Central District Consumer Bankruptcy Attorney's Association

Yikes.
Dennis McGoldrick, 350 S. Crenshaw Bl., #A207B, Torrance, Ca 90503 310-328-1001-voice
> On Dec 8, 2013, at 2:27 PM, "Mark J. Markus" wrote:
>
> For the CH. 11 newbies out there, here is a good explanation and learning tip from Judge Jaroslavsky up north. regarding the seriousness of following the rules for the disclosure statement process
>
>
> In re JENNIFER LINN WILSON, Debtor(s).
>
> No. 13-11374
>
> UNITED STATES BANKRUPTCY COURT FOR THE NORTHERN DISTRICT OF
> CALIFORNIA
>
> 2013 Bankr. LEXIS 5138
>
>
> December 6, 2013, Decided
> December 6, 2013, Entered on Docket
>
> COUNSEL: [*1] For Jennifer Linn Wilson, Debtor: Daniel J. Hanecak, Law Offices
> of Daniel J. Hanecak, Sacramento, CA.
>
> For U.S. Trustee, Office of the U.S. Trustee / SR, U.S. Trustee: Minnie Loo,
> Office of the U.S. Trustee, San Francisco, CA.
>
> JUDGES: Alan Jaroslovsky, Chief Bankruptcy Judge.
>
> OPINION BY: Alan Jaroslovsky
>
> OPINION
>
>
> Memorandum re Dissemination of Unapproved Disclosure Statement
>
> The Chapter 11 process is essentially the marketing of securities. Creditors
> are solicited to give up their right to a liquidation dividend and instead
> invest their claims in a reorganized debtor. For this reason, the Bankruptcy
> Code requires a disclosure statement to be approved by the court and then sent
> to creditors along with a plan of reorganization. Copies of the plan and
> disclosure statement must be served on the Securities and Exchange Commission.
> Section 1125(e) of the Code provides a "safe harbor" from liability under state
> or federal laws governing the issuance, sale or purchase of securities for those
> who follow proper bankruptcy procedure regarding postpetition disclosure and
> solicitation.
>
> The procedure for obtaining permission to disseminate a disclosure statement
> is set forth in Rule 3017(a) of the Federal Rules of Bankruptcy Procedure. [*2]
> Pursuant to that rule, all creditors are given notice that a disclosure
> statement has been filed. Before it has been approved, the disclosure statement
> may be sent only to the debtor, and trustee or committee, the SEC, the U.S.
> Trustee, and a party who requests a copy in writing. See 7 Collier on Bankruptcy
> (16th Ed.), 1125.03[2].
>
> In this case, it appeared from the court docket that attorney Daniel Hanecak,
> counsel for the debtor in possession, served copies of an unapproved disclosure
> statement on all creditors in direct violation of Rule 3017(a). The court
> accordingly ordered him and the debtor in possession to appear and explain the
> apparent violation.
>
> Even though the court had specifically cited Rule 3017(a) in its order to
> show cause, when Hanecak appeared before the court he did not seem to understand
> his violation of bankruptcy law and the seriousness of it. He seemed to think
> that the court was calling him to task for not using the mailing labels as
> required by B.L.R. 2002-1(c), not violating the securities provisions of the
> Bankruptcy Code .
>
> The court finds it difficult to believe that any attorney representing a
> debtor in possession would not understand the seriousness [*3] of sending an
> unapproved disclosure statement to anyone who had not requested it in writing.
> It is evident that the court should have listened to the U.S. Trustee, who
> objected to Hanecak's employment on grounds that he was not qualified to
> represent Chapter 11 debtors in possession.1
>
> - - - - - - - - - - - - - - Footnotes - - - - - - - - - - - - - - -1 The court
> is mindful that the only other case before this court in which Hanecak was
> approved as counsel for a debtor in possession, In re Martin, No. 13-10715, has
> ended badly. Not only did Hanecak fail to obtain confirmation of a plan by a
> deadline he himself asked for, but he attempted to withdraw from the case and
> substitute another attorney without leave of court. That case has been converted
> to Chapter 7.
> - - - - - - - - - - - - End Footnotes- - - - - - - - - - - - - -
>
> Violation of 1125(b) of the Code and Rule 3017(a) is a very serious matter.
> It may justify monetary fines, In re California Fidelity, Inc., 198 B.R. 567,
> 573 (9th Cir.BAP 1996); In re Charles St. African Methodist Church, 499 B.R.
> 126, 133 (Bkrtcy.D.Mass. 2013); appointment of a trustee, In re Nautilus of New
> Mexico, Inc., 83 B.R. 784, 791 (Bkrtcy.N.D.Okl. 1988); disallowance of votes, In
> re Media Central, Inc., 89 B.R. 685, 689 (Bkrtcy.E.D.Tenn. 1988); or
> subordination of claims, In re Clamp-All Corp., 233 B.R. 198, 210 (BkrtcyD.Mass.
> 1999). [*4] The court has discretion to fashion an appropriate remedy depending
> on the facts of the case. In re California Fidelity, at 574.
>
> In this case, given Hanecak's apparent ignorance of bankruptcy law and
> complete lack of comprehension of the seriousness of his acts, the most
> appropriate remedy is to terminate his authorization to represent the bankruptcy
> estate, giving the debtor some time to obtain competent counsel. The court will
> accordingly enter an order revoking the debtor's authorization to employ
> Hanecak. The court will retain jurisdiction to vacate his employment
> authorization in the event that it was obtained by any misrepresentations. Any
> replacement counsel approved by the court must first obtain court approval of a
> method of properly informing creditors that their votes were solicited
> improperly before proceeding to seek confirmation of a plan.
>
> An appropriate order will be entered.
>
> Dated: December 6, 2013
>
> /s/ Alan Jaroslovsky
>
> Alan Jaroslovsky
>
> Chief Bankruptcy Judge
>
> *************************
> Mark J. Markus
> Law Office of Mark J. Markus
> Mailing Address Only:
> 11684 Ventura Blvd. PMB #403
> Studio City, CA 91604-2652
> (818)509-1173 (818)509-1460 (fax)
> web: http://www.bklaw.com/
> Certified Bankruptcy Law Specialist--The State Bar of California Board of Legal Specialization
> This Firm is a Qualified Federal Debt Relief Agency
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>> On 12/6/2013 3:44 PM, Hale Andrew Antico wrote:
>
>

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