Business Law Chapter 30 Homework Third Parties The Fcra Governs

CHAPTER 30: BANKRUPTCY LAW 495

Espinosa appealed to the Court of Appeals for the Ninth Circuit, which issued an initial

per curiam

opinion remanding the case to

(2008).FN5 In addition, the Court of Appeals held that although Espinosa’s failure to serve United with a summons and complaint

1205.FN6

FN4. The one-page discharge order contained a paragraph that purported to exclude “ ‘any debt … for a student loan’ ”

from the discharge. 530 F.3d 895, 896 (9th Cir.2008). That provision appeared irreconcilable with the confirmation order,

which contemplated the discharge of the interest on Espinosa’s student loan debt. Suggesting that the Bankruptcy Court

may have automatically generated the discharge order without tailoring it to the terms of the confirmation order, the Court

FN5. In so doing, the Court of Appeals disagreed with two other Courts of Appeals. See

In re Mersmann,

505 F.3d 1033,

1047-1049 (10th Cir.2007) (en banc);

Whelton v. Educational Credit Management Corp.,

432 F.3d 150, 154 (2d Cir.2005).

FN6. Three Courts of Appeals have reached the opposite conclusion on similar facts. See

In re Ruehle,

412 F.3d 679,

682-684 (6th Cir.2005);

In re Hanson,

397 F.3d 482, 486 (7th Cir.2005);

In re Banks,

299 F.3d 296, 302-303 (4th

Cir.2002).

1328.01, p. 1328-5 (rev. 15th ed.2008). Chapter 13 nevertheless restricts or prohibits entirely the discharge of certain types of

debts. As relevant here, § 1328(a) provides that when a debtor has completed the repayments required by a confirmed plan, a

bankruptcy court “shall grant the debtor a discharge of all debts provided for by the plan or disallowed under section 502 of this

FN7. Section 523 provides:

“(a) A discharge under section 727, 1141, 1228(a), 1228(b), or 1328(b) of this title does not discharge an individual

debtor from any debt-

FN8. Because United brought this action on a motion for relief from judgment under Rule 60(b)(4), our holding is confined

to that provision. We express no view on the terms upon which other provisions of the Bankruptcy Rules may entitle a

debtor or creditor to postjudgment relief.

A

FN9. Subject to certain exceptions, Bankruptcy Rule 9024 makes Rule 60(b) applicable to Chapter 13 proceedings. One

such exception provides that “a complaint to revoke an order confirming a plan may be filed only within the time allowed

by” 11 U.S.C. § 1330. Fed. Rule Bkrtcy. Proc. 9024. Section 1330(a) imposes a 180-day time limit for a party to seek

revocation of a confirmation order “procured by fraud.” Courts of Appeals disagree as to whether a Rule 60(b)(4) motion

should be treated as a “complaint to revoke” a plan subject to § 1330‘s time limit and substantive limitation to motions

final. See Restatement (Second) of Judgments 22 (1980); see generally

id.,

§ 12. The list of such infirmities is exceedingly short;

otherwise, Rule 60(b)(4)‘s exception to finality would swallow the rule.

[13][14][15] “A judgment is not void,” for example, “simply because it is or may have been erroneous.”

Hoult v. Hoult,

57 F.3d 1, 6

(C.A.1 1995); 12 J. Moore et al., Moore’s Federal Practice § 60.44[1][a], pp. 60-150 to 60-151 (3d ed.2007) (hereinafter Moore’s).

Similarly, a motion under Rule 60(b)(4) is not a substitute for a timely appeal

.

Kocher v. Dow Chemical Co.,

132 F.3d 1225, 1229

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jurisdiction must be distinguished from an error in the exercise of jurisdiction, and … only rare instances of a clear usurpation of

power will render a judgment void” (brackets and internal quotation marks omitted)).

[16] This case presents no occasion to engage in such an “arguable basis” inquiry or to define the precise circumstances in which

a jurisdictional error will render a judgment void because United does not argue that the Bankruptcy Court’s error was jurisdictional.

proposed discharge of his student loan interest. Specifically, United argues that the Bankruptcy Court violated United’s due

process rights by confirming Espinosa’s plan despite Espinosa’s failure to serve the summons and complaint the Bankruptcy Rules

require for the commencement of an adversary proceeding. We disagree.

[18] Espinosa’s failure to serve United with a summons and complaint deprived United of a right granted by a procedural rule. See

Fed. Rule Bkrtcy. Proc. 7004(b)(3). United could have timely objected to this deprivation and appealed from an adverse ruling on

hardship. In support of this contention, they cite the text of § 523(a)(8), which provides that student loan debts guaranteed by

governmental units are not dischargeable “

unless

” a court finds undue hardship. 11 U.S.C. § 523(a)(8) (emphasis added). They

argue that this language imposes a “ ‘self–executing’ limitation on the effect of a discharge order” that renders the order legally

unenforceable, and thus void, if it is not satisfied. Brief for Petitioner 23-24; Brief for United States as

Amicus Curiae

18 (quoting

Tennessee Student Assistance Corporation v. Hood,

541 U.S. 440, 450, 124 S.Ct. 1905, 158 L.Ed.2d 764 (2004)). In addition,

FN10. Sections 1328(a) and 523(a)(8) provide that student loan debt

is

dischargeable in a Chapter 13 proceeding if a

court makes a finding of undue hardship. In contrast, other provisions in Chapter 13 provide that certain other debts are

not

dischargeable under

any

circumstances. See,

e.g.,

§§ 523(a)(1)(B), (C) (specified tax debts); § 523(a)(5) (domestic

support obligations); § 523(a)(9) (debts “caused by” the debtor’s unlawful operation of a vehicle while intoxicated). We

express no view on the conditions under which an order confirming the discharge of one of these types of debt could be

set aside as void.

FN11. The Government suggests that § 523(a)(8)‘s “self–executing” nature derives in part from the text of § 523(a), which

states that “[a] discharge under section 727 … or 1328(b) of this title

does not discharge

an individual debtor from any

debt,” including the student loan debts specified in paragraph (8) (emphasis added); see Brief for United States as

Amicus

Curiae

18; see also Reply Brief for Petitioner 1-2. That is not what we concluded in

Hood

and, in this case, would be

irrelevant in any event.

FN12. United relies on our decisions in

United States ex rel. Wilson v. Walker,

109 U.S. 258, 3 S.Ct. 277, 27 L.Ed. 927

(1883), and

Vallely v. Northern Fire & Marine Ins. Co.,

254 U.S. 348, 41 S.Ct. 116, 65 L.Ed. 297 (1920), to argue

otherwise. Those authorities are not controlling because they predate Rule 60(b)(4)‘s enactment and because we

interpreted the statutes at issue in those cases as stripping courts of

jurisdiction

-either over the parties,

id.,

at 354-356, 41

S.Ct. 116, or the res,

Wilson,supra,

at 265-266, 3 S.Ct. 277-and United concedes that the statutory limit in this case is not

jurisdictional. See

supra,

at 1377-1378.

[22] Rule 60(b)(4) strikes a balance between the need for finality of judgments and the importance of ensuring that litigants have a

full and fair opportunity to litigate a dispute. Where, as here, a party is notified of a plan’s contents and fails to object to

confirmation of the plan before the time for appeal expires, that party has been afforded a full and fair opportunity to litigate, and

the party’s failure to avail itself of that opportunity will not justify Rule 60(b)(4) relief. We thus agree with the Court of Appeals that

CHAPTER 30: BANKRUPTCY LAW 499

[24][25] As Espinosa concedes, Tr. of Oral Arg. 31, 36, a Chapter 13 plan that proposes to discharge a student loan debt without a

determination of undue hardship violates §§ 1328(a)(2) and 523(a)(8). Failure to comply with this self-executing requirement

should prevent confirmation of the plan even if the creditor fails to object, or to appear in the proceeding at all. See

Hood,

541 U.S.

at 450, 124 S.Ct. 1905.FN13 That is because § 1325(a) instructs a bankruptcy court to confirm a plan only if the court finds,

inter

alia,

that the plan complies with the “applicable provisions” of the Code. § 1325(a) (providing that a bankruptcy court “shall confirm

FN13. This is essential to preserve the distinction between Congress’ treatment of student loan debts in § 523(a)(8) and

debts listed elsewhere in § 523. Section 523(a)(8) renders student loan debt presumptively nondischargeable “unless” a

FN14. In other contexts, we have held that courts have the discretion, but not the obligation, to raise on their own initiative

certain nonjurisdictional barriers to suit. See

Day v. McDonough,

547 U.S. 198, 202, 209, 126 S.Ct. 1675, 164 L.Ed.2d

FN15. Bankruptcy courts appear to be well aware of this statutory obligation. See,

e.g., In re Mammel,

221 B.R. 238, 239

(Bkrtcy.N.D.Iowa 1998) (“[W]hether or not an objection is presently lodged in this case, the Court retains the authority to

review this plan and deny confirmation if it fails to comply with the confirmation standards of the Code”).

[26] We are mindful that conserving assets is an important concern in a bankruptcy proceeding. We thus assume that, in some

cases, a debtor and creditor may agree that payment of a student loan debt will cause the debtor an undue hardship sufficient to

debtor can withdraw the plan and file another without penalty.

We acknowledge the potential for bad-faith litigation tactics. But expanding the availability of relief under Rule 60(b)(4) is not an

Supplemental Case Printout for:

Insight into Ethics

C.D.Cal.,2009.

White v. Experian Information Solutions, Inc.

Not Reported in F.Supp.2d, 2009 WL 4267843 (C.D.Cal.)

United States District Court,

C.D. California.

Terri N. WHITE, et al., Plaintiffs,

v.

EXPERIAN INFORMATION SOLUTIONS, INC., et al., Defendants.

No. SACV 05-1070 DOC (MLGx).

These actions involve claims against consumer credit reporting agencies based on the procedures by which those agencies

produce credit reports for individuals with debts discharged through Chapter 7 bankruptcy proceedings. Defendants Experian,

Trans Union, and Equifax (“Defendants”) are the nation’s three major repositories for consumer credit information. Under the Fair

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Credit Reporting Act (“FCRA”), 15 U.S.C. § 1681a(f), they are classified as “consumer credit reporting agenc[ies],” meaning that

update the status of the accounts they maintain. Plaintiffs brought these actions challenging Defendants’ reliance on creditors to

voluntarily update the status of discharged debts, charging that this practice constitutes a negligent and a willful failure to employ

reasonable procedures to ensure the maximum possible accuracy of credit reports, in violation of the FCRA, 15 U.S.C. § 1681e(b).

They also contend that Defendants have negligently and willfully failed to conduct reasonable reinvestigations of disputed credit

information, as the FCRA requires in 15 U.S.C. § 1681i(a). These causes of action include allegations that Defendants have

Clifton C. Seale, III, and Jose Hernandez. The Acosta plaintiffs consist of Robert Randall and Bertram Robison. Finally, Kathryn L.

Pike is the representative Pike plaintiff.

On August 19, 2008, a settlement agreement between the parties as to Plaintiffs’ claims for injunctive relief was approved by the

Court. Plaintiffs’ claims for damages remained to be adjudicated. On January 26, 2009, the Court held oral argument regarding

class certification. While the Court issued a tentative denying certification, it deferred ruling on the motion to certify the class

II. DISCUSSION

A. Request for Protective Order for Deposition of Jose Hernandez

This is a discovery dispute at the settlement approval stage between the Settling Plaintiffs and the

White

Plaintiffs. The

White

Plaintiffs seek to depose class representative Hernandez regarding: (1) his personal knowledge of and reasons for supporting the

settlement; and (2) his understanding of the incentive award and his entitlement thereto. W. Pl.’s Opp. at 6. The

White

Plaintiffs

The

White

Plaintiffs’ stated purpose for the deposition is to challenge the continuing adequacy of Mr. Hernandez as lead plaintiff.

The adequacy of a class representative’s representation is at issue at all states of a class action.

Christman v. Bruavin Realty

Advisors, Inc.,

191 F.R.D. 142, 146 (N.D.Ill.1999) (quoting

Susman v. Lincoln American Corp.,

561 F.2d 86, 89-90 (7th Cir.1977).

In this case, the

White

Plaintiffs have indicated that they believe Mr. Hernandez’s representation is no longer adequate due to a

breakdown during settlement negotiations. The Court finds it appropriate for the

White

Plaintiffs to conduct a deposition that is

FN1. At oral argument, the

White

Plaintiffs stated that they recently learned they are also missing some documents

exchanged between the Settling Plaintiffs and Defendants. Settling Plaintiffs represented that they had produced all such

emails. As this claim was not briefed nor the subject of a motion, it will not be addressed here.

Rule 3-700(D) sets forth the ethical contours of attorneys’ responsibilities to hand over papers to former clients. Rule 3-700(D)

provides:

representatives decide to object and are no longer represented by settlement class counsel, nor have they presented authority

interpreting Rule 3-700(D) as it applies to representation by California attorneys in federal question cases. Therefore, authority

addressing Rule 3-700 obligations as applied to work product generally provide the only direction. The California state courts that

have interpreted the scope of Rule 3-700(D) and whether it contains an exception for work product have looked for guidance from

the state statute governing work product, Cal.Code Civ. Proc. §§ 2018.010–.030.

The confusion over applicable law seems to have arisen because of the conflation of two requests by the

White

Plaintiffs: a request

for documents of former counsel under Rule 3-700 and a request for documents through discovery as an objecting party to the

settlement. If the

White

Plaintiffs had requested these documents as a part of discovery, then the Court would interpret their right to

discovery of that work product under federal common law. Additionally, if the

White

Plaintiffs asked to admit work product from their

former counsel into evidence at the final fairness hearing, the Court would decide the admissibility through federal common law. In

Whether Rule 3-700(D) includes an implicit exception for work product is an issue which has been discussed but not resolved by

California courts. In

Metro-Goldwyn-Mayer, Inc. v. Superior Court,

the California Court of Appeal noted that “the absolute right of a

client to his attorney’s work product, and the absolute right of an attorney to protect his or her impressions, conclusions, opinions,

and legal research or theories from disclosure” could be in conflict under California law. 25 Cal.App.4th 242, 244, 30 Cal.Rptr.2d

371 (Cal.Ct.App.1994). In

Eddy v. Fields,

the Court of Appeal again observed, “[t]he statutory work product privilege and the

FN2. The other cases cited by the

White

Plaintiffs in support of this proposition,

Metro-Goldwyn-Mayer,

25 Cal.App. 4 at

249, and

Eddy,

121 Cal.App.4th 1543, 18 Cal.Rptr.3d 487, both involved waiver, which is not applicable here.

In

MGM,

the Court of Appeal stated that it had aligned itself with the line of authority that “holds that the attorney is the exclusive

holder of the privilege for purposes of adversarial discovery conducted in the course of litigation” prior to the passage of Rule 3–

and 405.” FN4

FN4. The

White

Plaintiffs also cite State Bar of California Standing Committee on Professional Responsibility and

Conduct’s Formal Opinion Nos.1992-17 and 2007-174. While Opinion No.1992-17 does discuss the meaning of Rule 3-

3-700(D) obligations.

Taking this direction, the Court looks to the sources cited by the Standing Committee. In the Bar Association of San Francisco

(1972), the Ethics Committee stated, “[i]n the Committee’s opinion, ‘work product’ for which the client may be billed, belongs to the

client.”

See also

LACB Formal Opinion No. 362 (1976) (affirming finding of Opinion 362). The Ethics Committee also stated, “this

Committee believes that, in most cases, virtually everything in a client’s file is the property of the client, because it either has been

copied at client expense, or the time utilized to create it has been at client expense. LACB Formal Opinion No. 405 (1982).FN5

FN5. While these three opinions from the Los Angeles County bar pre-date the passage of Rule 3-700 in 1988, the State

Bar’s citation to them in 1990 indicate that it still found them instructive regarding the issue.

Weighing the arguments provided by these authorities, the Court finds that Rule 3-700(D) is indeed modified by the protection

FN6. Rule 3-700(D) also contains a limitation on disclosure, stating that it must be “[s]ubject to any protective order or

non–disclosure agreement.” The non-disclosure agreements signed in this case present an alternative basis for restricting

the production of emails with other Plaintiffs’ counsel. In May 2006, all Plaintiffs’ counsel signed a Joint Prosecution

Agreement that provides “no Party may share or disseminate such work product without the express agreement of all the

Parties to this Agreement.”

Id.

at 16. The

White

Plaintiffs also signed an “Attorney Representation Agreement” which

C. Motion of Charles Juntikka and the

White

Plaintiffs for an Order Allowing Counsel to Contact Proposed Class Members

White

Plaintiffs’ Counsel Charles Juntikka has requested court approval of a proposed letter he wishes to send to 2,500 of the

members of the proposed class with whom he has a current attorney-client relationship and another 20,000 members of the

proposed class with whom he has a former attorney-client relationship. The letter, presented by Juntikka in the reply, states, “I am

against

this “monetary relief” settlement because I believe the amount of the awards is woefully inadequate and the conditions for

to enter an appearance through an attorney if the member so desires. Fed. R. Civ. Proc. 23(c)(2)(B)(iv). The corollary of this right

is that class members may consult outside attorneys in deciding how they should elect to act in response to the settlement. Any

limitation by the Court on “communications between parties and potential class members should be based on a clear record and

specific findings that reflect a weighing of the need for a limitation and the potential interference with the rights of the parties.”

Gulf

Oil Co. v. Bernard,

452 U.S. 89, 101, 101 S.Ct. 2193, 68 L.Ed.2d 693 (1981).

FN7. Settling Plaintiffs have thereby withdrawn their assertion that all communications of Juntikka with any member of the

class must go through Settlement Class Counsel. S. Pl.’s Opp. at 6.

The concerns weigh differently as to the 20,000 former clients that Juntikka wishes to contact. The need for a limitation is great

where, as here, a neutral, court-approved settlement notice has been sent to the class and the objecting plaintiffs’ counsel seeks to

encourage class members to opt out, presenting his alternative view of the settlement. Juntikka states that he has already sent a

The

White

Plaintiffs assert that the Court may only limit communications with the class if they can demonstrate that statements

made in the potential communication are misleading.

Gulf Oil

does not support such a reading of courts’ power to limit

communications. Instead,

Gulf Oil

encourages courts to narrowly tailor restrictions such that limitations do not make it more difficult

506 CASE PRINTOUTS TO ACCOMPANY BUSINESS LAW TODAY

for the parties to vindicate their rights. 452 U.S. at 102. Here, Juntikka is not absolutely limited in contacting the 20,000 class

minimum they did not desire to send a letter that did not articulate the reasons why Juntikka opposed the settlement. Juntikka has

thus presented the Court with an all-or-nothing proposition, saying he prefers to send nothing rather than a more neutral notice.

Weighing the interests at play in the class notification stage, the

White

Plaintiffs Motion to Contact Class Members is GRANTED as

to the request for Juntikka to contact his clients and DENIED as to the request to send the proposed letter to Juntikka’s former

clients.

IV. DISPOSITION