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June 2015
From the Colorado Bar Association
Business Law Section

Ed Naylor, Editor
In this issue...
Go Code Colorado: Build Apps. Build Business. Build Colorado.
Colorado Secretary of State’s Office

Go Code Colorado, an initiative of the Colorado Secretary of State’s office, recently closed out the second year of its civic app challenge. The program partners with the Governor’s Office, the Office of Economic Development and International Trade, and the Office of Information Technology, to make state-managed, public data more accessible on the Colorado Information Marketplace portal. Go Code Colorado is a leader in the open data movement, staging a civic app challenge that engages entrepreneurs and developers to build data-fueled apps that help businesses make better decisions.

2015 Challenge

This year’s challenge began in April with weekend competitions in Colorado Springs, Denver, Durango, Fort Collins, and Grand Junction. Teams were given problem statements collected from the business community, challenging them to solve business problems through the use of public data. Two teams from each location advanced to a mentor weekend in Boulder to hone their apps and business ideas. On May 21 in Denver they presented their final ideas to a sold-out audience of 300 and a five judge panel comprised of leaders from Colorado’s tech entrepreneurship community. At the end of the final event, each of the three winning teams were awarded Go Code Colorado’s prize: a year-long, $25,000 contract with the Secretary of State’s office.

“When our office launched Go Code Colorado last year, we had a vision for the value that data could add to Colorado’s business community,” said Wayne Williams, Colorado Secretary of State. “This year’s challenge proves that putting a resource like public data in the hands of smart and savvy entrepreneurs and developers can create great solutions for Colorado businesses.”

“The apps were stronger this year,” said Erik Mitisek, CEO of the Colorado Technology Association, who also served as a finalist judge for the competition. “Go Code Colorado continues to find innovators across the state who are doing amazing things with public data.”

The winning teams are MentorMatter, from Denver, and Flow and Pikr Knows, both from Ft. Collins. MentorMatter designed an app to connect college and university students with volunteer industry mentors to improve recruiting and increase new hire retention through mentorship. Pikr Knows addressed tourism intelligence, designing a tourism app for residents and visitors that suggests activities based on user preferences. Flow designed an incentive-based app meant to reduce traffic congestion by analyzing, predicting, and promoting responsible and environmentally friendly ways to change commuting patterns.

Award-Winning Program

Go Code has received multiple awards for its value and innovative nature. CIO Magazine awarded the program its 2015 CIO 100 Award. Go Code Colorado was also awarded the International Association of Commercial Administrators (IACA) Merit Award, the Colorado Technology Association’s 2014 Technology Project of the Year Award, and was recognized as a Bright Idea by Harvard’s Kennedy School through its Innovations in American Government Awards competition. Go Code Colorado is also a finalist for this year’s IDEAS award, presented by the National Association of Secretaries of State (NASS).

For more information about Go Code Colorado, visit gocode.colorado.gov.

Recent US Supreme Court Bankruptcy Cases
By Deanna L. Westfall, Weinstein & Riley, P.S.

Here are summaries of two recent US Supreme Court decisions in the bankruptcy realm of interest to bankruptcy and business practitioners.

Recovery of Attorney Fees: Baker Botts, et al., LLP v Asarco, LLC, 576 U.S. ___ (June 15, 2015)

The Supreme Court (Justices Thomas, Roberts, Scalia, Kennedy and Alito) addressed the applicability of Section 330(a)(1) to attorneys’ fees incurred defending an application for fees. Counsel, Baker Botts LLP and Jordan, Hyden, Womble, Culbreth & Holzer, P.C., were duly approved as counsel for ASARCO. The firms pursued claims, including claims against ASACO’s parent company for fraudulent transfers. The result was payment in full of all creditors.

Upon application, the Bankruptcy Court awarded counsel $120 million in fees, plus a $4.1 million enhancement for “exceptional performance.” The Court awarded an additional $5 million for time expended defending the fee applications. The District Court upheld the awards. The Fifth Circuit reversed, holding that Section 330 did not permit awards for defending fee applications.

While these numbers appear outrageous, a key factor is that the attorneys seeking fees had recovered from ASARCO’s parent company a judgment in the amount of $7 to $10 billion. Post-bankruptcy, ASARCO returned to the control of the parent company. The parent company fought ASARCO’s attorneys’ fees—the same fees that resulted in the judgment against it.

The Majority found that neither Section 327 nor Section 330 explicitly include attorneys’ fees for defending a fee application as compensable. Section 327 allows the hiring of professionals to assist the trustee (or debtor in possession) for the benefit of the estate. Section 330(a) allows “reasonable compensation for actual, necessary services rendered.” Accordingly, the Majority held that fees expended defending an application for fees are governed by the American Rule—which provides that each party shall pay its own legal fees and expenses. The Court indicated that the defense of such fees cannot be included under the language of Section 330, because the defense does not benefit the estate.

The Dissent (Justices Breyer, Ginsburg and Kagan) found the majority opinion unpersuasive and inconsistent with prior interpretations of the Code (allowing compensation for preparing fee applications) and the Equal Access to Justice Act (EAJA). “In my view, the majority is wrong to distinguish between the costs of fee preparation and the costs of fee litigation.” The Dissent found the distinction between the language allowing fee shifting in EAJA and the Bankruptcy Code “difficult to reconcile.”

Justice Sotomayor issued a short opinion concurring in part and concurring with the decision.

Junior Lien Strips: Bank of America, N.A. v. Caulkett, June 1, 2015

This case addresses an issue that had been bubbling in the lower courts of the 11th Circuit for several years. As expected by many, the Supreme Court overruled the 11th Circuit’s aberrant ruling allowing Chapter 7 junior lien strips. It also left several questions for another day.

The debtors in the cases consolidated for hearing shared the same general history. They both had homes with first and second mortgages. In both cases, the first mortgage was greater than the value of the home. The second mortgage on each home was thus wholly underwater, although properly perfected. Each debtor sought to strip the second mortgage, as they could in a Chapter 13 case, but without the lengthy process and payment plan requirements of Chapter 13.

The Court did not emphasize that the debtors could seek the relief requested by following the stricter requirements of Chapter 13. Rather, the Court focused its analysis on 11 U.S.C. § 506(d) and Dewsnup v. Timm, 502 U.S. 410 (1992), for the interpretation of allowed claims under 11 U.S.C. § 502. The Court found that under the long standing interpretation of Section 502, the claims were allowed claims. Furthermore, under Dewsnup’s interpretation of Section 506(d), the debtor may “strip off the Bank’s junior mortgages only if the Bank’s claim”—generally its right to repayment from the debtors, § 101(5)—is “not an allowed secured claim.” Caulkett, at p. 3.

The parties agreed in this case that the junior mortgages were allowed claims, but disputed whether they were allowed “secured” claims under Section 506(a). After comparing the language defining secured claims in Section 506(a)(1) to the use in Section 506(d), the Court noted that the determination of whether the mortgages are “allowed secured claims” appears to be a perfect case for application of the “normal rule of statutory construction that identical words used in different parts of the same act are intended to have the same meaning.” Id. However, the Court deferred to Dewsnup, indicating that the meaning of secured claim under Section 506(d) had already been determined by Dewsnup, so that case’s determination that the claim was an allowed senior claim foreclosed the discussion in this case. This confirms that a debtor may not strip a lien in a Chapter 7 case.

Accordingly, the Court reversed the 11th Circuit, upholding existing law regarding lien strips—they may only occur in a reorganization chapter, not in a Chapter 7 liquidation. Three Justices (Sotomayor, Kennedy, Breyer) joined in a caustic footnote criticizing Dewsnup, and its reasoning in not allowing Chapter 7 strip offs. The footnote appears to chastise counsel for not seeking to overturn Dewsnup. Stay tuned.

Business Law Section Activities
Antitrust and Consumer Protection Subsection

Save the dates!

Antitrust Issues in Healthcare—Week of September 1
Presented by Richard B. Benenson of Brownstein Hyatt Farber Schreck, LLP.

Joint and Several Liability in Multiple-Product Conspiracy Cases— Tuesday, October 13
Presented by Jeffrey S. Roberts of Faegre Baker Daniels.

Bankruptcy Subsection

Exemption Legislation Update

On June 5, 2015, Gov. John Hickenlooper signed several bills into law, including SB 15-283 concerning debt collection proceedings, and, in connection therewith, increasing the scope and value of assets that may be exempted, clarifying definitions of “earnings,” and specifying the procedure for service of notice of exemption and pending levy in certain garnishment proceedings. The new law goes into effect July 1, 2015. View the final version of SB 15-283.

New Bankruptcy Subsection Co-Chairs

Matthew Faga (Law Clerk to the Hon. Michael E. Romero) and Mark Larson (Allen & Vellone, P.C.) will take over as the new co-chairs of the Bankruptcy Subsection (July 2015—June 2017). If you have ideas for future subsection events or CLEs, please contact Matt and Mark.

Bankruptcy Court Technology Trainings

The Bankruptcy Court and the CBA Bankruptcy Subsection are offering a free, one-hour, courtroom technology training in Courtroom C, U.S. Bankruptcy Court. Training sessions will be held from 10 to 11 a.m. on July 17, August 14, September 18, October 9, and November 13. For more information on the training, please contact Matthew Faga. Register online by clicking on the links for the dates listed above, or RSVP to (303) 860-1115 x727 or email lunches@cobar.org.

CBA-CLE Information

Unless noted, programs are held at the CBA-CLE offices, 1900 Grant St. Ste. 300, Denver

Mastering Microsoft Word in the Law Office
Thursday, August 13, 9 a.m. to 4:45 p.m.

This is advanced training on how to conquer Word formatting with styles to save time and create better legal documents. Program highlights include: create, share, automate, and manage your electronic documents step-by-step; create complex legal documents with ease, speed, and accuracy, no matter your skill level, and make document drafting easy and efficient!

This program is offered for 7 general CLE credits. Learn more and register online.

2015 Colorado Legal and Technology Expo—FREE for the Colorado Legal Community—Featuring the Latest in Technology Innovations!
Friday, August 21, 8:30 a.m. to 4:30 p.m.

The Colorado Legal and Technology Expo offers a chance to learn about the latest in legal services and technology that can help you and your firm improve efficiencies and find the best law practice management tools available.

There will be an exhibit area with a variety of legal vendors showcasing their services and products, plus a series of short, informational sessions that will review new technologies in further detail. Not only can you hear about the new products, but the Expo offers an opportunity to test them out and ask questions from the experts.

The program will be held at the Warwick Hotel, 1776 Grant Street, Denver. This year, three 50-minute CLE accredited presentations are offered for a nominal registration fee. Learn more and reserve your spot today!

Hanging Your Shingle
August 20–22

Sponsored by the Lawyer’s Professional Liability Committee and the Solo/Small Firm Section of the Colorado Bar Association

There is a wealth of information packed into two and half days. If you are starting your own firm, this program is invaluable. Program highlights include: Appreciating the Difference Between Not Working for Someone Else and Working for Yourself; Writing Your Business Plan; What Does a Bank Want to See Before It Loans Money or Extends a Line of Credit?; What Type of Entity Should You Choose When Starting Your Law Firm?; All Things Accounting and Finance: From Accounts Payable to Billable Hours to Accounts Receivable; Trust Account Management and Fee Agreements; Key Aspects of Law Practice Management; Manage Your Malpractice Exposure Malpractice Insurance; The Practical Application of the Rules of Professional Conduct; Marketing and Business Development; Technology: Your First Partner; The Importance of Social Media in Starting Your Own Firm; Ethics of Social Media; Professionalism in Your Practice; and The Value of Getting a Mentor.

This program is offered for 18 general CLE credits, including 7.9 ethics credits. Learn more and register online.

Save the Dates: 2015 Business Law Institute—October 28–29

Grand Hyatt Hotel, 1750 Welton Street, Denver

CLE Membership Program for New Attorneys
For attorneys in their first 5 years of practice

New attorneys can get an “edge” in their practice by joining the CBA-CLE New Lawyer Edge Membership program. New Lawyer Edge is designed to help new attorneys transition from law school to law practice, with tools and resources for success. The membership includes: Unlimited Free Attendance at Live “Build Your Practice” CLE Seminars; a 50% discount on all other Live and Live Webcast CBA-CLE Seminars; 24/7 online access to all Basics and Fundamentals homestudies; 50% discount on all other online CBA-CLE Homestudies; a 20% discount on CBA-CLE Books; plus other research resources and networking opportunities!

The program is only $199 for 3 years for CBA members in their first 5 years of practice—not per year—$199 total! New attorneys can sign up now; learn more and register online.

Recent Homestudies

A Primer on Advising Nonprofit Organizations

24th Annual Institute on Advising Nonprofit Organizations in Colorado

Closely Held Businesses: Strategies for Tackling Key Issues

Check out the complete catalog of CLE Homestudies—search by practice area or credits.

CBA-CLE Books

Colorado Bar Association CLE offers a number of substantive publications including Practitioner’s Guide to Colorado Business Organizations, 2nd Ed. Browse the Table of Contents for more details.

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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