Class action incentive award

[Pascal666]

I filed two federal class action lawsuits years ago, one in California and one in Illinois. Both cases are still pending and will not complete until after my chapter 7 discharge in Illinois. Neither case has been certified as a class action yet. I have spent and will continue to spend lots of time preparing for the cases, flying to court, sitting through mediations, etc. As class representative I would normally receive an incentive award at the end of each case for my time and trouble. I was told the two cases should be listed as contingent and unliquidated (21) on schedule B.

1. Does the incentive award become part of the bankruptcy estate?

2. Does the fact that I will invest time into the cases post discharge matter?

3. When filing for bankruptcy in Illinois, federal exemptions are not available. Do any Illinois exemptions apply to an incentive award?

4. Is the case in Illinois treated differently than the case in California?

For anyone looking up the Illinois exemptions please note that most websites are out of date. Easiest way I've found to tell is that the current homestead exemption is $15,000. I would post a link here but unfortunately this forum requires me to have 15 posts in order to post links.

Thank you in advance for your assistance.

[despritfreya]

If my below assessment is not correct (that you already have your discharge), then, yes, it needs to be listed and, until it is abandoned, you cannot continue the litigation without the intervention of the Trustee who, the moment you file bk, becomes the true "party-in-interest". Listing it on line 21 or 35 would be appropriate.

______________________


From your brief posting history, it appears that you filed bk and have already obtained a discharge. We had a back-and-forth relating to the IRS filing a Proof of Claim.

Assuming I am correct. . .

Your post tells me that you failed to list this "class action" as an asset in your already discharged (asset) case. My guess is someone has now told you that you are not the correct party plaintiff since your failure to disclose means that this asset has not been abandoned by your Trustee.

Until you properly disclose the asset and the Trustee either abandons by a "Notice of Abandonment" or abandons it by closing your case, you get nothing. You have no right to even proceed as the Plaintiff. It does not matter where the suit was filed (California or Illinois). The asset and all of its potential benefits (unless you can exempt them) do not belong to you.

You need to immediately amend Schedule B (21 or 35). Then provide all of the relevant information to the Trustee so that he/she can make an informed decision as to whether or not the asset should be abandoned. The quicker you take care of this the quicker you can continue in your pursuit. In all likelihood, the Trustee will determine that the suit is "pie-in-the-sky" and walk away. (This is what typically happens to debtors who are involved in the "show me the note" type litigation. A Trustee does not want anything to do with such nonsense - not that I am guessing at your issues but just using this as an example.)

Do the amendment ASAP.

Des.

[Pascal666]

You are correct, I already have my discharge. I listed both cases on my Schedule B.

The one and only trustee's report (filed on 1/30/2011, shortly after my discharge) stated only "Potential litigation in federal courts in Chicago and California. Investigating."

I notified my attorneys in the class actions about the bankruptcy beforehand, and reminded them several times after. They keep insisting it doesn't affect the cases. As the class had not been certified at the time I filed for bankruptcy at that point no possibility of an incentive award existed, only a damage award. Since the class certification, settlement talks, and me putting time into the case all happen post-discharge, I was starting to think they may be right about the bankruptcy not affecting the incentive award.

I just received a settlement offer that included the language: "Settlement Class Representative represents and warrants that he has not assigned or transferred any interest in the Action which is the subject of this Agreement, in whole or in part."

I reminded my attorneys again about the bankruptcy and they again insist I can sign that without a problem. I want to make sure my class action attorneys are correct before signing that. Unfortunately my bankruptcy attorneys stopped responding to my emails once I got my discharge.

Thank you again for all your help Des.

[Pascal666]

the Trustee either abandons by a "Notice of Abandonment" or abandons it by closing your case, you get nothing.

How would I tell in PACER if the case has been closed?

[despritfreya]

I listed both cases on my Schedule B. . . The one and only trustee's report (filed on 1/30/2011, shortly after my discharge) stated only "Potential litigation in federal courts in Chicago and California. Investigating." (this tells me the asset has not been abandoned). . . I notified my attorneys in the class actions about the bankruptcy beforehand, and reminded them several times after. They keep insisting it doesn't affect the cases. (Wrong) As the class had not been certified at the time I filed for bankruptcy at that point no possibility of an incentive award existed. . . (Again wrong. The "cause of action" regardless of "class" status, is a pre-petition asset.) Since the class certification, settlement talks, and me putting time into the case all happen post-discharge, I was starting to think they may be right about the bankruptcy not affecting the incentive award. . . I just received a settlement offer. . .My attorneys. . .insist I can sign that without a problem. . .(Wrong.) How would I tell in PACER if the case has been closed?

Unless the ENTIRE claim is exempt your “class action” attorneys are wrong and, if you proceed without an abandonment you and those attorneys may be subject to sanctions. I strongly suggest you send them a copy of this response as I am sure they do not want to end up in front of your bk judge and be directed to disgorge ALL fees.

1. You can check PACER. If the case is closed it will have an entry indicating that the Trustee has finished his job and has abandoned all assets not otherwise administered. If this entry is not on PACER. . .

2. Look for a “Notice of Abandonment” which would have been filed by the Trustee.

3. If you do not find 1 or 2 above and your claims are not exempt then the asset DOES NOT belong to you. It belongs to the Bk estate. If the class action attorneys do not get the Trustee’s permission (they must be appointed by the bk court to represent the estate’s interest) and proceed to settle, any settlement can be set aside and those attorneys will be sanctioned. Period, end of story. Neither you nor they have any right to do anything with an asset that does not belong to you.

4. DO NOT SIGN ANYTHING UNTIL THE ASSET IS REMOVED FROM THE BK ESTATE. Your bk attorney should have told you this and, if that attorney is now ignoring you because you have your discharge I think you have a legitimate bar complaint. Your attorney had a duty to properly advise you as to what you could and could not do with this asset. If he failed to properly advise you he has not zealously represented your interests.

5. Since you are not getting any response from your bk attorney your next course of action, assuming you determine that there has not been an abandonment, is to contact the Trustee and let him know what is going on. Give him the name, address and phone number of the “class action” attorney as I am sure he will have “words” for that attorney.

Do not risk the revocation of your discharge. Take steps to ensure that you have the right to proceed with the litigation.

As it relates to your efforts, if such efforts benefit the bk estate I am sure the Trustee will agree to compensate you. However, if you proceed without getting the Trustee's blessing he is going to think you and your state court attorney were attempting to commit bk fraud and you could get nothing along with the possible revocation of the discharge.

Des.

[Pascal666]

I guess the whole point of me being on this forum in the first place is I can't seem to trust any of my attorneys. Kinda sad when the only person who seems to know what they are talking about is one who has gotten no money from any of my cases yet and I've only talked to online.

Not sure if it matters, but I want to clarify that both class actions are in federal court.

You are saying the trustee cannot simply mark the case as closed, they have to actually file something that would show up in the PACER Docket Report correct? So since the most recent item in the PACER Docket Report is the report I mentioned then there is no way these are abandoned.

My bankruptcy attorney advised me before I filed that any monies I received from the cases would be part of the estate but he didn't know how else the bankruptcy would affect the cases. I felt this was reasonable as I doubt he often gets debtors with pending class action lawsuits.

I have $2268.98 remaining of my wildcard exemption I would like to apply to the incentive award. Do any other exemptions apply? I was kind of hoping that since I put time into the case the wages exemption would apply too. At what point do exemptions get filed for contingent and unliquidated assets? I'm starting to think my bankruptcy attorney should have listed the cases on my original Schedule C.

The Illinois Department of Revenue has a priority claim for sales tax but didn't bother to file a proof of claim. You've told me before (unfortunately more than 30 days after the bar date) that my bankruptcy attorneys should have filed the form for them. Is there any way to correct this?

With the current settlement offer the only benefit the estate will get is the incentive award. The remainder of the settlement is Cy Pres.

[despritfreya]

Not sure if it matters, but I want to clarify that both class actions are in federal court.

No, does not matter which court, Federal or State. It is still an asset.

You are saying the trustee cannot simply mark the case as closed, they have to actually file something that would show up in the PACER Docket Report correct?

Correct. Once the Trustee is finished he will file his report of no distribution (or final accounting if there is a distribution) something like this, in the case of no assets:

Chapter 7 Trustee's Report of No Distribution: I, John Doe, having been appointed trustee of the estate of the above-named debtor(s), report that I have neither received any property nor paid any money on account of this estate; that I have made a diligent inquiry into the financial affairs of the debtor(s) and the location of the property belonging to the estate; and that there is no property available for distribution from the estate over and above that exempted by law. Pursuant to Fed R Bank P 5009, I hereby certify that the estate of the above-named debtor(s) has been fully administered. I request that I be discharged from any further duties as trustee. . .”

This shows up as an entry on the Docket and can be seen through PACER. Once the Trustee files his report the Clerk closes the case.

So since the most recent item in the PACER Docket Report is the report I mentioned then there is no way these are abandoned.

That would be my guess.

I have $2268.98 remaining of my wildcard exemption I would like to apply to the incentive award. Do any other exemptions apply? I was kind of hoping that since I put time into the case the wages exemption would apply too.

I do not know your State’s exemptions. Maybe someone else will chime in.

At what point do exemptions get filed for contingent and unliquidated assets? I'm starting to think my bankruptcy attorney should have listed the cases on my original Schedule C.

Yes, if there was an available exemption, it should have been taken at the beginning of the case even though the claim was contingent. You would have to ask your attorney if you can amend Schedule C at this time. Again, I do not know what, if any, exemption would apply.

The Illinois Department of Revenue has a priority claim for sales tax but didn't bother to file a proof of claim. You've told me before (unfortunately more than 30 days after the bar date) that my bankruptcy attorneys should have filed the form for them. Is there any way to correct this?

Contact the Department of Revenue and ask it to file a late claim. Not sure if it will get paid but, it does not hurt to try.

Des.

[Pascal666]

From my class action attorneys:

First, regarding the language about "Assignment of an interest in the Action": in the context of a class action, your interest in the action is your interest, as a plaintiff, who has the right to sue as alleged in the complaint. Whereas some types of claims may be assigned or transferred, those at issue here cannot. You can't have been hired to be a plaintiff, and if the case were to continue (e.g., to appeal), you can't make a deal with someone else to stand in your shoes. The incentive award isn't an interest in the Action because your service as Class Representative wasn't contingent on receiving that incentive award, which was totally in the judge's discretion.

Second, in relation to your bankruptcy, you have indicated that you disclosed your participation in this case to the trustee. I believe you have also indicated that the bankruptcy matter has settled, correct? As I indicated, we're not bankruptcy attorneys, but we believe that if you disclosed these cases and nothing in the schedule of assets in the settlement referred to some prospective award or indicated some obligation should an award be made, it doesn't seem as if that would be an issue.

[despritfreya]

From my class action attorneys:. . ."we're not bankruptcy attorneys".

And, there in lies the problem.

I'm not a divorce attorney therefore I would not be making any assumptions as to what goes on in that area of the law. Niether should your class action attorneys as it relates to what is and what is not appropriate until your bk is closed and/or the asset is abandoned.

Call your Trustee in the morning.

Des.

[Pascal666]

Both class actions were disclosed on Schedule B which was filed late September 2010. They were discussed at my 341 meeting in late November 2010. The trustee mentioned them in his report filed late January 2011. I sent the trustee an email last Monday and followed up with a phone conversation on Wednesday. He still has not bothered to contact class counsel. At what point are these considered abandoned simply because the trustee was too busy (or lazy) to do anything about them?

Class counsel was able to obtain an extension from the Court to file the settlement papers today. Class counsel continues to insist an incentive award is not and cannot be an "interest" in the litigation and wants me to sign the settlement papers asap so they can be filed today. If, having made full disclosure of my bankruptcy to class counsel and full disclosure of the class action lawsuits to my trustee, on the advise of class counsel I sign and return the settlement paperwork, what's the worst that can happen?

[Pascal666]

As this issue as been coming to a head today I finally recognized that there are two separate issues here. My interest as class representative to sign a settlement agreement, and my interest in an incentive award.

Regardless of the disposition of the incentive award, have my rights to sign a settlement agreement been affected by the bankruptcy?

If the trustee continues to do nothing, class counsel will simply assign a different plaintiff as class representative and have them sign the settlement agreement. At that point the trustee has screwed me out of the portion of the incentive award that would have been exempt (after I amend Schedule C) and my priority creditors out of the rest of it. If my trustee fails to sign the settlement agreement today do I then have a claim against my trustee for failure to do his job?

[despritfreya]

As this issue as been coming to a head today I finally recognized that there are two separate issues here. My interest as class representative to sign a settlement agreement, and my interest in an incentive award. Regardless of the disposition of the incentive award, have my rights to sign a settlement agreement been affected by the bankruptcy? If the trustee continues to do nothing, class counsel will simply assign a different plaintiff as class representative and have them sign the settlement agreement. At that point the trustee has screwed me out of the portion of the incentive award that would have been exempt (after I amend Schedule C) and my priority creditors out of the rest of it. If my trustee fails to sign the settlement agreement today do I then have a claim against my trustee for failure to do his job?

This is a very interesting quandary to which I have no answer.

I believe, since you are a party-plaintiff, regardless of the class status, until the asset is abandoned, you have no right to act at all. My recommendation is to find a good bk attny ASAP and go over the issues. Let the attny make the call to the Trustee since you are not getting any response. Maybe filing a Motion to Abandon the asset is in order.

Do you have a cause of action vs. the Trustee? Only if the "incentive" is not an asset of the estate and his failure to act has caused you damage. If it is an asset of the estate that the Trustee has squandered, then the creditors have a claim against him for violating his fiduciary duties.

Des.

[Pascal666]

My trustee finally contacted my class action attorney on Monday. I then received an email from my trustee stating "Please feel free to execute the settlement agreement." Not sure at this point if he was approving the agreement or saying that he didn't need to approve it, but I signed it and it was filed with the court by the deadline.

Thank you again for all your help Des.

[despritfreya]

That's great. Now, your next step is to find out if you get to keep any proceeds.

Des.