Burlington dentist takes bankruptcy to U.S. Supreme Court – Burlington Times News

Isaac Groves Times-News @TNIGroves

The U.S. Supreme Court gets something like 8,000 petitions every year to hear cases including this year one from a dentist with a practice in Burlington but it hears 80 or fewer.

Theres about a 1 percent chance of being granted cert, said Scott Gaylord, a professor at the Elon University School of Law, who represented North Carolina in a suit over its Confederate flag license plate that got to the high court.

In that case, the court put North Carolinas case on hold and heard a similar case from Texas.

At 1 percent, no is usually a safe bet, Gaylord said.

Cert is legal shorthand for a writ of certiorari, which means a higher court agrees to hear a case from a lower court.

Lawyers representing Dr. Sharon Cobham submitted such a writ at the end of February, and it was scheduled for conference last Thursday, meaning the court could decide this week whether it will hear the case.

A local case going to the nations highest court may not be unheard of, but is not well remembered. Chief Superior Court Judge Wayne Abernathy said he couldnt remember another.

Its really unusual, Abernathy said, and very expensive.

Its expensive because you dont start with the Supreme Court, and it takes a lot of billable time to go through all the steps. If this case Nicole LeCann DDS v Sharon Cobham DDS goes all the way, the Supreme Court would be the fifth court to hear it.

Whether the court hears a case is totally up to the justices. If four of the nine want to hear it, the case is in.

Its informally called the rule of four, Gaylord said.

When writing a petition to the Supreme Court, Gaylord said, you have to consider who will probably be reading it first, which is probably a clerk. Before taking it to a justice, the clerk wants to see an issue of national significance or a conflict among the 13 powerful circuit Courts of Appeals. So if the Fourth Circuit Court, which handles North Carolina cases, writes that the Ninth Circuit misinterpreted the law in some way, the high court might want to settle that.

Youve got to get noticed, Gaylord said. Youve got to get out of that big pack.

It also takes persistence. Some legal issues have to come to the court more than once.

Its unlikely it will be granted the first time because the courts not doing that lately, Gaylord said.

While the issue could come up again, this case just gets this chance.

"It they don't grant cert," said Cobham's lawyer Joshua Bennett, "that's the end of the road."

THE COBHAM CASE is about whether someone can declare bankruptcy on a court judgment for fraud, and the argument has turned on whether doing something knowing it would do harm means intending to do harm.

"We argue the judgment doesn't contain the requisite intent elements," Bennett said.

The case was not originally heard in Alamance County, but by the N.C. Business Court, which handles complex business cases. Cobham was a partner in dental practices in Burlington, Winston-Salem, Durham and Apex with LeCann, an old friend from dental school.

In 2012, the Business Court ruled in favor of LeCann, finding Cobham, president of the joint enterprises, in 2007 started making unauthorized transfers from the businesses she owned with LeCann, often without her partners permission or even over her objections. Sometimes these were loans to herself, and sometimes unjustified expenses, like a mortgage payment on a condominium her brother lived in, a pair of Prada shoes she called a uniform expense, even a Match.com account.

The court ordered Cobham had to pay back $559,888 to the joint businesses including $74,879 from the Burlington practice and because fraud was found, she also had to pay triple that in punitive damages: $1,679,664 for a grant total of $2,238,552.

IT IS HARD TO COLLECT money from judgments like these in North Carolina. Sam Piero, one of LeCanns lawyers, is pretty familiar with how hard. He has been struggling to collect a six-figure fraud judgment in a local case since 2012.

Im not sure there is any way to collect this money, Piero said. All you can do is go after them and continue going after them until they give in.

This state doesnt let plaintiffs garnish debtors wages. Courts can freeze their assets, but that freeze is put on hold if the case goes on to higher courts or bankruptcy court.

In 2014, the U.S. Bankruptcy Court for the Eastern District of North Carolina denied Cobhams petition for Chapter 7 bankruptcy LeCann had filed a motion in opposition because the U.S. Bankruptcy Code doesnt protect debtors from fraud judgments.

Cobham appealed the bankruptcy court decision to the U.S. District Court for the Western District of North Carolina, which found the bankruptcy court was right but for the wrong reason.

To be denied bankruptcy protection because of fraud in North Carolina, it must be shown that the debtor not only meant to take money but also intended to do harm. The business and bankruptcy courts decided Cobham knew she was doing harm to the businesses, so she must have meant to. The District Court didnt buy that, but decided Cobham couldnt declare bankruptcy because she broke her duty of loyalty to the company, which, for some reason, is called defalcation.

Cobham appealed that to the U.S. Fourth Circuit Court of Appeals, which agreed with the bankruptcy court.

IN THE PETITION TO the Supreme Court, Cobhams lawyers argue that the bankruptcy court read things into the law when it found that knowing the results of her actions would be harmful to her partners business, and finances showed she had the malicious intent required by North Carolinas laws to give LeCann the close to $2 million in punitive damages, so that willful and malicious injury now means willful and malicious act leading to injury. And by upholding it, the Fourth Circuit changed and expanded the law, going against earlier Supreme Court decisions and creating more reasons to deny bankruptcy protection. And as a bankruptcy issue, Bennett said, it does affect the whole country.

"(The Supreme Court) aught to review this because the Fourth Circuit, in our view, not only didn't follow its own precedent, but Supreme Court precedent as well," Bennett said. "It's an important issue."

LeCanns lawyers have submitted a brief in opposition, basically, asking the Supreme Court to let this one go, saying the Appeals Court interpreted the law correctly, and even if it didnt, the District Court made a good alternative argument not to grant bankruptcy. They also argue there is no national issue for the court to decide.

The petition presents no issue of importance beyond these litigants, the brief reads.

Reporter Isaac Groves can be reached at igroves@thetimesnews.com or 336-506-3045. Follow him on Twitter at @tnigroves.

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Burlington dentist takes bankruptcy to U.S. Supreme Court - Burlington Times News