5.24.11 Complex Litigation

"Some of us are standing awfully close to the woodchipper."
-Bruce's words of encouragement on studying for the final

Distribution (§ 726)

First: Secured creditors to extent of security
-may be delayed by automatic stay
Second: "Priority" creditors (§ 507)
a. Expenses of administering estate (lawyers, appraisers, etc.)
b. Unpaid wages ($10,000/90days)
c. Employee benefit plans
d. Post-filing expenses of business (ability to continue business, get credit, etc.)
e. Alimony and taxes (non-dischargeable through bankruptcy)
Third: Unsecured creditors (pro rata after ALL of the above are paid in FULL)

Refiling Restrictions
If discharged under 7, 11, or 12 AND #2 is a 13, 4 years
If discharged under 13 AND #2 is ANOTHER 13, 2 years
If never discharged OR #2 is not a 13, no wait
(Discharge=completed bankruptcy)

8 Bad Acts (Non-dischareable § 523)(you will still owe debt after bankruptcy)
1. Taxes/fines
2. Money by false pretenses
3. Willful and malicious injury (drunk driving charges)
4. Alimony/child support
5. Embezzlement/larceny
6. Student Loans within 5 years
7. Failure to schedule creditor
8. Secured claim in exempt asset
($500+ in luxury goods within 90 days of filing is PRESUMED non-dischargeable.)

5 REALLY Bad Acts (Discharge Denied § 727) (If you do any of these all debts are NON-dischargeable)
1. Falsify/coerced/destroy records
2. Conceal property
3. Failure to fully account
4. Failure to obey court order
5. False statements or claims

Plan of Reorganization (Debtor has exclusive for 120 days)
Must be accepted by:
½ the number of creditors
AND
2/3 of dollar value of the claims

Liquidation vs. Reorganization
Chapter 7- Trustee in charge
Chapter 11- Debtor in possession (debtor knows business best)
Trustee can be appointed to takeover.
Plan of Reorganization- Debtor must prove they have a plan to get back on track
Must be able to deliver more under chapter 11 than chapter 7.
If plan cannot be agreed upon, converted to chapter 7 and liquidated.

Biggest Bankruptcy in history $639 Billion- Leeman Brothers

Chapter 12 Family Farm Bankruptcy
What is a family farm?
1. 50% of debt arises from farming operations
2. Debt must be less than $3.2 million
3. At least 50% of income must be from farming

Chapter 13 Regular Income Reorganization
Must owe less than:
Unsecured $336000
Secured $1,010,650
Submit plan for repayment:
No less than 36 months
Not longer than 60 months
Must pay all disposable income (everything after basic bills)
If you can pay at least $6000, you can't file chapter 7

2005 changes
-If you can pay, you must ($6000 over 60 months)
-You must propose a plan and begin funding it before plan is approved

Product Liability
New area of law
"caveat emptor" buyer beware
Thomas v. Winchester (1852)
-inherently dangerous products- those that could kill you (poison, guns, etc.)
McPherson v. Buick (1916)
-defective wooden wheel, made by another manufacturer
"caveat venditor" vendor beware

"Everything in Threes"
Types of Losses
1.Personal Injury
2.Property damage
3.Economic losses

Recovery
1.Contract- warranty
a.Express- clearly stated
I.Affirmation of fact or promise- says something concrete and tangible about goods "will last for 3 years"
II.Description- "made of 24k gold" etc.
III.Samples/Models/Demos- goods you buy must conform
(Puffing not included, opinions aren't warranties, facts are.)
b.Implied warranty of merchantability- must be fit for ordinary purpose of goods
c.Implied warranty of fitness for particular purpose-
I.Seller knows purpose
II.Known reliance
III.Actual Reliance
2.Tort-(negligence) You have a duty to manufacture products that do not cause losses
a.Manufactured- rare, a product turns out different from the others, flawed
b.Designed-
I.Structure- made as designed, poor material, etc.
II.Safety- saw designed with safety guard
III.Forseeable misuse- most common-if manufacturer can foresee a misuse of a product, they are liable for torts as a result.
d. Failure to warn or instruct- it is a product defect to not inform consumers of proper use
3.Strict Liability- Liability without culpability
-"condition unreasonably dangerous"
- inherently dangerous/unavoidably unsafe (knives, guns, bleach, utility makes them dangerous)

New Trends in Product Liability
1. Market Share liability- hold manufacturer liable even if it cannot be shown that it was their product that caused the loss. All manufacturers pay according to market share.
2. Liability for product manufacturing goes beyond the manufacturers - sue for defective product, can sue anyone in the retail chain.
3. Privity- even if product is dangerous and defective, only person who buys it may sue, only they have direct connection to manufacturer. NO LONGER REQUIRED We almost never get our products from the manufacturer. Now "any reasonably foreseeable plaintiff." Rail Road case

RCW 7.72