The Lawletter Vol 47 No 4

Lee Dunham—Senior Attorney, National Legal Research Group

       It can be frustrating for creditors when a debtor files for bankruptcy, especially when the creditor has put time and expense into successfully litigating a claim in court and obtaining a judgment. Nonetheless, with limited exceptions, even judgment debts are dischargeable in bankruptcy. Among these exceptions to discharge are exceptions that apply to certain fraudulently incurred debts. To claim the benefit of these exceptions, the creditor must bring a timely filed “adversary proceeding” (a suit filed in the Bankruptcy Court, under a separate case number but under the umbrella of the larger bankruptcy case) and plead and prove that a particular debt is nondischargeable under 11 U.S.C. § 523(a)(2)(A) or (B).

       In nondischargeability actions brought pursuant to § 523(a)(2)(A), the plaintiff bears the burden of proving the elements of the claim by a preponderance of the evidence. Grogan v. Garner, 498 U.S. 279, 291 (1991); In re Ricker, 475 B.R. 445, 455 (Bankr. E.D. Pa. 2012); In re Witmer, 541 B.R. 769, 777 (Bankr. M.D. Pa. 2015).

       A claim is nondischargeable under § 523(a)(2)(A) where the creditor proves each of the following: (1) the debtor obtained money through a material misrepresentation that, at the time, the debtor knew was false or was made with gross recklessness as to its truth; (2) the debtor intended to deceive the creditor; (3) the creditor justifiably relied on the false representation; and (4) its reliance was the proximate cause of loss. In re Rembert, 141 F.3d 277, 280-81 (6th Cir. 1998). Section 523(a)(2)(A) applies only to statements other than statements “respecting the debtor’s or an insider’s financial condition,” which fall under the narrower exception defined under § 523(a)(2)(B).

The Lawletter Vol 47 No 4

Matthew McDavitt—Senior Attorney, National Legal Research Group

     It is not uncommon for the estates of individuals at death to possess one or more souvenirs, pieces of jewelry, trophies, collectibles, or artworks made from animal parts, such as carved ivory, fur rugs, tortoise-shell ornaments, crocodile skin leather, and the like. What legal issues might an estate or beneficiary face if he were bequeathed animal parts listed in Endangered Species Act?

     The U.S. Congress enacted the Endangered Species Act (“ESA” or the “Act”) (currently codified at 16 U.S.C. §§ 1531-1544) on December 28, 1973, with the aim of barring commerce in the endangered and threatened species listed in the Act, as such financial value contributes to the continuing depletion of such species and the contraction of their populations and range.

     Importantly, among the acts prohibited under the ESA, it is forbidden for an individual to “possess, sell, deliver, carry, transport, or ship, by any means whatsoever, any such species taken in violation [of the Act].” Id. § 1538(a)(1)(D) (emphasis added). However, this statutory language barring possession of an ESA-regulated species part applies solely to animals “taken in violation” of the Act, i.e., the animal was captured and/or killed and transformed into a commercial product after such species had been listed to the ESA.

The Lawletter Vol 47 No 4

Paul Ferrer—Senior Attorney, National Legal Research Group

            A question that has long vexed both litigants and courts alike is what constitutes a “final decision” triggering the right to file an appeal under 28 U.S.C. § 1291, which confers jurisdiction on the federal circuit courts of appeals over “appeals from all final decisions of the district courts of the United States.” In a civil case (except where the United States is a party), the notice of appeal from a “final decision” must be filed “within 30 days after entry of the judgment or order appealed from.” Fed. R. App. P. 4(a)(1)(A). Many an appeal has been lost just by failing to timely file the notice of appeal.

            Making a determination as to when an appeal must be filed to comply with the 30-day time limit is supposed to be relatively easy in light of the procedures specified in Federal Rule of Civil Procedure 58. Rule 58 requires that every judgment generally “must be set out in a separate document.” Fed. R. Civ. P. 58(a). If a separate document is required by Rule 58(a), then judgment is “entered,” and the time to appeal starts running, when the judgment is entered in the civil docket and the earlier of one of these two events occurs: (1) the judgment is, in fact, set out in a separate document, or (2) 150 days have run from the entry of the judgment in the civil docket. Fed. R. Civ. P. 58(c)(2). The second alternative deals with those situations in which the district court, despite the requirements of Rule 58(a), does not set the judgment out in a separate document.

The Lawletter Vol 47 No 4

Brad Pettit—Senior Attorney, National Legal Research Group

            In a very recent Chief Counsel Advisory, the Internal Revenue Service (“IRS”) clarified prior advisories and rulings regarding both the federal income and employment tax implications of payments made to and received by individuals for foster-home or difficulty-of-care services. In IRS Chief Counsel Advisory 202243009, 2022 WL 16551520 (Oct. 28, 2022), the IRS made it clear that although qualified payments received by individuals for providing qualified foster-home or difficulty-of-care services are not gross income to the payee, the payor is still responsible for the Federal Insurance Contributions Act (“FICA”) and the Federal Unemployment Tax Act (“FUTA”) employment taxes if there is an employer-employee relationship between the payor and payee, and no statutory exemption from employment tax obligations applies, such as the parent-child exemption.

The Lawletter Vol 47 No 3

Brad Pettit—Senior Attorney, National Legal Research Group

            A recent decision by the District of Columbia Court of Appeals indicates that since a judgment for the debt of only one spouse does not attach to property held by the judgment debtor and his or her spouse as tenants-by-the-entireties, the nondebtor spouse takes the subject property free from a judgment lien against the debtor spouse's property even if the spouses’ divorce and the former couple's divorce decree and property settlement agreement calls for the debtor spouse to transfer to the nondebtor spouse his or her share of the couple's tenancy-by-the-entities property. Blount v. Padgett, 261 A.3d 200 (D.C. 2021). In Blount, the court relied upon the rule that “[a]lthough the characteristics of a tenancy by the entireties include ‘an inability of one spouse to alienate his interest,’ Morrison [v. Potter], 764 A.2d [234,] 236 [(D.C. 2000)], one spouse can voluntarily ‘relinquish [and convey] his or her interest to the other.’ Clark [ v. Clark], 644 A.2d [449,] 452 [(D.C. 1994)]. Id. at 203. The Blount court also cited the District of Columbia rule, which is not followed in all jurisdictions, that "a lien that cannot attach to property held as tenants by the entireties during a debtor's marriage will not necessarily attach to the property upon the debtor's divorce." Id. at 204.

The Lawletter Vol 47 No 3

Nadine Roddy—Senior Attorney, National Legal Research Group

       Over the last two decades, over two-thirds of the states have enacted legislation authorizing the use of marijuana and marijuana products for medical purposes by persons with debilitating conditions. See, e.g., Va. Code Ann. § 18.2-251.1. At present, over one-third of the states have also decriminalized possession of small amounts of marijuana and marijuana products for recreational (“adult”) use by persons 21 years of age and older. See, e.g., Conn. Gen. Stat. § 21a-279a. Unsurprisingly, such laws have created difficulties for employers wishing to prevent their employees from bringing marijuana into the workplace and/or performing work while under its influence. Employers’ drug-use policies have been challenged in the courts by aggrieved employees on the basis of such laws, with mixed results.

The Lawletter Vol 47 No 3

Charlene Hicks—Senior Attorney, National Legal Research Group

            It is common enough for an overworked attorney drafting a contract to regard a choice-of-law clause as boilerplate and therefore not in need of thoughtful consideration. However, the specific wording of such a clause may well alter the outcome of a future dispute between the contracting parties. Perhaps the most important consideration in this regard is whether the clause is worded broadly enough to encompass all potential causes of action that may arise in both contract and tort. In addition, specific language may be included to ensure that the chosen forum’s statute of limitations will also apply.

            One recent illustrative case is ARKRAY America, Inc. v. Navigator Business Solutions, Inc., No. N20C-12-012 MMJ (2021) (CCLD), 2021 Del. Super. LEXIS 463 (June 9, 2021). There, the parties entered into two separate contracts, one for software and consulting services and one for a license. Both contracts contained nearly identical choice-of-law clauses except that one provided for Utah law to apply and the other for Delaware law.

The Lawletter Vol 47 No 3

Fred Shackelford—Senior Attorney, National Legal Research Group

            In a case of apparent first impression, the Ninth Circuit Court of Appeals has decided when a cause of action in admiralty for wrongful death accrues. In Deem v. William Powell Co., 33 F.4th 554 (9th Cir. 2022), a shipyard machinist contracted mesothelioma while employed in repairing naval vessels. His illness was diagnosed on February 20, 2015, and he died on July 3, 2015. His wife filed suit within three years of his death but more than three years after the illness was diagnosed. The federal district court ruled that the claim was time-barred because the three-year statute of limitations began to run at the time of the diagnosis.

            The issue on appeal was succinctly stated: "When does a wrongful death claim accrue in a maritime case?" Id. at 559. To decide the question, the appellate court recognized that there is a fundamental distinction between survival actions and wrongful death actions under admiralty law.

The Lawletter Vol 47 No 3

Amy Gore—Senior Attorney, National Legal Research Group

            The Virginia Supreme Court in Erie Insurance Exchange v. Jones by Hardison, ___ Va. ___, 870 S.E.2d 716 (2022), reversed a lower court ruling concerning the scope of coverage under a homeowner’s policy for injuries involving an all-terrain vehicle (“ATV”). There, a passenger on an ATV was injured when a tree limb struck her. The vehicle was operated by the daughter of the named insureds under the Erie Exchange Insurance policy. As with most homeowner’s policies, the Erie Exchange policy excluded coverage for bodily injury arising out of the ownership, maintenance, or use of a land motor vehicle. However, the policy exempted from the exclusion a vehicle if “they are a lawn or farm type vehicle or snowblower, wherever used or located, if not subject to motor vehicle registration.” Id. at ___, 870 S.E.2d at 717.

The Lawletter Vol 47 No 2

Alistair Edwards—Senior Attorney, National Legal Research Group 

            It is not unusual for homes in a subdivision to be subject to restrictive covenants limiting the owners’ use of their property to residential purposes and/or prohibiting the use of the property for commercial, trade, or business purposes. This sort of restriction can also be found in instruments such as declarations governing condominium or townhouse communities. With the increasing popularity of programs such as VRBO and Airbnb, numerous courts have recently dealt with the issue of whether these so-called short-term rentals violate these sort of use restrictions. So far, the courts, strictly construing the covenants, have been fairly hesitant to find a violation.

            For example, recently in Lake Serene Property Owners Association v. Esplin, No. 2020-CA-00689-SCT, 2022 WL 713417 (Miss. Mar. 10, 2022), the Mississippi Supreme Court held that a homeowner's use of his property for short-term rentals was a “residential use” and, thus, did not violate the restrictive covenants governing the subdivision and limiting use to residential use.