Posts Tagged ‘Boca Raton Bankruptcy Attorney’

Number FIVE of the Six Major Points Series

July 2011

Here is Number FIVE of the Six Major Points Series

I handle corporate workouts, reorganizations and dissolutions and other types of disputes among co-owners of privately owned companies, in other words I advise clients when they are experiencing adverse business situations.

But what does it really mean to be a business lawyer handling dissolution and other types of disputes among co-owners or adverse business situations? Does it require a special temperament and skill set? Here’s my take on the answers to these questions:

It Means understanding business and the relationships that make it work.

This is the Fifth of the Six Major Points Series:

Number FIVE of the Six Major Points Series

It Means Understanding Valuation Basics. In many instances, by the time lawyers are brought into the picture the relationship between the business owners has deteriorated past the point of no return. If it’s a viable business, one or the other is going to have to be bought out. The single biggest impediment to amicable resolution becomes the disparate views of the company’s value as seen through the very different lenses being worn by the potential purchaser and the potential seller. The business lawyer is not a business appraiser, but he or she must be able to elevate the client’s understanding of basic appraisal approaches and methodology, along with any applicable legal concepts such as the case-law-driven rules surrounding minority and marketability discounts in “fair value” buyout proceedings. The lawyer’s grasp of appraisal doctrine becomes even more critical when collaborating with a professional business appraiser who has been engaged to prepare a valuation report and to testify as an expert at a valuation hearing. The business lawyer must be able to speak the language of appraisal and understand its doctrinal basis to put on a persuasive valuation case.

If you missed any please check out my other blog postings

Sidney Turner

www.SidneyTurnerllc.com

 

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New York Divorce Settlement revisited?

July 2011

In New York, after 33 years of marriage, couple divorced in 2006. They agreed to split their considerable wealth equally. She got the apartment; he got the house.

More than two years later, W received a voicemail message that stunned her: H wanted to revise their settlement. W refused, and H sued.

When the couple split their assets evenly, the largest chunk of money was invested with Mr. Madoff. H kept much of his funds in the Madoff account, which was held in his name. W, who said she had no interest in investing with Madoff, received her settlement proceeds in cash.

Shortly after Madoff admitted wrongdoing in December 2008, H, filed court papers to drastically alter the terms of his divorce settlement.

W, he argued in the lawsuit, should be required to turn over millions of dollars that she had received in their settlement to make up for the substantial losses he had sustained in the fraud. H began arguing that he and W were mistaken about the existence of the account. “There was in fact no account and no securities or other assets,”

A ruling in this case would only have a direct effect on New York’s laws, but a decision by the influential court could influence how judges interpret laws in other states.

Sidney Turner

www.SidneyTurnerllc.com

 

 

 



 

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Number FOUR of the Six Major Points Series

July 2011

Here is Number FOUR of the Six Major Points Series

I handle corporate workouts, reorganizations and dissolutions and other types of disputes among co-owners of privately owned companies, in other words I advise clients when they are experiencing adverse business situations.

But what does it really mean to be a business lawyer handling dissolution and other types of disputes among co-owners or adverse business situations? Does it require a special temperament and skill set? Here’s my take on the answers to these questions:

It Means understanding business and the relationships that make it work.

This is the Forth of the SIX Major Points Series


Number FOUR of the Six Major Points Series

It Means Understanding Finance and Accounting Basics. Almost every business divorce case involves some degree of dispute over company finances and accounting. Many small companies involved in business litigation do not prepare any financial statements; much less do they have an outside CPA who prepares audited financial statements. The company’s tax returns may present a distorted picture of the company’s income, compensation to principals, and other expenses. A business lawyer must have a basic understanding of financial and tax accounting, including the ability to comprehend financial statements, internal reports such as QuickBooks, and (last but not least) tax returns, in order to converse intelligently with the client and the client’s accountant about financial issues that likely will take center stage in the litigation.

If you missed any please check out my other blog postings

Sidney Turner

www.SidneyTurnerllc.com

 

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Number THREE of the Six Major Points Series

July 2011

Here is Number Three of the Six Major Points Series

I handle corporate workouts, reorganizations and dissolutions and other types of disputes among co-owners of privately owned companies, in other words I advise clients when they are experiencing adverse business situations.

But what does it really mean to be a business lawyer handling dissolution and other types of disputes among co-owners or adverse business situations? Does it require a special temperament and skill set? Here’s my take on the answers to these questions:

It Means understanding business and the relationships that make it work.

This is the Third of the SIX Major Points Series

Number THREE of the Six Major Points Series

It Means Knowing the Law. Each form of business entity, be it partnership, corporation or limited liability company, is governed by a separate statutory scheme with rules that, in many key instances, are significantly different as is the case law that has developed around each form. The standing requirements to bring a dissolution proceeding vary among the entities, and even within the same type of entity depending on the statute invoked. The availability of a buyout remedy depends on the type of entity and the alleged statutory basis for dissolution. Under still-evolving case law the filing of a dissolution petition may inadvertently trigger a right of first refusal under a shareholders’ agreement. Particularly with corporations, there are numerous, mandatory, statutory provisions that come into play at the board level. The availability of a court-appointed receiver can differ depending on the entity type. The list goes on and on. The business lawyer must have a thorough understanding of the legal framework within which closely held businesses operate and whose rules govern forced judicial dissolution, derivative actions and other varieties of owner vs. owner litigation.

If you missed any please check out my other blog postings

Sidney Turner

www.SidneyTurnerllc.com

 

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Number TWO of the Six Major Points Series

July 2011

Here is Number Two of the Six Major Points Series

I handle corporate workouts, reorganizations and dissolutions and other types of disputes among co-owners of privately owned companies, in other words I advise clients when they are experiencing adverse business situations.

But what does it really mean to be a business lawyer handling dissolution and other types of disputes among co-owners or adverse business situations? Does it require a special temperament and skill set? Here’s my take on the answers to these questions:

It Means understanding business and the relationships that make it work.

This is the Second of the SIX Six Major Points Series


Number TWO of the Six Major Points Series

It Means Knowing Your Client’s Business. Every closely held business is different. Some operate on a partnership model with diffuse authority and little or no formality in regard to decision making. Written agreement among the owners may be non-existent. Others may have detailed written agreement calling for hierarchical management, and still act like a cadre of co-equals, others may have a hierarchical management structure that is rigorously followed. The business lawyer also must discern who holds what leverage in the company’s business. For example, one owner may control relations with the company’s key customers, which may have significant implications in terms of who’s in a position to buy out whom. One owner may have personal financial resources the other lacks, or may personally own the real estate housing the company’s business. The point is, as a business lawyer you need to understand how the business at hand operates, not just on paper but in practice, and you need to understand how the business operation affects your client’s ability to prosecute or defend claims of shareholder oppression, deadlock or financial impropriety, and how it influences the range of possible outcomes.

If you missed any please check out my other blog postings

Sidney Turner

www.SidneyTurnerllc.com

 

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Do you know 363 Sales have increased?

July 2011

The surge in bankruptcies that occurred in 2008 and 2009 featured a greater number of 363 sales followed by liquidating plans than in prior bankruptcy cycles. A “363 sale” refers to the sale of any asset that is allowed by the bankruptcy court under Section 363 of the U.S. Bankruptcy Code. Typically, the term is used to describe the sale of a majority of a business’s assets as an ongoing enterprise.

In a best-case scenario, a 363 sale might take a few weeks to execute, especially when a buyer is lined up prior to the filing and, because there are no realistic alternatives, no auction is held. Such was the scenario in both the General Motors and Chrysler Chapter 11 reorganizations. More likely, however, the process will take two to four months and sometimes longer.

Once the major assets are sold, the real work of the wind-down begins. The remaining assets are liquidated; the remainder of the company is wound down; secured creditors get their collateral (or more likely the cash equivalent of their collateral up to the value of their claims); and unsecured creditors’ claims are reviewed, valued, and then paid in full or in part, generally in accordance with the priority scheme in the Bankruptcy Code.

 

Sidney Turner

www.SidneyTurnerllc.com

 

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Did You Know?

June 2011

 

Controlling owner or partner of closely held company buys out interests of non-controlling owners who subsequently sue for damages raised for example by the general partner of a real estate limited partnership who misled the limited partners into selling him their interests at a price far below market value. It can be argued that damages can be calculated as the difference between the actual sale price and the value of the asset or interest at the time of the trial or at the time of the transaction at issue.

Sidney Turner

www.SidneyTurnerllc.com

 

 

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Hazards of Co-mingling Funds

June 2011

Estate of Richard Glatzer, Appellee.

No. 3D11-196
Lower Tribunal No. 10-4540

Third District Court of Appeal State of Florida

January Term, A.D. 2011
Filed: May 18, 2011

Opinion filed May 18, 2011.

Not final until disposition of timely filed motion for rehearing.

An appeal from a non-final order from the Circuit Court for Miami-Dade County, Lawrence A. Schwartz and Gerald D. Hubbart, Judges.

May, Meacham & Davell, and William C. Davell, Carolyn B. Brombacher and Christopher D. Barber (Fort Lauderdale), for appellant.

Steven Silverman, for appellee.

Before GERSTEN and SALTER, JJ., and SCHWARTZ, Senior Judge.

SALTER, J.

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BankAtlantic appeals two non-final circuit court orders directing it to transfer the funds in a deceased physician’s professional association account to the depository account (at a different bank) established for the administration of his estate. We reverse both orders and remand for the entry of an order directing repayment of the funds (and any earnings thereon) to the account from which they were transferred.

BankAtlantic was a secured creditor of the late doctor’s professional association under a note and mortgage. The promissory note included a right of setoff:

RIGHT OF SETOFF. To the extent permitted by applicable law, Lender reserves a right of setoff in all Borrower’s accounts with Lender (whether checking, savings, or some other account)…. Borrower authorizes Lender, to the extent permitted by applicable law, to charge or setoff all sums owing on the indebtedness against any and all such accounts and, at Lender’s option, to administratively freeze all such accounts to allow Lender to protect Lender’s charge and setoff rights provided in this paragraph.

The decedent personally guaranteed his professional association’s promissory note, and his death constituted an event of default under that note. The orders requiring transfer of the funds to a different bank thus impaired BankAtlantic’s right of setoff. Although the parties agreed that the deceased physician owned all of the shares of his professional association, there was no evidence presented to support a “piercing of the corporate veil” under Dania Jai-Alai Palace v. Sykes, 450 So. 2d 1114 (Fla. 1984), or any other alter ego theory.

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While the appellee Estate was apparently entitled to take possession of the professional association stock held by the doctor at his death, 1 no such conclusion extended to the association’s funds on deposit in the corporate name at BankAtlantic. In Gettinger v. Gettinger, 165 So. 2d 757 (Fla. 1964), the Supreme Court of Florida held that “the affairs of a corporation, even though substantially owned by a decedent, cannot be administered by decedent’s executor as assets of the decedent’s estate.” In this case, “substantially” is 100%, and the result is identical.

The Estate seeks affirmance of the orders below on three independent grounds: (1) that the orders are not appealable; (2) that the Estate has the power to “take charge of and marshal” the funds in the professional association account; and (3) that the probate court ruling should be upheld because no decision was made regarding any competing claims to the funds. None of these arguments is persuasive.

As to jurisdiction, the orders are reviewable non-final orders under Florida Rule of Appellate Procedure 9.130(a)(3)(B). CRM Distrib., Inc. v. Resolution Trust Corp., 593 So. 2d 593 (Fla. 3d DCA 1992). Regarding the Estate’s second argument, section 69.031(1), Florida Statutes (2010), and the cases cited by the Estate refer to marshaling “part or all of the personal assets of the estate” and to the

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use of court-approved depositories for such assets. The point in this case is that the stock of the professional association is an asset of the Estate, but the funds of the professional association are a step removed from the Estate. The decedent’s Estate essentially ignored the separate corporate existence of the professional association and that entity’s obligations to its own creditors.

The third argument also fails. BankAtlantic’s rights are not protected just because the funds are frozen in a restricted depository account of the Estate. In this case, BankAtlantic’s possessory and contractual rights to setoff are impaired by the transfer to a different bank.2

Reversed and remanded, with directions to order the return of the transferred funds (and any interest earned on such funds while in the transferee bank’s possession) to BankAtlantic.
——–

Notes:

1. § 733.607(1), Fla. Stat. (2010); Perez v. Lopez, 454 So. 2d 777 (Fla. 3d DCA 1984).

2.As an example of another such impairment, if the transferee bank later failed, BankAtlantic would have to protect its interests as an indirect creditor of the estate’s depository account (not as a direct creditor of a named account holder/debtor) in the transferee bank’s liquidation.

Sidney Turner

www.SidneyTurnerllc.com

 

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Bankruptcy and Employment???

May 2011

ERIC MYERS, Plaintiff-Appellant,
v.
TOOJAY’S MANAGEMENT CORPORATION, Defendant-Appellee.

No. 10-10774
D.C. Docket No. 5:08-cv-00365-WTH-GRJ

UNITED STATES COURT OF APPEALS FOR THE ELEVENTH CIRCUIT

May 17, 2011

PUBLISH

 

Appeal from the United States District Court

for the Middle District of Florida

Before TJOFLAT, CARNES and HILL, Circuit Judges.

CARNES, Circuit Judge:

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A section of the Bankruptcy Code prohibits employers from taking certain actions against people who are or have been in bankruptcy. 11 U.S.C. § 525. The first subsection of that section applies to government employers and provides that they may not “deny employment to, terminate the employment of, or discriminate with respect to employment against” a person on that ground. Id. § 525(a). The second subsection provides that a private employer may not “terminate the employment of, or discriminate with respect to employment against” an individual on that ground. Id. § 525(b). The primary issue this appeal presents is whether that second subsection prohibits a private employer from denying employment to an individual on the ground that he is or has been in bankruptcy, even though it, unlike the first subsection, does not say that. Elementary principles of statutory construction and common sense persuade us to answer that question in the negative.

I.

 

A.

In January 2008 Eric Myers filed a Chapter 7 bankruptcy petition with a bankruptcy court in North Carolina. The next month he moved from North Carolina to central Florida looking for a fresh start and found work as a shift supervisor at a Starbucks coffeehouse. In May 2008 the bankruptcy court

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discharged Myers’ debts. While still a supervisor at Starbucks, Myers came across an advertisement for a managerial position at a local TooJay’s Gourmet Deli restaurant. He expressed his interest in the position to Thomas Thornton, the regional manager of TooJay’s Management Corporation.

In mid-July 2008 Myers had an interview with Thornton. According to Myers, he was told during the interview that he would be paid about $55,000 per year, that there was a bonus plan, and that there were other benefits such as health insurance. At the end of the interview a two-day on-the-job evaluation of Myers was scheduled, beginning Thursday, July 31, 2008 and ending Friday, August 1. Myers was to receive $100 pay for each of those two days, which was less than half of what he would have been paid if he had actually been hired for the position at his proposed salary.1 Myers later explained that the on-the-job evaluation “was just so that we could both get a feel for the restaurant, that I would make sure I was comfortable doing it there, that [Thorton] was comfortable with me and the other restaurant managers were comfortable with me.”

On July 31, 2008, the first day of the on-the-job evaluation, Myers observed the operation of the restaurant, including its kitchen and its deli, to see how

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TooJay’s operated. Later Myers did some kitchen prep work and made a few deli sandwiches. He also completed several personnel forms: a personnel action form, federal tax forms, a medical history form, a payroll deduction authorization form, a form acknowledging receipt of the employee handbook, a driver safety form, and a federal form to verify employment eligibility.

The top of the personnel action form asked the TooJay’s manager or corporate officer to “Check Appropriate Box(s).” The options given, among others, were “New Hire,” “Rehire,” and “Other (explain).” On Myers’ form, the “Other(explain)” box was checked and the explanation written next to it was “OJE.” Below that, information about Myers was written in the “Employee Information” area, and in the remarks section was written: “2 days of OJE (on the job evaluation) at 100.00 per day.” Myers filled out his personal information on the other forms and signed where necessary. Many of the spaces that he filled out or signed were designated on the forms as “Employee Name” or “Employee Signature.”

On August 1, 2008, the second day of Myers’ on-the-job evaluation, he spent most of the day in the kitchen. He also completed more personnel forms. Those forms included an acknowledgment of receipt of a sexual harassment manual; a non-solicitation and confidentiality agreement; and an authorization and

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release of personal information for a background check.2 The background check release permitted TooJay’s to “conduct a comprehensive review” including a review of Myers’ “credit history and reports.” Myers filled out and signed those forms in the appropriate spaces, many of which were designated as being for the “Employee” name or signature. For example, the new hire checklist, which listed all the forms that Myers had filled out, had his name on the “Employee Name” line. The checklist, however, also had the letters “OJE” written and underlined twice at the top of the page.

According to Myers’ trial testimony, at the end of his on-the-job evaluation Thornton scheduled him to begin work on August 18 without informing him that his employment would be conditioned on a clean credit history. According to Thornton’s testimony, however, he never offered Myers a job. When asked whether he had the authority to hire assistant managers, Thornton responded that he only “had the authority to interview and recommend the hiring of assistant managers.” Hiring was contingent on the background check, something that Thornton said he told Myers.

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On August 4, 2008, Myers gave Starbucks his two weeks notice. That was also the date on a letter that TooJay’s sent to Myers, informing him: “that we find it necessary to rescind our previous offer of employment. This decision was based in whole or in part, on the information provided us in a Consumer Report…. The report was prepared pursuant to an authorization signed by you at the time of the application.” Myers received the letter on August 12, 2008.

After Myers received that letter he called Thornton, who told him that he was not hired because of “a financial matter” and that he should contact Sharon Polinski in TooJay’s human resources department. He did, and Polinski told him that the only reason he was not hired was that he had filed for bankruptcy, and it was TooJay’s policy not to hire people who had done that. On August 13, 2008, Myers wrote a letter to William Korenbaum, TooJay’s President and CEO, whom he had never met, asking him to reconsider the company’s decision. Myers began by stating “I am writing to you in regard to my employment offer which was withdrawn by your company prior to the commencement of my employment.” After explaining why he thought that TooJay’s should hire him despite his bankruptcy, Myers closed the letter by expressing his hopes that TooJay’s would change its mind and stated that he “look[ed] forward to hopefully becoming a member of the TooJay’s family.”

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TooJay’s did not respond to Myers’ letter. Shortly after he wrote it, Starbucks let Myers return to his shift supervisor position at the same rate of pay but with fewer hours. TooJay’s eventually sent Myers a check for the payment it had promised him for the two days of his on-the-job evaluation.

B.

On September 2, 2008, Myers filed a lawsuit against TooJay’s. The complaint alleged, among other things, that TooJay’s had discriminated against him because of his bankruptcy, in violation of 11 U.S.C. § 525(b), by refusing to hire him and, alternatively, by terminating him from the job after it had hired him.3 TooJay’s and Myers filed cross-motions for summary judgment on the refusal to hire claim. The district court denied Myers’ motion and granted TooJay’s based on its conclusion that § 525(b) does not prohibit a private employer from refusing to hire someone because of a bankruptcy. TooJay’s had also moved for summary judgment on the wrongful termination claim, but the district court denied the motion after finding a genuine issue of material fact about the existence of an employment relationship between Myers and TooJay’s.

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During a two-day jury trial, Myers presented several witnesses and testified himself. During his testimony, Myers changed his tune several times about when he was hired. He testified at one point during direct that “I began my employment on… July 31st,” but at another point said that he was hired “[o]n the 31st or—or August 1st.” He testified on cross-examination that he was hired before his on-the-job evaluation began on July 31, 2008, and implied that the hiring took place after his interview with Thornton.4

At the close of the evidence, Myers moved for judgment as a matter of law, which the district court denied, sending the wrongful termination claim to the jury. Forty-three minutes later, the jury returned a verdict in favor of TooJay’s, responding to the first special interrogatory, “Do you find from a preponderance of the evidence… [t]hat the Plaintiff became an employee of the Defendant?” with: “No.” The district court entered judgment against Myers.

Myers filed a renewed motion for judgment as a matter of law and a motion for new trial, both of which the district court denied. He then filed a notice of

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appeal from the judgment, specifying the orders granting summary judgment to TooJay’s on his refusal to hire claim, denying his renewed motion for judgment as a matter of law on his wrongful termination claim, and denying his motion for a new trial as to that claim. This is his appeal.

II.

Myers has two claims that TooJay’s violated § 525(b). One claim is that it did so by refusing to hire him because he had filed for bankruptcy, and the other claim is that it actually did hire him but then terminated him because he had filed for bankruptcy. The first claim was rejected by the district court on summary judgment, while the second was rejected by the jury after a trial. He contends that the district court erred in granting summary judgment against him on the first claim and, alternatively, that it erred in denying his motion for judgment as a matter of law and his motion for new trial on the second claim.

A.

We will start with Myer’s refusal to hire claim, which is his primary one. Section 525 of the Bankruptcy Code provides individuals who are or have been in bankruptcy with some protection against discriminatory actions by employers. See 11 U.S.C. § 525(a)-(b). The acts against which they are protected depend on whether the employer is a “governmental unit” or a “private employer.” Id.

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Section 525(a), which was enacted first, provides in relevant part that:

[A] governmental unit may not… deny employment to, terminate the employment of, or discriminate with respect to employment against, a person that is or has been a debtor under this title or a bankrupt or a debtor under the Bankruptcy Act, or another person with whom such bankrupt or debtor has been associated….

Id. (emphasis added). Section 525(b), by contrast, provides in relevant part:

No private employer may terminate the employment of, or discriminate with respect to employment against, an individual who is or has been a debtor under this title, a debtor or bankrupt under the Bankruptcy Act, or an individual associated with such debtor or bankrupt….

Id. The conspicuous difference between the two subsections is that § 525(a), the one applying to government employers, explicitly forbids them from either denying or terminating employment because of a bankruptcy, while § 525(b), the one applying to private employers, forbids them from terminating employment because of bankruptcy but says nothing about denying employment because of it.

The district court’s reasoning, with which we are in full accord, is as follows:

A comparison of the words used in subsections (a) and (b) demonstrates that subsection (a) prohibits government employers from “deny[ing] employment to” a person because of his or [her] bankrupt status, whereas subsection (b) does not contain such a prohibition for private employers. Rather, the private sector is prohibited only from discriminating against those persons who are already employees. In other words, Congress intentionally omitted any mention of denial of employment from subsection (b), but specifically provided that denial

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of employment was actionable in subsection (a). Thus, by its plain language, the statute does not provide a cause of action against private employers for persons who are denied employment due to their bankrupt status. “Where Congress has carefully employed a term in one place but excluded it in another, it should not be implied where excluded.”

(citation omitted and first alteration in original). If TooJay’s were a governmental unit, Myers would have a refusal to hire claim; because it is not, he does not. Our conclusion flows along with a stream of decisions by other federal courts. See In re Burnett, _F.3d_, No. 10-20250, 2011 WL 754152, at *2 (5th Cir. Mar. 4, 2011); Rea v. Federated Investors, 627 F.3d 937, 940—41 (3d Cir. 2010); Burnett v. Stewart Title, Inc., 431 B.R. 894, 901 (S.D. Tex. 2010); Fiorani v. CACI, 192 B.R. 401, 407 (E.D. Va. 1996); Pastore v. Medford Sav. Bank, 186 B.R. 553, 555 (D. Mass. 1995); In re Stinson, 285 B.R. 239, 250 (Bankr. W.D. Va. 2002); In re Madison Madison Int’l of Ill., 77 B.R. 678, 682 (Bankr. E.D. Wis. 1987).

Myers argues, against the strong current of those decisions and contrary to the clear contextual meaning of the operative language in § 525(b), that we should broadly construe the language “or discriminate with respect to employment” in § 525(b) to include denial of employment. He believes that doing so would better effectuate the Bankruptcy Code’s remedial purpose of giving bankruptcy debtors a fresh start. His construction of § 525(b) does not hold water for a number of reasons.

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First, as we have already noted, § 525(a) expressly prohibits a government employer from refusing to hire someone based on a bankruptcy filing, while § 525(b) does not. The Supreme Court and this Court have often held, “[w]here Congress includes particular language in one section of a statute but omits it in another section of the same Act, it is generally presumed that Congress acts intentionally and purposely in the disparate inclusion or exclusion.” Dean v. United States, _U.S._, 129 S.Ct. 1849, 1854 (2009) (quotation marks omitted); Russello v. United States, 464 U.S. 16, 23, 104 S.Ct. 296, 300 (1983) (same) (quoting United States v. Wong Kim Bo, 472 F.2d 720, 722 (5th Cir. 1972)); Delgado v. U.S. Att’y Gen., 487 F.3d 855, 862 (11th Cir. 2007).5

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Had Congress wanted to cover a private employer’s hiring policies and practices in § 525(b), it could have done so the same way it covered a governmental unit’s hiring policies and practices in § 525(a). See Russello, 464 U.S. at 23, 104 S.Ct. at 300. That Congress did not speaks loudly and clearly. United States v. Crape, 603 F.3d 1237, 1246 (11th Cir. 2010); Delgado, 487 F.3d at 862 (“[W]here Congress knows how to say something but chooses not to, its silence is controlling.” (quoting CBS Inc. v. Prime Time 24 Joint Venture, 245 F.3d 1217, 1226 (11th Cir. 2001)).

The second reason we reject Myers’ position has two parts. The first part is that the “or discriminate with respect to employment” language is in both § 525(a) and (b), and it would be illogical to read the identical language in two successive subsections to have different meanings. See Powerex Corp. v. Reliant Energy Servs., Inc., 551 U.S. 224, 232, 127 S.Ct. 2411, 2417 (2007) (“A standard principle of statutory construction provides that identical words and phrases within the same statute should normally be given the same meaning.”); Douglas v. Yates, 535 F.3d 1316, 1320-21 (11th Cir. 2008) (“Similar language contained

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within the same section of a statute must be accorded a consistent meaning.” (alterations omitted) (quoting Nat’l Credit Union Admin. v. First Nat’l Bank & Trust Co., 522 U.S. 479, 501, 118 S.Ct. 927, 939 (1998))).

The second part of this reason for rejecting Myers’ position is that the “or discriminate” language cannot have the meaning he attributes to it in § 525(b). It cannot because that language appears in a sentence providing that “a governmental unit may not… deny employment to, terminate the employment of, or discriminate with respect to employment against” a bankruptcy debtor. 11 U.S.C. § 525(a). If “discriminate with respect to employment” included the denial of employment, the words “deny employment” in § 525(a) would be meaningless, pointless, superfluous. And that “is an interpretative no-no.” In re Hedrick, 524 F.3d at 1189; see also Corley v. United States, _U.S._, 129 S.Ct. 1558, 1566 (2009) (“[A] statute should be construed so that effect is given to all its provisions, so that no part will be inoperative or superfluous, void or insignificant.” (quotation marks omitted)); United States v. Menasche, 348 U.S. 528, 538-39, 75 S.Ct. 513, 520 (1955) (“The cardinal principle of statutory construction is to save and not to destroy. It is our duty to give effect, if possible, to every clause and word of a statute….” (quotation marks and citations omitted)); Polycarpe v. E&S Landscaping Serv., Inc., 616 F.3d 1217, 1223 (11th Cir. 2010) (“[I]t is our

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obligation to give meaning to all of the statutory language that Congress enacted.”); Huff v. Dekalb County, 516 F.3d 1273, 1280 (11th Cir. 2008) (“[We] must respect the longstanding general principle that courts must not interpret one provision of a statute to render another provision meaningless.” (quotation marks and alterations omitted)).

The combined effect of the conclusions from those two syllogisms is this one: The “or discriminate with respect to employment” language in § 525(a) means something other than discrimination in hiring; and it means the same thing in § 525(b) as in § 525(a); therefore, in § 525(b) the language means something other than discrimination in hiring. It must mean, instead, discrimination in some other aspects of employment, such as in promotions, demotions, hours, pay, and so forth.

The third reason we reject Myers’ argument is that, in essence, it calls for us to recast the meaning of § 525(b)’s language in a way that will better achieve one of the broad purposes Congress sought to achieve in the Bankruptcy Code, which is to give debtors who go through bankruptcy a fresh start. See Leary v. Warnaco, Inc., 251 B.R. 656, 658-59 (S.D.N.Y. 2000). But “we interpret and apply statutes, not congressional purposes.” Friends of the Everglades v. S. Fla. Water Mgmt. Dist., 570 F.3d 1210, 1226 (11th Cir. 2009) (quoting In re Hedrick, 524 F.3d

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1175, 1188 (11th Cir. 2008) (quotation marks omitted)); see also Fla. Dep’t of Revenue v. Piccadilly Cafeterias, Inc., 554 U.S. 33, 52, 128 S.Ct. 2326, 2339 (2008) (“[I]t is not for us to substitute our view of policy for the legislation which has been passed by Congress.” (quotation marks and alterations omitted)); Oncale v. Sundowner Offshore Servs., Inc., 523 U.S. 75, 79, 118 S.Ct. 998, 1002 (1998) (“[I]t is ultimately the provisions of our laws rather than the principal concerns of our legislators by which we are governed.”).

A statute is not a “Magic Eye” image. When presented with the plain text of a statute, we do not gaze at it blurry-eyed, attempting to see some hidden image formed by the broad purpose that lies behind the legislation. As the Supreme Court and this Court have explained, purpose-driven statutory interpretation “at the expense of specific provisions ignores the complexity of the problems Congress is called upon to address and the dynamics of legislative action.” Bd. of Governors v. Dimension Fin. Corp., 474 U.S. 361, 373-74, 106 S.Ct. 681, 688-89 (1986); Friends of the Everglades, 570 F.3d at 1227 (“[T]he legislative process serves as a melting pot of competing interests and a face-off of battling factions.”). “The provisions of legislation reflect compromises cobbled together by competing political forces,” Friends of the Everglades, 570 F.3d at 1227, and “[i]nvocation of the ‘plain purpose’ of legislation at the expense of the terms of the statute itself

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takes no account of the processes of compromise and, in the end, prevents the effectuation of congressional intent,” Dimension Fin. Corp., 474 U.S. at 374, 106 S.Ct. at 689. Judges and courts tempted to bend statutory text to better serve congressional purposes would do well to remember that Congress enacts compromises as much as purposes.

Or to put it in different terms, “we are not licensed to practice statutory remodeling.” United States v. Griffith, 455 F.3d 1339, 1344 (11th Cir. 2006); see also Ali v. Fed’l Bureau of Prisons, 552 U.S. 214, 228, 128 S.Ct 831, 841 (2008) (“We are not at liberty to rewrite the statute to reflect a meaning we deem more desirable.”); Pavelic & Leflore v. Marvel Entm’t Grp., 493 U.S. 120, 126, 110 S.Ct. 456, 460 (1989) (“Our task is to apply the text, not to improve upon it.”); Noble State Bank v. Haskell, 219 U.S. 575, 580, 31 S.Ct. 299, 300 (1911) (denial of rehearing) (Holmes, J.) (“We fully understand the practical importance of the question, and the very powerful argument that can be made against the wisdom of the legislation, but on that point we have nothing to say, as it is not our concern.”); Friends of the Everglades, 570 F.3d at 1224 (“[W]e are not allowed to add or subtract words from a statute; we cannot rewrite it.”); Wright v. Sec’y for Dep’t. of Corrs., 278 F.3d 1245, 1255 (11th Cir.2002) (“Our function is to apply statutes, to carry out the expression of the legislative will that is embodied in them, not to

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‘improve’ statutes by altering them.”); Harris v. Garner, 216 F.3d 970, 976 (11th Cir. 2000) (“We will not do to the statutory language what Congress did not do with it, because the role of the judicial branch is to apply statutory language, not to rewrite it.”).

Our holding that § 525(b) does not apply to refusals to hire is in accord with the holdings of the only two other circuits that have decided the issue. See In re Burnett, _F.3d_, No. 10-20250, 2011 WL 754152, at *2 (5th Cir. Mar. 4, 2011) (holding 11 U.S.C. § 525(b) does not prohibit private employers from denying employment to persons because of their status as a bankruptcy debtor); Rea v. Federated Investors, 627 F.3d 937, 940-41 (3d Cir. 2010) (same).

B.

Myers’ other claim, the one for wrongful termination in violation of § 525(b), is doomed by a defect different in kind from the one that defeated his refusal to hire claim. The legal premise of the termination claim is correct: A private employer cannot terminate an employee because he has filed for bankruptcy. But the factual basis he asserts for the claim—that he was hired and then fired because of his bankruptcy filing—was rejected by the jury. After hearing all of the evidence, and being properly instructed, the jury in answering a special interrogatory found that Myers had not proven by a preponderance of the

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evidence that he had ever become an employee of TooJay’s. On that basis the district court entered judgment against Myers on his wrongful termination claim. It thereafter denied his motions for judgment as a matter of law and for a new trial based on the weight of the evidence. Myers contends that both of those rulings were error.

We review de novo a district court’s denial of a renewed motion for judgment as a matter of law. Aronowitz v. Health-Chem Corp., 513 F.3d 1229, 1236 (11th Cir. 2008). And a motion for judgment as a matter of law may be granted only if after examining “all evidence in a light most favorable to the non-moving party” we determine “there is no legally sufficient evidentiary basis for a reasonable jury to find” for that party. Id. at 1236-37 (quotation marks omitted). We review a district court’s denial of a motion for new trial only for an abuse of discretion. Lipphardt v. Durango Steakhouse of Brandon, Inc., 267 F.3d 1183, 1186 (11th Cir. 2001). And “new trials should not be granted on evidentiary grounds unless, at a minimum, the verdict is against the great—not merely the greater—weight of the evidence.” Id. at 1186; see also Redd v. City of Phenix City, 934 F.2d 1211, 1215 (11th Cir. 1991) (“When there is some support for a jury’s verdict, it is irrelevant what we or the district judge would have concluded.”).

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We have already discussed Myers’ waffling on the witness stand about the date on which he believed he had been hired and his inconsistent statements about the purpose of his on-the-job evaluation, all of which undermined his credibility. See supra at 3, 8. It was undisputed that two of the employment forms expressly stated that he was at the restaurant only for an “OJE”—an on-the-job evaluation. And he was paid for those two days less than half the amount he would have received for two days work if he had been an employee. There was also the letter Myers wrote afterwards to TooJay’s President and CEO acknowledging that the “employment offer” was “withdrawn by your company prior to the commencement of my employment,” and stating that he “look[ed] forward to hopefully becoming a member of the TooJay’s family” in the future. See supra at 6-7.

That evidence was more than enough for the jury to discredit Myers’ contrary testimony and find that no employment relationship was formed. See Cleveland v. Home Shopping Network, Inc., 369 F.3d 1189, 1193 (11th Cir. 2004) (“Credibility determinations, the weighing of the evidence, and the drawing of legitimate inferences from the facts are jury functions, not those of a judge.” (quoting Reeves v. Sanderson Plumbing Prods., 530 U.S. 133, 150, 120 S.Ct. 2097, 2010 (2000))); see also Owens v. Wainwright, 698 F.2d 1111, 1113 (11th Cir. 1983) (“Appellate courts reviewing a cold record give particular deference to

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credibility determinations of a fact-finder who had the opportunity to see live testimony.”). The district court did not err in denying Myers’ renewed motion for judgment as a matter of law.

Nor did the court abuse its discretion in denying Myers’ motion for a new trial. The jury’s verdict is not against the great weight of the evidence.

AFFIRMED.
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Notes:

1. The proposed annual salary for the position, $55,000, would work out to daily pay of approximately $211—$55,000 divided by 260 work days (5 days a week for 52 weeks a year).

2.Myers also completed a new hire checklist and a motor vehicle information form, though it is not clear from the record on which day of the on-the-job evaluation those forms were filled out.

3.Myers also included in his original complaint a breach of contract claim under Florida law. And he amended the complaint on September 4, 2008 by adding a claim for unpaid wages under the Fair Labor Standards Act. The FLSA claim and the state law contract claim were both withdrawn by Myers in his response to TooJay’s motion for summary judgment.

4.In his opening brief to this Court, Myers asserted that “[i]f [he] successfully completed the [on-the-job evaluation], TooJay’s was going to hire him,” which contradicts his trial testimony that he had been hired before starting the on-the-job evaluation. He also asserted in his brief that “[a]t the conclusion of the [on-the-job evaluation], Thornton offered [him] the Assistant Manager position, [he] accepted the position, and Thornton told [him] that he was hired.” But he states in the same brief that when he received TooJay’s letter dated August 4, 2008, he “did not know if he was not being hired or if he was being fired.”

5.At oral argument Myers for the first time argued that under Gomez-Perez v. Potter, 553 U.S. 474, 128 S.Ct. 1931 (2008), we should not apply the selective inclusion presumption recognized in Russello because Congress enacted § 525(b) seven years after § 525(a). See Gomez-Perez, 553 U.S. at 486, 128 S.Ct. at 1940 (“Negative implications raised by disparate provisions are strongest in those instances in which the relevant statutory provisions were considered simultaneously when the language raising the implication was inserted.” (quotation marks and alteration omitted)). But in Gomez-Perez the Court also relied on “the fact that the prohibitory language in [the later-enacted statutory provision] differs sharply from that in the [earlier-enacted one]” and that the later statutory provision “was not modeled after [the earlier one] and is couched in very different terms.” Id. at 486-87, 128 S.Ct. at 1940.

In this case, as we have already discussed, the prohibitory language of § 525(b) does not differ materially from § 525(a), except for the conspicuous absence of the clause “deny employment to.” Compare 11 U.S.C. § 525(b) with 11 U.S.C. § 525(a). In enacting § 525(b), Congress obviously took the key language of § 525(a) and altered it in the one key respect that we are discussing. The selective inclusion presumption that applies in these circumstances, which has been followed as precedent by this Court for more than 38 years and was recognized by the Supreme Court in Russello and other decisions, is not weakened by the passage of seven years between the enactment of the two subsections of § 525. See United States v. Elliott, 62 F.3d 1304, 1311-12 (11th Cir. 1995) (applying the selective inclusion presumption where the two provisions had been enacted 20 years apart); see also Wong Kim Bo, 472 F.2d at 722.

Congress had § 525(a) in front of it when it enacted § 525(b). It used the same language for § 525(b) that it had in § 525(a) except it left out “deny employment to” in § 525(b). We presume that Congress did so for a reason.
——–

Sidney Turner

www.SidneyTurnerllc.com

 

 

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Sale of a debtor’s business as a going concern under section 363.

March 2011

Almost every bankruptcy expert agrees that the expedited bankruptcies of General Motors and Chrysler diverted from traditional restructuring practice because of the government’s role in those corporations and the danger that their liquidation might have posed to the broader economy. (Please see my blog on this subject dated    )

However their opinions diverge on whether the automotive makers’ cases set a meaningful legal precedent for the future. It has been said by a bankruptcy expert at UCLA Law School that “What happened in GM and Chrysler is so outrageous and so illegal that until March of this year, nobody even conceptualized it,”. Is there any reason all debtors cannot propose to do what GM and Chrysler have now done?

We seem to have the answer; once considered the exception to restructurings involving confirmed plans and quick sales, the sale of a debtor’s business and assets as a going concern under section 363 is increasingly becoming the vehicle of choice for bankruptcies. Section 363 sales are fundamentally different than reorganization from traditional bankruptcy. For example, orderly section 363 sales are often completed within 60 days of the petition date. In contrast pre-negotiated plans often take two to three times as long to confirm.

Due to the liquidity crisis over the past two years, the lack of available financing in bankruptcy cases has left many debtors with no meaningful alternative to affect the prompt, orderly sale of their businesses and assets than section 363 of the U.S. Bankruptcy Code. This often leads to a bankruptcy without any distribution or compensation for unsecured creditors while sales that take place under section 363 also lack the usual rights and protections afforded to creditors in the confirmation process.

In addition when DIP financing is available in the current market it increasingly comes from private investment funds that have already invested in the debtor’s pre-bankruptcy capital structure, rather than traditional bank lenders. Such funds often use the provision of DIP financing to influence the timeline and outcome of the chapter 11 case.

In many cases a stalking-horse-bidder increasingly emerges from the ranks of the debtor’s existing lenders and seeks to credit bid the secured claims it holds in a proposed sale of a debtor’s assets under section 363, rather than making cash bids. Often these stalking-horse-bidders have invested in the debtor with the expectation that they will be able to bid for their assets in bankruptcy, the so-called “loan-to-own” approach.

The creditor who makes an investment through the purchase of debt or a pre/post-petition loan is often the driving force behind the debtor’s bankruptcy filing. The investor will sometimes maneuver the debtor so that a chapter 11 filing is the debtor’s best, or only, remaining option to maximize value for creditors through a section 363 sale of the debtor’s assets. The ability to credit bid its debt claims in any such sale often gives the investor a significant advantage over other bidders making cash offers.

In Big 10 Tire Stores Inc. (In re BT Tires Group Holding, LLC, No. 09-11173-css (Bankr. D. Del. filed April 2, 2009) (cases consolidated into that of parent holding company) private equity firm Sun Capital Partners Inc. both owned the equity and had made pre and post-petition secured loans to the debtor. Sun Capital served as the stalking-horse bidder for the debtor’s assets, and in the ensuing section 363 sale proposed credit bidding its secured debt in the amount of $27.89 million and offered to assume certain liabilities, effectively thwarting the other bidders. A planned auction was canceled after no other bids were submitted, and Sun Capital acquired the debtor’s assets. Recently, in another case, In re Innovative Resource Alliance, Inc., Case No. 08-23071-BKC-PGH (Bankr. SDFL) a creditor with both pre and post-petition secured claims in excess of $10 million credit bid less than $1 million at auction for the assets of the debtor.

Investor driven sales are not without their detractors. Bankruptcy Courts and other interested parties have suggested that in some cases investors may unduly influence the sale process or constrain a company’s ability to obtain new credit, leaving the company with no alternative to filing for bankruptcy protection. Some argue that an investor who holds debt and equity interests in the debtor’s business often has greater access and insight into their records than potential third party buyers. Given the shortened timetable for effecting most 363 sales (e.g., less than 60 days), other potential bidders may come to believe that they cannot overcome this perceived disadvantage, and tailor their bids accordingly. Another common complaint is that the investor acquires the debtor’s most valuable assets using debt claims which are often purchased at a substantial discount while shedding many liabilities through the 363 process at the expense of unsecured creditors, who frequently receive little or no compensation as a result of the proposed sale. Given the relative advantages enjoyed by investors, some have wondered whether bankruptcy courts are inadvertently providing their stamp of approval to insider deals by approving these transactions

Sidney Turner

www.SidneyTurnerLLC.com

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