Business Law Insolvency Law Committee

Summary: A California appellate court has held that a lender could not recover its attorney’s fees against a sublessor for breach of the settlement agreement because the lender failed to introduce its invoices or to authenticate them under the "business records" exception to the hearsay rule. [Copenbarger vs. Morris Cerullo World Evangelism, Inc., 2018 Westlaw 5921229 (Cal.App.).] Read more

The following is a case update prepared by Professor Dan Schechter, Loyola Law School, Los Angeles, analyzing a recent decision of interest: SUMMARY: A district court in California has held that when a software developer intentionally covered up the shortcomings in its custom software project, its client could invoke California's Unfair Competition Law to recover the payments it made to the developer for the worthless work product. [Copart, Inc., vs. Sparta Consulting, Inc., 2018 Westlaw 4293023 (E.D. Cal.).] FACTS: A… Read more

Summary: A California appellate court has held that even though a third deed of trust was recorded prior to an assessment lien, the HOA took priority over the lender due to a subordination clause contained in the recorded CC&Rs. [Bear Creek Master Association vs. Southern California Investors, Inc., 2018 Westlaw 5659789 (Cal.App.).] Read more

Summary: A district court in New York has held that a group of junior creditors who supported a Chapter 11 debtor's cramdown plan did not breach their obligations to the senior creditors under the terms of an intercreditor agreement because the juniors held both secured and unsecured claims, and the agreement did not prohibit the juniors from exercising their rights as unsecured creditors. [In re MPM Silicones, LLC, 2018 Westlaw 6324842 (S.D.N.Y.).] Read more

Summary: The Ninth Circuit has held that a trial court correctly ordered equitable restitution of $1.27 billion due to a payday lender's deceptive practices. [Federal Trade Commission vs. AMG Capital Management, LLC, 2018 Westlaw 6273036 (9th Cir.).] Read more

Summary: A bankruptcy court in Georgia has held that after a fraudulent gift deed was nullified by a court order just before a bankruptcy petition was filed, judgment liens held by the bankrupt's creditors reattached to his property interest and were therefore transfers that took place outside of the 90 day preference period. [In re Johnson, 2018 Westlaw 3869602 (Bankr. N.D. Ga.).] Read more

Summary: The First Circuit has held that under Massachusetts law, the post-sale notice given by a lender to a defaulting car buyer must state that the borrower’s deficiency liability is based on the difference between the balance due and the vehicle’s fair market value, rather than the auction price. [Williams vs. American Honda Finance Corp., 907 F.3d 83 (1st Cir. 2018).] Read more

Summary: A federal court in New York has held that despite a deeply discounted conversion price, a convertible note was not usurious because the stock option granted to the noteholder did not constitute "interest." [Blue Citi, LLC vs. 5Barz International, Inc., 2018 Westlaw 4500870 (S.D.N.Y.).] Read more

Summary: A bankruptcy court in Illinois has held that a financing statement that did not describe the collateral but instead simply referred to a security agreement was inadequate because that security agreement was not attached and the creditor failed to use a "supergeneric" collateral description. [In re I80 Equipment, LLC, 2018 Westlaw 4006294 (Bankr. C.D. Ill.).] Read more

The New York Court of Appeals has held that an "accrual clause" contained in a residential mortgage-backed securities agreement was not a condition precedent to the accrual of the purchaser's warranty claim against the originator; therefore, the plaintiff's claim was time-barred. Further, any contractual attempt by the parties to delay the commencement of the statute of limitations was void as against public policy. [Deutsche Bank N.T. Co. vs. Flagstar Capital Markets Corp., 2018 Westlaw 4976777 (N.Y.).] Read more