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May 2016 Archives

Debtor May Not Discharge Fraudulent Conveyance Liability in Bankruptcy

Resolving a split among the lower courts, the United States Supreme Court has held that a provision of the Bankruptcy Code that prohibits debtors from discharging debts "obtained by...false pretenses, a false representation, or actual fraud," can include transactions by which a debtor tranfers its assets to a third-party for little or no consideration, i.e., so-called fraudulent conveyances. Husky International Electronics, Inc. v. Ritz, 136 S.Ct. 1581 (May 16, 2016). This decision addresses the frequent circumstance in which a debtor transfers its assets to related persons or entities for little money and then files bankruptcy to discharge all its debts to creditors.

City Council Re-Districting Cannot Include State Prison Population

The Rhode Island federal district court has held that the City of Cranston cannot include the population of the state's Adult Correctional Institutions (ACI) when it draws its districts for city council. Davidson v. City of Cranston, C.A. 14-91L, slip op., (D.R.I. May 24, 2016). The court distinguished the United States Supreme Court's recent decision, Evenwell v. Abbott,136 S.Ct. 1120 (2016), in reaching its decision. The district court held that the current redistricting plan violates Section 1 of the Fourteenth Amendment. The decision is also significant as the state's legislative districts for the General Assembly also include the ACI's population and, presumably, will also have to be redrawn.

Ohio's Special Counsel Did Not Violate FDCPA By Using Ohio AG Letterhead

The Supreme Court has held unanimously that private attorneys hired by the Ohio Attorney General to collect debts owed to agencies of the State of Ohio did not violate the Fair Debt Collection Practices Act (FDCPA) by sending out demand letters on the Attorney General's letterhead. Sheriff v. Gillie, No. 15-938, 2016 WL 2842453 (U.S. May 16, 2016). The opinion reverses a decision by the Sixth Circuit holding that the letters did violate the FDCPA.

"After-Acquired" UCC-1 Filing Has Priority Over Unperfected Car Loan Security Interest

Justice Stern of the Rhode Island Superior Court has issued a decision holding that a creditor with a UCC-1 filing that includes after-acquired property has a priority security interest in the debtor's company car over another lender who financed the purchase of the vehicle but failed to perfect its security interest. Pet Food Experts, Inc. v. Alpha Nutrition, Inc., d/b/a, C.A. No. KC-2015-1003, slip decision, (R.I.Super. May 10, 2016). The decision extensively analyzes Rhode Island law on security interests and is a good primer for those who practice in the area.

Asbestos Defendant Forfeited Personal Jurisdiction Defense

The Rhode Island Superior Court has held in an asbestos case that defendant forfeited its defense of personal jurisdiction by actively litigating the claims against it for over two years before moving to dismiss even though it had asserted the defense in its answer. Bazor v. Abex Corp., C.A. No. PC-10-3965 (R.I.Super. May 2, 2016). The court said that during those two years the defendant had objected to the trial date that was pending when it was added to the case, re-deposed plaintiff, identified its witnesses for deposition, participated in the deposition of one of plaintiff's experts, objected to its Rule 30(b)(6) deposition, but not on jurisdictional grounds, identified its expert witnesses, filed motions in limine, defended the deposition of one of its experts, and participated in settlement conferences. The court commented that during none of these events did the defendant mention any preservation of the defense of lack of personal jurisdiction.

Affirmative Defenses Not Subject to "Plausibility" Pleading Standard

The United States District Court for the District of Rhode Island recently held that a defendant's allegation of affirmative defenses is not subject to the "plausibility" pleading standard set forth in Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007) and Ashcroft v. Iqbal, 556 U.S. 662 (2009). Owen v. American Shipyard Co., C.A. No. 1:15-CV-413S, 2016 WL 1465348 at *3 (D.R.I. Apr. 14, 2016). The issue arises in the context of wrongful death premises liability claims brought against a shipyard when three business invitees drove their vehicle off a pier and drowned. Plaintiffs moved to strike all of the defendants' affirmative defenses arguing that the defenses failed to conform to the federal plausibility standard.