United States Bankruptcy Court, District of Rhode Island Volume 9, Issue 1 ON THE DOCKET January, February, March 2008 Inner Workings: News and Advice by Susan M. Thurston, Clerk of Court Welcome to the first 2008 district of Rhode Island. In fact, issue of our classic newsletter On the Judge Votolato is currently the Docket. As usual, we have lots of longest serving active duty bank- Inside this issue: news to report on happenings at the ruptcy judge in the entire country. U. S. Bankruptcy Court since last Judge Votolato has handled thou- fall. First, many of you surely no- sands of interesting cases during his ticed our new Court Technology Spe- judgeship here, in addition to his cialist, Mr. Samuel Nogueras, who work throughout the last four dec- Inner Workings 1-2 commenced employment at the Court ades helping to educate the bar and on January 7, 2008. Sam is an ex- public on bankruptcy and other le- Team Coach 3 perienced audio system specialist and gal topics. This spring, in recogni- has seamlessly transitioned to his tion of his outstanding contributions Chambers 4 new role as the Court’s digital court to law related education in Rhode Personnel Update recorder operator and sound system Island, Judge Votolato was expert. As the amount of technology awarded the 2008 Giannini Award Recent Court 5-6 Decisions in the courtroom has grown over the by the Rhode Island Legal/ years, it is a tremendous advantage to Educational Partnership. Please have someone with Sam’s expertise join me in congratulating Judge and knowledge running the automa- Votolato on his impressive forty tion equipment during court proceed- year contribution to the federal ings. Soon Sam will also be respon- bankruptcy sys- sible for managing the videoconfer- tem in the dis- encing component, which is nearly trict of Rhode ready for prime-time. Island! 2008 also marks the 40th an- The start niversary of Bankruptcy Judge Ar- of the year – January 1, 2008 – thur N. Votolato’s continuous service (Continued on page 2) as the sole bankruptcy judge for the ON THE DOCKET Page 2 (Inner Workings Cont’d from pg. 1) which went into effect on Febru- Those of you who practice be- ary 15, 2008, and a second update fore the Department of Labor marked the debut of the Court’s to the Means Test forms, effective may well come before Judge new and improved website to March 3, 2008. Detailed infor- Calianos in the near future! the public. The site has been mation on these changes is posted Please join me in extending our reorganized to better locate on the main page of the website heartfelt congratulations to Jon critical bankruptcy information, under News and Announcements. on his professional success. As has a much cleaner look and you can imagine, after all these Lastly, I would like to an- provides easier navigation years with the Court, both Cindy nounce the upcoming departure of through the use of hovering and Jon will be sorely missed by two long time employees of the menu buttons. We have also their court colleagues and the Court – Cindy Cory, Courtroom added certain content in the public they have so honorably Deputy and Jonathan Calianos, Spanish language as this need served. Career Law Clerk. Cindy will be has grown considerably since retiring on June 1, 2008 after al- BAPCPA. Also, we have most 37 years of service with the added an extensive Self Help/ federal government. If you see Pro Se section to answer fre- Cindy in the courtroom between quently asked questions and to now and June 1, please join me in provide detailed information on congratulating her on her amazing the procedural requirements for service to the federal judiciary different chapter filings. As and wish her a well deserved re- usual, we strongly welcome tirement! Jonathan, on the other your comments and sugges- hand, will be transferring to the tions. A Pro Se survey to col- Executive Branch on May 9, lect your feedback has been 2008, to begin service as an Ad- added to the homepage Please ministrative Law Judge for the visit the main page to complete Department of Labor in Boston. the on-line survey. Other re- Jon has served as Judge Voto- cent changes include three lato’s distinguished Career Law amendments to our local rules Clerk for the past fifteen years. CONGRATULATIONS AND BEST WISHES TO JON AND CINDY! Volume 9, Issue 1 Page 3 Team Coach by Lucinda Cory, Courtroom Deputy It’s been a little over a new party. Many filers seem easy: always choose the initiating year since the implementation reluctant to add another party motion/document. For example, of Mandatory Electronic Case when they see this screen - when filing a motion to continue a Filing. We now have nearly thinking that they’ve done confirmation hearing, link your mo- 100% of the bankruptcy bar e- something wrong. Simply tion to continue to the plan, not the filing. Congratulations to all of leave the “association” boxes hearing notice. you on your continued success unchecked and click into the REMINDERS: with the electronic filing sys- next screen. tem! Still, new members of the A large number attorneys and credi- Choosing the right event is im- e-filing community must take tors are now making use of the No- portant. The “Motion” and some time getting used to the tice of Appearance (text only) event “Other” categories are popu- system. This column seeks to which allows an entry of appearance lated with many events from help neophytes (and veterans) without a pdf form. Electronic no- which to choose. Do not try to navigate through the events tices go to the parties and attorneys use ‘document’ when you are with ease and comfort. in the case so a certificate of service filing schedules, payment ad- is not necessary on this particular The questions most commonly vices, or a means test. Many event. This event is a time-saver for faced by ECF users are those events have special functions, e-filers. involving choosing party filers, e.g. payment advices, which are event codes and associating the private entries and cannot be Remember those deadlines! Finan- filing to the appropriate docu- seen by PACER users who are cial Management Certificates must ment (“linking”). not parties to a case. be filed within 45 days after the first meeting of creditors in order to not When filing a jointly-signed Some have deadlines, linking hold up a debtor(s) discharge. All pleading with a party who has screens, and occasional ques- P.3 and P.4 Declarations are due 15 not previously appeared in a tions to be answered. By trying days after the underlying document case, the ECF user will find to use ‘document’ or an inap- is e-filed. A checklist for each case that the second signatory is not propriate event, the proper might be a way to ensure that all in the “pick list”. The new deadlines and linkages may not necessary paperwork, declarations party must then be added. Us- be available. If in doubt, please and certificates have been timely ing the function ADD CRE- check out our list of events lo- filed. ATE NEW PARTY will allow cated on our website under CM/ you to add the joint filer - but ECF Info -> User Manual -> please remember the system Events & Flowcharts. will ask you to create the attor- The rule of thumb for linking is ney/client relationship with the On The Docket Page 4 Are you an attorney who would like to brush up on your efiling skills? Do you have new support staff or existing support staff who could benefit from ECF training? Our court conducts ECF Training Classes every month. We welcome you to take advantage of this training op- portunity either for yourself and/or your support staff. Please contact Jennifer Davis at 626-3110 for more information or email her at jenni- firstname.lastname@example.org. We look forward to seeing you again! Chambers Personnel Update by Leah Waterman, Judicial Assistant Chambers would sweet events, we are sad to see 18, although he will be visiting like to make two announce- him leave, but delighted and Chambers during the next few ments. First, as many of you wish him well in the next phase weeks to begin the process of are aware, Jonathan Calianos, of his career. The good news is assuming his new duties with who has been Judge Votolato’s that the Department of Labor the Court. Please join us in Career Law Clerk for the past ALJs use our courtroom for Welcoming Jeffrey Dana to 15 years, will be leaving the hearings on a regular basis, so U.S. Bankruptcy Court! Bankruptcy Court at the begin- Judge Calianos will be coming Jonathan, Jeff and I would ning of May. Jonathan has back to visit often in the future. also like to take this opportunity been appointed an Adminis- Congratulations, Jonathan! to acknowledge Judge Voto- trative Law Judge for the We are also very pleased to lato’s upcoming anniversary of U.S. Department of Labor in announce that after an extensive 40 years on the bankruptcy Boston. Needless to say it is search, Jeffrey Dana, Esq., has bench. Best Wishes, Judge! with mixed feelings that we been appointed as Judge Voto- say goodbye to Jonathan – it lato’s Law Clerk. Many of us has been a terrific experience are familiar with Jeff as he has to work with him, get to know practiced law at Rhode Island him personally and watch he Legal Services for many years. and his wife, Catherine, raise His familiarity with bankruptcy three beautiful children. We law and our ECF system, as applaud Jonathan’s achieve- well as his fluency in Spanish, ment in earning one of the are an added bonus! Jeff will highest scores on the ALJ Ex- officially begin work on April amination. As with all bitter- ON THE DOCKET Page 5 Recent Court Decisions by Jonathan C. Calianos, Esq., Law Clerk Here is a short digest of some noteworthy opinions cipals of the debtor paid a retainer of $25,000 to from the Court. As always, the full text of Court the debtor’s attorney. During the bankruptcy, opinions is available at our website counsel did not draw down on the retainer but www.rib.uscourts.gov sought to return the retainer to the principals and seek 100% of its compensation from the estate. Is the Court required to approve stipulations The Court denied the request to return the deposit between debtors and creditors regarding as- which would have diminished the pool of assets sumption of leases under 11 U.S.C. § 365(p)(2)? available for distribution to unsecured creditors The Case: In Re Garbett, BK No. 07- under the Chapter 11 Plan. The Court also ques- 10404 (Bankr. D.R.I. June 11, 2007) tioned whether counsel to the DIP had a conflict of interest. The debtor’s attorney argued that DIP Short Answer: NO. counsel has no fiduciary duty to the bankruptcy The debtor attempted to assume two auto- estate because he cannot simultaneously represent mobile leases under Section 365(p)(2) and the both the interests of the DIP and the estate, as such creditor specifically asked the Court to approve the interests are inherently in conflict. The Court re- stipulations as it did not want to run afoul of the viewed Section 1107(a) and disagreed, holding reaffirmation provisions set forth in Section 524 of that counsel for the DIP does owe a fiduciary duty the Code. While the Court found that it was not to the estate. In so holding, the court followed the required to approve lease assumptions under Sec- path forged by the overwhelming majority of tion 365(p)(2), it also held that the specific agree- courts that have considered this issue. ments in question went too far by requiring the Can a debtor include language in his or her debtor to waive his discharge as part of the as- Chapter 13 Plan that requires a mortgagee to sumption. As such, the Court denied the stipula- file a detailed fee application if it is seeking re- tions, finding them to be incomplete attempts at imbursement of attorney’s fees and costs from reaffirmation. the debtor or property of the estate for services Does Counsel to the debtor in possession owe a rendered from the date of filing through confir- fiduciary duty to the bankruptcy estate? mation? The Case: In Re Hardman’s Hotel of The Case: In re Mihok, BK. No. 06-10062 Smithfield, Inc., BK No. 05-15700 (Bankr. D.R.I. and In re Trigo, 06-10589 August 6, 2007). (Bankr.D.R.I. March 14, 2007) Short Answer: YES Prior to filing the Chapter 11 petition, prin- (Continued on page 6) ON THE DOCKET Page 6 Inside Story Headline (Recent Court Decisions Cont’d from pg. 5) Short Answer: YES– but the secured the creditor may be required to bear the expense creditor will not actually be required to file a fee of preparing the application, plus the fees and application until the debtor challenges the claim costs of the debtor incurred in successfully chal- of the creditor. lenging the request, all depending on the facts These cases were consolidated for pur- and circumstance of the particular case.” poses of the Court’s decision because the Chapter For purposes of determining substantial 13 plans contained similar provisions requiring abuse under 11 U.S.C. §707(b)(3), will the the secured creditor to file detailed fee applica- Court consider voluntary contributions made tions if it was seeking reimbursement of attorney to a debtor’s 401K plan or mandatory repay- fees or costs from the debtor or property of the ments on an outstanding 401K loan? bankruptcy estate that accrued from the date of filing through and including confirmation. The The Case: In re Mokri, BK No. 06- secured creditor objected, arguing that it would be 11073(Bankr. D.R.I. April 27, 2007) unduly burdensome and costly to produce fee ap- Short Answer: Assuming no other facts plications in all Chapter 13 cases. The creditor are relevant, the Court will not count 401k con- also contended that the provision impermissibly tributions or loan repayments as disposable in- modified the terms of their note and mortgage, in come for determining substantial abuse under violation of § 1322(b)(2). The Court disagreed, Section 707(b)(3). finding the plan provisions to be acceptable be- cause the funds used to pay mortgagee’s attorney In this case, the Court was presented with fees and costs were property of the bankruptcy the narrow question of whether voluntary 401k estate and that triggered the fee application proc- contributions or mandatory 401k loan repay- ess. The Court did make the following caveat ments would be considered disposable income however: “Where the debtor does not challenge for purposes of determining substantial abuse the amount sought, the creditor is not required to under Section 707(b). The Court found that be- prepare and file an application, and the creditor is cause both of these 401k expenditures would not not entitled to compensation for doing so. ... If the be considered disposable income available to pay debtor does request that an application be filed, creditors in a Chap- the creditor will be allowed a reasonable fee for ter 13 proceeding preparing the application, provided the request is they should not be not materially different, i.e., not a lot higher than counted for deter- the amount allowed. ... If there is a material dif- mining substantial ference between the request and the award, then abuse.