Ch. 7 Takeaways From Evander Kane Bankruptcy


June 22, 2021

Danning Gill attorneys Alphamorlai “Mo” Kebeh and Zev Shechtman authored an article for Law360 analyzing Evander Kane’s bankruptcy case pending in the Northern District of California Bankruptcy Court.

According to the attorneys, a recent decision in the case informs that when an individual chapter 7 debtor’s debts are not clearly “consumer” debts and not clearly “non-consumer” debts for purposes of section 707(b) of the Bankruptcy Code, the debtor may be entering a gray area in between the two. Practitioners should closely scrutinize the facts of those gray area debts, as the outcome will partially be dependent on the jurisdiction of the debtor’s residence.

In the U.S. Court of Appeals for the Ninth Circuit, where courts are prone to considering the totality of circumstances, practitioners should pay attention to whether the relevant transaction produced an economic benefit and whether the debtor had any consumptive intent, among other relevant factors. Meanwhile, in the Fourth Circuit, courts harbor a bare-bones interpretation of section 707, focusing only on whether there was profit motive rendering the debt non-consumer. Unless and until the U.S. Supreme Court settles the split, practitioners should pay extra credence to the particular factors relevant in their jurisdiction.

This case also raises interesting policy concerns. The debtor enjoyed an expensive lifestyle, replete with multimillion dollar gambling debts, fancy cars, personal expenses of over $1 million per year and other extravagances not experienced by the average debtor. Notwithstanding his outsized lifestyle fueled by debt, Kane is afforded chapter 7 relief. Meanwhile, individual debtors with much more modest means, but with above median income and primarily consumer debts, are typically subjected to the rigors of chapter 13.  This raises basic questions of fairness under the Bankruptcy Code.

To read the full article, click here. (Subscription required)

Katerra’s Bankruptcy: Grand Plans And a Tumbling Set of Dominoes

Globe St.

June 10, 2021

Danning Gill partner Zev Shechtman was quoted in Globe St. about construction firm Katerra Inc. that had bragged of “breaking new ground in the building industry.” But its recent bankruptcy filing in the Southern District of Texas was a more recognizable collection of issues including a potential over extension, pandemic-driven problems, questions about accounting procedures, and then tumbling support by wary investors complicated business as usual for the six-year-old company with nearly $3 billion invested in the startup.

“They had a vision, they borrowed a lot of money on the basis of this vision, then they sought to disrupt the construction industry,” Shechtman.

Globe. St. also reported that the pace of growth was one likely factor in the events. Acquisition and integration of businesses is a challenge to any company. A startup like Katerra doing more than three acquisitions a year is no exception. The positioning of the company may have played another role.

“There’s a lot in here about this financial problem and I think that’s going to be a big part of the story,” Shechtman says of the filing he reviewed. “There’s a lot to unpack here about what happened financially, which kind of business mistakes were made, what kind of lending mistakes were made, and institutional oversight.”

To read the full article, click here.


Aaron E. de Leest prevails in the Ninth Circuit in a published decision

Danning Gill attorney, Aaron E. de Leest, prevails in the Ninth Circuit in a published decision on an issue important to Danning Gill’s trustee and debtor clients.  In its decision, the Ninth Circuit held that the doctrines of issue preclusion and claim preclusion can be applied to deny a debtor’s amended claims of exemption.  The Ninth Circuit went on to add that:

“[t]o hold otherwise would not only undermine the finality of exemption orders, but would considerably frustrate the trustee’s duty to expeditiously close the debtor’s estate. Debtors can amend their exemptions as a matter of course, Fed. R. Bankr. P. 1009(a), so if orders denying exemptions carry no preclusive weight, debtors could delay matters by claiming the same property as exempt time and time again. Debtors could also decline to meaningfully press their claims, and creditors would bear the brunt of such behavior, as the relitigation of resolved issues would drain estate—not to mention judicial—resources. Those burdens are precisely what the preclusion doctrines were designed to avoid, and they remain available to the bankruptcy courts when ruling on previously denied claims” (internal case citations omitted).

A link to the Ninth Circuit’s decision is here:


Zev Shechtman Appointed President of the Los Angeles Bankruptcy Forum for 2021 to 2022

Zev Schechtman, Attorney at LawDanning Gill is pleased to announce that our Partner Zev Shechtman has been appointed President of the Los Angeles Bankruptcy Forum for 2021 to 2022.   The LABF is the leading educational and networking resource for bankruptcy and insolvency professionals in the Central District of California, and particularly in Los Angeles, the San Fernando Valley and Santa Barbara.  Zev is particularly excited about the LABF’s Diversity Equity & Inclusion Committee. The mission of LABF’s Diversity Equity & Inclusion Committee is to reflect our fundamental belief that diversity strengthens our practice and that all people deserve inclusivity, equity and a chance to have a seat at the table.

Amid Erika Janes’ Legal Troubles, Flaunting Her Wealth on ‘Real Housewives’ May Be a Risky Move


May 19, 2021

In light of the premier of the new seasons on ‘Real Housewives of Beverly Hills’ on Wednesday, May 19, Danning Gill Partner Zev Shechtman spoke with Variety about the risky move reality star Erika Jayne is making appearing on the show in the midst of her soon-to-be ex-husband’s legal troubles including his involuntary bankruptcy.

He told Variety, “If she even is under oath, she’ll have a lot of evidence against her that she’ll have to account for.  So you don’t want your client out there making public statements. And her whole life is a public statement.”

To read the full story click the link below.




Administration of Attorney Oath for Alphamorlai “Mo” Kebeh by The Honorable Martin R. Barash

Danning Gill welcomes Alphamorlai “Mo” Kebeh as an associate at our firm and as a newly admitted member of the State Bar of California!  Mo is a 2020 graduate of UCLA Law School.  On April 5, 2021, the firm, along with Mo’s friends and family around the country, had the unique experience of observing Mo’s swearing in ceremony, in which The Honorable Martin R. Barash, United States Bankruptcy Judge, administered the attorney oath, all via Zoom.  The event was a reminder that, even as the pandemic has presented unprecedented challenges, it has also afforded special opportunities for people to connect.

Read about Mo, his recent publications and accomplishments here.

Sarah Danning — First Woman Bankruptcy Trustee in the Central District


As Women’s History Month Comes to a Close, LABF Honored and Recognized Some of the Women Trailblazers in our Bankruptcy Community Who Opened the Door and Set the Path for Today’s Women Practitioners.


Sarah Danning was the country’s and the district’s first female bankruptcy trustee.

Danning began practicing law in Los Angeles a year after she graduated from USC Law School in 1923. In her later years, she recalled the gender discrimination she experienced early in her career, revealing advice she received while applying for her first legal jobs: Never tell any prospective hiring law firm that she was able to type, as law firms were likely to give her secretarial work rather than legal work.

One of her first jobs was with The Local Loan Company in Los Angeles. She later had an office in the Subway Terminal Building, which opened in Downtown Los Angeles in 1925 (designated Los Angeles historic cultural monument #177). She entered the practice of bankruptcy and became the country’s first female bankruptcy trustee.

One of six siblings, she passed her commitment to bankruptcy law on to her brother, Curtis Ben Danning. 17 years her junior, Mr. Danning later became one of the founders of the Danning Gill firm. Sarah Danning worked well into her 80s. After retiring from her practice as trustee, she made weekly visits to the Danning Gill offices, where she drafted wills for her own clients. A Danning Gill staff member who befriended Ms. Danning recalled her as a “spitfire” who always spoke her mind. Another member of the firm described her as “an exceptional woman, intelligent, humorous and kind.”

Sarah Danning was honored by the State Bar in 2003, when Ben Danning accepted certificates acknowledging the siblings’ respective 50 and 75 years of practice, as told in this State Bar posting: click here. Ms. Danning passed away later that year at the age of 100.


Can Alamo Drafthouse Battle Back From Bankruptcy and Lead a Moviegoing Revival?

March 31, 2021
Danning, Gill, Israel & Krasnoff, LLP partner Zev Shechtman
spoke with Variety regarding the movie theater’s bankruptcy.

“Alamo’s challenges mirror those of the entire cinema industry, which has just endured the most punishing 12-month stretch in its century-long history. Can it put its financial house in order while recapturing its pre-pandemic swagger? Will it be able to successfully remind customers of the fun they once had sipping a microbrew and munching on truffle popcorn while watching the latest Tarantino flick? Are its customers so eager to go out and socialize after a year of being housebound that they’ll see anything and everything that hits the big screen, or will COVID-19 prove to be the final nail in the coffin of the theatrical experience?”

Read more:  click here.

Leadership Perspective:
A Bankruptcy Boutique’s View of The COVID-19 Crisis’s The Mid-Market Report
February 26, 2021

“Changes in the economy drive bankruptcy filings, even absent major events like a recession or pandemic,” according to managing partner Eric Israel was featured in a Q&A in’s Mid-Market Report.  The profile was focused on the firm’s success and issues that impact mid-size firms.

In responding to the question about fostering the next generation of legal talent, Eric said, “The next generation is our future. We would all like to see our firms prosper long after we’re gone. To accomplish that, we need to groom our young folks, not just in substantive law (which is also important), but in the ethics of practicing law, marketing and law firm management. All are necessary for a properly working firm.”

Eric P. Israel, Attorney at LawFirm Name: Danning, Gill, Israel & Krasnoff

Firm Leader: Eric Israel, Managing Partner

Head Count: 10 attorneys

Locations: Century City (Los Angeles), California

Practice Areas: business bankruptcy, restructuring, insolvency, debtor-creditor disputes, fiduciary representation, related litigation, mediation

Governance structure and compensation model:  LLP

Do you offer alternative fee arrangements?  Yes, although most of our work is still on an hourly or fixed fee basis.

What do you view as the two biggest opportunities for your firm, and what are the two biggest threats? 

Ironically, first off COVID is proving to be an opportunity for my firm, as we are a bankruptcy boutique firm. Changes in the economy drive bankruptcy filings, even absent major events like a recession or pandemic. The world is presently experiencing significant economic changes with the shift to remote working that I predict will have many long-term ramifications. The transition from brick and mortar to online business that was already underway will only accelerate.  Manufacturers and even service providers will need to adapt or fail. This will also drive down rents for retail and office space, and in turn increase bankruptcy filings by landlords and lenders. Second, changes in technology drive increases in productivity, but they also can cause severe swings in the economy.  For example, the shift away from oil and gas to renewables is affecting the price of oil, which this year crashed and has only started recovering. We have also seen many retail bankruptcies where management failed to shift to online marketing soon enough.

In terms of threats, as a countercyclical practice, the volume of our business typically decreases as the economy grows. Longer periods of economic growth put pressure on insolvency-centered practices. Second, as a boutique law firm, we are only as successful as our relationships. A challenge for an older firm is to maintain strong connections with our historic commerce partners while continually expanding our referral base as both our rainmakers and our clientele age and eventually retire.

There is much debate around how law firms can foster the next generation of legal talent. What advantages and disadvantages do midsize firms have in attracting and retaining young lawyers, particularly millennials? 

The next generation is our future. We would all like to see our firms prosper long after we’re gone. To accomplish that, we need to groom our young folks, not just in substantive law (which is also important), but in the ethics of practicing law, marketing and law firm management. All are necessary for a properly working firm. We actively encourage our younger talent to join us at marketing functions and introduce them to ongoing clients to hopefully keep the relationship strong long term.

To read the full Q&A please click here. (Subscription required)


Recent Case Adds to Trend of Courts Allowing Bankruptcy Trustees to “Look Back” as Far as 10 Years to Avoid Transfers When the IRS is a Creditor

In the recent case of Mitchell v Zagaroli, 2020 WL 6495156 (Bankr. W.D.N.C. 2020), 2020 WL 6495156 (Bankr. W.D.N.C. 2020), the bankruptcy court ruled that a chapter 7 trustee under 11 U.S.C. § 544(b) could “step into the shoes” of the IRS as an actual creditor to avoid a fraudulent transfer of property occurring up to ten years prior to the petition date.

Under section 544(b) of the Bankruptcy Code, the trustee of a bankruptcy estate may “avoid” (or colloquially, “claw back”) certain transfers of property.  According to section 548 of the Bankruptcy Code, the reach back period for the trustee prior to the bankruptcy filing to avoid transfers is two years.  However, section 544(b) allows a trustee to avoid any fraudulent transfer “that is voidable under applicable law by a creditor holding an unsecured claim.”  Generally, this has been applied to a trustee employing avoidance powers under applicable non-bankruptcy law (i.e. State law), typically extending the look back period by a few years.  In Zagaroli, the Court ruled that, if the IRS is an unsecured creditor of the bankruptcy estate, the look back period may extend to ten years prior to the petition date.

In Zagaroli, the debtor allegedly transferred multiple parcels of real property to his parents for no consideration in December 2010 and June 2011.  In May 2018, the debtor filed a chapter 7 petition.  The IRS filed a proof of claim in the debtor’s case.  Thereafter, the trustee filed an action to avoid the debtor’s 2010 and 2011 transfers to his parents.  The trustee claimed that section 544(b) allowed the trustee to use section 6502 of the Internal Revenue Code to avoid transfers as far back as ten years before the debtor’s petition filing.

To determine the merits of this claim, the court relied on the plain meaning of Bankruptcy Code section 544(b).  As the IRS had an unsecured claim in the debtor’s estate, the court determined that the plain language of section 544(b) allowed the trustee to “step into the shoes” of the IRS (an “actual creditor”) and use section 6502 of the Internal Revenue Code to avoid the debtor’s real estate transfers.  To support this conclusion, the court relied heavily on In re Gaither, 595 B.R. 201 (Bankr. D.S.C. 2018), which determined that section 544(b) similarly permitted the trustee to step into the IRS’s shoes and that courts should not look beyond the plain meaning of this provision.  Zagaroli cited other cases as well and characterized this as the “majority rule.”

It does appear that the majority of cases in the nation ruling on this issue have come to the same conclusion as Zagaroli, though some courts have disagreed.  For example, in In re Vaughan Co., 498 B.R. 297 (Bankr. D.N.M. 2013), the court relied more heavily on congressional intent and determined that a trustee should not be permitted to use the unique powers of the IRS.  The Vaughan Co. court opined that the federal government was not meant to be used as a “mere conduit for the enforcement of private rights which could have been enforced by the private parties themselves.”  Id. at 304 (citing Marshall v. Intermountain Elec. Co., 614 F.2d 260 (1980)).  Thus, under this court’s analysis, a trustee could step into the IRS’ shoes but would still be barred by the state’s statute of limitations, unlike the IRS.  Id. at 305.

Despite the few opposing decisions, the holding in Zagaroli suggests that courts are continuing to extend trustees’ avoiding powers by extending the look back period when the IRS is an unsecured creditor of the bankruptcy estate.  At this time, however, there is no binding authority on this issue from the Ninth Circuit.