Free Response to Motion - District Court of Colorado - Colorado

Case 1:04-cv-01114-PSF-OES

Document 80

Filed 07/25/2005

Page 1 of 10

IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLORADO Civil Action No. 04-cv-1114-PSF-OES KENNETH L. KEIL, Plaintiff, v. CITIGROUP, INC.; SANFORD I. WEILL, Chief Executive Officer of Citigroup, Inc.; THOMAS F. FARRELL; FARRELL & SELDIN; F. EUGENE WESTHAFER; THE SILVERMAN LAW FIRM, P.C.; and JOHN DOES (1-10), Defendants.

RESPONSE TO MOTION FOR RELIEF FROM JUDGMENT

Defendants, F. Eugene Westhafer and The Silverman Law Firm, P.C., ("Attorneys"), through their attorney of record, Richard E. Mishkin of Berenbaum, Weinshienk & Eason, P.C., respond to Kenneth L. Keil's Motion for Relief from Judgment, (the "Motion"), as follows: Mr. Keil's Motion is a disingenuous attempt to intentionally mislead the Court and avoid his lawful obligation to pay the $1,146. 86 judgment for costs awarded to the Attorneys by the Court on June 29, 2005. The $1,146.86 judgment for costs is not a claim that is dischargeable in Mr. Keil's bankruptcy case. Assuming arguendo that the $1,146.86

judgment for costs is a claim that could have been discharged in Mr. Keil's bankruptcy case, Mr. Keil's failure to list the Attorneys as creditors and his failure to give them the notices 1

Case 1:04-cv-01114-PSF-OES

Document 80

Filed 07/25/2005

Page 2 of 10

they would have been entitled to as creditors make the $1,146.86 judgment a debt that was not discharged in Mr. Keil's bankruptcy case. FACTUAL BACKGROUND On or about March 4, 2005, the undersigned counsel filed a "Suggestion of Filing of Bankruptcy Petition by Kenneth L. Keil" with the Court, (the "Suggestion"). In the

Suggestion the undersigned counsel notified the Court that, on or about February 2, 2002, Mr. Keil had filed a Chapter 7 Bankruptcy Petition. The undersigned counsel also filed with the Court the Notice of Filing Bankruptcy Case the Attorneys received on or about February 18, 2005. A copy of that Notice is attached as Exhibit A. It is not a notice to Mr. Keil's creditors. On April 1, 2005, Mr. Keil filed a Motion for Dismissal Against Defendants F. Eugene Westhafer and The Silverman Law Firm, (the "Motion to Dismiss"). On April 8, 2005, the Attorneys filed their response to the Motion to Dismiss and asked the Court to either deny it or in the alternative award them costs, including their attorneys' fees. On April 18, 2005, the Court entered an Order Accepting and Adopting Recommendation of United States Magistrate Judge, (the "Order"). In the Order the Court awarded the Attorneys their costs, but not their attorneys' fees and ordered Mr. Keil and the Attorneys to confer and attempt to reach agreement about the amount of those costs; the Court also stated that if Mr. Keil and the Attorneys did not reach agreement regarding costs before May 13, 2005, the Attorneys had leave of the Court to file a motion to determine costs. On May 18, 2005 the Attorneys filed a Motion for Determination of Costs, (the "Motion on Costs"). Attached to the Motion on Costs was the undersigned counsel's May 2, 2005 letter to Mr. Keil asking him to agree by May 9, 2005 to pay the Attorneys' costs in the

2

Case 1:04-cv-01114-PSF-OES

Document 80

Filed 07/25/2005

Page 3 of 10

amount of $2,954.80 or offer what other amount of costs he was willing to agree should be awarded to the Attorneys. Mr. Keil rejected the offer the Attorneys made and did not make them an offer to pay them any amount of costs. A hearing on the Motion on Costs was canceled once to accommodate the clerk of the Court. A hearing on the Motion for Costs was held on June 29, 2005. In his Motion, Mr. Keil represents to the Court that he knows the undersigned counsel stated on June 29, 2005, at a hearing on costs, that the Attorneys were "never notified of Mr. Keil's filing bankruptcy . . . ." Mr. Keil then spends the bulk of the Motion making an argument based on his misrepresentation of what he "knows" the undersigned counsel said at the June 29, 2005 hearing on costs. At the June 29, 2005 hearing on costs, Mr. Keil maintained that a judgment against him and in favor of the Attorneys for their costs could not be entered because the costs represented a claim that had been discharged in his bankruptcy. In response, the undersigned counsel, who the day before had received a copy of Mr. Keil's June 28, 2005 "Response to Notice of Hearing on Billing Costs", ("Costs Response"), stated that he disagreed with Mr. Keil because "the costs did not represent a claim that arose prior to Mr. Keil's filing his bankruptcy petition and because Mr. Keil had failed to properly or timely list the Attorneys or either of them as creditors in his bankruptcy case or give them the requisite notice as creditors in his bankruptcy case." The Clerk of the Court properly decided that it was not appropriate at a Hearing on Costs to address the issues Mr. Keil was trying to raise, and that the undersigned counsel was responding to, but rather the only purpose of the hearing on costs was to determine what

3

Case 1:04-cv-01114-PSF-OES

Document 80

Filed 07/25/2005

Page 4 of 10

amount of costs would be awarded to the Attorneys consistent with the Court's April 18, 2005 Order. As is evidenced by the Affidavits of each of the Attorneys, collectively attached as Exhibit B, the day Mr. Keil filed his Response to Notice of Hearing on Billing Costs, i.e., June 28, 2005, was the first time either of them received notice that: (i) he allegedly were listed as a creditor in Mr. Keil's Bankruptcy Case; (ii) the First Meeting of Creditors in Mr. Keil's bankruptcy case was held on March 9, 2005; (iii) Mr. Keil's creditors had until May 9, 2005 to object to the discharge of the debts he owed them; and, (iv) Mr. Keil had received a discharge in bankruptcy on June 15, 2005. As is evidenced by the Amended Verification of Creditor Matrix attached to the Motion and apparently signed by Mr. Keil on May 9, 2005, the first time Mr. Keil listed either of the Attorneys as creditors in his bankruptcy case was on May 9, 2005. There is no evidence before the Court that Mr. Keil ever filed his Amended Creditor Matrix or his verification of it with the Bankruptcy Court. The Motion and the Exhibits to it are devoid of any evidence to contradict the fact that it was not until June 28, 2005 that Mr. Keil, or anyone else gave notice to either of the Attorneys that on and after May 9, 2005 he considered each a creditor in his bankruptcy case; in his Affidavit, contained in the body of the Motion, Mr. Keil states: "I am not aware Robert H. Carpenter, bankruptcy attorney for Kenneth L. Keil, not noticing Kenneth L. Keil's creditors, including the Silverman Law Firm and F. Eugene Westhafer, that Kenneth L. Keil had filed a bankruptcy." Mr. Keil apparently maintains that this statement is one based on his personal knowledge. However, what Mr. Keil does not know is not a statement

4

Case 1:04-cv-01114-PSF-OES

Document 80

Filed 07/25/2005

Page 5 of 10

based on his personal knowledge, rather it is a statement based on his lack of personal knowledge. ARGUMENT The Bankruptcy Code, 11 U.S.C.A Sections 101, et. seq., (the "Code"), does not define when a debtor incurs a debt. However, the Code defines "debt" as a "liability on a claim". 11 U.S.C.A. § 101(12). Section 101(5)(A) of the Code defines a "claim" as a "right to payment, whether or not such right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured, or unsecured". Section 101(10) (A) of the Code, defines "creditor" as an "entity that has a claim against the debtor that arose at the time of or before the order for relief concerning the debtor". 11 U.S.C.A. § 101(10)(A). The order for relief concerning a debtor arises when the debtor's bankruptcy petition is filed. H. Rept. No. 95-595; H.R. 8200, 95th Conf. 1st Sess. at 315-16 (1977). Mr. Keil filed his Chapter 7 Bankruptcy Petition on February 2, 2005. The order for relief in Mr. Keil's bankruptcy case arose on February 2, 2005. The Attorneys' claim for costs did not arise before Mr. Keil filed his bankruptcy petition. Rather it arose out of his actions after he filed his bankruptcy petition. Specifically, the Attorneys' claim for costs arises out of Mr. Keil's Motion to Dismiss filed with the Court on April 1, 2005, almost two (2) months after he filed his bankruptcy petition. Courts have held that that a claim is a pre-petition claim if a right to payment becomes "vested" prior to the commencement of the bankruptcy case. Chiasson v. J. Louis

5

Case 1:04-cv-01114-PSF-OES

Document 80

Filed 07/25/2005

Page 6 of 10

Matherne & Assocs., 4 F.3d 1329, 1335 (5th Cir., 1993). The Attorneys' claims for costs in this case did not become vested prior to the commencement of Mr. Keil's bankruptcy case. In Mullen v. United States, 696 F.2d 470, (6th Cir., 1983) the court found a transaction did not meet the definition of a "claim" and recognized the requirement that there be a "right to payment" in order to have a claim under the Bankruptcy Code. In that case, an officer for the United States Air Force argued that the USAF had a "claim" against him within the meaning of the Automatic Stay provisions of Section 362 because the officer was not entitled to retirement benefits until 75% of his readjustment allowance had been repaid. Id. at 472. USAF argued that it merely has the right to recoup prepaid retirement benefits. Id. The court noted that because Section 101 of the code requires that there be a "right to payment" in order to have a claim, the Code's broad definition of "claim" should "not be read to encompass every monetary obligation unless Congress has evidenced such intent". Id. at 473. Here, the Attorneys did not even consider asking the Court for an award of costs until their response to Mr. Keil's Motion to Dismiss. Even then, the Attorneys had no right to payment of their costs. As the Court correctly held, the award of costs under Rule 54(d) (1) was not mandatory, but discretionary. (Citing AeroTech, Inc., v. Estes, 110 F.3d 1523, 15261527, (10th Cir. 1997). The $1,146.86 judgment for costs entered on June 29, 2005 was not a claim dischargeable in Mr. Keil's bankruptcy case. Assuming arguendo that the $1,146.86 judgment for costs entered on June 29, 2005 was a claim that could have been discharged in Mr. Keil's bankruptcy case, Mr. Keil's failure to list the Attorneys as creditors and his failure to give them the notices they would have

6

Case 1:04-cv-01114-PSF-OES

Document 80

Filed 07/25/2005

Page 7 of 10

been entitled to as creditors make the $1,146.86 judgment a debt that was not discharged in Mr. Keil's bankruptcy case. The Discharge of Debtor attached as an exhibit to the Motion clearly states that among the debts not discharged under a Chapter 7 Bankruptcy Case are "some debts not properly listed by the debtor." Rule 1009(a) of the Bankruptcy Code gives a general right to amend a schedule of liabilities. Fed. Rules Bankr. Proc. Rule 1009(a), 11 U.S.C.A. (2005). The rule provides that a schedule may be amended by the debtor at any time before the case is closed. Id. However, the debtor must give "notice of the amendment to the trustee and to any entity affected thereby" (emphasis added). Id. The Advisory Committee Notes

following the rule state that "[n]otice of any amendment of the schedule of liabilities is to be given to any creditor whose claim is changed or newly listed". Id. The Attorneys were not listed as creditors in Mr. Keil's original matrix of creditors. Mr. Keil did not even try to list the Attorneys as his creditors in his bankruptcy case until May 9, 2005. It was not until June 28, 1005 that Mr. Keil gave notice to the Attorneys that he had allegedly amended his Matrix of Creditors to add them as persons who had claims against him, which claims he wanted discharged in his bankruptcy. The Notes to Fed.RulesBankr.Proc. Rule 1009(a), 11 U.S.C.A. (2005). provide that if a schedule is amended to include an additional creditor, the effect of the dischargeability of the creditor's claim will be governed by the provisions of section 523(a) (3) of the Bankruptcy Code. Id. Section 523(a)(3)(A) provides that a discharge under the Bankruptcy Code does not discharge an individual debtor from any debt that is not listed or scheduled in time to permit "timely filing of a proof of claim unless such creditor had notice or actual knowledge of the case for such timely filing" (emphasis added). 11 U.S.C.A. § 523(a)(3)(A)

7

Case 1:04-cv-01114-PSF-OES

Document 80

Filed 07/25/2005

Page 8 of 10

(2005). Rule 3002(c) provides that in a chapter 7 liquidation, a proof of claim is timely filed if it is filed not later than 90 days after the first date set for the meeting of creditors. Fed.RulesBankr.Proc. Rule 3002(c), 11 U.S.C.A. (2005). See also In Re Black, 70 B.R. 645, 650 (Bankr. D. Utah, 1986). It was not until June 28, 2005 that the Attorneys had any notice that Mr. Keil considered them to be creditors who had claims against him that could be discharged in his bankruptcy case. This was 13 days after the Discharge was entered in Mr. Keil's bankruptcy and more than 45 days after the May 9, 2005 deadline by which the Attorneys could object to Mr. Keil's attempt to discharge those alleged claims. Mr. Keil cannot even pretend that he tried to list the Attorneys as creditors until he signed his Amended Verification of Creditor Matrix on May 9, 2005. Yet, Mr. Keil's argues that all creditors were properly noticed by the United States Bankruptcy Court that: 1. A hearing on behalf of Plaintiff's bankruptcy filing was to be held on March 9, 2005; 2. 3. Creditors had a right to be present at this hearing and protest or object; and, Creditors had 60 days until May 9, 2005 to file objections.

However, the notice sent to the Attorneys on or about February 18, 2005, attached as Exhibit A does no such thing. In fact, the last statement in the Notice sent to the Attorneys on or about February 18, 2005, states, "(y)ou may be a creditor of the debtor. If so, you will receive an additional notice from the court setting forth important deadlines." The Attorneys, as Mr. Keil's alleged creditors, have not received any notices from the Court concerning Mr. Keil's bankruptcy case, not even after he allegedly listed them as creditors in an amended Creditor Matrix.

8

Case 1:04-cv-01114-PSF-OES

Document 80

Filed 07/25/2005

Page 9 of 10

Because neither of the Attorneys had any notice or actual knowledge that Mr. Keil considered each a creditor in his bankruptcy case until June 28, 2005, the Attorneys' $1,146.86 judgment is not a claim that was discharged in Mr. Keil's bankruptcy under the terms of the June 15, 2005 Discharge. WHEREFORE, the $1,146.86 Judgment for Costs awarded the Attorneys against Mr. Keil on June 29, 2005 is valid and his Motion must be denied. Respectfully submitted this 25th day of July 2005.

BERENBAUM, WEINSHIENK & EASON, P.C.

______________________________ Richard E. Mishkin, Esq., #3805 370 17th Street, Ste. 4800 Denver, CO 80202 Telephone: (303) 825-0800 Attorneys for Defendants F. Eugene Westhafer and The Silverman Law Firm

9

Case 1:04-cv-01114-PSF-OES

Document 80

Filed 07/25/2005

Page 10 of 10

CERTIFICATE OF SERVICE I hereby certify that on July 25, 2005, I electronically filed the foregoing RESPONSE TO MOTION FOR RELIEF FROM JUDGMENT with the Clerk of the Court using the CM/ECF system which will send notification of such filing to the following e-mail addresses: served via U.S. Mail, postage prepaid on this 21st day of June, 2005 to the following: David G. Palmer, Esq. Kristi L. Blumhardt, Esq. GREENBERG TRAURIG, LLP 1200 17th Street, Suite 2400 Denver, Colorado 80202 [email protected] [email protected] Thomas F. Farrell, Esq. FARRELL & SELDIN 7000 S. Yosemite Street, Suite 120 Englewood, Colorado 80112 [email protected] and I hereby certify that I have mailed or served the document to the following non CM/ECF participants by mail, as indicated by the non-participant's name: Kenneth L. Keil ­ (Mail) 1507 E. 16th Street Loveland, Colorado 80538

s/ Richard E. Mishkin, Esq. BERENBAUM,WEINSHIENK & EASON, P.C. 370 17th Street, Ste. 4800 Denver, CO 80202 Telephone: (303) 825-0800 Fax: (303) 629-7610 [email protected] Attorneys for Defendants F. Eugene Westhafer and The Silverman Law Firm, P.C.

10