Judge Jacqueline P. Cox - Opinions

Judge Jacqueline P. Cox

14 B 11526
In this matter an attorney retained under a Court-Approved Retention Agreement ("CARA") in a Chapter 13 case initially failed to seek fees for pursuing a Motion for Damages for a violation of the automatic stay and instead decided that she was entitled to $3000 in fees in addition to the $4000 flat fee.
This court ruled that the CARA requires attorneys to pursue damages and injunctions for violations of the automatic stay and the discharge. The opinion covers attorneys' duties under Section 329 of the Bankruptcy Code  and Federal Rule of Bankruptcy Procedure 2017  to disclose initial and subsequent fee agreements.

 15 B 37632
Seventeen days after the Debtors modified their confirmed Chapter 13 plan the Trustee asked to have their case dismissed on term of plan grounds because it would take 86 months to complete plan payments. The court denied the motion ruling that the court can not confirm a plan projected to last for more than sixty months as limited by Bankruptcy Code sections 1322(d)(1)-(2) and 1329(c) but that dismissal is not mandated if a debtor needs a reasonable period of time to cure an arrearage incurred during the plan term.

14 B 44983
This is Debtor 401 Properties Limited Partnership's second Chapter 11 case.  Its first Chapter 11 case was found to have been filed in bad faith and dismissed on August 16, 2010 - case number 10 B 28114. The court found that the second case was also filed in bad faith. The Debtor's principals Leon Greenblatt and Andrew Jahelka (as well as its former general partner's representative Michael Horrell) are using the bankruptcy system to wage a battle for control of the Debtor, rather than the appropriate bankruptcy purposes of maximizing recoveries to creditors and maintaining a going concern.

15 B 013904, 15 A 00568
In this case a former spouse has asked that certain debts/obligations of a Chapter 7 Debtor established in a Dissolution of Marriage Judgment be held to be not dischargeable under Sections 523(a)(5) and (a)(15) of the Bankruptcy Code.  The Court found that the Temporary Spousal Support, Health Care, Pension and Real Estate Tax and Assessments obligations are not dischargeable domestic support obligations.  A fine for noncompliance with discovery obligations was held to be not in the nature of support and for that reason is dischargeable.  The state court judgment reserved ruling on attorney's fees.  When that issue gets resolved this Court will determine whether that obligation can be discharged.

09 B 05868, 12 A 00430

Following the Supreme Court’s decision in Wellness International Network v. Sharif, the Seventh Circuit affirmed a 2010 order that this Court entered which found that a Trust that the Debtor (Sharif) administered was the Debtor’s alter-ego and therefore its assets were property of his bankruptcy estate.  Since the 2010 order, the Debtor, the Debtor’s sister, and, most recently, the Debtor’s other sister have made no less than 10 attempts to reclaim the Trust assets.  These attempts have been well documented in over 180 pages of orders and opinions from this Court, all of which have denied their requests.

Despite all of this, two of the Debtor's sisters recently brought motions seeking to recover the Trust assets. This opinion outlines the seven-year history of the parties' efforts to reclaim the Trust assets.  This latest attempt also failed.  This opinion includes an Order to Show Cause why the sisters, and their attorney, Maurice J. Salem, should not be sanctioned under Rule 9011 for bringing improper and frivolous motions.

14 B 41542, 15 A 00009
The Debtor defaulted on a vehicle loan within a month of purchasing a 2015 Chevrolet Equinox.  He was referred to the vehicle dealership by Uber, the ride-sharing service. AmeriCredit failed to convince the Court that the Debt was nondischargeable because the Debtor refused to reaffirm it and due to various misstatements the Debtor made on the credit application.  The Court pointed out that neither Uber nor a representative of the dealership testified. Judgment was entered in favor of the debtor/defendant.  The debt was discharged.

14 B 44983, 15 A 00499
Court overruled objection that a partial assignee of a note lacks standing to sue on it.

In re LJBV LTD
January 28, 2016

15 B 35961
In this matter, the Court granted secured creditor 36 Holdings, LLC’s Motion to Dismiss the Debtor’s Chapter 11 Case. The Debtor is a single-asset real estate entity that filed for bankruptcy on the day a receiver was appointed in a pre-petition state court foreclosure case. The Debtor argued it needed bankruptcy protection from the secured creditor because it interfered with a deal to sell the property in an attempt to acquire the property for itself and because the appointed receiver was not eligible to serve in that capacity due to a conflict of interest. The Debtor could have sought immediate review of the interlocutory receiver order pursuant to Illinois Supreme Court Rule 307(a)(2), but did not. The Court ruled that the bankruptcy case was filed in bad faith because bankruptcy objectives of maximizing value and maintaining going concerns were not implicated herein. The Debtor filed its bankruptcy petition to forum shop. In addition, the Debtor failed to timely file schedules.

In re Richard Sharif
November 25, 2015

09 B 05868
In this case, the sister of the Debtor, as the purported executrix of their mother’s (Soad Wattar) testamentary estate, seeks an order vacating a five-year old order directing the turnover of property (the “2010 Motion”) alleged to be the mother’s. The movant argued that the court lacked personal jurisdiction because the mother’s estate was not served with the 2010 Motion.
The movant seeks relief from the bankruptcy court, while contending that it does not consent to the court’s jurisdiction over any state court claims.

On August 5, 2010, the court ordered two financial institutions to turn over to the Chapter 7 Trustee funds held in certain investment accounts and directed the Debtor to account for and turn over to the Trustee all interests and accounts concerning him or the Soad Wattar Revocable Living Trust (the “2010 Order”). The court also ordered the Debtor and his sisters not to interfere with and to cease any act to exercise control over property of the bankruptcy estate, including life insurance policies.

The movant now argues that the 2010 Order is void, seeking redress pursuant to Federal Rule of Civil Procedure 60(b)(4), made applicable under Federal Rule of Bankruptcy Procedure 9024.

The Court denied the motion to vacate the 2010 Order. The movant did not provide evidence that it is a party that was entitled to notice of the 2010 Motion or that the property dealt with in the 2010 Order belonged to a testamentary estate. The will submitted to the Court transferred all of the decedent’s property to a revocable living trust which was held, pursuant to a default judgment in Wellness International Network Ltd. a/k/a WIN, et al. v. Sharif, adversary proceeding no. 09-00770, in 2010, to be the alter ego of the Debtor.

The Court’s finding that the trust was the Debtor’s alter ego was appealed to the District Court, the Seventh Circuit Court of Appeals and the U.S. Supreme Court.

In re John F. Walsh
September 24, 2015

08 B 06424
This is a case stressing the importance of counsel representing a debtor in an underlying state court action to get approval, even if retroactive, of the Bankruptcy Court under 11 U.S.C. § 327 for such representation in order to be paid from the bankruptcy estate.

Freeborn & Peters LLP (“Freeborn”) represented the debtor in a pre-petition state court action for defamation brought by a real estate developer against the debtor and two local newspaper organizations in late 2007.  The case was litigated and appealed up to the Illinois Supreme Court, which remanded the case to the trial court to award the debtor reasonable attorney’s fees and costs.  Ultimately, the trial court entered judgment in the amount of $339,010 in favor of the debtor and against the developer.  Freeborn proceeded to attempt collection on the judgment.

Unbeknownst to Freeborn, six months after the lawsuit was filed, the debtor filed for Chapter 13 bankruptcy relief, converted his case to Chapter 7 before the judgment had been entered and eventually received a discharge.  However, the debtor failed to disclose the state court lawsuit in both his Schedules and his Statement of Financial Affairs.  The developer discovered the debtor’s bankruptcy filing and moved to have the judgment vacated on the basis that the debtor was judicially estopped from enforcing the judgment because he failed to disclose the lawsuit in his bankruptcy case.  Rather than contact the Chapter 7 Trustee and get authorization to be employed as special counsel, Freeborn continued to litigate the case and actually argued that the judgment was not property of the bankruptcy estate.

After the developer appealed the state trial court’s denial of its motion to vacate, its counsel notified the Trustee of the civil case.  The debtor’s bankruptcy case was reopened.  More than a year later, in 2014, the Illinois Appellate Court dismissed the appeal and determined that the debtor’s claim against the developer belonged to the Trustee and the judgment was an asset of the bankruptcy estate.  Only then did Freeborn file an application for fees and reimbursement of expenses related to services performed during the debtor’s Chapter 13 case and requested that such fees and expenses be allowed as a secured administrative expense under 11 U.S.C. § 503(b)(1)(A) or (b)(2).  Both the Chapter 7 Trustee and the condominium association, which had indemnified the debtor for legal fees, objected to the fee application.

After a hearing, the Court denied Freeborn’s fee application and request for an administrative claim because it did not secure approval of its employment before performing services.

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