Let’s assume that you work for a company and things are not going well. You start negotiating a severance. Does the employer have an obligation to share with you its intention to seek bankruptcy protection? Maybe. If you ask. But what if you don’t ask? What if they don’t tell? What if perhaps, you really should have assumed that bankruptcy was an option that might be considered even though it’s not mentioned at all during the negotiations? These issues were faced by the 7th Circuit in the case of Smith v. Duffy, decided on August 3. They answered the questions but rather than discuss them, I’ve posted the Court’s decision here.
I will share one thought. The case discusses, among other things, the duty of candor that parties owe each other – and uses the attorney-client relationship as an illustration of when that duty of candor not only arises, but is expected. But it also does so by reminding us when that duty of candor simply doesn’t exist.
The case of a special relationship, such as the lawyer’s fiduciary obligation to his client, is really just a special case of the general proposition that context can create a duty of candor. The lawyer’s specialized knowledge invites the client to repose trust in what the lawyer tells him, and the client’s expectation would be shattered if the lawyer could be uncandid with impunity, as is normal in arm’s length dealings between buyers and sellers.
I encourage you to read this case, and put yourself in the shoes of the now very disgruntled employee. Ask yourself – when entering into an arm’s length negotiation, are you equipped to handle the negotiations yourself? Or might you find a benefit by having someone by your side who has a legal duty to be candid with you. Perhaps better said – are you better off being told what you want to hear? Or are you better off hearing what you need to know?
Read the case and think about that the next time you think about buying a home, or refinancing or modifying your real estate mortgage. And most definitely think about it if your boss calls you into your office and wants to discuss your departure from the company.
A Message For Those With Their Head in the Sand
Here’s one for the “believe it or not” list: ostriches do not hide their heads in the sand. I know – you’re thinking “get OUT!” I was as shocked as the next person. Apparently, while they do not bury their head, they will sometimes lie on the ground trying to make themselves look inconspicuous. According to The Phrase Finder:
Birds are not stupid (at least not all of them), and I find it difficult to believe that a bird that merely lies about hoping not to be avoided (such as one might do at a high school or college reunion) is intellectually deficient. So if ostriches don’t hide their heads in the sand, why do people struggling with high house payments often do just the opposite?
(more…)
Tags: Bankruptcy, Chapter 11, Chapter 13, Chapter 7, Commentary - Legal, Credit and Debt, debt, Mortgages and Foreclosures
Posted in Bankruptcy, Chapter 13, Chapter 7 | No Comments »