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Challenge to Constitutionality of Bankruptcy Code Provision Re Debt Advice, Plus Other Bankruptcy, Insurance and Securities Matters

By FindLaw Staff on May 18, 2010 | Last updated on March 21, 2019

Adams v. Zelotes, No. 07-1853, concerned an action challenging the constitutionality of a Bankruptcy Code provision, 11 U.S.C. § 526(a)(4), alleging that the provision's prohibition on debt relief agencies advising clients to incur additional debt in contemplation of bankruptcy violated plaintiff's First Amendment rights.  The Second Circuit reversed an injunction in favor of plaintiff, on the ground that the Supreme Court's decision in Milavetz directly foreclosed plaintiff's as-applied challenge by narrowly construing the Bankruptcy Abuse Prevention and Consumer Protection Act to avoid his First Amendment complaint.

AmeriCredit Fin. Servs. v. Tompkins, No. 09-0022, involved a creditor's appeal from the bankruptcy court's order expunging creditor's unsecured claim in a Chapter 13 proceeding and overruling creditor's objection to the confirmation of the plan.  The court of appeals vacated the order, on the ground that both state law and the contract of the parties gave creditor the right to an unsecured deficiency judgment.

Arrowood Indemn. Co. v. King, No. 07-5249, concerned an action by an insurer seeking a declaration that neither a homeowner's policy nor an umbrella policy provided coverage for a tort plaintiff's claimed injuries.  The Second Circuit certified the following questions to the Connecticut Supreme Court:  1) With respect to a claim for negligent entrustment under a liability policy that excludes coverage for "[a]rising out of . . . [t]he entrustment by an insured" "to any person," "of a motor vehicle" other than "[a] motorized land conveyance designed for recreational use off public roads, not subject to motor vehicle registration and . . . [o]wned by an insured and on an insured location," is the insured location a) the place where the entrustment of the vehicle took place, or b) the place where the vehicle is garaged, or c) the place where the accident occurred?  2) In the absence of a policy definition of "premises", should a private road located within a residential development owned by the insured's homeowners association be considered "premises used . . . in connection with a [residence] premises" under the terms of a homeowner's insurance policy if the portion of the road where the liability arose is not regularly used by the insured, although other portions of the road are so used?  3) Under Connecticut law, where a liability insurance policy requires an insured to give notice of a covered claim "as soon as practical," do social interactions between the insured and the claimant making no reference to an accident claim justify a delay in giving notice of a potential claim to the insurer?

Slayton v. Am. Express Co., No. 08-5442, involved a securities fraud action challenging one allegedly misleading statement made in the defendants' May 15, 2001 quarterly report.  The court of appeals affirmed the dismissal of the complaint, on the ground that the alleged misleading statement was a forward-looking statement that was protected by the safe harbor of the Private Securities Litigation Reform Act.

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