Coney Island Auto Parts Unlimited, Inc. v. Burton, Trustee, 2026 WL 135998 (January 20, 2026) (click here for .pdf).  In 2014, Debtor Vista-Pro Automotive, LLC filed an adversary proceeding against Coney Island to recover $50,000.00 in unpaid invoices. Coney Island did not answer and a default judgment was entered in 2015. In 2021, the Trustee was able to garnish Coney Island’s bank accounts. Coney Island then filed a Motion to vacate the judgment pursant to Federal Rule of Civil Procedure 60 on the grounds that it had not been properly served and, therefore, the 2015 judgment was void. The Bankruptcy Court denied the Motion because it was not filed within a “reasonable time” and the District Court and Eighth Circuit affirmed.

Rule 60(b)(4) expressly provides that a party may move for relief from a void judgment. However, Rule 60(c)(1) provides that a “motion under Rule 60(b) must be made within a reasonable time.”

The structure of Rule 60 confirms what the plain text of subdivision (c)(1) provides. When Rule 60 modifies the default reasonable-time limit, it does so expressly. For example, Rule 60(c)(1) imposes a 1-year limit on Rule 60(b) motions alleging mistakes, new evidence, or fraud. Thus, one would expect Rule 60 to include an analogous provision if a special, unlimited-time principle applied to motions alleging voidness. …But the Rule does not.

Coney Island argued that the reasonable time limit of Rule 60(b)(1) did not apply to void judgments, and the passage of time did not turn a nullity into an enforceable judgment.

This argument cannot bear the weight that Coney Island and others have placed on it. Even if the passage of time cannot cure voidness, the same principle holds true for most legal errors. Nevertheless, statutes and rules routinely limit the time during which a party can seek relief from a judgment infected by error. Therefore, a party in Coney Island’s position would need to show that some principle of law, such as the Due Process Clause, gives a party the right to allege voidness at any time. .. Giving a party a “reasonable” time to seek relief from an allegedly void judgment may well be all that due process demands.

The analysis is not different because the issue was failure of proper service and the possibility that a party may not learn of the judgment for a significant period of time. A defendant may strategically use that unlimited time to wait and file a Rule 60(b) motion until the plaintiff attempts to collect on the judgment. There was also no consensus among other courts that a party could move for relief at any time, and the Rule’s “text and structure” take precedence over historical practice. Similarly, policy concerns over an interpretation of a rule generally do not carry any weight when a rule is not ambiguous.

As Coney Island did not contend that its Motion was filed within a reasonable time, the lower court’s decision was affirmed. “Litigants seeking relief under Rule 60(b)(4) must comply with Rule 60(c)(1) and file a motion within a reasonable time.”

Scott Riddle’s practice focuses on bankruptcy and reorganization. Scott has represented businesses and other parties in Bankruptcy cases for over 20 years.  You can contact Scott at 404-815-0164 or scott@scottriddlelaw.com.  For more information, click here.

“Ever tried. Ever failed. No matter. Try again. Fail again. Fail better.” Samuel Beckett in Worstword, Ho. Many have tried to extend the deadline for discharge complaints that is found in Bankruptcy Rule 4007(c), almost always after missing the deadline. The Eleventh Circuit recently affirmed that equitable tolling still does not apply to extend the deadline in TL90108 LLC v. Ford, 147 F.4th 1351, 2025 WL 2304512 (11^th Cir., August 11, 2025). The issue was whether equitable tolling applied to the Bankruptcy Rule 4007(c) deadline to file a complaint under 11 U.S.C. §523(c) in light of subsequent Supreme Court opinions. 

A previous panel held that equitable tolling did not apply to Rule 4007. See In re Alton, 837 F.2d 457 (11th Cir. 1988). The Creditor argued that the decision in Alton had been abrogated by the Supreme Court’s decisions in  Kontrick v. Ryan, 540 U.S. 443, 124 S.Ct. 906, 157 L.Ed.2d 867 (2004), and Holland v. Florida, 560 U.S. 631, 130 S.Ct. 2549, 177 L.Ed.2d 130 (2010). In Kontrick, the Supreme Court held that Rule 4004 (denial of discharge) was a non-jurisdictional claim-processing rule, but it stopped short of deciding whether equitable tolling might apply.

After Kontrick, the Court considered, in Holland, 560 U.S. at 645, 130 S.Ct. 2549, whether the nonjurisdictional statute of limitations in the Antiterrorism and Effective Death Penalty Act (“AEDPA”) may be equitably tolled. The Court concluded that “a nonjurisdictional federal statute of limitations is normally subject to a rebuttable presumption in favor of equitable tolling.” Id. at 645–46, 130 S.Ct. 2549 (emphasis in original) (internal quotation marks omitted). Thus, based on the combination of Kontrick and Holland, the limitations period in Rule 4004—closely related to Rule 4007 —is presumably subject to equitable tolling.

The Creditor argued that these cases effectively established that Rule 4007 was also a non-jurisdictional, claim-processing rule like Rule 4004 and “have removed Alton’s doctrinal underpinning to the point of abrogation, leaving behind the presumption in favor of equitable tolling.”  The Circuit panel agreed that Rule 4007 is also a non-jurisdictional, claim-processing rule but that was not sufficient to overturn Alton. Nothing in Kontrick leads to the conclusion that Rule 4007 can be equitably tolled, and Holland does not apply to the Bankruptcy Rules. “The doctrinal underpinning of our decision in Alton was a plain reading of Rule 4007(c) and the absence of any express language in the rule indicating that its deadline was subject to equitable doctrines.” See also Nutraceutical Corp. v. Lambert, 586 U.S. 188, 139 S.Ct. 710, 203 L.Ed.2d 43 (2019) (“Whether a rule precludes equitable tolling turns not on its jurisdictional character but rather on whether the text of the rule leaves room for such flexibility.” (emphasis added).  The Creditor’s motion to extend the deadline to file a discharge complaint was, therefore, properly denied in the Bankruptcy Court.

Scott Riddle’s practice focuses on bankruptcy and reorganization. Scott has represented businesses and other parties in Bankruptcy cases for over 20 years.  You can contact Scott at 404-815-0164 or scott@scottriddlelaw.com.  For more information, click here.

In Barger v. Rocket Mortgage, LLC, Adv. Proc. No. 23-5164-bem, 2025 WL 1416871 (Bankr. N.D. Ga. May 15, 2025), the Chapter 7 Trustee sought to avoid a deed because every letter of the notary’s name was not fully discernible in the signature. The Court previously granted summary judgment to the lender/transferee and the Trustee sought reconsideration, contending that the Court erred in its interpretation of the Exact Name requirement in O.C.G.A. §45-17-8.1(a). Judge Ellis-Monro denied the Motion.

“[I]n documenting a notarial act, a notary public shall sign on the notarial certification, by hand in ink, only and exactly the name indicated on the notary’s commission and shall record on the notarial certification the exact date of the notarial act.”

O.C.G.A. § 45-17-8.1(a).  

The Court found that the statute does not impose a legibility requirement or a “directive as to the quality of the signature or the discernibility of each letter in the signature.”

Scott Riddle’s practice focuses on bankruptcy and reorganization. Scott has represented businesses and other parties in Bankruptcy cases for over 20 years.  You can contact Scott at 404-815-0164 or scott@scottriddlelaw.com.  For more information, click here.

In re Thomas, Ch. 13 Case No. 24-10535-RMM, 2025 WL 1373615 (Bankr. M.D. Ga. May 12, 2025). Debtors’ Chapter 13 Plan proposed to reduce the secured creditor’s claim to the value of the manufactured home that served as collateral. The sole legal issue was whether a manufactured home that was Debtors’ residence was a “motor vehicle” for purposes of the hanging paragraph of 11 U.S.C. §1325(a). Debtors had obtained the loan less than 910 days before the filing of the Bankruptcy petition.

The Lender argued that the home was a motor vehicle and, therefore, the Debtors could not cram down the loan. The Court disagreed. “The definition of motor vehicle has two distinct parts: it is a vehicle that is both (1) ‘driven or drawn by mechanical power’ and (2) ‘manufactured primarily for use on public streets, roads, and highways.’” See 49 USC §30102(a)(7).  A manufactured home does not fall within this definition based on the plain language of this statute. This conclusion was also consistent with all relevant persuasive authority. The National Highway Transportation Safety Administration has also excluded manufactured homes from the definition of motor vehicles for at least 50 years. See, e.g., NHTSA Interpretation Letter to Constance Newman (Mar. 17, 1976), 1976 WL 533912, also available at https://www.nhtsa.gov/interpretations/aiam2279).  

The Lender’s objection to the Chapter 13 Plan was, therefore, overruled.

Scott Riddle’s practice focuses on bankruptcy and reorganization. Scott has represented businesses and other parties in Bankruptcy cases for over 20 years.  You can contact Scott at 404-815-0164 or scott@scottriddlelaw.com.  For more information, click here.

In Watson v. Bradsher and Ali, 2025 WL 2205853 (11th Cir. August 4, 2025), the Debtor met Plaintiffs at a bar and invited one of them to go home with him. She sternly rejected his advances and moved with her friend to another part of the bar. Debtor tried to pay his tab and could not find his wallet, and accused Plaintiffs of stealing it. “He admitted that he had not seen [Plaintiff] take his wallet but insisted that ‘th[o]se bitches got my wallet.’ He repeatedly demanded [Plaintiffs] arrest and threatened to have the bar shut down if the officers did not comply…. The next day, Watson found his wallet in his car.” Debtor’s accusations caused the police to detain the Plaintiffs.

[Plaintiffs] sued [Debtor] in state court for slander per se, false imprisonment, and battery. A jury returned a general verdict for [Plaintiffs]. The jury awarded [Plaintiff Bradsher] compensatory damages of $75,000 and punitive damages of $5,000. It awarded [Ali] compensatory damages of $25,000 and punitive damages of $5,000. The court also awarded the women $39,000 in attorney’s fees and $1,500 in expenses.

Debtor filed a Chapter 7 petition and Plaintiffs filed a proceeding to except the judgment debt from his discharge pursuant to 11 U.S.C. §523(a)(6). After a trial, Judge Ellis-Monro “ruled that the judgment debts for slander and false imprisonment were nondischargeable but that the judgment debt owed to Ali for battery was dischargeable. [She] found that Watson did not intend to make physical contact with Ali when he poked her forehead, so the injury could not have been “willful.” And [she] attributed $2,500 of Ali’s judgment to the debt for battery.”

The District Court affirmed in part and reversed in part, finding that “‘further clarification [was] necessary’ to determine whether the slander injury was ‘willful.’ It described the tension between the bankruptcy court’s finding that Watson ‘genuinely believed’ that Bradsher and Ali stole his wallet and its finding that Watson’s slander was ‘willful.’” On remand, the Bankruptcy Court held that Debtor’s slander was not willful because he genuinely believed Plaintiffs had stolen his wallet. Judge Ellis-Monro also apportioned the damages, finding that two-thirds of the damages award arose from the nondischargeable false imprisonment claim. The same percentage was used for the award of attorney’s fees and punitive damages. Debtor appealed a second time and the District Court affirmed.

The Eleventh Circuit first affirmed the finding that the judgment debt arising from false imprisonment was nondischargeable. Under Georgia law, the tort of false imprisonment requires proof of intent to cause injury, so that requirement of §523(a)(6) was met. The willfulness requirement was also established.

Bradsher’s and Ali’s confinement was the “injury,” and the bankruptcy court found that Watson intended to cause it. It found that [Debtor] intended his accusations to cause Bradsher and Ali to be detained by the police, that he continued accusing them of stealing his wallet and insisting that they go to jail, and that he threatened adverse consequences for any officer who did not cooperate. That [Debtor] genuinely believed that the women had stolen his wallet does not negate the fact that he willfully caused their confinement.

The malicious element was also established, as the Bankruptcy Court determined that Debtor’s actions were wrongful and excessive, rather than merely reporting a crime.

The bankruptcy court did not clearly err by finding that [Debtor] engaged in “wrongful” acts that were “excessive” when he relentlessly accused Bradsher and Ali of theft using profane and derogatory language, taunted and intimidated them with repeated threats of jail, and pressed officers to arrest them even after witnessing the officers confirm that the women were not carrying his wallet. Worse still, [Debtor] abused his position as a county commissioner by threatening the officers’ employment if his demands to arrest
Bradsher and Ali were not met. True, [Debtor] “genuinely believed” that his wallet had been stolen by Bradsher and Ali. But after reporting his wallet missing, [Debtor’s] civic duty was done. Despite his genuine yet mistaken belief, his later actions crossed the line from “civic duty” to report a crime into “wrongful” and “excessive” conduct.

The Circuit affirmed the holding that the debt was nondischargeable, and also affirmed the Bankruptcy Court’s allocation of damages.

The bankruptcy court did not clearly err in its allocation of the judgment debts. In finding that Bradsher’s and Ali’s injuries for false imprisonment were more substantial than their
injuries for slander, the bankruptcy court relied on testimony from Bradsher, Ali, and two officers who responded to the underlying altercation. The bankruptcy court considered the fear, embarrassment, and shame that Bradsher felt from being confined in the back of a police car. It also found that Bradsher suffered from insomnia, depression, and paranoia caused by her false imprisonment. As for Ali, it considered that being falsely imprisoned caused her to feel “violated” and that she now suffers from stress and sleep problems. Based on this evidence, it found that the “greater harm” suffered by Bradsher and Ali was attributable to “the temporary loss of liberty resulting from the false imprisonment,” not the “embarrassment resulting from the defamatory statements,” and it allocated two-thirds of their damages to their judgments for false imprisonment.

Scott Riddle’s practice focuses on bankruptcy and reorganization. Scott has represented businesses and other parties in Bankruptcy cases for over 20 years.  You can contact Scott at 404-815-0164 or scott@scottriddlelaw.com.  For more information, click here.

The question posed by this case is easy to state. Does the sole owner of an administratively dissolved Georgia limited liability company have an interest in real property that was at all times titled in the name of the limited liability company that is sufficient to render the real property “property of the estate” under Section 541 of the Bankruptcy Code such that the property cannot be foreclosed upon after the owner files for bankruptcy without violating the automatic stay of Section 362(a) of the Bankruptcy Code? The answer, although requiring a bit of explanation, is similarly easy to state. No, he does not.

Judge Basier noted that Georgia law expressly provides that “[a] limited liability company administratively dissolved continues its existence…” O.C.G.A § 14-11-603(b)(3).

[T]he remainder of O.C.G.A § 14-11-603 makes clear the “administrative dissolution” is a temporary state that is intended to be resolved by the dissolved entity curing the matters that led to its dissolution.6 This is apparent because the limited liability company is given five (5) years to seek “reinstatement,” O.C.G.A § 14-11-603(b)(4), and during that lengthy period its exclusive right to use its name is maintained notwithstanding its purported “dissolution.” O.C.G.A § 14-11-603(b)(6). It is further apparent because, in cases where reinstatement occurs, the limited liability company is treated “as if the administrative dissolution has never occurred.” O.C.G.A. § 14-11-603(b)(4). Based on the foregoing, it is simply incorrect to say that the LLC “no longer exists,” such that it could no longer be the owner of the Property.

A member in an LLC has no interest in specific LLC property, O.C.G.A. § 14-11-501(a), and the administrative dissolution of the LLC did not create any new rights of a member. Further, “[n]o evidence was presented that the Debtor took any action during the almost two (2) years he claims that the LLC did not exist to transfer record title to the Property to himself, which would have required the execution of a deed by the LLC in his favor and the recordation of that deed in the real property records. None of that was done. Instead, the Debtor continued to treat the LLC as if it existed and owned the Property.”

The Court concluded that the Debtor did not have an interest in the real property, and the property was not property of the Bankruptcy estate. Therefore, the foreclosure sale was not stayed by Section 362.

Scott Riddle’s practice focuses on bankruptcy and reorganization. Scott has represented businesses and other parties in Bankruptcy cases for over 20 years.  You can contact Scott at 404-815-0164 or scott@scottriddlelaw.com.  For more information, click here.

(7) The debtor’s aggregate interest, not to exceed $1,500.00 in value, in any implements, professional books, or tools of the trade of the debtor or the trade of a dependent of the debtor.

Judge Coleman noted that there was a split of authority in Georgia Bankruptcy Courts. In Curry v. Dial Fin. Corp. (Matter of Curry), 18 B.R. 358 (Bankr. N.D. Ga. 1982), Judge Kahn held that a vehicle could never be a tool of the trade as the Georgia exemption statute “contemplates that the [debtor] uses the tool with his hands, and that the [debtor’s] work requires some degree of manual skill.” Judge Bihary followed this reasoning in Conerton v. Wachovia Bank (In re Conerton), No. 03-62155, 2004 WL 5846767 (Bankr. N.D. Ga. Jan. 13, 2004) (Bihary, J.) See also Mitchell v. First Franklin Fin. Corp. (In re Mitchell), No. 17-68428-PMB, 2018 WL 1442256 (Bankr. N.D. Ga. March 21, 2018) (Baisier, J.) (vehicle is incidental to, but not an integral part of, debtor’s work as a law clerk who travels to meet clients). Other Courts have allowed the exemption under certain circumstances. Schneider v. Fidelity Nat’l Bank, 37 B.R. 747 (Bankr. N.D. Ga 1984) (Norton, J.) (allowing an exemption for a traveling salesman when travel was the essence of his occupation).

The Judge reviewed the statutory text and definitions of “tools” and “trade,” but did not find them dispositive. He then reviewed the exemption statute as a whole, finding it “noteworthy that the Georgia exemption statute has separate exemptions for motor vehicles (O.C.G.A. § 44-13-100(a) (3)) and for tools of the trade (O.C.G.A. § 44-13-100(a)(7)).” Finding that was also not dispositive, the Court reviewed, in detail, the history of the exemption. Ultimately, Judge Coleman agreed with Judge Kahn’s reasoning in Curry.

[I]n Georgia a tool of the trade is an implement used by a person in that person’s work. Tools of the trade may be far more sophisticated today than they were when the Supreme Court of Georgia considered the question, but the term still contemplates that the person uses the tool with his hands, and that the person’s work requires some degree of manual skill.

This interpretation is only bolstered by the statute’s grouping of tools of the trade with implements and professional books, by the separate motor vehicle exemption, and by the relatively low dollar amount of the tools-of-the-trade exemption. Bringing together these disparate threads, the Court finds that the Debtor cannot exempt her BMW as a tool of her trade as a realtor under O.C.G.A. § 44-13-100(a)(7).

Thus, at least in the Southern District in Judge Coleman’s Court, a debtor cannot claim an exemption in a vehicle as a tool of the trade.

Scott Riddle’s practice focuses on bankruptcy and reorganization. Scott has represented businesses and other parties in Bankruptcy cases for over 20 years.  You can contact Scott at 404-815-0164 or scott@scottriddlelaw.com.  For more information, click here.

In In re Antman, 2024 WL 4786241, Ch. 13 Case No. 23-60317-ejc (Bankr. S.D. Ga. Nov. 14, 2024), the debtor’s father died in 1996 and in his will left his house to debtor and her three siblings in equal shares. Debtor and her husband had lived in the house since 1999. Debtor filed a Chapter 13 case in 2023 and claimed a $43,000 homestead exemption (the “double exemption”) in the house pursuant to OCGA §44-13-100(a)(1). The Trustee objected to the exemption, arguing that she was only entitled to the $21,500 exemption because she only held a partial ownership interest in the house.

Section 44-13-100(a)(1) provides that a debtor may exempt: “(1) The debtor’s aggregate interest, not to exceed $21,500.00 in value, in real property or personal property that the debtor or a dependent of the debtor uses as a residence, in a cooperative that owns property that the debtor or a dependent of the debtor uses as a residence, or in a burial plot for the debtor or a dependent of the debtor. In the event title to property used for the exemption provided under this paragraph is in one of two spouses who is a debtor, the amount of the exemption hereunder shall be $43,000.00.”

The Trustee’s objection hinged on the argument that the title to the house was not in “one of two spouses who is a debtor;” rather, the debtor only owned a fractional interest with her siblings.

Here, the Debtor has claimed a $43,000.00 double exemption in the real property devised to her, and to her three siblings, by their late father. The Trustee does not dispute that the Debtor uses the property as her residence. Nor does he dispute that the Debtor is entitled to a $21,500.00 homestead exemption. Instead, the Trustee makes essentially two arguments. First, he argues that the plain language of the Georgia exemption statute prevents the Debtor from claiming the double exemption because she has only a partial ownership interest in the residence. Second, he argues that the purpose of the double exemption statute—which, he says, is to protect a debtor’s non-filing spouse’s equitable interest in a residence—is not implicated here because the Debtor’s husband has no equitable interest to protect… Thus, the question before the Court is whether O.C.G.A. §44-13-100(a)(1) requires sole ownership of the homestead or permits a debtor with only a partial interest to claim the double exemption.

Judge Coleman disagreed with the Trustee and held that the statute did not require that the property be titled solely in a debtor’s name to trigger the double exemption.

The Trustee is wrong: nothing in O.C.G.A. §44-13-100(a)(1) requires the debtor to have sole title to the homestead to claim the double exemption. By its terms, the statute requires only that “title to property used for the [homestead] exemption” be “in one of two spouses who is a debtor.” O.C.G.A. § 44-13-100(a)(1). Contrary to the Trustee’s assertion, the word “solely” does not appear anywhere in the homestead exemption provision, and the Court will not read that word into the statutory text. What the statute does say is that title must be in the debtor as opposed to the debtor’s non-filing spouse.

The Court also held that the double exemption does not require the non-filing spouse to have an equitable interest in the property. In doing so, Judge Coleman disagrees with the analysis of Judge Diehl in the Northern District in In re Neary, No. 03-97808, 2004 WL 3222872 (Bankr. N.D. Ga. Apr. 21, 2004) and instead relies upon Judge Walker’s opinion and analysis in In re Burnett, 303 B.R. 684, 686 (Bankr. M.D. Ga. 2003).

Here, as previously discussed, the plain language of O.C.G.A. § 44-13-100(a)(1) permits the Debtor to claim the $43,000.00 double exemption. She is a married person, title to the property is in her name rather than in her spouse’s, and she and her husband use the property as their residence. Nothing in the statute requires the Debtor’s husband to have an equitable interest in the property, and, like Judge Walker , the Court declines to read such a requirement into the text “based on one party’s notion of fairness in a particular set of unusual circumstances.”

Judge Coleman’s opinion includes a detailed history of the purpose of the homestead exemption and authority in Georgia courts, and is worth a read to understand his findings and ruling.

Scott Riddle’s practice focuses on bankruptcy and reorganization. Scott has represented businesses and other parties in Bankruptcy cases for over 25 years.  You can contact Scott at 404-815-0164 or scott@scottriddlelaw.com.  For more information, click here.

I am straying off the strict topic of Bankruptcy law and into an area of general litigation and attorney ethics that has come up in one of my pending cases.  When it is OK for a lawyer to pay, or offer to pay, a witness in a pending case? The common sense answer that probably comes to mind immediately is “never.” Then we might consider some exceptions for witness fees and expenses that may be required by applicable law and expert fees and expenses.  Other payments are far more questionable. Read until the end of this long-winded post for a very common Bankruptcy scenario that may surprisingly run afoul of the ethical rules and federal criminal law.

In my case, we are litigating against a law firm and their client in Bankruptcy Court. The law firm is also acting as counsel in the litigation, thus making them lawyers, parties and witnesses for themselves and their client. The law firm also has an agreement with their client to pay any award of damages or sanctions that may be assessed against him in the case. Thus, they have an agreement to pay a client/co-party/witness whose testimony also bears upon the firm’s own potential liability.

The starting point in Georgia is, not surprisingly, the Rules of Professional Conduct, but most states have a similar, if not identical, rule.  Rule 3.4(b)(3) states:

Fairness to Opposing Party and Counsel

A lawyer shall not: (3) pay, offer to pay, or acquiesce in the payment of compensation to a witness contingent upon the content of the testimony or the outcome of the case. But a lawyer may advance, guarantee, or acquiesce in the payment of: (i) expenses reasonably incurred by a witness in preparation, attending or testifying; or (ii) reasonable compensation to a witness for the loss of time in preparing, attending or testifying; or (iii) a reasonable fee for the professional services of an expert witness…The maximum penalty for a violation of this rule is disbarment.

Courts have held that the payment of witnesses beyond allowed expenses is not just an actual or potential conflict of interest, or a matter that goes to bias or credibility at trial. It “violates the integrity of the of the justice system and undermines the proper administration of justice.” Ward v. Nierlich, 2006 WL 5412626 (S.D. Fla Sept. 20, 2006)(ruling on Florida’s identical Rule 3.4(b)); Golden Door Jewelry Creations, Inc. v. Lloyds Underwriters Non– Marine Ass’n, 865 F.Supp. 1516, 1525 (S.D.Fla.1994).

The very heart of the judicial system lies in the integrity of the participants…. Justice must not be bought or sold. Attorneys have a solemn responsibility to assure that not even the taint of impropriety exists as to the procurement of testimony before courts of justice. It is clear that the actions of the respondent in attempting to obtain compensation for the testimony of his clients … violates the very essence of the integrity of the judicial system and the disciplinary rule and code of professional responsibility, the integration rules of the Florida Bar and the oath of his office.

The Florida Bar v. Jackson, 490 So.2d 935, 936 (Fla.1986). The cases also make it clear that the Rule applies equally to payments made for truthful testimony. Ward v. Nierlich, 2006 WL 5412626 (the rules “clearly prohibit a lawyer from paying or offering to pay money or other rewards to witnesses in return for their testimony, be it truthful or not…”). The Golden Door court cited a New York opinion that states:

Payment to a witness to testify in a particular way, payment of money to prevent a witness’s attendance at a trial and the payment … to make him sympathetic …  are all payments which are absolutely indefensible…. The payment of a sum of money to a witness to “tell the truth” is as clearly subversive of the proper administration of justice as to pay him to testify to what is not true. In re Robinson, 151 A.D. 589, 600, 136 N.Y.S. 548, 445 (1912), affirmed, 209 N.Y. 354, 103 N.E. 160 (1913) (emphasis added).

865 F.Supp. at 1525-26.

We will not tolerate payments of any sum of money by an attorney to witnesses for the opposition to secure or influence testimony, whether it be for the purpose of securing truthful testimony or otherwise.

In re Kien, 69 Ill.2d 355, 14 Ill.Dec. 365, 368, 372 N.E.2d 376, 379 (1977) (attorney suspended for 18 months).

           In Golden Door, the plaintiff, with the assistance of its lawyers, paid fact witnesses over $750,000.00. The court concluded that the attorneys violated ethical rules. In Ward, a witness was paid $5,000.00 and a stake in the outcome of the litigation. The lawyers who assisted with the payment were disqualified for compromising the integrity of the judicial system and “engaging in a scheme to purchase the testimony of witnesses.” In Patel v. 7-Eleven, Inc., 2015 WL 9701133 (C.D.Ca. April 14, 2015), a disgruntled former employee of the defendant corporation contacted plaintiff’s counsel and offered to act as a witness for plaintiffs. Plaintiff’s counsel hired the witness as an “expert” at $300.00 per hour, but the court determined that the witness was a actually a fact witness improperly paid for his testimony. The court disqualified plaintiff’s counsel for the ethical breaches.

In order to maintain ethical standards of professional responsibility, the Court must assess a sanction against Plaintiffs’ counsel’s conduct that actually punishes counsel for its ethical wrongdoing. Because a lesser effective sanction is not available in this case, the Court concludes that disqualification of counsel as a result of their ethical violation is necessary to maintain the integrity of these proceedings.

Of course, there are many more cases and different fact scenarios but virtually all have the same bottom line.

           Now we get to an even more critical question. Is the payment of witnesses a federal crime?  Section 201(c)(2) of Title 18 states the following:

(c)Whoever— (1)otherwise than as provided by law for the proper discharge of official duty—  (2) directly or indirectly, gives, offers, or promises anything of value to any person, for or because of the testimony under oath or affirmation given or to be given by such person as a witness upon a trial, hearing, or other proceeding, before any court, any committee of either House or both Houses of Congress, or any agency, commission, or officer authorized by the laws of the United States to hear evidence or take testimony, or for or because of such person’s absence therefrom … shall be fined under this title or imprisoned for not more than two years, or both.

Again, an outright secret bribe to a witness for favorable testimony is an easy call. However, a Bankruptcy Court has extended this statute to benefits to a potential witness in the context of a settlement motion. 

In In re Telcar Group, Inc., 363 B.R. 345 (Bankr. E.D.N.Y. 2007), the Chapter 7 Trustee sought approval of a settlement that may have provided a financial benefit to an insider in the case who may have been a witness in later proceedings. An objection to the proposed settlement was filed on the grounds that it violated public policy against the payment of witnesses. The Court held:

Although the Amended Stipulation does not require Mignone to testify for the Trustee, the Court cannot consider the question of whether Mignone is or will be a witness in a vacuum. All parties agree that Mignone is a central figure in the history of the Debtor. Although the Trustee may speculate that he may not call Mignone as a witness to testify in the Levey Litigation, there remains the possibility that Mignone’s testimony may be required by the Leveys or Bogart. Here, by reason of the reimbursement and release provisions of the Amended Settlement, Mignone has been offered something of value which, on its face, appears to be in violation of 18 U.S.C. § 201, et. seq. since that statute criminalizes the giving of something of value for or because of past or potential testimony before a Court. More specifically, if the Amended Settlement is approved by this Court, and at a future time the Trustee achieves success in the Levey Litigation in which Mignone testifies as a witness, the connection between Mignone’s testimony and the reimbursement arguably falls within the purview of 18 U.S.C. § 201. Whether it is actually criminal conduct is not for the Court to now decide. Rather, the Court must consider the effect of the settlement and, no matter how the issue is parsed, the reimbursement to Mignone is inexorably tied to success in the litigation against the Levey Entities.

Please review the full opinion for the detailed facts and context. The Court also concluded that the proposed settlement violated NY Disciplinary Rule 7-109(c), which was substantially similar to Georgia Rule 3.4. See also Golden Door (declining to apply §201(c)(2) but finding ethical violations); United Realty Advisors, LP v. Verschleiser, 2019 WL 4889420 (S.D.N.Y 2019) (remedies for “reprehensible conduct” of lawyers and violations of §201(c)(2) were criminal prosecution, disbarment or other bar sanctions).

I won’t go further into this criminal statute, but if the improper payments violate this statute they will almost certainly violate the applicable ethical rules. In short, do not pay witnesses for their testimony beyond basic expenses. The consequences can be severe for lawyers and their clients.

Scott Riddle’s practice focuses on bankruptcy and reorganization. Scott has represented businesses and other parties in Bankruptcy cases for over 30 years.  You can contact Scott at 404-815-0164 or scott@scottriddlelaw.com.  For more information, click here.

It is expensive to stay in Bankruptcy. Last month a Brown Rudnick lawyer tried to increase his hourly rate from $1,000 per hour to $1,500 per hour. Chief Judge Laurie Selber Silverstein in Delaware rejected the increase, “saying that no client would approve such a steep fee hike in the middle of a case.” See Reuters article.

“There may be a reason, but a 50% increase of someone’s rates is not something that any client I ever had would have accepted,” Silverstein said at a court hearing. “If he’s behind market, I don’t think he gets to catch it all up at one time.”

Judge Silverstein allowed $1,000 per hour for the lawyer. The case is In re Kidde-Fenwal, Inc. The highest hourly fees charged by Brown Rudnick partners is $2,250 per hour. As of February 2024, the Fee Examiner reported that 15 firms had billed over $20 million in the case, which was filed in May 2023.

Scott Riddle’s practice focuses on bankruptcy and reorganization. Scott has represented businesses and other parties in Bankruptcy cases for over 30 years.  You can contact Scott at 404-815-0164 or scott@scottriddlelaw.com.  For more information, click here.