Internet Lawyer Blog

When a husband and wife face a relatively simple divorce (e.g., no children and little assets or liabilities) they can agree to be financially liable for debts that each person incurred (i.e., the legal terms for obtained) on his/her own. So, neither person is jointly liable for any of the other person's debt. For example, if the husband stops payments on his credit card bill, the credit card company may not seek payments from his former wife since she was not on her former husband's account. In this situation, if either of the formerly-married persons made the decision to file for bankruptcy, the divorce does not have an impact on bankruptcy procedure. If either or both of them qualified for chapter 7, they could do so and not be concerned about their prior divorce.

Another situation that may come up in divorce and bankruptcy situation is when the couple have joint debts (i.e., they are both financially liable for a specific debt). For example, they are joint account holders of credit cards, or under the Family Purpose Doctrine, they are jointly responsible for a debt. In some states, this type of scenario may come up when a former spouse incurs medical fees during marriage, which is generally treated as a joint or shared debt. So, her husband is legally responsible for those debts as well if the wife goes through medical procedures and cannot make payments.

Generally, it is not abnormal for a divorcing couple to find out they are financially liable for a debt and they are mandated to hold each other harmless from liability on that debt. In such circumstances, the court does not change the rights of the creditor. Stated otherwise, if both husband and wife are liable for a debt (i.e., it is a joint debt) and the court enters an order making only one of them responsible for that debt and to "hold harmless" the other former spouse, the following situation may occur:

If the husband fails to make payment to the creditor, the creditor has the legal right to contact the husband's former wife for payment. The creditor can also file a lawsuit against the wife in order to collect the debt. The wife may have no remedy or recourse against the creditor; however, she does have recourse against her former husband. Stated otherwise, she can request the judge to hold the former husband in contempt, due to his failure to follow the court's order to hold her harmless regarding the specific debt.

The option of which type of bankruptcy to file is fairly important in this situation. Please note that chapter 7 bankruptcy does not discharge or wipe out debts that are incurred in the course of a divorce or separation agreement. In other words, if the former husband files for bankruptcy relief under chapter 7, any debts that he was responsible for in his divorce will not be discharged. But under chapter 13, a person who owes a large amount of debt that he/she was responsible for in their divorce, can deal with such debts through a repayment plan.

In this scenario, if the former husband files bankruptcy under chapter 13 and lists his former wife as a creditor and co-debtor, and if he complies with his confirmed repayment plan, then at the conclusion of the repayment plan he will not be responsible for "divorce debt." Also, the court which was administering the divorce should not find the former husband in contempt, as long as the specific debt constitutes property settlement and is not child support or alimony.

This situation may apply to either of the spouses, i.e., the former husband or wife. If either person is liable for the debts of the other, stemming from their divorce settlement, a chapter 13 bankruptcy allows them to discharge that debt. However, a chapter 7 bankruptcy does not, and it permits the court to hold the non-paying spouse in contempt.

Please remember that debts regarding a domestic support obligation, such as child support or alimony, will not be discharged in chapter 7 or chapter 13. These types of debts can be repaid via chapter 13 bankruptcy. For more information on this topic, please contact Salar Atrizadeh, Esq. or visit the law firm's website at www.atrizadeh.com.

Last year, the California State Legislature made various efforts to regulate commercial transactions on the Internet. These efforts provide interesting questions and concerns regarding practical and constitutional limits on a state's capability to legislate or regulate transactions on the world-wide-web (i.e., the Internet) due to its intrinsic interstate character.

One important consideration is the Dormant Commerce Clause, which stems from Article I, section 8, clause 3 of the federal Constitution. This doctrine implies that Congress only has the power to regulate interstate commerce and that the states do not have such power. Its application to the regulation of activities on the Internet is not quite developed and includes a series of judicially-created analyses. So far, the United States Supreme Court (which is the nation's highest court) has not issued any definitive rulings. In addition, we do not have authoritative decisions by federal courts regarding the capability of the states to control online privacy and data security, tax online sales, or regulate online gambling.

As mentioned in this article, the legislators in this state passed or proposed laws that would develop our state's regulatory power over transactions on the Internet which relate to the following topics: (i) privacy and data security; (ii) taxation of retail sales over the Internet; and (ii) online gambling.

California's legislation (i.e., enactment of laws) may be different from federal legislation efforts which could cause the United States Supreme Court to repeal or strike down the law. SB 761, which is "Do Not Track" bill, posits that legislation would violate the Dormant Commerce Clause since it would cause regulation of an out-of-state activity and would subject online businesses to inconsistent state regulation. As such, a state's efforts to tax online retail activity are limited by current federal laws (e.g., court decisions and/or statutes) preventing the states from taxing sales of businesses which do not have a geographic presence in the specific state. A state's power to control or regulate online gambling is still uncertain, especially because of the absence of clear federal law on the subject. Thus far, one state supreme court has upheld a state's right to ban online gambling over a Dormant Commerce Clause challenge.

The future of state regulation of Internet activity depends on various developments. For example, it depends on the standard of scrutiny which courts apply to state regulation of the Internet. Second, it depends on the arrival of new technology which can help website operators to distinguish users from different states. Third, it depends on the viewpoint of Congress towards online transactions and whether it is willing to subject activities exclusively to federal regulation or to grant states the power to regulate these type of activities.

The following is a list of new and pending legislation in California:

I. Privacy and Data Security

1. S.B. 24 (Data Security Breach Notice)
2. S.B. 445 (Library Records
3. S.B. 602 (Reader Privacy )
4. S.B. 761
a. Do Not Track
b. Un-passed

II. Taxation -- A.B. 28 ("Amazon" tax)

III. Gambling

1. S.J.R. 14 (opt out of federal regulation)
2. S.B. 40 & 45
a. State framework
b. Did not pass

Megaupload.com was among the world's biggest file-sharing sites with 150 million registered users and about 50 million hits daily. It was big enough that it earned founder Kim Dotcom $42 million in 2011.

The movie industry objected that the site was making money off pirated material; even though, Megaupload is based in Hong Kong and the founder was living in New Zealand, some of the alleged pirated content was hosted on leased servers in Virginia, which was sufficient for U.S. prosecutors to take action.

Thereafter, the site was closed and its founder and three Megaupload employees were arrested in New Zealand on allegations by American prosecutors that they facilitated millions of illegal downloads of films, music and other content, costing copyright holders at least $500 million in lost revenue.

The authorities in New Zealand were able to obtain artwork, weapons, and more than $8 million in funds and cars valued at nearly $5 million after serving 10 search warrants at several businesses and homes around Auckland.

A group of hackers retaliated for the recent news and claimed credit for attacking the Justice Department's website. After investigations by federal officials, it was confirmed that the department's website was down for several hours and the disruption was being "treated as a malicious act." This group of hackers who are also known as "Anonymous" claimed credit and also claimed that they also broke into the Motion Picture Association of America's website.

Fairfax Media located at New Zealand reported that the defendants were present at the courtroom for extradition proceedings which may last a year or longer. Dotcom's lawyer raised objections to a media request to take photographs and video, but then Dotcom spoke out from the dock, saying he didn't mind photos or video "because we have nothing to hide." The judge granted the media access, and ruled that the four would remain in custody until a second hearing Monday.

Michelle Obama is officially live on Twitter. The first lady's Twitter feed went live on Thursday and her link is being managed by the president's re-election campaign. The first two tweets came from the campaign staff and described the account as "a new way for you to connect with First Lady Michelle Obama and the President's campaign." The traffic was high within the first hour with more than 20,000 followers. President Barack Obama also has a Twitter account managed by the campaign. Its first tweet of the day: "It's not every day we get to welcome the First Lady of the United States to Twitter - happy to have you, Michelle Obama!"

This acknowledges that technology plays a key role in our lives and allows us to communicate with each other through different means and methods. Twitter is an online social networking service and microblogging service that enables its users to send and read text-based posts of up to 140 characters, known as "tweets". It was created in March 2006 by Jack Dorsey and launched that July. The service rapidly gained worldwide popularity, with over 300 million users as of 2011, generating over 300 million tweets and handling over 1.6 billion search queries per day. It has been described as "the SMS of the Internet." Twitter Inc. is based in San Francisco, with additional servers and offices in New York City.

The potential value of the Hostess name and how Twinkie, Ding Dong or Wonder Bread could be repurposed into other consumer products was being assessed as Hostess Brand filed for bankruptcy this last Wednesday.

For the time being, Hostess will continue to produce Twinkies, but some experts are concerned about whether the company can survive. This is Hostess Brands' second trip in bankruptcy court where it resurfaced in 2009 after a four-and-a-half year corporate restructuring.

Throughout history, buyers have placed high bets on brand names like Borders, Polaroid and Sharper Image which continue to resonate with consumers even after the company has filed for bankruptcy and has liquidated its assets.

In January 2011, the University of Minnesota filed suit alleging that a website operator violated copyright law by posting a widely-used psychological test online. The psychological test, which is known as the Minnesota Multiphasic Personality Inventory ("MMPI"), was developed to assess personality traits and help diagnose mental disorders. This test contains more than 500 statements which test takers are supposed to mark either true or false. Over the years, MMPI has become one of the most commonly used psychological tests. The lawsuit alleges that a New Zealand-based Web operator named Andrew Dobson illegally posted the statements and software that claimed to interpret the answers to two websites.

The university's main concern is to avoid exposure of the test questions to ensure validity of responses because if test-takers have seen the test before, then any responses may be invalid. The University's lawyer stated that the lawsuit was filed to ensure the websites did not repost the tests. In addition, if the websites cooperate, the lawsuit will likely be withdrawn.

This topic is an example of how intellectual property can be obtained and abused by a third party without legal justification. Intellectual property refers to creations of the mind: inventions; literary and artistic works; and symbols, names and images used in commerce. Intellectual property is divided into two categories: (1) Industrial Property which includes patents for inventions, trademarks, industrial designs and geographical indications; and (2) Copyright which includes literary works (e.g., novels, poems and plays), films, music, artistic works (e.g., drawings, paintings, photographs and sculptures) and architectural design. The legal rights related to copyright include those of performing artists in their performances, producers of phonograms in their recordings, and broadcasters in their radio and television programs.

In California, a new Facebook feature which permits an advertiser to publish or broadcast a user's "like" of its product to others in that individual's circle is under scrutiny.

The United States District Court in San Jose, California refused to grant a motion to dismiss which states that Facebook ads violate its user's right of publicity by utilizing their names and photographs without authorization. However, the court dismissed an unjust enrichment claim. In the lawsuit, Facebook's position is that user permission is not required to promote its user's likes to those in that user's circle, in a category it terms "sponsored stories." Facebook contends that such information is newsworthy and exempted under California's right-of-publicity statute. The company's position is that its users constitute public figures.

California's right-of-publicity statute is codified under Civil Code section 3344 which states as follows:

"Any person who knowingly uses another's name, voice, signature, photograph, or likeness, in any manner, on or in products, merchandise, or goods, or for purposes of advertising or selling, or soliciting purchases of, products, merchandise, goods or services, without such person's prior consent, or, in the case of a minor, the prior consent of his parent or legal guardian, shall be liable for any damages sustained by the person or persons injured as a result thereof. In addition, in any action brought under this section, the person who violated the section shall be liable to the injured party or parties in an amount equal to the greater of seven hundred fifty dollars ($750) or the actual damages suffered by him or her as a result of the unauthorized use, and any profits from the unauthorized use that are attributable to the use and are not taken into account in computing the actual damages. In establishing such profits, the injured party or parties are required to present proof only of the gross revenue attributable to such use, and the person who violated this section is required to prove his or her deductible expenses. Punitive damages may also be awarded to the injured party or parties. The prevailing party in any action under this section shall also be entitled to attorney's fees and costs."

Generally, punitive damages are awarded in addition to actual damages when the defendant acted with recklessness, malice, or deceit. Punitive damages, which are intended to punish and thereby deter blameworthy conduct, are generally not recoverable for breach of contract. The Supreme Court has held that three guidelines help determine whether a punitive-damages award violates constitutional due process: (1) the reprehensibility of the conduct being punished; (2) the reasonableness of the relationship between the harm and the award; and (3) the difference between the award and the civil penalties authorized in comparable cases. BMW of North America, Inc. v. Gore, 517 U.S. 559, 116 S.Ct. 1589 (1996).

For more information about this topic contact Los Angeles Attorney, Salar Atrizadeh, Esq.

In the recent years, online harassment or cyberharassment has become an important issue. This is because the Internet has changed our lives on so many levels. Generally, the law prohibits harassment and our readers should consider taking certain precautions when being harassed.

Cyberharassment is different from cyberstalking because it does not involve a credible threat. Cyberharassment occurs when someone sends harassing email messages, instant messages, or posts entries simply to torment another person. Different jurisdictions have different approaches in addressing cyberharassment in codifying their laws. For example, some include language addressing electronic communications in general harassment statutes. However, some states have created stand-alone cyberharassment statutes.

California Penal Code section 653.2 subsection (a) states that, "[e]very person who, with intent to place another person in reasonable fear for his or her safety, or the safety of the other person's immediate family, by means of an electronic communication device, and without consent of the other person, and for the purpose of imminently causing that other person unwanted physical contact, injury, or harassment, by a third party, electronically distributes, publishes, e-mails, hyperlinks, or makes available for downloading, personal identifying information, including, but not limited to, a digital image of another person, or an electronic message of a harassing nature about another person, which would be likely to incite or produce that unlawful action, is guilty of a misdemeanor punishable by up to one year in a county jail, by a fine of not more than one thousand dollars ($1,000), or by both that fine and imprisonment.

See California Penal Code section 422 related to hate crimes. See also California Penal Code section 653m for more information.

In California, the stalking laws are included under Section 646.9 of the Penal Code, which states that any person who willfully and maliciously, and repeatedly follows or harasses another person and who makes a credible threat with the intent to place that person in reasonable fear for his or her safety or that of an immediate family member is guilty of stalking. Stalking cases may include additional related charges such as: (1) Trespassing; (2) Vandalism; (3) Burglary; (4) Criminal Threats; and (5) Obscene, Threatening, or Annoying Phone Calls.

Please keep in mind that willfulness is a standard related to the culprit's state of mind. For example, when the person is acting purposefully, then he/she has the "conscious object" of engaging in conduct and believes or hopes that the attendant circumstances exist. If the person is acting knowingly, then he/she is practically certain that his conduct will lead to the result. If the person is acting recklessly, then he/she is aware that the attendant circumstances exist, but nevertheless engages in the conduct that a "law-abiding person" would have refrained from. If the person acts negligently, then he/she is unaware of the attendant circumstances and the consequences of his conduct, but a "reasonable person" would have been aware. Finally, if the person acts with strict liability, then mental state is irrelevant and he/she is strictly liable.

In the last few years and with the emerging of the world wide web, a new kind of stalking has developed which is also called "cyber stalking." This type of misconduct occurs when the violator utilizes the Internet, electronic mail (e-mail) or other communication devices to harass and stalk others. For example, it can occur by sending e-mails to the victim, impersonating another person in online chat rooms and e-mail messages, and disseminating lies in cyberspace. It is also important to note that the Internet is a cheap and efficient method for "cyber stalkers" to anonymously cause harm to their victims.

If you have any questions, contact me, Salar Atrizadeh, Esq. to discuss your options.

The National Association of Consumer Bankruptcy Attorneys ("NACBA") filed an amicus brief addressing the constitutionality of Michigan's bankruptcy specific exemption scheme in In re Schafer, No. 11-1340 (6th Cir.) NACBA's brief argues that section 522(b)(3)(A) of the Bankruptcy Code permits the states to enact whatever exemption laws deemed appropriate without regard to whether those laws are limited to bankruptcy debtors or applicable to all debtors in the state. Joining in the amicus brief were the National Consumer Law Center, Legal Services Association of Michigan, The Michigan Poverty Law Program and the Council of the Consumer Law Section of the State Bar of Michigan.

The State of California does not allow a debtor to use Federal bankruptcy exemptions under Title 11 of the United States Code ("Title 11 U.S.C.). For example, California has two sets of exemptions which can be used in a bankruptcy case. The exemptions are codified in California Code of Civil Procedure sections 703 and 704. A bankruptcy debtor is required to select only one set of exemptions. Click here to read the California exemptions under section 703. You may also click here to review the California exemptions under section 704. If you have any questions, contact me to discuss your options and avenues.

For example, in discussing C.C.P. § 704.730(a)(3), the United States Bankruptcy Court for the Southern District of California held that, to determine Chapter 7 debtor's "gross annual income," for purpose of deciding whether debtor was entitled to enhanced $150,000 homestead exemption accorded by the California legislature to debtors who are at least 55 years old and who have annual gross incomes of no more than $15,000, bankruptcy court had to deduct from gross receipts of business that debtor operated as sole proprietorship any legitimate business expenses, without regard to whether debtor's business was service oriented or was a more capital intensive enterprise, such as retail sales. See In re Bush, 346 B.R. 207. Generally, gross annual income has been interpreted as income from debtors gross receipts if he/she owns a business reduced by the expenses of that company. Gross annual income is the functional equivalent of "adjusted gross income" as used for computing taxes, i.e., wages, salaries, etc. or other income less the variety of possible deductions. See Shelly v. Kendall (In re Shelly), 184 B.R. 356, 358 (9th Cir. BAP 1995) affd. 109 F.3d 639 (9th Cir. 1997).

On November 28, 2011 American Airlines filed for bankruptcy protection under chapter 11. The filing by the AMR Corp. and its subsidiaries, including, but not limited to, American Airlines and American Eagle, resulted from unsuccessful attempts to win labor concessions. The bankruptcy filing listed $24.7 billion in assets and $29.6 billion in liabilities or debts.

The filing allows American to continue normal business operations during the restructuring. At the hearing, the bankruptcy court approved the debtor's requests to pay its employees, resume with its customer programs, and pay vendors critical to maintaining its daily business operations.

It seems clear that the cost gap between the airline and its competitors was indefensible. It is also clear that since 9/11, the economic climate has been most uncertain, oil prices remain high and volatile, which may have ultimately caused American Airlines to file for bankruptcy protection.

In the court papers, the company listed as its unsecured creditor Wilmington Trust Corp., which is the trustee for holders of $460 million in 6.25 percent convertible senior notes due in 2014. On September 27, 2011, the company sold $725.7 million of 10-year bonds backed by aircraft to refinance maturing debt. Also, this debtor paid the highest interest rates since 2009 to raise the cash.

Hopefully, with the economic recession coming to an end, the airlines can recover from the bear market that we are facing at this time.

The United States Bankruptcy Court required additional information from the trustee in the winding down of MF Global, to determine whether the trustee has a conflict of interest. In the case, the bankruptcy trustee has been accused of having a conflict because of prior work done for JPMorgan Chase & Co, which was one of the key lenders to MF Global. However, the trustee's law firm disclosed that it was hired by JPMorgan sometime between 2009 and 2010, and that the related income was less than 1/10 of 1% of the law firm's annual revenue.

In the legal profession, conflicts of interest are not uncommon. However, a bankruptcy trustee should be careful not to engage in conduct constituting conflict of interest with any of the bankruptcy debtors or businesses that file for bankruptcy. A conflict of interest can be a financial interest in any creditor or business of a bankruptcy or even knowing a bankruptcy debtor filing for bankruptcy. It is unethical for a bankruptcy trustee to administer a bankruptcy estate if he has a personal interest in the outcome of the bankruptcy case.

A trustee must be knowledgeable of all applicable laws, including, but not limited to, 11 USC § 701(a)(1), § 101(14), and § 101(31), and must decline any appointment in which the trustee has a conflict of interest or lacks disinterestedness. A trustee should a procedure to screen new cases for possible conflicts of interest or lack of disinterestedness when he or she is appointment.

If a trustee discovers a conflict of interest or a lack of disinterestedness after accepting the appointment, the trustee should immediately file a notice of resignation in the case. Generally, conflict waivers by either the debtor or creditor are not effective to prevent the trustee's duty to resign.

The U.S. Supreme Court has declined to hear a bankruptcy case in which a lender had contended that it did not violate the automatic stay in bankruptcy when it exercised its rights under the Real Estate Settlement Procedures Act ("RESPA") and reanalyzed a debtor couple's escrow account to determine how much money the couple needed to deposit to cover taxes assessed after they had filed their bankruptcy petition (Countrywide Home Loans Inc. v. Francisco Rodriguez, No. 10-1285, Chapter 13, U.S. Sup.; See 7/6/11).

After Francisco and Anna Rodriguez filed for Chapter 13 bankruptcy in the U.S. Bankruptcy Court for the District of New Jersey, the couple filed an adversary complaint against their lender, Countrywide Home Loans Inc., contending that it had violated the automatic stay by requiring them to deposit more money into their escrow account.

Steven J. Baum, P.C. was dropped by Fannie Mae and Freddie Mac, the mortgage-finance companies operating under U.S. conservatorship, from their list of law firms eligible to handle foreclosures.

Fannie Mae said that, "After Nov. 15, 2011, servicers may not refer any new Fannie Mae foreclosure or bankruptcy cases in New York to Steven J. Baum PC..."

On November 10, 2011, Freddie Mac announced its ban. So, both companies said the Baum firm would continue to work on matters referred before the effective dates. Neither said why the firm was being suspended.

Last month, Steven J. Baum PC, one of the largest foreclosure law firms in New York state, agreed to pay the United States approximately $2 million so to resolve a probe of its foreclosure filings. The agreement concluded an investigation into whether the firm filed misleading pleadings, affidavits and mortgage assignments in courts, according to a statement by U.S. Attorney Preet Bharara in Manhattan. The settlement didn't constitute a finding of wrongdoing.

It seems that such non-compliances truly burden the homeowners the most because they are the ones that have to ultimately face eviction. The lenders will recover losses from the TARP funds or mortgage insurance if applicable.

Click here to read on how to avoid foreclosure.

The bankruptcy filing by Jefferson County that includes Birmingham is the largest ever municipal bankruptcy. According to sources, county commissioners decided to declare bankruptcy because creditors balked at economic concessions outlined in a September deal.

The county is facing $4.23 billion in debt, according to the Birmingham News. The largest creditor, JPMorgan Chase & Co., owns about $1 billion of the county's $3.14 billion in sewer construction bonds. Reuters says the sewer bonds had soured in the mid-2000s amid corruption that led to bribery and fraud charges.

The county, listed assets and debt of more than $1 billion in Chapter 9 bankruptcy petition filed on November 9, 2011 in U.S. Bankruptcy Court in Birmingham.

The threat of bankruptcy has loomed over the county for more than three years and inspired provisions in the federal Dodd-Frank law seeking to protect localities from complex financial trades involving derivatives.