Bankruptcy Dodge Will Not Work

(As part our Collective Voice Series we present a post by sceptical, a dedicated Blog Hooligan on the LS Forum)

Former Durham DA Mike Nifong, through his attorney James Craven, filed for bankruptcy on Jan. 16 in an attempt to derail the suits filed in federal court by former Duke Lacrosse players. Nifong's Bankruptcy Filing

While bankruptcy would normally end a civil suit, this is not the case if the debtor engaged in "malicious and willful" conduct. In a collaborative Blog composed of Penn State Dickinson School of Law members, Professor Marie T. Reilly posted her analysis of this bankruptcy filing. Professor Marie T. Reilly is a scholar and teacher of bankruptcy, commercial law and contracts. She is an expert on fraudulent transfer law and has published articles on a variety of topics including corporate successor liability, check kiting, sexual harassment and the holder in due course rule.

Red Lion Blog

Nifong lists assets (a house and a car) totalling about $244,000. He lists liabilities of over $180 million. Insolvent? Yes. I think so. The $180 million takes into account the pending claims of six Duke lacrosse players who each filed prosecutorial misconduct suits against him for around $30 million a pop. None of the Duke players' claims have been reduced to judgment. But that doesn't matter for bankruptcy. A debtor has to list all claims against him or his property in a bankruptcy petition. And "claim," under the Bankruptcy Code, means a "right to payment, whether or not such right is reduced to judgment, liquidated, unliquidated, fixed, contingent . . . ."

Nifong's bankruptcy filing invokes an "automatic stay"-- which enjoins creditors (including the Duke players) from taking any act to collect on a "claim." The automatic stay enjons all six civil cases against Nifong. The bankruptcy court will decide whether to lift the stay and let the litigation proceed. But first, the bankruptcy court will likely decide whether the players' claims against Nifong will survive his bankruptcy or be "discharged."

The point of filing of filing a chapter 7 petition for a guy like Nifong is to give him something to live for (financially speaking). He's lost his law license for professional misconduct. He might be able to scrape out a living working retail. But if the Duke six get judgments, he'll be working for them-- unless he can get a discharge of those debts from a bankruptcy court.

Discharge is bankruptcy jargon for forgiveness. Not everybody can earn their way out of debt problem. Official forgiveness of indebtedness in bankruptcy yields a social value we all enjoy--insurance coverage against financial failure. Creditors whose claims are discharged provide the coverage in the form of debt forgiveness. We all pay the premiums. Creditors charge us all a little bit more to cover the risk that a subset of us will default and discharge debt.

The trick is to provide just enough and the right kind of debt forgiveness but not too much. If a person can run to bankruptcy court for debt forgivness, why should he try to live within his means and avoid overwhelming liability in the first place? Putting the same problem another way, finding the optimal scope of bankruptcy discharge is another example of the endlessly fascinating problem of dual causation. Both debtor and creditor have a hand in preventing hopeless financial failure, just the same as both the drug dealer and user are 'responsible' for or 'cause' drug addition. We need discharge policy that encourages creditors to make good underwiting decisions and at the same time encourages debtors to live within their means.

Blowing by a lot of detail, the Bankruptcy Code purports to extend discharge to the "honest and unfortunate debtor" but withhold it from the dishonest, conniving, or undeserving debtor. First, not everyone qualifies for bankruptcy relief. Second, those who qualify cannot discharge all claims against them.

Here's where Nifong has to worry. The Bankruptcy Code excludes from claims for which an individual can obtain a discharge, those "for willful and malicious injury by the debtor to another entity . . . ." The idea is that if you hurt someone intentionally and you cause injury, you're the cheaper avoider of the loss and you don't qualify for the social insurance coverage. The phrase "willful and malicious" is a holdover from the Bankrutpcy Act of 1898. The Restatement of Torts and modern tort rhetoric talks about intentional, reckless and negligent acts-- but makes no mention of "willful and malicious" injury. Bankruptcy lawyers will be watching to see whether this discharge issue is actually litigated in Nifong's case or goes away in a global settlement in the shadow of a discharge. If the parties do litigate, we'll be watching to see whether Nifong will argue that his prosecutorial misconduct was willful but not malicious, or more inscrutably, malicious but not willful. Either way, if Naifong can show that the exception to discharge does not apply, he'll get debt forgiveness and the Duke players will walk away with nothing. That's his only hope of forgiveness, at least on this earth. Red Lion Report

"Rogue Prosecutor"

In this case, Nifong's "willful and malicious injury" was his false prosecution of Evans, Finnerty, and Seligmann.

As a matter of fact, the North Carolina Attorney General declared the original defendants innocent, stated that the alleged crime never occurred, and described Nifong as a "rogue prosecutor."

Based on the significant inconsistencies between the evidence and the various accounts given by the accusing witness, the Attorney General and his prosecutors determined that the three indi­viduals were innocent of the criminal charges and dismissed the cases April 11, 2007 NC AG Report

Nifong's Disbarment

As a matter of fact and law, the Disciplinary Hearing Commission of the NC Bar, a quasi-judicial panel, found that Nifong violated multiple Bar rules in his conduct of the prosecution, and ordered him disbarred. NC State Bar Findings of Fact And Conclusions of law

State Bar Findings 11-15

Eleven: "Did Defendant by representing to the Court that he had provided all potentially exculpatory evidence, a, make false statements of material fact or law to a tribunal in violation of Rule 3.3(a) (1)?" The answer is yes. "B, engage in conduct involving dishonesty, fraud, deceit or misrepresentation in violation of Rule 8.4(c) of the Revised Rules of Professional Conduct?" The answer is yes.

Twelve: "Did Defendant by representing to opposing counsel that he had provided all potentially exculpatory evidence, a, make false statements of material fact to a third person in the course of representing a client in violation of Rule 4.1?" The answer is yes. "B, engage in conduct involving dishonesty, fraud, deceit or misrepresentation in violation of Rule 8.4(c) of the Revised Rules of Professional Conduct?" The answer is yes.

Thirteen: "Did Defendant by representing to the Court that the substance of all Dr. Meehan's oral statements to him concerning the results of all examinations and tests conducted by DSI were included in DSI's report, a, make false statements of material fact or law to a tribunal in violation of Rule 3.3(a) (1)?" The answer is yes. "B, engage in conduct involving dishonesty, fraud, deceit or misrepresentation inviolation of Rule 8.4(c) of the Revised Rules of Professional Conduct?" The answer is yes.

Fourteen: "Did Defendant by representing to opposing counsel that the substance of all Dr. Meehan's oral statements to him concerning the results of all examinations and tests conducted by DSI were included in DSI's report, a, make false statements of material fact to a third person in the course of representing a client in violation of Rule 4.1?" Yes. "B, engage in conduct involving dishonesty, fraud, deceit or misrepresentation in violation of Rule 8.4(c) of the Revised Rules of Professional Conduct?" The answer is yes.

Fifteen: "Did Defendant by representing or implying to the Court at the beginning of the December 15, 2006, hearing that he was not aware of the potentially exculpatory DNA results or alternatively was not aware of their exclusion from DSI's report, a, make false statements of material fact or law to a tribunal in violation of Rule 3.3(a) (1)?" The answer is yes. "B, engage in conduct involving dishonesty, fraud, deceit or misrepresentation in violation of Rule 8.4(c) of the Revised Rules of Professional Conduct?" The answer is yes.

Criminal Contempt of Court

As a matter of law Judge Osmond Smith found Nifong guilty of contempt of court for lying to the court and the defense attorneys, and sentenced him to a jail sentence.

Smith said Nifong "willfully made false statements" in September when he insisted he had given the defense all results from a critical DNA test. Smith found that Nifong had provided the defense with a DNA testing report that he knew to be incomplete. The omitted data contained test results showing that DNA of multiple men, none of whom were lacrosse players, was on the accuser. Smith said his decision was aimed at "protecting and preserving the integrity of the court and its processes." He said truthfulness is especially important when it comes to the rights of the accused to a fair trial. ABC News

Thus, Nifong has been judged guilty of misconduct in his prosecution of the Duke lacrosse case.

The question then is whether his conduct was "malicious and willful?"

A). Nifong's public statements indicated malice towards the lacrosse team in general and the three indicted players specifically:

1) "In this case, where you have the act of rape - - essentially a gang rape - - is bad enough in and of itself, but when it's made with racial with racial epithets against the victim, I mean, it's just absolutely unconscionable," said District Attorney Mike Nifong.
"The contempt that was shown for the victim, based on her race was totally abhorrent," Nifong said. "It adds another layer of reprehensibleness, to a crime that already reprehensible." (WTVD 3/27/06)
2) "There's a good chance if someone had spoken up and said, 'You can't do this,' it might not have happened," Nifong said. (WRAL 3/27/06)
3) "We're talking about a situation where had somebody spoken up and said, 'Wait a minute, we can't do this,' this incident might not have taken place," Nifong said. (AP 3/28/06)
4) "My reading of the report of the emergency room nurse would indicate that some type of sexual assault did in fact take place," Nifong said. (WRAL 3/29/06)
5) "The circumstances of the rape indicated a deep racial motivation for some of the things that were done," District Attorney Mike Nifong said. "It makes a crime that is by its nature one of the most offensive and invasive even more so." (NBC17 3/29/06)
6) “It just seems like a shame that they are not willing to violate this seeming sacred sense of loyalty to team for loyalty to community," Nifong said on CNN on March 29. "My guess is that some of this stone wall of silence that we have seen may tend to crumble once charges begin to come out." (CNN Live 3/29/06)
7) There's been a feeling in the past that Duke students are treated differently by the court system,” Durham County District Attorney Michael Nifong says.
“There was a feeling that Duke students' daddies could buy them expensive lawyers and that they knew the right people.
“It's discouraging when people feel that way, and we try not to make that the case.” (USA Today 3/30/07)
8) “When I looked at what happened, I was appalled. I think that most people in this community are appalled," Nifong said. "I think that if Joe Cheshire weren't representing one of the people involved in this case, he might even admit that he was appalled." (WRAL 3/31/06)
9) If it's not the way it's been reported, then why are they so unwilling to tell us what, in their words, did take place that night?" Nifong told Smith on Thursday. "And one would wonder why one needs an attorney if one was not charged and had not done anything wrong." (ESPN 3/31/06)
10) “I would like to think that someone would have the human decency to call up and say, ‘What am I doing covering up for a bunch of hooligans?’” (News & Observer 4/10/07)
11) "The reason that I took this case is because this case says something about Durham that I’m not going to let be said," said Nifong. "I'm not going to allow Durham's view in the minds of the world to be a bunch of lacrosse players at Duke raping a black girl from Durham." (WRAL 4/13/06)
12) “And, I know that it looks sometimes over the course of the last few months that some of these attorneys were almost disappointed that their clients didn’t get indicted so they could be part of this spectacle here in Durham. And that’s the situation, we only indict based on our evidence we can’t indict everybody but we are entitled to present a case to the citizens of Durham whereby they can determine what occurred in this case.” (WRAL 7/17/06)

B. Nifong's actions in initiating the prosecution despite a lack of evidence demonstrated both willful and malicious behavior.

1. Nifong indicted the Duke lacrosse players knowing that the accuser Crystal Mangum had given multiple contradictory stories, and that she had a history of mental illness.
2. Nifong indicted three players after Mangum identified four players as her attackers in an improper line-up procedure ordered by Nifong.
3. Nifong indicted the players with an incomplete investigation of the allegations by the Durham Police, who did not interview key witnesses and did not address contradictions in their stories.
4. Nifong encouraged the Durham PD to press ahead with the indictments, even though he told the investigator Ben Himan "we're f*cked," and took over as de facto lead investigator
5. Nifong proceeded with indictments even though he knew there was no DNA evidence linking Crystal Mangum with any of the lacrosse players.
6. Nifong indicted knowing that there was DNA on the accuser from multiple other males, indicating that if a rape had happened, other suspects should be sought.
7. Nifong indicted by going straight to the grand jury instead of arresting the suspects and having a probable cause hearing.
8. Nifong refused to examine exculpatory evidence offered by the defense attorneys and declined to meet them.
9. Nifong participated in witness intimidation and tampering involving Kim Pittman, Moez Elmostafa, and others.

C. Nifong actions in continuing the prosecution long after it was clear his case was falling apart also indicated maliciousness.

1. Nifong continued the prosecution without confronting the accuser about the inconsistencies in her accounts, and never personally asked her about what had happened.
2. Nifong dropped rape charges in December, 2006 due to changes in Mangum's account yet persisted in sexual offense charges based on the same flimsy stories.
3. Nifong lied about the DNA results to the court and to the defense attorneys.
4. Nifong taunted the defendants by saying he could make the case go away "with the stroke of a pen," but would no do so.
5. Nifong demeaned the defense attorneys on multiple occasions both in and out of the courtroom.
6. Nifong lashed out at members of the press who questionned him, including an angry e-mail to Susannah Meadows of Newsweek.
7. Nifong was initially unrepentant to the North Carolina Bar and dismissive about his misconduct charges.
8. Nifong ignored multiple calls for him to recuse himself from the case and he did so only after the ethics charges were filed by the NC Bar.

If ever there was a case of a prosecutor involved in "willful and malicious injury" to defendants, it was Mike Nifong's treatment of Dave Evans, Reade Seligmann, and Collin Finnerty.

Nifong's attempt to declare bankruptcy will hopefully fail because bankruptcy should not protect evil-doers from creditors. If it does fail, then the lawyers for the lacrosse players should seek a summary judgment against Nifong because he did not respond to their suit other than the bankruptcy filing.