On Monday, January 13, 2014, the Supreme Court of the United States
("SCOTUS") will hear a landmark case concerning a bankruptcy court's
power to protect the bankruptcy process from abuse. In Stephen Law v.
Alfred H. Siegel, Chapter 7 Trustee, Mr. Law forfeited the privilege
of claiming a homestead exemption due to his attempt to retain
non-exempt equity in his home. Law listed a second mortgage on his
residence held by a non-existent "Lili Lin of China." The Supreme
Court's interest in the almost 10 year old EBG case, which has thus far
seen 14 appeals in various venues, seems focused on a circuit split over
the interpretation of 105(a), the section of the U.S. Code that grants
courts equitable powers to implement court orders or rules. The decision
will certainly change the way Bankruptcy Courts operate ging forward.
Mr. Law's conduct forced the Bankruptcy Trustee, Alfred Siegel, to spend
hundreds of hours (and approximately a million dollars) disproving the
existence of the second mortgage, and defending against Law's numerous
appeals. Bankruptcy courts have "broad authority" under Section 105(a)
of the Code and their inherent powers to "take any action that is
necessary or appropriate 'to prevent an abuse of process.'" The
Bankruptcy Court acted within its statutory and inherent authority in
finding that Mr. Law forfeited the privilege of claiming a homestead
exemption. It is up to SCOTUS to affirm this ruling.
Steven T. Gubner, Managing Partner at Ezra Brutzkus Gubner (EBG) and
Counsel of Record, in Stephen Law v. Alfred H. Siegel, Chapter 7
Trustee says, "Despite defending over 14 appeals, I am proud that
the Office of the United States Trustee, the Solicitor General, all the
prior courts, and my client Alfred Siegel, have not wavered in their
duty to ensure that Mr. Law's conduct not go unpunished." Trustee Alfred
Siegel adds, "We are extremely happy that over the past eight years all
the lower courts have agreed with us that Mr. Law's conduct justified
the surcharge of his homestead exemption." The two now hope SCOTUS will
confirm every lower courts' ruling.
Stephen Law v. Alfred H. Siegel, Chapter 7 Trustee (Case No.
12-5196) will be heard on January 13, 2014 at 11:30 AM EST. Neal Kumar
Katyal, Partner at Hogan Lovells and Co-Chair of its Appellate Practice,
will be arguing the case.
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