Litigating on a Budget

LITIGATING ON A BUDGET:

Panel: Stephen Berken, Esq., Honorable Joseph Rosania, D. Colo.,

Cynthia Kennedy, Esq.

I. Analyzing Your Case

A. Research Your Claims and Defenses

1. Is there a State Court or Administrative Judgment/Ruling/Determination which may bar your claim/defense? Or give you a basis for a Motion to Dismiss? People (and entities) come to bankruptcy court with creditors in tow. Often there are proceedings elsewhere which will define your offensive/defensive options:

a) Rooker-Feldman. If there is truly a state court judgment which has ruled on the matter at hand, it is determinative. This is jurisdictional.

b) Res Judicata. Both offensive and defensive res judicata claims can be waived. Use it or lose it. This is one circumstance where YOU MUST bring the pre-trial motion.

c) Collateral Estoppel. Same as res judicata above. Don’t wait until trial or closing to add this issue.

See full article included in materials.

2. Does the Complaint State a Cause of Action?

a. Motion for Judgment on the Pleadings - Fed.R.Bankr.P. 7012(c)

i. A Motion for Judgment on the Pleadings can be a cost effective strategy for a plaintiff to the extent that, based upon the pleadings alone, plaintiff is entitled to judgment as a matter of law; the process provides for a shortcut to judgment in the event that a judgment can be rendered based upon the allegations in the pleadings alone.

ii. A Motion for Judgment on the Pleadings should be filed after the case is at-issue, and must be filed early enough not to delay trial.

iii.A Motion for Judgment on the Pleadings is treated as a request for summary judgment if the court is to consider matters outside of the pleadings. See Fed.R.Bankr.P. 7012(d). However, if the matter is referenced in the pleadings (i.e., a contract) or is external to the claims (i.e, jurisdictional), the “outside the pleadings” rule may not apply.

iv. Special matters (e.g., fraud) must be pled with specificity under Fed.R.Bankr.Proc. 7009. If not pled properly, consider a motion for failure to state a claim or for judgment on the pleadings. Fraud is one area where it may be better to raise the issue earlier rather than have to litigate the issue at trial.

b. Vague Claims. Some claims have traditionally been so vague they were hard to get a court to dispose of early, such as alter ego cases. The cases of Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 561 (2007) and Ashcroft v. Iqbal, 129 S. Ct. 1949 (2009) created a new standard for assertion of claims—the complaint must state a facially plausible set of facts meeting the elements of the claim.

SinceTwomblyandIqbal, courts routinely reject attempts to pierce the corporate veil when the complaint contains only conclusory allegations.See Madison Cnty. Commc’ns Dist. v. Century Link, Inc., 2012 WL 6685672 (N.D. Ala. Dec. 20, 2012);Mark IV Transp. & Logistics, Inc. v. Lightning Logistics, LLC, 2012 WL 4506470 (D.N.J. Sept. 28, 2012);Landmark Ventures, Inc. v. Wave Systems Corp., 2012 WL 3822624 (S.D.N.Y. Sept. 4, 2012);Legal Additions LLC v. Kowalski, 2010 WL 335789, at *6 (N.D. Cal. 2010);Partners Coffee Co., LLC v. Oceana Servs. & Prods. Co., 700 F. Supp. 2d 720, 736 (W.D. Pa. 2010).

State courts are beginning to adopt this higher standard of pleading. See e.g., Warne v. Hall, 2016 CO 50, 373 P.3d 588, 590 (Colo. 2016).

3. Know the Elements. You Need to Prove/Defend Against—this will help you tailor yourdiscovery and focus your efforts.

4. Burden of Proof. Which side has the initial burden of going forward and which the ultimate burden of persuasion? See e.g., In re Anthem Communities/ RBG, LLC, 267 B.R. 867 (Bankr. D. Colo. 2001)(Bank’s insufficient evidence to meet burden of going forward determinative; Debtor’s reciprocal burden to show adequate protection not invoked). Is there a possibility of shifting the burden? Are any rebuttable presumptions involved?

B. What Evidence Will It Take to Prove/Defend Your Case.

1. Think up Front. Figure out early what kind of evidence you need to prove or disprove each element and whether you will need expert testimony to get there.

2. Think About Expert Testimony. Now is time to think about what elements require expert testimony. Accountants may not be required (a judge can do math), but may make the presentation of damages much easier; whereas you may absolutely need them for monetary conversion figures or historical stock prices, for example. Experts can be anyone from the computer repair person who can testify the debtor’s records were destroyed in a computer failure (relevant re 727 claim of lost records), to an auctioneer rendering a liquidation value, to an economist projecting farm yields and interest rates, to a medical doctor testifying on a student loan hardship discharge case.

C. Can You Win? Try to be objective. All our clients are morally outraged at their circumstances and although our position is to be advocates, bankruptcy attorneys are pragmatists and we best represent our clients when we have the appropriate distance from the issues.

D. Prepare a Budget

1. Think it Through.Think through the entire case and attempt and prepare a reasonable outline of fees and costs anticipated and allowances for contingencies.

2. Talk to the Client.Sit down and discuss the budget with the client so that any determinations to increase or adjust expenditures are made with the client knowing the exposure and risk of, for example, going without an expert.

3. Consider Settlement. Consider the value of settlement as opposed to the cost and uncertainty of trial. Advise client of all non-litigation alternatives. This is where long experience and creativity come in.

II. Preparing Your Case

A. Discovery

1. Proportional Discovery is now the expectation. Cull those “kitchen sink” interrogatories and requests and focus on the documents you need to prove/disprove the elements of the case.

2. Narrowly Tailored discovery requests accomplish two things. First, the opposing side is more likely to respond to them instead of devise blanket objections. Second, when you go before the judge (if necessary) on a discovery issue, you look reasonable and are more likely to get what you need.

3. Know Your Court/Judge.LOOK UP THE WEB SITE FOR YOUR JUDGE/COURT. Most courts/judges now have streamlined methods for resolving discovery disputes.

4. Investigate. You can call those witnesses on the other side’s list. You can do internet searches, property searches, etc.

B. Document Subpoenas

1. Third Party Subpoenas.Get documents directly from the source, i.e., serve the bank directly for the bank’s records relating to the debtor’s checking account. Getting documents directly from the source assures they are complete and accurate.

2.Under Fed.R.Civ.P. Rule 45, a subpoena must:

(i)state the court from which it is issued;

(ii) state the title of the action and civil action number;

(iii) command each person to whom it is directed to do the following at the specified time and place: attend and testify; (and/or)produce designated documents, electronically stored information, or tangible things in that person’s possession, custody, or control; or permit the inspection of premises; and

(iv) set out the text of Rule 45(d) and (e).

3. Issuance.A subpoena may be issued by the court clerk or an attorney who is authorized to practice in the issuing court. Fed.R.Civ.P. 45(a)(3). A copy of the notice of subpoena must be served on all parties prior to the subpoena being served on the party to whom the subpoena is directed. Fed.R.Civ.P. 45(a)(4).

4. Limitations. When serving a subpoena for documents, keep in mind that the rules impose limitations on where the subpoena may command production of documents. Specifically, a subpoena may only be issued within 100 miles of where the person resides, is employed, or regularly transacts business in person. Fed.R.Civ.P. 45(c)(2).

C.Depositions

1.Depositions May or May Not be Necessary.

a. Experts. See the attached article on Real Property Valuations regarding depositions of appraisers. There are times when the best strategy is not to depose the other side’s experts, particularly if the deposition might expose the weakness in their theories.

b. Fact Witnesses. With regard to fact witnesses, it rarely hurts to know what the other side is going to say ahead of time and a deposition pins them down and avoids surprises at trial. If the deposed party does not testify as expected at trial, you can use the deposition to refresh a witness’s recollection or for impeachment purposes. Impeaching witnesses reduces their credibility. Remember the golden rule: If you don’t know the answer, don’t ask the question. Depositions are also very useful to determine which exhibits you will need help authenticating. 2. Deposition Strategies. This is not the time to prove your case to the other side. It is the time to obtain information and narrow issues. Use a circular technique where you move through a subject, let the deponent breathe a sigh of relief that you are done with that area, and then circle around to the killer questions latter when he/she is off guard. You can always cut and paste for trial prep.

3. Uses of the Deposition. Pursuant to Rule 7032, Fed. R. Bankr. P., at a hearing or trial, generally, all or part of a deposition may be used against a party if the party was present or represented at the deposition and had reasonable notice of it, if it would be admissible under the Federal Rules of Evidence if the deponent were present and testifying, and the use is otherwise allowed under the Federal Rules. Fed. R. Bankr. P. 7032(1). Additionally, deposition testimony can be used for impeachment purposes or for any purpose if the court finds that the witness is dead, the witness lives more than 100 miles away from the hearing or trial, the witness cannot testify because of age, illness or incarceration or the witness’s attendance could not be procured at the hearing or trial through use of a subpoena. Fed. R. Bankr. P. 7032(2) and (4).

4. Budget Considerations. For Out of State Witnesses consider telephonic depositions.

III. Post-Discovery/Pre-Trial Matters

A. Motion for Summary Judgment – Fed.R.Bank.P. 7056

1. Undisputed Facts. A Motion for Summary Judgment can be cost effective if the disputed issue is solely a legal issue and the parties agree to stipulate to all issues of fact.

2. Factual Issues.If factual issues exist for the trier of fact, a Motion for Summary Judgment is generally not the most cost effective approach as courts routinely deny these motions on the basis that there are material facts in dispute which prohibit entry of summary judgment.

3. Reasons to File It Anyway. However, a Motion for Summary Judgment results in each party presenting its best case—you are forced to really analyze and apply the legal elements to your evidence. You get to know what evidence the other side has to create the “question of fact”. This information can be invaluable both to let you know the weaknesses in your own case and those of the opponent. The resulting analysis can lead to meaningful settlement discussions.

B. Motion to Strike

1. Redundant or Scandalous Material.A Motion to Strike can also be a cost effective way to eliminate evidentiary issues related to an insufficient defense or any “redundant, immaterial, impertinent, or scandalous matter.” However, in a trial to court one may presume the judge is ignoring such improper filings.

2. Timing. A Motion to Strike may be raised by the court or by a party before responding to the pleading. Consider a Motion to Strike for pleadings or filings that are not timely filed.

3. Failures to Disclose Witnesses or Exhibits

a. Pursuant to Fed.R.Civ.P. 37(c), in the event a party fails to provide information or identify a witness as required by Fed.R.Civ.P.26(a), the party is “not allowed to use that information or witness to supply evidence on a motion, at a hearing, or at a trial, unless the failure was substantially justified or is harmless.” Fed.R.Civ.P. 37(c)(1), Fed.R.Bankr.P. 7037. b. “The determination of whether a Rule 26(a) violation is justified or harmless is entrusted to the broad discretion of the district court.” Woodworker’s Supply, Inc. v. Principal Mut. Life Ins. Co., 170 F.3d 985, 993 (10th Cir.1999).

c. A Motion to Strike based on timeliness can be a cost effective way to narrow issues for trial and limit time spent at trial.

C. Motion in Limine. Such motions are used primarily in jury trials where preventing the trier of fact from seeing the evidence is important because of its prejudicial nature. Most bankruptcy related trials are in front of judges; however, if the elimination of large amounts of evidence can be accomplished by motion, it may save time and cost at trial.

IV. Presenting Your Case—General Tips

A. Testimony

1. Owner Testimony. "A person may testify as a lay witness only if his opinions or inferences do not require any specialized knowledge and could be reached by any ordinary person." LifeWise Master Funding v. Telebank, 374 F.3d 917 (10th Cir. 2004); Doddy v. Oxy USA, 101 F.3d 448 (5th Cir. 1996). "Admittedly, the law permits the owner of a business to give his lay opinion as to the business' value.” James River Ins. Co. v. Rapid Funding, LLC, 658 F.3d 1207, 1216 (10th Cir. 2011). But seeIn re Behrends, 2017 Bankr. LEXIS 3674 (Bankr. D. Colo. Apr. 10, 2017). “[T]he Court determines the weight and credibility of [debtor’s] testimony. Based on the surrounding circumstances, the Court does not find Debtor's valuation testimony credible."

2. Prepare Your Witnesses. This should be obvious, but is time consuming. You need to take the time.See Witness Demeanor below.

B. Getting Documents into Evidence

1. Request for Judicial Notice – F.R.E. 201: If a fact of your case is not subject to reasonable dispute and generally known or capable of determination through sources that cannot reasonably be disputed, a request for judicial notice of a fact can be a cost effective way to get evidence before the court.

2. Self-Authenticating Documents – F.R.E. 902: If you are using a document under seal, a certified document or acknowledged document, etc. (see F.R.E. 902(1-12)), it is important to note that extrinsic evidence of authenticity is not required to admit certain documents into evidence. Therefore, the use of these documents can be cost effective in lieu of a witness to authenticate the document.

3. Authentication. The first objection may be that the document has not been authenticated. Federal Rules of Evidence (FRE) 901 and 902 govern authentication.

a. FRE 901 (a) states that evidence is authenticated if there is “evidence sufficient to support a finding that the matter in question is what its proponent claims.” FRE 901 (b) then provides a list of potential ways that a litigant can satisfy this standard. Perhaps the easiest way to authenticate a document or data is under FRE 901(b)(1), which simply stares that a witness with personal knowledge testifies that the document is what it is claimed to be.

b.An alternative is 90l (b)(4), which refers to distinctive characteristics. This rule states that evidence may be authenticated by appearance, content, substance, internal patterns, or other distinctive characteristics, taken in conjunction with circumstances.

4. Internet Materials. A website posting found at a distinctive Web address might be enough to satisfy the evidentiary burden of showing authenticity. The burden then shifts to the other side to challenge the authenticity. You may be able to forgo this examination of your client if the document you wish to admit is “self-authenticating” under FRE 902. Rule 902 says that extrinsic evidence of authenticity as a condition precedent to admissibility is not required with respect to the following:

(4) Certified copies of public records.

(5) Official publications. Books, pamphlets, or other publications purporting to be issued by public authority.

(6) Newspapers and periodicals. Printed materials purporting to be newspapers or periodicals.

You may also apply FRE 201 (b), Judicial Notice, to authenticate internet materials. The rule allows a fact to be introduced into evidence if the truth of that fact is so notorious or well known, or so authoritatively arrested, that it cannot reasonably be doubted. The source does not necessarily have to be produced in court, but just identified by the witness as the website used to find the evidence of value for the property-although a printout of the website data is more helpful.

5. Hearsay. Most of the evidence presented on property will be based on out-of-court statements offered to prove value. There are some exceptions that will help get around the hearsay objection.

a. FRE 803(8) Public Records, etc. addresses public records or reports: records, reports, statements or data compilations for a public office on matters as to which there was a duty to report. This rule could apply to tax assessor statements for real property or other government records.

b. FRE 803(17) is an exception for market reports (think MLS for realtors) and commercial publications. If the evidence you wish to present is a marker quotation, tabulation, directory, or other published compilation and is generally used or relied upon by the public or persons in particular professions, you will get by the hearsay objection. Many of the forms of data discussed below for real estate, automobiles, and stock fir nicely into the hearsay exception FRE 803(17).

6. RelevanceFRE 401, 402. You will not draw an objection if you make sure the information in the documents you intend to use bears on the issues before the court.

7.Original Document/Best Evidence FRE 1002. To prove the content of a writing, the original is required with some exceptions, most notably, duplicates (FRE 1003) and public records (FRE 1005). This rule applies most commonly to contracts, wills, leases, and things of that nature where the actual terms of the document itself are debated. You can expect that a copy of a buy-sell agreement for a business and a purchase agreement for an automobile or home may be objected to under FRE 1003. Have originals of those types of documents available.

C. Objections

1. Well Placed Objection is Priceless. Even a veteran litigator can lose their train of thought at an evidentiary objection and never get back to the essential question. You don’t want to annoy the judge, but objections can be very effective. The secret is to know ahead of time which battles you are prepared to take on.

2. But Don’t You Let an Objection Fluster You. Because you have thought out the evidentiary basis for every exhibit you have, you will not be caught off guard. The secret both to well-placed objections and to addressing those tossed out at you, are in the Rules of Evidence. Take the time to read through and find the basis for your exhibit.