>
<div id="ftn3">
<div class="MsoNormal" style="line-height: 16.2pt; margin-bottom: 1.5pt; margin-left: 0in; margin-right: 0in; margin-top: 4.25pt; mso-line-height-rule: exactly; vertical-align: baseline;">
<span style="font-family: Georgia, Times New Roman, serif;"><a href="file:///C:/Users/Antony/Desktop/new%20article.docx#_ftnref3" name="_ftn3" title=""><span class="MsoFootnoteReference"><!--[if !supportFootnotes]--><span class="MsoFootnoteReference">[3]</span><!--[endif]--></span></a> <i>Leyva
v. Nat'l Default Servicing Corp</i>., 255 P.3d 1275, 1279-1281 (Nev. 2011).<o:p></o:p></span></div>
</div>
<div id="ftn4">
<div class="MsoNormal" style="line-height: 13.95pt; margin-top: 6.05pt; mso-line-height-rule: exactly; text-align: justify; text-justify: inter-ideograph; vertical-align: baseline;">
<span style="font-family: Georgia, Times New Roman, serif;"><a href="file:///C:/Users/Antony/Desktop/new%20article.docx#_ftnref4" name="_ftn4" title=""><span class="MsoFootnoteReference"><!--[if !supportFootnotes]--><span class="MsoFootnoteReference">[4]</span><!--[endif]--></span></a> Under NRS 104.3301(1)(a), a person entitled to
enforce an instrument is "[t]he holder of the instrument."<o:p></o:p></span></div>
</div>
<div id="ftn5">
<div class="MsoNormal" style="text-align: justify; text-justify: inter-ideograph; vertical-align: baseline;">
<span style="font-family: Georgia, Times New Roman, serif;"><a href="file:///C:/Users/Antony/Desktop/new%20article.docx#_ftnref5" name="_ftn5" title=""><span class="MsoFootnoteReference"><!--[if !supportFootnotes]--><span class="MsoFootnoteReference">[5]</span><!--[endif]--></span></a> To "prove" a transaction under NRS
104.3203(2), a party must present evidence sufficient to establish that it is
more likely than not that the transaction took place. NRS 104.3103(1)(i)
(defining "prove"); NRS 104.1201(2)(h) (defining [**18] "burden
of establishing")<o:p></o:p></span></div>
</div>
<div id="ftn6">
<div class="MsoNormal" style="line-height: 13.8pt; margin-bottom: .05pt; margin-left: 0in; margin-right: 0in; margin-top: 6.35pt; mso-line-height-rule: exactly; text-align: justify; text-justify: inter-ideograph; vertical-align: baseline;">
<span style="font-family: Georgia, Times New Roman, serif;"><a href="file:///C:/Users/Antony/Desktop/new%20article.docx#_ftnref6" name="_ftn6" title=""><span class="MsoFootnoteReference"><!--[if !supportFootnotes]--><span class="MsoFootnoteReference">[6]</span><!--[endif]--></span></a> <span style="letter-spacing: 0.1pt;">In <i>Pasillas</i>, the Nevada Supreme Court concluded that the following
nonexhaustive list of factors would aid district courts in determining what
sanctions are appropriate: "whether the violations were intentional, the
amount of prejudice to the nonviolating party, and the violating party's
willingness to mitigate any harm by continuing meaningful negotiation."
Pasillas v. HSBC Bank USA, 127 Nev. ___,___, 255 P.3d 1281, 2011 Nev. LEXIS 39
(Adv. Op. No. 39, July 7, 2011)</span><span style="letter-spacing: 0.1pt;"><o:p></o:p></span></span></div>
<div class="MsoFootnoteText">
<br /></div>
</div>
</div>
Anonymoushttp://www.blogger.com/profile/02507643510494938178noreply@blogger.com0tag:blogger.com,1999:blog-5898536086571838489.post-80331314270415504012013-07-10T23:57:00.001-07:002013-10-21T10:53:25.629-07:00SEC Lifts Rule 506 Solicitation and Advertising Ban pursuant to JOBS Act<div class="MsoNormal" style="background-color: white; background-position: initial initial; background-repeat: initial initial; margin: 6pt 0in; text-align: justify;">
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify; text-indent: 0.5in;">
<span style="font-family: Georgia, Times New Roman, serif;">The Securities and Exchange Commission
(SEC) adopted a new rules today implementing Title II of the JOBS Act. In
essence, these new rules lift the ban on general solicitation or general
advertising for certain private securities offerings for business startups,
while also adopting rules to discourage fraudsters from touting the investments
and to add new protections for investors.<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify; text-indent: 0.5in;">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify; text-indent: 0.5in;">
<span style="font-family: Georgia, Times New Roman, serif;">The new rules become effective 60 days
after publication in the Federal Register. During this 60 day period the rules
will be subject to public comment.</span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify; text-indent: 0.5in;">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span>
<span style="font-family: Georgia, Times New Roman, serif;">Ordinarily, the offer and sale of
securities require registration with the SEC. A number of exemptions from
registration exist but most of these exemptions prohibited general solicitation
advertising. <a href="http://www.law.uc.edu/sites/default/files/CCL/33ActRls/rule506.html"><span style="color: blue;">Rule 506 of Regulation D</span></a> for example allowed
a company (issuer) to raise an unlimited amount of capital from an unlimited
number of “accredited investors” and up to 35 non-accredited investors<a href="http://www.blogger.com/blogger.g?blogID=5898536086571838489" name="_ftnref1">. [1]</a></span><br />
<br />
<a name='more'></a></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify; text-indent: 0.5in;">
<span style="font-family: Georgia, Times New Roman, serif;">But on April 5, 2012, President Obama
signed into law the Jumpstart Our Business Startups Act, or JOBS Act. Section
201(a)(1) (Title II) of the JOBS Act directs eliminates the prohibition on
general solicitation and advertising for securities offerings relying on Rule
506 provided that the sales are limited to accredited investors and an issuer
takes reasonable steps to verify that all purchasers of the securities are
accredited investors. The Act mandated that the SEC remove this general
solicitation restriction. The legislative intent of the act was to ease or
loosen the regulatory constraints faced by startup companies seeking to raise
capital with the presumption that by doing so, additional jobs might result.<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify; text-indent: 0.5in;">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify; text-indent: 0.5in;">
<span style="font-family: Georgia, Times New Roman, serif;">The JOBS Act also required the SEC to
formulate and implement rules that “require the issuer to take reasonable steps
to verify that purchasers of the securities are accredited investors, using
such methods as determined by the Commission.” There is no restriction on who
an issuer can solicit, but an issuer must take reasonably reliable.<a href="http://www.blogger.com/blogger.g?blogID=5898536086571838489" name="_ftnref2"> [2]</a><o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify; text-indent: 0.5in;">
<span style="font-family: Georgia, Times New Roman, serif;">In August of 2012, the SEC proposed a
rule that would remove the general solicitation ban for certain 506 offerings
in which sales of securities would be limited to accredited investors and
issuers would be required to take reasonable steps to verify such accredited
status.<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify; text-indent: 0.5in;">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify; text-indent: 0.5in;">
<span style="font-family: Georgia, Times New Roman, serif;">The final rule approved Wednesday makes
changes to Rule 506 to permit issuers to use general solicitation and general
advertising to offer their securities provided that the issuer takes reasonable
steps to verify that the investors are accredited investors. In addition, all
purchasers of the securities must fall within one of the categories of persons
who are accredited investors under an existing rule (<a href="http://www.law.uc.edu/sites/default/files/CCL/33ActRls/rule501.html"><span style="color: blue;">Rule 501 of Regulation D</span></a>) or the issuer
reasonably believes that the investors fall within one of the categories at the
time of the sale of the securities.<a href="http://www.blogger.com/blogger.g?blogID=5898536086571838489" name="_ftnref3"> [3]</a><o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify; text-indent: 0.5in;">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify; text-indent: 0.5in;">
<span style="font-family: Georgia, Times New Roman, serif;">The determination of the reasonableness
of the steps taken to verify an accredited investor is an objective assessment
by an issuer. An issuer is required to consider the facts and circumstances of
each purchaser and the transaction. The final rule provides a non-exclusive
list of methods that issuers may use to satisfy the verification requirement
for individual investors. These include:<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify; text-indent: 0.5in;">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal" style="margin: 0in 0in 0.0001pt 0.5in; text-align: justify;">
<span style="font-family: Georgia, Times New Roman, serif;">• Reviewing copies of
any IRS form that reports the income of the purchaser and obtaining a written
representation that the purchaser will likely continue to earn the necessary
income in the current year.<o:p></o:p></span></div>
<div class="MsoNormal" style="margin: 0in 0in 0.0001pt 0.5in; text-align: justify;">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal" style="margin: 0in 0in 0.0001pt 0.5in; text-align: justify;">
<span style="font-family: Georgia, Times New Roman, serif;">• Receiving a written
confirmation from a registered broker-dealer, SEC-registered investment
adviser, licensed attorney, or certified public accountant that such entity or
person has taken reasonable steps to verify the purchaser's accredited status.<o:p></o:p></span></div>
<div class="MsoNormal" style="margin: 0in 0in 0.0001pt 0.5in; text-align: justify;">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
<span style="font-family: Georgia, Times New Roman, serif;"><span style="color: blue;"><a href="http://www.sec.gov/answers/formd.htm" target="_blank">Form D</a></span>.
The notice that issuers must file with the SEC when they sell securities under
Regulation D, will be advised to include a separate box for issuers to check if
they are claiming the <i>new</i> Rule 506 exemption.<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify; text-indent: 0.5in;">
<span style="font-family: Georgia, Times New Roman, serif;">In connection with this new rule, the
SEC voted to issue a rule proposal requiring issuers to provide additional
information about these securities offerings to better enable the SEC to
monitor the market with that ban now lifted. The proposal also provides for
additional safeguards as this market changes and new practices develop.<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify; text-indent: 0.5in;">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify; text-indent: 0.5in;">
<span style="font-family: Georgia, Times New Roman, serif;">The SEC also adopted rules that
disqualify felons and other bad actors from participating in certain securities
offerings as required by the Dodd-Frank Act.<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify; text-indent: 0.5in;">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify; text-indent: 0.5in;">
<span style="font-family: Georgia, Times New Roman, serif;">The rule amendments become effective 60
days after publication in the Federal Register. The rule proposal will undergo
a 60-day public comment period following its publication in the Federal
Register.<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify; text-indent: 0.5in;">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify; text-indent: 0.5in;">
<span style="font-family: Georgia, Times New Roman, serif;">In conjunction with the lift of the ban
against general solicitation and advertising, the SEC approved a proposal
mandating issuers file a notice of sale 15 days before commencing an offering
or advertising or soliciting same; and second notification at the conclusion of
an within 30 days subsequent to completing an offering. The second notice would
update the information contained in the Form D and indicate that the offering
has ended.<a href="http://www.blogger.com/blogger.g?blogID=5898536086571838489" name="_ftnref4"> [4]</a><o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify; text-indent: 0.5in;">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify; text-indent: 0.5in;">
<span style="font-family: Georgia, Times New Roman, serif;">The proposal also requires issuers to
provide additional information about the issuer and the offering. Currently,
Form D requires identifying information about the company or the fund selling the
securities, any related persons, the exemption the issuer is relying on to
conduct the offering, and certain other factual information about the issuer
and the offering.<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
<span style="font-family: Georgia, Times New Roman, serif;">Issuer
would now be required under the proposal to provide additional information to
enable the SEC to gather more information on the changes to the Rule 506 market
that could occur now that the general solicitation ban has been lifted.<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
<span style="font-family: Georgia, Times New Roman, serif;">The
additional information would include:<o:p></o:p></span></div>
<ol start="1" type="1">
<li class="MsoNormal" style="text-align: justify;"><span style="font-family: Georgia, Times New Roman, serif;">the
issuer’s Web site(s);<o:p></o:p></span></li>
<li class="MsoNormal" style="text-align: justify;"><span style="font-family: Georgia, Times New Roman, serif;">The
nature of the securities to be offered;<o:p></o:p></span></li>
<li class="MsoNormal" style="text-align: justify;"><span style="font-family: Georgia, Times New Roman, serif;">The
types of investors in the offering;<o:p></o:p></span></li>
<li class="MsoNormal" style="text-align: justify;"><span style="font-family: Georgia, Times New Roman, serif;">The
use of proceeds from the offering;<o:p></o:p></span></li>
<li class="MsoNormal" style="text-align: justify;"><span style="font-family: Georgia, Times New Roman, serif;">The
manner of general solicitation used; and,<o:p></o:p></span></li>
<li class="MsoNormal" style="text-align: justify;"><span style="font-family: Georgia, Times New Roman, serif;">The
methods used to verify the accredited investor status of investors.<o:p></o:p></span></li>
</ol>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify; text-indent: 0.25in;">
<span style="font-family: Georgia, Times New Roman, serif;">Critically, the proposal disqualifies
issuers who fail to file Form D. If the issuer or its affiliates do not comply
with the new Form D filing requirements in a Rule 506 offering the
disqualification would continue for one year beginning after the required Form
D filings are made. Issuers would be able to rely on a cure period for a late
Form D filing and, in certain circumstances, could request a waiver from the
staff.<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify; text-indent: 0.25in;">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify; text-indent: 0.25in;">
<span style="font-family: Georgia, Times New Roman, serif;">The proposal also requires issuers to
include certain legends or cautionary statements in any written general
solicitation materials used in a Rule 506 offering notifying prospective
investors that the offering is limited to accredited investors and that certain
potential risks may be associated with such offerings.<a href="http://www.blogger.com/blogger.g?blogID=5898536086571838489" name="_ftnref5"> [5]</a><o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify; text-indent: 0.25in;">
<span style="font-family: Georgia, Times New Roman, serif;">The proposal requires issuers to submit
written general solicitation materials to the SEC. Under the proposal, issuers
are required to submit written general solicitation materials to the SEC
through an intake page on the SEC’s Web site. Materials submitted in this
manner would not be available to the general public. As proposed, this
requirement would be temporary, expiring after two years.<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify; text-indent: 0.25in;">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify; text-indent: 0.25in;">
<span style="font-family: Georgia, Times New Roman, serif;">Rule 156 under the Securities Act—would
be extended to the sales literature of private funds. It would apply to all
private funds whether or not they are engaged in general solicitation
activities. In the proposing release, the SEC would express its view that
private funds should now begin considering the principles underlying Rule 156.<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify; text-indent: 0.25in;">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
<b><span style="font-family: Georgia, Times New Roman, serif;">Disqualification
of Felons and Other “Bad Actors”<o:p></o:p></span></b></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify; text-indent: 0.25in;">
<span style="font-family: Georgia, Times New Roman, serif;">Under the final disqualification rule
approved today, an issuer cannot rely on the Rule 506 exemption if the issuer
or any other person covered by the rule had a “disqualifying event.” The final
disqualification rule covers the issuer, including its predecessors and
affiliated issuers, as well as:<o:p></o:p></span></div>
<ol start="1" type="1">
<li class="MsoNormal" style="text-align: justify;"><span style="font-family: Georgia, Times New Roman, serif;">Directors
and certain officers, general partners, and managing members of the
issuer;<o:p></o:p></span></li>
<li class="MsoNormal" style="text-align: justify;"><span style="font-family: Georgia, Times New Roman, serif;">20
percent beneficial owners of the issuer;<o:p></o:p></span></li>
<li class="MsoNormal" style="text-align: justify;"><span style="font-family: Georgia, Times New Roman, serif;">Promoters;<o:p></o:p></span></li>
<li class="MsoNormal" style="text-align: justify;"><span style="font-family: Georgia, Times New Roman, serif;">Investment
managers and principals of pooled investment funds; and <o:p></o:p></span></li>
<li class="MsoNormal" style="text-align: justify;"><span style="font-family: Georgia, Times New Roman, serif;">Persons
compensated for soliciting investors as well as the general partners,
directors, officers and managing members of any compensated solicitor.<o:p></o:p></span></li>
</ol>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
<span style="font-family: Georgia, Times New Roman, serif;">Disqualifying
events include:</span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
</div>
<ol>
<li><span style="font-family: Georgia, Times New Roman, serif;">Criminal
convictions in connection with the purchase or sale of a security, making
of a false filing with the SEC or arising out of the conduct of certain
types of financial intermediaries. The criminal conviction must have
occurred within 10 years of the proposed sale of securities (or five years
in the case of the issuer and its predecessors and affiliated issuers).</span></li>
<li><span style="font-family: Georgia, Times New Roman, serif;">Court
injunctions and restraining orders in connection with the purchase or sale
of a security, making of a false filing with the SEC, or arising out of
the conduct of certain types of financial intermediaries. The injunction
or restraining order must have occurred within five years of the proposed
sale of securities.</span></li>
<li><span style="font-family: Georgia, Times New Roman, serif;">Final
orders from the Commodity Futures Trading Commission, federal banking
agencies, the National Credit Union Administration, or state regulators of
securities, insurance, banking, savings associations, or credit unions
that bar the issuer from associating with a regulated entity, engaging in
the business of securities, insurance or banking, or engaging in savings
association or credit union activities; or are based on fraudulent,
manipulative, or deceptive conduct and are issued within 10 years of the
proposed sale of securities.</span></li>
<li><span style="font-family: Georgia, Times New Roman, serif;">Certain
SEC disciplinary orders relating to brokers, dealers, municipal securities
dealers, investment companies, and investment advisers and their
associated persons.</span></li>
<li><span style="font-family: Georgia, Times New Roman, serif;">SEC
cease-and-desist orders related to violations of certain anti-fraud
provisions and registration requirements of the federal securities laws.</span></li>
<li><span style="font-family: Georgia, Times New Roman, serif;">SEC
stop orders and orders suspending the Regulation A exemption issued within
five years of the proposed sale of securities.</span></li>
<li><span style="font-family: Georgia, Times New Roman, serif;">Suspension
or expulsion from membership in a self-regulatory organization (SRO) or
from association with an SRO member.</span></li>
<li><span style="font-family: Georgia, Times New Roman, serif;">U.S.
Postal Service false representation orders issued within five years before
the proposed sale of securities.</span></li>
</ol>
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify; text-indent: 0.25in;">
<span style="font-family: Georgia, Times New Roman, serif;">The final rule provides an exception
from disqualification when the issuer can show it did not know and, in the
exercise of reasonable care, could not have known that a covered person with a
disqualifying event participated in the offering.<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify; text-indent: 0.25in;">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify; text-indent: 0.25in;">
<span style="font-family: Georgia, Times New Roman, serif;">Finally, disqualification applies only
for disqualifying events that occur after the effective date of this rule. But
matters that existed before the effective date of the rule and would otherwise
be disqualifying are subject to a mandatory disclosure requirement to
investors.</span><span style="font-family: Verdana, sans-serif; font-size: 10pt;"><o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify; text-indent: 0.25in;">
<br /></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: "Verdana","sans-serif"; font-size: 10.0pt; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman";">
</span><br />
<hr align="left" size="1" width="33%" />
<span style="font-family: "Verdana","sans-serif"; font-size: 10.0pt; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman";">
</span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
<a href="http://www.blogger.com/blogger.g?blogID=5898536086571838489" name="_ftn1"><span style="font-family: "Verdana","sans-serif"; font-size: 8.0pt; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman";">[1]</span></a><span style="font-family: "Verdana","sans-serif"; font-size: 8.0pt; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman";"> Accredited investors are
individuals who meet certain minimum income or net worth levels, or certain
institutions such as trusts, corporations or charitable organizations that meet
certain minimum asset levels.<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
<a href="http://www.blogger.com/blogger.g?blogID=5898536086571838489" name="_ftn2"><span style="font-family: "Verdana","sans-serif"; font-size: 8.0pt; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman";">[2]</span></a><span style="font-family: "Verdana","sans-serif"; font-size: 8.0pt; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman";"> The law also directed the SEC to
amend Rule 144A under the Securities Act, an exemption from registration that
applies to the resale of securities to larger institutional investors known as
qualified institutional buyers, or QIBs. Under current Rule 144A, offers of
securities can only be made to QIBs. Under the new rule, Rule 144A is amended
so that offers of securities can be made to investors who are not QIBs as long
as the securities are sold only to persons whom the seller reasonably believes
are QIBs. <o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
<a href="http://www.blogger.com/blogger.g?blogID=5898536086571838489" name="_ftn3"><span style="font-family: "Verdana","sans-serif"; font-size: 8.0pt; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman";">[3]</span></a><span style="font-family: "Verdana","sans-serif"; font-size: 8.0pt; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman";"> Under the existing Rule 501, a
person qualifies as an accredited investor if he or she has either an individual
net worth or joint net worth with a spouse that exceeds $1 million at the time
of the purchase, excluding the value (and any related indebtedness) of a
primary residence; or an individual annual income that exceeded $200,000 in
each of the two most recent years or a joint annual income with a spouse
exceeding $300,000 for those years, and a reasonable expectation of the same
income level in the current year.<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
<a href="http://www.blogger.com/blogger.g?blogID=5898536086571838489" name="_ftn4"><span style="font-family: "Verdana","sans-serif"; font-size: 8.0pt; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman";">[4]</span></a><span style="font-family: "Verdana","sans-serif"; font-size: 8.0pt; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman";"> Presently, an issuer relying on
Rule 506 is required to file a Form D no later than 15 calendar days <i>after</i> the
first sale of securities in an offering.<o:p></o:p></span></div>
<br />
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
<a href="http://www.blogger.com/blogger.g?blogID=5898536086571838489" name="_ftn5"><span style="font-family: Verdana, sans-serif; font-size: 8pt;">[5]</span></a><span style="font-family: Verdana, sans-serif; font-size: 8pt;"> If
the issuer is a private fund and includes information about past performance in
its written general solicitation materials, it would be required to provide
additional information in the materials to highlight the limitations on the
usefulness of this type of information. The issuer also would need to highlight
the difficulty of comparing this information with past performance information
of other funds.<o:p></o:p></span></div>
</div>
Anonymoushttp://www.blogger.com/profile/02507643510494938178noreply@blogger.com1tag:blogger.com,1999:blog-5898536086571838489.post-84425885905422815222013-07-09T13:36:00.001-07:002013-10-21T10:59:19.986-07:00SEC Obtains Final Judgment Against Miami Attorney for preparing and presenting False Attorney Letters on behalf of issuer.<div class="MsoNormal" style="background: white; mso-outline-level: 2; text-align: justify;">
<div style="margin-bottom: .0001pt; margin: 0in;">
<span style="font-family: Georgia, Times New Roman, serif;"><b>SEC Litigation Release No. 22746</b><o:p></o:p></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span style="font-family: Georgia, Times New Roman, serif;"><b>July 9, 2013</b><o:p></o:p></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span style="font-family: Georgia, Times New Roman, serif;"><b><u>SEC v. Merkin</u></b><u><o:p></o:p></u></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-align: justify; text-indent: .5in;">
<span style="font-family: Georgia, Times New Roman, serif;">On July 1, 2013, a
District Judge for the Southern District of Florida, signed a final judgment
against defendant Stewart A. Merkin (“Merkin”) in a civil action originally
filed by the SEC on October 3, 2011. The Defendant is an attorney in
Miami, Florida. <o:p></o:p></span></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-align: justify;">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-align: justify; text-indent: .5in;">
<span style="font-family: Georgia, Times New Roman, serif;">The alleged
violations include Section 10(b) of the Securities Exchange Act of 1934 (the
“Exchange Act”) and Rule 10b-5 thereunder. <span class="apple-converted-space"> </span><span style="background: white;">The
Defendant wrote four attorney representation letters for posting on the website
of Pink Sheets LLC and its successor, Pink OTC Markets, Inc. Therein, he
disclaimed knowledge of any investigation into possible violations of the
securities laws by StratoComm or any of its officers or directors. However, the
SEC’s complaint also alleges that the Defendant was representing StratoComm and
several individuals in connection with the SEC’s investigation at the time.
Nevertheless, in order that StratoComm’s shares would continue to be quoted,
the SEC’s complaint alleges that Defendant falsely stated that to his knowledge
StratoComm was not under investigation.</span><o:p></o:p></span></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-align: justify;">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<span style="font-family: Georgia, Times New Roman, serif;"><u1:p></u1:p>
<u1:p></u1:p>
<u1:p></u1:p>
<u1:p></u1:p>
</span><br />
<div style="margin-bottom: .0001pt; margin: 0in; text-align: justify; text-indent: .5in;">
<span style="font-family: Georgia, Times New Roman, serif;">On October 3, 2012,
the Court granted the Commission’s motion for summary judgment with respect to
liability, finding that the Defendant made false statements of material fact,
with scienter, in connection with the purchase or sale of securities.
Defendant subsequently consented to the entry of a final judgment that: (i)
orders him liable to pay a total of $125,000 in disgorgement, prejudgment
interest and a civil penalty; (ii) imposes a permanent injunction against
future violations of Section 10(b) and Rule 10b-5 of the Exchange Act by making
false or misleading statements; and (iii) permanently bars Merkin from
participating in an offering of penny stock. In consenting to these remedies,
Merkin retained his right to appeal from the Court’s ruling on summary judgment
with respect to liability. </span><span style="font-family: Verdana, sans-serif; font-size: 10pt;"><o:p></o:p></span></div>
</div>
Anonymoushttp://www.blogger.com/profile/02507643510494938178noreply@blogger.com7tag:blogger.com,1999:blog-5898536086571838489.post-24020724112390298422013-07-07T14:28:00.001-07:002013-10-21T10:58:02.152-07:00Fed. R. Civ. P. 12(b)(6); Fed. R. Civ. P. 8(a)(2); and Judicial Notice—A Motion to Dismiss<div class="MsoNormal" style="margin-bottom: 6.0pt; margin-left: .1in; margin-right: .3in; margin-top: 6.0pt; text-align: justify; text-indent: .55in;">
<div style="text-align: justify;">
<span style="font-family: Georgia, Times New Roman, serif;"> <span style="text-indent: 0.5in;">The Federal Rules of Civil Procedure
permit a responding party to seek dismissal of a claim, or any part thereof,
for "failure to state a claim upon which relief can be granted."</span><i style="text-indent: 0.5in;"> <a href="http://www.law.cornell.edu/rules/frcp/rule_12"><span style="color: blue;">Fed.
R. Civ. P. 12(b)(6)</span></a>.</i><span style="text-indent: 0.5in;"> A motion to dismiss under Federal Rule
of Civil Procedure 12(b)(6) requires the Court to decide whether the facts
alleged in the complaint entitle the plaintiff to relief.</span><i style="text-indent: 0.5in;"> Id.</i><span style="text-indent: 0.5in;"> The
court need not accept as true conclusory allegations of law made in the
complaint, nor must it accept unreasonable inferences or unwarranted deductions
of fact. Hon. William W. Schwarzer, et al.,</span><i style="text-indent: 0.5in;"> Federal Civil
Procedure Before Trial §</i><span style="text-indent: 0.5in;"> 9:221 (2000) (citing</span><i style="text-indent: 0.5in;"> </i><u style="text-indent: 0.5in;">In re Delorean Motor Co</u><i style="text-indent: 0.5in;">.,</i><span style="text-indent: 0.5in;"> 991
F.2d 1236, 1240 (6th Cir. 1993)). In addition, the court need not accept as
true conclusory allegations or legal characterizations of counsel.</span><i style="text-indent: 0.5in;"> See,
</i><u style="text-indent: 0.5in;">W Mining Council v. Watt</u><i style="text-indent: 0.5in;">,</i><span style="text-indent: 0.5in;"> 643
F.2d 618, 624 (9th Cir. 1981).</span></span><br />
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-indent: 0.5in;">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-indent: 0.5in;">
<span style="font-family: Georgia, Times New Roman, serif;">The United States Supreme Court
heightened the federal pleading standards governing Rule 12(b)(6) motions. In<i> </i><u>Bell Atl. Corp. v. Twombly</u><i>,</i> 550
U.S. 544 (2007), the Supreme Court held that notice pleading requires more than
a mere legal conclusion to defeat a motion to dismiss. The Supreme Court
specifically stated that a plaintiff is obligated "to provide the
'grounds' of his entitle[ment] to relief" beyond mere "labels and
conclusions."<i> </i><u>Id</u><i>.</i> at
555. The Supreme Court also stated that "a formulaic recitation of the
elements of a cause of action will not do."<i> Id.</i> As a
result, a plaintiff must provide "[f]actual allegations . . . enough to
raise a right to relief above the speculative level ... on the assumption that
all the allegations in the complaint are true (even if doubtful in fact)."<i> </i><u>Id</u><i>.</i> More recently, in<i> </i><u>Ashcroft v. Iqbal</u><i>,</i> 556
U.S. 129 S. Ct. 1937 (2009), the Supreme Court further reaffirmed<i> </i><u>Twombly</u> and clarified that
its holding applies in all civil actions in the United States district courts.<i> </i><u>Id</u><i>.</i> at 1951.</span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-indent: 0.5in;">
<span style="font-family: Georgia, Times New Roman, serif;"></span></div>
<a name='more'></a><span style="font-family: Georgia, Times New Roman, serif;"><br /></span>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<b><span style="font-family: Georgia, Times New Roman, serif;">Fed.
R. Civ. P. 8(a)(2)</span></b></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-indent: 0.5in;">
<span style="font-family: Georgia, Times New Roman, serif;"><a href="http://www.law.cornell.edu/rules/frcp/rule_8"><span style="color: blue;">Fed.
R. Civ. P. 8(a)(2)</span></a> requires "a short and plain statement
of the claim showing that the pleader is entitled to relief," in order to
"give the defendant fair notice of what the ... claim is and the grounds
upon which it rests."<i> </i><u>Conley v. Gibson</u>, 355 U.S. 41, 47 (1957). The factual
allegations within a claim must be enough to raise a right to relief above the
speculative level.<i> 5 C. Wright & A. Miller, Federal Practice and
Procedure</i>, § 1216, pp. 235-236 (3d ed. 2004).<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-indent: 0.5in;">
<span style="font-family: Georgia, Times New Roman, serif;">In considering a motion to dismiss for
failure to state a claim upon which relief can be granted, all material
allegations in the complaint are accepted as true and are to be construed in
the light favorable to the non-moving party.<i> </i><u>Russell v. Landrieu</u>, 621 F.2d
1037, 1039 (9th Cir. 1980). A dismissal under Fed. R. Civ. P. 12 (b)(6) can be
based on the lack of a cognizable theory or the absence of sufficient facts
under a cognizable theory.<i> </i><u>Robertson v. Dean Witter Reynolds, Inc</u><i>.</i>, 749 F.2d
530, 533-534 (9th Cir. 1984).<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Georgia, Times New Roman, serif;"><b>Judicial
Notice</b><o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-indent: 0.5in;">
<span style="font-family: Georgia, Times New Roman, serif;">If adjudicative facts or matters of
public record meet the requirements of Fed. R. Evid. 201, a court may
judicially notice them in deciding a motion to dismiss.<i> United States
v. Richie</i>, 342 F.3d 903, 908 (9th Cir. 2003); <i>see</i>, Fed. R. Evid. 201(b) ("A Judicially noticed fact must be
one not subject to reasonable dispute in that it is either (1) generally known
within the territorial Jurisdiction of the trial court or (2) capable of
accurate and ready determination by resort to sources whose accuracy cannot
reasonably be questioned.")<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-indent: 0.5in;">
<span style="font-family: Georgia, Times New Roman, serif;">This includes allegations made in
pleadings, court orders, and other documents filed in other lawsuits.<a href="http://www.blogger.com/blogger.g?blogID=5898536086571838489" name="_ftnref1">[1]</a> Judicial notice of matters of public record will
not convert a Rule 12(b)(6) motion to a summary judgment motion.<i> Lee</i>,
250 F.3d at 688. Judicial notice is proper where a fact is “not subject to
reasonable dispute in that it is either (1) generally known within the
territorial jurisdiction of the trial court, or (2) capable of accurate and
ready determination by resort to sources whose accuracy cannot reasonably be
questioned.” Fed. R. Evid. 201(b).<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-indent: 0.5in;">
<span style="font-family: Georgia, Times New Roman, serif;">The Ninth Circuit has indicated that
court files may be judicially noticed.<i> </i><u>Mullis v. United
States Bank. Ct</u><i>.</i>, 828 F. 2d 1385, 1388, fn. 9 (9th Cir.
1987); <i>see also</i>,<i> </i><u>U.S. ex rel Robinson Rancheria Citizens
Council v. Borneo, Inc.</u>, 971 F. 2d 244, 248 (9th Cir. 1992)(“[W]e
‘may take notice of proceedings in other courts, both within and without the
federal judicial system, if those proceedings have a direct relation to matters
at issue.’”).<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-indent: 0.5in;">
<span style="font-family: Georgia, Times New Roman, serif;">The court may also take into account
matters of public record, orders, items present in the record of the case, and
any exhibits attached to the complaint."<i> See, 5A Charles A.
Wright & Arthur R. Miller, Federal Practice and Procedure, Civil 2D</i> §
1356-57 (2d ed. 1990);<i> see also, </i><u>Coos County Bd. of County Commis v. Kempthorne</u><i>, </i>531
F.3d 792, 811 (9th Cir. 2001). The Court may further <u>"consider
documents on which the complaint 'necessarily relies' and whose
'authenticity</u> . . . is not contested." <u>Lee v. City of Los Angeles</u><i>,</i> 250
F.3d 668, 688 (9th Cir. 2001) (citations omitted);<i> see also, </i><u>Warren v. Fox Family Worldwide, Inc.</u><i>,</i> 328
F.3d 1136, 1141 (9th Cir. 2003) (same). A court may also treat certain
documents as incorporated by reference into the plaintiff’s complaint if . . .
the document forms the basis of the plaintiff’s claim."<i> See, </i><u>Committee for Reasonable Regulation of Lake
Tahoe v. Tahoe Regional Planning Agency</u><i>,</i> 365 F.
Supp. 2d 1146, 1153 (D. Nev. 2005).<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-indent: 0.5in;">
<span style="font-family: Georgia, Times New Roman, serif;">The documents attached hereto as Exhibits
“A” and “B” are included for purposes of establishing the presence of an
indispensable party, namely, RRH, LTD and the Court may further consider them
as documents on which the complaint necessarily relies and whose authenticity ... are not contested. These are the very subscription agreements directly
referred to by Plaintiff in his claims as to the purchase of securities and the
alleged claims of fraud in conjunction therewith. For these reasons, Exhibits
“A” and “B” are directly related to the civil case in front of this Court. The
documents are not subject to reasonable dispute, and, per the standard set
forth above, may properly be considered. The exhibits include:<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Georgia, Times New Roman, serif;">1) Exhibit
“A” – The RRH Consulting Agreement<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Georgia, Times New Roman, serif;">2) Exhibit
“B” – The RRH Subscription Agreements<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Georgia, Times New Roman, serif;">3) Exhibit
“C” – JF Blog Biography<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Georgia, Times New Roman, serif;">4) Exhibit
“D” – JF Web Blog<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Georgia, Times New Roman, serif;">5) Exhibit
“E” - State Bar of Nevada Complaint against JF for the Unauthorized Practice of
Law<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Georgia, Times New Roman, serif;">6) Exhibit
“F”- State Bar of Nevada Judgment against JF<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Georgia, Times New Roman, serif;">7) Exhibit
“G” JF Civil/Criminal Case Records<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Georgia, Times New Roman, serif;">8) Exhibit
“H” Nevada Attorney General Press Release Re: JF<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-indent: 0.5in;">
<span style="font-family: Georgia, Times New Roman, serif;">These are each matters of public
record. They are directly related to the civil case before this Court and the
Court may take judicial notice of these documents.<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Georgia, Times New Roman, serif;"><b>1. <u>The
Amended Complaint in its Entirety, Lacks both a Cognizable Legal Theory
and Sufficient Facts Alleged Under a Cognizable Legal Theory</u></b><o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-indent: 0.5in;">
<span style="font-family: Georgia, Times New Roman, serif;">In considering a motion to dismiss for
failure to state a claim upon which relief can be granted, all material
allegations in the complaint are accepted as true and are to be construed in
the light most favorable to the non-moving party.<i> </i><u>Russell v. Landrieu</u>, 621 F.2d
1037 (9th Cir. 1980). A dismissal under Fed. R. Civ. P. 12(b)(6) is essentially
a ruling on a question of law.<i> </i><u>North Star International v. Arizona Corp. Comm</u>., 720 F.2d
578 (9th Cir. 1983). For a defendant-movant to succeed, it must appear to a
certainty that a plaintiff will not be entitled to relief under any set of
facts that could be proven under the allegations of the complaint.<i> </i><u>Halet v. Wand Investment Co</u>., 672
F.2d 1305 (9th Cir. 1982). Dismissal can be based on the lack of a cognizable
legal theory or the absence of sufficient facts alleged under a cognizable
legal theory.<i> </i><u>Robertson
v. Dean Witter Reynolds, Inc</u><i>.</i>, 749 F.2d 530, 533-534
(9th Cir. 1984).<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-indent: 0.5in;">
<span style="font-family: Georgia, Times New Roman, serif;">The Amended Complaint does not meet the
standards with respect to Fed. R. Civ. P. 8(a)(2). Plaintiff has not provided
Defendant with "a short and plain statement of the claim showing that the
pleader is entitled to relief," in order to give the defendant fair notice
of what the claim is and the grounds upon which it rests. Plaintiff's factual
allegations do not raise a right to relief above the speculative level.
Plaintiff has not presented a claim that is "plausible on its face."<i> </i><u>Bell Atlantic Corp. v. Twobly</u>,
550 U.S. 544,127 S. Ct. 1955, 1974 (2007).<o:p></o:p></span></div>
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<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-indent: 0.5in;">
<span style="font-family: Georgia, Times New Roman, serif;">Plaintiff has not presented enough
relevant information necessary and sufficient to any of his so-called claims to
be fairly analyzed.<b><u> He simply has not presented a cognizable
theory for relief or sufficient facts under a cognizable theory to withstand
a motion to dismiss pursuant to Rule 12 (b)(6).</u></b><i> </i><u>Robertson</u>, 749 F.2d at 533-534.
The Amended Complaint is all but impossible to read much less understand. It is
nothing more than a series of disconnected ramblings reminiscent of a
post-modern stream of consciousness novel nobody understands. Defendants are
left to merely guess as to what the theory and supporting facts may be, and
this does not meet the burden of stating a claim upon which relief can be
granted. Perhaps this might be tolerable to this Court given Plaintiff is a<i> pro
se</i> litigant. But as Exhibits “C”, “D” and “E” clearly indicate,
Plaintiff has for years held himself out as a law school graduate and has been
sanctioned by the Nevada State Bar for the unauthorized practice of law.<a href="http://www.blogger.com/blogger.g?blogID=5898536086571838489" name="_ftnref2"> [2]</a> Exhibit “C” and “D” include his website or blog
where he represents in his own biography that he attended Northrop University
School of Law and Bernadine University, and received a Law Degree. He also
claims that he finished at the top of his class but declined to take the Bar
Exam because he believes “the legal system is a fraud that allows members of
the Bar an entitlement to steal, lie and forge documents for clients”. In light
of this Plaintiff should not be allowed the benefit of more liberal pleading
standards typically applicable to<i> pro-se</i>, non-law graduates and
should be obliged to comply with standards necessary and sufficient to meet the
requirements of Fed. R. Civ. P. 8.<o:p></o:p></span></div>
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<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Georgia, Times New Roman, serif;"><b>2. <u>Plaintiff’s
First Cause of Action Fails to State a Claim upon Which Relief May be
Granted.</u></b><o:p></o:p></span></div>
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<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-indent: 0.5in;">
<span style="font-family: Georgia, Times New Roman, serif;">JF terms his first cause of action as
follows: <u>“Wrongful Termination, Bad Faith Breach of a Quasi
Contract: In Retaliation for exercising a basic right. </u>Convoluted at
best, this claim or claims is/are incomprehensible. It appears to be directed
to Defendants Joe Bloe and ABC. It also appears to be at least two separate
claims, namely: (1) wrongful termination; and/or (2) an unjust enrichment or<i> quasi</i> contract
claim.<o:p></o:p></span></div>
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<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Georgia, Times New Roman, serif;"><b><i>(i) The Wrongful Termination Claim</i></b><o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-indent: 0.5in;">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-indent: 0.5in;">
<span style="font-family: Georgia, Times New Roman, serif;">Plaintiff describes the nature of the
employment relationship at issue to some extent in his Amended Complaint as
follows:<o:p></o:p></span></div>
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<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal" style="margin: 0in 0in 0.0001pt 0.5in;">
<span style="font-family: Georgia, Times New Roman, serif;">32. In or about
January of 2010 Plaintiff was hired by Defendant to manage and over see the
company "News" Department, he was hired as an employee, and as
one of four supervisors, he was supervised by the Company CEO, and by Joe Bloe
personally, Plaintiff was told what work to do and when to do it, Plaintiff had
one subordinate employee that he directed, this employee was provided by the
company, and plaintiff was required to work at the ABC offices on Park Avenue,
Plaintiff, prepared scripts for Video presentations, edited articles from
Pakistan, and created content for ABC Clients. Each item he completed was
directed by the company and was always subject to company approval. For all
this Plaintiff was paid at the rate of $5,000 a month, at that time Plaintiff
was paid $2,000 in cash and $3,000 a month in Stock, as restricted shares,
which is worth substantially less than at the time it was provided. <a href="http://www.blogger.com/blogger.g?blogID=5898536086571838489" name="_ftnref3">[3]<o:p></o:p></a></span></div>
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<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-indent: 0.5in;">
<span style="font-family: Georgia, Times New Roman, serif;">Nevada recognizes the tort of bad faith
discharge where an employer breaches an implied covenant of good faith and fair
dealing, but only in “those rare and exceptional instances where the employer's
conduct goes well beyond the bounds of ordinary breach of contract liability.”<i> </i><u>Smith v. Cladianos</u>, 104 Nev. 67,
752 P.2d 233, 235 (1988). The doctrine's application to at-will employees is
further restricted to conduct that violates public policy. <i>See, </i><u>Vancheri</u>, 777 P.2d at 370;<i> </i><u>Smith</u>, 752 P.2d at 235.<a href="http://www.blogger.com/blogger.g?blogID=5898536086571838489" name="_ftnref4"> [4]</a> In the instant matter, Plaintiff does not even
claim that a written contract existed between him and any of the Defendants as
to employment. Indeed the amended complaint can only be read in a manner that
dictates nothing other than an “at-will” employment relation existed between
Plaintiff and Defendant(s).<o:p></o:p></span></div>
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<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-indent: 0.5in;">
<span style="font-family: Georgia, Times New Roman, serif;">Nevada recognizes the common law
doctrine of employment at-will.<i> </i><u>K Mart Corp. v. Ponsock,</u> 732 P.2d 1364 (Nev. 1987). The
doctrine provides that "employment for an indefinite term may be
terminated at any time for any reason or for no reason by either the employee
or the employer without legal liability."<i> </i><u>Southwest Gas Corp. v. Ahmad</u>,
99 Nev. 594, 596, 668 P.2d 261 (1983) (Justice Steffen, dissenting). An
employer privileged to terminate an employee at any time necessarily enjoys the
lesser privilege of imposing prospective changes in the conditions of
employment.<i> </i><u>Albrant v. Sterling
Furniture Co</u>., 85 Or. App. 272, 736 P.2d 201, review denied, 304 Or.
55, 742 P.2d 1186 (1987). At the heart of the at-will employment doctrine is
the general rule that at-will employment can be terminated without liability by
either the employer or the employee at any time and for any reason or no reason.<i> </i><u>Martin v. Sears, Roebuck & Co.</u><i>,</i> 111
Nev. 923, 926, 899 P.2d 551, 553-54 (1995).<o:p></o:p></span></div>
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<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
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<span style="font-family: Georgia, Times New Roman, serif;"><b><i>(ii) The Quasi Contract Claim</i></b><o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-indent: 0.5in;">
<span style="font-family: Georgia, Times New Roman, serif;">In Nevada, the elements of an unjust
enrichment claim or “quasi contract” are: (1) a benefit conferred on the
defendant by the plaintiff; (2) appreciation of the benefit by the defendant;
and (3) acceptance and retention of the benefit by the defendant (4) in
circumstances where it would be inequitable to retain the benefit without
payment. <i>See</i>, <u>Lease Partners Corp., Inc. v. Robert L.
Brooks Trust</u>, 113 Nev. 747, 942 P.2d 182, 187 (Nev.1997) (quoting<i> </i><u>Union America Mortgage & Equity Trust v.
McDonald</u>, 97 Nev. 210, 626 P.2d 1272, 1273 (Nev.1981) (quoting<i> </i><u>Dass v. Epplen</u>, 162 Colo. 60, 424
P.2d 779, 780 (Colo. 1967))).<a href="http://www.blogger.com/blogger.g?blogID=5898536086571838489" name="_ftnref5">[5]<o:p></o:p></a></span></div>
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<span style="font-family: Georgia, Times New Roman, serif;">
Any claim of<i> quasi</i> contract should be dismissed
because the Plaintiff has failed to plead the elements necessary for such a
claim. Plaintiff has not specified what benefit was conferred upon the
defendant (or that any such benefit was indeed conferred). Plaintiff has not pled
as to the appreciation of any such benefit by the Defendants. Plaintiff has not
pled any circumstances of inequity as to retention of any benefit by Defendants
without payment.<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-indent: 0.5in;">
<span style="font-family: Georgia, Times New Roman, serif;">Plaintiff’s nonsensical claim for<i> quasi</i> contract
starts with a legal conclusion that a quasi contract is created at the start of
the employment relationship. Quoting directly from the Amended Complaint:<o:p></o:p></span></div>
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<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal" style="margin: 0in 0in 0.0001pt 0.5in;">
<span style="font-family: Georgia, Times New Roman, serif;">51. At the time of
the employment there was created between ABC and Plaintiff, a Quasi Contract
relationship; the terms of the hiring were employing Plaintiff in good faith,
and a promise to deal with Plaintiff fairly and justly, that quasi contract
relationship also contains a covenant of good faith and fair dealing based on
the employment relationship.<o:p></o:p></span></div>
<div class="MsoNormal" style="margin: 0in 0in 0.0001pt 0.5in;">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal" style="margin: 0in 0in 0.0001pt 0.5in;">
<span style="font-family: Georgia, Times New Roman, serif;">52. A second part of
that quasi contract relationship was a promise to reimburse plaintiff for
his gas and upkeep for his car as the company required Plaintiff to work at the
offices in Las Vegas, and Knew that Plaintiff Lived in St. George, Plaintiff
has paid $65.00 a week for gas to travel back and forth, and has gone through a
set of tires which costs over $400.00, Plaintiff is entitled to be reimbursed
$2,080 in Gas plus $400.00 for tires, or mileage based on the IRS allowance.<a href="http://www.blogger.com/blogger.g?blogID=5898536086571838489" name="_ftnref6">[6]<o:p></o:p></a></span></div>
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<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-indent: 0.5in;">
<span style="font-family: Georgia, Times New Roman, serif;">The notion that somehow at the<u> inception</u> of
an employment relationship a quasi contract between an employer and employee is<i> automatically</i> created
mandating that an employer reimburse an employee for transportation or vehicle
expenses is simply erroneous. Looking back to Paragraph 32 of the Amended
Complaint, no mention is made regarding such expenses nor has Plaintiff claimed
anywhere else, that any understanding was reached as to these expenses or that
any promise of reimbursement was for these expenses was ever made by any of the
Defendants. This misguided legal conclusion betrays a fundamental
misunderstanding of a claim based on unjust enrichment or<i> quasi</i> contract
theory. Regardless, it does it support an unjust enrichment claim.<o:p></o:p></span></div>
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<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-indent: 0.5in;">
<span style="font-family: Georgia, Times New Roman, serif;">Given that: (1) Plaintiff has failed to
plead he was anything more than at will employee; (2) an at-will employee has
no cognizable “bad faith” discharge claim under Nevada law; (3) Plaintiff has
not adequately pled that his discharge somehow violated Nevada public policy;
and (4) the pleadings cannot support an action sounding in<i> quasi </i>contract
or unjust enrichment, Plaintiff’s first claim for relief should be dismissed.<o:p></o:p></span></div>
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<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Georgia, Times New Roman, serif;"><b>3. <u>Plaintiff’s
Second, Third, Sixth, Seventh, Eighth and Ninth Claims<a href="http://www.blogger.com/blogger.g?blogID=5898536086571838489" name="_ftnref7">[7]</a> Fail
to State a Claim upon Which Relief May be Granted give than he is not the real
part in interest has non standing to bring forth these claims.</u></b><o:p></o:p></span></div>
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<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-indent: 0.5in;">
<span style="font-family: Georgia, Times New Roman, serif;">The captions for Plaintiff’s second,
third, sixth, seventh, eighth and ninth claims are listed below.<o:p></o:p></span></div>
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<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
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<span style="font-family: Georgia, Times New Roman, serif;">Second Cause of Action - Fraud by
Misrepresentation (Joe Bloe, Mary Bloe, ABC)<o:p></o:p></span></div>
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<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Georgia, Times New Roman, serif;">Third Cause of Action - Private action
for Unlawful Manipulation of Securities under 9 (e) In Violation of Section 9
(a) (2) & (4) and authorization for a private right of action under 10 (b)
and the 1933 act, Section 12 (2) Of the Securities Laws (all defendants)<o:p></o:p></span></div>
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<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Georgia, Times New Roman, serif;">Sixth Cause of Action - Breach of oral
contract/Promissory Fraud promising the future value of ABC Securities and seeking
benefit of the bargain damages of $0.25 per share, and $3.00 per share (Joe
Bloe, Mary Bloe et al.)<o:p></o:p></span></div>
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<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Georgia, Times New Roman, serif;">Seventh<b> </b>Cause of Action – Whistleblower for a
New Variation of the Illegal Pump and Dump Scheme (all defendants)<o:p></o:p></span></div>
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<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Georgia, Times New Roman, serif;">Eighth Case of Action - Breach of
Contract, Failure of Consideration (defendants: ______)<o:p></o:p></span></div>
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<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Georgia, Times New Roman, serif;">Ninth Cause
of Action - Fraud by Concealment (_________, and ABC)<o:p></o:p></span></div>
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<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-indent: 0.5in;">
<span style="font-family: Georgia, Times New Roman, serif;">Each of these claims is predicated on
the alleged or implied fact that <b><u>Plaintiff</u></b> entered
into a transaction involving the purchase or sale of a security. Similarly,
each of these claims is grounded in fraud. In Paragraph 12 of the Amended
Complaint, Plaintiff references certain subscription agreements utilized in the
transactions alleged to have taken place whereby Plaintiff claims to have
purchased the securities at issue. Paragraph 12 reads:<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-indent: 0.5in;">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal" style="margin: 0in 0in 0.0001pt 0.5in;">
<span style="font-family: Georgia, Times New Roman, serif;">12. Joe Bloe who is
not an officer or director of ABC (ABC.OB) personally sells stock in ABC, and
is and has done so through a subscription agreement, under SEC exemption Regulation
"D" section 506, but without providing any prospectus, or submitting
the same to the State or paying any exemption fee, accordingly Plaintiff is
informed and believes that no prospectus or subscription agreement has been
authorized for the State of Nevada in the year 2009, or at any time, and
plaintiff further believes ABC has never filed an S1 or other registration
statement for their securities, but that all shares of the company have been
sold in this fashion, or used to acquire labor or goods.<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Georgia, Times New Roman, serif;">
Paragraph 28 of the Amended Complaint reads:<o:p></o:p></span></div>
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<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal" style="margin: 0in 0in 0.0001pt 0.5in;">
<span style="font-family: Georgia, Times New Roman, serif;">28. In or about
February 2009 Plaintiff was in Las Vegas at his office on Jones and was
approached by Joe Bloe to invest in his Company ABC, Plaintiff was induced by
Joe Bloe to invest a substantial amount of money to acquire shares in ABC Inc,
("ABC") the representations were that Plaintiff would make a large
return of more than double his investment, and that the shares he was acquiring
for $0.10 would be worth $0.25 by the end of 2010, the second part of this
representation was that if Plaintiff did invest this money ABC would fund
Plaintiff's company the following, e.g. for the first for months, ABC would
fund $500,000 a month and on the 5th month ABC would fund $50,000,000. The
purpose of this funding was to acquire properties out of foreclosure to keep
the homeowner in the property.<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-indent: 0.5in;">
<span style="font-family: Georgia, Times New Roman, serif;">Copies of these subscription agreements
and bank drafts used to purchase shares are included herewith (including the
February 2009 transaction Plaintiff references in Paragraph 28) as Exhibit “B.”<b><u> Quite
plainly, Plaintiff has never<i> personally,</i> in his <i>individual</i> capacity,
engaged in any transaction for the purchase of securities from any of the
Defendants</u></b><u>.</u> To the extent that Plaintiff refers to any such
transaction in his Amended Complaint, by necessity, he must be referring to
transactions whereby the Nevada entity named RRH, LTD (“RRH”) purchased
securities. Absent any personal or individual purchase or sale of securities
from any of the defendants, Plaintiff has no standing to plead Claim Numbers 2,
3, 6, 7, 8, and 9.<o:p></o:p></span></div>
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<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Georgia, Times New Roman, serif;"><b><i>As to Plaintiff’s Second, Third, Sixth, Seventh, Eighth and
Ninth Claims (each grounded in fraud) Plaintiff has failed to Plead Facts Giving
Rise to a strong inference of Securities Fraud.</i></b><o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-indent: 0.5in;">
<span style="font-family: Georgia, Times New Roman, serif;"><a href="http://www.law.cornell.edu/uscode/text/15/78j"><span style="color: blue;">Section
10(b) of the Securities Exchange Act of 1934</span></a> prohibits fraud in
the purchase or sale of a security. 15 U.S.C. § 78(b). To properly state a
claim under Section 10(b) and Rule 10b-5 thereunder, Plaintiff must plead that:
(1) Defendants made a material misrepresentation or omission, (2) Defendants
acted with scienter, (3) there was a connection with the purchase or sale of a
security, (4) Plaintiff relied on the alleged misrepresentation or omission,
(5) Plaintiff suffered economic loss, and (6) the alleged misrepresentation or
omission caused the loss from which Plaintiff seeks to recover damages.<i> </i><u>Dura Pharm., Inc. v. Broudo</u>, 544
U.S. 336 (2005) at 341-42.<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Georgia, Times New Roman, serif;">
<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-indent: 0.5in;">
<span style="font-family: Georgia, Times New Roman, serif;">Prior to 1995, the Ninth Circuit had
already established that since Section 10(b) sounds in fraud, plaintiffs were
required by <a href="http://www.law.cornell.edu/rules/frcp/rule_9"><span style="color: blue;">Rule 9(b)</span></a> to plead with particularity the
time, place, and specific content of the false representations, as well as the
identities of the parties making the misrepresentation.<i> See, </i><u>In re GlenFed Sec. Litig</u>., 42
F.3d 1541, 1547-48 (9th Cir. 1994). Plaintiffs, however, were permitted to
plead scienter more generally.<i> Id.</i><o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-indent: 0.5in;">
<span style="font-family: Georgia, Times New Roman, serif;">In 1995, Congress concluded that more
stringent pleading standards were required in order to deter “abusive
securities fraud claims.”<i> </i><u>In
re Silicon Graphics</u>, 183 F.3d at 973. Consequently, the Reform Act
was enacted and requires Plaintiffs to plead “specific facts” that give rise to
a “strong inference of scienter,” defined as “intentional or deliberately
reckless” misconduct. 15 U.S.C. § 78u-4(b)(2) (plaintiffs must “state with
particularity facts giving rise to a strong inference that the defendant acted
with the required state of mind”);<i> In re Silicon Graphics Inc.</i>, 183
F.3d at 974. The factual allegations must not only be particular, but also must
“strongly imply [the defendant’s]<i> contemporaneous</i> knowledge
that the statement was false when made.” <u>In re Read-Rite Corp</u><i>.</i>, 335 F.3d 843, 847 (9th Cir.
2003).<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-indent: 0.5in;">
<span style="font-family: Georgia, Times New Roman, serif;">Thus, a motion to dismiss under the
Reform Act is quite a bit different than the usual Rule 12(b)(6) motion. “The
[Reform Act] requires a plaintiff to plead a complaint for securities fraud
with an unprecedented degree of specificity and detail. This is not an easy
standard to comply with – and was not intended to be — – a plaintiff must be
held to it.”<i> </i><u>Eminence
Capital, LLC v. Aspeon, Inc</u><i>.</i>, 316 F.3d 1048, 1052 (9th Cir.
2003). “The purpose of this heightened pleading requirement [is] to eliminate
abusive securities litigation and particularly to put an end to the practice of
pleading ‘fraud by hindsight.’”<i> </i><u>In re Vantive Corp. Sec. Litig.</u>, 283 F.3d 1079, 1084-85 (9th
Cir. 2002).<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-indent: 0.5in;">
<span style="font-family: Georgia, Times New Roman, serif;">Moreover, in conducting this inquiry,
unlike a typical motion to dismiss, all inferences are not drawn in favor
of Plaintiffs. Instead, the Supreme Court recently clarified that the court
“must take into account plausible opposing inferences.” <u>Tellabs, Inc. v. Makor Issues & Rights,
Ltd</u><i>.</i>, U.S. 127 S. Ct. 2499, 2509 (2007). The Supreme Court
explained that the strength of an inference depends on its particular context:
“To determine whether the plaintiff has alleged facts that give rise to the
requisite ‘strong inference’ of scienter, a court must consider plausible
nonculpable explanations for the defendant’s conduct, as well as inferences
favoring the plaintiff.” <u>Id.</u> at
2510. A complaint will survive a motion to dismiss under the Reform Act “only
if a reasonable person would deem the inference of scienter cogent and at least
as compelling as any opposing inference one could draw from the facts alleged.”<i> </i><u>Id</u><i>. </i>This focuses on
whether the totality of allegations in a complaint gives rise to the requisite
strong inference of scienter.<i> </i><u>Id</u><i>.</i> Finally<b>,<u> the Reform Act provides
that if the above pleading requirements are not met, “the court<i> shall</i> ...
dismiss the complaint</u></b><u>.</u> . . .” 15 U.S.C. § 78u-4(b)(3)
(emphasis added).<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-indent: 0.5in;">
<span style="font-family: Georgia, Times New Roman, serif;">In the instant matter, Plaintiffs
alleged claims of fraud or misrepresentation in the Second, Third, Sixth,
Seventh, Eighth and Ninth causes of actions are based on alleged statements
made by Defendant(s)<i> that the stock price would eventually rise</i>.
Such a prognostication if made cannot be sufficient. Indeed, Plaintiff fails to
plead that at the time such statements were made any of the Defendant(s) knew
they were untrue. These claims should be dismissed as Plaintiff has not alleged
specific facts giving rise to a strong inference of scienter.<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-indent: 0.5in;">
<span style="font-family: Georgia, Times New Roman, serif;">When an entire complaint, or an entire
claim within a complaint, is grounded in fraud and its allegations fail to
satisfy the heightened pleading requirements of Rule 9(b), a district court may
dismiss the complaint or claim. Though there is no explicit basis in the text
of the federal rules for a dismissal of a complaint for failure to satisfy Rule
9(b), it is established law in this and other circuits that such dismissals are
appropriate. <a href="http://www.blogger.com/blogger.g?blogID=5898536086571838489" name="_ftnref8">[8]<o:p></o:p></a></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-indent: 0.5in;">
<span style="font-family: Georgia, Times New Roman, serif;">A motion to dismiss a complaint or
claim “grounded in fraud” under Rule 9(b) for failure to plead with
particularity is the functional equivalent of a motion to dismiss under Rule
12(b)(6) for failure to state a claim. If insufficiently pled averments of
fraud are disregarded, as they must be, in a complaint or claim grounded in
fraud, there is effectively nothing left of the complaint. In that event, a
motion to dismiss under Rule 12(b)(6) would obviously be granted. Because a
dismissal of a complaint or claim grounded in fraud for failure to comply with
Rule 9(b) has the same consequence as a dismissal under Rule 12(b)(6),
dismissals under the two rules are treated in the same manner.<i> See
Lovelace,</i> 78 F.3d at 1017 (“We treat a dismissal for failure to plead
fraud with particularity under Rule 9(b) as a dismissal for failure to state a
claim upon which relief can be granted.”);<i> </i><u>Seattle-First Nat'l Bank v. Carlstedt</u><i>,</i> 800
F.2d 1008, 1011 (10th Cir.1986) (“The dismissal of a complaint or counterclaim
for failing to satisfy the requirements of Rule 9(b) is treated as a dismissal
for failure to state a claim upon which relief can be * 1108 granted under Fed.
[R.] Civ. P. 12(b)(6).”).<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-indent: 0.5in;">
<span style="font-family: Georgia, Times New Roman, serif;">As with Rule 12(b)(6) dismissals,
dismissals for failure to comply with Rule 9(b) should ordinarily be without
prejudice. “[L]eave to amend should be granted if it appears at all possible
that the plaintiff can correct the defect.”<i> </i><u>Balistreri v. Pacifica Police Dep't</u><i>,</i> 901
F.2d 696, 701 (9th Cir.1988) (internal quotation marks omitted) (alteration in
original).<i> See also, </i><u>Bly-Maagee</u><i>,</i> 236
F.3d at 1019 (when dismissing for failure to comply with Rule 9(b) “leave to
amend should be granted unless the district court determines that the pleading
could not possibly be cured by the allegation of other facts”) (internal
quotation marks omitted);<i> </i><u>Caputo
v. Pfizer, Inc</u><i>.,</i> 267 F.3d 181, 191 (2nd Cir. 2001)
(where the plaintiff has requested leave to amend in the event the court is
inclined to dismiss on Rule 9(b) grounds, “the failure to grant leave to amend
is an abuse of discretion unless the plaintiff has acted in bad faith or the
amendment would be futile”).<i> See also, </i><u>Eminence Capital v. Aspeon, Inc.</u><i>,</i> 316 F.3d 1048
(9th Cir.2003).<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Georgia, Times New Roman, serif;"><b>5. <u>As
to Plaintiff’s First, Second, Third, Sixth, Seventh, Eighth and Ninth
Claims Plaintiff cannot represent RRH (the real party in interest,
indispensable to these proceedings) as he is not an attorney.</u></b><o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal" style="margin: 12pt 0in 0.0001pt; text-indent: 0.5in;">
<span style="font-family: Georgia, Times New Roman, serif;">It
is well established that a corporation can only appear through an attorney.<i> See e.g.,
</i><u>In re Highley</u><i>,</i> 459
F.2d 554, 555 (9th Cir. 1972);<i> </i><u>United States v. 9.19 Acres of Land</u><i>, </i>416 F. 2d
1244, 1245 <i>(</i>6th Cir. 1969);<i> </i><u>Shapiro Bernstein & Co. v. Continental Record
Co.</u>, 386 F.2d 426, 427 (2 Cir., 1967);<i> </i><u>Simbraw, Inc. v. United States</u>, 367
F.2d 373 (3rd Cir. 1966);<i> </i><u>DeVilliers
v. Atlas Corp</u>., 360 F.2d 292, 294 (10th Cir. 1966). (“A corporation
can appear in a court proceeding only through an attorney at law.”) This of
course has been extended to other forms of business entities.<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-indent: 0.5in;">
<span style="font-family: Georgia, Times New Roman, serif;">When a corporate party fails to retain
counsel, it is appropriate for the court to strike that party's pleadings. Fed.
R. Civ. P. 12(f) (allowing a court to strike from a pleading "any
redundant, immaterial, impertinent, or scandalous matter");<i> see
e.g., </i><u>Donovan v. Road
Rangers Country Junction, Inc</u><i>.,</i> 736 F.2d 1004, 1005 (5th
Cir. 1984) ("[The<i> pro se</i> party] declined to hire counsel
to represent the corporation so the district court properly struck the defenses
of the corporation.");<i> see also, </i><u>Liberty Mutual
Insurance Co. v. Hurricane Logistics Company</u><i>,</i> 216 F.R.D.
14, 16 (D.D.C. 2003) ("If a corporate defendant does not retain counsel,
the court may strike the corporation's answer.") (citing<i> </i><u>Donovan</u><i>,</i> 736 F.2d at
1005).<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-indent: 0.5in;">
<span style="font-family: Georgia, Times New Roman, serif;">Here, the First cause of action
directly involves the Consulting Agreement as between RRH (the indispensable
party) and Defendant Crown. Plaintiff’s Second, Third, Sixth, Seventh, Eighth
and Ninth claims of the Amended Complaint, resting on the allegation of a sale or
purchase of securities should be stricken as the only real party in interest
would have been the RRH. RRH, however, cannot be represented by Plaintiff. As a
business entity, if it intends to appear in this litigation, RRH must retain
the services of an attorney licensed to practice in this Court. The appropriate
consequence of the Nevada Entities' failure to retain counsel is to strike the
improperly pled claims filed by Plaintiff.<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Georgia, Times New Roman, serif;"><b>6.
Plaintiff’s Fourth Cause of Action for Defamation Per Se should be dismissed
for Failure to State a Claim Upon which Relief May be Granted.</b><o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-indent: 0.5in;">
<span style="font-family: Georgia, Times New Roman, serif;">Plaintiff’s fourth cause of action is
entitled: “Fourth Cause of Action for Defamation Per Se By written Libel Joe
Bloe, ____________.” Plaintiff alleges the following offending written
statements in his complaint as to:<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal" style="margin: 0in 0in 0.0001pt 0.5in;">
<span style="font-family: Georgia, Times New Roman, serif;"><span style="letter-spacing: -0.75pt;">115. </span>On or about November
24, 2010 Joe Bloe sent out an email, publishing by Libel, to third unprivileged
parties, namely; __________________ stating as a fact That Plaintiff was a
blackmailer. A Crime punishable as a felony.<o:p></o:p></span></div>
<div class="MsoNormal" style="margin: 0in 0in 0.0001pt 0.5in;">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal" style="margin: 0in 0in 0.0001pt 0.5in;">
<span style="font-family: Georgia, Times New Roman, serif;"><span style="letter-spacing: -0.75pt;">116. </span>On November 27, Joe
Bloe published a statement on the ABC message board calling Plaintiff a
"THIEF" an "Extortionist", and a "BLACKMAILER",
Plaintiff is not a thief, extortionist or blackmailer. The statements were in
written form.<o:p></o:p></span></div>
<div class="MsoNormal" style="margin: 0in 0in 0.0001pt 0.5in;">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal" style="margin: 0in 0in 0.0001pt 0.5in;">
<span style="font-family: Georgia, Times New Roman, serif;">117. On November 27
Yahoo ID ______________, made comments on the ABC message board that Plaintiff
is a "THIEF" an "Extortionist", and a
"BLACKMAILER", Plaintiff is not a thief, extortionist or blackmailer.
These statements were written.<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-indent: 0.5in;">
<span style="font-family: Georgia, Times New Roman, serif;">To establish a prima facie case of
defamation, a plaintiff must prove: (1) a false and defamatory statement by
defendant concerning the plaintiff; (2) an unprivileged publication to a third
person; (3) fault, amounting to at least negligence; and (4) actual or presumed
damages. See,<i> </i><u>Chowdhry
v. NLVH, Inc</u><i>.,</i> 109 Nev. 478, 483, 851 P.2d 459, 462
(1993). Under the rule established in<i> </i><u>New York Times Co. v. Sullivan</u>, 376 U.S. 254, 279-80,
84 S. Ct. 710, 11 L.Ed.2d 686 (1964), a media defendant may not be held liable
for damages in a defamation action involving a public official plaintiff unless
“actual malice” is pleaded and proven. This rule was extended to<b><u> public
figure plaintiffs</u></b><u>.</u><i> </i><u>Curtis Publishing Company v. Butts</u>, 388 U.S. 130, 87
S.Ct. 1975, 18 L.Ed.2d 1094 (1967).<a href="http://www.blogger.com/blogger.g?blogID=5898536086571838489" name="_ftnref9">[9]<o:p></o:p></a></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-indent: 0.5in;">
<span style="font-family: Georgia, Times New Roman, serif;">Libel, in turn, is defined by Nevada
statute as a malicious defamation, expressed by printing, writing, signs,
pictures or the like, tending to blacken the memory of the dead, or to impeach
the honesty, integrity, virtue, or reputation, or to publish the natural
defects of a living person or persons, or community of persons, or association
of persons, and thereby to expose them to public hatred, contempt or ridicule.<i> NRS</i> 200.510(1).<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-indent: 0.5in;">
<span style="font-family: Georgia, Times New Roman, serif;">In addition to Nevada's requirement
that a plaintiff prove libel per se or special damages, the First Amendment
places additional restrictions upon a plaintiff's ability to bring an action
for libel. In 1964, the Supreme Court held that public officials must prove
their defendants made the defamatory statement with actual malice or “knowledge
that it was false or with reckless disregard for whether it was false or not.”<i> </i><u>New York Times v. Sullivan</u>, 376
U.S. 254, 280, 84 S.Ct. 710, 11 L.Ed.2d 686 (1964). Later the Supreme Court
extended the actual malice standard to public figures<i><u>. Curtis Publishing
Co. v. Butts</u></i>, 388 U.S. 130, 155, 87 S.Ct. 1975, 18 L.Ed.2d 1094
(1967).<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-indent: 0.5in;">
<span style="font-family: Georgia, Times New Roman, serif;">Exhibit “H” (a formal announcement
released by the State of Nevada Office of the Attorney General regarding
Plaintiff JF) details that he was a radio persona, a talk show host for the
show “Straight Talk” broadcast on the radio station KKVV 1060 for almost 10
years. This, in addition to his general notoriety within the community, makes
Plaintiff a public figure. In light of this Plaintiff has failed to plead
adequately as it pertains to a cause of action for defamation or libel <i>per
se</i>. He failed to plead that the alleged defamatory statement or writing was
made with actual malice or “knowledge that it was false or with reckless
disregard for whether it was false or not.” As a result Plaintiff’s fourth
cause of action should be dismissed.<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Georgia, Times New Roman, serif;"><b>CONCLUSION</b><o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-indent: 0.5in;">
<span style="font-family: Georgia, Times New Roman, serif;">For the reasons set forth herein,
Defendants respectfully request that this Court dismiss Plaintiff's Amended
Complaint. He has failed to join an indispensable party which if joined would
result in a lack of diversity jurisdiction and he has failed to state a claim
upon which relief may be granted. Alternatively, Defendant(s) request this
Court strike each or any of the claims in the Amended Complaint for the reasons
as set forth herein.</span><span style="font-family: Verdana, sans-serif; font-size: 10pt;"><o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Georgia, Times New Roman, serif; font-size: x-small;"><a href="http://www.blogger.com/blogger.g?blogID=5898536086571838489" name="_ftn1">[1]</a> <i>See</i>,<i> </i><u>Burbank-Glendale-Pasadena
Airport Authority v. City of Burbank</u>, 136 F.3d 1360, 1364 (9th Cir.
1998) (taking judicial notice of pleadings filed in state court action);<i> </i><u>Alpha III, Inc. v. City of San Diego</u>,
187 Fed. Appx. 709, 710, 2006 WL 1876853, (9th Cir. 2006) (taking judicial
notice of state court’s written opinions and final judgment);<i> </i><u>Glenbrook Capital Ltd. Partnership v.
Kuo</u>, 525 F. Supp. 2d 1130, 1137 (N.D. Cal. 2007) (taking judicial
notice of state court judgment); <u>Cattie
v. Wal-Mart Stores, Inc</u><i>.</i>, 504 F. Supp. 2d 939, 950-51 (S.D.
Cal. 2007) (taking judicial notice of several relevant state court judgments);<i> </i><u>Green v. Warden, U.S. Penitentiary</u>,
699 F.2d 364, 369 (7th Cir. 1983) (taking judicial notice of litigant’s
extensive record of litigation and the subject matter of those lawsuits);<i> </i><u>Lynch v. Leis</u>, 382 F.3d 642, 648,
fn. 5 (6th Cir. 2004) (taking judicial notice of court records available online
to members of the public).<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Georgia, Times New Roman, serif; font-size: x-small;"><a href="http://www.blogger.com/blogger.g?blogID=5898536086571838489" name="_ftn2">[2]</a> See Exhibits “E” and “F”<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 6pt;">
<span style="font-family: Georgia, Times New Roman, serif; font-size: x-small;"><a href="http://www.blogger.com/blogger.g?blogID=5898536086571838489" name="_ftn3">[3]</a> Plaintiff’s
Amended Complaint, Paragraph 32, Page 17.<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Georgia, Times New Roman, serif; font-size: x-small;"><a href="http://www.blogger.com/blogger.g?blogID=5898536086571838489" name="_ftn4">[4]</a> <i>See also</i>,<i> </i><u>Newmiller
v. Farmers Ins. Exchange</u> 1991 WL 209630, 1 (C.A.9 (Nev. (C.A.9
(Nev.), 1991)<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Georgia, Times New Roman, serif; font-size: x-small;"><a href="http://www.blogger.com/blogger.g?blogID=5898536086571838489" name="_ftn5">[5]</a> <i>See also</i>,<i> </i><u>WMC~
Phase 3, LLC v. Shushok & McCoy, Inc</u>. 2010 WL 3942798, 13 (D.
Nev.) (D.Nev.,2010)<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Georgia, Times New Roman, serif; font-size: x-small;"><a href="http://www.blogger.com/blogger.g?blogID=5898536086571838489" name="_ftn6">[6]</a> Plaintiff’s Amended Complaint,
Paragraphs 51-52, Pages 22-23.<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Georgia, Times New Roman, serif; font-size: x-small;"><a href="http://www.blogger.com/blogger.g?blogID=5898536086571838489" name="_ftn7">[7]</a> Plaintiff’s Amended Compliant
appears to have two “Eighth Claims.” For purposes of this Motion, Defendants’
have treated the second “Eighth Claim” as a “Ninth Claim.”<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Georgia, Times New Roman, serif; font-size: x-small;"><a href="http://www.blogger.com/blogger.g?blogID=5898536086571838489" name="_ftn8">[8]</a> <i>See, e.g., </i><u>Bly-Magee v. California</u><i>,</i> 236
F.3d 1014, 1019 (9th Cir.2001) (“[T]he complete absence of particularity in
Bly-Magee's first amended complaint fails to satisfy Rule 9(b). We therefore
affirm the district court's dismissal ....” (citation omitted));<i> </i><u>In re Burlington Coat Factory Sec.
Litig</u><i>.,</i> 114 F.3d 1410, 1424 (3d Cir.1997) (“[W]hile
dismissal on Rule 12(b)(6) alone would not have been proper, the dismissal on
Rule 9(b) grounds was.”);<i> </i><u>Lovelace
v. Software Spectrum, Inc</u><i>.,</i>78 F.3d 1015, 1021 (5th
Cir.1996) (“Because we find that Plaintiffs have failed to adequately plead
scienter under Rule 9(b), we hold that the district court did not err in
dismissing Plaintiffs' claims for failure to plead fraud with particularity.”);<i> </i><u>Bankers Trust Co. v. Old Republic Ins.
Co.</u><i>,</i> 959 F.2d 677 (7th Cir.1992) (holding that the
complaint should have been dismissed for failure to comply with Rule 9(b), but
remanding to the district court for consideration of whether plaintiff should
be permitted to amend).<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<a href="http://www.blogger.com/blogger.g?blogID=5898536086571838489" name="_ftn9"><span style="font-family: Georgia, Times New Roman, serif; font-size: x-small;">[9]</span></a><span style="font-family: Georgia, Times New Roman, serif; font-size: x-small;"> <i>See also</i>,<i> </i><u>Wynn v. Smith</u> 117 Nev. 6,
11, 16 P.3d 424, 427 (Nev., 2001).</span><span style="font-family: Verdana, sans-serif; font-size: 8pt;"><o:p></o:p></span></div>
<div class="MsoNormal">
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Anonymoushttp://www.blogger.com/profile/02507643510494938178noreply@blogger.com0tag:blogger.com,1999:blog-5898536086571838489.post-44335626752644957142013-07-06T18:32:00.000-07:002013-10-21T10:57:07.370-07:00SEC To Hold Open Meeting to Consider the Elimination of the Prohibition Against General Solicitation and Advertising For Rule 506 and Rule 144A Offerings<div class="MsoNormal" style="background-color: white; background-position: initial initial; background-repeat: initial initial; text-align: justify;">
<div style="text-align: justify;">
<div style="margin: 0in 0in 0.0001pt; text-indent: 0.5in;">
<span style="font-family: Georgia, Times New Roman, serif;">The
Securities and Exchange Commission will hold an Open Meeting on Wednesday, July
10, 2013 at 10:00 a.m., in the Auditorium, Room L-002. (SEC’s main offices, 100
F Street, NE, Washington, DC.)<o:p></o:p></span></div>
<div style="margin: 0in 0in 0.0001pt;">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div style="margin: 0in 0in 0.0001pt; text-indent: 0.5in;">
<span style="font-family: Georgia, Times New Roman, serif;">The
Commission will consider whether to adopt amendments to eliminate the
prohibition against general solicitation and general advertising in certain
securities offerings conducted pursuant to Rule 506 of Regulation D under the
Securities Act and Rule 144A under the Securities Act, as mandated by Section
201(a) of the Jumpstart Our Business Startups Act.<o:p></o:p></span></div>
<div style="margin: 0in 0in 0.0001pt;">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div style="margin: 0in 0in 0.0001pt; text-indent: 0.5in;">
<span style="font-family: Georgia, Times New Roman, serif;">The
Commission will also consider whether to propose amendments to Regulation D,
Form D and Rule 156 under the Securities Act. The proposed amendments are
intended to enhance the Commission’s ability to evaluate changes in the market
and to address the development of practices in Rule 506 offerings.<o:p></o:p></span></div>
<div style="margin: 0in 0in 0.0001pt;">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div style="margin: 0in 0in 0.0001pt; text-indent: 0.5in;">
<span style="font-family: Georgia, Times New Roman, serif;"><u1:p></u1:p>
<u1:p></u1:p>
<u1:p></u1:p>
</span></div>
<div style="margin: 0in 0in 0.0001pt; text-align: start; text-indent: 0.5in;">
<span style="font-family: Georgia, Times New Roman, serif;">Finally, the Commission will consider whether to adopt amendments
to disqualify securities offerings involving certain “felons and other ‘bad
actors’” from reliance on the exemption from Securities Act registration
pursuant to Rule 506 as mandated by Section 926 of the Dodd-Frank Wall Street
Reform and Consumer Protection Act.</span><span style="font-family: Verdana, sans-serif; font-size: 10pt;"><o:p></o:p></span></div>
</div>
</div>
Anonymoushttp://www.blogger.com/profile/02507643510494938178noreply@blogger.com1tag:blogger.com,1999:blog-5898536086571838489.post-83412234211727257632013-07-05T22:38:00.001-07:002013-10-21T10:56:40.257-07:00SEC Litigation Release No. 22742<div class="MsoNormal" style="background-color: white; background-position: initial initial; background-repeat: initial initial; text-align: justify;">
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
<span style="font-family: Georgia, Times New Roman, serif;"><b>SEC Litigation Release No. 22742 </b><o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
<span style="font-family: Georgia, Times New Roman, serif;"><b>July 3, 2013</b><o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
<span style="font-family: Georgia, Times New Roman, serif;"><b><i>Securities and Exchange Commission v. Magdalena
Tavella, et al.</i></b><o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
<span style="font-family: Georgia, Times New Roman, serif;"><b>Civil Action No. 13 CIV 4609 (S.D.N.Y.) </b><o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify; text-indent: 0.5in;">
<span style="font-family: Georgia, Times New Roman, serif;">The Securities and Exchange
Commission filed a complaint against 8 Argentine citizens who are alleged to
have unlawfully sold millions of shares of Biozoom, Inc. in unregistered
transactions. The SEC also secured a TRO, freezing assets held in U.S. securities
firms in accounts of the eight defendants and two other Argentine citizens who
had Biozoom shares but had not yet sold them. Last week the SEC suspended
trading in Biozoom due to concerns that some shareholders may be unlawfully
distributing its securities.<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify; text-indent: 0.5in;">
<span style="font-family: Georgia, Times New Roman, serif;">The SEC alleges that from
March to June 2013, the defendants received more than 20 million shares of
Biozoom (formerly Entertainment Art, Inc.) or one-third of the company's total
outstanding shares. In a one-month period beginning in May, 8 of the Defendants
sold more than 14 million shares yielding almost $34 million. $17
million out of the sales proceeds was wired to overseas bank accounts.<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify; text-indent: 0.5in;">
<span style="font-family: Georgia, Times New Roman, serif;">According to the SEC's
complaint, the Defendants claimed to have acquired the bulk of the shares in
March 2013 from Biozoom’s former shareholders who purchased them in private
placements that began in 2007. Each of the defendants provided stock purchase
agreements between them and the former shareholders purportedly signed by the
defendants and those shareholders. </span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify; text-indent: 0.5in;">
<span style="font-family: Georgia, Times New Roman, serif;"></span></div>
<a name='more'></a><span style="font-family: Georgia, Times New Roman, serif;"><br /></span>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
<span style="font-family: Georgia, Times New Roman, serif;"> <span style="text-indent: 0.5in;">The SEC alleges that the
documents were false because the Entertainment Art investors had sold all of
their stock in the company in 2009, almost four years earlier. As the complaint
alleges:</span></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify; text-indent: 0.5in;">
<span style="font-family: Georgia, Times New Roman, serif;"><i>On July 18, 2008,
Entertainment Art filed a Form S-1 registration statement with the Commission
to register the resale transactions for the 34 shareholders who acquired
Entertainment Art stock in these private placements ("the Form S-1
Shareholders"). In particular, of the total 1,810,000 shares outstanding
at the time of the Form S-1, Entertainment Art's S-1 covered 610,000, or
approximately one-third, of the company's then outstanding shares.</i><o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify; text-indent: 0.5in;">
<span style="font-family: Georgia, Times New Roman, serif;"><i>The remaining 1,200,000
shares of Entertainment Art stock were held by the three company officers in
three identical 400,000 share blocks.</i><o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify; text-indent: 0.5in;">
<span style="font-family: Georgia, Times New Roman, serif;"><i>On May 1, 2009, Entertainment
Art announced, in a public filing with the Commission, that the three
Entertainment Art officers sold their total 1,200,000 shares of Entertainment
Art to "Medford Financial" a Belizean entity, for a purchase price of
$120,000.</i><o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify; text-indent: 0.5in;">
<span style="font-family: Georgia, Times New Roman, serif;"><i>Contrary to this disclosure,
however, Medford Financial purchased more than 1,200,000 shares of
Entertainment Art. In fact, Medford Financial also purchased all of the 610,000
shares that had been purchased by the S-1 shareholders. Thus, in this
transaction, Medford Financial purchased all of the outstanding shares,
including the shares then held by the Form S-1 Shareholders.</i><o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify; text-indent: 0.5in;">
<span style="font-family: Georgia, Times New Roman, serif;"><i>Each of the S-1
shareholders received their initial investment back, with an additional, small
return on their investment. Thus, by on or around May 2009, each of the S-1
shareholders had no remaining shares or other interest in Entertainment Art.</i><o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify; text-indent: 0.5in;">
<span style="font-family: Georgia, Times New Roman, serif;"><i>According to company
filings, on June 30, 2009, Entertainment Art's board of directors
approved the implementation of a 33:1 forward split for Entertainment Art stock
without correspondingly increasing the authorized shares of common stock for
Entertainment Art. On July 21, 2009, the forward split became effective, and as
a result of the forward split, the company had 59,730,000 shares of common stock
outstanding-which was all owned by Medford Financial.</i><o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify; text-indent: 0.5in;">
<span style="font-family: Georgia, Times New Roman, serif;"><i>On October 25, 2012,
Entertainment Art reported, in a public filing with the Commission, that on
October 19 Medford Financial sold 39,600,000 common shares of Entertainment Art
in a private transaction with LeMond Capital for a purchase price of $430,000,
which equates to approximately $0.01 per share.</i><o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify; text-indent: 0.5in;">
<span style="font-family: Georgia, Times New Roman, serif;"><i>LeMond Capital purports to
be a foreign entity based in the British Virgin Islands. As a result of the
sale, Entertainment Art disclosed that LeMond Capital controlled over 66.3% of
the Company's issued and outstanding common stock.</i><o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify; text-indent: 0.5in;">
<span style="font-family: Georgia, Times New Roman, serif;"><i>However, on information and
belief, Le Mond Capital purchased the entire company from Medford Financial-and
all of 59,730,000 outstanding shares.</i><o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify; text-indent: 0.5in;">
<span style="font-family: Georgia, Times New Roman, serif;"><i>The owner of LeMond
Capital, Sara Deutsch, became Entertainment Art's new President, Chief
Executive Officer, Principal Executive Officer, Treasurer, Chief Financial
Officer, Secretary, Treasurer, and Director. On information and belief, Deutsch
is a resident of Buenos Aires, Argentina.</i><o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify; text-indent: 0.5in;">
<span style="font-family: Georgia, Times New Roman, serif;"><i>From September 2011 to at
least October 2012, Deutsch worked as a manager of Magdalena's Party. According
to the business' website, Magdalena's Party is a restaurant located in Buenos
Aires, Argentina. According to another website describing Magdalena's Party, it
is co-owned by Deutsch, defendant Magdalena Tavella, and others.</i><o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify; text-indent: 0.5in;">
<span style="font-family: Georgia, Times New Roman, serif;"><i>On March 12, 2013,
Entertainment Art filed a Form 8-K with the Commission in which it announced a
dramatic change in its business operations from a company that developed
fashionable leather bags to a company that was involved in the biomedical
industry. In particular, Entertainment Art announced a transaction pursuant to
which its newly formed subsidiary, Biozoom Technologies, Inc., acquired certain
patents, licenses, and related assets from each of three separate companies;
Opsolution Spectroscopic Systems, Opsolution NanoPhotonics, and Opsolution
GmBH, (the "Opsolution acquisition") in exchange for cash of $50,000
and 39 million shares of Entertainment Art common stock.</i><o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify; text-indent: 0.5in;">
<span style="font-family: Georgia, Times New Roman, serif;"><i>Entertainment Art described
that, through Biozoom, it was now in the business of "researching,
developing, and licensing technologies relating to the mobile remote collection
of biomedical data as well as bilateral diagnostic communication."</i><o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify; text-indent: 0.5in;">
<span style="font-family: Georgia, Times New Roman, serif;"><i>Entertainment Art further
disclosed that -as of immediately after closing of the Opsolution acquisition
and filing of the Form 8-K -Deutsch would step down as CEO and Chief Financial
Officer of Entertainment Art, but would stay on as a Director only.</i><o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify; text-indent: 0.5in;">
<span style="font-family: Georgia, Times New Roman, serif;"><i>As a result of the
transaction, the 59,730,000 outstanding shares of Entertainment .Art were
allocated in the following manner. First, Le Mond Capital returned 39,000,000
shares to the company, and then those 39,000,000 shares were allocated -as
shares bearing a restrictive legend -to four entities that were associated with
the Opsolution entities.</i><o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify; text-indent: 0.5in;">
<span style="font-family: Georgia, Times New Roman, serif;"><i>Thus, after these
allocations, 20,730,000 shares of Entertainment Art remained. Le Mond
Capital retained 600,000 of these shares bearing a restrictive legend. The
remaining 20,130,000 shares-which represented the total shares purchased by the
Form S-1 Shareholders (and subsequently sold in the Medford Financial
transaction on or around May 2009) -were unallocated.</i><o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify; text-indent: 0.5in;">
<span style="font-family: Georgia, Times New Roman, serif;"><i>On April 1, 2013,
Entertainment Art changed its name to Biozoom, under the trading symbol
"BIZM" on the OTC Bulletin Board.</i><o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify; text-indent: 0.5in;">
<span style="font-family: Georgia, Times New Roman, serif;">The defendants' shares of
Biozoom were deposited into their accounts as shares that purportedly could be
freely traded and the defendants sold them even though no registration was in
effect and preemptively, no exemption applied.<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify; text-indent: 0.5in;">
<span style="font-family: Georgia, Times New Roman, serif;">In addition to the
temporary restraining order and asset freeze granted by the court, the SEC is
seeking preliminary and permanent injunctions, return of the selling
defendants' allegedly ill-gotten sale proceeds, and civil penalties. The SEC
also seeks preliminary and permanent injunctions against the non-selling
defendants because of the likelihood that both defendants will offer or sell
their Biozoom shares to the public in violation of the registration
requirements of U.S. securities law.<o:p></o:p></span></div>
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span>
<div style="margin-bottom: .0001pt; margin: 0in; text-align: justify;">
<br /></div>
</div>
Anonymoushttp://www.blogger.com/profile/02507643510494938178noreply@blogger.com0tag:blogger.com,1999:blog-5898536086571838489.post-67093534652163199882013-07-03T21:25:00.000-07:002013-10-21T10:56:14.266-07:0011 USC § 727 – and Denial of Discharge<div class="MsoNormal" style="margin: 6pt 0in 6pt 10pt; text-align: justify;">
<span style="font-family: Georgia, Times New Roman, serif;"><a href="http://www.westlaw.com/Link/Document/FullText?findType=L&pubNum=1000546&cite=11USCAS727&originatingDoc=I2e40d743a7db11dcb6a3a099756c05b7&refType=LQ&originationContext=document&vr=3.0&rs=cblt1.0&transitionType=DocumentItem&contextData=(sc.Search)"><span style="color: black; text-decoration: none;">§ 727</span></a>. <i>Discharge<o:p></o:p></i></span></div>
<div class="MsoNormal" style="margin: 6pt 0in 6pt 10pt; text-align: justify;">
<span style="font-family: Georgia, Times New Roman, serif;">(a) The court shall grant the debtor a discharge, unless—<o:p></o:p></span></div>
<div class="MsoNormal" style="margin: 6pt 0in 6pt 20pt; text-align: justify;">
<span style="font-family: Georgia, Times New Roman, serif;">(2) the debtor, with intent to hinder, delay, or defraud a
creditor or an officer of the estate charged with custody of property under
this title, has transferred, removed, destroyed, mutilated, or concealed, or
has permitted to be transferred, removed, destroyed, mutilated, or concealed—<o:p></o:p></span></div>
<div class="MsoNormal" style="margin: 6pt 0in 6pt 0.5in; text-align: justify;">
<span style="font-family: Georgia, Times New Roman, serif;">(A) property of the debtor, within one year before the date
of the filing of the petition; or<o:p></o:p></span></div>
<div class="MsoNormal" style="margin: 6pt 0in 6pt 0.5in; text-align: justify;">
<span style="font-family: Georgia, Times New Roman, serif;">(B) property of the estate, after the date of the filing of
the petition;<o:p></o:p></span></div>
<div class="MsoNormal" style="margin: 6pt 0in 6pt 20pt; text-align: justify;">
<span style="font-family: Georgia, Times New Roman, serif;">(3) the debtor has concealed, destroyed, mutilated,
falsified, or failed to keep or preserve any recorded information, including
books, documents, records, and papers, from which the debtor’s financial
condition or business transactions might be ascertained, unless such act or
failure to <a href="http://www.blogger.com/blogger.g?blogID=5898536086571838489" name="co_pp_sp_164_172_1"></a>act was justified under all of the
circumstances of the case;<o:p></o:p></span></div>
<div class="MsoNormal" style="margin: 6pt 0in 6pt 20pt; text-align: justify;">
<span style="font-family: Georgia, Times New Roman, serif;">(4) the debtor knowingly and fraudulently, in or in
connection with the case—<o:p></o:p></span></div>
<div class="MsoNormal" style="margin: 6pt 0in 6pt 0.5in; text-align: justify;">
<span style="font-family: Georgia, Times New Roman, serif;">(A) made a false oath or account;<o:p></o:p></span></div>
<div class="MsoNormal" style="margin: 6pt 0in 6pt 20pt; text-align: justify;">
<span style="font-family: Georgia, Times New Roman, serif;">(5) the debtor has failed to explain satisfactorily, before
determination of denial of discharge under this paragraph, any loss of assets
or deficiency of assets to meet the debtor’s liabilities[.]<o:p></o:p></span></div>
<div class="MsoNormal" style="margin: 6pt 0in; text-align: justify;">
<span style="font-family: Georgia, Times New Roman, serif;"><a href="http://www.westlaw.com/Link/Document/FullText?findType=L&pubNum=1000546&cite=11USCAS727&originationContext=document&vr=3.0&rs=cblt1.0&transitionType=DocumentItem&contextData=(sc.Search)#co_pp_d86d0000be040"><span style="color: black; text-decoration: none;">§ 727(a)(2)</span></a>, (3),
(4)(A), and (5).<a href="file:///C:/Users/Antony/AppData/Local/Microsoft/Windows/Temporary%20Internet%20Files/Content.Outlook/9AC0B4YA/11%20USC%20%C2%A7%20727%20%20and%20Denial%20of%20Discharge%20(Scrumlick).docx#_ftn1" name="_ftnref1" title=""><span class="MsoFootnoteReference"><!--[if !supportFootnotes]--><span class="MsoFootnoteReference"><span style="color: black;">[1]</span></span><!--[endif]--></span></a><o:p></o:p></span><br />
<span style="font-family: Georgia, Times New Roman, serif;"><a href="file:///C:/Users/Antony/AppData/Local/Microsoft/Windows/Temporary%20Internet%20Files/Content.Outlook/9AC0B4YA/11%20USC%20%C2%A7%20727%20%20and%20Denial%20of%20Discharge%20(Scrumlick).docx#_ftn1" name="_ftnref1" title=""><span class="MsoFootnoteReference"><span class="MsoFootnoteReference"><span style="color: black;"><br /></span></span></span></a></span></div>
<div class="MsoNormal" style="margin: 6pt 0in; text-align: justify; text-indent: 0.5in;">
<span style="font-family: Georgia, Times New Roman, serif;"><a href="http://www.westlaw.com/Link/Document/FullText?findType=L&pubNum=1000546&cite=11USCAS727&originationContext=document&vr=3.0&rs=cblt1.0&transitionType=DocumentItem&contextData=(sc.Search)#co_pp_08d30000fbae5"><span style="color: black; text-decoration: none;">Section 727(a)(4)(A)</span></a>
denies a discharge to a debtor who “knowingly and fraudulently” makes a false
oath or account in the course of the bankruptcy case. <a href="http://www.westlaw.com/Link/Document/FullText?findType=L&pubNum=1000546&cite=11USCAS727&originationContext=document&vr=3.0&rs=cblt1.0&transitionType=DocumentItem&contextData=(sc.Search)#co_pp_08d30000fbae5"><span style="color: black; text-decoration: none;">§ 727(a)(4)(A)</span></a>. A
false statement or an omission in the debtor’s bankruptcy schedules or
statement of financial affairs can constitute a false oath.<a href="file:///C:/Users/Antony/AppData/Local/Microsoft/Windows/Temporary%20Internet%20Files/Content.Outlook/9AC0B4YA/11%20USC%20%C2%A7%20727%20%20and%20Denial%20of%20Discharge%20(Scrumlick).docx#_ftn2" name="_ftnref2" title=""><span class="MsoFootnoteReference"><!--[if !supportFootnotes]--><span class="MsoFootnoteReference"><span style="color: black;">[2]</span></span><!--[endif]--></span></a>
“The fundamental purpose of <a href="http://www.westlaw.com/Link/Document/FullText?findType=L&pubNum=1000546&cite=11USCAS727&originationContext=document&vr=3.0&rs=cblt1.0&transitionType=DocumentItem&contextData=(sc.Search)#co_pp_08d30000fbae5"><span style="color: black; text-decoration: none;">§ 727(a)(4)(A)</span></a> is to
insure that the trustee and creditors have accurate information without having
to conduct costly investigations.” <a href="http://www.westlaw.com/Link/Document/FullText?findType=Y&serNum=2000029576&pubNum=164&originationContext=document&vr=3.0&rs=cblt1.0&transitionType=DocumentItem&contextData=(sc.Search)#co_pp_sp_164_63"><i><span style="color: black; text-decoration: none;">Fogal Legware of Switz., Inc. v.
Wills (In re Wills),</span></i><span style="color: black; text-decoration: none;"> 243 B.R. 58, 63
(9th Cir. BAP 1999)</span></a> (citing <a href="http://www.westlaw.com/Link/Document/FullText?findType=Y&serNum=1990054335&pubNum=164&originationContext=document&vr=3.0&rs=cblt1.0&transitionType=DocumentItem&contextData=(sc.Search)#co_pp_sp_164_274"><i><span style="color: black; text-decoration: none;">Aubrey v. Thomas (In re Aubrey),</span></i><span style="color: black; text-decoration: none;"> 111 B.R. 268, 274 (9th Cir. BAP
1990)</span></a>). That said, a false statement or omission that has no impact on
a bankruptcy case is not material and does not provide grounds for denial of a
discharge under <a href="http://www.westlaw.com/Link/Document/FullText?findType=L&pubNum=1000546&cite=11USCAS727&originationContext=document&vr=3.0&rs=cblt1.0&transitionType=DocumentItem&contextData=(sc.Search)#co_pp_08d30000fbae5"><span style="color: black; text-decoration: none;">§ 727(a)(4)(A)</span></a>. <i><span style="color: black; text-decoration: none;"><a href="http://www.westlaw.com/Link/Document/FullText?findType=Y&serNum=2000029576&originationContext=document&vr=3.0&rs=cblt1.0&transitionType=DocumentItem&contextData=(sc.Search)">Id.</a></span></i><o:p></o:p></span><br />
<span style="font-family: Georgia, Times New Roman, serif;"><i><br /></i></span></div>
<div class="MsoNormal" style="margin: 6pt 0in; text-align: justify;">
<span style="font-family: Georgia, Times New Roman, serif;"> Plaintiffs
must show by a preponderance of the evidence that: (1) Debtor made such a false
statement or omission, (2) regarding a material fact, and (3) did so knowingly
and fraudulently. <i>See </i><a href="http://www.westlaw.com/Link/Document/FullText?findType=Y&serNum=2005613838&pubNum=164&originationContext=document&vr=3.0&rs=cblt1.0&transitionType=DocumentItem&contextData=(sc.Search)#co_pp_sp_164_377"><i><span style="color: black; text-decoration: none;">Searles,</span></i><span style="color: black; text-decoration: none;"> 317 B.R. at 377;</span></a> <a href="http://www.westlaw.com/Link/Document/FullText?findType=Y&serNum=2007477108&pubNum=164&originationContext=document&vr=3.0&rs=cblt1.0&transitionType=DocumentItem&contextData=(sc.Search)#co_pp_sp_164_882"><i><span style="color: black; text-decoration: none;">Roberts,</span></i><span style="color: black; text-decoration: none;"> 331 B.R. at 882</span></a> (same
test, broken down into four elements). <o:p></o:p></span><br />
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span>
<a name='more'></a></div>
<div class="MsoNormal" style="margin: 6pt 0in 6pt 0.25in;">
<b><span style="font-family: Georgia, Times New Roman, serif;">B. False Statement or Omission<o:p></o:p></span></b></div>
<div class="MsoNormal" style="margin: 6pt 0in; text-align: justify;">
<span style="font-family: Georgia, Times New Roman, serif;"> The
first of these three elements is satisfied. The evidentiary record before this
Court and as detailed and itemized in this brief, is replete with clear and
convincing, irrefutable evidence of the existence of multiple omissions by
Debtors. Indeed Debtors’ Counsel, as
discussed herein, admitted as much in his opening statement at trial. Moreover, Debtors have cited no authority,
either before the bankruptcy court at trial or in any pleadings prior to trial
that the subject bank accounts, that the pre petition transfers of funds, and
the omission of income need not have been disclosed. Indeed, the fact that they ultimately amended
their filings at least so as to disclose the accounts at issue is tantamount to
an admission that at least the bank accounts should have been disclosed in the
first instance even if it took them almost two years to do so. Nor has Debtor cited any authority or
provided any evidence or testimony that the income admittedly received by them
at trial from wholly owned LLCs was nothing less than income within the meaning
of the statement of financial affairs (Official Form 7), regardless of how that
income may have characterized.<o:p></o:p></span></div>
<div class="MsoNormal" style="margin: 6pt 0in 6pt 0.25in;">
<b><span style="font-family: Georgia, Times New Roman, serif;">C. Materiality.<o:p></o:p></span></b></div>
<div class="MsoNormal" style="margin: 6pt 0in; text-align: justify;">
<span style="font-family: Georgia, Times New Roman, serif;"><a href="http://www.blogger.com/blogger.g?blogID=5898536086571838489" name="co_pp_sp_164_173_1"></a> The next element is that the
false statement or omission must involve a material fact. A fact is material
“if it bears a relationship to the debtor’s business transactions or estate, or
concerns the discovery of assets, business dealings, or the existence and
disposition of the debtor’s property.” <a href="http://www.westlaw.com/Link/Document/FullText?findType=Y&serNum=2000029576&pubNum=164&originationContext=document&vr=3.0&rs=cblt1.0&transitionType=DocumentItem&contextData=(sc.Search)#co_pp_sp_164_62"><i><span style="color: black; text-decoration: none;">Wills,</span></i><span style="color: black; text-decoration: none;"> 243 B.R. at 62</span></a>
(citations omitted). As detailed herein and as demonstrated by the evidentiary
record before the Court and at trial, we have at issue in the present case,
tens of thousands of dollars in undisclosed personal bank accounts and dozens
of surreptitious transactions pre and post petition in these clandestine
accounts together with the omission of significant income. This more than suffices to satisfy the
materiality element here. Moreover,
Debtors’ briefs, their evidence proffered at trial and their testimony make no
credible argument that the undisclosed accounts, the surreptitious transactions
and payments related to those transactions, and the omitted income are not
material under this broad test.<a href="file:///C:/Users/Antony/AppData/Local/Microsoft/Windows/Temporary%20Internet%20Files/Content.Outlook/9AC0B4YA/11%20USC%20%C2%A7%20727%20%20and%20Denial%20of%20Discharge%20(Scrumlick).docx#_ftn3" name="_ftnref3" title=""><span class="MsoFootnoteReference"><!--[if !supportFootnotes]--><span class="MsoFootnoteReference"><span style="color: black;">[3]</span></span><!--[endif]--></span></a> <o:p></o:p></span></div>
<div class="MsoNormal" style="margin: 6pt 0in; text-align: justify; text-indent: 0.5in;">
<span style="font-family: Georgia, Times New Roman, serif;">A number of courts have considered the concept of
materiality. Most cited is <i>In re Chalik,</i> 748 F.2d 616, 618 (11th
Cir.1984).<a href="file:///C:/Users/Antony/AppData/Local/Microsoft/Windows/Temporary%20Internet%20Files/Content.Outlook/9AC0B4YA/11%20USC%20%C2%A7%20727%20%20and%20Denial%20of%20Discharge%20(Scrumlick).docx#_ftn4" name="_ftnref4" title=""><span class="MsoFootnoteReference"><!--[if !supportFootnotes]--><span class="MsoFootnoteReference">[4]</span><!--[endif]--></span></a>
There, the court concluded:<o:p></o:p></span></div>
<div class="MsoNormal" style="margin: 6pt 0in 6pt 0.5in; text-align: justify;">
<span style="font-family: Georgia, Times New Roman, serif;">The
subject matter of a false oath is “material,” and thus sufficient to bar
discharge, if it bears a relationship to the bankrupt's business transactions
or estate, or concerns the discovery of assets, business dealings, or the
existence and disposition of his property.... The recalcitrant debtor may not
escape a section 727(a)(4)(A) denial of discharge by asserting that the
admittedly omitted or falsely stated information concerned a worthless business
relationship or holding; such a defense is specious. (Citation omitted.) It
makes no difference that he does not intend to injure his creditors when he
makes a false statement. Creditors are entitled to judge for themselves what
will benefit, and what will prejudice, them. (Citations omitted.) The veracity
of the bankrupt's statements is essential to the successful administration of
the Bankruptcy Act. (Citation omitted.)<o:p></o:p></span></div>
<div class="MsoNormal" style="margin: 6pt 0in 6pt 0.5in; text-align: justify;">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal" style="margin: 6pt 0in; text-align: justify; text-indent: 0.5in;">
<span style="font-family: Georgia, Times New Roman, serif;">The court in <i>In re Bailey,</i> 147 B.R. 157,
162–63 (Bankr.N.D.Ill.1992), reiterated the foregoing, and added several
observations. Quoting from <i>Matter of Yonikus,</i> 974 F.2d 901 (7th
Cir.1992), the <i>Bailey</i> court stated “ ‘[d]ebtors have an absolute duty to
report whatever interests they hold in property, even if they believe their
assets are worthless or unavailable to the bankruptcy estate.’ ” The <i>Bailey</i>
court continued: “This is because ‘[t]he bankruptcy court, not the debtor,
decides what property is exempt from the bankruptcy estate.’ ” The <i>Bailey</i>
court then wrote at length:<o:p></o:p></span></div>
<div class="MsoNormal" style="margin: 6pt 0in 6pt 0.5in; text-align: justify;">
<span style="font-family: Georgia, Times New Roman, serif;">Debtors
in Chapter 7 proceedings have an affirmative duty to disclose on their
schedules of assets whatever ownership interest they hold in any property,
inclusive of all legal and equitable interest in said property, as of the
commencement of a bankruptcy case. (Citations omitted.) The purpose behind 11
U.S.C. § 727(a)(4) is to enforce debtors' duty of disclosure and to ensure that
the debtor provides reliable information to those who have an interest in the
administration of the estate. (Citations omitted.) “Bankruptcy Trustees lack
the time and resources to play detective and uncover all the assets and
transactions of their debtors.” Since § 727(a)(4) relates to the discovery of
assets and enforces debtors' duty of disclosure, an omission can be material,
even if the creditors were not prejudiced by the false statement. (Citations
omitted.)<o:p></o:p></span></div>
<div class="MsoNormal" style="margin: 6pt 0in;">
<b><span style="font-family: Georgia, Times New Roman, serif;"> D. Intent.<o:p></o:p></span></b></div>
<div class="MsoNormal" style="margin: 6pt 0in; text-align: justify; text-indent: 0.5in;">
<span style="font-family: Georgia, Times New Roman, serif;">The
last element is intent. Debtor must have “knowingly and fraudulently” made a
false oath or account. <a href="http://www.westlaw.com/Link/Document/FullText?findType=L&pubNum=1000546&cite=11USCAS727&originationContext=document&vr=3.0&rs=cblt1.0&transitionType=DocumentItem&contextData=(sc.Search)#co_pp_08d30000fbae5"><span style="color: black; text-decoration: none;">Section 727(a)(4)(A)</span></a>. A
debtor “acts knowingly if he or she acts deliberately and consciously.” <a href="http://www.westlaw.com/Link/Document/FullText?findType=Y&serNum=2007477108&pubNum=164&originationContext=document&vr=3.0&rs=cblt1.0&transitionType=DocumentItem&contextData=(sc.Search)#co_pp_sp_164_883"><i><span style="color: black; text-decoration: none;">Roberts,</span></i><span style="color: black; text-decoration: none;"> 331 B.R. at 883</span></a>
(citation omitted). In this case Debtors do not appear to admit that they made
a deliberate and conscious choice to omit but claim that either, (1) they simply forgot to
include them or didn’t know they had to be included,…(an innocent oversight).
Of course it is not uncommon for Debtors to refuse to admit intent. As for acting fraudulently, the Ninth Circuit
held in <a href="http://www.westlaw.com/Link/Document/FullText?findType=Y&serNum=2007477108&originationContext=document&vr=3.0&rs=cblt1.0&transitionType=DocumentItem&contextData=(sc.Search)"><i><span style="color: black; text-decoration: none;">Roberts</span></i></a> that
the elements of common law fraud substantially overlap the elements of a claim
under <a href="http://www.westlaw.com/Link/Document/FullText?findType=L&pubNum=1000546&cite=11USCAS727&originationContext=document&vr=3.0&rs=cblt1.0&transitionType=DocumentItem&contextData=(sc.Search)#co_pp_08d30000fbae5"><span style="color: black; text-decoration: none;">Section 727(a)(4)(A)</span></a>,
except that “materiality replaces the elements of reliance and proximately
caused damage,” so that the creditor must show: “(1) [that] the debtor made the
representations [<i>e.g.,</i> a false statement or omission in bankruptcy
schedules]; (2) that at the time <i>he knew they were false;</i> [and] (3) that
he made them with the <i>intention and purpose of deceiving the creditors</i>
....” <a href="http://www.westlaw.com/Link/Document/FullText?findType=Y&serNum=2007477108&originationContext=document&vr=3.0&rs=cblt1.0&transitionType=DocumentItem&contextData=(sc.Search)"><i><span style="color: black; text-decoration: none;">Id.</span></i><span style="color: black; text-decoration: none;"> at 884</span></a> (citations omitted, emphasis added).<a href="http://www.blogger.com/blogger.g?blogID=5898536086571838489" name="co_anchor_Ia351bcd7bbe611e08b05fdf15589d"></a><o:p></o:p></span></div>
<div class="MsoListParagraph" style="margin-bottom: 6.0pt; margin-left: 58.5pt; margin-right: 0in; margin-top: 6.0pt; mso-add-space: auto; mso-list: l2 level1 lfo3; text-align: justify; text-indent: -.5in;">
<!--[if !supportLists]--><span style="font-family: Georgia, Times New Roman, serif;"><b><i>(1)<span style="font-style: normal; font-weight: normal;">
</span></i></b><!--[endif]--><b><i>Reckless Indifference as Probative of
Fraudulent Intent<o:p></o:p></i></b></span></div>
<div class="MsoNormal" style="margin: 6pt 0in; text-align: justify; text-indent: 0.5in;">
<span style="font-family: Georgia, Times New Roman, serif;">Recklessness
can be probative of fraudulent intent.
In <a href="http://www.westlaw.com/Link/Document/FullText?findType=Y&serNum=2000029576&originationContext=document&vr=3.0&rs=cblt1.0&transitionType=DocumentItem&contextData=(sc.Search)"><i><span style="color: black; text-decoration: none;">Wills</span></i></a> the
Ninth Circuit stated in dicta that a court “may find the requisite intent where
there has been a pattern of falsity or from a debtor’s <i>reckless</i>
indifference to or disregard of the truth.” <a href="http://www.westlaw.com/Link/Document/FullText?findType=Y&serNum=2000029576&pubNum=164&originationContext=document&vr=3.0&rs=cblt1.0&transitionType=DocumentItem&contextData=(sc.Search)#co_pp_sp_164_64"><i><span style="color: black; text-decoration: none;">Wills,</span></i><span style="color: black; text-decoration: none;"> 243 B.R. at 64</span></a>
(emphasis added) (citing <a href="http://www.westlaw.com/Link/Document/FullText?findType=Y&serNum=1996076079&pubNum=164&originationContext=document&vr=3.0&rs=cblt1.0&transitionType=DocumentItem&contextData=(sc.Search)#co_pp_sp_164_564"><i><span style="color: black; text-decoration: none;">Coombs,</span></i><span style="color: black; text-decoration: none;"> 193 B.R. at 564).</span></a> The
Appellate Court specifically left unresolved in <a href="http://www.westlaw.com/Link/Document/FullText?findType=Y&serNum=2007477108&originationContext=document&vr=3.0&rs=cblt1.0&transitionType=DocumentItem&contextData=(sc.Search)"><i><span style="color: black; text-decoration: none;">Roberts</span></i></a>
whether “a reckless disregard of both the serious nature of the information
sought and the necessary attention to detail and accuracy in answering may rise
to the level of fraudulent intent necessary to bar a discharge....” <a href="http://www.westlaw.com/Link/Document/FullText?findType=Y&serNum=2007477108&pubNum=164&originationContext=document&vr=3.0&rs=cblt1.0&transitionType=DocumentItem&contextData=(sc.Search)#co_pp_sp_164_884"><i><span style="color: black; text-decoration: none;">Roberts,</span></i><span style="color: black; text-decoration: none;"> 331 B.R. at 884 n. 4</span></a>
(quoting <a href="http://www.westlaw.com/Link/Document/FullText?findType=Y&serNum=2006796664&pubNum=164&originationContext=document&vr=3.0&rs=cblt1.0&transitionType=DocumentItem&contextData=(sc.Search)#co_pp_sp_164_217"><i><span style="color: black; text-decoration: none;">Mondore v. Mondore (In re Mondore),</span></i><span style="color: black; text-decoration: none;"> 326 B.R. 214, 217
(Bankr.W.D.N.Y.2005)</span></a>).<o:p></o:p></span></div>
<div class="MsoNormal" style="margin: 6pt 0in; text-align: justify;">
<span style="font-family: Georgia, Times New Roman, serif;"> Numerous courts including five other circuit
courts have held a reckless indifference to the truth can support denial of
discharge under <a href="http://www.westlaw.com/Link/Document/FullText?findType=L&pubNum=1000546&cite=11USCAS727&originationContext=document&vr=3.0&rs=cblt1.0&transitionType=DocumentItem&contextData=(sc.Search)#co_pp_08d30000fbae5"><span style="color: black; text-decoration: none;">§ 727(a)(4)(A)</span></a>. <i>See,
e.g., </i><a href="http://www.westlaw.com/Link/Document/FullText?findType=Y&serNum=1987056740&pubNum=350&originationContext=document&vr=3.0&rs=cblt1.0&transitionType=DocumentItem&contextData=(sc.Search)#co_pp_sp_350_111"><i><span style="color: black; text-decoration: none;">Boroff v. Tully (In re Tully),</span></i><span style="color: black; text-decoration: none;"> 818 F.2d 106, 111 (1st Cir.1987)</span></a>
(debtor’s omissions evidenced “reckless indifference to truth equivalent to
fraud for purposes of <a href="http://www.westlaw.com/Link/Document/FullText?findType=L&pubNum=1000546&cite=11USCAS727&originationContext=document&vr=3.0&rs=cblt1.0&transitionType=DocumentItem&contextData=(sc.Search)#co_pp_08d30000fbae5"><span style="color: black; text-decoration: none;">§ 727(a)(4)(A)</span></a>”); <a href="http://www.westlaw.com/Link/Document/FullText?findType=Y&serNum=1983155756&pubNum=350&originationContext=document&vr=3.0&rs=cblt1.0&transitionType=DocumentItem&contextData=(sc.Search)#co_pp_sp_350_1584"><i><span style="color: black; text-decoration: none;">Salomon v. Kaiser (In re Kaiser),</span></i><span style="color: black; text-decoration: none;"> 722 F.2d 1574, 1584 n. 4 (2d
Cir.1983)</span></a> (citing authority that reckless indifference to truth is the
equivalent of fraud, and that a pattern of reckless and cavalier disregard for
truth can be serious enough to supply the necessary fraudulent intent required
by <a href="http://www.westlaw.com/Link/Document/FullText?findType=L&pubNum=1000546&cite=11USCAS727&originationContext=document&vr=3.0&rs=cblt1.0&transitionType=DocumentItem&contextData=(sc.Search)#co_pp_08d30000fbae5"><span style="color: black; text-decoration: none;">§ 727(a)(4)(A)</span></a>); <a href="http://www.westlaw.com/Link/Document/FullText?findType=Y&serNum=1992118182&pubNum=350&originationContext=document&vr=3.0&rs=cblt1.0&transitionType=DocumentItem&contextData=(sc.Search)#co_pp_sp_350_178"><i><span style="color: black; text-decoration: none;"> (In re Beaubouef),</span></i><span style="color: black; text-decoration: none;"> 966 F.2d 174, 178 (5th Cir.1992)</span></a> (multiple
falsehoods, combined with “<b><u>failure to
take advantage of the opportunity to clear up all inconsistencies and omissions
when he filed his amended schedules,” constituted “reckless indifference to the
truth and, therefore, the requisite intent to deceive</u></b>”) (citation
omitted, emphasis added); <a href="http://www.westlaw.com/Link/Document/FullText?findType=Y&serNum=2000532989&pubNum=506&originationContext=document&vr=3.0&rs=cblt1.0&transitionType=DocumentItem&contextData=(sc.Search)#co_pp_sp_506_686"><i><span style="color: black; text-decoration: none;">Keeney v. Smith (In re Keeney),</span></i><span style="color: black; text-decoration: none;"> 227 F.3d 679, 686 (6th Cir.2000)</span></a> (“A
reckless disregard as to whether a representation is true will also satisfy the
intent requirement”) (citation omitted); <a href="http://www.westlaw.com/Link/Document/FullText?findType=Y&serNum=1998153662&pubNum=506&originationContext=document&vr=3.0&rs=cblt1.0&transitionType=DocumentItem&contextData=(sc.Search)#co_pp_sp_506_728"><i><span style="color: black; text-decoration: none;">In re Chavin,</span></i><span style="color: black; text-decoration: none;"> 150 F.3d 726, 728 (7th Cir.1998)</span></a> (“not
caring whether some representation is true or false—the state of mind known as
‘reckless disregard’—is, at least for purposes of the provisions of the
Bankruptcy Code governing discharge, the equivalent of knowing that the
representation is false and material”) (citations omitted); <a href="http://www.westlaw.com/Link/Document/FullText?findType=Y&serNum=2004467327&pubNum=164&originationContext=document&vr=3.0&rs=cblt1.0&transitionType=DocumentItem&contextData=(sc.Search)"><i><span style="color: black; text-decoration: none;">Martin Marietta Materials Southwest,
Inc. v. Lee (In re Lee),</span></i><span style="color: black; text-decoration: none;"> 309 B.R. 468
(Bankr.W.D.Tex.2004)</span></a> (following <a href="http://www.westlaw.com/Link/Document/FullText?findType=Y&serNum=1992118182&originationContext=document&vr=3.0&rs=cblt1.0&transitionType=DocumentItem&contextData=(sc.Search)"><i><span style="color: black; text-decoration: none;">Beaubouef</span></i><span style="color: black; text-decoration: none;">).</span></a> <i>See generally</i> C.C. Marvel,
Annotation, <a href="http://www.westlaw.com/Link/Document/FullText?findType=Y&serNum=1958012868&pubNum=0000999&originationContext=document&vr=3.0&rs=cblt1.0&transitionType=DocumentItem&contextData=(sc.Search)"><i><span style="color: black; text-decoration: none;">False Oath or Account as Bar to
Discharge in Bankruptcy Proceedings,</span></i><span style="color: black; text-decoration: none;"> 59 A.L.R.2d 791,
1958 WL 11371 (1958, updated weekly per Westlaw)</span></a>
(“Annotation, <i>False Oath or Account</i>”); § 9.5 (reckless disregard).<o:p></o:p></span></div>
<div class="MsoNormal" style="margin: 6pt 0in; text-align: justify; text-indent: 0.5in;">
<span style="font-family: Georgia, Times New Roman, serif;">These
cases could be read as equating recklessness with a knowing and fraudulent
intent, but that goes too far. The statute specifically requires that the
debtor make a false oath or account “knowingly and fraudulently.” <a href="http://www.westlaw.com/Link/Document/FullText?findType=L&pubNum=1000546&cite=11USCAS727&originationContext=document&vr=3.0&rs=cblt1.0&transitionType=DocumentItem&contextData=(sc.Search)#co_pp_08d30000fbae5"><span style="color: black; text-decoration: none;">§ 727(a)(4)(A)</span></a>. As
one court put it:<o:p></o:p></span></div>
<div class="MsoNormal" style="margin: 6pt 40.3pt 6pt 49.7pt; text-align: justify;">
<span style="font-family: Georgia, Times New Roman, serif;">[A] debtor does not necessarily act
with fraudulent intent even if he knowingly makes a false oath, and <a href="http://www.westlaw.com/Link/Document/FullText?findType=L&pubNum=1000546&cite=11USCAS727&originationContext=document&vr=3.0&rs=cblt1.0&transitionType=DocumentItem&contextData=(sc.Search)#co_pp_08d30000fbae5"><span style="color: black; text-decoration: none;">§ 727(a)(4)(A)</span></a>, by
requiring both knowledge and the intent to defraud, implicitly acknowledges
that fact. It would certainly be anomalous to hold that a finding of reckless
disregard on the part of a debtor for the accuracy of her schedules obviates
the need to establish fraudulent intent, even though the Code permits no such
“short cut” with respect to a debtor who signs schedules containing information
which she knows to be false.<o:p></o:p></span></div>
<div class="MsoNormal" style="margin: 6pt 0in; text-align: justify;">
<span style="font-family: Georgia, Times New Roman, serif;"><a href="http://www.westlaw.com/Link/Document/FullText?findType=Y&serNum=1992037937&pubNum=164&originationContext=document&vr=3.0&rs=cblt1.0&transitionType=DocumentItem&contextData=(sc.Search)#co_pp_sp_164_696"><i><span style="color: black; text-decoration: none;">United States v. Sumpter (In re
Sumpter),</span></i><span style="color: black; text-decoration: none;"> 136 B.R. 690, 696
(Bankr.E.D.Mich.1991)</span></a>, aff’d on other grounds, <a href="http://www.westlaw.com/Link/Document/FullText?findType=Y&serNum=1994175839&pubNum=164&originationContext=document&vr=3.0&rs=cblt1.0&transitionType=DocumentItem&contextData=(sc.Search)"><span style="color: black; text-decoration: none;">170 B.R. 908 (E.D.Mich.1994)</span></a>,
aff’d in part, rev’d in part, <a href="http://www.westlaw.com/Link/Document/FullText?findType=Y&serNum=1995174658&pubNum=506&originationContext=document&vr=3.0&rs=cblt1.0&transitionType=DocumentItem&contextData=(sc.Search)"><span style="color: black; text-decoration: none;">64 F.3d 663 (6th Cir.1995)</span></a>
(table).<o:p></o:p></span></div>
<div class="MsoListParagraph" style="margin-bottom: 6.0pt; margin-left: 58.5pt; margin-right: 0in; margin-top: 6.0pt; mso-add-space: auto; mso-list: l2 level1 lfo3; text-align: justify; text-indent: -.5in;">
<!--[if !supportLists]--><span style="font-family: Georgia, Times New Roman, serif;"><b><i>(2)<span style="font-style: normal; font-weight: normal;">
</span></i></b><!--[endif]--><b><i>Circumstantial Evidence and Inferences
of Intent.<o:p></o:p></i></b></span></div>
<div class="MsoNormal" style="margin: 6pt 0in; text-align: justify;">
<span style="font-family: Georgia, Times New Roman, serif;"> On the
other hand, intent usually must be proven by circumstantial evidence or
inferences drawn from the debtor’s course of conduct. <i>See, e.g., </i><a href="http://www.westlaw.com/Link/Document/FullText?findType=Y&serNum=2005613838&pubNum=164&originationContext=document&vr=3.0&rs=cblt1.0&transitionType=DocumentItem&contextData=(sc.Search)#co_pp_sp_164_377"><i><span style="color: black; text-decoration: none;">Searles,</span></i><span style="color: black; text-decoration: none;"> 317 B.R. at 377</span></a>
(evidence supported “factual inference” that debtor “intended to list a sum
below the trustee’s radar screen”); <a href="http://www.westlaw.com/Link/Document/FullText?findType=Y&serNum=2007477108&pubNum=164&originationContext=document&vr=3.0&rs=cblt1.0&transitionType=DocumentItem&contextData=(sc.Search)#co_pp_sp_164_884"><i><span style="color: black; text-decoration: none;">Roberts,</span></i><span style="color: black; text-decoration: none;"> 331 B.R. at 884</span></a>
(fraudulent intent “may be established by inferences drawn from [debtor’s]
course of conduct”); <a href="http://www.westlaw.com/Link/Document/FullText?findType=Y&serNum=2000029576&pubNum=164&originationContext=document&vr=3.0&rs=cblt1.0&transitionType=DocumentItem&contextData=(sc.Search)#co_pp_sp_164_64"><i><span style="color: black; text-decoration: none;">Wills,</span></i><span style="color: black; text-decoration: none;"> 243 B.R. at 64</span></a>
(same). <b><u>Recklessness can be part of
that circumstantial evidence</u></b>.<o:p></o:p></span></div>
<div class="MsoNormal" style="margin: 6pt 0in; text-align: justify;">
<span style="font-family: Georgia, Times New Roman, serif;"> <a href="http://www.westlaw.com/Link/Document/FullText?findType=Y&serNum=1996076079&originationContext=document&vr=3.0&rs=cblt1.0&transitionType=DocumentItem&contextData=(sc.Search)"><i><span style="color: black; text-decoration: none;">Coombs</span></i></a>
strikes the appropriate balance. It is critical of too easy a reliance on
recklessness, but as noted in <i>Wills</i>
it also stands for the general proposition that a court “<i>may</i> find the
requisite intent where there has been a pattern of falsity or from a debtor’s
reckless indifference to or disregard of the truth.” <a href="http://www.westlaw.com/Link/Document/FullText?findType=Y&serNum=2000029576&pubNum=164&originationContext=document&vr=3.0&rs=cblt1.0&transitionType=DocumentItem&contextData=(sc.Search)#co_pp_sp_164_64"><i><span style="color: black; text-decoration: none;">Wills,</span></i><span style="color: black; text-decoration: none;"> 243 B.R. at 64</span></a>
(emphasis added) (citing <a href="http://www.westlaw.com/Link/Document/FullText?findType=Y&serNum=1996076079&pubNum=164&originationContext=document&vr=3.0&rs=cblt1.0&transitionType=DocumentItem&contextData=(sc.Search)#co_pp_sp_164_564"><i><span style="color: black; text-decoration: none;">Coombs,</span></i><span style="color: black; text-decoration: none;"> 193 B.R. at 564).</span></a> The <a href="http://www.westlaw.com/Link/Document/FullText?findType=Y&serNum=1996076079&originationContext=document&vr=3.0&rs=cblt1.0&transitionType=DocumentItem&contextData=(sc.Search)"><i><span style="color: black; text-decoration: none;">Coombs</span></i></a> court
said it well:<o:p></o:p></span></div>
<div class="MsoNormal" style="margin: 6pt 0in 6pt 0.5in; text-align: justify;">
<span style="font-family: Georgia, Times New Roman, serif;">The essential point is that there must be something about
the adduced facts and circumstances which suggest that the debtor intended to
defraud creditors or the estate. For instance, multiple omissions of material
assets or information may well support an <i>inference of fraud</i> if the
nature of the assets or transactions suggests that the debtor was aware of them
at the time of preparing the schedules and that there was something about the
assets or transactions which, because of their size or nature, a debtor might
want to conceal. <a href="http://www.westlaw.com/Link/Document/FullText?findType=Y&serNum=1996076079&pubNum=164&originationContext=document&vr=3.0&rs=cblt1.0&transitionType=DocumentItem&contextData=(sc.Search)#co_pp_sp_164_565"><i><span style="color: black; text-decoration: none;">Coombs,</span></i><span style="color: black; text-decoration: none;"> 193 B.R. at 565–66</span></a>
(emphasis added).<a href="file:///C:/Users/Antony/AppData/Local/Microsoft/Windows/Temporary%20Internet%20Files/Content.Outlook/9AC0B4YA/11%20USC%20%C2%A7%20727%20%20and%20Denial%20of%20Discharge%20(Scrumlick).docx#_ftn5" name="_ftnref5" title=""><span class="MsoFootnoteReference"><!--[if !supportFootnotes]--><span class="MsoFootnoteReference"><span style="color: black;">[5]</span></span><!--[endif]--></span></a><o:p></o:p></span></div>
<div class="MsoNormal" style="margin: 6pt 0in 6pt 0.5in; text-align: justify;">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoListParagraph" style="margin-bottom: 6.0pt; margin-left: 58.5pt; margin-right: 0in; margin-top: 6.0pt; mso-add-space: auto; mso-list: l2 level1 lfo3; text-align: justify; text-indent: -.5in;">
<!--[if !supportLists]--><span style="font-family: Georgia, Times New Roman, serif;"><b><i>(3)<span style="font-style: normal; font-weight: normal;">
</span></i></b><!--[endif]--><b><i>Motive<o:p></o:p></i></b></span></div>
<div class="MsoNormal" style="margin: 6pt 0in; text-align: justify;">
<span style="font-family: Georgia, Times New Roman, serif;"> Motive can support a finding of knowing and fraudulent
intent, but it is not indispensable. A bankruptcy court might find that a
debtor’s reckless indifference to the truth is part of an attempt to fly “below
the trustee’s radar screen” <a href="http://www.westlaw.com/Link/Document/FullText?findType=Y&serNum=2005613838&pubNum=164&originationContext=document&vr=3.0&rs=cblt1.0&transitionType=DocumentItem&contextData=(sc.Search)#co_pp_sp_164_377"><span style="color: black; text-decoration: none;">(<i>Searles,</i> 317 B.R. at 377),</span></a> or to
protect family or friends from intrusive discovery or preference or fraudulent
transfer actions, or simply to make investigation difficult for the bankruptcy
trustee or creditors. Alternatively, the court might never know the debtor’s
motive, but the number of misstatements or omissions, or the size or nature of
a single one, might suffice to support a finding that a debtor knowingly and
fraudulently made a false oath or account. <i>See </i><a href="http://www.westlaw.com/Link/Document/FullText?findType=Y&serNum=2012269451&pubNum=164&originationContext=document&vr=3.0&rs=cblt1.0&transitionType=DocumentItem&contextData=(sc.Search)#co_pp_sp_164_878"><i><span style="color: black; text-decoration: none;">Hansen v. Moore (In re Hansen),</span></i><span style="color: black; text-decoration: none;"> 368 B.R. 868, 878 (9th Cir. BAP
2007)</span></a> (“The sheer number of material inaccuracies contained in schedules
that debtor, an attorney, admittedly reviewed and revised twice suffices as
circumstantial evidence to support the finding that the ‘knowingly and
fraudulently’ element of <a href="http://www.westlaw.com/Link/Document/FullText?findType=L&pubNum=1000546&cite=11USCAS727&originationContext=document&vr=3.0&rs=cblt1.0&transitionType=DocumentItem&contextData=(sc.Search)#co_pp_d40e000072291"><span style="color: black; text-decoration: none;">§ 727(a)(4)</span></a> was
proven.”). In the present case, Debtors’
adversary counsel hints at the existence and nature of motive in his opening
statement. He states in relevant part,
the following:<a href="file:///C:/Users/Antony/AppData/Local/Microsoft/Windows/Temporary%20Internet%20Files/Content.Outlook/9AC0B4YA/11%20USC%20%C2%A7%20727%20%20and%20Denial%20of%20Discharge%20(Scrumlick).docx#_ftn6" name="_ftnref6" title=""><span class="MsoFootnoteReference"><!--[if !supportFootnotes]--><span class="MsoFootnoteReference"><span style="color: black;">[6]</span></span><!--[endif]--></span></a><o:p></o:p></span></div>
<div class="MsoNormal" style="margin: 6pt 0.05in 6pt 0.5in; text-align: justify; text-indent: 0.5in; vertical-align: baseline;">
<span style="font-family: Georgia, Times New Roman, serif;">COUNSEL
FOR DEBTOR: <b><u>[Debtor] had not even
contemplated filing bankruptcy. It was only on the eve of learning that a
default judgment had been taken in by the Department of Employment</u></b>, a
suit that he didn't even know about because it was served at the plaintiffs'
address and not his, that he decided to file bankruptcy, and that was on June
29th when he went to go meet with his lawyer give or take a day or two. I
believe the petition was filed the first week of July -- <o:p></o:p></span></div>
<div class="MsoNormal" style="margin: 6pt 0.05in 6pt 0.5in; text-align: justify; text-indent: 0.5in; vertical-align: baseline;">
<span style="font-family: Georgia, Times New Roman, serif;">UNIDENTIFIED
SPEAKER: The 1st. The 1st. <o:p></o:p></span></div>
<div class="MsoNormal" style="margin: 6pt 0.05in 6pt 0.5in; text-align: justify; text-indent: 0.5in; vertical-align: baseline;">
<span style="font-family: Georgia, Times New Roman, serif;">COUNSEL
FOR DEBTOR: -- the 1st of July. <b><u>Prior
to that, there was never any contemplation of bankruptcy.</u></b> <o:p></o:p></span></div>
<div class="MsoNormal" style="margin: 6pt 0.05in 6pt 0.5in; text-align: justify; text-indent: 0.5in; vertical-align: baseline;">
<span style="font-family: Georgia, Times New Roman, serif;">COUNSEL
FOR DEBTOR: So, I mean, it's going to be a little bit of a stretch to say, oh,
you know, you were hiding these things, and you had the intent to delay or
hinder especially when none of these accounts had anything in them. And like I
said, your Honor, it's their burden. You know, I don't want to belabor the point.
Let's just see what happens. Thank you.</span></div>
<div class="MsoNormal" style="margin: 6pt 0in; text-align: justify;">
<span style="font-family: Georgia, Times New Roman, serif;">The Debtors, in an effort to evade creditors, filed for
Bankruptcy without so much as a thought, merely to frustrate their
creditors. Their efforts at hindrance
and delay continued even during the course of the bankruptcy notwithstanding
their duty as debtors to be truthful and forthcoming.<o:p></o:p></span></div>
<div class="MsoListParagraph" style="margin-bottom: 6.0pt; margin-left: 58.5pt; margin-right: 0in; margin-top: 6.0pt; mso-add-space: auto; mso-list: l2 level1 lfo3; text-align: justify; text-indent: -.5in;">
<!--[if !supportLists]--><span style="font-family: Georgia, Times New Roman, serif;"><b><i>(4)<span style="font-style: normal; font-weight: normal;">
</span></i></b><!--[endif]--><b><i>Hindrance and Delay<o:p></o:p></i></b></span></div>
<div class="MsoNormal" style="margin: 6pt 0in; text-align: justify;">
<span style="font-family: Georgia, Times New Roman, serif;">Debtors appear to be arguing that their last filing of
schedules amended to finally disclose the clandestine accounts, however late in
the day, is enough to overcome the clear and unequivocal evidence that these
accounts were (1) material; and (2) indeed omitted yet subject to compulsory
disclosure. It is as though they believe that whatever the circumstance
surrounding the omission or concealment f these accounts, all is forgiven once
they are disclosed. But efforts on the
part of Debtors to hinder or delay creditors notwithstanding ultimate
disclosure may suffice to deny discharge.<o:p></o:p></span></div>
<div class="MsoNormal" style="margin: 6pt 0in; text-align: justify; text-indent: 0.5in;">
<span style="font-family: Georgia, Times New Roman, serif;"><i>Under </i><a href="http://www.westlaw.com/Link/Document/FullText?findType=Y&serNum=1999192209&pubNum=164&originationContext=document&vr=3.0&rs=cblt1.0&transitionType=DocumentItem&contextData=(sc.Search)#co_pp_sp_164_732"><i><span style="color: black; text-decoration: none;">Beauchamp,</span></i><span style="color: black; text-decoration: none;"> (</span><i><span style="color: windowtext; text-decoration: none;">In re Beauchamp</span></i><span style="color: windowtext; text-decoration: none;">, 236 B.R. 727, 732-34 (B.A.P. 9th
Cir. 1999) </span><span style="color: windowtext;">aff'd,</span><span style="color: windowtext; text-decoration: none;"> 5 F. App'x 743 (9th Cir. 2001)</span></a>) “[t]wo elements
comprise an objection to discharge under § 727(a)(2)(A): 1) a disposition of
property, such as transfer or concealment, and 2) <b><u>a subjective intent on the debtor's part to hinder, delay or defraud
a creditor through the act of disposing of the property.</u></b>” <i>Lawson,</i>
122 F.3d at 1240. Here the evidence presented at trial clearly
establishes both elements. <o:p></o:p></span></div>
<div class="MsoNormal" style="margin: 6pt 0in; text-align: justify; text-indent: 0.5in;">
<span style="font-family: Georgia, Times New Roman, serif;">Debtors appear to argue that, because they
ultimately disclosed the clandestine bank accounts (two years after initially
filing their petition and prior amended schedules) they have absolved
themselves of any wrongdoing. In this view, <i>Debtors</i> direct the Court to
clear repentant debtors, setting the deadline for repentance as far out as
close to two years subsequent to filing a petition for bankruptcy so long as
coming clean occurs prior to trial on the matter.<o:p></o:p></span></div>
<div class="MsoNormal" style="margin: 6pt 0in; text-align: justify; text-indent: 0.5in;">
<span style="font-family: Georgia, Times New Roman, serif;">But as the <i>Beauchamp</i>
Court so eloquently stated: “a debtor who first foils creditors by secreting
assets, and then repents, pits the fundamental “fresh start” purpose of the Code,
requiring liberal construction in favor of the debtor, against the “clean
hands” maxim.”<a href="file:///C:/Users/Antony/AppData/Local/Microsoft/Windows/Temporary%20Internet%20Files/Content.Outlook/9AC0B4YA/11%20USC%20%C2%A7%20727%20%20and%20Denial%20of%20Discharge%20(Scrumlick).docx#_ftn7" name="_ftnref7" title=""><span class="MsoFootnoteReference"><!--[if !supportFootnotes]--><span class="MsoFootnoteReference">[7]</span><!--[endif]--></span></a><sup>,<a href="file:///C:/Users/Antony/AppData/Local/Microsoft/Windows/Temporary%20Internet%20Files/Content.Outlook/9AC0B4YA/11%20USC%20%C2%A7%20727%20%20and%20Denial%20of%20Discharge%20(Scrumlick).docx#_ftn8" name="_ftnref8" title=""><span class="MsoFootnoteReference"><!--[if !supportFootnotes]--><span class="MsoFootnoteReference">[8]</span><!--[endif]--></span></a></sup> In <i>Beauchamp</i>,
the debtor did not wait till Summary Judgment.
Indeed he “came clean” as early as the first 341 creditors’
meeting. Even still he was denied discharge. The Debtor in <i>Beauchamp</i> stressed that he had disclosed his secret fund by the
time of the meeting of creditors, and urged that Court to extend the grace
period to the § 341 meeting, so long as the schedules are properly amended. <o:p></o:p></span></div>
<div class="MsoNormal" style="margin: 6pt 0in; text-align: justify; text-indent: 0.5in;">
<span style="font-family: Georgia, Times New Roman, serif;">But as the <i>Beauchamp </i>Court found, <i>In re Waddle<a href="file:///C:/Users/Antony/AppData/Local/Microsoft/Windows/Temporary%20Internet%20Files/Content.Outlook/9AC0B4YA/11%20USC%20%C2%A7%20727%20%20and%20Denial%20of%20Discharge%20(Scrumlick).docx#_ftn9" name="_ftnref9" title=""><span class="MsoFootnoteReference"><!--[if !supportFootnotes]--><span class="MsoFootnoteReference"><b>[9]</b></span><!--[endif]--></span></a>
</i>did not so hold. A creditor there sought to bar discharge under
several theories, the debtor denied having had an interest in the property at
issue, and the court held that the creditor had failed to carry its burden.
Reiterating elements of a cause of action under § 727(a), the court mentioned
in passing that a debtor might avoid the penalty of the section by reporting
concealed assets at the meeting of creditors: at most, dicta of insignificant
moment. <i>See Waddle,</i> 29 B.R. at 103.<o:p></o:p></span></div>
<div class="MsoNormal" style="margin: 6pt 0in; text-align: justify; text-indent: 0.5in;">
<span style="font-family: Georgia, Times New Roman, serif;">In <i>Baker
v. Mereshian,<a href="file:///C:/Users/Antony/AppData/Local/Microsoft/Windows/Temporary%20Internet%20Files/Content.Outlook/9AC0B4YA/11%20USC%20%C2%A7%20727%20%20and%20Denial%20of%20Discharge%20(Scrumlick).docx#_ftn10" name="_ftnref10" title=""><span class="MsoFootnoteReference"><!--[if !supportFootnotes]--><span class="MsoFootnoteReference"><b>[10]</b></span><!--[endif]--></span></a>
</i>the Ninth Circuit Court noted that in a comparable situation, it has stated
that a “debtor who fully discloses his property transactions at the first
meeting of creditors is not fraudulently concealing property from his
creditors.” Nevertheless, <i>Mereshian</i> does not stand for the proposition
that §341 meeting confessions absolve fraud. Instead, the Panel there merely
affirmed the Bankruptcy Court's finding of absence of intent to hinder, delay
or defraud, noting in passing the debtor's candid acknowledgment of the
transactions at the meeting of creditors. <i>Mereshian,</i> 200 B.R. at 346. In
<i>Beauchamp</i> the lower Court found that,
but for the threatened Rule 2004 examination, no disclosures would have been
forthcoming from the <i>Beauchamp</i>
debtor.<i> </i>None of cases cited by
the debtor in <i>Beauchamp</i> hold that
disclosure of secreted assets at or before the § 341 meeting precludes finding
intent to hinder, delay or defraud much less so for half hearted disclosure two
years our on the eve of summary judgment or trial as in the case of these
Debtors.<i><o:p></o:p></i></span></div>
<div class="MsoNormal" style="margin: 6pt 0in; text-align: justify; text-indent: 0.5in;">
<span style="font-family: Georgia, Times New Roman, serif;">Indeed, in the present case, it is clear from the
evidentiary record that, but for Plaintiffs’ prosecution of its claims and the
filing of the Motion for Summary Judgment, the Debtors would never have come
clean and disclosed the clandestine bank accounts. <o:p></o:p></span></div>
<div class="MsoListParagraph" style="margin-bottom: 6.0pt; margin-left: .75in; margin-right: 0in; margin-top: 6.0pt; mso-add-space: auto; mso-list: l1 level1 lfo1; text-indent: -.5in;">
<!--[if !supportLists]--><span style="font-family: Georgia, Times New Roman, serif;"><b>I.<span style="font-weight: normal;">
</span></b><!--[endif]--><b>CONCLUSION<i><o:p></o:p></i></b></span></div>
<div class="MsoNormal" style="margin: 6pt 0in; text-align: justify; vertical-align: baseline;">
<span style="font-family: Georgia, Times New Roman, serif;"> While
it is true that a discharge cannot be denied when items are omitted from the
schedules by honest mistake, the existence of more than one falsehood, together
with a debtor’s failure to take advantage of the opportunity to clear up all
inconsistencies and omissions, such as when filing amended schedules, can be
found to constitute reckless indifference to the truth satisfying the requisite
finding of intent to deceive.<a href="file:///C:/Users/Antony/AppData/Local/Microsoft/Windows/Temporary%20Internet%20Files/Content.Outlook/9AC0B4YA/11%20USC%20%C2%A7%20727%20%20and%20Denial%20of%20Discharge%20(Scrumlick).docx#_ftn11" name="_ftnref11" title=""><span class="MsoFootnoteReference"><!--[if !supportFootnotes]--><span class="MsoFootnoteReference"><span style="color: black;">[11]</span></span><!--[endif]--></span></a> In the case at bar, Debtors filed their
petition on July 1, 2010. They filed
their schedules soon thereafter on <span style="background: yellow; mso-highlight: yellow;">___________</span>. They amended
their schedules to include 91 new phantom creditors on <span style="background: yellow; mso-highlight: yellow;">_</span> but did not amend at this time so as to
include the undisclosed bank accounts, prepetition transfers, and income. Despite numerous opportunities to be
forthright and honest in their disclosures, The Debtors stubbornly
refused. To wit:<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpFirst" style="margin-bottom: 6.0pt; margin-left: .5in; margin-right: 0in; margin-top: 6.0pt; mso-add-space: auto; mso-list: l0 level1 lfo2; tab-stops: decimal .5in 1.05in right 6.45in; text-align: justify; text-indent: -.25in; vertical-align: baseline;">
<!--[if !supportLists]--><span style="font-family: Georgia, Times New Roman, serif;">(1) <!--[endif]-->Debtors failed to come clean at three separate 341 Creditors
Meetings. <o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="margin-bottom: 6.0pt; margin-left: .5in; margin-right: 0in; margin-top: 6.0pt; mso-add-space: auto; mso-list: l0 level1 lfo2; tab-stops: decimal .5in 1.05in right 6.45in; text-align: justify; text-indent: -.25in; vertical-align: baseline;">
<!--[if !supportLists]--><span style="font-family: Georgia, Times New Roman, serif;">(2) <!--[endif]-->Plaintiffs filed their Complaint detailing missing bank accounts
and income more than a year and a half ago; still, Debtors refused to come
clean and amend. <o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="margin-bottom: 6.0pt; margin-left: .5in; margin-right: 0in; margin-top: 6.0pt; mso-add-space: auto; mso-list: l0 level1 lfo2; tab-stops: decimal .5in 1.05in right 6.45in; text-align: justify; text-indent: -.25in; vertical-align: baseline;">
<!--[if !supportLists]--><span style="font-family: Georgia, Times New Roman, serif;">(3) <!--[endif]-->On January 6, 2012 the Trustee filed a motion to extend time to
object to discharge based in part on Debtors': (1) failure to disclose numerous
assets (including but not limited bank accounts) and income sources; and (2)
the Debtors' falsified statements as to average monthly income on the Chapter 7
Statement of Current Monthly Income and Means-Test Calculation submitted in
support of their bankruptcy petition.<a href="file:///C:/Users/Antony/AppData/Local/Microsoft/Windows/Temporary%20Internet%20Files/Content.Outlook/9AC0B4YA/11%20USC%20%C2%A7%20727%20%20and%20Denial%20of%20Discharge%20(Scrumlick).docx#_ftn12" name="_ftnref12" title=""><span class="MsoFootnoteReference"><!--[if !supportFootnotes]--><span class="MsoFootnoteReference"><span style="color: black;">[12]</span></span><!--[endif]--></span></a>
Still, Debtors refused to come clean and disclose.<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="margin-bottom: 6.0pt; margin-left: .5in; margin-right: 0in; margin-top: 6.0pt; mso-add-space: auto; mso-list: l0 level1 lfo2; tab-stops: decimal .5in 1.05in right 6.45in; text-align: justify; text-indent: -.25in; vertical-align: baseline;">
<!--[if !supportLists]--><span style="font-family: Georgia, Times New Roman, serif;">(4) <!--[endif]-->Despite numerous depositions and discovery requests, Debtors
refused to acknowledge the existence of the missing accounts and income.<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpLast" style="margin-bottom: 6.0pt; margin-left: .5in; margin-right: 0in; margin-top: 6.0pt; mso-add-space: auto; mso-list: l0 level1 lfo2; tab-stops: decimal .5in 1.05in right 6.45in; text-align: justify; text-indent: -.25in; vertical-align: baseline;">
<!--[if !supportLists]--><span style="font-family: Georgia, Times New Roman, serif;">(5) <!--[endif]-->Finally, ONLY AFTER Defendants filed a Motion for Summary Judgment
on or about _________, when it was clear and unequivocal, that the jig was up,
did Debtors begrudgingly decide to disclose the existence of the previously
undisclosed accounts.<o:p></o:p></span></div>
<div class="MsoNormal" style="margin: 6pt 0in; text-align: justify; vertical-align: baseline;">
<span style="font-family: Georgia, Times New Roman, serif;">Remarkably, they refused to disclose the apparent and obvious
income they received as evidenced by their own testimony at trial.<o:p></o:p></span></div>
<div class="MsoNormal" style="margin: 6pt 0in; text-align: justify; vertical-align: baseline;">
<span style="font-family: Georgia, Times New Roman, serif;"> <a href="http://www.westlaw.com/Link/Document/FullText?findType=L&pubNum=1000546&cite=11USCAS727&originationContext=document&vr=3.0&rs=cblt1.0&transitionType=DocumentItem&contextData=(sc.Search)#co_pp_08d30000fbae5"><span style="color: black; text-decoration: none;">§ 727(a)(4)(A)</span></a> is
satisfied if “the debtor <a href="http://www.blogger.com/blogger.g?blogID=5898536086571838489" name="co_pp_sp_164_176_1"></a><i>knew</i> the
statement (or omission) was false” and “the debtor made the statement (or
omission) with <i>fraudulent intent.</i>” <a href="http://www.westlaw.com/Link/Document/FullText?findType=Y&serNum=2004467327&pubNum=164&originationContext=document&vr=3.0&rs=cblt1.0&transitionType=DocumentItem&contextData=(sc.Search)#co_pp_sp_164_477"><i><span style="color: black; text-decoration: none;">Lee,</span></i><span style="color: black; text-decoration: none;"> 309 B.R. at 477</span></a>
(emphasis added). Tr., Dec. 18, 2006, p. 8:2–4. <a href="http://www.westlaw.com/Link/Document/FullText?findType=Y&serNum=2004467327&originationContext=document&vr=3.0&rs=cblt1.0&transitionType=DocumentItem&contextData=(sc.Search)"><i><span style="color: black; text-decoration: none;">Lee</span></i></a>
requires an “intent to deceive,” but not just Debtor’s conscious omissions; <a href="http://www.westlaw.com/Link/Document/FullText?findType=Y&serNum=2004467327&originationContext=document&vr=3.0&rs=cblt1.0&transitionType=DocumentItem&contextData=(sc.Search)"><i><span style="color: black; text-decoration: none;">Lee</span></i></a> also
permits that intent to be inferred from appropriate circumstantial evidence.
The existence of more than one falsehood, together with a debtor’s failure to
take advantage of the opportunity to clear up all inconsistencies and omissions,
such as when filing amended schedules, <i>can</i> be found to constitute a
basis for a finding of <i>intent to deceive.</i> In other words, the court need
not find that there is any actual admission by a debtor of any intent to
deceive, but rather in looking at all of the circumstances, whether or not such
intent may be <i>inferred.</i> The
record before this Court overwhelmingly supports that inference. The requisite intent is supported by the
number of omissions, by the magnitude of the omissions, by the conscious exclusion
of information, even at the time of trial, and no attempt to correct the
inaccuracies. These are exactly the sort
of circumstances referred to in <a href="http://www.westlaw.com/Link/Document/FullText?findType=Y&serNum=1996076079&originationContext=document&vr=3.0&rs=cblt1.0&transitionType=DocumentItem&contextData=(sc.Search)"><i><span style="color: black; text-decoration: none;">Coombs</span></i></a> (and <a href="http://www.westlaw.com/Link/Document/FullText?findType=Y&serNum=2004467327&originationContext=document&vr=3.0&rs=cblt1.0&transitionType=DocumentItem&contextData=(sc.Search)"><i><span style="color: black; text-decoration: none;">Lee</span></i><span style="color: black; text-decoration: none;">)</span></a> as supporting an inference of knowing and fraudulent intent. <o:p></o:p></span></div>
<div class="MsoNormal" style="margin: 6pt 0in; text-align: justify; vertical-align: baseline;">
<span style="font-family: Georgia, Times New Roman, serif;"> Debtors who without compunction conceal assets and
file fraudulent schedules, but who realize exposure is imminent and have the
grace (or wit) to surrender before trial, should not be rewarded with a
discharge. Ultimately, such a policy would grant debtors time to gauge the
aggressiveness of their creditors before committing to comfortable levels of
divulgence. Good faith and fair play did
not motivate Debtors’ disclosure; rather, the motivating factor behind these
debtors’ decision to ultimately disclose the existence of the clandestine
accounts was the looming threat of summary judgment. Even then, they could not summon the
integrity and candor to adequately disclose prepetition transfers, payments to
creditors and income and have yet to do so. For all of these reasons Debtor’s
discharge should be denied.</span><span style="font-family: Verdana, sans-serif;"><o:p></o:p></span></div>
<br />
<div>
<hr align="left" size="1" width="33%" />
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<br />
<div id="ftn1">
<div class="MsoNormal" style="margin: 3pt 0in; text-align: justify;">
<span style="font-family: Georgia, Times New Roman, serif; font-size: x-small;"><a href="file:///C:/Users/Antony/AppData/Local/Microsoft/Windows/Temporary%20Internet%20Files/Content.Outlook/9AC0B4YA/11%20USC%20%C2%A7%20727%20%20and%20Denial%20of%20Discharge%20(Scrumlick).docx#_ftnref1" name="_ftn1" title=""><span class="MsoFootnoteReference"><!--[if !supportFootnotes]--><span class="MsoFootnoteReference">[1]</span><!--[endif]--></span></a> Plaintiffs
bear the burden of proving by a preponderance of the evidence that Debtor’s
discharge should be denied. <a href="http://www.westlaw.com/Link/Document/FullText?findType=Y&serNum=2005613838&pubNum=164&originationContext=document&vr=3.0&rs=cblt1.0&transitionType=DocumentItem&contextData=(sc.Search)#co_pp_sp_164_376"><i><span style="color: black; text-decoration: none;">Searles,</span></i><span style="color: black; text-decoration: none;"> 317 B.R. at
376.</span></a>
That does not, however, change the preponderance of evidence standard. Rather,
it has been held to mean that actual, rather than constructive, intent is
required. <i>See </i><a href="http://www.westlaw.com/Link/Document/FullText?findType=Y&serNum=1996076079&pubNum=164&originationContext=document&vr=3.0&rs=cblt1.0&transitionType=DocumentItem&contextData=(sc.Search)#co_pp_sp_164_560"><i><span style="color: black; text-decoration: none;">Garcia v. Coombs (In re Coombs),</span></i><span style="color: black; text-decoration: none;"> 193 B.R. 557, 560 (Bankr.S.D.Cal.1996)</span></a> (strict construction
of statute in favor of discharge is rule of “statutory interpretation” not
“rule to apply to consideration of evidence”).<o:p></o:p></span></div>
<div class="MsoFootnoteText" style="margin-bottom: 3.0pt; margin-left: 0in; margin-right: 0in; margin-top: 3.0pt; text-align: justify;">
<span style="font-family: Georgia, Times New Roman, serif; font-size: x-small;"><br /></span></div>
</div>
<div id="ftn2">
<div class="MsoFootnoteText" style="margin-bottom: 3.0pt; margin-left: 0in; margin-right: 0in; margin-top: 3.0pt; text-align: justify;">
<span style="font-family: Georgia, Times New Roman, serif; font-size: x-small;"><a href="file:///C:/Users/Antony/AppData/Local/Microsoft/Windows/Temporary%20Internet%20Files/Content.Outlook/9AC0B4YA/11%20USC%20%C2%A7%20727%20%20and%20Denial%20of%20Discharge%20(Scrumlick).docx#_ftnref2" name="_ftn2" title=""><span class="MsoFootnoteReference"><!--[if !supportFootnotes]--><span class="MsoFootnoteReference">[2]</span><!--[endif]--></span></a> <a href="http://www.westlaw.com/Link/Document/FullText?findType=Y&serNum=2005613838&pubNum=164&originationContext=document&vr=3.0&rs=cblt1.0&transitionType=DocumentItem&contextData=(sc.Search)#co_pp_sp_164_377"><i><span style="color: windowtext; text-decoration: none;"> In re Searles</span></i><span style="color: windowtext; text-decoration: none;"> (B.A.P.
9th Cir. 2004) 317 B.R. 368 </span><span style="color: windowtext;">aff'd,</span><span style="color: windowtext; text-decoration: none;"> (9th
Cir. 2006) 212 Fed.Appx. 589</span><span style="color: black; text-decoration: none;"> 377.</span></a><o:p></o:p></span></div>
</div>
<div id="ftn3">
<div class="MsoNormal" style="margin: 3pt 0in; text-align: justify;">
<span style="font-family: Georgia, Times New Roman, serif; font-size: x-small;"><a href="file:///C:/Users/Antony/AppData/Local/Microsoft/Windows/Temporary%20Internet%20Files/Content.Outlook/9AC0B4YA/11%20USC%20%C2%A7%20727%20%20and%20Denial%20of%20Discharge%20(Scrumlick).docx#_ftnref3" name="_ftn3" title=""><span class="MsoFootnoteReference"><span class="MsoFootnoteReference"><br /></span></span></a></span>
<span style="font-family: Georgia, Times New Roman, serif; font-size: x-small;"><a href="file:///C:/Users/Antony/AppData/Local/Microsoft/Windows/Temporary%20Internet%20Files/Content.Outlook/9AC0B4YA/11%20USC%20%C2%A7%20727%20%20and%20Denial%20of%20Discharge%20(Scrumlick).docx#_ftnref3" name="_ftn3" title=""><span class="MsoFootnoteReference"><!--[if !supportFootnotes]--><span class="MsoFootnoteReference">[3]</span><!--[endif]--></span></a> See, <i>In re Coombs</i> (Bankr. S.D. Cal. 1996)
193 B.R. 557
(distinguishing between broad test of materiality and narrower test of intent).<o:p></o:p></span></div>
<div class="MsoFootnoteText" style="margin-bottom: 3.0pt; margin-left: 0in; margin-right: 0in; margin-top: 3.0pt; text-align: justify;">
<span style="font-family: Georgia, Times New Roman, serif; font-size: x-small;"><br /></span></div>
</div>
<div id="ftn4">
<div class="MsoFootnoteText" style="margin-bottom: 3.0pt; margin-left: 0in; margin-right: 0in; margin-top: 3.0pt; text-align: justify;">
<span style="font-family: Georgia, Times New Roman, serif; font-size: x-small;"><a href="file:///C:/Users/Antony/AppData/Local/Microsoft/Windows/Temporary%20Internet%20Files/Content.Outlook/9AC0B4YA/11%20USC%20%C2%A7%20727%20%20and%20Denial%20of%20Discharge%20(Scrumlick).docx#_ftnref4" name="_ftn4" title=""><span class="MsoFootnoteReference"><!--[if !supportFootnotes]--><span class="MsoFootnoteReference">[4]</span><!--[endif]--></span></a> <i>Id</i> at 566.<o:p></o:p></span></div>
</div>
<div id="ftn5">
<div class="MsoNormal" style="margin: 3pt 0in; text-align: justify;">
<span style="font-family: Georgia, Times New Roman, serif; font-size: x-small;"><a href="file:///C:/Users/Antony/AppData/Local/Microsoft/Windows/Temporary%20Internet%20Files/Content.Outlook/9AC0B4YA/11%20USC%20%C2%A7%20727%20%20and%20Denial%20of%20Discharge%20(Scrumlick).docx#_ftnref5" name="_ftn5" title=""><span class="MsoFootnoteReference"><!--[if !supportFootnotes]--><span class="MsoFootnoteReference">[5]</span><!--[endif]--></span></a> <i>In re Coombs</i> (Bankr. S.D. Cal. 1996)
193 B.R. 557, 565 referring to: <i>In re Woodfield,</i> 978 F.2d 516, 518 (9th
Cir.1992); <i>In re Gipe,</i> 157 B.R. 171, 176–77 (Bankr.M.D.Fla.1993).
Another court has called them “factors to consider”. <i>In re Schroff,</i> 156
B.R. 250, 254–55 (Bankr.W.D.Mo.1993).<o:p></o:p></span></div>
<div class="MsoFootnoteText" style="margin-bottom: 3.0pt; margin-left: 0in; margin-right: 0in; margin-top: 3.0pt; text-align: justify;">
<span style="font-family: Georgia, Times New Roman, serif; font-size: x-small;"><br /></span></div>
</div>
<div id="ftn6">
<div class="MsoFootnoteText" style="margin-bottom: 3.0pt; margin-left: 0in; margin-right: 0in; margin-top: 3.0pt; text-align: justify;">
<span style="font-family: Georgia, Times New Roman, serif; font-size: x-small;"><a href="file:///C:/Users/Antony/AppData/Local/Microsoft/Windows/Temporary%20Internet%20Files/Content.Outlook/9AC0B4YA/11%20USC%20%C2%A7%20727%20%20and%20Denial%20of%20Discharge%20(Scrumlick).docx#_ftnref6" name="_ftn6" title=""><span class="MsoFootnoteReference"><!--[if !supportFootnotes]--><span class="MsoFootnoteReference">[6]</span><!--[endif]--></span></a> Transcript Trial Day 1, No. 1 Volume 1 A.M. at pg. 30.<o:p></o:p></span></div>
</div>
<div id="ftn7">
<div class="MsoNormal" style="margin: 3pt 0in; text-align: justify;">
<span style="font-family: Georgia, Times New Roman, serif; font-size: x-small;"><a href="file:///C:/Users/Antony/AppData/Local/Microsoft/Windows/Temporary%20Internet%20Files/Content.Outlook/9AC0B4YA/11%20USC%20%C2%A7%20727%20%20and%20Denial%20of%20Discharge%20(Scrumlick).docx#_ftnref7" name="_ftn7" title=""><span class="MsoFootnoteReference"><!--[if !supportFootnotes]--><span class="MsoFootnoteReference">[7]</span><!--[endif]--></span></a> <i>Beauchamp</i>, 236 B.R. 727.<o:p></o:p></span></div>
</div>
<div id="ftn8">
<div class="MsoFootnoteText" style="margin-bottom: 3.0pt; margin-left: 0in; margin-right: 0in; margin-top: 3.0pt; text-align: justify;">
<span style="font-family: Georgia, Times New Roman, serif; font-size: x-small;"><a href="file:///C:/Users/Antony/AppData/Local/Microsoft/Windows/Temporary%20Internet%20Files/Content.Outlook/9AC0B4YA/11%20USC%20%C2%A7%20727%20%20and%20Denial%20of%20Discharge%20(Scrumlick).docx#_ftnref8" name="_ftn8" title=""><span class="MsoFootnoteReference"><!--[if !supportFootnotes]--><span class="MsoFootnoteReference">[8]</span><!--[endif]--></span></a> <i>See, e.g., Bajgar,</i> 104 F.3d at 498 n. 1
(although reasons for barring discharge must be substantial, “ ‘[o]n the other
hand, the very purpose of certain sections of the law, like 11 U.S.C. § 727(a)[
], is to make certain that those who seek the shelter of the bankruptcy code do
not play fast and loose with their assets or with the reality of their affairs.’
”) (quoting <i>Boroff v. Tully (In re Tully),</i> 818 F.2d 106 (1st Cir.1987)).<o:p></o:p></span></div>
</div>
<div id="ftn9">
<div class="MsoFootnoteText" style="margin-bottom: 3.0pt; margin-left: 0in; margin-right: 0in; margin-top: 3.0pt; text-align: justify;">
<span style="font-family: Georgia, Times New Roman, serif; font-size: x-small;"><a href="file:///C:/Users/Antony/AppData/Local/Microsoft/Windows/Temporary%20Internet%20Files/Content.Outlook/9AC0B4YA/11%20USC%20%C2%A7%20727%20%20and%20Denial%20of%20Discharge%20(Scrumlick).docx#_ftnref9" name="_ftn9" title=""><span class="MsoFootnoteReference"><!--[if !supportFootnotes]--><span class="MsoFootnoteReference">[9]</span><!--[endif]--></span></a> <i>In re Waddle</i>, 29 B.R. 100, 103
(Bankr.W.D.Ky.1983); 4 <i>Collier on Bankruptcy</i> ¶ 727.02[6][b] (15th
ed.1985<o:p></o:p></span></div>
</div>
<div id="ftn10">
<div class="MsoFootnoteText" style="margin-bottom: 3.0pt; margin-left: 0in; margin-right: 0in; margin-top: 3.0pt; text-align: justify;">
<span style="font-family: Georgia, Times New Roman, serif; font-size: x-small;"><a href="file:///C:/Users/Antony/AppData/Local/Microsoft/Windows/Temporary%20Internet%20Files/Content.Outlook/9AC0B4YA/11%20USC%20%C2%A7%20727%20%20and%20Denial%20of%20Discharge%20(Scrumlick).docx#_ftnref10" name="_ftn10" title=""><span class="MsoFootnoteReference"><!--[if !supportFootnotes]--><span class="MsoFootnoteReference">[10]</span><!--[endif]--></span></a> <i>In re Mereshian,</i> 200 B.R. 342, 346 (9th
Cir. BAP 1996) referring to <i>In re Waddle,</i> 29 B.R. 100, 103
(Bankr.W.D.Ky.1983)).<o:p></o:p></span></div>
</div>
<div id="ftn11">
<div class="MsoNormal" style="margin: 3pt 0in; text-align: justify;">
<span style="font-family: Georgia, Times New Roman, serif; font-size: x-small;"><a href="file:///C:/Users/Antony/AppData/Local/Microsoft/Windows/Temporary%20Internet%20Files/Content.Outlook/9AC0B4YA/11%20USC%20%C2%A7%20727%20%20and%20Denial%20of%20Discharge%20(Scrumlick).docx#_ftnref11" name="_ftn11" title=""><span class="MsoFootnoteReference"><!--[if !supportFootnotes]--><span class="MsoFootnoteReference">[11]</span><!--[endif]--></span></a> <a href="http://www.westlaw.com/Link/Document/FullText?findType=Y&serNum=2004467327&pubNum=164&originationContext=document&vr=3.0&rs=cblt1.0&transitionType=DocumentItem&contextData=(sc.Search)#co_pp_sp_164_477"><i><span style="color: black; text-decoration: none;">Lee,</span></i><span style="color: black; text-decoration: none;"> 309 B.R. at 477</span></a> (emphasis added,
citations omitted); <i>see</i> Tr., Dec. 18, 2006, pp. 7:23–8:25.<o:p></o:p></span></div>
</div>
<div id="ftn12">
<div class="MsoFootnoteText" style="margin: 3pt 0in; text-align: justify;">
<span style="font-family: Georgia, Times New Roman, serif; font-size: x-small;"><a href="file:///C:/Users/Antony/AppData/Local/Microsoft/Windows/Temporary%20Internet%20Files/Content.Outlook/9AC0B4YA/11%20USC%20%C2%A7%20727%20%20and%20Denial%20of%20Discharge%20(Scrumlick).docx#_ftnref12" name="_ftn12" title=""><span class="MsoFootnoteReference"><!--[if !supportFootnotes]--><span class="MsoFootnoteReference">[12]</span><!--[endif]--></span></a> See ______, Doc. ____, p. 2, paras. 8-10.</span><span style="font-family: "Cambria","serif"; font-size: 11.0pt; mso-ascii-theme-font: major-latin; mso-hansi-theme-font: major-latin;"><o:p></o:p></span></div>
</div>
</div>
Anonymoushttp://www.blogger.com/profile/02507643510494938178noreply@blogger.com1tag:blogger.com,1999:blog-5898536086571838489.post-56737270276115295642013-06-25T12:04:00.000-07:002013-10-21T10:55:14.204-07:00Fifth Amendment Privilege in the Context of Parallel Civil and Criminal Proceedings (Nevada)<div class="MsoNormal" style="margin: 12pt 0.05in; text-align: justify; text-indent: 0.45in; vertical-align: baseline;">
<span style="font-family: Georgia, Times New Roman, serif;">Determining how to proceed in response to a
civil litigant's request for accommodation of his or her Fifth Amendment
privilege against self-incrimination is a matter within the discretion of the
district court. <u>Francis v. Wynn Las
Vegas</u>, 127 Nev. Adv. Op. 60 (October 6, 2011). Therefore, a lift of a of a stay civil
proceedings made in connection with such a request is similarly within this court’s
discretion. <u>Federal Sav. and Loan
Ins. Corp. v. Molinaro</u>, 889 F.2d 899, 902 (9th Cir. 1989). "The Fifth Amendment privilege against
self-incrimination may be invoked in both criminal and civil proceedings."
<u>Francis</u>, 127 Nev. Adv. Op. 60 (October 6, 2011).<o:p></o:p></span></div>
<div class="MsoNormal" style="margin: 12pt 0.05in; text-align: justify; text-indent: 0.45in; vertical-align: baseline;">
<span style="font-family: Georgia, Times New Roman, serif;">When parallel civil and criminal actions arising
from the same transactions or issues have been instituted, a court is faced
with a dilemma. On the one hand, a parallel civil proceeding can vitiate the
protections afforded the accused in the criminal proceeding if the prosecutor
can use information obtained from him through civil discovery or testimony
elicited in the civil litigation. This also may cause him to confront the prospect of divulging information which may incriminate him. On
the other hand, the pendency of a parallel criminal proceeding can impede the
search for truth in the civil proceeding if the accused resists disclosure and
asserts his privilege against self-incrimination and thereby conceals important
evidence. Milton Pollack, Sr. J., U.S. Dist. Ct., S.D.N.Y., Parallel Civil
and Criminal Proceedings, 129 F.R.D. 201, 202 (Oct. 17-19, 1989).</span><br />
<span style="font-family: Georgia, Times New Roman, serif;">
</span><br />
<a name='more'></a></div>
<div class="MsoNormal" style="margin: 12pt 0.05in; text-align: justify; text-indent: 0.45in; vertical-align: baseline;">
<span style="font-family: Georgia, Times New Roman, serif;">Courts typically address this dichotomy by balancing the
divergent interests implicated when a civil litigant invokes the Fifth
Amendment. <u>Francis,</u> 127 Nev. at ____, 262 P.3d at 711. <o:p></o:p></span></div>
<div class="MsoNormal" style="margin: 12pt 0.05in; text-align: justify; text-indent: 0.45in; vertical-align: baseline;">
<span style="font-family: Georgia, Times New Roman, serif;">Notwithstanding, a defendant has no constitutional right
to a stay simply because a parallel criminal proceeding is in the works." <u>Microfinancial,
Inc. v. Premier Holidays Intern.,</u> 385 F.3d 72, 77-78 (1st Cir. 2004); <i>see also</i>, <u>Louis Vuitton Malletier
S.A. v. LY USA, Inc.,</u> 676 F.3d 83, 98 (2d Cir. 2012) (observing that while
the district court may stay a civil proceeding due to a related criminal
matter, "the Constitution rarely, if ever, <u>requires</u> such a
stay"); <u>Molinaro,</u> 889 F.2d at 902 ("While a district court may
stay civil proceedings pending the outcome of parallel criminal proceedings,
such action is not required by the Constitution."). <o:p></o:p></span></div>
<div class="MsoNormal" style="margin: 12pt 0.05in; text-align: justify; text-indent: 0.45in; vertical-align: baseline;">
<span style="font-family: Georgia, Times New Roman, serif;">Courts have also observed that a stay of civil discovery
pending the outcome of a related criminal matter should not be granted lightly
because it "is an extraordinary remedy appropriate for extraordinary
circumstances." <u>Weil v.
Markowitz,</u> 829 F.2d 166, 174 n.17 (D.C. Cir. 1987). Thus, "[a] movant
(seeking a stay) must carry a heavy burden" in order to demonstrate that a
stay is warranted. <u>Microfinancial,</u> 385 F.3d at 77; <i>see</i>, <u>Alcala v. Texas Webb
County,</u> 625 F. Supp. 2d 391, 397-98 (S.D. Tex. 2009) ("[<b><u>T]here is a strong presumption in favor
of discovery, and it is the party who moves for a stay that bears the burden of
overcoming this presumption</u></b>."). emphasis added.<o:p></o:p></span></div>
<div class="MsoNormal" style="margin: 12pt 0.05in; text-align: justify; text-indent: 0.45in; vertical-align: baseline;">
<span style="font-family: Georgia, Times New Roman, serif;">The Ninth Circuit Court of Appeals has set forth a
comprehensive framework for analyzing whether to grant a stay. <u>Keating v.
Office of Thrift Supervision,</u> 45
F.3d 322 (9th Cir. 1995). Under this framework, courts should analyze 'the
extent to which the defendant's Fifth Amendment rights are implicated,'" <u>Id</u>.
at 324 (quoting <u>Molinaro,</u> 889 F.2d at 902), as well as the following
non-exhaustive factors: (1) the interest of the plaintiffs in proceeding
expeditiously with [the] litigation or any particular aspect of it, and the
potential prejudice to plaintiffs of a delay; (2) the burden which any
particular aspect of the proceedings may impose on defendants; (3) the
convenience of the court in the management of its cases, and the efficient use
of judicial resources; (4) the interests of persons not parties to the civil
litigation; and (5) the interest of the public in the pending civil and
criminal litigation. <u>Id</u>. at 325.<o:p></o:p></span></div>
<div class="MsoNormal" style="margin: 12pt 0.05in; text-align: justify; text-indent: 0.45in; vertical-align: baseline;">
<span style="font-family: Georgia, Times New Roman, serif;">This framework has been adopted by several jurisdictions.
<i>See, e.g.,</i><u> Alcala,</u> 625 F.
Supp. 2d at 398-99; <u>S.E.C. v. Nicholas,</u> 569 F. Supp. 2d 1065, 1068-69,
1072 (C.D. Cal. 2008); <u>Sterling Nat. Bank v. A-1 Hotels Intern., Inc.,</u>
175 F. Supp. 2d 573, 576 (S.D.N.Y. 2001); <u>Avant! Corp. v. Superior Court,</u>
94 Cal. Rptr. 2d 505, 51011 (Ct. App. 2000); <u>King v. Olympic Pipeline Co.,</u>
16 P.3d 45, 52-53 (Wash. Ct. App. 2000). <o:p></o:p></span></div>
<div class="MsoNormal" style="margin: 12pt 0.05in; text-align: justify; text-indent: 0.45in; vertical-align: baseline;">
<span style="font-family: Georgia, Times New Roman, serif;">The Nevada Supreme Court has adopted this framework as
well. “Because this framework carefully
accounts for the interests that are involved when a party brings a motion to
stay in connection with a request for accommodation of their Fifth Amendment
privilege, we believe that it supplies the appropriate rubric for considering
such motions.” <u><span style="background: white; mso-bidi-font-weight: bold;">Aspen Fin. Servs. v. Eighth Judicial Dist. Court of Nev.</span></u>, 289 P.3d 201 (2012 Nev.)<o:p></o:p></span></div>
<div class="MsoNormal" style="margin: 12pt 0.05in 12pt 0in; text-align: justify; text-indent: 0.9pt; vertical-align: baseline;">
<b><u><span style="font-family: Georgia, Times New Roman, serif;">Implication of the Fifth Amendment privilege <o:p></o:p></span></u></b></div>
<div class="MsoNormal" style="margin: 12pt 0.05in; text-align: justify; text-indent: 0.45in; vertical-align: baseline;">
<span style="font-family: Georgia, Times New Roman, serif;">The extent to which a party's Fifth Amendment privilege
against self-incrimination is implicated is generally determined by reference
to the overlap between the civil and criminal cases and the status of the
criminal matter. <u>Alcala,</u> 625 F. Supp. 2d at 400. The degree of overlap
between the issues in the civil and criminal matters has been described as
"[t]he most important factor at the threshold" in considering whether
to grant a stay. Pollack<u>,</u> <u>supra</u>, at 203. The extent of overlap is
relevant because "[i]f there is no overlap, there would be no danger of
self-incrimination and accordingly no need for a stay." <u>Trustees of
Plumbers Pen. Fund v. Transworld Mech.,</u>
886 F. Supp. 1134, 1139 (S.D.N.Y. 1995). Conversely, a significant overlap
increases the risk of self-incrimination and heightens the need for a stay. <u>Alcala,</u>
625 F. Supp. 2d at 400 n.8. "Thus a stay is most appropriate where the
subject matter of the parallel civil and criminal proceeding or investigation
is the same." <u>King,</u> 16 P.3d at 55.<o:p></o:p></span></div>
<div class="MsoNormal" style="margin: 12pt 0.05in; text-align: justify; text-indent: 0.45in; vertical-align: baseline;">
<span style="font-family: Georgia, Times New Roman, serif;">Here, the criminal proceedings and the civil proceedings
center around the very same issues and conduct. But,
as one court noted: "it would be perverse if plaintiffs who claim to be
the victims of criminal activity were to receive slower justice than other
plaintiffs because the behavior they allege is sufficiently egregious to have
attracted the attention of the criminal authorities." <u>Sterling,</u> 175
F. Supp. 2d at 575.
As courts in other jurisdictions have
recognized, there is "no reason why those victims who have the resources
and willingness to pursue their own investigation and enforce their own rights
should be precluded either from doing so or from sharing the fruits of their
efforts with law enforcement agencies." <u>International Business Machines
Corp. v. Brown,</u> 857 F. Supp. 1384,
1389 (C.D. Cal. 1994); <i>see</i>, <u>King,</u>
16 P.3d at 58.<o:p></o:p></span></div>
<div class="MsoNormal" style="margin: 12pt 0.05in; text-align: justify; text-indent: 0.45in; vertical-align: baseline;">
<span style="font-family: Georgia, Times New Roman, serif;">Moreover, as the Nevada Supreme Court indicated
in <u>Aspen</u>, “the possibility that a private plaintiff may share
information with the government "is hardly the same thing" as the
situation in which the government is a party in parallel criminal and civil
proceedings. <u>Id</u>. at 579. After all, it must be remembered that private
entities and the government have differing interests. <u>Id</u>. <o:p></o:p></span></div>
<div class="MsoNormal" style="margin: 12pt 0.05in 12pt 0in; text-align: justify; text-indent: 0.9pt; vertical-align: baseline;">
<b><u><span style="font-family: Georgia, Times New Roman, serif;">Plaintiffs' interests and potential prejudice <o:p></o:p></span></u></b></div>
<div class="MsoNormal" style="margin: 12pt 0.05in 12pt 0in; text-align: justify; text-indent: 0.5in; vertical-align: baseline;">
<span style="font-family: Georgia, Times New Roman, serif;">A stay would cause substantial prejudice to the
interests of the Plaintiff. Plaintiffs to civil suits have "an obvious
interest in proceeding expeditiously," <u>Microfinancial, Inc. v. Premier
Holidays Intern.,</u> 385 F.3d 72, 78 (1st Cir. 2004). The delay resulting from
a stay may also "duly frustrate a plaintiff's ability to put on an
effective case" because as time elapses, "witnesses become
unavailable, memories of conversations and dates fade, and documents can be
lost or destroyed." <u><span style="background: white; mso-bidi-font-weight: bold;">Aspen Fin. Servs. v. Eighth
Judicial Dist. Court of Nev.,</span></u><span style="background: white; mso-bidi-font-weight: bold;"> 289 P.3d 201, 209 (Nev. 2012)</span> quoting <u>Alcala v. Texas Webb County,</u> 625
F. Supp. 2d 391, 405 (S.D. Tex. 2009). <o:p></o:p></span></div>
<div class="MsoNormal" style="margin: 12pt 0.05in 12pt 0in; text-align: justify; text-indent: 0.5in; vertical-align: baseline;">
<span style="font-family: Georgia, Times New Roman, serif;">In addition, because plaintiffs are often
"entitled to preserve the fact that they were deprived of
information" due to a defendant's invocation, a stay may impede a
plaintiff's ability to obtain these "negative inferences." <u><span style="background: white; mso-bidi-font-weight: bold;">Aspen Fin. Servs. v. Eighth Judicial Dist. Court of Nev.</span></u><span style="background: white; mso-bidi-font-weight: bold;">, 289 P.3d 201, 209 (Nev. 2012)</span>
quoting <u>In re CFS-Related Securities Fraud Litigation,</u> 256
F. Supp. 2d 1227, 1239 (N.D. Okla. 2003).<o:p></o:p></span></div>
<div class="MsoNormal" style="margin: 12pt 0.05in 12pt 0in; text-align: justify; text-indent: 0.5in; vertical-align: baseline;">
<span style="font-family: Georgia, Times New Roman, serif;">The delay caused by a stay would greatly
prejudice the Plaintiff’s ability to present an effective case in view of the
time sensitive nature of the claims and the likelihood the Defendant has or
would flee or depart the jurisdiction. A stay would also delay or preclude
Plaintiff’s ability to draw the adverse inference of the Defendant’s
invocation—that is, that he was deprived of information by the central figure
in the civil proceedings. Thus, the prejudice that a continued stay would pose
to Plaintiff is severe.<o:p></o:p></span></div>
<div class="MsoNormal" style="margin: 12pt 0.05in 12pt 0in; text-align: justify; text-indent: 0.9pt; vertical-align: baseline;">
<b><u><span style="font-family: Georgia, Times New Roman, serif;">Burdens on the defendants<o:p></o:p></span></u></b></div>
<div class="MsoNormal" style="margin: 12pt 0.05in 12pt 0in; text-align: justify; text-indent: 0.5in; vertical-align: baseline;">
<span style="font-family: Georgia, Times New Roman, serif;">The primary burden posed by parallel criminal
and civil matters is the danger of undermining a defendant's Fifth Amendment privilege
against self-incrimination. [T]he Fifth
Amendment does not forbid adverse inferences against parties to civil actions
when they refuse to testify in response to probative evidence offered against
them."). Such an inference may be drawn only "when independent
evidence exists of the fact to which the party refuses to answer." <u>Doe
ex rel. Rudy-Glanzer v. Glanzer,</u> 232 F.3d 1258, 1264 (9th Cir. 2000).
Though not binding on this court, the court in <u>King v. Olympic Pipeline Co.,</u> 16 P.3d 45, 54 (Wash. Ct.
App. 2000), provides guidance by expressing that an adverse inference arising
from a defendant's invocation, and its effect on the defendant's interest,
should be considered when balancing the competing interests involved in this
type of case. Here, to the extent that an adverse inference may be drawn and
detrimentally affect Defendant, such an effect does not change the fact that a
stay is not warranted in light of the other factors that disfavor a stay.<sup> <o:p></o:p></sup></span></div>
<div class="MsoNormal" style="margin: 12pt 0.05in; text-align: justify; text-indent: 0.45in; vertical-align: baseline;">
<span style="font-family: Georgia, Times New Roman, serif;">In addition, continuing with civil discovery in
the face of a criminal investigation may burden a defendant because, by
invoking the privilege to certain questions, a defendant may inadvertently
"reveal[ ] his weak points to the criminal prosecutor." <u>Afro-Lecon,
Inc. v. U.S.,</u> 820 F.2d 1198, 1203
(Fed. Cir. 1987). Other burdens include the diversion of resources needed to
defend a possible criminal action, <u>White v.
Mapco Gas Products, Inc.,</u> 116 F.R.D. 498, 502 (E.D. Ark. 1987), or
"the likelihood that the materials unearthed during civil discovery may
eventually inure to the benefit of the government prosecution," thereby
effectively broadening the scope of criminal discovery. <u>King v. Olympic Pipeline Co.,</u> 16 P.3d 45, 58 (Wash. Ct.
App. 2000).<u><o:p></o:p></u></span></div>
<div class="MsoNormal" style="margin: 12pt 0.05in; text-align: justify; text-indent: 0.45in; vertical-align: baseline;">
<span style="font-family: Georgia, Times New Roman, serif;">To be sure, these are heavy burdens. But the
fact remains that a public record exists of Defendant’s prior inconsistent
statement before a court and tribunal that as a result would judicially estop
him from now claiming he had an ownership interest in the subject property.<o:p></o:p></span></div>
<div class="MsoNormal" style="margin: 12pt 0.05in 12pt 0in; text-align: justify; text-indent: 0.9pt; vertical-align: baseline;">
<b><u><span style="font-family: Georgia, Times New Roman, serif;">Convenience and efficiency of the district court <o:p></o:p></span></u></b></div>
<div class="MsoNormal" style="margin: 12pt 0.05in; text-align: justify; text-indent: 0.45in; vertical-align: baseline;">
<span style="font-family: Georgia, Times New Roman, serif;">This court has an interest in convenience and efficiency.
The district court's interest is, of course, "deserving of substantial
weight." <u>Microfinancial, Inc. v. Premier Holidays Intern.,</u> 385 F.3d
72, 79 (1st Cir. 2004). "[C]onvenience of the courts is best served when
motions to stay proceedings are discouraged."<sup> </sup> <u><span style="background: white; mso-bidi-font-weight: bold;">Aspen</span></u><span style="background: white; mso-bidi-font-weight: bold;">, 289 P.3d 201, 210 (Nev. 2012)</span> quoting <u>U.S. v. Private
Sanitation Industry Ass'n,</u> 811 F. Supp. 802, 808 (E.D.N.Y. 1992). In
addition, "a policy of freely granting stays solely because a litigant is
defending simultaneous multiple suits would threaten to become a constant
source of delay and an interference with judicial administration." <u>Id.</u>
quoting <u>Paine, Webber, Jackson &
Curtis, Inc. v. Malon S. Andrus, Inc.</u>, 486 F. Supp. 1118, 1119
(S.D.N.Y. 1980). <o:p></o:p></span></div>
<div class="MsoNormal" style="margin: 12pt 0.05in; text-align: justify; text-indent: 0.45in; vertical-align: baseline;">
<span style="font-family: Georgia, Times New Roman, serif;">The stay in effect grinds this case to a halt. It would
further frustrate the district court's interest in managing its caseload and
expeditiously resolving the underlying suit given that it had already been
pending for over a year and a half.<o:p></o:p></span></div>
<div class="MsoNormal" style="margin: 12pt 0.05in; text-align: justify; text-indent: 0.9pt; vertical-align: baseline;">
<span style="font-family: Georgia, Times New Roman, serif;"><b><u>Interest of the public in the civil and criminal matters </u></b><b><o:p></o:p></b></span></div>
<div class="MsoNormal" style="margin: 12pt 0in; text-align: justify; text-indent: 0.5in; vertical-align: baseline;">
<span style="font-family: Georgia, Times New Roman, serif;">There is a "presumption that the public has an
interest <span style="background-color: white;">in prompt resolution of civil cases."</span> <u>Aspen</u>, 289 P.3d 201, 211 (Nev. 2012) quoting,<b> </b><u><span style="background: white;">Microfinancial</span></u><span style="background-color: white;">,
385 F.3d at 79 n.4 (citing FRCP 1</span>, the federal counterpart to NRCP
1). Plaintiff has alleged that the
Defendant committed willful acts of theft embezzlement and conversion. It
appears as though there was sufficient probably cause so as to warrant the
return of the subject property to its rightful owner, Plaintiff. Defendant’s former landlord appears to have
suffered similarly as a result of item stolen from the premises rented to
Defendant. The public undoubtedly has an
interest in rooting out such activity. The stay has halted the civil proceeding
indefinitely, without any way to forecast when it could return to the district
court's active docket. The delay flowing from a stay would shake the public's
confidence in the administration of justice. <i>See</i>, <u>Keating v. Office of
Thrift Supervision,</u> 45 F.3d 322, 326 (9th Cir. 1995) (holding that the
public's interest in speedily resolving a case outweighed the defendant's
interest in a stay because, among other things, a delay "would have been
detrimental to public confidence) <i>see also</i>, <u>Avant! Corp.</u>, 94 Cal. Rptr. 2d at 513,
("Clearly, the public has a significant interest in a system that
encourages individuals to come to court for the settlement of their
disputes."). Thus, as with most of the other applicable factors, the
public's interest in the prompt resolution of the civil proceeding weighs
against a stay.</span></div>
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