Mercedes Benz USA is to pay aver $400,000 for the initial $6,000 dispute.

Lemon Law Update: Some Manufacturers just don’t get it: they are responsible for the attorney fees if they lose their lemon law case. In Hinkley v. Mercedes-Benz USA, the original dispute of approximately $6,000 turned into a legal battle over $400,000 legal fees and the manufacturer ultimately lost in the Wisconsin Court of Appeals upheld the award of attorney fees of over $400,000. Let it be the lesson for the savvy manufacturers that if the consumer is able to show a pri-facia lemon law case, they need to settle rather quickly and avoid a potential lengthy and costly dispute, that could dent their pocket for both parties’ counsel fees.

Reagon-Dykes Auto Group Bankruptcy may be bad-facts/bad news for honest auto dealers.

Another out-of-trust dealer files for Chapter 11 Bankruptcy in an attempt to protect its assets and keep operating or orderly liquidate. Last week, on August 1, 2018, Reagor-Dykes Auto Group, a franchised Ford Dealer of Lubbock, Texas filed for Chapter 11 bankruptcy in Texas. The voluntary petition was filed in the Bankruptcy Court for the Northern District of Texas. The court’s docket showed at least 6 related cases for Reagor-Dykes related company. Case Number are 18-50214-rlj11, 18-50215-rlj11, 18-50216-rlj11, 18-50217-rlj11, 18-50218-rlj11, 18-50219-rlj11. As of this morning, many creditors filed their appearances and the cases are to be jointly administered. The hearing on the Debtor’s motion to use cash collateral to pay salaries and some other obligations is set for hearing on August  16, 2018.

The filing stems from the dealer’s default on its obligation on floor-plan financing. According to Ford, the dealer defaulted on $41 million in floor plan financing. Allegedly, the dealer was also falsifying the financing paper and double financing the same assets multiple times. The parties are expected in court this week to start the proceeding and the dealer will try to keep its door open and to prevent Ford from repossessing or otherwise moving the collateral from the dealer’s location. The filing is a stark reminder of the common occurrence from about 10 years ago, when during the financial crisis of 07-09, many dealers were unable to meet their obligation under their flor plan loans and cripple defaults were very common though-out the country. While many dealers, especially large one, were able to file for bankruptcy and emerge at somehow controlled liquidation or reorganization, many others were simply “left to die,” when their floor-plan lenders, often in panic, repossessed or removed their inventory.

We will closely monitor the case and its development simply because the above dealer is one of the Ford’s largest and most prestigious dealer in the nation. Let us hope that a set of bad facts does not bring out a set of bad law, as other honest and hardworking auto dealers might be detrimentally affected by this case, especially if they find themselves in need of a bankruptcy filing.

Penalty Relief for Partnerships That Filed Late in 2017

The IRS recently issued guidance providing penalty relief for certain partnerships that did not file the required returns in 2017 for the 2016 tax year.

Notice 2017-47 provides penalty abatement for these partnerships only if certain circumstances apply:

1. The partnership filed the returns with the IRS and furnished Schedule K1 to its partners (as appropriate) by the date that would have been timely, or
2. The partnership filed Form 7004 to request an extension by the date that would have been timely before the deadline change.

This is a great chance to clean up tax liability exposure.  

Filing a tax return after the assessment by the IRS will not be considered a “proper tax return” under Beard standard and would not make the tax debt dischargeable.

Filing a tax return after the assessment by the IRS will not be considered a “proper tax return” under Beard standard and would not make the tax debt dischargeable.

The 3^rd Circuit court has just decided a case regarding the dischargability of the tax debt, when a taxpayer files his “tax return” after the Service assesses the tax deficiency. The court held that under the long standing Beard v. Commissioned of Internal Revenue case, the tax payer failed the fourth requirement of the test to make “. . . a  honest and reasonable attempt to satisfy the requirements of the tax law.”  The court rejected the approach adopted by the Eighth Circuit in In re Colsen that the “reasonable attempt . . . focuses of the content of the form, not on the circumstances of its filing.” Therefore, the court concluded that the tax payer’s forms 1040 were not a return for 11 U.S.C. 523(a)(1)(B) purposes and could not be discharged. Following the same reasoning, the failed attempt to file a “return” would not start a Statue of Limitation for collections’ purposes of the tax debt and the Service could try to collect any time. IRC 6502.

Thomas Giacchi v. U.S. Department of the Treasury Internal Revenue Service.

NJ to allow lawyers without a true physical location to practice in the state.

NJ finally reconsidered its long-standing requirement ( Rule 1:21-1(a)) of a physical or, in the words of the rules, “bona fide” office location in the state. Effective February 1, 2017, the rule change allows a virtual office under a few conditions. 

First, the practitioner “must structure his or her practice in such a manner as to assure, as set forth in RPC 1.4, prompt and reliable communication with and accessibility by clients, other counsel, and judicial and administrative tribunals before which the attorney may practice.” 

Second, the practitioner must designate a physical location for the record keeping and document request purposes. 

Third, the practitioner must “designate the Clerk of the Supreme Court as agent upon whom service of process.” 

Forth, the attorney must employ [t]he system of prompt and reliable communication . . . [that may be] achieved through maintenance of telephone service staffed by individuals with whom the attorney is in regular contact during normal business hours." 

Finally, the attorney “shall be reasonably available for in-person consultations requested by clients at mutually convenient times and place.”

This is a big win for out of state providers, who could not afford or did not wish to maintain a burdensome physical location in the state. However, many serious practitioners would probably opt for an actual physical office in the state to impress their clients. I am sure that most clients will care.

Mortgage payments cannon be discharged in a bankruptcy, when deeply interconnected with family support obligations.

In my consumer bankruptcy practice, I often encounter questions regarding the dischargeability of financial obligations. A person on the phone or face-to-face, usually at the first meeting or case evaluation, wants me to draw a quick conclusion and tell from a simplified fact pattern, if the debt is dischargeable or not. I am often pressed to decline a quick answer, unless I am presented with a full set of all relevant fact.

Just like in the case below, I was asked to research, if a mortgage obligation could be discharged, when a couple specifically agreed in the preceding divorce to maintain a house, to make the mortgage payments, and to allow their teenage kids to live there and attend their school district. I came across the case from the Bankruptcy Court in the Western District of Pennsylvania that addressed my issue head-on. Obligations to make mortgage payments and to pay child support coupled with physical placement of child in mortgaged property make the payments of the mortgage a non-dischargeable domestic support obligations. In re Price, No 15-07012-JAD, 2015 WL 9957177 (Bankr. W.D. Pa. Oct. 5, 2015)

New 2017 PA Tax Amnesty April 21, 2017- June 19, 2017.

From April 21, 2017 to June 19, 2017 the Department of Revenue will waive all penalties and half of the interest on eligible tax delinquencies for anyone who participates in the 2017 Tax Amnesty Program. 

One must file all missed tax returns and/or extensions to take advantage of the program. This will be one of the best opportunities in a while to take care of the missed or never-filed returns.

More details, including a brief explanatory video at the Department’s web-site at:

http://www.revenue.pa.gov/taxamnesty/Pages/default.aspx#.WHWnmFMrLIU