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Nov. 2012

November 2012
From the Colorado Bar Association
Business Law Section

Ed Naylor, Editor
To view pdf of this newsletter, click here.
In this issue...
Amendments to the Federal Rules of Bankruptcy Procedure Effective Dec. 2
By Britney Beall-Eder, Castle Stawiarski, LLC

On Dec. 1, certain new amendments to the Federal Rules of Bankruptcy Procedure (Rules) become effective. Although not as lengthy or cumbersome as the amendments and new rules effective Dec. 1, 2011, practitioners should still be aware of these amendments. This summarizes the amendments to Rules 1007 (deadlines for debtor schedules), 2015 (Trustee records), 3001 (proof of claim for consumer credit), 7054 (response times for requests for costs) and 7056 (summary judgment deadlines).

Rule 1007(c)—Deadlines for filing Debtor’s Schedules

Amendments to Rule 1007(c) clarify the timeframe for filing the debtor’s schedules, statements, and other documents, excluding the list of creditors in Rule 1007(a)(2), in connection with an involuntary bankruptcy case. In a voluntary case, Rule 1007(c) requires that the debtor’s statements, schedules, and other documents required by subdivision (b)(1), (4), (5), and (6) shall be filed with the petition or within fourteen days of the petition. In an involuntary case, the amendments to Rule 1007(c) exclude the documents to be provided under Rule 1007(a)(2) and specify that the schedules, statements, and other documents required by subdivision (b)(1) be filed by the debtor within fourteen days after the entry of the order for relief. This technical amendment to Rule 1007 is intended to remove the inconsistency that now exists between Rule 1007(a)(2), which currently requires that the list of creditors in an involuntary case be filed within seven days after the entry of the order for relief, and Rule 1007(c), which also currently requires the involuntary debtor to file the same list of creditors within fourteen days of the entry of the order for relief.

Rule 2015—Required Trustee Reports

Amendments to Rule 2015 clarify and correct the statutory reference to the records and reports that must be kept and filed by the trustee or debtor in possession. The amendments to Rule 2015(a)(3) require that the trustee or debtor in possession file the reports and summaries required by section 704(a)(8) of the Code, which “shall include a statement, if payments are made to employees, of the amounts of deductions for all taxes required to be withheld or paid for and in behalf of employees and the place where these amounts are deposited…” This amendment is intended to correct a clerical error resulting from the enactment of the 2005 amendments, which split 11 U.S.C. section 704 into subsections. Accordingly, the amendment makes clear that the reference in Rule 2015 to section 704 should reference post-BAPCPA section 704(a)(8) as opposed to the pre-2005 section 704(8).

Rule 3001—Proof of Claim for Consumer Credit Agreements

Significant changes were made in 2011 affecting the proof of claim process for mortgage holders. Additional amendments for open-end or revolving consumer credit agreements become effective next month. When the claim is based upon a writing, the amendments to Rule 3001(c)(1) exempt holders of open-end or revolving consumer credit agreements from filing a copy of the writing on which the claim is based with the proof of claim. However, if a party in interest requests a copy of the writing, the holder of the claim must provide the writing within 30 days of the request. This deadline may be extended under Rule 9006 for cause.

Notwithstanding that the underlying writing upon which the claim is based will no longer be required in connection with the filing of a proof of claim for these holders, Rule 3001(3)(A) provides certain additional requirements for claims based on an open-end or revolving consumer credit agreement, except when the agreement is secured by the debtor’s principal residence. These additional requirements are that each proof of claim must include:

  1. the name of the entity from whom the creditor purchased the account;
  2. the name of the entity to whom the debt was owed at the time of an account holder’s last transaction on the account;
  3. the date of an account holder’s last transaction;
  4. the date of the last payment on the account; and
  5. the date on which the account was charged to profit or loss. Rule 3001(3)(A).

In review of the committee recommendations concerning the amendments to Rule 3001(3)(A), the Bankruptcy Rules Advisory Committee deemed the information set forth in (3)(A)(i-v) necessary as it pertains to proof of claim holders filed by open-end or revolving consumer credit agreements, most often credit cards, because these claims are routinely transferred multiple times prior to the claim holder receiving the claim. For this reason, the additional information required under the amendments to Rule 3001(3)(A) may assist the debtor with identification of the particular account upon which the claim is based. Additionally, the new requirements may help the debtor in ascertaining the timeliness of the claim.

Although Rule 3001(3) is a less stringent requirement from the current Rule in terms of production of the writing upon which the claim is based, the Advisory Committee found that the amendments to Rule 3001(3) reflect a fair balance—appropriate disclosure by the creditor concerning the holder’s claim, while also providing the debtors and trustees sufficient information to identify whether the claim is timely, valid and enforceable.

While significant differences exist between the changes implemented for mortgage holder proofs of claim commencing December 2011 and the new amendments for open-end or revolving consumer credit agreements effective December 2012, the committee notes indicate one similarity. To the extent that a claim filed by the holder of an open-end or revolving consumer credit agreement complies with Rule 3001(a), (b), (c)(1), (c)(2), (c)(3)(A), and (e), the holder’s claim will be prima facie evidence of the validity of the claim despite the fact that the writing upon which the claim is based may not have been received or requested by a party in interest. Similar to the sanctions applicable to a mortgage proof of claim holder, holders of open-end or revolving consumer credit agreements also expose themselves to sanctions for failure to comply with the new amendments.

Rule 7054—Time to Respond to Request for Costs

Amendments to Rule 7054 also become effective on Dec. 1. The amendments apply to the time frame in adversary proceedings in which a party may respond to a prevailing party’s requests for costs in a case, in addition to the time frame in which a party may seek court review of the costs taxed by a clerk. Amended Rule 7054 changes the time for a party to respond to a prevailing party’s request for costs from one day to fourteen days, and extends the time frame to seek court review of the costs taxed from five days to seven days. The amended Rule will conform the existing Rule with the time frames under the Federal Rules of Civil Procedure, Rule 54 and the 2009 time-computation amendments.

Rule 7056—Deadlines for Summary Judgment in Adversary Proceedings

Last, an amendment to Rule 7056 mandates that a motion for summary judgment in an adversary proceeding must be filed at least thirty days before the initial date scheduled for an evidentiary hearing on any issue upon which summary judgment is sought. This amendment is designed to make similar the procedure that is followed in both bankruptcy and federal civil procedure. In 2010, Civil Rule 56 was amended to mandate that a motion for summary judgment be filed within 30 days from the close of discovery. Due to the more expedited process often imposed in bankruptcy adversary cases, and because evidentiary hearings are often frequently scheduled shortly after the close of discovery in an adversary case, amended Rule 7056 connects the timing for filing a motion for summary judgment to the first scheduled evidentiary hearing date, as opposed to the close of discovery. This amendment will allow the bankruptcy courts to rule on summary judgment prior to an evidentiary hearing scheduled on the same issues, which will be more economical for the parties and the court.

In summary, although the amendments to the bankruptcy rules that become effective Dec. 1 may be less comprehensive and burdensome than the rule changes implemented over the last year, practitioners should carefully review these new changes to the federal bankruptcy rules to ensure proper compliance and implementation for daily practice.

Working Group on Legal Opinions

The meeting of the Working Group on Legal Opinions (WGLO) was scheduled for Oct. 29–30, to celebrate James Fuld and his seminal article “Legal Opinions in Business Transactions—An Attempt to Bring Some Order Out of Some Chaos,” 28 Bus. Law. 915 (1973). The program was entitled “Fuld at 40.” Unfortunatley, Hurricane Sandy caused the cancellation of the program. The next meeting is scheduled for May 13–14.

The WGLO (including Representatives of the ABA Legal Opinions Committee and a number of state bar associations (including Colorado)) are working on a “Statement of Customary Opinion Practices.” Our work on the Statement is moving along into its third year. Challenges confronting us include addressing the differences in approach between tailoring exceptions and using a laundry list (the real estate bar tends to favor the latter approach), and addressing misleading opinions. The ultimate objective is to secure broad acceptance of the Statement by state bar opinion committees and other relevant parties, similar to that achieved by the “Statement on the Role of Customary Practice in the Preparation and Understanding of Third-Party Legal Opinions” (63 Bus. Law. 1277 (2008)). Both the Real Estate Sections and the Business Law Sections approved the Statement on the Role of Customary Practice after publication in the Business Lawyer.

Those interested may access the Fall 2012 Legal Opinion Newsletter on the ABA website. The newsletter covers this and other matters being addressed by the ABA’s Legal Opinion Committee.

Colorado Secretary of State Update

On Nov. 19, Secretary of State Scott Gessler announced a fee holiday for all online business filings, beginning Saturday, Dec. 1 and continuing until further notice. The fee holiday will bring all online business filing fees to $1.

“Launching new online services has helped our office become more efficient. At the same time, we have improved office operations to save customers time and money. We can now lower fees for a time, so businesses can use that money to grow and create jobs,” Gessler said.

The fee holiday applies to all online business filings. It does not include late fees. Gessler will review the reduction on a monthly basis to ensure the office is able to meet its budgetary obligations.

Gessler noted his office can absorb the reductions while continuing to provide top-notch services.

“This move further demonstrates Colorado is a low-fee state. But Colorado also has great customer service,” Gessler said.

The Secretary of State’s office takes no state taxpayer dollars. Its operations are funded primarily by filing fees from businesses and non-profits. The business filing fee holiday follows fee reductions for non-profits that took effect in October and fee reduction for notaries public that took effect at the beginning of November. For a table listing the filing fees that will be changed, click here.

Business Law Section Activities
Bankruptcy Subsection

Farewell to Brad Bolton—Wednesday, Dec. 12, 5–7 p.m.

Please join us for a reception to thank Brad Bolton for over three decades of dedicated service to the bench and bar. The reception will be held at the CBA-CLE offices, 1900 Grant Street, 9th Floor reception area.

Financial Institutions Subsection

Lunch and Learn Returns in January

The Financial Institutions Subsection Lunch and Learn is back, beginning Wednesday, Jan. 16 with “Turn-Around Lending—Case Studies.” The program, presented by Keith D. Palesh, Regional Manager and Executive Vice President of Wells Fargo Capital Finance, will present case studies involving turn-around lending with the intent of providing industry perspectives on strategies, common problems which arise with turn-around lending, liquidation issues, and the need for such lending.

The live program will be in the CBA-CLE Large Classroom, 1900 Grant Street, Suite 300, Denver, CO, and also available via webcast. Same-day registration will begin at 11:30, followed by the program from noon to 1 p.m.

Complete details related to the luncheon as well as registration information will be posted to the CBA-CLE website in the very near future.

Save the Date: UCC Article 9 Security Interests: Collateral Refresher and Hot Topics—Wednesday, March 6

Mark your calendars! The Financial Institutions Subsection is sponsoring a half-day CLE related to UCC Article 9 Security Interests. Topics for this program will include a summary of the categories and types of collateral covered under Article 9, filing and searching for security interests, and UCC security interest opinions. The live program will be held at the CBA-CLE Classroom, 1900 Grant Street, Suite 300, Denver, CO or via webcast.

Please check the CBA-CLE website in the coming weeks for additional topics and complete information on the class.

M&A Subsection

Current Developments in the Energy Industry—Tuesday, Dec. 4

The Energy Industry landscape is constantly changing and as a result the M&A market in the industry is dynamic. Many factors are contributing to activity in the industry, everything from the rise and fall of government incentives to innovations in technology. This presentation will highlight the current state of the M&A market in the traditional energy and renewable energy sectors and discuss some of the key drivers.

Faculty: Billi R. McCullough, Esq., Holland & Hart LLP, Denver,

The program will be held from 7:30 to 9 a.m. at the CBA-CLE offices, 1900 Grant Street, Suite 300, Denver, CO. The program has been submitted for one general CLE credit. Click here for more information and to register.

CBA Annual Ethics Update

2012 Annual Ethics Update—Wednesday, Dec. 12

Sponsored by the Business, Real Estate, Tax, and Trust & Estate Law Sections
Presented by: Alec Rothrock and Herrick K. Lidstone, Jr., of Burns, Figa & Will, P.C.

The program begins at noon at The Warwick Hotel located at 1776 Grant Street, Denver, CO 80203. If you can’t make the live program, telephone conference participation is available. The program has been submitted for two ethics CLE credits. Click here for more information and to register by Dec. 10.

CBA-CLE Information

Bankruptcy Basics from the Creditor’s Perspective—Thursday, Dec. 13

Program Chair: Kimberley H. Tyson, Esq.; Faculty: Megan Adeyemo, Esq., Daniel Garfield, Esq., Susan Hendrick, Esq., Robert Shilliday III, Esq., and David Wadsworth, Esq.

This program covers consumer bankruptcy issues related to Chapters 7 and 13 cases, how debts are (or are not) discharged in bankruptcy, avoidance actions, “automatic stays” and the litigation that often surrounds it, how to make a creditor’s claim, and liens and security interests in bankruptcy cases. A live program and webcast option is available. Click here to register online or call 303.860.0608 or 800.860.2531.

2013 National CLE Conference® in Snowmass—Bankruptcy Track—Jan. 2–5

All presentations are live, and feature some of the best lawyers, judges and professors from throughout the country. Our early morning and late afternoon schedule provides 12–16 hours of continuing legal education credit per program, while at the same time allowing ample time to enjoy Snowmass. A few of the topics to be covered in the sessions include the latest and greatest (or not) case law developments, mortgage issues, legal ethics, and fraudulent conveyances.

Call 303-860-0608 (toll free 888-860-2531) or click here to view the agenda and register.

CBA-CLE Featured Publications

Practitioner’s Guide to Colorado Business Organizations, Second Edition

Managing Editors: Allen Rozansky and Lee Reichert

The Guide begins with basic topics that a Colorado practitioner should consider in the choice-of-entity process. The book then presents detailed discussions of the numerous types of Colorado entities. The 2012 supplement includes substantive updates to 21 of the 34 chapters in the book. Some of these updates are significant, including updates for Federal regulations and statutes, and Secretary of State filing and website changes. The exhibits to many of these chapters contain updated sample forms, documents, and charts.

For more information or to order the book, call 303.860.0608 or 800.860.2531 or click here.

Guide for Colorado Nonprofit Organizations, First Edition, Includes the 2012 Supplement

Managing Editor: Karen E. Leaffer, Esq.

This is a comprehensive guide for attorneys and managers/advisors of nonprofit organizations designed to assist in the understanding and addressing of the legal and tax issues facing Colorado nonprofit organizations. The 2012 Supplement includes important updates, including changes brought about by Leahy-Smith America Invents Act, lobbying and political activities, and more.

For more information or to order the book, call 303.860.0608 or 800.860.2531 or click here.

Contributions for future newsletters are welcome –
Contact Ed Naylor at ed.naylor@moyewhite.com or 303-292-2900

This newsletter is for information only and does not provide legal advice.

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