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Judge Orders Lawyer to Pay $236,000 Law School Debt

Submitted by Amaris Elliott-Engel on Tue, 06/16/2015 - 17:54

Here's a piece I wrote for the Connecticut Law Tribune about a lawyer's law school debt:

Law school students learn how to argue over contracts. But that doesn't necessarily mean they can litigate their way out of a contract to pay their law school loans. One Branford-based attorney is facing this reality after a federal judge ruled that, more than two decades after receiving his law degree, he owes the federal government more than $236,000 for his legal education.

Gregory P. Cohan went to the University of Bridgeport Law School—now the Quinnipiac School of Law—and got his Connecticut bar license in 1993. But he hasn't made a payment on his law school loans since 2001. A few years before that, he consolidated his federal law school loans under the William D. Ford Federal Direct Loan Program, which ties monthly repayment amounts to an individual's income. After 25 years, any balance left on loans is forgiven.

According to Cohan's calculations, his payment should have been about $100 a month. But the government puts the number at $300.

Cohan argued in court papers that because the federal Department of Education incorrectly calculated his monthly repayment, the government materially breached his student-loan agreement, made it impossible for him to pay back his loans and thus discharged his duty to perform under the contract.

"The defendant, the non-breaching party, is entitled to the benefit of the bargain," Cohan wrote. "The plaintiff agreed to reasonable, affordable payments for [a] period of 25 years, then forgiveness of any unpaid balance. The parties agreed that defendant would not be charged more than he could afford to pay, and that he would not have an unmanageable debt hanging over his head for the rest of his life."

The disagreement stems from how Cohan's income was calculated. Cohan reported that his 2001 income was $14,605. But Assistant U.S. Attorney Christine Sciarrino, who handled the case for the federal government, took issue with Cohan's calculations. Because income tax filings actually reflect the previous year's income, Sciarrino said Cohan couldn't officially compute his 2001 salary in December of that year. She said he should have used his adjusted gross income from 2000, which was $26,960. That would have put his loan repayment burden at $310.17 per month, she said.

U.S. District Judge Jeffrey A. Meyer acknowledged that it was within the government's discretion to use the alternative documentation Cohan submitted for his annual income instead of his actual tax returns. But there isn't any evidence in the record, Meyer said, that Cohan even tried to pay the $100 a month that he believed he actually owed beginning in 2002.

"Defendant has presented no evidence to support his statement at oral argument that the government 'made it impossible for [him] to make the payments' or that he was unable to calculate his payments because he lacked access to the Federal Register," Meyer said. "Defendant is and was a practicing attorney. In fact, this debt arises directly as a result of his legal training. … He has provided no reason why he could not have done his research and mailed payments many years ago."

When Cohan consolidated his loans in August 1999, he owed $97,658.55. Now he has been ordered to pay $236,535. That's because while the case has been pending, the unpaid principal balance has been accruing at 8.25 percent every year.

The federal government declared that Cohan was in default on Sept. 17, 2002, and his entire loan balance became due 270 days after payment was due at the end of 2001. The government did not file to collect on Cohan's loans until May 2011.

Sciarrino noted that Cohan was required to pay under the income contingent repayment plan because direct consolidation loans must be repaid that way if a borrower has defaulted on the underlying loans. Cohan defaulted on his underlying loans in the 1990s, according to the opinion.

Cohan did not respond to a request for comment. The U.S. Attorney's Office declined to comment.

CT Supreme Court Mulls Role of Exculpatory Clauses in Banking Industry

Submitted by Amaris Elliott-Engel on Tue, 04/15/2014 - 08:43

The Connecticut Supreme Court is considering an issue of first impression: does public policy prohibit exculpatory clauses in deposit agreements between banks and customers? I wrote about the case for the Connecticut Law Tribune:

Nine years ago, the Connecticut Supreme Court ruled that a ski resort couldn't limit its liability through contractual clauses. Now the court has to decide if the banking industry can be permitted to do what the winter recreational industry cannot.

The justices heard oral arguments last month in a case, the banking industry says, could have profound influence on its future financial health. Bank of America is seeking to overturn a $823,777 verdict returned by a jury that found the financial institution liable for the money a Catholic school employee swindled from the school.

The case begins with Salvatore Licitra, who started out as a part-time bus driver at St. Bernard School of Montville. Over time, his duties expanded to making bank deposits, working on accounts payable and accessing the school's computer system to prepare checks from the school's account. He had access to third-party checks written to the school and blank checks in the school's name.

Licitra's duties expanded, Bank of America said in court papers, even though the school never ran a background check on him and his criminal record "includes several convictions for forgery, larceny, altering prescriptions, issuing bad checks, improper use of credit cards, and burglary."

He continued his criminal activities in 2002 by opening an account with the school's tax identification number. He proceeded to deposit into the account, over the course of four years, more than 1,000 checks, some payable to the school and others drawn on the school's operating fund account.

"Bank employees knew him and came over to shake his hand and joke around with him when he visited the branch," according to the school's court papers. "In the years to follow, the defendant [Bank of America] sent statements for the account to Licitra's home address; issued Licitra an ATM card; and processed hundreds of transactions on the account for Licitra."

Licitra's embezzlement continued until his position at the school was eliminated in 2006. He was arrested in July 2007, after officials at the Diocese of Norwich discovered the scam, and is currently serving a seven-year prison sentence.

In the meantime, St. Bernard filed a civil lawsuit in an attempt to recoup some of its losses.

The school, noting that it was a longtime customer of Bank of America, argued that the bank violated its own policies and let Licitra open a checking account in the school's name even though he was not an authorized signer of documents for the school's accounts. The bank even failed to disclose the existence of the illicit account to the school's accountants for four years in a row, the school complains.

After hearing all of the evidence, the jury found that Bank of America was negligent, breached its contract with the plaintiff, and violated sections of Connecticut banking law and Uniform Commercial Code. Jurors found Bank of America 95 percent liable for Licitra's actions and St. Bernard 5 percent liable.

Bank of America's legal position has been that the lawsuit should have been thrown out because St. Bernard officials took too long to notify the bank about the unauthorized transactions. The bank has deposit account agreements which require customers to review monthly bank statements and to report any questionable transactions within 60 days. Any customer not acting within this time frame, according to the agreements, is barred from bringing "any legal proceeding or action against us to recover any amount alleged to have been improperly paid out of your account."

During the trial, New London Superior Court Judge James Devine declared that those exculpatory clauses—requiring St. Bernard to notify Bank of America about problems within 60 days in order to be able to sue the bank—were contrary to Connecticut public policy. He cited the 1995 case of Hanks v. Powder Ridge Restaurant Corp., in which the Supreme Court held that it was against the public interest to allow a ski resort to limit its liability through an exculpatory contract clause.

And so, in an apparent issue of first impression, Devine interpreted Connecticut General Statute Section 42a-4-103 to find that the Bank of America deposit agreements were unenforceable. The law states: "Parties to the agreement cannot disclaim a bank's responsibility for its lack of good faith or failure to exercise ordinary care or limit the measure of damages for the lack of failure. However, the parties may determine by agreement the standards by which the bank's responsibility is to be measured if those standards are not manifestly unreasonable."

Devine reasoned that the "exculpatory language in the agreement affects the public interest adversely, and, therefore, it is unenforceable because it violates public policy."

The result of the judge's ruling, Bank of America said, was that the trial jury was not permitted to see the deposit account agreements that were in effect at the time.

In appealing the trial court ruling, Bank of America says that the point of the deposit account agreement is not to absolve the bank of liability if it fails to operate in good faith and with ordinary care. Instead, the bank argues, the agreement is just setting out a procedure that customers—including the school—must follow in order to make a legal claim.

Other jurisdictions allow banks to have similar-length notice periods, Bank of America further argued.

The Connecticut Bankers Association has filed an amicus brief in the case. That brief argues that public policy does support exculpatory clauses in the contractual relationship between banks and their depositors. The organization said the bank's exculpatory clause isn't really comparable to that of the ski resort, which is designed to limit liability for physical injuries sustained by customers who are invited onto the resort's property.

"While the invitee to the ski area may have no ability to control the risk they take in using the ski area, the depositor has control over its deposits insofar as it can review activity in its account on a monthly basis," Jeffrey Mirman and David Wiese, of Hinckley, Allen & Snyder in Hartford, wrote in the bankers' amicus brief.

Contractual provisions limiting the amount of time account holders have to notify banks of account irregularities are vital to detecting fraudulent activity early on. If the trial court decision is not overturned, the association said Connecticut will become an outlier in fraud prevention in the United States. Fraud losses will skyrocket, the association warns.

St. Bernard counters that the reason for barring exculpatory clauses exists outside of the context of winter recreation. Exculpatory clauses have no place in the banking industry, the school countered, because account agreements are "contracts of adhesion," meaning banks have "a decisive advantage of bargaining strength" over their patrons.

To allow exculpatory clauses, such as the one used by Bank of America, "would allow banks to run roughshod over our legislature and their customers alike," St. Bernard's lawyers said.

Further, the school's lawyers argue, even if St. Bernard had a responsibility to review its bank statements for suspect transactions, that requirement applied only to the bank officials operating a fund account, not a fraudulent account that school officials had no idea even existed.

Gerald Garlick, of Krasow, Garlick & Hadley in Hartford, is representing Bank of America. He declined comment. Cassie Jameson and Michael Colonese, of Brown Jacobson in Norwich, are representing the school. They, too, declined comment.

But Ryan Barry, of Barry and Barall in Manchester, and former cochairman of the General Assembly's Banks Committee, said that Devine is a well-regarded judge and his reasoning could be persuasive to the Supreme Court. Even though Connecticut would be in the minority of states in barring banks from putting contractual limits on how much time depositors have to flag fraudulent account transactions, Connecticut does not have to follow the majority rule, said Barry, who has no role in the case.

"The courts in our state sometimes lead the way in many areas of the law," Barry said.

A new wrinkle in awarding Office of Conflict Counsel contract

Submitted by Amaris Elliott-Engel on Thu, 01/16/2014 - 13:05

Philadelphia City Paper cross-posted my report on how the city of Philadelphia is back to square one in its plan to develop an Office of Conflict Counsel to represent criminal defendants and family-court defendants when the Defender Association of Philadelphia, Community Legal Services or the Support Center for Child Advocates is already representing another person in the case. An excerpt: 

The city of Philadelphia will not be entering into a contract right away to create an Office of Conflict Counsel after all.

Mayor Michael A. Nutter's press secretary, Mark McDonald, said in an email that the winning bidder did not have the same name in place at the start of the process as at the end of the process, so the contract can't be issued legally.

The City Code requires that the name of the entity initiating the bid process in the eContract Philly system have the same name as the entity with whom the city contracts.

Philadelphia attorney Daniel-Paul Alva's bid appeared to be the winner to start a new Office of Conflict Counsel in Philadelphia.

However, Alva and his former partner on the project, Scott DiClaudio, bid for the conflict-counsel work as Alva & Associates LLC. DiClaudio stepped back from the project in the wake of social-media postings he made. The city said in a statement that Alva is actually "not associated with Alva & Associates," and that his actual firm name is the Law Offices of Daniel P. Alva. The name change means the city cannot contract with Alva at this point.

"In no way does this reflect on the proposal to establish a Conflict Counsel office," McDonald wrote. "The administration is committed to carrying this out. Nor does it reflect on the quality of the proposal from Mr. Alva. But the rules are clear."

The city has to begin the bidding process again from scratch.

Alva wrote in an email that he will resubmit his bid in the new contract process and "hopefully will be chosen again."

New Model For Conflict Counsel in Philadelphia Delayed--For Now

Submitted by Amaris Elliott-Engel on Wed, 01/15/2014 - 18:06

The city of Philadelphia is not going to be entering a contract right away to start a for-profit Office of Conflict Counsel after all.

Mayor Michael A. Nutter's press secretary, Mark McDonald, said in an email that the winning bidder did not have the same name in place at the start of the process as at the end of the process, so the contract can't be issued legally.

Philadelphia attorney Daniel-Paul Alva was the winner of the bid to start a new Office of Conflict Counsel in Philadelphia.

"In no way does this reflect on the proposal to establish a conflict counsel office," McDonald wrote. "The administration is committed to carrying this out. Not does it reflect on the quality of the proposal from Mr. Alva. But the rules are clear."

The city has to begin the bidding process from scratch.

Alva wrote in an email that he will resubmit his bid in the new contract process and "hopefully will be chosen again."

The city announced its intention Tuesday, December 31, to contract with Alva & Associates to start a for-profit law firm from scratch to represent criminal defendants and family-court defendants when the Defender Association of Philadelphia, Community Legal Services or the Support Center for Child Advocates is already representing another person in the case.

The plan was for the firm to handle the first appointments in criminal cases and juvenile-delinquent cases in which the Defender Association has a conflict, and for the firm to represent the primary caregiver in every dependency case, Alva said in an interview earlier this month. The firm would have taken all new appointments starting March 1. The firm bid to do the work for $9.5 million.

The plan has generated opposition from many quarters, including from Councilman Dennis O'Brien. O'Brien's director of legislation and policy, Miriam E. Enriquez, said in an interview today that her office is pleased the process is starting over and that they hope the next iteration of conflict-counsel representation makes "sure the constitiontal rights of the indigent are preserved and protected."

Alva said in an interview earlier this month that he was looking forward to proving “detractors” wrong.

While the firm will be for-profit, “I did not expect to make one cent of profit” from city funds, Alva said. “No one is going to accuse myself or my firm of pocketing profit” at the expense of quality legal representation.

The new office didn't plan to make a profit from city tax dollars, Alva said, but from fees earned by referring clients' cases in other types of matters.

Through those referrals, the firm could help achieve the goal of “Civil Gideon,” a movement in recent years to expand legal representation for civil legal matters involving fundamental needs like custody of children or housing, Alva argued.

There were four other bidders for the contract: Ahmad & Zaffarese & Smyler,, Montoya Shaffer and Sokolow & Associates, according to the city's notice.

SCOTUSBlog: Justices Seem to Favor Forum Selection Clauses in Oral Argument

SCOTUSBlog has an interesting analysis on an oral argument this week in the U.S. Supreme Court on forum selection clauses. The blog predicts that the Fifth Circuit will be reversed in the first forum selection clause case to get to the justices in a quarter-century. The justices also seemed to favor an argument from an amici brief that a "forum-selection clause gives [defendant] Atlantic Marine a complete defense to litigation in any excluded court," SCOTUSBlog reported.

Update: No Action Yet By U.S. Supreme Court in Argentinian Bond Case

Reuters reports that the U.S. Supreme Court did not take action today on a case involving what Argentina owes some bondholders after its default over a dozen years ago. "Based on the court's usual practice, Tuesday's development may mean either that the court will decline to hear the case or that it will ask the Obama administration to weigh in on whether the dispute is worth the court's attention," Reuters reported.

My prior post is here:

Argentinian Debt Default Heads to U.S. Supreme Court

Long after Argentina rebounded from its 2000-2001 financial crisis, lawsuits over its debt are still working their way through the American courts. Some cases are not yet at the U.S. Supreme Court, but the Buenos Aires Herald reports "the case that is now in the hands of the US Supreme Court is the one that relates to whether Argentina violated an equal treatment clause known as 'pari passu' because it failed to treat all creditors equally." The case is up for the justices to decide whether to grant certiorari. The Second Ciruit ruled Argentina had breached the contractual promise to treat bondholders equally, the Buenos Aires Herald reported.




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