Attachment Lien: How an Unsecured Creditor can be Protected Against a Debtor's Bankrutpcy

It is axiomatic that a cash transaction exposes the seller to little risk of loss. And it is easy to require cash payment for small purchases. However, when it comes to large transactions such as real estate purchases or wholesale purchase of goods, there are few purchasers who can afford to pay cash. So, sellers often consider extending credit in order to enable more purchase tranactions to take place. The added volume of transactions comes with its downsides. Sellers need to properly balance out the additional sales volume against the risk of purchaser defaults. Sophisticated sellers factor in the borrower's creditworthiness against the transaction profits, and seek guaranties and security for payment. In a secured transaction, seller seller may take back the collateral if debtor defaults on the payments, or goes bankrupt.

But what about sellers who extend credit without taking back a security? What protection do they have when the debtor defaults or is at risk of filing for banktuptcy? In such situations, the creditor may have rush to the court and seek an "attachment lien." Attachment is a prejudgment remedy that allows the creditor, who has followed the statutory requirements and who has established a prima facie claim, to have a lien recorded against real property and/or the debtor's assets seized and held until final adjudication at trial. See, Lorber Industries v. Turbulence, Inc., 175 Cal. App. 3d 532, 535 (1985).

If an unsecured creditor succeeds in obtaining an attachment lien, the creditor is placed in very similar situation to a creditor who obtained security at the inception of the transaction. Federal Bankruptcy law recognizes attachment liens issued by state courts under state law. A “prejudgment attachment constitutes a valid and perfected lien which is superior to the rights of the Trustee, notwithstanding that judgment has not been entered.” In re Giordano, 169 B.R. 12, 13 (Bankr. D.R.I. 1994). An unperfected prejudgment attachment lien could be pursued after bankruptcy, and upon judgment, the prejudgment attachment lien would ripen into a vested lien, relating back to the date of attachment. In the Matter of DeLancey, 94 B.R. 311, 314 (Bankr. S.D.N.Y. 1988). See, In re Southern California Plastics, Inc. (Diamant v. Kasparian), 165 F. 3d 1243 (9th Cir. 1999).

Obtaining an attachment lien requires proper facts, proper timing, and proper legal skills. If a debtor is going out of business or about to file for bankruptcy, there is often little time to file lawsuit and go through the lengthy motion process to obtain an attachment lien. In emergency situations, a creditor must act promptly and bring an ex parte application for a Right to Attach Order, and promptly perfect the lien by recording the resulting Writ of Attachment. It behooves the creditors to retain experienced business litigaiton attorneys to assist them with these processes.

Robin Mashal is a Los Angeles business attorney, and a partner at the law firm of Hong & Mashal LLP. Mr. Mashal has been admitted to the State Bar of California and the Bar of the United States Supreme Court. He can be reached by phone at (310) 286-2000.

Is British Petroleum (BP) Operating Responsibly in the United States?

On April 20, 2010, an offshore drilling rig operated by Transocean Ltd. on behalf of BP exploded in the Gulf of Mexico, killing 11 people and causing a large oil spill. The efforts last week to contain the spill using "top kill" method failed; authorities are now looking at a possible containment by August 2010. With nearly a month and half passing, the Deepwater Horizon oil spill continues to expand and and threaten the coasts of Louisiana, Texas, Mississippi, Alabama and Florida. In a news conference this week, Rear Adm. Mary E. Landry of the Coast Guard commented that oil is leaking at the rate of 5,000 barrels per day, which is five times the originally estmiated rate of 1,000 barrels per day. NASA satellites have been able to observe the spread of the oil from the space. The Deepwater Horizon disaster has now surpassed the Exxon-Valdez oil spill, to become the single largest oil spill in the U.S. history.

Rep. Ed Markey (D-Mass.) has charged that BP from the beginning understood the extent of the oil spill, but it attempted to cover up by "lowballing" the numbers. Markey said "without question" the oil spill in the Gulf of Mexico should be considered "criminal." In response, BP has committed up to $500 Million over the next ten years to study the impact of the oil spill in the Gulf of Mexico on the environment and the surrounding wildlife.

The Deepwater Horizon oil spill has not been BP's only legal issue in the recent past. In 2000, BP paid $6.5 Million in civil penalties for illegal disposal of hazardous waste and violating federal drinking water laws, paid $10 Milliion to resolve Clean Air Act case, and its subdiary was hit with a $500,000 criminal fine for failing to report the illegal disposal of hazardous waste in Alaska. In 2005, OSHA fined BP $21 Million for violating OSHA laws. These records caused BP to be placed on Mother Jones magazine's Ten Worst Corporations of 2000, and Multinational Monitor's Ten Worst Corporations of 2005.

BP evolved out of a British oil exploration in Iran. In May 1901, the Shah of Iran granted a concession to William Knox D'Arcy to search for oil. After oil was discovered, on April 14, 1909 the Anglo-Persian Oil Company, Limited was incorporated with an initial capital of Two Million Pounds Sterling. In 1935, the company changed its name to Anglo-Iranian Oil Company, Limited. In 1954 the company changed its name to The British Petroleum Company Limited. In 1980, the company was re-registered as a public company under the name The British Petroleum Company p.l.c. In 1998, the company merged with U.S. oil company Amoco and became BP Amoco p.l.c. In 2001 the company changed its named to BP p.l.c.

BP p.l.c. is currently United Kingdom's largest coporation; the company is listed on the London Stock Exchange (LSE: BP.) and on the New York Stock Exchange (NYSE: BP). It is globally the fourth largest company, and the third largest energy company (with operations in more than 80 countries). BP is one of the six "supermajors", which are "vertically integrated private sector oil exploration, natural gas, and petroleum product marketing companies." BP is the 100th largest contributor to political campaigns in the United States, and has contributed $5 Million in this regard since 1990. BP's retail operations in the United States include AMPM convenient stores and ARCO gas stations.

The materials for this blog were gathered from various sources including The Telegraph, The Washington Post, Politico, Wikipedia, and The New York Times. For more inforation, run a search on Google.

Robin Mashal is a Los Angeles business attorney, and a partner at the law firm of Hong & Mashal LLP. Mr. Mashal has been admitted to the bar of the United States Supreme Court. He can be reached by phone at (310) 286-2000.

SEC Charges Goldman Sachs & Co. with Civil Fraud, and British and German Authorities May Follow Suit

On Friday, April 16, 2010, the Securities and Exchange Commission (SEC) announced bringing civil fraud charges against Goldman Sachs & Co. SEC's complaint alleges that Goldman Sacks sold securities based on risky mortgage investments without disclosing to buyers that hedge fund Paulson & Co. who had influence in the selection of profolio, was betting the securities would fail. Goldman Sachs has denied all charges. SEC's compliant has not charged Paulson & Co. or its billionaire manager John Paulson.

On the news of SEC's charges, shares of Goldman Sachs & Co. fell 12.8 percent, a loss of $12 Billion in market value. The news also impacted the broader markets, putting an end to a six-day U.S. stock market rally, and causing the European markets to slump.

Founded in 1869, Goldman Sachs is currently the largest investment banking firm in the United States. Commentators believe that although Goldman Sachs may be able to defend itself against SEC charges, the damage to the company's image may allow Morgan Stanley, the second position U.S. investment banking firm, and foreign rivals such as Deutsche Bank and UBS to take on a portion of Goldman Sachs' market.

British Prime Minister Gordon Brown, and German government spokesman Ulrich Wilhelm said their governments will seek information from the SEC about Goldman Sachs Group's operations; the investigations may lead into legal action in those jurisdictions.

The materials for this blog were gathered from various sources including The Associated Press, Business Week, and Reuters. For additional information, run a search on Google.

Robin Mashal is a Los Angeles business attorney, and a partner at the law firm of Hong & Mashal LLP. He can be reached by phone at (310) 286-2000.

Justice Stevens Considers Retiring from the United States Supreme Court

In his recent press interviews, Justice John Paul Stevens has hinted at his intentions to retire from the United States Supreme Court. “I do have to fish or cut bait, just for my own personal peace of mind and also in fairness to the process,” he told the New York Times, “The president and the Senate need plenty of time to fill a vacancy.” At age 89, the Honorable John Stevens is currently the second-oldest justice to have served at the Supreme Court, after Justice Oliver Wendell Holmes. With 34 years of service at the Supreme Court bench, Justice Stevens is currently the fourth-longest-serving justice in the Court's 220-year history.

Justice John Paul Stevens

Justice Stevens was born April 20, 1920 in Chicago, Illinois. In 1941, he earned his bachelor of arts in English from the University of Chicago. Soon thereafter, he enlisted in the U.S. Navy, where he served as an intelligence officer from 1942 to 1945, and was awarded a Bronze Star for his service. He later attended Northwestern Univeristy School of Law from where he obtained his juris doctorate degree in 1947 magna cum laude. After finishing law school, Stevens clerked for Justice Wiley Rutledge during the 1947-48 Supreme Court term. Stevens was admitted to the State Bar of Illinois in 1949. He gained expertise in antitrust laws, first as an associate of Poppenhusen, Johnston, Thompson & Raymond, and later as a partner in the firm of Rothschild, Stevens, Barry & Myers. He was invited to teach an atitrust course at the University of Chicago Law School, and in 1969 he acted as a special prosecutor on the Greenberg Commission where he investigated corruption charges against Supreme Court justices. In 1970, President Nixon nominated Stevens to the Seventh Circuit Court of Appeals, and in 1975 President Ford nominated him to the U.S. Supreme Court.

Although Justice Stevens has not yet officially announced his retirement, people believe the announcement should come by April 28, 2010, when the current Supreme Court term ends. This will provide President Obama an opportunity to appoint a second Supreme Court Justice. Anonymous sources from the White House have speculated potential candidate for this vacancy would include judge Diane Wood (Seventh Circuit Court of Appeals), judge Merrick Garland (D.C. Circuit Court of Appeals), and Elena Kagan (Supreme Court's first female Attorney General).

Materials for this blog were gathered from various sources including Wikipedia, Associated Press, The Washington Post, the New York Times, and Business Week. For more information, run a search on Google.

Robin Mashal is a Los Angeles business attorney, and a partner at the law firm of Hong & Mashal LLP. Mr. Mashal has been admitted to the bar of the United States Supreme Court. He can be reached by phone at (310) 286-2000.

Healthcare and the Law, 2010

United States' healthcare has been a hot legal and political topic for years. In 2008, then presidential candidate Barack Obama made healthcare reform a key part of his campaign promise of "change we can believe in." The legislation took many months of Congressional debates, not to mention it requiring the Forty-Fourth U.S. President to spend the past 18 days traveling and campaigning for votes. However, President Obama may soon realize his campaign promise.

On Sunday, March 21, 2010, the U.S. House of Representative finally passed the health bill on a close 219-210 vote, over Republicans' unanimous opposition. As the House was in voting session, demonstrators outside the Capitol building were chanting "just vote no." The Congressional Budget Office has commented that this piece of legislation will extend health coverage to 32 million Americans who are uninsured, and will prevent insurance companies from denying coverage to people due to pre-existing medical conditions. President Obama and Vice President Joe Biden watched the House vote from the Roosevelt Room at the White House. When the Bill passed, President Obama telephoned House Speaker Nancy Pelosi to congratulate her. "We did not fear our future," the President commented publicly, "we shaped it."

(Official White House Photo by Pete Souza)

Last month, Anthem Blue Cross (ABC), California's largest for-profit insurance company, announced its intent to raise premiums by as much as thirty-nine percent, effective March 1, 2010. Consumer Watchdog, a consumer advocate group, reacted to this news by filing a class action lawsuit against ABC, on March 1, in the Superior Court of California for the County of Ventura. The lawsuit alleged ABC is forcing the insured into policies with lower coverage at higher costs. Consumer Watchdog has filed a public records request seeking ABC to release its actuarial data underlying the rates. In a February 2010 Congressional hearing, House Democrats accused ABC's parent company of padding its rates beyond the cost increases. The final chapter in this battle is yet to be written. For further news on this matter, run a search on Google.

Robin Mashal is a Los Angeles business attorney, and a partner at the law firm of Hong & Mashal LLP. He can be reached by phone at (310) 286-2000.

Los Angeles Superior Court Judge is Censured for Abusing his Authority

Los Angeles Superior Court judge Brett C. Klein has resigned from his position after the California Commission on Judicial Performance ("CCJP") barred the judge from presiding over any other court cases and from accepting any court-referred assignments. According to the CCJP Decision, the CCJP brought a notice of formal proceeding against Judge Klein on January 14, 2010, for "misconduct constituting an abuse of authority and reflecting embroilment, bias and a failure to be patient, dignified and courteous in his handling of a hearing in a class action lawsuit."

Jacqueline Cohen, et al. vs. Windsor Fashions, Inc., et al., Los Angeles Superior Court, case no. BC 381468, was a class action lawsuit against a women's clothing chain store. The case was assigned to Judge Susan Bryant-Deason. The parties had reached a mediated settlement whereby defendant would issue a $10 gift voucher to each class member, the class representative would be paid $2,500, and the class action counsel would receive $125,000 in attorney's fees. The parties had given notice to the class members, and had subsequently brought a motion for the final approval of the settlement terms. Judge Bryant-Deason had preliminarily approved this settlement, but when Judge Bryant Deason became ill, Judge Klein presided over the final approval hearing of the class action settlement on January 16, 2009.

At the final approval hearing, Judge Klein made certain sarcastic remarks towards Plaintiffs' counsel, and ordered that he would receive a number of gift vouchers from Defendant--a women's clothing retailer--as his legal fees in lieu of the $125,000 in cash that had been preliminarily approved. Judge Klein signed the final approval order and e-mailed it to the parties' attorneys. As well, Judge Klein sent a copy of this order to the Metropolitan News-Enterprise which newspaper published an article about it. Noting Judge Klein's prior conduct, and the way he handled the Windsor Fashions, Inc. case, CCJP issued a censure against Judge Klein pursuant to Article VI, Section 18, Subsection (d) of the California Constitution.

In 1990, Governor George Deukmejian appointed Brett C. Klein to the Los Angeles Municipal Court. In 2000, the California judicial system went through a unification process, during which process Judge Klein was elevated to a Superior Court judge. On November 30, 2009, Judge Klein irrevocably retired from his judicial position, thus ending his nearly two decades at the bench.

The materials for this weblog were gathered from various sources, including Los Angeles Times blog, American Bar Association Journal article, Metropolitan News-Enterprise and WikiMedia. For further information, run a search on Google.

Robin Mashal is a Los Angeles business attorney, and a partner at the law firm of Hong & Mashal LLP. He can be reached by phone at (310) 286-2000.

New California Laws in 2010

With the commencement of year 2010, new laws are taking effect in California. Below is a summary of some of the more notable laws:

AB 9 - Political Reform Act: the law defines what actions by a local government may constitute improper campaign activity.

AB 91 - the new law establishes a pilot program in Los Angeles, Alameda, Sacramento and Tulare counties, for persons convicted of DUI offenses, as a pre-condition to having their driver's license reissued, they must install an Ignition Interlock Device in vehicles owed by the offender.

AB 144 - increases penalty for fraudulent use of disabled parking placards from $100 to $1,000. Now, parking enforcement officers and police officers may issue citations.

AB 166 - the bill establishes a mechanism for owners of abandoned boats to turn them in to the authorities before them become an environmental hazard.

AB 171 - new law governs credit and loans products offered by dental offices.

AB 242 - increases penalties against dog fighting spectators.

AB 260 - aimed at protecting borrowers against abusive mortgage lending practices.

AB 303 - Hospital Seismic Safety Financing: the bill allows hospitals to use local funds and draw federal funds for earthquake safety improvement.

AB 305 - prosecutors can now seek jail sentences for polluters who make false reports concerning offshore oil spills, and the statute of limitation is increased from 1 to 5 years.

AB 329 - Reverse Mortgage Elder Protection Act: the law requires higher counselling for borrowers, including informing borrowers of the risks of using a reverse mortgage.

AB 524 - the law imposes fines ranging from $5,000 to $50,000 on publishers who publish paparazzo photos or audio recordings obtained by engaging in offensive behavior.

AB 962 - gun sellers are required to record sales of ammunitions, and to identify and fingerprint the purchasers of ammunitions.

AB 1046 - Prior California law provided homestead exemptions for bankruptcy filers in the amount of $50,000 for a single person, $75,000 for a married couple, and $150,000 for the disabled or the elderly. New California law increases these amounts to $75,000, $100,000 and $175,000, respectively.

AB 1953 - makes it illegal to sell faucets or replacement parts that contain more than one-quarter of one-percent (0.0025) lead.

SB 572 - designates May 22 in commemoration of the gay rights leader Harvey Milk.

The materials above were gathered from various sources including the Los Angeles Times, the California Highway Patrol, Yubanet and NBC. For more information run a search on Google.

Robin Mashal is a California business attorney, and a partner at the law firm of Hong & Mashal, LLP. He can be reached at (310) 286-2000.