Tuesday, November 15, 2005

In Re Rains (9th Cir. - Nov. 8, 2005)

Crickey. Sure, we're toughening up on the ability of debtors to file for bankruptcy. But I never knew that it would be this tough.

Omar Rains was (indeed, according to the State Bar, still is) a California attorney. Things apparently do not go well for him, so he decides to go BK. There's an adversary bankruptcy proceeding that goes to mediation, and that process lasts all day. It's a tough negotiation, but eventually, at the end of the day, the parties enter into a settlement agreement. The contract requires Rains to pay $250,000 -- no small amount -- to the trustee, but Rains agrees to do so, and signs the settlement agreement.

Which sucks for Rains, of course. But things are going to get much, much worse for him. Because immediately after the mediation, Rains -- whose head is pounding -- drives himself to the emergency room, at which point he's promptly admitted to the hospital and diagnosed with a ruptured cerebral aneurysm, sub-arachnoid hemmorage, and stoke. Yikes. He undergoes surgery the very next day and is in the ICU for a month before eventually being discharged. Guess he should have skipped the mediation, eh?

Thereafter, Rains tries to get out of the settlement agreement. Claiming -- quite plausibly, in my view -- that he was actively having a stroke during the negotiation and execution of this agreement. And he backs up this claim with the testimony of various medical professionals that, given what was medically going on in his head at the time, Rains would have been "without the mental capacity to engage in business affairs on September 23, 2002 [the date of the mediation] . . . and for a number of days on each side of that date." Which, again, I find fairly plausible. Let me say, for the record, that if I'm ever having a stroke, I hope to God that I'm not doing so during a day-long mediation, much less one at the end of which I'm going to agree to spend a quarter million bucks. This may come as a shock, but I may not be thinking entirely clearly during such a process.

What I think, of course, doesn't matter. Because the bankruptcy court concludes that Rains had the mental capacity to understand and enter into the settlement agreement notwithstanding his stroke, the district court agrees, and the Ninth Circuit -- probably rightly -- concludes that such a factual finding is not "clear error".

Still. What a crappy day for Rains. Makes my own very worst days sound like an utter cakewalk.