Commercial Banking, Collections, and Bankruptcy

Ct. of Appeals certified question to Wisconsin Supreme Ct. regarding whether wine dealerships are automatically considered as “intoxicating liquor” dealerships that are covered under Wisc. Fair Dealership Law (Act). Record showed that plaintiff terminated defendants’ dealerships that distributed plaintiff’s wine products, and plaintiff contended that it could do so because defendants’ dealerships were not covered by said Act that would otherwise require that any termination of covered dealerships be done only if plaintiff had established good cause to do so. As such, issue in case is whether definition of dealership contained in Wisc. Stat. section 135.02(3)(b) includes wine dealership relationship.

In bankruptcy proceeding, Dist. Ct. did not err in denying Trustee’s renewed request to avoid debtor’s $297 million transfer to group of debtor’s customers under 11 USC section 549 that was made few days after debtor had filed for bankruptcy protection. Ct. of Appeals, in prior appeal regarding same issue, found that: (1) section 549 relief was not available because Bankruptcy Ct. had authorized said transfer; and (2) Bankruptcy Ct.’s subsequent order indicating that it had not intended to foreclose section 549 avoidance action did not defeat language of its prior order authorizing said transfer. As such, under mandate rule and law of case doctrine, Dist. Ct. could not revisit instant section 549 issue, even though Trustee had argued that creditors were collaterally estopped from arguing that instant post-petition transfer was authorized. Dist. Ct. erred, though, in treating $25 million held in reserve/trust under confirmed bankruptcy plan was property belonging to bankruptcy estate that was subject to pro-rata distribution to all of debtor’s creditors instead of to creditors/customers identified in instant trust, since: (1) under confirmed plan, identified creditors/customers of debtor preserved their right to recover their trust property; and (2) unrebutted evidence indicated that instant customer was able to trace portion of reserve funds back to its investment with debtor.

Dist. Ct. did not err in finding that defendants-certain former Emerald Casino officers/shareholders in instant Bankruptcy Ct. adversary proceeding breached contracts they had with debtor-Casino that resulted in Illinois Gaming Bd.’s decision to revoke Casino’s gaming license. Relevant shareholder’s agreement with Casino required defendants to comply with all of Bd.’s rules and to not commit acts that would jeopardize renewal of Casino’s license, and record showed that: (1) defendants violated said rules by failing to disclose either agreements to relocate Casino, construction contracts for new location and/or stock transfers among shareholders; and (2) Bd. cited instant rule infractions when revoking Casino’s gaming license. While defendants argued that requisite causation had not been established because Dist. Ct. had failed to find that any individual defendant’s failure to disclose information to Bd. caused Bd. to investigate and revoke gaming license, Dist. Ct. could properly find that: (1) each rule violation was material element and substantial factor in Bd.’s decision to revoke Casino’s license and that all defendants were responsible for at least one violation; and (2) Bd.’s decision to revoke Casino’s license was foreseeable to all defendants given Bd.’s authority to revoke gaming licenses under Ill. statute and given language in contract prohibiting defendants from not committing acts that would jeopardize Casino’s gaming license. Also, Dist. Ct. did not err in valuing Casino’s license at $272 million based in 2008 bid for license, although Dist. Ct. erred in failing to make each defendant jointly and severally liable for said damage figure.

Record contained sufficient evidence to support Bankruptcy Ct.’s order disbarring attorney Al-Haroon B. Husain after U.S. Trustee claimed that Husain’s filings regularly failed to include debtor’s genuine signatures, and where record showed that Husain as matter of routine signed client-debtor’s names to documents requiring debtors to verify statements under penalty of perjury and copied and reused clients’ signatures to documents that they had not seen. Ct. rejected Husain’s claim that his conduct did not merit disbarment or that disbarment was too harsh because other practitioners had committed similar infractions. Ct. further rejected Husain’s contention that his clients had authorized him to sign their names. Ct., though, remanded to Dist. Ct. for consideration of Husain’s appeal of Bankruptcy Ct.’s contempt finding regarding Husain’s failure to follow Bankruptcy Ct.’s directive to refund fees he had collected from 18 clients, where Dist. Ct. judge had yet to act on issues raised in said appeal.

Dist. Ct. did not err in affirming Bankruptcy Ct.’s order finding that claims made by creditors who had executed retail foreign currency and spot metal transactions with debtor (future commissions merchant) were not entitled to same priority given to claims qualifying as “customer property,” which are entitled to priority over all other claims. Bankruptcy Ct. could properly conclude that foreign currency and spot metal transaction did not constitute “commodity contracts” for purposes of including said transactions into customer property category.

Dist. Ct. did not err in dismissing on res judicata grounds plaintiff’s Fair Housing Act action, alleging that defendants had wrongfully foreclosed on his home, where state court had previously approved final judicial sale of plaintiff’s home as part of defendants’ foreclosure action against plaintiff. Plaintiff conceded in state court action that instant lawsuit concerned same “events and actions” at issue in state court foreclosure action that pertained to plaintiff’s defaulted mortgage, as well as his claims that he had actually made payments on said mortgage. Moreover, other elements of res judicata had been established, where: (1) parties were same or in privity in both actions; and (2) state court judgment was final. Ct. further noted that plaintiff actually presented matters at issue in instant lawsuit while litigating state-court foreclosure action.

In action by plaintiff-debtor alleging that defendant-debt collector violated venue provision of Fair Debt Collection Practices Act (FDCPA), 15 USC section 1692i, Dist. Ct. erred in granting defendant’s motion for summary judgment, where defendant initiated debt collection action in wrong venue as explained in Suesz, 757 F.3d 636 (7^th Cir. 2014). Ct. of Appeals rejected defendant’s claim that it was entitled to safe harbor provision of FDCPA that would excuse instant infraction since at time it initiated debt collection action instant venue was permissible under Newsom, 76 F.3d 813 (7^th Cir. 1996), where Supreme Ct. in Jerman, 559 U.S. 573, held that FDCPA’s statutory safe harbor for bona fide mistakes did not apply to mistakes of law. Also, under Jerman, Dist. Ct. could not find that safe harbor provision protected some mistakes of law that were based on established case law that was later overruled as mistake. (Dissent filed.)

In action concerning dispute over home mortgage loan, record failed to support Dist. Ct.’s order finding as part of settlement of instant dispute that plaintiff had agreed to release any claims he had against another bank, as well as trust company, neither of which had been party in instant action. Dist. Ct. could make no such finding because it had failed to conduct evidentiary hearing on matter. As such, remand was required to conduct such hearing.