Consequential and Punitive Damages Available on Fraudulent Transfer Claim

In a recent case, the California Court of Appeal held that not only may a plaintiff recover the underlying debt or judgment on a common law fraudulent transfer claim but may additionally recover consequential and punitive damages from the defendant. (Berger v. Varum (2019) 35 Cal.App.5th 1013.) The court explained that, while the statutory fraudulent transfer claim under the California Uniform Voidable Transactions Act (UVTA) does not provide for such remedies, the UVTA is not the exclusive remedy. Therefore, where the plaintiff proves a common law fraudulent transfer against the defendant, the plaintiff may recover any damages caused by the fraudulent transfer. Likewise, the court held that punitive damages under Civil Code section 3294 may be available.

California Launches Financing Program for Energy Efficiency on Affordable Multifamily Properties

Last month, the California Alternative Energy and Advanced Transportation Financing Authority (CAEATFA) approved a financing program for energy efficiency retrofits on affordable multifamily properties. The program provides qualifying lenders and finance companies with loss reserve contributions of up to 15% of $1 million for the financing of such retrofits on properties with at least 50 percent of the units restricted to income eligible households. Read here for further details.

SCOTUS Clarifies When a Creditor Is in Contempt for Violating a Bankruptcy Discharge

Yesterday, the U.S. Supreme Court clarified when a creditor may be held in contempt for violating a bankruptcy court's discharge order. (Taggart v. Lorenzen, 587 U.S. -- (2019) No. 18-489.) The court held that neither strict liability nor the creditor's subjective belief governs. Instead, an objective standard applies:  the creditor may be held liable if there is "no fair ground of doubt" as to whether the discharge order barred the particular conduct of the creditor. (Id. at p. 2.)

A discharge order is one of the primary benefits--in some cases the only lasting benefit--of filing for bankruptcy. It is the main mechanism by which the bankruptcy laws provide debt relief. Once a discharge order is entered, creditors are enjoined from attempting to collect a debt that is covered by the order. (Note, between the time the bankruptcy petition is filed and the discharge order is entered, debt collection is enjoined by virtue of the automatic stay under 11 U.S.C. section 362.)

The debtor in Taggart had received a Chapter 7 discharge but then faced a $45,000 state court attorney's fees award from litigation of a discharged claim. The creditor believed that the debtor had "returned to the fray" of the litigation after the bankruptcy discharge and that, therefore, the attorney's fees liability was not covered by the discharge order. The lower courts ultimately disagreed and awarded $112,000 in sanctions to the debtor and against the creditor, applying a strict liability standard under which a creditor would be liable for violating a discharge order if (1) the actions of the creditor were ultimately found to violate the discharge and (2) the creditor intended the actions which violated the discharge, regardless of the creditor's knowledge or belief of the applicability of the discharge order. The U.S. Court of Appeal for the Ninth Circuit then reversed based on a subjective standard, which would have insulated the creditor if it had a good faith belief that its actions were consistent with the discharge order.

The Supreme Court rejected both the strict liability standard and the subjective test. Instead, the court held that the bankruptcy court may impose contempt sanctions when "there is no objectively reasonable basis for concluding that the creditor's conduct might be lawful under the discharge order." The court reasoned that the governing Bankruptcy Code sections should be interpreted to incorporate the civil contempt standard in the non-bankruptcy context, which provides there is no contempt when there is "a fair ground of doubt" as to the wrongfulness of the defendant's conduct.
--MTB

Introducing Triple L

I've been thinking about starting this blog and newsletter for some time now and am finally getting around to it. "Triple L" stands for land, law, and litigation, the three pillars of my working life. I liked the name "Triple L" because I read a lot of western fiction and the name sounds like a ranch brand to me, which I thought would be cool and would make a satisfying contrast between something old timey and something newer like blogging and the information I plan to publish here. I also live and work in the East Bay near Mount Diablo, an area with a lot of ranching history and cattle grazing on the hills to this day. According to Google, there are at least one or two ranches of that name, presumably using a branding iron in the shape of LLL or maybe 3L . I also considered simply "3L" for the name of the blog, but for most lawyers, that term will conjure memories of the third and final year of law school, and we don't want to go there.

This exercise will serve a number of purposes. First, simply needing to maintain this publication will help my office and I stay abreast of significant developments in real estate, real estate law, real estate litigation, and litigation procedure affecting investors, businesses, and lawyers in California. Having educated myself and my office, it's then a simple email or print and snail mail to provide useful updates to clients and to those who may care in the broader legal and real estate communities. Last but not least, I will hopefully have occasion to toot my own horn from time to time by sharing some success stories and other news about me and my practice.

If you would like to receive this blog, you may follow the prompts to subscribe, and you are welcome to send me a note if you would like to receive a periodic email or mailed version of the blog in newsletter form, and I'll put you on a list. --MTB