Metropolitan News-Enterprise

 

Friday, June 11, 2021

 

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Ninth Circuit Rejects Lenore Albert’s Plea to Retain Assets Despite Chapter 7 Bankruptcy

 

By a MetNews Staff Writer

 

Lenore L. Albert, a controversial figure who regained her law license on April 21 after a series of disciplinary suspensions, yesterday lost her bid in the Ninth U.S. Circuit Court of Appeals to hold on to certain assets despite being in Chapter 7 bankruptcy.

Judge Consuelo M. Callahan wrote the opinion which affirms a determination by the Bankruptcy Appellate Panel (“BAP”). Affirmance can be grounded, Callahan said, simply on the basis of the Bankruptcy Court for the Central District of California having denied the exemptions that Albert sought after having previously denied those very exceptions.

Albert contended that the U.S. Supreme Court’s 2014 opinion in Law v. Siegel bars the denial of exemptions based on the judicially created doctrines of issue and claim preclusion. There, Justice Antonin Scalia (now deceased) wrote that in exercising its “statutory and inherent powers, a bankruptcy court may not contravene specific statutory provisions.”

Opinion Misread

Callahan said that Albert has misread Law, explaining:

“The debtor in that case unquestionably qualified for the disputed exemption under California’s exemption statutes….But based on the debtor’s misconduct, the bankruptcy court decided to apply the exemption’s value to fees the trustee had incurred sorting out the situation.…The Supreme Court reversed. Pointing out that the Bankruptcy Code prohibits using exemption funds for administrative expenses like the trustee’s fees, the Court held that the bankruptcy court lacked authority to ‘surcharge’ the debtor’s exemption.”

She said that “because no Code provision bars bankruptcy courts from deeming prior orders preclusive, the conflict animating Law is not present here.”

Albert, citing California law, sought to exempt her state-court cross-complaint for personal injuries against Ford Motor Credit Company and moneys owed to her by former clients, estimating the value of each to be “$500,000 TBD.” Callahan said of the initial denial of the exemptions:

“As Albert appealed those orders too late to the BAP, and never to this court, they are binding, even if Albert believes them wrongly decided.”

She added:

“[U]nlike Law, where the debtor was statutorily entitled to the exemption, here Albert, by operation of the earlier orders, is not. Nothing in Law prevented the bankruptcy court from giving preclusive effect to that determination.”

Duplicate Issues

The issues were the same the second time Albert sought the exemptions as they were in the first instance, Callaghan said, notwithstanding that the bankrupt in her second effort estimated the claim against Ford to be $1.93 million.

“It is unclear where she got this number, considering that Ford settled for $167,500, but the change is immaterial,” the jurist remarked.

Albert was relying on California’s Code of Civil Procedure §704.140 which provides that “an award of damages or a settlement arising out of personal injury is exempt to the extent necessary for the support of the judgment debtor and the spouse and dependents of the judgment debtor.”

Callahan wrote:

“Whatever the estimated value of Albert’s counterclaims, she had to show that the amount she claimed as exempt would be necessary for her support….So regardless of whether the claims remained contingent or had been reduced to a settlement post-petition, Albert’s interest in them remained the same.”

The bankruptcy judge had found that Albert did not need the funds for her support.

The case is In re Albert, 20-60006.

 Albert has been a party to numerous legal proceedings. Yesterday’s Ninth Circuit decision comes one year, to the day, after its ruling that reinstatement of her State Bar license may not be conditioned on her payment of $5,738 in discovery sanctions, a debt that was dischargeable in bankruptcy.

However, Circuit Judge Patrick J. Bumatay wrote for a three-judge panel, “Albert’s $18,714 debt to the State Bar is non-dischargeable.” That debt was based on sanctions imposed on her.

Albert was an unsuccessful candidate for the state Assembly in 2016, for Orange County district attorney in 2018, and for the chairmanship of the state Democratic Party in 2019.

 

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