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'Practice By Ambush'

By David L. Buchbinder and Kathleen A. Cashman-Kramer
March 29, 2005

In their desire to zealously represent clients, practitioners may often attempt to rewrite the Bankruptcy Code or Rules in motions or reorganization plans. However, recent opinions have taken umbrage with these efforts to conduct “practice by ambush” that either propose provisions inconsistent with the Bankruptcy Code or seek to deprive parties in interest of due process, or both. After all, fundamental due process ” … is the cornerstone underpinning bankruptcy procedure…A creditor has the right to rely on the Bankruptcy Code and Rules and to expect to be accorded due process of law in accordance with the Bankruptcy Code and Rules, and the United States Constitution.” In re Whelton, 299 B.R. 306, 318 (D. Vt. 2004).

When a motion or plan attempts to rewrite the Code or Rules, due process is abused when parties in interest are left to the vagaries of fine print inserted into lengthy plans or seemingly routine and innocuous motions. Courts are, however, becoming more vigilant in their efforts to prevent these abuses. Several recent opinions draw attention to this issue in the context of motion practice and in Chapter 11 and 13 plans. The decisions almost uniformly reject the notion that creative counsel may dispense with the Code or Rules simply by saying so in a pleading.

Chapter 11 Plans

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