Life Without Lawyers: Liberating Americans from Too Much Law
A new book (2009) from Norton by Philip K. Howard
Highlights Provided to the American Academy of Economic and Financial Experts (AAEFE) by Tom Climo
Philip Howard is the founder of an organization "Common Good," a non-profit, non-partisan legal reform coalition dedicated to restoring common sense to America. By conducting polls, hosting forums, and engaging with leaders in health care, education, law, business, and public policy from across the country, Common Good is developing practical solutions to restore reliability to our legal system and minimize the impact of legal fear in American life.
Mr. Howard is also author of “The Death of Common Sense: How Law is Suffocating America (Random House, 1995) and “The Collapse of the Common Good: How America’s Lawsuit Culture Undermines Our Freedom (Ballantine, 2002). “Life without Lawyers: Liberating Americans from Too Much Law” is his third venture in similar waters.
Mr. Howard’s methodology is pretty straightforward. Find a couple of instances of a frightening disparity between what was needed to be done with what was done and how long it took, then attribute blame. Blame is placed center stage at the door of the legal profession.
I am unlikely to argue with the blame even if the methodology used in arriving at it is suspect. It is disturbing in the few instances when someone bothers to investigate some of the outrageous miscarriages of justice outlined by Mr. Howard that often Mr. Howard can be seen to be exaggerating or has not quite conveyed accurately the end result of the very case he wants us to wring our hands about. In a recent review of “Life Without Lawyers,” former New York Times journalist Anthony Lewis, who has also published a book on the First Amendment, describes the disparity between Mr. Howard’s fact and his fiction. For example, in Hartford, Connecticut in 2002, a boy with autism in the seventh grade began attacking other students and kicking his teachers. His parents rejected that he be moved to a different school. The school instituted legal proceedings required by federal law. “After almost two years of legal hearings,” Howard writes, “the hearing officer issued an order that the boy be removed from the school.” Makes good reading, but the fact of the matter, as the Hartford Courant reported, the hearings lasted two months, not two years, and the boy was apparently adjusting well in his new school.
If you like reading hyperbole and exaggerated accounts, this is the book for you. It even includes the infamous $54 million trouser case where in Washington D.C. a lawyer with a robe, Judge Roy Pearson, sued his dry cleaner for that amount for allegedly losing a pair of pants. I’m not sure it is the case, but Mr. Howard tells us that it dragged on for two years, cost the Korean immigrants who owned the store $100,000 in legal fees, and led them to close the store.” Unfortunately, as I can believe the middle premise – the legal cost to the dry cleaner – probably the first premise and conclusion are correct as well.
Indeed, it is precisely the high cost of legal fees in the particular area of Chapter 11 bankruptcy that has won my concern, and has invigorated me to become involved as Economic Specialist for the Legal Victim Assistance Project (LVAP), a Congressional District Programs, Inc. 501(c)(3) registered public charity. Preliminary research for LVAP is demonstrating that three-quarters of the capital assets in a Chapter 11 bankruptcy proceeding are being disbursed as legal fees instead of an allocation of workable assets between debtor and lenders. This means the efficiency of productive assets is being severely compromised in bankruptcy proceedings owing to legal fees. This means the National Product, the Domestic Product, and Disposable Income in our country is reduced to twenty-five cents on the dollar for no better reason than to fatten the wallets of law firm partners. Without any “skin “ in the game, unlike the Creditors who are owed money, or unlike the Debtor who no doubt has operated the business for years, attorneys dive fresh into bankruptcy much like vultures taking the majority of the proceeds for themselves without regard to the fairness or efficiencies intended by the very system they are there to implement. LVAP calls this a “fraud on the Court,” and, as well, it is in violation of the fiduciary trust on the part of the legal profession.
Returning to Mr. Howard, his new book, and his organization founded in 2002, I will have a much better feel about him, his writings, and the benevolence of his organization when I see his support for practical applications to improve the legal arena rather than his whining about so-called perpetrated and possibly isolated instances of how legal maneuverings manage to move us a little afar from the field of common sense and equitable jurisprudence. I shall recommend that LVAP contact Common Sense.
 Expert witness for economic damage and loss practicing in Las Vegas, Nevada, and Economic Specialist, Legal Victim Assistance Project (LVAP).
 Meryl Lanson, Program Director at LVAP, and Mary Alice Gwynn, Esq., a practicing attorney in Delray Beach, Florida, have put together data suggesting this “takings” by law firms is in excess of 75%.
Sunday, March 29, 2009
Life Without Lawyers: Liberating Americans from Too Much Law
Monday, February 9, 2009
UNITED STATES COURT OF APPEALS ELEVENTH CIRCUIT
CASE NO.: 08-11286-J
DISTRICT COURT CASE NO.: 07-cv-60770-ALTONAGA/TURNOFF
BARON’S STORES, INC., NORMAN LANSON,
AND MERYL LANSON,
RONALD C. KOPPLOW, ESQ., KOPPLOW & FLYNN, P.A.,
MARC COOPER, ESQ., COOPER & WOLFE, P.A.,
SONYA SALKIN, ESQ., AND MALNIK & SALKIN, P.A.
APPELLANTS PETITION FOR REHEARING EN BANC
OF JANUARY 15, 2009 ORDER OF AFFIRMANCE
IV. STATEMENT OF COUNSEL AS TO THE FOLLOWING ISSUE(S) ASSERTED TO MERIT EN BANC CONSIDERATION
I express a belief, based on a reasoned and studied professional judgment, that the Panel decision is contrary to the following decision(s) of this Court (Eleventh Circuit) and contrary to the decisions of the United States Supreme Court, and that consideration by the full court is necessary to secure and maintain uniformity of this court’s decisions and the integrity of the judicial process.
In re Prince, 40 F.3d, 356(11th Cir. 1994)
In re Jennings, 199 Fed.Appx. 845, 2006 WL 2826947 (C.A. 11th Cir.) ;
In re Walker, 515 F.3d, 1204 (C.A. 11th Cir. 2008);
Travelers Indemnity Company v. Gore 761 F.2d 1549 (11th Cir. 1985) Hazel-Atlas Glass Co. v. Hartford-Empire Company, 322 U.S. 238, (1944).
Appellants, Baron’s Stores, Inc., Norman Lanson, Pro Se and Meryl Lanson, Pro Se, respectfully assert that an En Banc Rehearing of the Court’s January 15, 2009 Order is warranted. In addition, the underlying bankruptcy proceeding and the ultimate decision of the Panel involves a question of exceptional pubic importance, and likewise warrants consideration by the full court:
Arthur Morburger, Counsel for Baron’s Stores, Inc.
This Court’s decision fails to address the Appellees (all attorneys and therefore Officers of the Court) perjured affidavits, signed by all the Appellees/Attorneys who swore, under oath, in their boilerplate Affidavits, that they had no connections or adverse interest to any of the parties when, in fact, they had more than sixty (60) undisclosed connections and/or conflicts of interest to parties involved in the bankruptcy proceeding. Ignoring the attorneys perjured Affidavits sends a “clear message” that it is okay for attorneys, who are officers of the court, to lie to the court, under oath, and it is okay for these officers of the court to ignore the mandatory disclosure requirements under Bankruptcy Rule 2014. The result of attorneys/officers of the court ignoring the mandatory bankruptcy rules and “lying under oath” caused a fifty-two year old company’s demise, caused more than two hundred people to lose their jobs, benefits, and security, caused the devastating financial loss to the sole shareholders, caused the creditors of the estate extreme damage as they were paid between 4 and 8 cents on the dollar, while the attorneys/officer of the court were rewarded with millions of dollars in ill gotten fees. The dishonest attorneys who lied to the court, under oath, benefited by being monetarily rewarded for their criminal acts of perjury, and for their breach of fiduciary duties to their clients and to the court; This very rule, enacted by Congress, was specifically designed to protect the public from such a “travesty of justice” in that which occurred here in the In re Baron’s proceedings.
The Panel’s decision also conflicts with the authoritative decisions of every other United States Court of Appeals that has addressed the issue of mandatory disclosure, under the penalty of perjury, pursuant to Bankruptcy Rule 2014.
COURSE OF PROCEEDING
On March 11, 2005, Meryl M. Lanson filed an Emergency Motion to Reopen Baron’s bankruptcy, Case No. 97-25645-PGH-BKC, for “fraud on the court” pursuant to Bankruptcy Rule 2014. In their initial retention Affidavits to be appointed counsel in the bankruptcy proceedings, attorneys, Marc Cooper, Ronald C. Kopplow and Sonya Salkin, swore under oath, that they did not have any connections and/or conflicts of interest to the estate. Later, Appellants discovered over sixty undisclosed connections and/or conflicts of interest of the three attorneys. On April 7, 2005, the Bankruptcy Court granted Appellants Emergency Motion to Reopen for the purpose of adjudicating the merits of Appellants claim that the Attorneys, not only perpetrated a fraud upon the Court, but violated the mandatory bankruptcy rule 2014.
On November 30, 2005, the Bankruptcy Court entered an Order Denying the Appellees/Attorney’s Motion for Summary Judgment. Within that Order, on Page 11, the Court stated:
“The Bankruptcy Court concluded that the disclosure obligation mandated by the Bankruptcy Code and Rules “implicates a public policy interest justifying relief…under Rule 60(b)(6). Id. at 188 (quoting In re Southmark Corp., 181 B.R. 291, 295 (Bankr. N.D. Tex. 1995)). The Bankruptcy Court observed that it was alleged that the professionals failed to disclose conflicts of interest that would have barred their retention. Id. at 188. The Bankruptcy Court found that if this were true, it would constitute “fraud on the court” warranting relief even though more than a year had passed since the professionals were retained and their fees approved. Id. As a result, the Bankruptcy Court found it appropriate to consider the sanctions motions. Id. In this case, Debtor has alleged that the Attorneys failed to make appropriate disclosures under Bankruptcy Rule 2014. If these allegations are true this inadequate disclosure by the Attorneys may constitute “fraud on the Court,” which must be addressed.”
The Bankruptcy Court, on Page 14 of this same Order, stated
“Additionally, all professionals whose employment must be approved by the Court are required to make disclosure under Bankruptcy Rule 2014. Bankruptcy Rule 2014(a) requires that the application to employ must be accompanied by verified statement of the person to be employed that discloses the connections between that person and the universe of parties in the case. Bankruptcy Rule 2014(a). The professional cannot pick and choose which connections to disclose. Id. at 511 (citing In re Hot Tin Roof, Inc., 205 B.R. 1000, 1003 (B.A.P., 1st Cir. 1997)). It is the responsibility of the professional to disclose all relevant connections.”
The Bankruptcy Court ultimately ruled that the attorneys did not perpetrate a fraud upon the Court stating that the attorneys did not possess subjective intent citing Davenport Recycling Assocs. v. C.I.R., 220 F.3d 1255, 1262 (11th Cir. 2000). On January 7, 2008, the District Court affirmed the Bankruptcy Court’s ruling. On January 15, 2009, this Court issued its Affirmance Order stating:
“our law requires the demonstration of a plan or scheme…designed to improperly influence the court, which indicates that scienter is required” without citation to any of the Eleventh Circuit cases on which the Court relied upon.
II. STATEMENT OF FACTS
Appellees/Attorneys, Kopplow and Cooper, represented Appellants’ Baron’s Stores, Inc. and its sole shareholders, Norman Lanson, individually, and Meryl Lanson, individually, in an accounting malpractice lawsuit. Appellees/Attorneys, Kopplow and Cooper, filed the lawsuit only in the name of the corporation, Baron’s, and failed to file the lawsuit, within the statute of limitations, on behalf of their individual clients, Appellants, Norman Lanson and Meryl Lanson. When Appellees/Attorneys, Kopplow and Cooper, realized that they committed malpractice by failing to file suit on behalf of their individual clients within the statute of limitations, they recommended that their clients, Norman Lanson and Meryl Lanson, consult with Sonya Salkin, a bankruptcy attorney and a Region 21 Panel Trustee, to pursue bankruptcy on behalf of Baron’s. In order to simultaneously continue to hide their malpractice, and at the same time maintain control of the bankruptcy, Kopplow and Cooper failed to disclose their more than sixty connections and/or conflicts of interest in violation of mandatory Bankruptcy Rule 2014. In addition, and of most critical importance, Appellees/Attorneys lied, under oath, thereby committing perjury, when they signed an Affidavit filed directly with the Court claiming no connections whatsoever to any party involved in the bankruptcy proceedings. Salkin was consulted with and ultimately retained by the Appellants, the Lansons, to protect their most valuable asset, Baron’s Stores, Inc., and to maximize the recovery on behalf of themselves and their wholly owned corporation. Salkin also violated the mandatory disclosure rules when she, too, swore under oath that she did not have any connections to anyone in the bankruptcy proceedings. These are blatant misrepresentations that are reflected in the record. In reliance on Appellees/Attorneys sworn affidavits that they had no connections and/or conflicts of interest, the Bankruptcy Court appointed them as attorneys in the bankruptcy proceeding. In Appellants Initial Brief, on Page 23, Appellants requested equitable remedies under the manifest injustice that occurred in the bankruptcy proceedings. Appellants also requested the Eleventh Circuit to fashion an equitable remedy to rectify the injustice that occurred due to the non-disclosure in violation of the mandatory requirements under Bankruptcy Rule 2014.
III. ARGUMENT AND AUTHORITIES
This Panel’s decision fails to address the Appellees/Attorneys blatant violation of Bankruptcy Rule 2014, the mandatory disclosure requirements, and by this Court’s failure to address this violation, conflicts with three (3) prior decisions of this Circuit.
In re Prince, 40 F.3d, 356 (11th Cir. 1994) the Court dealt with the exact same issue, the mandatory disclosure requirements for professionals under Rule 2014, and found as follows:
“Whether Sirote firm inadvertently or intentionally neglected to inform the court of its conflicts is of no import. If the actions of the Sirote firm in this case had been performed by a sole practitioner, disbarment proceedings would undoubtedly have ensued. Law firms, no matter their size, must ensure that their representations do not result in irreconcilable, intolerable conflicts that can only result in harm to their clients, as in this case. In this instance, Sirote was in the unfortunate position of having to serve too many masters. Where a claimant, who represented members of the investing public, was serving more than one master or was subject to conflicting interests, he should be denied compensation It is no answer to say that fraud or unfairness were [sic] not shown to have resulted.” Woods v. City Nat’l Bank & Tr. Co., 312 U.S. at 268, 61 S.Ct. at 497 (1941). The conflicts Sirote firm operated under pushed the limits of discretion to the extreme. Because Sirote firm could not have adequately and impartially served its client under the circumstances of this case, the bankruptcy court’s award of fees was improper. (Emphasis added)
While a bankruptcy judge’s discretion in deciding compensation cases under section 328 enjoys great bounds, it is not unlimited. A finding that Sirote firm qualifies for fees in this case would render the impartiality requirements of the Bankruptcy Code meaningless. While a complete denial of fees may be extreme in some instances, this case requires nothing less. “This sanction serves to deter future wrongdoing by those punished and also to warn others who might consider similar defalcations.” Gray, 30 F.3d at 1323. Accordingly, we find that the district court’s affirmance of the bankruptcy court’s award of fees constitutes an abuse of discretion. See Neville v. Eufaula Bank & Trust Co. (In re U.S. Golf Corp.), 639 F.2d 1197, 1201 (5th Cir.1981).
For the foregoing reasons, we find that the law firm of Sirote & Permutt, PC. is not entitled to compensation for its work in representing Prince in his bankruptcy proceedings because the firm operated under intolerable conflicts of interest which unduly prejudiced the Debtor in violation of the Bankruptcy Code.
This Court’s opinion is also in conflict with its previous opinion in In re Jennings, 199 Fed.Appx. 845, 2006 WL 2826947 (C.A. 11th Cir.) The Eleventh Circuit affirmed the underlying order denying fees for failure to disclose under Bankruptcy Rule 2014 and affirmed disgorgement of all pre-petition fees, citing the Eleventh Circuit’s analysis in In re Prince cited above.
The Eleventh Circuit agreed that the bankruptcy court was not required to peruse the entire record to discern any connections or conflicts. The relevant disclosures must appear in the application and accompanying Affidavit filed pursuant to Rule 2014. The Eleventh Circuit also agreed with the district court, that undisclosed connections and conflicts “prejudiced the bankruptcy estate and deprived each of an unbiased independent assessments of the available and outstanding claims,” citing In re Prince, 40 F.3d at 361 (finding a conflict of interest where counsel “was in the unfortunate position of having to serve too many masters.”)
Having made these determinations, the Eleventh Circuit agreed that the bankruptcy court was well within its discretion to conclude that the professionals initial and continuing violation of the disclosure rules, coupled with its non-disinterestedness, warrants its disqualification and denial of all compensation including disgorgement of any pre-petition retainer. The Eleventh Circuit blanketly denied compensation based on the non disclosure and was not moved by the attorneys’ argument that fraud or unfairness were [sic] not shown to have resulted.”(quoting Woods v. City Nat’l Bank & Tr. Co., 312 US. 262, 268 (1941)).
The Panel’s decision, not only conflicts with this Court’s previous opinion in the In re: James Walker 515 F.3d 1204 (11th Cir. 2008) proceeding, but also emphatically affirmed a “fraud on the court” stating that “lying under oath is lying under oath.” In the In re James Walker, this Court affirmed the bankruptcy court’s sanction and removal for “fraud on the court” of a creditor-elected trustee, who was not an attorney, and whose failure to disclose was that of which was one remote connection from ten years prior to the bankruptcy proceedings. The creditor-elected trustee argued that she was not required to submit a verified statement regarding her connections. This Court made a very firm assertion when it declared “the idea that false testimony when offered to the court voluntarily is immune to the consequences of lying under oath is absurd. Lying under oath is lying under oath.” This Court’s Opinion in Walker never mentioned the requirement of scienter and never included it in its analysis affirming the bankruptcy court’s finding of “fraud on the court” which, too, did not include any analysis or finding of subjective intent or scienter. In fact, after a thorough research and review of all cases, including a request to West Law’s research attorneys, it was discovered that, to date, the only opinion found, where the Eleventh Circuit affirmed and found fraud on the court, was in the In re James Walker bankruptcy proceeding.
“Fraud on the court” requires the involvement of an attorney. This requirement is confirmed in the Eleventh Circuit case Travelers Indemnity v. Gore (cite supra) in which the Eleventh Circuit refused to find “fraud on the court” for Gore’s perjury because there was no allegation of an attorneys involvement. In addition, the Eleventh Circuit in Travelers adopted the following definition of “fraud on the court” from other circuits. “Fraud on the court” should, we believe, embrace only that species of fraud which does or attempts to, defile the court itself or is a fraud perpetrated by officers of the court so that the judicial machinery cannot perform in the usual manner its impartial task of adjudicating cases… There is no mention of scienter in this court’s previous definition of “fraud on the court” adopted from other circuits where scienter is never mentioned. The majority of circuits require an attorneys involvement because attorneys are highly educated in the law and know when a deception to the court is occurring. That explains why scienter is not required for “fraud on the court” because attorneys, as officers of the court, know better.
In S.E.C. v. ESM Group, 835 F.2d 270 (11th Cir. 1988), the Eleventh Circuit relying on Travelers refused to find fraud on the court because the attorney involved was not a direct participant in the plan to defraud. In S.E.C., scienter is never mentioned.
However, this Court retreated from its earlier position where it required the direct participation of an attorney, and for the first time, found “fraud on the court” in the Walker proceeding by affirming the bankruptcy court’s finding of “fraud on the court” of a non-lawyer. This court, in Walker, affirmed the “fraud on the court” of a non-lawyer who failed to disclose one remote connection in her voluntary Affidavit. In direct contrast, this Court never addressed the three attorneys mandatory (not voluntary) requirements under the Bankruptcy Rules in its Order, and affirmed the same bankruptcy court’s selective enforcement of the mandatory rules legislated by Congress, when it applies to attorneys; attorneys who failed to disclose more than sixty (60) connections and/or conflicts of interest, the majority of which were not remote but in fact, present and ongoing from prior to and during the bankruptcy proceedings. The Court did not cite one case to support its retreat from Walker. The only legal authority this Court cited, which was previously relied upon by the same bankruptcy court, to support its about face from Walker, is Davenport. Davenport is not applicable and is distinguishable because it was a tax court case with no mandatory disclosure requirements attached to it. Furthermore, this Court has used Davenport for the premise of an unconscionable scheme calculated to interfere with the judicial system’s ability to properly adjudicate the matters before it. The perjured Affidavits were filed for one reason - to influence the court to authorize their employment. The plan or scheme to influence the Court to authorize their employment was confirmed after the attorneys were put on notice to amend their Disclosure Affidavits, informing the court of their connections and/or conflicts of interest, and they failed to do so. What could be more unconscionable than having three attorneys, officers of the court, with combined legal experience of eighty five years, knowingly lie to the court in order to authorize employment to secure their ill-gotten fees. To reiterate, the Eleventh Circuit’s affirmance of the same bankruptcy court’s finding of “fraud on the court,” “lying under oath is lying under oath.” The distinction in Walker v. Baron’s, is that in Walker, it was one creditor elected non attorney trustee who failed to disclose one remote connection, and in Baron’s, it was three attorneys, one being a United States Panel Trustee, who collectively failed to disclose more than sixty (60) present and ongoing connections and/or conflicts of interest.
The Panel’s decision is also in conflict with other circuits court of appeals, and the United States Supreme Court case in Hazel-Atlas Glass Co. v. Hartford-Empire Company, 322 U.S. 238, (1944).
In the Seventh Circuit, U.S. v. Gellene, 182 F.3d 578 (7th Cir. 1999), the Court found, that although Gellene made some disclosure, he did not fully disclose his connections and withheld the information over a two year period which not only was in violation of Rule 2014 but resulted in a conviction of bankruptcy fraud, served a jail sentence, was fined and was disbarred. The bankruptcy court also told Mr. Gellene: “New York is different from Milwaukee…Professional things like conflicts [of interest] are taken very, very seriously. And for better or worse you’re stuck in Wisconsin.”
In the Second Circuit, Kupferman v. Consolidated Research and Manufacturing Corp., 459 F.2d 1072(2nd Cir. C.I.R. 1972) stated: “an attorney’s loyalty to the court, as an officer thereof, demands integrity and honest dealing with the Court. And when he departs from that standard in the conduct of a case he perpetrates a “fraud upon the court.”
In the U.S. Supreme Court, Hazel-Atlas Glass Co. v. Hartford-Empire Company, 322 U.S. 238, (1944) an attorney may commit fraud on the court, not only through misrepresentation, but also through omission. Also in Hazel Atlas “it is a wrong….which ….cannot complacently be tolerated consistently with the good order of society… involv[ing] two victims: the individual litigant …and the court itself, whose integrity is compromised by the fraudulent behavior of its officers.) “The very temple of justice is defiled.”
The Panel’s decision involves question of exceptional public importance which warrants consideration by the full Court.
The economic estimation of the loss of social capital damages to American society arising from the failed and unwarranted reorganization of Baron’s, a fifty-two year old family business, is as follows:
Baron’s was an S-corporation producing taxable income to its owners and income tax payable of $100,000.00 per year – loss of ten years income tax equals $1,000,000.00
Baron’s payroll, per year, for two hundred employees was $4,000,000.00
The share of Baron’s contribution towards FICA, rounded at about 7% per year is $280,000.00 which over ten years equals $2,800,000.00
Baron’s employees share of FICA, mitigated by re-employment of some workers, as many were unable to find re-employment, and thus received unemployment compensation, coupled with lost income tax and lost employee share of FICA is estimated over ten years to have cost the Federal Government $2,300,000.00
Baron’s paid sales tax to the State of Florida over the ten years with annual sales approximating $20,000,000.00 at 6% equals $12,000,000.00.
Baron’s, the corporate entity, and through its owners, supported non-profit organizations estimated at $20,000.00 per year over ten years equals $200,000.00.
The total estimated loss of social capital because of Baron’s demise, over the past ten years, is $18,300,000.00.
Considering the economic crisis we are in, and the bankruptcies that are being filed on a daily basis, and will continue to be, this case is an example of what happens when attorneys lie to the court, under oath, and put their self interests ahead of those they are duty bound to protect. In the Baron’s bankruptcy, the professionals received more than $2 million in ill gotten fees, out of a pot of approximately $3 million, the creditors received pennies on the dollar, two hundred people were put out of work, and the sole owners lost everything they and their family worked fifty two years to build.
For all the foregoing reasons, stated above, this Honorable Court should GRANT Appellant’s Petition for Rehearing En Banc and vacate its January 15, 2009 Order of Affirmance. In the alternative, this Honorable Court should consider the instant Petition as a Motion for Panel Rehearing and enter an Order vacating its January 15, 2009 Order consistent with the arguments made hereinabove. This Honorable Court should grant such other and further relief as this Court deems just and proper herein.
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT
D. C. Docket No. 07-60770-CV-CMA
BKCY No. 97-25645-BKC-PG
In Re: BARON'S STORES, INC., Debtor.
BARON'S STORES, INC.,
COOPER & WOLF,
RONALD C. KOPPLOW,
KOPPLOW & FLYNN,
SONYA SALKIN, et al.,
Appeal from the United States District Court
for the Southern District of Florida
(January 15, 2009)
Before CARNES, BARKETT and WILSON, Circuit Judges.
Meryl M. Lanson and Norman Lanson ( the “Lansons”), proceeding pro se,and Baron’s Stores, Inc. (“Baron’s”), appeal the district court’s order, affirming the bankruptcy court’s decision finding that attorneys Marc Cooper, Ronald Kopplow, and Sonya Salkin (collectively “the attorneys”), who worked on behalf of Baron’s during its bankruptcy proceedings, did not perpetrate a fraud on the bankruptcy court.
We examine independently the factual and legal determinations of the bankruptcy court, employing the same standards of review as the district court. In re Issac Leaseco, Inc., 389 F.3d 1205, 1209 (11th Cir. 2004). We review the bankruptcy court’s factual findings for clear error and all questions of law de novo.
In re Int’l Admin. Servs., Inc., 408 F.3d 689, 698 (11th Cir. 2005). For a factual finding to be clearly erroneous, we, “after reviewing all of the evidence, must be left with a definite and firm conviction that a mistake has been committed.” United States v. Rodriguez-Lopez, 363 F.3d 1134, 1137 (11th Cir. 2004) (quotation omitted).
“Fraud on the court must involve an unconscionable plan or scheme which is designed to improperly influence the court in its decision . . . .” Davenport Recycling Assocs. v. C.I.R., 220 F.3d 1255, 1262 (11th Cir. 2000) (alleged fraud on tax court). “It has been found only in those instances where the fraud vitiates
the court’s ability to reach an impartial disposition of the case before it.” Id. Upon review of the record, and upon consideration of the briefs of the parties, we discern no reversible error. To the extent that the movants challenge the legal finding, the bankruptcy court did not err in finding that, to demonstrate
the perpetration of fraud on the court, Baron’s and the Lansons must have demonstrated an intentional scheme to perpetrate a fraud. Our law requires the demonstration of a “plan or scheme . . . designed” to improperly influence the court, which indicates that scienter is required. Moreover, to the extent that the movants contend that recklessness satisfies this requirement, they did not raise the argument before the bankruptcy court, and they do not develop it on appeal. Accordingly, we do not consider this argument. See Narey, 32 F.3d at 1526-27; Horsley, 304 F.3d at 1131 n.1.
The bankruptcy court’s factual finding, that the attorneys did not intend at any point to mislead or defraud the court, is supported by the evidence, and the movants have not demonstrated that this finding and accompanying credibility determinations were clearly erroneous. Looking at all of the evidence, one is not left with a definite and firm conviction that the bankruptcy court committed a mistake in finding no deliberate scheme designed to improperly influence the court.
Because the Lansons and Baron’s have not demonstrated that the bankruptcy court clearly erred in finding that the attorneys were credible and not involved in a plan or scheme designed to improperly influence the court in its decision, we affirm the district court’s decision affirming the bankruptcy court.
Tuesday, January 27, 2009
SONYA L. SALKIN, ESQ.,
A UNITED STATES CHAPTER 7 PANEL TRUSTEE
ADMITTED PARTICIPATING IN AND SUBMITTING
THE DOCUMENTS WHICH CONFIRMED THE
1997 BANKRUPTCY OF BARON’S STORES, INC.
A FORENSIC DOCUMENT EXPERT DECLARED
THE BANKRUPTCY DOCUMENTS TO BE TAMPERED
WITH, ALTERED AND FALSIFIED
January 27, 2009
The Chapter 11 bankruptcy of Baron's Stores, Inc. was confirmed using tampered, altered and falsified documents.
Sonya L. Salkin, Baron's bankruptcy counsel, and a Region 21 Chapter 7 Panel Trustee, admitted that she was responsible for the preparation and submission of the amended Plan of Liquidation and the amended Disclosure Statement confirming the 1997 bankruptcy of Baron's. The documents were tampered with and altered and submitted for confirmation in direct contravention of the instructions of the United States Trustee, David Butler, and Assistant United States Trustee, Ramona Elliott.
Meryl M. Lanson, Officer of Baron's, retained a forensic document expert, Michael G. Kessler of Kessler and Associates. Mr. Kessler, declared under the penalty of perjury, on May 2, 2008, that “someone tampered with these documents, modified them, and/or altered them resulting in these documents not representing what they are presented to be. These documents have been falsified.”
Sonya Salkin has never hired an independent expert to refute Mr. Kessler's sworn declaration. Sonya Salkin refuses to be deposed pertaining to the falsified documents. Sonya Salkin has admitted to The Florida Bar that she never ascertained whether the documents that confirmed the bankruptcy of Baron’s were falsified. Sonya Salkin has filed for protection from the courts regarding any discovery pertaining to the documents. Baron's, Norman Lanson, and Meryl Lanson have been denied their due process rights to depose Sonya Salkin on the falsified documents. Judge Jeri Beth Cohen has protected Salkin by denying discovery on the falsified documents. Judge Jeri Beth Cohen, with malice and intent, has obstructed justice causing further damage to Baron’s, its creditors, and the Lansons. Such denial is a violation of the constitution of these United States of America.
The Courts and The Florida Bar continue to protect Sonya Salkin from any discovery and protect her from being deposed regarding the falsified documents that confirmed the bankruptcy of Baron's.
The falsification of the documents that confirmed Baron's bankruptcy has caused multi millions of dollars worth of damages to Baron's and its creditors, and was the reason that two hundred people lost their jobs. All the assets of Baron's were distributed amongst the lawyers, and their undisclosed insider connections, who conspired to destroy Baron's, its principles, its employees and its creditors for their own selfish greed. This is a common practice in Chapter 11 bankruptcy cases.
NOVEMBER 6, 1991
WASHINGTON, D.C. 20515
‘BROOKS REQUESTS G.A.O. PROBE OF
U.S. BANKRUPTCY TRUSTEE SYSTEM’
Mismanagement, conflicts of interest, and political cronyism are hindering the effectiveness of the Justice department’s U.S. Bankruptcy Trustee Program, witnesses told a House Judiciary Committee panel today. In response to this testimony and numerous complaints he has received, Congressman Jack Brooks (D-Texas) announced that he is requesting the General Accounting Office to conduct a thorough investigation of the program.
“A smoothly functioning bankruptcy system is vital to the well-being of the American economy,” said Brooks, Chairman of both the Subcommittee on Economic and Commercial Law and the full Judiciary Committee, “and Congress created the U.S. Trustee Program to be a cornerstone of that system. Unfortunately, the examples of abuse that have come to our attention provide a clear signal that the U.S. Trustee Program is simply not getting the job.”
The U.S. Trustee Program, housed in the department of Justice, performs a wide range of administrative functions in bankruptcy cases, including monitoring cases, holding creditors meetings and reviewing fee requests. For example, in Chapter 7 liquidation cases, the U.S. Trustees establish the supervisory panels of private trustees who act as fiduciaries for individual debtors’ estates. U.S. Trustees are also intended to serve as the watchdogs of the bankruptcy system to ensure fairness and ferret out fraud and abuse.
“Since 1987,” continued Brooks, “17 former trustees and five of their employees have been convicted of embezzling funds in excess of $6.1 million from bankruptcy estates – and I am afraid this is just the tip of the iceberg. Given the increasing numbers of bankruptcy filings at a time of deep and lingering recession, we cannot afford to take chances with the Trustee Program.”
Lawrence A. Beck, a bankruptcy attorney from San Antonio, Texas, criticized the U.S. Trustee System from the debtor’s viewpoint. He encountered disorganization and resistance from the local U.S. Trustee when he sought help in investigating gross irregularities in the private trustee’s handling of the debtor’s estate. “Most individual debtors who enter bankruptcy with significant assets,” said Beck, “eventually conclude that they have become trapped in a crooked, dishonest system which is run for the benefit of the panel trustees and his hand-picked attorney, and which is supervised by incompetent bureaucrats.”
George Francis Bason, Jr., a former bankruptcy Judge, told the Subcommittee that despite a promising start in 1978, the U.S. Trustee Program has suffered “significant deterioration” in recent years. According to Bason, political favoritism and conflicts of interest are among the chief causes of this decline.
“Cronyism has come to have too large a role in appointments in the U.S. Trustee system,” said Bason. “Competent people at the local level are leaving in disgust…and too many of the remaining personnel in both the national and the local offices are simply not qualified by background and experience to do their jobs efficiently and well.”
With respect to conflicts of interest, Bason told the subcommittee that as a judge he presided over two cases with national and international significance in which he “found that intense pressure was exerted by the national office upon the local office of the U.S. Trustee to abandon the U.S. Trustee’s proper independent role as a neutral, impartial administrator and instead to act as a servant and advocate for the narrow self-interest of one party to the litigation.”
Larry E. Kelly, Chief Judge of the U.S. Bankruptcy Court for the Western District of Texas, echoed Bason’s charges of political favoritism in the Trustee program. Kelly also testified that the “major defect” in the Trustee Program is “a lack of devotion and purpose in its very existence from the uppermost levels of the Justice Department. I have, with recent exceptions, seen no indication that the program has any pride or discernible purpose in its leadership.”
Brooks concluded: “I, for one, am not going to stand by while those caught up in the crippling economic crisis facing this country are subjected to further abuse by those entrusted with the fair administration of the bankruptcy system. I am determined to see that the U.S. Trustee Program gets back on track.”
Sol Stein, 1999/04, wrote Bankruptcy: A Feast for Lawyers that reveals how the Chapter 11 experience aids the bankruptcy bar and rarely the debtor company and its creditors. Many of us fondly remember Stein and Day Publishers, part of the 70% of bankruptcies that are filed to heal but wind up killed by the Trustees of U.S. Bankruptcy system.
Like Baron’s Mens Stores, Stein and Day existed for decades providing jobs and creatively serving public and private needs of a thriving community.
Elia Kazan, winner of five Pulitzer prizes and two Academy Awards, in his autobiography said, "My publisher, Sol Stein, was my producer, my editor; Sol Stein was my director. Stein had books on bestseller lists for nineteen consecutive years until he had to file for Reorganization under Chapter 11 Bankruptcy.
Basic Trust is a social staple that underpins all commerce. Failure of trust in a capitalistic society causes hoarding, greed, and moral failure motivated by fear of scarcity. Ever since good faith, fair dealing, and good will were removed as the backdrop for contracts and regulation, the United States has sunk into a moral and ethical chasm that is now evidenced by potentially the greatest economic crisis of the century. It was brought on by failure of those in power to serve responsibly. CEO’s forgot who sustained the business that afforded them fat bonuses - Trustees are not trusted.
Baron’s Mens Stores never forgot the community, their employees, and to this day, for the past fifteen years, have been fighting for their creditors to be fairly treated by having reopened Baron’s bankruptcy, exposing the fraud, including but not limited to the fact that Baron’s bankruptcy was confirmed using falsified documents. The unnecessary bankruptcy of Baron’s confirmed by fraud perpetrated by attorneys cost Florida a business that had sustained for fifty two years.
The United States cannot sustain business as usual. Each person who reads this must take action for self protection and posterity.
As a direct result of the U.S. Trustee’s failure in the case of Baron’s, a fifty two year old multi-generational family owned company, was lost. We live in an “economic world.” The unnecessary loss of Baron’s through fraud and abuse in the bankruptcy system cannot be viewed in terms of the loss to the owners of Baron’s alone – that is the tip of the iceberg. The real losses caused by FRAUD and ABUSE go further in a cascade of damages emanating from but this one case.
Let’s look at an Economic Estimation of the Loss of Social Capital Damages to American Society arising from the failed reorganization of Baron’s.
- Baron’s was an S-Corporation producing taxable income to its
owners and therefore Income Tax Payable of $100,000.00 per
- Loss of 10 years Income Tax equals $1,000,000.00.
- Baron’s employed 200 workers with a payroll of $4,000,000.00 per year.
- The lost FICA tax employers share over the past 10 years at 7%
(rounded) $280,000.00 x 10 years equals $2,800,000.00.
- Baron’s employees’ share of FICA would be mitigated by re-employment of workers; however, many workers were unable to find re-employment. Between unemployment compensation paid, and lost income tax, and lost employee share of FICA, it is estimated that the COST TO THE FEDERAL GOVERNMENT over 10 years equals $2,300,000.00.
- Baron’s paid Sales Tax to the State of Florida. Baron’s sales per year were $20,000,000.00 at 6% over 10 years equals $12,000,000.00.
- Baron’s also supported non-profit organizations through the Corporate entity, or the Owners, estimated at $20,000.00 per year over 10 years equals $200,000.00.
- THE TOTAL ESTIMATED LOSS OF SOCIAL CAPTIAL IS $18,300,000.00 OVER THE PAST 10 YEARS!
THIS IS ‘ONE’ FAILED REORGANIZATION CAUSED BY “FRAUD ON THE COURT” UNDER THE WATCH OF THE U.S. TRUSTEE IN REGION 21
In my opinion, through the research that I have done, I believe, this is a criminal racketeering enterprise in violation of 18 U.S.C. § 152, §1623, §1341 and §1346.
Just prior to posting I received the “New York Lawyer – Legal Times” article by David Ingram – “Rove Subpoenaed to Testify About U.S. Attorney Firings.”
At the end of the article, House Judiciary Committee Chairman, John Conyers, Jr., who issued the Subpoena, said in a statement “Change has come to Washington, and I hope Karl Rove is ready for it. After two years of stonewalling, its time for him to talk.”
Sonya Salkin, Esq., Baron’s counsel, and a United States Chapter 7 Panel Trustee, must answer for her admitted participation in the documents that confirmed Baron’s bankruptcy. After years of stonewalling by Ms. Salkin, her attorneys, and co-conspirators, it is time for her to talk as well. Sonya Salkin must be deposed and our due process rights must be invoked NOW.
Submitted by: Meryl M. Lanson