How Much is this Going to Cost?

How Much is this Going to Cost? That question is one that attorneys often hear from existing and new clients who are involved in matters for which they are seeing the attorney.  While some projects are capable of being estimated in terms of the cost, in litigation, where at least two parties are arguing over something that is important to each of them, because no one party has control over what the other one will do, it is often nearly impossible to estimate “How much it is going to cost.” A perfect example of this was recently reported here.  While the particulars of the case are not necessarily important for today’s purposes, the significance is that there was a legal fight that lasted approximately 38 years concerning some property in Madison County, Indiana.  Imagine in 1978 trying to answer the client’s question of “How much is this going to cost?”  Thirty eight years later, the real estate is going to be sold at an auction. In another relatively recent case, two landowners fought over a strip of land 35’ X 100’, which had been valued at $890.  That litigation lasted 3 years and involved 2 separate appeals.  It is fair to say that each party incurred far more than $890 in fees, not to mention the value of their own time invested in the fight. We have written extensively before about how slow litigation can proceed; the true cost of that litigation; and the toll it can take on the parties involved.  These cases are yet further examples of how unpredictable, time consuming, and undoubtedly expensive litigation can be. ...

Key Man Life Insurance and Corporate Knowledge: A Lesson for All to Remember

Key Man Life Insurance and Corporate Knowledge: A Lesson for All to Remember What a corporation’s officers and shareholders know concerning the business of the corporation, the corporation knows.  This knowledge that is imputed to a corporation remains with the corporation throughout its life, and a recent case involving “key man life insurance” highlights this important lesson for all business owners that a corporation is not allowed to suffer from “amnesia” and to otherwise ignore information that its officers have been told or that is in the corporate files. Key man life insurance is an important tool for all small business owners, as it allows the company or the other shareholders to purchase the shares from a family of another shareholder who may have deceased.  The proceeds of that life insurance policy are used to purchase those shares, thereby allowing continuity of ownership but also providing some value for those shares to the decedent’s estate. In a recent case decided by the 7th Circuit, a corporation had purchased key man life insurance, insuring the life of the majority shareholder.  The beneficiary originally was the other shareholder, but that was then changed so that the beneficiary was the corporation itself.  There was evidence that the intent did not change, i.e., it was the intent to have the shares of the “key man” purchased with the proceeds of the life insurance. The key man eventually retired, and sold his shares to a new owner, who became the president of the corporation.  The insurance policy remained in place.  When the retired “key man” died, the insurance company paid the $1,000,000 of proceeds...

Bankruptcy: The Fraud Exception

Bankruptcy: The Fraud Exception While the general rule is that a person who files for bankruptcy is relieved from all debts incurred by that person before the filing of the bankruptcy, as with all general rules, there are exceptions, and one of those exceptions has been the subject of some debate in recent years.  Specifically, the Bankruptcy Code does not allow a person to discharge a debt to the extent that debt was obtained by fraud.  Exactly how that provision of the Bankruptcy Code was to be enforced has been the subject of some disagreement, but the Supreme Court has now offered its opinion pursuant to a case arising out of Texas. In Husky International Electronics, Inc. v. Ritz, the United States Supreme Court has found that the term “actual fraud” found in §523(a)(2)(A) of the Bankruptcy Code encompasses forms of fraud, like fraudulent conveyance schemes, that can be effected without making a false representation. In Husky, a company controlled by Ritz incurred unsecured debt to Husky.  Rather than paying the debt, Ritz caused the assets of the debtor entity to be transferred to other entities owned and controlled by Ritz.  Husky then filed a lawsuit against Ritz seeking to hold him personally responsible for the company’s debt citing a Texas statute which made shareholders liable for their “actual fraud”.[1]  In response, Ritz filed for Chapter 7 bankruptcy relief. Husky contended that Ritz could not discharge his obligations to Husky in bankruptcy because the inter-company transfer scheme constituted “actual fraud” pursuant to 11 U.S.C. §523(a)(2)(A).  That section reads as follows: A discharge under [Chapter 7, 11, 12, or 13]...

When March Madness Goes to the “Courts”

When March Madness Goes to the “Courts” On February 7, 2015, an ugly fight broke out between two Indiana high school basketball teams.  As a result of the fight, the officials ended the game and the schools suspended the students who were involved the following Monday.  The Indiana State High School Athletic Association (“IHSAA”), of which both schools are members, then issued additional penalties, including suspending both schools from participating in the state tournament and cancelling each school’s remaining regular season games. Both schools and the individual players on those teams filed a lawsuit seeking an injunction against the IHSAA hoping to be able to participate in the state tournament.  The trial court granted that injunction, and both teams were allowed to participate in the tournament, with one of those teams actually reaching the state championship game. Despite the fact that season has long been over, the IHSAA appealed the trial court decision, and the Indiana Court of Appeals recently ruled in favor of the IHSAA and found that the trial court should not have issued the injunction that it did. So why keep fighting?  The IHSAA likely wanted to get a judicial ruling that the IHSAA had the authority to issue rulings similar to what it did in this instance, because the longstanding rule in Indiana is that courts will exercise very limited interference with the rules and internal affairs of voluntary membership associations such as the IHSAA. As has been discussed extensively through this blog in other contexts, Indiana courts are very reluctant to interfere with contractual relationships, particularly between sophisticated parties.  This same principle of non-interference...

Say What You Mean; Mean What You Say

When a person files bankruptcy, the law allows for certain “exemptions” so that the person can keep certain things that the legislature has determined are the bare necessities of life in order to make a fresh start.  Any property that is not “exempt”, and assuming it is of sufficient value, is to be gathered and then sold for the benefit of the creditors of the person filing bankruptcy. Different States have different laws about what exemptions are allowed.  While there are many similarities, each State is allowed to make its own laws concerning what is exempt and what is not or it can utilize the exemptions created by Congress.  In Illinois, one of those things that a person is allowed to keep is a bible.  In a recent case, we were again reminded that courts, when faced with unambiguous language in a law (similar to what courts will do with a contract) will enforce the exact terms of the law and not attempt to infer any intent from those words or give those words any different meaning other than their plain and ordinary meaning. In the recent case, the person who filed bankruptcy (“debtor”) had a bible.  But it was no ordinary bible.  It was a first edition Book of Mormon from 1830.  Everyone agreed that the bible was worth $10,000.  The bankruptcy trustee, and the bankruptcy court, said that the debtor should not be allowed to keep this very rare bible, but instead it should be sold for the benefit of her creditors.  It was also noted that she had several additional copies of the Book of Mormon...

Ag Lending: Could Selling Crops Be a Crime?

Ag Lending: Could Selling Crops Be a Crime? In an agriculture heavy state such as Indiana, lenders necessarily will have a certain portion of its lending dedicated to agricultural and farming operations.   There are certain protections for lenders under both Indiana law and federal law, which, while easy to follow, may not often be employed by lenders. The Uniform Commercial Code (“UCC”) was written to provide guidance concerning commercial transactions, and has been adopted in some fashion throughout the United States, including Indiana.  States are free, however, to adopt certain other provisions or deviations from the UCC.  As a general rule under the UCC, someone who buys a product in the “ordinary course” of the seller’s business buys that product free from any security interest or lien that a lender may have attached to that product.  This is true even if the lien is perfected and the buyer knows about the lien. Historically, there was an exception to this rule for “farm products”, which includes crops.  Therefore, under the UCC, a wholesale buyer of a farmer’s crops bought those crops subject to any lender’s lien. Congress, however, passed a federal law in 1985 to override this UCC exception, and stated that a buyer who in the ordinary course of business buys a farm product from a seller engaged in farming operations buys that farm product free of any lender’s lien. As with every rule, there are exceptions, and this one is no different.  This same federal law provides that the buyer of farm products will take the farm products subject to the lender’s lien if the buyer has been...
Page 3 of 1112345...10...Last »