Commercial Banking, Collections, and Bankruptcy

Dist. Ct. did not err in awarding plaintiff $778,306.70 in lost profits arising out of defendant’s breach of distribution contract that restricted defendant from making direct sales of its silos to customers in area covered by agreement. Although defendant argued that plaintiff could not recover any lost profits due to provision in agreement that precluded plaintiff from obtaining recovery of any lost profits arising out of breach of instant agreement, Dist. Ct. could properly find under Wisconsin case law that plaintiff could recover lost profits, where instant limitation of remedies clause violated Wisconsin statute (section 402.719), since: (1) said clause failed of its essential purpose because said clause provided plaintiff with no remedy for instant breach of agreement; and (2) under section 402.719, Dist. Ct. could therefore consider all UCC remedies, including lost profits as damages arising out of instant breach of parties’ agreement. Moreover, defendant’s request to certify instant damages question to Wisconsin Supreme Ct. is inappropriate, since: (1) said court has previously found that limitation of consequential damages provision is per se unconscionable where, as here, it fails of its essential purpose; and (2) certification of issue is proper only if state supreme court had not resolved said issue. Fact that other state courts had taken different approach to instant limited remedy clause, or that defendant argued that Wisconsin Supreme Ct. would reconsider its stance in view of said state-court rulings did not require different result.

Dist. Ct. did not err in entering sanctions order that held debtor’s attorney and debtor jointly and severally liable to creditor for $1,837.50 under Fed. R. Bankr.8020 and 28 USC section 1927. Bankruptcy Ct. could properly find that debtor’s attorney filed separate Chapter 13 petitions for improper purpose of thwarting debtors’ creditors, rather than paying them, where intent on filing said petitions was to re-litigate one creditor’s successful state-court foreclosure judgment on debtor’s home. Also, sanctions were appropriate, where debtor’s attorney never presented argument as to why Bankruptcy Ct.’s determination was clearly erroneous, and debtor’s attorney failed to file any opening brief in appeal of dismissal of debtor’s petition, even though appeal had been pending for 16 months. Moreover, counsel improperly used automatic stay provision in 11 USC section 362(a) as litigation ploy to drag out state-court foreclosure proceedings and filed series of last-minute extension requests to further delay proceedings. Also, Dist. Ct. did not err in eventually suspending counsel’s law license to practice in W.D. Wis., where said suspension was based on Wis. Supreme Ct. order suspending counsel’s law license for one year. Ct. further observed that suspension would also have been appropriate if based on counsel’s actions taken in this and other federal court cases.

Ct. of Appeals certified question to Illinois Supreme Court as to whether debtor in Chapter 7 bankruptcy proceeding can assert as exemption under section 21 of Illinois Workers’ Compensation Act proceeds to her workers’ compensation claim that was pending at time she had filed her bankruptcy petition, but was settled two days after she had filed said petition. Bankruptcy Ct. and Dist. Ct. denied said exemption, after concluding that use of any workers’ compensation exemption to thwart instant class of medical creditors who provided treatment for debtor’s work-related injuries would frustrate purpose of Illinois Workers’ Compensation Act. Ct. of Appeals, though, noted that section 21 of Illinois Workers’ Compensation Act has been interpreted by bankruptcy courts to create exemption for workers’ compensation claims, and that question remained to be answered by Illinois Supreme Court as to whether Illinois Workers’ Compensation Act as altered by 2005 amendments allowed instant care-provider creditors to reach proceeds of debtor’s workers compensation claim.

Dist. Ct. did not err in granting plaintiff’s motion for summary judgment, alleging that defendant breached contract that gave plaintiff exclusive distribution rights to sell defendant’s medical bed as long as plaintiff submitted minimum number of orders for said bed. Defendant failed to file response to plaintiff’s summary judgment motion, which otherwise indicated that plaintiff had submitted requisite number of orders to retain instant exclusivity rights. Moreover, Dist. Ct. did not err in granting plaintiff’s motion to amend its complaint to add damages claim, even though said motion was filed after plaintiff had obtained instant summary judgment order. Record supported finding that defendant could have foreseen plaintiff’s consequential damages caused by instant breach, where plaintiff’s representative made clear during contract negotiations that plaintiff needed exclusivity rights to make agreement worthwhile and to allow plaintiff to develop customer base. Also, Dist. Ct. could properly calculate damages by estimating fair market value for agreement at time of breach and then reducing expected profits by 10.08 percent to account for market risk and uncertainty.

Bankruptcy Ct. erred in denying City of Chicago’s requests to vacate orders keeping debtors’ vehicles in debtors’ bankruptcy estates, where said requests had been filed after Chapter 13 payment plans had been established, and where: (1) debtors had incurred almost $12,000 in traffic-related fines while vehicles were in bankruptcy estates; and (2) inclusion of said vehicles in bankruptcy estates meant that City would not get paid for said fines and automatic stay of 11 USC section 362 prevented said vehicles from being towed. Generally, under 11 USC section 1327(b), confirmation of payment plan vests all property in bankruptcy estate to debtor, and Bankruptcy Ct. failed to state why debtors’ vehicles had to remain in bankruptcy estate. Moreover, point of returning property to debtors is to ensure that debtors pay ordinary and necessary expenses of maintaining their property, and Ct. rejected proposition that Chapter 13 permits debtors to use particular assets (i.e. vehicles) to earn money without paying for assets’ expenses.