Justia Bankruptcy Opinion Summaries

Esplanade Properties Corporation, a subsidiary of R.H. Macy & Co., owned the Macy’s Parcel in Kenner, Louisiana. In 1992, while Esplanade Properties was under bankruptcy protection and subject to an automatic stay, Jefferson Parish assessed ad valorem taxes for that year. In 1993, the Sheriff conducted a tax sale for nonpayment of those taxes, but the sale was later nullified because it occurred during the bankruptcy stay. For nearly two decades, the Parish took no action to collect the 1992 taxes. After subsequent transfers, the property was acquired by Esplanade Mall Realty Holding, LLC, which in 2018 received notice of a large sum due for past taxes, including the 1992 taxes, interest, and costs. The company disputed the collectibility of the old taxes, citing a statutory three-year limitation on tax sales.The 24th Judicial District Court initially dismissed the suit on procedural grounds, and the Louisiana Fifth Circuit Court of Appeal affirmed. The Louisiana Supreme Court reversed and remanded. While proceedings continued, the property was sold to Pacifica Kenner, LLC, which was substituted as plaintiff. The trial court ultimately ruled that La. R.S. 47:2131—which prohibits tax sales for taxes more than three years overdue—was unconstitutional because it conflicted with Louisiana constitutional provisions regarding tax collection and prescription. The trial court denied declaratory relief to the plaintiff.The Supreme Court of Louisiana reviewed the case and chose to avoid the constitutional issue, finding it unnecessary to resolve the dispute. Interpreting the relevant statutes, the court concluded that the Sheriff was required to include all statutory impositions, including the 1992 taxes, interest, and costs, in the 2020 tax sale price. The court held that the redemption price for the property must likewise include these amounts. The judgment was reversed, rendered, and remanded to the trial court to calculate the redemption price consistent with this interpretation. View "ESPLANADE MALL REALTY HOLDINGS, LLC VS. LOPINTO" on Justia Law

The dispute centers on a series of complex financial transactions involving a Wyoming family and their businesses, a local bank, and a commercial lender. The plaintiffs, including a married couple and their closely held LLC, entered into various loans and mortgages related to their commercial property and business operations. When financial difficulties arose—exacerbated by a downturn in the oil and gas industry—the parties restructured their debt, resulting in a 2017 mortgage and, after the operating company filed for bankruptcy, a 2019 settlement agreement. The plaintiffs later alleged that the bank and lender’s actions and omissions caused them to lose equity in both their home and commercial property, and the defendants counterclaimed for breach of the settlement agreement and sought attorney fees.The District Court of Natrona County dismissed or granted summary judgment for the bank and lender on all claims and counterclaims, finding the mortgage unambiguously secured two loans and the bank had no duty to release it after only one was repaid. It also concluded the plaintiffs could not establish justifiable reliance on any alleged misrepresentations, interpreted the settlement agreement as permitting (but not requiring) the lender to record the quitclaim deed after a sale period, and found no breach by the lender. The district court further ruled the plaintiffs breached the agreement by filing suit, thus entitling the bank and lender to attorney fees.On review, the Supreme Court of Wyoming affirmed the district court’s decisions dismissing the plaintiffs’ claims, holding the mortgage secured both loans and the bank acted within its rights. The Supreme Court, however, reversed the grant of summary judgment to the bank and lender on their counterclaims, finding that filing the lawsuit was not a breach of the settlement agreement or its implied covenant of good faith and fair dealing. Consequently, the award of attorney fees and costs to the bank and lender was also reversed. View "Adams v. ANB Bank" on Justia Law

Two individuals entered into a loan agreement and mortgage with a bank in Puerto Rico, using their home as collateral. After a decade, they faced financial difficulties and stopped making payments. The bank denied a request to modify the loan but proposed a short sale. The bank then initiated foreclosure proceedings in Puerto Rico’s Court of First Instance, resulting in a judgment against the borrowers. Multiple short sale offers were rejected until one was conditionally accepted, but the sale did not close in time and the home was foreclosed. Subsequently, the bank garnished funds from the borrowers, who then filed for Chapter 13 bankruptcy.The United States Bankruptcy Court for the District of Puerto Rico confirmed the borrowers’ Chapter 13 plan, noting their intent to pursue claims against the bank. The borrowers filed an adversary proceeding seeking damages and other relief. The bank moved to dismiss the adversary complaint, but the bankruptcy court denied this motion, allowing the case to proceed. The borrowers later filed a similar complaint in the United States District Court for the District of Puerto Rico and moved to withdraw the adversary proceeding to the district court. The district court denied the withdrawal as untimely and dismissed the separate federal case. After the borrowers completed their bankruptcy plan and received a discharge, the bankruptcy court dismissed the adversary proceeding for lack of subject matter jurisdiction.On appeal, the United States Court of Appeals for the First Circuit held that the bankruptcy court erred in finding it automatically lost jurisdiction over the adversary proceeding post-discharge. The appellate court vacated and remanded the case for further proceedings, instructing the lower courts to reassess jurisdiction and properly address the borrowers’ motion for withdrawal and their jury trial request. View "Guallini-Indij v. Banco Popular de Puerto Rico" on Justia Law

Richard and Lucia Parks, along with their family real estate business Parks Diversified, L.P. and related entities, became involved in a legal dispute after their son, David Klein, filed a voluntary Chapter 11 bankruptcy petition on behalf of Parks Diversified. The Parkses asserted that Klein did not have the authority to file the petition and claimed he did so as part of a scheme to take control of family assets. Despite these objections, the parties entered into a stipulation to dismiss the bankruptcy case, with the Parkses waiving certain claims. Later, the Parkses and their entities filed a complaint in California state court against Klein and others, alleging various causes of action related to the alleged unauthorized bankruptcy filing.Following this, the law firm representing some of the defendants requested the bankruptcy court to reopen the case, and the state court complaint was removed to the bankruptcy court. The bankruptcy court dismissed the claims for failure to state a claim and granted special motions to strike. On appeal, the United States District Court for the Central District of California found that the bankruptcy court had subject-matter jurisdiction over the case, holding that the issue of corporate authority to file a bankruptcy petition was not jurisdictional. The district court remanded with instructions to vacate orders where jurisdiction was lacking and to remand remaining claims to state court.The United States Court of Appeals for the Ninth Circuit reviewed the case and affirmed the district court’s judgment. The appellate court held that, consistent with precedents from the Second and Third Circuits, a lack of corporate authority to file a bankruptcy petition does not deprive the bankruptcy court of subject-matter jurisdiction. The court clarified that while proper authorization is mandatory, it is not jurisdictional, and thus affirmed the lower court’s conclusion on this point. View "TALON DIVERSIFIED HOLDINGS INC. V. BECKER" on Justia Law

Steven and Virginia Savage were officers and sole shareholders of a company that designed and installed digital planetarium equipment. When their company experienced financial distress, they used personal funds and credit cards to support business operations, but the company eventually defaulted on a large loan personally guaranteed by the Savages. In the year preceding their bankruptcy filing, the Savages received over $700,000 from the company, which they failed to fully disclose in their bankruptcy filings. Their bankruptcy schedules did not mention this income, and significant portions of the transferred funds were not satisfactorily explained, especially regarding rent payments from the company to the Savages and the use of those funds.After the company and the Savages filed for bankruptcy, the creditor, Coastal Capital, objected to the Savages’ discharge in their Chapter 7 proceedings. The United States Bankruptcy Court for the District of New Hampshire held a bench trial and found that, although the Savages explained most of the company funds they received, they failed to account for over $56,000. The court denied the Savages a discharge under 11 U.S.C. § 727(a)(5) for failing to satisfactorily explain the loss or deficiency of assets. The Savages’ post-trial motions were denied, and the United States District Court for the District of New Hampshire affirmed the bankruptcy court’s ruling.On appeal, the United States Court of Appeals for the First Circuit affirmed the district court’s judgment. The court held that § 727(a)(5) does not require a “substantial” loss of assets to deny discharge, nor does it require that the unaccounted-for funds be enough to pay all liabilities. It also found no clear error in the bankruptcy court’s factual determinations and rejected the Savages’ arguments regarding destruction of evidence and the sufficiency of their explanations. The denial of discharge was affirmed. View "Coastal Capital, LLC v. Savage" on Justia Law

An investment fund specializing in gems and minerals filed for bankruptcy in October 2019. Prior to this, one of the fund’s managing members, through his own companies, had engaged a law firm to represent him and his separate business interests in connection with federal investigations and anticipated arbitration involving the fund and its leadership. The law firm’s engagement letters were addressed to the individual and his other company, not the fund itself, and did not state that the fund was responsible for payment. Some of the legal work benefited all respondents, including the fund, and the fund issued two checks to the law firm. However, a significant balance remained unpaid.During the bankruptcy proceedings, the law firm filed a claim against the fund for unpaid legal fees. The Official Committee of Equity Security Holders, appointed to represent the fund’s equity holders, objected, arguing the fund was not liable for the debt. The United States Bankruptcy Court for the Eastern District of Wisconsin granted summary judgment to the Equity Committee, finding the fund had no obligation to pay the law firm based on the evidence presented. The law firm appealed to the United States District Court for the Eastern District of Wisconsin, which affirmed the bankruptcy court’s decision.The United States Court of Appeals for the Seventh Circuit reviewed the district court’s affirmance de novo. The Seventh Circuit held that the law firm had not provided sufficient evidence of an enforceable promise by the fund to pay the legal fees, either as a primary obligor or under promissory estoppel. Additionally, the court found that neither Wisconsin’s statutory indemnification provision for LLC managers and members nor the fund’s operating agreement extended indemnification rights to the individual who had retained the law firm. The Seventh Circuit affirmed the district court’s judgment. View "Ballard Spahr LLP v Official Committee of Equity Security Holders" on Justia Law

A steel subcontractor was hired to perform work for a university construction project and entered into a subcontract with the general contractor. The general contractor began defaulting on payments, prompting the subcontractor to notify the surety insurance company, which had issued a payment bond guaranteeing payment for labor, materials, and equipment. The surety made partial payment but disputed the remaining amount. The subcontractor then demanded arbitration against the contractor, with the surety notified and invited to participate. The contractor filed for bankruptcy and did not defend in arbitration, nor did the surety participate. The arbitrator awarded the subcontractor damages, including attorneys’ fees and interest, and the award was confirmed in court. The subcontractor sought to enforce the arbitration award against the surety, including attorneys’ fees and prejudgment interest, and also brought a bad faith claim under Pennsylvania’s insurance statute.The Centre County Court of Common Pleas initially excluded evidence of the arbitration award against the surety at trial and ruled the surety was not liable for attorneys’ fees or bad faith damages. A jury found for the subcontractor on the underlying debt, and the court awarded prejudgment interest at the statutory rate. Both parties appealed. The Superior Court held the arbitration award was binding and conclusive against the surety, who had notice and opportunity to participate, and affirmed liability for attorneys’ fees related to pursuing the contractor in arbitration. The court rejected the bad faith claim, holding the statute did not apply to surety bonds, and confirmed the statutory interest rate.On appeal, the Supreme Court of Pennsylvania affirmed in all respects. It held that Pennsylvania’s insurance bad faith statute does not apply to surety bonds, based on statutory language. The court also held that the surety is bound by the arbitration award against its principal, and is liable for attorneys’ fees incurred in arbitration and prejudgment interest at the statutory rate. View "Eastern Steel v. Int Fidelity Ins. Co." on Justia Law

Thomas O’Hara filed for Chapter 13 bankruptcy in early 2024. When the United States Trustee sought to dismiss his case, the bankruptcy court held a hearing and indicated it would convert the case to Chapter 7, unless O’Hara exercised his right to voluntarily dismiss under 11 U.S.C. § 1307(b) before the conversion order was entered. O’Hara did not file a motion to dismiss until after the bankruptcy court entered an order converting the case. His subsequent attempt to dismiss under § 1307(b) was denied, as was his later motion under Rule 60(b), in which he argued his delay should be excused as neglect and that his right to dismiss was circumvented.The United States District Court for the Western District of Michigan reviewed the bankruptcy court’s orders. The district court concluded that O’Hara’s appeals regarding the conversion and denial of dismissal were untimely, except for his timely appeal of the bankruptcy court’s denial of his Rule 60(b) motion. The district court affirmed the bankruptcy court, finding O’Hara’s Rule 60(b) motion meritless, as the case had already been converted before his dismissal motion was filed, and found no excusable neglect or extraordinary circumstances.The United States Court of Appeals for the Sixth Circuit reviewed the district court’s affirmance. It held that its jurisdiction was limited to review of the August 7 order denying Rule 60(b) relief, as only that appeal was timely. The Sixth Circuit concluded that the bankruptcy court did not abuse its discretion in denying Rule 60(b) relief, because O’Hara’s failure to seek dismissal prior to conversion was a strategic decision, not excusable neglect, and his right to dismiss under § 1307(b) ceased once the case was converted. The court affirmed the district court’s decision and remanded for further proceedings. View "O'Hara v. Vara" on Justia Law

This case involves individuals who filed asbestos-related tort claims against DBMP LLC. The claims arise from injuries allegedly caused by asbestos-containing products manufactured by CertainTeed Corporation over several decades. Facing a growing number of lawsuits and significant financial exposure, CertainTeed underwent a "divisional merger" under Texas law, splitting into two entities: New CertainTeed, which received most assets and non-asbestos liabilities, and DBMP, which received all asbestos-related liabilities and certain assets. An uncapped funding agreement obligated New CertainTeed to cover DBMP’s asbestos liabilities. DBMP then filed for Chapter 11 bankruptcy, invoking 11 U.S.C. § 524(g) to manage current and future asbestos claims through a trust. As a result, pending tort actions were automatically stayed.The United States Bankruptcy Court for the Western District of North Carolina denied motions from the plaintiffs to lift the automatic stay and to stay a preliminary injunction that extended the stay to CertainTeed affiliates. Applying the standards from In re Robbins, the bankruptcy court found that lifting the stay would prejudice the debtor’s estate, harm judicial economy by returning a large volume of cases to the tort system, and undermine consistent treatment of claimants under a § 524(g) plan. The bankruptcy court also found insufficient evidence of bad faith by DBMP in filing for bankruptcy. The United States District Court for the Western District of North Carolina affirmed, holding that the bankruptcy court’s findings and application of the Robbins factors were not an abuse of discretion.On further appeal, the United States Court of Appeals for the Fourth Circuit affirmed the district court’s decision. The Fourth Circuit held that the bankruptcy court did not abuse its discretion in refusing to lift the automatic stay. It found that DBMP sought bankruptcy protection for legitimate purposes under § 524(g), was not shown to have acted in bad faith, and that the statutory framework does not require insolvency. View "Herlihy v. DBMP, LLC" on Justia Law

Plaintiffs, who provided subadvisory investment services and loaned $1.5 million to FolioMetrix (personally guaranteed by two individuals), later engaged with defendants involved in a proposed merger of investment firms. Plaintiffs alleged that during merger negotiations, defendant Putnam promised to relieve the original borrowers of their obligations and personally assume the debt. Subsequent communications referenced intentions to transfer the loan liability to the new entity, but when plaintiffs sought a formal promissory note, defendants refused. Ultimately, defendants did not repay any portion of the loan.Plaintiffs filed suit in the Superior Court of the City and County of San Francisco in March 2019, alleging breach of contract, fraud, negligent misrepresentation, and breach of the covenant of good faith and fair dealing. At trial, the central dispute was whether defendants had agreed to assume the loan obligations under the promissory note. Plaintiffs argued that the agreement was formed through emails and conduct, while defendants denied any assumption of liability. The jury found in favor of defendants, determining no contract was formed and no promise was made to repay the loans. Following trial, the court awarded defendants attorney fees under Civil Code section 1717, based on a fee provision in the original promissory note, after reducing the requested amount.On appeal, the California Court of Appeal, First Appellate District, Division Five, addressed several issues. It ruled that the automatic bankruptcy stay did not preclude resolution of the appeal because the debtor (NAI) was the plaintiff rather than a defendant. The court rejected plaintiffs’ claims of error regarding jury instructions on contract formation, finding insufficient argument and no prejudice. It affirmed the attorney fee award, concluding the action was “on the contract” containing the fee provision, and held the fee amount was within the trial court’s discretion. The judgment and fee order were affirmed. View "Navellier v. Putnam" on Justia Law