T H E R E S O U R C E F O R B A N K R U P T C Y , C O L L E C T I O N A N D D E B T R E C O V E R Y

Vol. 24 • Issue No. 6November/December 2009

IN THIS ISSUE

Legal Aspects of Collecting an Account Receivable

Foreign Collections: Italy

Operation Unison

The Personal Touch

PATRON FUNDThe CLLA Patron Fund provides an excellent means for CLLA members to give something back to their association.

The Fund was established in 1963 and has a proud tradition of supporting the League and its endeavors. Patron Fund contributions create a financial reservoir that allows the League to underwrite worthy projects without the need for special fund drives. Patron Fund grants have been used to finance avariety of programs and projects that benefit our members and increase the overall visibility and viability of the League. In recent years, grants have been awarded to:

Q the CLLA Bankruptcy Section Q the Commercial Collection Agency Association QQ the Membership Development Committee Q the League’s Legislative Writer Q

Q the DePaul Business & Commercial Law Journal Q Q the CLLA to underwrite the expenses of League Counsel Q

Q the National Education Committee to produce teleseminars QQ the CLLA commissioned to prepare FTC white paper promoting changes to the FDCPA Q

All League members are invited to join this esteemed group of colleagues by simply completing the pledge form below. Your pledge is a meaningful way to demonstrate your commitment to the Commercial Law League of America®.

Contributing companies or firms are recognized by publication in the Patron Roster and by special designation as Patrons on conference badges for their members.

Return the completedform below to:

CLLA

36404 Treasury Center

Chicago, IL

60694-6400

Phone: 312.781.2000Fax: 847.526.3993

COMMERCIAL LAW LEAGUE OF AMERICA®

PATRON FUND PLEDGE FORMPlease include my name amongst the esteemed list of colleagues that support the Commercial Law League of America® as a Patron of the League. I understand that the minimum pledge to the Fund as established by the CLLA Board of Governors is $150.00. I also understand that my membership will appear by firm name when published in the Patron Fund Roster.

o I am enclosing my check made out to CLLA in the amount of $_____________________________.

OR

o I am faxing my credit card information to 847-526-3993 authorizing CLLA to charge my credit card the amount of $______________.

o MasterCard o Visa o AMEX o Discover

Credit Card Number Exp. Date

Signature Date

I understand that my listing in the Patron Fund Roster will appear as shown below.

First Name Last Name

Firm Name

Location

c o n te n t sDebt3 (ISSN 0888-8000) is published bi-monthly by the Commercial Law League of America®, 70 E. Lake Street, Suite 630, Chicago, IL 60601; (312) 781-2000. POSTMASTER: Send address changes to Debt3 70 E. Lake Street, Suite 630, Chicago, IL 60601. Periodicals postage paid at Chicago, Illinois and additional mailing office.

Copyright ©2009 by the Commercial Law League of America®. Permission to reprint materials in Debt3 may be granted on written request to the Editor at the Commercial Law League offices.

The views and conclusions expressed in articles are those of the authors and are not necessarily those of the Editorial Board, or of the Commercial Law League of America®; nor should any advertisement be considered an endorsement of the product or service involved.

The price of an annual subscription to members of the Commercial Law League of America® ($18.00) is included in their dues. Annual subscription to others is $65.00 per year in the U.S. and Canada, $70.00 else-where. Single copy price is $15.00. Write the Commercial Law League of America®, 70 E. Lake Street, Suite 630, Chicago, IL 60601; (312) 781-2000.

10 14 15

Vol. 24 • Issue No. 6November/December 2009

features 7 Protecting Company Assets

10 Legal Aspects of Collecting an Account Receivable

14 Small Claims in Ontario Are Not So Small Anymore

15 The Recession’s Silver Lining: Banks Forced To End Arbitration of Consumer Debt

foreign collections 18 Ten Questions and Answers to a Foreign Collections Lawyer: Italy

heard & overheard 20 Operation Unison-Canada’s Help with Katrina - 2005

league business 21 NCBJ Spotlight

24 The Personal Touch by Oliver Yandle

member news 22 AmongOurMembers•NewlyAdmittedMembers

7

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about clla

CLLA Core Purpose:To be the leader in providing legal, educational and professional servicesto the business and credit communities.

CLLA Core Values:• We provide service and value through competence, ethics and professionalism• We foster relationships• We create business and leadership opportunities• We provide high quality education• We are the leader in our industry

League members and other readers are invited to submit previously unpublished articles on commercial practice or topics relating to the general practice of law. Articles should be submitted electronically via e-mail. The preferred format is Microsoft Word or plain text. WordPerfect is accepted but not preferred. All articles will be reviewed. Send articles to ehart@clla.org. Manuscripts can be sent to Attn: Editor, Debt3, Magazine c/o Commercial Law League of America, 70 E. Lake Street; Suite 630; Chicago, IL 60601. CLLA can be reached at 312-781-2000 or toll free 800-978-2552.

Vol. 24 • Issue No. 6November/December 2009

meeting notices

New England Regional Meeting

Newton, MA

March, 2010

Annual Spring Meeting

Chicago, ILApril 29–May 2, 2010

Strategic Planning &

Leadership Conference

Boston, MAAugust 5-8, 2010

officers and board of governors

PresidentErnest “Rick” V. Thomas, III, Cincinnati, OH

President-ElectGary Weiner, Springfield, MA

TreasurerMurray S. Lubitz, White Plains, NY

Recording SecretaryBarry J. Gammons, Nashville, TN

Immediate Past PresidentDavid R. Gamache, St. Louis (Crestwood), MO

Board MembersRobert A. Bernstein, Charleston, SCChristine Hayes Hickey, Indianapolis, INBeau Hays, Atlanta, GAMarc Hirschel, Lakeville, CTAlan I. Nahmias, Encino, CA Jeff E. Rubin, Miami (Coral Gables), FL Jeffery Schatzman, Miami, FLDonald B. Scott, Mount Kisco, NYJoseph Terkell, New City, NYJulie A. Rausch, Milwaukee, WISteve A. Ungerman, Dallas, TX

Executive Vice PresidentOliver P. Yandle

editorial staff

Board of Associate EditorsDavid A. Rubin, Chair, Toronto, ONNancy Hamilton, Vice Chair, Cleveland, OHLawrence C. Brown, Vice Chair, Buffalo, NYElliott D. Levin, Immediate Past Chair,

Indianapolis, INNeil Abbott, Toronto, ONRichard G. Baumann, Los Angeles, CAJohn M. Birk, Gainsville, FLNicholas Krawec, Pittsburgh, PALee M. Mendelson, Van Nuys, CALouis S. Robin, Longmeadow, MARobert Schatzman, Coral Gables, FL

EditorOliver P. Yandle

Design/Publication ConsultantsNewcomb Integrated Marketing Solutions

Editing DirectorJoshua Greene

Contributing EditorsDavid Franklin, Montreal, PQSteven A. Frieze, London, England Harry Greenfield, Cleveland, OHNicholas Krawec, Pittsburgh, PAJoseph A. Marino, Clifton, NJTimothy Wan, Commack, NY Young Members’ Representative

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president’s pagePresident, Commercial Law League of America®

Ernest V. Thomas, III was born in Cincinnati, Ohio. In 1979 Ernest, better known as Rick, received his B.A. degree from Thomas More College located in Crestview Hills, Kentucky. Rick gradu-ated from the University of Cincinnati College of Law in 1982 with a J.D.. Rick is ad-mitted to practice law in both Ohio and Kentucky as well as being licensed to practice in the Federal Courts and the United States Court of Appeals for the Sixth Circuit. Rick is a member of the American Bar Association, Ohio State Bar Association, Kentucky Bar Association, and Cincinnati Bar Associa-tion. Rick is also a member of the Commercial Law League of America, the American Collectors Association and the International Commercial Collectors Association.

Only In The CLLAI recently attended the Annual Eastern District meet-

ing in New York City. It was one of the best con-ferences in New York that I have ever attended

(and I’ve attended quite a few since the early ’80s!).

In October, I attended the NARCA (National Asso-ciation of Retail Collection Attorneys) conference in San Francisco, and from there, I went to the NCBJ (National Conference of Bankruptcy Judges) in Las Vegas. I’ve at-tended many NARCA conferences, and the meeting in Oc-tober was, as usual, an excellent opportunity to see some friends and clients. Since my firm doesn’t do bankruptcy work, I’ve never had the pleasure of attending the NCBJ conference. I have to say, it was a real treat to see the pro-grams that the League’s Bankruptcy Section put on.

The CLLA hosts a breakfast on the first day of the con-ference and offers educational programs throughout the rest of the conference. I had the pleasure, as your president, to introduce the breakfast speaker, Paul Begala, who cur-rently works for CNN, and has, for the last 25 years, been involved either as a political strategist or pundit. In 1992, he and his partner, James Carville, served as senior strate-gists for the Clinton-Gore presidential campaign. Paul then served as counselor to President Clinton, where he was in-volved with everything from the State of the Union address to economic, domestic and international issues. During that time, he also acquired the uncanny ability to do remarkable and entertaining imitations of President Clinton.

Begala’s theme was “Only in America.” Besides high-lighting the accomplishments of our current president, Ba-rack Obama, he related his own family’s accomplishments. Begala shared the story of how his immigrant mother raised a son who, for more than a quarter century, has been closely involved with some of the most powerful and influential people in our great country. I was particularly touched when Begala described one of his most cherished White House memories — the day he was able to have his mother visit the White House and meet President Clinton.

Begala observed that only in America could the country go from the turmoil of the civil rights movement to having an African-American President elected in less than half a century. I could tell, however, that he was more proud of

the fact that his mother, who spent her life in this country cleaning other peoples’ houses, had the opportunity to meet the most powerful leader in the world. Only in America!

The breakfast also included the presentation of the Larry King Award by the Chair of the Bankruptcy Sec-tion, Debbie Ebner. The recipient, Judge Eugene Wedoff, was truly honored to receive this prestigious award. While I’ve always heard how respected our Bankruptcy Section is, this was a first-hand opportunity to see how the judges, trustees and practitioners in the bankruptcy field hold our Bankruptcy Section in such high esteem.

I previously mentioned how great the New York confer-ence was — that meeting was my first chance as president to see all the hard work done by our countless volunteers. While our Executive Vice President Oliver Yandle and staff — Elizabeth Hart, Meghan Flesch and Mary Jo Ritt — did an excellent job of organizing the meeting, countless volunteers made sure the education and networking events were first-class. I would like to recognize the Chair of the Eastern District, Fred Weinberg, and Arrangements Chair Warren Pinchuck. There’s simply not enough room in this article to list all the other members who gave so much of their time and effort. Thanks to everyone for a job well done.

While in New York, I also enjoyed having the oppor-tunity to meet with the leaders of several other organiza-tions. We extended an offer to other organizations in the credit and bankruptcy community to attend the New York conference and meet with myself, our President Elect Gary Weiner, Executive Vice President Oliver Yandle and League Counsel David Goch for an informal lunch. To my surprise and delight, everyone accepted!

In alphabetical order of acronym, we enjoyed the company of Robert Keach, president of ABI (American Bankruptcy Institute); Mike Cushing, president of DBA (Debt Buyers Association); Bill Mann, president of IACC (International Association of Commercial Collectors); Robert Furr, president of NABT (National Association of Bankruptcy Trustees) and Fred Blitt, president of NARCA (National Association of Retail Collection Attorneys). We

continued on page 6

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(continued from page 5)

shared war stories of past conferences, talked about recognition of indus-try leaders and, most importantly, discussed ways in which our various or-ganizations could collaborate in the future on legislative, educational and networking events. Each of these organizations offer distinct value to their members in the credit, collection and bankruptcy fields. I was particularly honored to hear the expressions of thanks for our hospitality and see how much these industry leaders respect the CLLA.

Another enjoyable aspect of the New York meeting was to sit in on the various section, region and committee meetings. In a prior article, I extend-ed the invitation to you, our members, to get involved and truly experience all the value the League has to offer. The response has been incredible.

I witnessed meetings where 25-year-plus members worked with young-er, newer members to plan to make our CLLA more vibrant, relevant and valuable to our members and the industry. Only in the CLLA do you see

new members involved in critical strategic planning, national legislative ef-forts and some of the best educational programs in the industry. Only in the CLLA can you find the best of the best in collection agencies, bank-ruptcy practitioners and creditors rights practitioners. Only in the CLLA can you find an organization that has been relevant to the commerce and legislation of America for well over 100 years.

I’m proud to say that only in the CLLA have I been able to establish business and personal relationships with some of the brightest stars in the credit industry.

Rick

Congratulations toNancy B. Hamilton

Caine & Weiner joins the credit and collection community in congratulatingNancy B. Hamilton on her selection as the Robert E. Caine Leadership Award winner.

This industry honor is bestowed upon a member of the Commercial Law League of America who exemplifies initiative, leadership among other CLLA members, mentoring, promoting

goodwill and advancing confidence within the CLLA.

Nancy's long-standing dedication to the CLLA, her active leadership role and on-goinginvolvement in the industry well-qualifies her for this prestigious honor.

Caine & Weiner www.caine-weiner.com

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COMPANY BACKGROUNDThe president of a company (“XYZ”) headquar-tered in New Jersey was facing severe medical is-sues that caused him to be physically unable to continue his routine trips to a satellite office, manu-facturing and warehouse facility located in Texas. While he preferred the hands-on approach, he was not concerned. After all, several internal controls were in place to prevent fraud and employee theft. The Texas-based satellite location was required to send regular reports to the New Jersey headquar-ters. All purchases outside of the ordinary course of business had to be approved by headquarters. All timesheets and expense reports, including support receipts, were submitted to the company headquar-ters for payment authorization. Also, all changes in operations and any other activities outside the

ordinary course of business of the satellite location had to be pre-approved by the New Jersey-based headquarters in writing.

Everything between the plants was handled both by computer and paper back-ups sent to the compa-ny headquarters on a weekly basis. Finally, author-ity at the satellite location in Texas was distributed between three trusted long-term employees (“M1,” “M2” and “M3”) for additional oversight.

The president judged the existing controls and procedures as sufficient to prevent company losses. However, these preventive measures in place were not tested nor reviewed on a regular basis. After approximately nine months of not visiting the Texas location, the president was informed by

ARE YOUR CLIENTS’ FRAUD AND INTERNAL CONTROLS SUFFICIENT?

According to research conducted by

the Association of Certified Fraud Examiners,

organizations in the United States lose an estimated

7% of their annual revenue to fraud. This percent-

age indicates an overwhelming estimate of losses

of $994 billion (yes, billion with a “B”) among U.S.

companies alone in 2008. These losses occur

despite increased awareness of anti-fraud controls

and new legislation passed to combat fraud.

The following case study illustrates the necessity for

every organization to review its internal controls,

regardless of what controls it currently has in place.

Continued on page 8

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M1 that inventory he personally knew had been shipped from the Texas warehouse was still being listed on the re-port sent to the company headquarters in New Jersey as be-ing within the facility. The manger, M1, stated that he was unaware as to where the merchandise had been shipped. Notwithstanding, M1 strenuously represented that there was a discrepancy between the reports sent to the company headquarters and the physical inventory at the Texas satel-lite location. THE INVESTIGATION Our firm, Marino, Mayers & Jarrach, LLC, was retained to assist XYZ in determining the location of the missing mer-chandise and ascertaining who was responsible for either the business record error or potential theft of the goods.

A special committee was formed, which was led by XYZ’s president and included our firm, XYZ’s outside accoun-tants and key members from the company’s headquarters.

The committee began its investigation by contacting all of the companies that XYZ uses to ship products from the Texas location to request copies of all of XYZ’s bills of lad-ing for the past six months for “audit control purposes.” The bills of lading supplied to XYZ by the various ship-ping companies were compared to XYZ’s master customer list, invoices and shipping records submitted by the Texas location.

An anomaly appeared. One bill of lading did not match any of the XYZ headquarters records. The handwriting on the bill of lading was recognized as that of one of the three “trusted” long-term managers, M2. Furthermore, the re-cipient of the goods was not a company included on XYZ’s master customer list, nor did it appear in XYZ’s accounting records.

Stating that XYZ was conducting a routine audit and qual-ity control review, the company president contacted the new company that had purchased the missing merchandise and requested copies of its purchase orders, which were sup-plied. These purchase orders matched the bill of lading, but the documents were not downloaded into XYZ’s comput-ers, nor were they part of its business files — contrary to company policies and procedure.

The president further inquired about the payment arrange-ments and method of payment for the subject goods. The allegedly new customer indicated that it was instructed to make payment to a third-party company.

In an accommodating business climate, traditional business ethics have been watered down to complacency. A hundred or even 50 years ago, a request for payment to a third party would have seemed highly unusual to the customer. Good business ethics, at that time, would have caused an inquiry with the home office of a business and a request in writing to confirm the unusual practice.

In contrast, vendors in today’s credit-tight economy will accept third-party checks in payment of outstanding obli-gations without question. Vendees are not unfamiliar with requests to issue payment to a third party and often do so without question. It appears that today’s businesses believe that payment is primary, with controls and the name of the payee being secondary or unimportant.

People rarely think of, or want to think of, the broad con-sequences — i.e., that they have paid the wrong party and someone will be calling later for payment and requesting receipts and written authorization.

In this case, while a request to pay a third party should have raised a red flag with the customer, it apparently did not. Thus, the request for a third-party payee was not confirmed through XYZ’s accounting and billing departments.

Fortunately, the customer was willing to provide the presi-dent of XYZ with all the information regarding the trans-fer and proof of payment. The third-party payee company’s name, where payment was actually directed, did not appear in any of XYZ’s business records.

A search of the records of the secretary of state of Texas re-vealed that the third-party payee company was a registered business of M2 and was located at the manager’s home ad-dress.

An exhaustive investigation revealed that the misappropri-ated merchandise was ultimately shipped to one of XYZ’s largest customers, whose orders had been decreasing in the last few years. Due to a drop-off in the economy, the New Jersey headquarters did not question the decline in orders.

The investigation also revealed that the dishonest manager, M2 — who was supposed to be an exclusive salesman for XYZ — was distributing business cards to XYZ’s custom-ers indicating that he was an independent broker.

THE RESOLUTIONTwo trusted managers, M2 and M3, and their accomplices were terminated. M3’s unrelated misconduct was discovered during the investigation. Criminal charges were filed against M2 for third-degree felony theft. The criminal charges were eventually dismissed upon an agreement of M2 to:

1. Pay full restitution of the cost of merchandise tracked above;

2. Execute a non-compete agreement;3. Agree to provide his bank statements, as well as the bank

statements of any company where he has an interest, to XYZ so XYZ could determine whether those entities had also participated in any thefts or misconduct.

Unfortunately, the case did not end there. The former man-ager, M2, did not fulfill his obligations and instead filed a complaint in Texas with the United States Equal Em-ployment Opportunity Commission (“EEOC”) citing age

Patricia L. Jarrach, Esq., CFE, CICA , is a member

of Marino, Mayers & Jarrach, LLC. Jarrach graduated from

Rutgers University in 1992 with a bachelor’s degree and

from Syracuse University, College of Law, with a juris

doctorate including a second-ary concentration Certifica-tion in Law, Technology and Management in 1998. She is

currently licensed to practice law in New Jersey and New

York and has been working as a complex litigation attorney

for over 10 years. Jarrach is also a Certified Fraud

Examiner and the current Treasurer of the New Jersey

Chapter of the Association of Certified Fraud Examiners.

She has obtained the designa-tion of Certified Internal

Controls Auditor from the Institute for Internal Con-

trols. For more information regarding the Association of

Certified Fraud Examiners and research relative to the impact of fraud on business-es, go to www.acfe.com. For more information regarding

the Institute for Internal Con-trols, visit www.theiic.org. Jarrach can be contacted by telephone, 973-473-8000, or by e-mail, tjarrach@

marinomayerslaw.com.

Continued from page 7

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discrimination for his termination and the termination of the other employees. M2 is threatening civil litigation. The EEOC complaint, which is being vigorously defended against based upon the extensive investigation techniques utilized, is still pending. Our fi rm remains actively involved in this situation and has been aiding in the defense of the EEOC complaint.

SEVEN LESSONS LEARNEDIt is nearly impossible to stop all incidents of employee theft or fraud. However, certain safeguards can minimize the risk and maxi-mize the detection of theft or fraud. XYZ took some of these steps; yet it failed to go far enough, and additional controls should have been in place.

1. While the president of XYZ made numer-ous trips prior to his health problems, all of those trips were pre-announced. A review of the computer records indicated a fl urry of ac-tivity in the inventory records the week prior to each of his pre-announced visits. Unan-nounced visits to the Texas location might have raised some red fl ags to a potential problem.

2. XYZ only completed a physical inventory count once a year, and employees at the Texas satellite location conducted the inventories. Physical inventory counts are an important control mechanism and cannot be replaced by a computer inventory re-cord. Quarterly or semi-annual physical inventory checks should be considered, and different representatives from headquarters or their auditors should be present to avoid collusion.

Numerous fraud schemes have been successfully perpetrated for years based upon the lack of inventory controls. (See, for exam-ple, the story of Crazy Eddie, located at www.whitecollarfraud.com/947660.html.) An outside auditor and specialists who are aware of common inventory fraud tricks should make spot inven-tory checks.

3. The fraud in this case was ultimately accomplished based upon fear and the intimidation of M1 and other employees by M2 and M3. Although the president of XYZ made regular announced vis-its, the managers controlled and limited his interactions during those visits. The president of XYZ needed to change the nature and tenor of his visits to include talking to the employees without the intervention of the local managers.

4. XYZ did not have an employee fraud hotline. Publishing and an-nouncing strict company policies involving the lack of tolerance for fraud and the general encouragement to report any potential incidents of fraud might have brought the situation to light ear-lier.

A company should create — preferably with a third-party interme-diary (such as the company’s attorney or accountant) — a hotline for employees to report any suspicious activities. A widely publi-cized commitment to investigating such tips, coupled with writ-ten “no repercussions” and “anonymous” policies, will encourage

employees to report suspicious activities. When an act of fraud is confi rmed, the company should publicize its willingness to take action by terminating all the offenders and initiating both civil and criminal prosecution.

5. While correctly having a surface distribution of authority at the Texas satellite location, the duties and authority of the individual managers were not clearly defi ned to the employees, and over-ride systems were accepted and unquestioned. While the management

clearly understood the New Jersey headquarters’ role in con-trolling the facility, the employees did not.

Most of the employees interviewed were un-aware of the controls put in place by the com-pany headquarters and believed that the entire plant was being controlled exclusively by the three managers. Therefore, any threats of ter-mination if the manager’s activities were ex-posed were incorrectly accepted as fact. Every employee in an organization is the fi rst line of defense against fraud, conversion and misappro-priation. Employers should emphasize that fact to their employees. They are the frontline eyes and ears, and whistleblowers should be protected and rewarded.

6. At the Texas location, the employee who was in charge of inven-tory and production was not communicating with the individual in charge of shipping or with the third person doing the invoicing. So when one manager came to each of the employees separately and said it was a “rush job” and “it would be cleaned up later,” it was not questioned nor reported. The employees thought they were doing their jobs and, as cited above, apparently thought their jobs were contingent upon obeying and not questioning all the managers’ instructions immediately. There was no internal con-trol system allowing the employees to follow through — and no encouragement for them to do so.

7. Finally, a president, board member, partner or any other individ-ual cannot oversee potential abuse alone. Companies, especially privately owned companies like the one in this case study, should consider the check-and-balance systems available outside of those currently required by legislation to protect themselves from pos-sible exploitation.

CONCLUSIONWithout providing signifi cantly more detail, it is impossible to high-light all the steps that XYZ could have taken to reduce or mitigate the damage incurred. This case study should serve as an example of the need to regularly review and monitor the internal controls com-panies have in place to deter and detect potential fraudulent activities and implement changes and random testing. Every employer should realize that dishonest employees can overcome preventive measures and controls with time and some effort when those measures are not periodically reviewed and properly tested.

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The Attorney’s Initial Efforts. When an attorney has a case referred to his office for collection, he should im-mediately acknowledge the claim in writing to the client or forwarder. Upon receiving a claim on behalf of a creditor, the attorney will first attempt to collect the money amica-bly without the necessity of the institution of a lawsuit. The attorney will make demand upon the debtor by advising the debtor in writing that the law firm has been retained by the creditor, and also by attempting to contact the debtor by telephone. On occasion, personal visits are made to the debtor’s business premises so that the attorney can discuss the matter directly with the debtor; at that time, the attor-ney can also “check out” the premises to ascertain whether the debtor entity appears to have sufficient assets (physi-cal inventory, machinery, or equipment on the premises) to satisfy the claim.

Whether by telephone conversation, personal interview, or with the assistance of a paralegal’s investigation, the at-torney will attempt to determine what the debtor entity has in the way of assets and liabilities, and what outstanding security interests the debtor may have, so he can write a knowledgeable report and make proper recommendations to the creditor or forwarder. He will also attempt to resolve any disputes amicably. If possible, when a debt is acknowl-edged or confirmed by a debtor but the debtor is unable to make a lump sum payment, the attorney will try to arrange a payout program, subject to client’s approval, backed up by a signed promissory note or stipulation for judgment. An initial report or recommendation is then submitted to claimant; this usually occurs within two weeks to thirty days from the receipt of claim. If the attorney is unable to obtain a voluntary payment or a payment schedule, and he believes suit will be effective in bringing about collection of the claim, he will then submit suit requirements to the cred-itor. An attorney will not file any legal proceeding without written authorization from the claimant. If suit is deemed necessary, the attorney will request court costs, a suit fee or retainer, an affidavit and other supporting documentation to substantiate the claim, before the suit is drafted.

The following article is reprinted from the American Law-yers Quarterly pamphlet as an introduction to the legal as-pects of collecting a commercial claim, with the hope that it will be both informative and helpful to those who are embarking on such an undertaking for the first time, as well as offering a concise review for lawyers and collection agents who are experienced in the field.

This information has been prepared by Attorney Richard G. Baumann, a partner in the Los Angeles law firm of Sulmeyer Kupetz, P.C., with the cooperation of The American Lawyers Quarterly staff. Mr. Baumann concentrates his practice on creditors rights, commercial collections and civil trial matters. Richard Baumann is certified as a Creditor’s Rights Specialist by the American Board of Certification. He is a Judge Pro Tem in the Los Angeles Superior Court, and has been admit-ted to practice before the United States Supreme Court. He is listed in Who’s Who in American Law and has repeatedly been named as one of Southern California’s “Super Lawyers.” Mr. Baumann received his Juris Doctor degree from the University of Wisconsin Law School. He is a Judge Pro Tem in the Los Angeles Superior Court and has been elected as a Fellow of the Commercial Law Foundation. Mr. Baumann has served as a member of the Board of Governors of the Commercial Law League of America (1986-1990) and was elected President of the Commercial Law League of America in 1990.

Legal Aspects of Collecting an Account Receivableby Richard G. Baumann

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What Will an Attorney Need in the Way of Court Costs? While costs and procedures differ materi-ally from state to state, attorneys will usually request suf-ficient sums to cover expenses for such things as the filing fee, service of the summons and complaint, costs for the entry of judgment, writ of execution, abstract of judgment, the marshal’s or sheriff ’s costs, and jury fees if a jury has been requested. These costs must be advanced by the credi-tor, and may be recoverable if the creditor gets a judgment against the debtor. At the conclusion of any case the prevail-ing attorney will submit an accounting of cost expenditures to the court and those costs will be included, together with interest, in the amount of the judgment grant by the court.

All monies advanced for costs are trust funds. Thus, at the conclusion of the case, a full accounting should be furnished to the client. The unexpended portion will be refunded in full, as well as any costs recovered from the debtor. Recovered costs are deemed to be the property of the claimant and are not subject to attorney’s commis-sions. Where monies are collected in excess of the principal amount of a judgment, the excess funds should first be al-located as a recovery of court costs. Only when costs have been recovered in full should additional monies collected be deemed interest and subject to commissions, unless spe-cifically prohibited by local statute.

What is a Suit Fee? A suit fee is a charge by the attor-ney for the filing of the suit and following through with the litigation on the creditor’s behalf. It is usually determined by a combination of factors like: What will the attorney have to do in the way of drafting legal documents or render-ing of legal opinions? What is the attorney’s past experience with the debtor? What is the nature of the action which is being undertaken? How large is the size of the claim? What is the dispute of the debtor and what is the attorney’s appraisal of the validity? What is the expectation of going through a trial? The ultimate collectibility of the claim may also be a determining factor in the amount of the suit fee. In the instance an attorney definitely recommended that a client not institute a suit but, as a matter of principle, the client has decided to go forward in any event, the attorney in order to assure himself of adequate compensation for his services will have to charge a retainer or increase his suit fee knowing that an ultimate recovery may be negligible.

A suit fee is not earned by the attorney until such time as the suit has been filed with the court. The mere prepa-ration of the complaint and supporting documents is not sufficient to earn a suit fee. However, it is not actually nec-essary to have served the debtor or to recover a judgment before the attorney is entitled to take the suit fee. Most suit fees are non-contingent and advanced by the creditor at the time that the costs are submitted to the attorney for the commencement of suit. The term “non-contingent suit fee” means that it is money “up front” and has nothing to do with the actual collection of the account. It is a fee for the legal work. In other words, the attorney is entitled to the suit fee regardless of the outcome of the case.

As a rule of thumb, you can expect attorneys to request a suit fee ranging from five to ten percent of the amount of the claim. In some instances attorneys may make their suit fee totally contingent upon collection or they may hedge a little bit by making a portion of the suit fee non-contingent up front with the balance of the suit fee contingent upon collection. In still other situations an attorney may waive suit fee entirely but request an increased commission con-tingent upon collection.

What Papers are Necessary to Commence a Suit? Initially, an attorney will usually require that the creditor submit all documentation that substantiates the claim, like an affidavit from the creditor, invoices and a statement of the account. It is also helpful for the attorney to receive any letters or memoranda that show that the de-fendant at one time or another acknowledged the claim or even letters that set forth the debtor’s disputes. Other avail-able papers such as written orders or proof of delivery may be needed if the debtor/defendant contests the action. (If a contested lawsuit goes to trial, the claimant may also be required to supply a witness who can testify as to the valid-ity of these documents.)

Many attorneys require that the creditor sign an as-signment of the claim. This may cause the creditor to fear relinquishing his rights against his debtor. There should be no cause for concern. The assignment, in fact, is for the creditor’s benefit and helps speed the legal process. The at-torney does not intend to take any proprietary interest in the claim, but rather to utilize the assignment to avoid the necessity of sending all the legal papers back to the credi-tor for signing and notarization each time a new pleading must be filed. The assignment is usually made to the attor-ney’s secretary who can then sign all the pleadings as they are drafted. Furthermore, the assignment has some limited strategic value as the suit is brought in the secretary’s name (although the creditor’s name is included in the body of the suit) and a debtor cannot file a cross action seeking af-firmative relief against the creditor without first searching him out and serving him, which may be very difficult if an out-of-state creditor is involved.

What Happens in the Course of a Lawsuit? It’s very much like a chess game: strategy, intrigue, thrust and parry, which is all started by someone instituting a lawsuit. The party starting the action is known as the plaintiff. The party who is sued is known as the defendant. The suit is started by the filing of a complaint and the issuance by the court of a summons.

The summons is a simple document which says, in ef-fect, that the defendant has been sued and to appear in the action and file an answer if he wishes to plead a defense. Otherwise, the summons warns him, judgment will be rendered against him for the sum stated in the complaint together with costs and the interest running from the date pleaded in the complaint.

Legal Aspects of Collecting an Account Receivable

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The Complaint in broad allegations states the facts and reasons for the action. In the commercial field there is usu-ally a simple allegation that the defendant is being sued for monies owed, for goods sold and delivered, or for work, la-bor or services which were rendered to the defendant.

The defendant is served with the summons and com-plaint. In other words, a copy of the documents is left with him. If the defendant is a corporation, the service is upon an offer of the firm. If the defendant is an individual, he personally should receive the documents. However, if per-sonal service cannot be effected, there is a provision for what is called “substitute service” against individuals and corporations. This is accomplished by leaving the papers with an agent or person apparently in charge of the business premises or with a member of the defendant’s household who is over the age of eighteen. These individuals are ad-vised of the nature of the papers which they are being given and then the serving party must also mail a copy of the pa-pers to the named defendants at the address. Additionally, in rare circumstances, where no one is available to receive service of process, service may be made upon the Secretary of State’s Office, or if a party is located out of state, the pa-pers can be sent to that local marshal or sheriff for personal service there. If a defendant does not file an answer within a specified period of time, then the claimant can obtain a judgment by default.

What is a Writ of Attachment? Obtaining a writ of attachment is a temporary method of protecting a creditor’s interest. If a writ of attachment is granted the defendant’s ability to use and dispose of the personal property is re-stricted or may be entirely taken out of his control during the pendency of the litigation. It is a procedure that is some-times valuable to a claimant and which prevents the debtor from disposing of his assets or placing them out of the reach of the creditor. However, attachment proceedings generally are allowed only under certain well-defined instances and may involve substantial costs. The plaintiff has the burden of proof to show the court that he has a valid claim that will be established at the time of trial.

What if the Suit is Contested? The debtor/defen-dant can retain an attorney who will interpose an answer to the complaint. The answer is a formal document in which the defendant sets forth his side of the story. Usually the de-fendant will enter a general denial which merely says that he is denying everything and forcing the plaintiff to prove ev-ery single allegation raised in the complaint. Additionally, it should be noted that a defendant can file a cross-complaint against the creditor. This is like a new suit that the debtor has against the creditor, and it usually asks for affirmative relief alleging that the creditor owes the debtor more money than the debtor owes the creditor. In this case it is the credi-tor who must now submit an answer to avoid the defendant getting a judgment. As stated, a cross-complaint is like a separate lawsuit. Because of the additional work involved and the additional exposure that the attorney must protect the creditor from, it is usually handled with a separate fee

arrangement. However, as a practical matter, few cross-complaints are ever filed. Once an answer is interposed, the case is considered “at issue”. The next step then is to clarify just what those issues are.

The debtor’s attorney can make a demand for a Bill of Particulars which the creditor must respond to within ten days. This Bill of Particulars asks questions like: What was the agreement? Who entered into it and when? What was sold? What work was done? What was the price involved? When was the work done? When was the merchandise sup-posedly delivered? Did anybody send any billings? Were any credits ever extended? The creditor then answers these questions and they are set forth in the completed Bill of Particulars.

The creditor also has some “discovery weapons” in his arsenal to launch at the debtor/defendant. The plaintiff can serve the defendant with a document called a “Demand to Admit or Deny”. In this document certain facts are alleged. The defendant is given a specified time to advise the plain-tiff whether or not he admits those facts are true; if admit-ted, those factual issues are then resolved. If enough of the facts are admitted, the plaintiff may be able to establish his case at that point and will then file a Motion for Summary Judgment.

The Motion for Summary Judgment is a request to the court for judgment without the necessity of the case going to trial, based on the grounds that there are not triable is-sues or no defense to the complaint. However, as a practical matter, judges are very reluctant to grant a summary judg-ment unless it is very clear that there is no defense to the action or that the defendant is really just putting forward a sham or attempting to delay the ultimate judgment. Most judges prefer adhering to the American tradition of allow-ing a party to have his day in court. Therefore, if there is any question at all as to a probable defense or an issue of fact to be resolved, the request for the summary judgment will be denied and the debtor will be allowed to proceed with the trial of the matter.

Another pre-trial procedure is known as a deposition. This is an oral examination which is recorded by a court reporter and subsequently put into writing and sworn to by the witness before a notary public. This procedure is used to clarify the issues and to memorialize testimony for the trial which is to be held at a later date. This secures needed testimony of a witness who later, at the time of trial, may no longer be in the area, or may be unavailable to testify, or who may even be dead. The debtor’s attorney can exam-ine the claimant to ascertain some additional information and the creditor’s attorney can examine the debtor as to his defenses.

What Actually Goes On on the Day of Trial? It should be noted that many cases are settled on the court-house steps on the day of the trial. Typically, the parties are required to appear first thing in the morning before a

Continued from page 11

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presiding judge whose job it is to assign various cases to different trial courts. Each attorney will be required to ad-vise the presiding judge whether or not they are ready with their witnesses and able to go forward with the trial on that day. The attorneys must also advise the judge of their time estimate as to how long it will take them to put on the case. Based upon this information, and the judge’s knowledge as to what is already going on in any particular courtroom hearing, the presiding judge will assign the litigants to an actual trial court.

Once in the trial courtroom, the trial judge may re-quest an in-chambers meeting with both attorneys before the start of the trial. This is to afford the actual trial judge an opportunity to briefly review the pleadings in the file and talk to the attorneys about the prospects of settlement. He may even give the attorneys his impressions and recom-mendations relative to a settlement. Some cases are settled at that juncture because an attorney hears the judge’s com-ments and figures a “reasonable” settlement at that time is better than an adverse decision later. However, if no settle-ment can be reached the matter will go forward to trial.

A trial follows well-defined procedures and is usually very formal. The plaintiff starts out by making an opening statement telling what he intends to prove. As he attempts to build his case he will call witnesses to the stand to be sworn and to testify as to the facts. When the attorney asks questions to establish his case, this is called “direct exami-nation”. After each witness has been examined the other at-torney has an opportunity to ask questions and this is called “cross-examination”. The scope of the questions asked in the cross-examination is limited to the testimony which is given in the direct examination. Anything else that the op-posing attorney wants to get into the case from that witness, he will have to get by recalling the witness later when he presents his case. If during the cross-examination the op-posing attorney has rattled the witness, or confused him, or perhaps hurt the plaintiff ’s case by some of the questions, then the plaintiff ’s attorney has an opportunity to clarify, or straighten out, or repair the damage next by a procedure called “redirect examination”. After all the plaintiff ’s wit-nesses have been called and testified, and all the evidence establishing the claim has been introduced, plaintiff will then summarize his case and tell the court that the plain-tiff “rests”. It is then the defendant’s opportunity to present their case in the same order by calling their witnesses, pro-ceeding with direct examination, and introducing opposing evidence. These witnesses are then cross-examined by the plaintiff and then defendant can redirect if it is needed. The defendant then makes his closing statements. Thereafter it is up to the judge or the jury to decide the issues and to render a decision.

In Presenting the Creditor’s Case a Plaintiff has About Five Basic Elements to Establish in Order to Put on What is Called a “Prima Facie” Case. The creditor must show: (1) that he received the order, (2) that there was a price for the order stated and agreed upon (3) that he delivered the

order, (4) that he made demand for payment, and (5) that he has not been paid. If these elements are not proved by the plaintiff when he presents his case, the defendant may ask the court to dismiss the case and for judgment in his favor.

At any time prior to the rendering of a decision the at-torneys, and the court itself, may make additional attempts to settle the case. In some instances cases are settled during the course of a trial, at a recess period, after both sides have had an opportunity to hear the testimony and realize the impact of strengths and weaknesses of the other’s case. A settlement finalizes the action and releases the debtor from any more than the agreed upon amount.

If a judgment is rendered, the losing party has a right to appeal to a higher court. However, from a practical stand-point, in terms of expense and results very few commercial collection cases are ever appealed. If the trial goes through a conclusion, the next step is to have the judgment entered.

We just covered the contest of a claim through the ac-tual trial. Frankly, in the majority of commercial collection cases, the debtor/defendant neither obtains an attorney to represent him, nor does he file an answer.

Consequently, after the expiration of the time allowed to the defendant to file an answer to the creditor’s com-plaint, the plaintiff may simply apply to the Court for a judgment against the defendant. This is called a Request to Enter Default Judgment.

The plaintiff, in order to obtain the judgment by de-fault, must file an affidavit with the Court swearing that the amount sued for is justly due and owing, and he must attach some evidence of the indebtedness, i.e., a copy of the state-ment of account, or the invoices that make up the account. The Request to Enter Default, in essence, also represents to the Court that the debtor/defendant has not taken issue with the allegations in the complaint, therefore, there is no dispute for the Court to hear or determine and judgment should be granted to the plaintiff without further ado.

If the creditor’s complaint is for merchandise sold or for services rendered to the defendant, the Court clerk will not require the plaintiff to come into Court and establish his case. The clerk will rely on the sworn documents filed with the Court. The clerk will check to see that the plaintiff gave notice to the debtor that the plaintiff would request a default judgment. The clerk will then review the complaint for the amount claimed due, compute the interest, figure in the costs expended in the suit, and enter a judgment by default against the defendant. In certain limited situations, the clerk may ask the plaintiff to appear in Court, before a judge, and actually establish the basis of the indebtedness before a default judgment is granted.

What is a Judgment? The judgment is the court decree determining the amount due from the losing party to the winning party. Hopefully the winning party is the creditor.

Continued on page 27

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CLLA membersencouraged to submit articles for DEBT3

Have an idea for an article? Why not write for Debt3?

Debt3 wants to increase the number of articles it publishes written by members of the CLLA. There is a tremendous

wealth of knowledge among CLLA members that would be beneficial to all if shared. Debt3 regularly runs articles on law

office or collection agency management, technology and marketing. Articles on practical tips in practicing law are

welcome as well. Feature articles and analysis of new and significant cases are encouraged.

If you have an article idea or would like to submit an article, simply e-mail it to:

clla@clla.org, fax it to 312-781-2010

or call the CLLA headquarters

at 312-781-2000.

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Are you upset with the balance your credit card com-pany claims you owe? If so, then you may be able to file suit.

While the recession has been anything but kind to consum-ers, several major banks recently announced that consumers will be now be able to bring consumer debt disputes before a judge and jury. Previously, consumer debt disputes were referred to arbitration panels—a “light” version of court.

Was this an act of kindness extended to consumers who have fallen on hard times? Hardly. While many consumers might assume that the traditional court system is the proper venue to resolve a disputed debt, the reality is that virtu-ally all credit card contracts contain provisions requiring that any dispute regarding amount owed would proceed to binding, mandatory arbitration. However, during the reces-sion, the arbitration associations that hear these cases have been pushed to the brink and are now unable to handle the crushing case load.

“The credit card companies have been hoisted by their own petard,” says Fred M. Luper, attorney at Luper, Neidenthal & Logan in Columbus, Ohio. “These companies tried to game the system by avoiding an impartial courtroom, but the economic downturn has exposed arbitration firms’ in-ability to handle the immense number of these cases.”

The two largest arbitration firms—the American Arbi-tration Association (AAA) and the National Arbitration Forum (NAF)—recently announced that they would no longer accept arbitration claims filed against consumers. In a remarkable policy shift, Bank of America announced on August 13 that it would no longer require consumers to arbitrate their disputed debt. This announcement follows the lead of JPMorgan Chase, which announced in late July that it would no longer participate in binding arbitrations over credit card disputes and is re-evaluating the inclusion of arbitration provisions in its consumer contracts.

While the arbitration firms have repeatedly faced accusa-tions of being in credit card providers’ back pockets, the final straw came when the NAF was hit with a lawsuit from Minnesota Attorney General Lori Swanson, alleging that the NAF was not the independent, neutral and impartial tribunal that it held itself out to be. The suit alleged that behind the scenes, the NAF was tied closely to the collec-tion industry. Within a week of being served with the suit, the NAF retreated and agreed to not accept any new cases related to credit cards and other consumer debt. Swanson, emboldened by the victory over the NAF, has since been

invited to testify before the Congressional Committee on Oversight and Government Reform to ask Congress to pro-hibit the use of binding, mandatory arbitration clauses in consumer contracts.

One of the most vexing problems with arbitration is that most consumers have no idea that the contract they enter into by signing up for a credit card waives their right to one of the most fundamental protections afforded by law in America: the right to trial by jury. Instead, many con-sumer contracts require the consumer and the company to proceed to arbitration.

“These agreements are almost unconscionable,” Luper says. “If consumers knew what they were signing, there is no way they would agree to waive their right to a jury.”

In arbitration, the parties appear before a trier of fact and present their case. The arbitrator, or arbitration panel, typi-cally uses the rules of evidence and procedure, but these rules are often implemented in a simpler and more flexible manner than those used in court. The arbitrator’s decision is usually final and cannot be appealed, except in very rare circumstances.

Proponents of arbitration claim that it provides a cheaper and faster means of resolving a dispute, while maintaining the impartiality and many characteristics of a traditional lawsuit. Opponents question the impartiality of arbitration and argue that consumers are trapped by the inability to ap-peal the arbitration orders. Additionally, consumers hardly “agree” to arbitration. Often the arbitration provision is placed in a lengthy credit card agreement, and a consumer is required to proactively “opt-out” of the agreement to ar-bitrate within 30 days of signing the agreement.

The tide seems to be turning against binding, mandatory arbitration. In June, President Obama called for legislation that would restrict or limit mandatory arbitration. The Ar-bitration Fairness Act of 2009 is currently pending before Congress.

According to USA Today, American Express is “reassess-ing” its policy on binding, mandatory arbitration. With Bank of America and Chase already relenting from their arbitration policies, and the refusal of the NAF and AAA to hear consumer debt disputes, many banks and credit card companies can be expected to discontinue their inclusion of arbitration provisions in consumer contracts in the near future.

The Recession’s Silver Lining: Banks Forced to End Arbitration of Consumer DebtConsumers Now Have the Right to Sue Their Credit Card Company in Court Over Disputed Consumer Debt

Fred M. Luper has also written a scholarly article on this topic for trade publications within the legal community. If you would like more information about this topic or to schedule an interview with him, please call (614) 221-7663 or e-mail fluper@ lnlattorneys.com.

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I attended my first CLLA Conference in New York City in November 2008. It was a great experience. One of the interesting things for me was the reaction other

attendees had when they heard that I was from Canada. Many of them recoiled in horror and commented on how expensive it was to pursue collections in Canada, particu-larly if it became necessary to commence legal proceedings. However, I have some exciting news for anyone with collec-tion matters in Canada.

The province of Ontario has passed a regulation that amends the Courts of Justice Act. The regulation will be in effect as of January 1, 2010, and the monetary jurisdiction of the small claims court will be increased from $10,000 to $25,000 Canadian funds. This will apply for all actions against debtors located in the province of Ontario, which is Canada’s industrial heartland and is home to approximately one-third of the country’s entire population, so many com-mercial collection matters will be based there. This is very good news indeed for collection agencies and lawyers involved in cross-border collections. It will directly impact the two main concerns of litigation: cost and timeli-ness. Small claims court procedures are much more stream-lined than superior court procedures.

An action is commenced in the small claims court by is-suing a plaintiff ’s claim. Copies of the supporting docu-mentation are attached. The plaintiff ’s claim is then served upon the defendant. The defendant has 20 days within

which to respond by filing a defense. If the defendant does not respond, the person can be noted in default and default judgment can be obtained without any further appear-ance before the court. It is a very quick and cost-effective procedure.

Once judgment is obtained, the usual execution remedies — such as garnishment or seizure and sale — are available. If a defense is filed, then the court will set a date for a settle-ment conference. The court will send out a notice shortly after filing a defense and set a date set for several weeks later. At the settlement conference, both sides appear and review the merits of the matter with to the intent of either settling the case or narrowing the issues for trial. If the case is not settled, the next step is to prepare it for trial by paying the appropriate fee.

Generally, matters in court go from issuance of the plain-tiff ’s claim to trial within one year — which is a much quicker timeline than the typical superior court cases. As we all know, time is money, so this speed also translates into less cost.

An amendment increasing the summary procedure in the superior court so that it will now cover any cases up to a monetary limit of $100,000 also was part of the small claims court jurisdictional limit increase amendments..The increases in monetary jurisdiction are significant — and will certainly be welcomed by collection lawyers and collec-tion agencies.

Richard Joseph Payne, Partner –Richard received

a B.A. and an LL.B from Dalhousie University and

was called to the Bar of the Province of Ontario in 1987.

He is a Partner with Morrison and Payne, Barristers and

Solicitors. Richard practices in the area of Commercial

Litigation with a primary focus on Debtor-Creditor

work including collections for lawyers and other profession-

als. Richard has practiced in Collections Law extensively

since he was called to the Bar in 1987 and has represented both unsecured and secured

Creditors in collection proceedings. Richard is a

member of the Law Society of Upper Canada and the

Toronto Lawyers Association and the Commercial Law

League of America. On September 23, 2009 he gave a presentation “Collecting on

your Outstanding Accounts – Solicitor Liens and Ethical

Collections” at a seminar arranged by the Law Society

of Upper Canada entitled “Ethics and Risk Management

in an Economic Downturn”.

45 Sheppard Avenue East, Suite 506, Toronto, Ontario

M2N 5W9416-224-9968 ext. 224

Fax 416-224-9313rpayne@bellnet.ca

are involved in the purchasing process and make

the final purchasing decisions.

are partner/owner/president/chair/CEOs

of Debt3 readers have recommended, specified or approved

the purchase of products and services, including:

• Computer/office software, e.g. collection, bankruptcy, organizational

• Law office automation services

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process server services

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readers are their company’s key decision makers:d e b t3

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For more information on how your company can target this exclusive audience, contact:

Kelly HartwegCLLA Sales and MarketingPhone: (708) 445-9945E-mail: kelly@buzoganyassociates.com

You can expect results when you talk to leaders

T H E R E S O U R C E F O R B A N K R U P T C Y , C O L L E C T I O N A N D D E B T R E C O V E R Y

Vol. 24 • Issue No. 6November/December 2009

IN THIS ISSUE

Legal Aspects of Collecting an Account Receivable

Foreign Collections: Italy

Operation Unison

The Personal Touch

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Mr. Frieze is a solicitor of the Supreme Court of England and Wales and a licensed insolvency practitioner. He is a partner in the fi rm of

Brooke North with offi ces in London and Leeds (England).

Throughout his career, Mr. Frieze has been involved in litigation and especially insolvency litigation although for the last fi fteen years he

has also specialized in international debt recovery litigation for clients based outside the UK who have claims in England and Wales.

He is the author of a number of practitioners’ books on insolvency law and has been the General Editor of Insolvency Intelligence (a jour-nal on insolvency law published in England) since its inception in 1988.

Mr. Frieze is a regular speaker at seminars on creditors’ rights and in-solvency and has taken part in such seminars in many countries both

on behalf of the CLLA and other organizations.

Steven A Frieze MA (Oxon)

Are there any problems with a U.S. claimant pursuing a claim against a debtor in your country?There are no issues concerning a U.S. claimant pursuing a claim against a debtor in Italy. Italian courts’ jurisdiction exists when the defendant’s domicile is located in Italy. There-fore, a foreign creditor may start proceedings against a debtor who resides or has its legal seat in Italy. This rule applies if the parties did not expressly agree in writing on a different jurisdiction.

If the outstanding invoices are in dollars, can the claim made in court proceedings be in dollars?Claims can be made in whatever currency the parties agreed upon when they reached an agreement — including dollars.

If there is no contractual right to interest, can in-terest nonetheless be claimed — and, if so, at what rate?If there is no contractual right to interest, according to sec-tions 1224 and 1284 of the Italian Civil Code, the debtor is allowed to claim interest from the creditor at a legal rate that varies every six months. In the second half of 2009, the rate was 3 percent per annum. Default interests on late payments are calculated,at a rate based on the rate of interest of the European Central Bank’s principal instrument of refi nancing with an addendum of 7

Domestic business within the United States is the mainstay of the vast majority of CLLA members. However the increasing glo-

balization of trade makes it important for all lawyers and other collection industry members to know at least a little about

how collection work is handled in other countries to manage expectations and identify problems before they arise. Clients and cred-

its may think that it is just as easy to collect a debt in another country as it is in the United States-but that rarely is the case.

As always, local representation can be key to successfully collecting debt in another country-however;

Italy based attorney Giorgio Corno offers insight on international practices in this issue of international Q&A’s.

foreigncollections

TEN QUESTIONS AND ANSWERS TO A FOREIGN COLLECTION LAWYER: Italy

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percent. This rate — which in second half of 2009, was 8 percent — is effective for six months.

Can lawyers in your jurisdiction work upon a contingency-fee basis — and, if so, what are the typical rates?Lawyers can agree on fees with their clients. The fee calculation is based on targets that the lawyer working on the claim reaches. The fee must always be compared to the lawyer’s work on the claim and should not bring the legal profession into disrepute.

Lawyers can work upon a contingency-fee basis. For collection work, the rates are typically between 18 and 25 percent, depending on the client and the claim. Disbursements are paid separately.

How do court costs compare with the U.S.?When a claim is brought in front of an Italian court, the claimant is due to pay an amount as “con-tributo unifi cato” — the amount varies, depending on the claim value. For example, Italian court costs for a decreto ingiuntivo (summary judgment) vary according to the value of the claim from €211 to €5.910.

What language would the court proceedings be in, and do documents have to be translated?Under the Italian Civil Procedure Code, court pro-ceedings are in Italian. When a foreign person must be heard, the judge will designate an interpreter. When documents are not written in Italian, the judge may designate a translator.

Will witnesses be required to visit your country for depositions in the trial?

In an ordinary proceeding, witnesses are usually required to visit Italy for depositions in the trial. However, courts may, upon request, allow deposi-

tion witnesses to be heard in another court of the same or another jurisdiction through a special proceedings called “rogatoria.”

What are the rules regarding enforcement of a foreign judgment ob-tained against a debtor in Italy?A foreign judgment can be enforced against a debtor in Italy. The claim holder needs, to that extent, to obtain an exequatur, i.e., the foreign judgment re-quires must be recognized prior to its enforcement.

What personal liability exists for the offi cers of a corporation that has issued checks that have not been honored? No personal liability lies on the offi cers of a cor-poration that has issued checks that haven’t been honored.

As stated by Law 507/99, he who kites a check is punished with a penalty, which is variable — and it also depends on the amount of the check.

What liability do offi cers of the corporation have if the corporation goes into bankruptcy?Offi cers of a corporation that has gone into bank-ruptcy may be held liable for damages suffered by the company or its creditors and can be held crimi-nally liable if they diverted, suppressed, concealed, destroyed or dissipated part or all of its goods or claimed or admitted nonexistence liabilities for the purpose of prejudicing creditors.

Giorgio CornoGiorgio Corno deals with insolvency,

company and commercial law and

regularly deals with insolvency law.

A graduate of Milan Catholic Univer-

sity and an international associate at

the Centre for Insolvency Law and

Practice, Kingston University (UK)

School of Law, Giorgio Corno is

qualifi ed both as an avvocato and as

a solicitor of the Supreme Court of

England and Wales.

He frequently lectures both at

national and international conferences,

mainly on corporate restructuring

and insolvency law, and contributes to

major legal journals several articles on

national and cross border insolvency

regulations.

Mr Corno is a member, among oth-

ers, of III (International Insolvency

Institute); INSOL Europe (being part

of its Academic Wing); ILA (Insolvency

Lawyers Association) (London); as well

as of the Monza Consiglio dell’Ordine

degli Avvocati.

Contact details:

Via Guastalla 15 – 20122 Milano

Via Mameli 11 - 20035 Lissone,

Milano, Italy

Tel. +39 039 2456792

Fax + 39 039 2458018

E-mail:

giorgio.corno@studiocorno.it

Web site:

www.studiocorno.it

TEN QUESTIONS AND ANSWERS TO A FOREIGN COLLECTION LAWYER: Italy

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heard & overheard

Operation Unison-Canada’s Help with Katrina - 2005

In September 2005 the Chief of the Canadian Defence staff, Gen. Hillier spoke with both the U.S. Chairman of the Joint Chiefs of Staff Gen. Richard Myers and

Admiral Tim Keating commander of NORAD and United States Northern Command to offer Canadian Forces sup-port to assist the U.S. with the devastating Katrina hur-ricane situation. Gen. Hillier indicated that should the U.S. need anything, the Canadian Forces would help our friends to the south in their time of need. Gen. Hillier also met with U.S. Ambassador David H. Wilkins who took the message directly to Washington.

The Canadian Forces moved quickly with Operation UNI-SON. In total over 1,000 navy, army, air force and other personnel were involved.

On September 6th HMC Ships1 Athabaskan (a destroyer), Ville de Québec (a frigate) and Toronto (a frigate) accompa-nied by the Canadian Coast Guard Ship Sir William Alex-ander left Halifax for Operation UNISON. Also deployed were navy and combat engineer divers to work with the 2nd Amphibious Group of the 2nd Fleet, US Navy to identify and remove hazards to shipping and inspect levees. In ad-dition, three Sea King helicopters were sent to the U.S. Gulf coast to assist in relief effort. The Canadian Air Force transported 27 Red Cross and 5 FAC officials to Houston and other logistics staff.

“On behalf of my grateful country, thank you and thank all Canadians for giving us your best when we need you most”, said U.S. Ambassador, David Wilkins. “What you are doing today ladies and gentlemen is important. You are saving lives and to those survivors in the United States you are helping them build back their lives”.

The supplies delivered by CF ships included 6000 pack-ages of diapers in various sizes, 6000 toiletry hygiene kits, 5000 blankets, 4000 large bottles of Pedialyte, 2000 first aid kits, modular tents to house 1,800 people, etc.

The ships returned to Canada September 18th, but the div-ers stayed until October 1st.

Not everyone appreciated the complimentary support of the Canadian Forces. The National Post indicated that certain local contractors politely asked when the Canadians were leaving, “I’m competing with unpaid labour” said a Missis-sippi builder. The cost of the gesture was estimated at $20 million and there were those who considered the deploy-ment somewhat excessive. However, on the other hand, Dr.

Richard Gimblett, a retired Canadian Forces Naval Officer and currently official historian of the Canadian Navy, in-dicated that the deployment was a very efficient use of our navy and only the navy could have delivered so much sup-port in such a short period of time, and to assist with the clean up of the devastation.

After returning from Operation UNISON, Commander Stuart Moors, Commanding Officer of HMCS Toronto wrote, “In addition to delivering tons of humanitarian sup-plies to the region, it is my view that our work made at least a small dent in facilitating the return of citizens of these communities so that they may begin rebuilding their homes and their lives.2

THE MAPLE LEAF - September 21, 2005HMC Ships Athabaskan, Ville de Québec and Toronto, accompanied by the Canadian Coast Guard Ship Sir William Alexander, left CFB Halifax September 6 to aid in the clean-up following the devastation

of Hurricane Katrina.

PTE/SDT DARCY LEFEBVREUS Ambassador David Wilkins addresses sailors at CFB Halifax before their departure to the southern US September 6 to provide humanitarian aid to the thousands

affected by Hurricane Katrina.

1 HMCS=Her Majesty’s Canadian Ship(s)

2 Sources for this article: www.forces.gc.ca, website of the Department of National Defence and the Canadian Forces.

David Rubin can be reached at (416) 862-3520 or via

david.rubin@gowlings.com

SAVE THE DATE for CLLA’s programs at the NCBJ taking place October14, 2009 in New Orleans, LA.

NCBJ SpotlightThe CLLA Bankruptcy Section once again held its annual breakfast and education event at the National Conference of Bankruptcy Judges on October 19, 2009.

During the breakfast, the Section awarded Judge Eugene Wedoff with the Lawrence King Award of Excellence. Following Judge Wedoff ’s enthusiastic acceptance speech, the audience enjoyed Paul Begala and his amazingly accurate imitations of Bill Clinton. In the afternoon, the Frank Koger Memorial Education Program “Current Developments in Hot and Emerging Areas of Bankruptcy” featured renowned practitioners, judges and scholars from across the country, discussing Chapter 11 issues.

These excellent events could not have occurred without the generous support of the following sponsors:

Gray Robinson PAAttorneys at Law Getzler Henrich & Associates LLC

Scott StuartDonlin Recano & Co., Inc.

Ronda RutherfordBankruptcy Manage-ment Solutions, Inc.

Barry ChatzArnstein & Lehr LLP

Denis PiercePierce and Associates, Attorneys at Law, P.C.

Richard N. GoldingThe Law Offices of Richard N. Golding

Harry GreenfieldBuckley King LPA

Alan LaskoAlan D. Lasko & Associates PC

Gary WeinerWeiner & Lange PC

Peter CalifanoCooper, White & Cooper LLP

Paul SingermanBerger Singerman, Attorneys at Law

Wanda BorgesBorges & Associates LLC

Harvey GrossNew York Institute of Credit

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league business

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member news

Among Our Members…Submissions for Member News

may be sent to the Commercial

Law League of America by mail, fax

or e-mail to:

Member News, Commercial Law League of America® 70 E. Lake StreetSuite 630, Chicago, IL 60601312-781-2000fax: 312-781-2010e-mail: ehart@clla.org

The Commercial Law League® reserves the right to determine whether to publish submissions or photos and to edit submissions without prior notice to those submitting the announcement.

s Collection Law Firm Rausch, Sturm, Israel, Enerson & Hornik, LLC (RSIEH) announced this week that 3 of its attorneys had been named Wisconsin Rising Stars by Super Lawyers magazine and 1 of its attorneys has been named a Wisconsin Super Lawyer.

Gregory W. Enerson, Ryan M. Peterson and Brandon E. Bowlin were named as Wisconsin’s top lawyers under the age of 40 by the award program. William C. Sturm was named as a Wisconsin Super Lawyer. Only 2.5 percent of the total lawyers in Wisconsin are listed as a Rising Star and only 5 percent of the total lawyers in Wisconsin are listed as a Super Lawyer. The selection procedure uses a multi-step evaluation process that incorporates a system of balloting, peer evalua-tion and internal research.

Enerson, Peterson and Bowlin were three of only eleven law-yers selected in the “Bankruptcy & Creditor/Debtor Rights” category and were the only attorneys in that category to practice at a retail collection firm. Sturm was the only Super Lawyer in the ““Bankruptcy & Creditor/Debtor Rights” category to practice at a retail collection firm.

This is the tenth time that an attorney of RSIEH has been honored with either a Rising Star or Super Lawyer des-ignation. RSIEH is a collection firm headquartered in Brookfield, Wisconsin with offices in Michigan, Minnesota, Montana, Iowa, Nevada, North Dakota, South Dakota, Nebraska, Oklahoma and Texas.

To read more, please visit the CLLA website at www.clla.org.

s Mr. Ronald Reynolds is pleased to announce his new firm name of Reynolds & Associates. The new contact infor-mation is as follows:

REYNOLDS & ASSOCIATES 823 Las Vegas Boulevard South Suite 280 Las Vegas, NV 89101Tel: 702-445-7000 Fax: 702-385-7743 ron@reynoldslawyers.com

s Leib Solutions partners with Jaws Youth Fund to collect toys for deserving youth during the holiday season

Jaws Youth Fund (JYF) is pleased to announce that it is teaming-up with LEIB Solutions for a holiday Toy Drive. LEIB Solutions will collect items for the toy drive through employees, clients and business partners. It will run from Thanksgiving to December 19, 2009 LEIB is collecting new, unwrapped toys or books which the Jaws Youth Fund will distribute to several Camden-area programs including: Center for Family Services, MLK Child Development Center, El Centro Child Care Center and Mi Casita Child Care.

About LEIB Solutions LEIB Solutions, www.leibsolutions.com, is a full service Ac-counts Receivable Management company, handling Domestic and International accounts receivables for small, mid-size and large companies. Founded in 1986, LEIB and its manage-ment team have been the recipients of many awards and certi-fications over the last 23 years. Respect. Tenacity. Results.

For more information contact: Bryan E. Leib, SCCP Vice President - Operations Fellow, Council on Litigation Man-agement (CLM) LEIB Solutions 800.462.2070 Ext.126bleib@leibsolutions.com; www.leibsolutions.com

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member news

UNITED STATES

ALABAMA Huntsville Todd R. Howard (Lawyer) Rahmati Law Firm 513 Madison Street Huntsville, Alabama 35801

ARIZONA Phoenix Matthew H. Sloan, Esq. (Lawyer) Jennings, Haug & Cunningham, LLP 2800 North Central Avenue, Suite 1800 Phoenix, Arizona 85004

ILLINOIS

Chicago Richard A. Snow (Lawyer) Richard A. Snow & Associates, LTD 123 W. Madison Street Chicago, Illinois 60602

Schaumburg Jim Kirby (Certified Com-mercial Collection Agency) Transworld Systems, Inc. 1375 E. Woodfield Road, Suite 110 Schaumburg, Illinois 60173

KANSAS

Lenexa Dave Lucas (Commercial Collection Agency) CACSI 16011 College Blvd., Suite 101 Lenexa, Kansas 66219

MASSACHUSETTS

Boston Jen Price (Law Student) New England School of Law (Boston) 154 Stuart Street Boston, Massachusetts 02116

MARYLAND

Towson Susan Seidel (Commercial Collection Agency) Access Receivables Management 200 E. Joppa Road, Suite 310 Towson, Maryland 21286

NORTH CAROLINA

Charlotte Heather W. Culp (Lawyer) Mitchell & Culp, PLLC 1001 Morehead Square Drive, Suite 330 Charlotte, North Carolina 28203

NEW JERSEY Cherry Hill Alison B. Weinroth-Shaw (Lawyer) Mattleman, Weinroth & Miller 12 Niamoa Drive Cherry Hill, NJ 08003

NEW JERSEY S. Plainfield Frank Boni (Certified Com-mercial Collection Agency) Smyth Collections 57 Craigwood Road S. Plainfield, NJ 07080

NEW JERSEY Roseland Howard S. Greenberg, Esq. (Lawyer) Ravin Greenberg LLC 101 Eisenhower Parkway, Fourth Floor Roseland, NJ 07068

NEW JERSEY New Providence James S. Olsen (Lawyer) Panasonic Electric Works Corporation of America 629 Central Avenue New Providence, NJ 07974

NEW MEXICO Albuquerque Robert H. Jacobvitz (Judge) United States Bankruptcy Court PO Box 546 Albuquerque, NM 87103-2545

NEW YORK Hawthorne Anne M. Thomas, Esq. (Lawyer) Thomas Law Offices, PLLC 7 Skyline Dr, First Floor Hawthorne, NY 10532

OHIO

Stow Andrew L. Paisley Law Offices of John D Clunk4500 Courthouse Blvd Ste 400Stow, OH 44236

OKLAHOMA

Tulsa David M. Garrett, Jr. (Law-yer) Garrett Law Office, P.C. 111 W 5th Street, Suite 800 Tulsa, OK 74103

PENNSYLVANIA

West Conshohocken Stephen Leibowitz (Lawyer) Stephen R. Leibowitz, L.L.C. P.O. Box 800 West Conshohocken, PA 19428

PENNSLYVANIA

Philadelphia Thomas Larkin (Commer-cial Collection Agency) Tate & kilrin Associates, Inc 2810 Southampton Rd Philadelphia, PA 19154

TEXAS

Dallas Jonathan C. Scott (Lawyer) Scott & Scott, LLP 2200 Ross Avenue, Suite 5000 Dallas, TX 75201

CANADA

ONTARIO

Toronto ❖ Geoffrey Sedlezky (Lawyer) Sedlezky Law Firm 1 Yonge Street, Suite 1801

Toronto, Ontario M5E 1W7

BRAZIL

Rio Grande Jamil Abdelrazzak Abo Abdo (Lawyer) Abdo, Abdo & Dinz Advogados Associados R. Cinco de Abril N258, Bairro Rio Brance Novo Hamburgo Rio Grande, 93310070

Veghel Mannes Westhuis (Lawyer) Bierens Collection Attorneys Zuidkade 6 Veghel,

Newly Admitted Members

The following individuals appeared as applicants in the League’s electronic publication in the months of September and October 2009. They will become official members in the months of November and December 2009. Members whose name a (❖) appears have

reinstated their membership with the CLLA. League members who have referred these new members, names will appear in italics underneath their listing.

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Oliver Yandleis the Executive

Vice President of the Commercial Law

League of America. He can be reached

at 312-781-2000 and via e-mail at

oyandle@clla.org

The Personal Touch

Do you remember your fi rst day at a new school? Maybe you had trouble fi nding your classroom. Or found yourself wandering aimlessly in the

cafeteria looking for a group to have lunch with.

What about your fi rst day at your very fi rst job? Did you have trouble keeping up with the jargon your colleagues kept using? Did it seem like you’d never learn enough to keep up with the rest of the offi ce?

And how about your fi rst Commercial Law League meet-ing? Had trouble fi guring out what all the dots on the name badges meant? Did the cocktail parties feel a little bit like the cafeteria tables at that new school?

Being a “newbie” can be an intimidating experience. You’re anxious to make friends, build credibility, and learn the ropes. Doing it on your own can be daunting, maybe even demoralizing. But sometimes, all it takes is one person – a mentor of sorts – to lend a hand, share some advice or make an introduction. Think about it – where would you be without the people who taught you, who helped you get where you are?

A recent study by Alexandria-Va.-based association market-ing fi rm Marketing General Incorporated polled more than 500 association professionals to fi nd out what marketing strategies and tactics they are using to successful recruit new members. One of the study’s key fi ndings was that a highly personal approach to new member “on-boarding” helps to retain new members. Of the top ten on-boarding techniques cited, those that are considered “high touch” – volunteer welcome calls, new member receptions and the like, correlate with higher member renewal rates.

The value one receives from any organization comes from active involvement – the more engaged you are, the more benefi t you get. But associations have unique cultures, tra-ditions and processes that defi ne that experience. And of-ten, it can be diffi cult for new members to wade through all of that and fi gure out how to get involved. The more chal-lenging their experience, the more likely they are to leave. But with a helping hand, new members can fi nd their way to rewarding, long term success in the organization.

The study’s fi ndings only confi rm what CLLA has known for some time now – that the membership experience for new members is greatly enhanced by the personal touch.

Now, you can help your fellow CLLA members take advan-tage of all the organization has to offer and make lifelong friends in the process. CLLA has launched a new men-toring program designed to help new League members to get involved in League activities, build personal and professional networks, and enhance our association com-munity. Through the member mentor program, veteran members are asked to personally call new members, intro-duce them to the League, and help them fi nd ways to get involved. It gives new members a personal contact to help them take full advantage of all the League has to offer. But the relationship doesn’t end there. Mentors and mentees are encouraged to spend social time together at meetings and events; share ideas about association activities and the industry through social networking sites, list serves, the CLLA discussion forums and other communication out-lets; and to provide insights on ways to get the most from the CLLA experience. It’s not a member retention program – it’s a member enrichment program, for both the mentor and the mentee. In fact, some mentors fi nd themselves get-ting more out of the experience than their mentee.

Although it’s a new program, we’ve already had a great response by our veteran members. The Young Members Section has actively reached out to dozens of new members to help them get involved. And several regions are mak-ing contributions to the program as well. In fact, both the Midwest and Eastern regions have volunteered to partici-pate as mentors and are actively engaged in contacting new members. But we can always use more! I encourage you to consider becoming a mentor and sharing your experience, ideas and friendship to newcomers to the League.

To those members already participating in the program, I thank you for the time and energy you have put into this effort. Your phone call, email or letter can be the differ-ence in keeping a new member involved. And, it can be the start of a valuable professional and personal friendship. I would especially like to thank Gary Tier for spearheading the program, and Elizabeth Hart for her excellent support and follow up. If you would like to get involved, please let Elizabeth and Gary know of your interest.

Thanks to all of you for your energy, enthusiasm and cre-ativity on behalf of the League.

I’ve learned that

people will forget

what you said,

people will forget

what you did, but

people will never

forget how you

made them feel.

– Maya Angelou

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Ad Space

80thThe Chicago/

Team TriadMVPs in their Field

&80&80 Chicago/

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116thNational Convention of the

Commercial Law League of AmericaApril 29–May 2, 2010 Westin Michigan Avenue

Spring Meeting

JOB No 49336_Spring Mtg Ad DATE December 7, 2009 12:40 PM DESIGNER RMV

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• Education

• Government Affairs

• Marketing

• Meetings

• Membership

• Professional Responsibility

• Fair Debt Collection

Practices Act

• Forwarders & Receivers

Please submit this request immediately

To: David R. GamacheGamache & Myers, P.C.1000 Camera Ave.Suite ASt. Louis, MO 63126Fax: 314-835-6604

CC: CLLA70 E. Lake StreetSuite 630Chicago, IL 60601Fax: 312-781-2010

YES! I want to join a committee,

My committee choices are:

1._________________________________________________

2._________________________________________________

3._________________________________________________

NAME

FIRM NAME

ADDRESS

PHONE FAX

LEND A HANDand help lead the way

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• Education

• Government Affairs

• Marketing

• Meetings

• Membership

• Professional Responsibility

• Fair Debt Collection

Practices Act

• Forwarders & Receivers

Please submit this request immediately

To: David R. GamacheGamache & Myers, P.C.1000 Camera Ave.Suite ASt. Louis, MO 63126Fax: 314-835-6604

CC: CLLA70 E. Lake StreetSuite 630Chicago, IL 60601Fax: 312-781-2010

YES! I want to join a committee,

My committee choices are:

1._________________________________________________

2._________________________________________________

3._________________________________________________

NAME

FIRM NAME

ADDRESS

PHONE FAX

LEND A HANDand help lead the way

Debt

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27

The judgment then becomes part of the permanent court records.

What is an Abstract? An abstract is a record of the judgment that is then filed with the County Registrar of Deeds in any county where the defendant may have proper-ty. This creates a lien on any of the judgment debtor’s prop-erty in that county for a specified number of years.

What is an Execution? If the judgment is not paid then an execution follows. The execution is the order of the court directing the sheriff or another court officer, like the marshal, to seize the defendant’s property to satisfy the judg-ment that has been rendered.

What is a Levy? A levy is the process by which the sher-iff or another court officer acquires possession and control over the judgment debtor’s property to satisfy the judgment. The most common levies seen in collection cases are lev-ies against a judgment debtor’s bank account or wages. The marshal charges a fee for each levy. If property, other than cash, is seized by putting a marshal’s keeper on the debtor’s premises, the property must be removed from the premises, stored, advertised for sale and ultimately sold at public auc-tion with the proceeds going to the judgment creditor. Need-less to say this procedure is extremely expensive. The costs, while ultimately recoverable from the defendant, must be paid by the creditor. Therefore, in most instances a levy and sale will take place only in cases where substantial amounts of money and property are involved.

If there is no property of the judgment debtor available for seizure the court officer returns the execution papers to the court marked “Unsatisfied”. In that instance the creditor must then look to other avenues of approach to recover his money. However, if the judgment has been paid, a docu-ment entitled “Satisfaction of Judgment” must be filed with the court.

If a creditor does not know what kind of property the debtor has to levy on, the creditor can resort to supplemen-tary proceedings. These proceedings provide that the judg-ment creditor may, by a court order or by subpoena, direct the judgment debtor to appear in court and answer ques-tions under oath relating to his property and his ability to pay. These proceedings are often referred to as “ORAPS” which stands for “Order for Appearance”. The information that the creditor’s attorney obtains from the defendant dur-ing the course of an ORAP can then be used to determine what kind of payment arrangement the debtor can live with or what assets he has which can be levied upon. The judg-ment debtor may not refuse to answer any reasonable ques-tions relating to his assets or his employment. If he fails to respond to any question the attorney can obtain an immedi-ate order from the court compelling the debtor’s response.

If a judgment debtor attempts to ignore the court order which is personally served on him, requiring his appearance in court, the judge will issue a bench warrant to the mar-shal’s office directing that the individual be arrested and

brought before the court. He will then be required to post a bond to assure his future appearance to respond to ques-tions. In some judicial districts, when the debtor appears for the next judgment debtor examination, the bond posted by the debtor will be turned over to the creditor in partial satis-faction of the judgment.

Judgment debtor examinations have been especially use-ful to attorneys in uncovering concealed assets which can be seized to satisfy a judgment or in finally determining that the judgment defendant has no assets with which to satisfy the judgment and that the judgment is uncollectible. In the latter instance at least the attorney can write a definitive let-ter to the creditor recommending that the matter be charged off as a loss for tax purposes and that the file be retired.

What Else Is Helpful to Know About Pursuing a Commercial Claim? In many instances, the creditor is located a substantial distance from the debtor’s locale, and the long-distance nature of the attorney-client relationships dictates some special circumstances. The attorney should keep the client advised by sending written status reports on a regular basis. To avoid unnecessary inquiries, the attorney should advise the creditor how far ahead to advance their file for a further report. The client, for his part, can help speed along the proceedings by replying promptly and completely to the attorney’s request for information and documenta-tion.

In general, it is not a good idea to forward original docu-ments to the attorney unless they are requested. However, it is certainly helpful to equip the attorney from the very out-set with photocopies of pertinent documentation and full information as to the circumstances surrounding the debtor and any known disputes.

In some instances, the attorney may be authorized to settle a claim by accepting a return of merchandise. This usually results in a special fee arrangement in line with the value of the merchandise returned and the amount of credit granted by virtue of the return.

At any point along the way in the course of a commercial case, the collection process may be hampered by some form of insolvency proceedings. These may take the form of a bankruptcy petition (which acts as an automatic stay against further action by a creditor), an assignment for the benefit of creditors (wherein a debtor assigns all of his assets to an independent third party for the purpose of liquidation), or a state court receivership (similar to bankruptcy). In any of these instances, it is important to protect the rights of the creditor by the timely filing of a proof of claim. Thereafter, there is usually little to be done on the creditor’s behalf other than to continue to monitor the situation and wait for the results of the proceedings.

Hopefully, armed with the knowledge you have gained from this pamphlet, you will better understand the nature and course of a commercial collection lawsuit.

Continued from page 13

CLLA online education programming is available thanks to funding fromthe CLLA Fund for Public Education, a sponsor of quality education formore than 26 years. The Fund seeks to provide education to those interested in the credit, collections, or bankruptcy fields through programsoffered to the business community, the bar generally and, if appropriate, tothe public-at-large. The Fund is always seeking input from those in thefield about topics of interest and new trends in the area of the law. Pleaseemail us at clla@clla.org for programming input and overall site reflections.

70 E. Lake Street, Suite 630 • Chicago, IL 60601 • 312.781.2000 • www.clla.org

No need to beat the streets for CLE requirements you must meet

The CLLA can save the day, CLE available the 24 hour way

Whether fuzzy slippers adorn your feetor in that cubicle or office seat

CLLA online education programming at a cost you can’t beat

www.eondirect.com/clla

ONLINE EDUCATIONCommercial Law League of America

S P O N S O R E D B Y T H E C L L A F U N D F O R P U B L I C E D U C A T I O N

70 E. Lake Street, Suite 630 • Chicago, IL 60601 • 312.781.2000 • www.clla.org

www.clla.org

It’s the site designed by commercial law professionals for commercial law professionals—featuring:

Breaking news that affects you—Read up on the latest from Washington, D.C., Member News,Press Releases, and Commentary on Pending Legislation.

Calendar of events—Learn about and register for upcoming regionaland national meetings where you can meetcolleagues, network with peers, learn about new and upcoming legislation, and attend educational sessions.

Directory of Members—Access the CLLA Names Directoryto stay in contact with colleaguesnear and far. Non-members canfind professional assistance in theircity simply by entering a city, state,or zip code.

Debt3 Online—Tap into current and past articles and features; professional resources, productreviews, bankruptcy, collections and debtrecovery leader profiles; practice tips;credit industry legislative updates; and much more…

General resources—Find copies of the New Bankruptcy Code,various CLLA Position Papers, and a list of DataBreach Notification Laws by state.

Member resources—Find Attendee Lists from CLLA sponsored events, receive discounts upto 60% on LoisLaw searches, discounts on INSOL membership, and discounts on encrypted data backup services from Green Backup.

Shopping cart—Purchase client informational pamphlets,educational conference materials on CD,collection folders, Dennison® labels and more.

Bookmark it today … other exciting new featuresare being added soon!

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