Justia Bankruptcy Opinion Summaries
Burciaga v. Moglia
Burciaga lost his job and filed for bankruptcy a week later. On the date the bankruptcy proceeding began, Burciaga’s former employer owed him approximately $24,000 for unused vacation time. Illinois treats vacation pay as a form of wages. Exemptions for debtors in Illinois rest on state law, 11 U.S.C. 522(b)(2). Burciaga asked the district court to treat 85% of the vacation pay as exempt from creditors’ claims. Illinois permits creditors to reach 15% of unpaid wages but forbids debt collection from the rest. The Chapter 7 Trustee, objected. The bankruptcy judge and district court sided with the Trustee. The Seventh Circuit reversed, finding nothing ambiguous about Illinois law or section 522(b)(2) and (3)(A); 85% of unpaid wages are exempt from creditors’ claims in Illinois, and vacation pay is a form of wages. View "Burciaga v. Moglia" on Justia Law
L&L Painting Co., Inc. v. Odyssey Contracting Corp.
A contractor and the prime contractor, involved in repainting the Queensboro Bridge, became embroiled in a dispute. The subcontractor stopped work. The parties sued each other for breach of contract. The subcontractor filed for bankruptcy. At the final pre-trial conference on an adversary proceeding, the parties entered into a stipulation that if the Bankruptcy Court determined that the subcontractor was the breaching party, then “all of the [p]arties’ pending claims will be withdrawn and disposed of in their entirety with prejudice” and the adversary proceeding “shall be deemed to be finally concluded in all respects.” Following a bench trial, the Bankruptcy Court concluded that the subcontractor was the breaching party and ordered compliance with the stipulation. Instead, the subcontractor appealed. The district court concluded that the subcontractor had released its claims and waived its right to appeal and modified the Bankruptcy Court’s order to make it a dismissal of the adversary proceeding with prejudice. The Third Circuit affirmed. The stipulation’s language confirms an intent to end all pending claims based on the Bankruptcy Court ruling: a party that seeks to appeal must make its intent to do so clear at the time of the stipulation setting the manner for resolution. View "L&L Painting Co., Inc. v. Odyssey Contracting Corp." on Justia Law
In re: FirstEnergy Solutions Corp.
FES distributes electricity, buying it from its fossil-fuel and nuclear electricity-generating subsidiaries. FES and a subsidiary filed Chapter 11 bankruptcy. The bankruptcy court enjoined the Federal Energy Regulatory Commission (FERC) from interfering with its plan to reject certain electricity-purchase contracts that FERC had previously approved under the Federal Power Act, 16 U.S.C. 791a or the Public Utilities Regulatory Policies Act, 16 U.S.C. 2601, applying the ordinary business-judgment rule and finding that the contracts were financially burdensome to FES. The counterparties were rendered unsecured creditors to the bankruptcy estate. The Sixth Circuit agreed that the bankruptcy court has jurisdiction to decide whether FES may reject the contracts, but held that the injunction was overly broad (beyond its jurisdiction) and that its standard for deciding rejection was too limited. The public necessity of available and functional bankruptcy relief is generally superior to the necessity of FERC’s having complete or exclusive authority to regulate energy contracts and markets. The bankruptcy court exceeded its authority by enjoining FERC from “initiating or continuing any proceeding” or “interfer[ing] with [its] exclusive jurisdiction,” given that it did not have exclusive jurisdiction. On remand, the bankruptcy court must reconsider and decide the impact of the rejection of these contracts on the public interest—including the consequential impact on consumers and any tangential contract provisions concerning such things as decommissioning, environmental management, and future pension obligations—to ensure that the “equities balance in favor of rejecting the contracts.” View "In re: FirstEnergy Solutions Corp." on Justia Law
Posted in: Bankruptcy, Energy, Oil & Gas Law, Government & Administrative Law, US Court of Appeals for the Sixth Circuit, Utilities Law
CSI Worldwide, LLC v. Trumpf, Inc.
Trumpf, the U.S. subsidiary of an international business, hired Lynch to handle Trumpf’s appearance at a Chicago trade show. Lynch subcontracted with CSI for some of the services. CSI claims that it told Trumpf that it was unsure of Lynch’s reliability and that Trumpf agreed to pay CSI directly or guarantee the payment. There was no written agreement between Trumpf and CSI. Lynch did not pay CSI, which claimed $530,000 in Lynch’s ensuing bankruptcy. CSI also sued Trumpf, asserting promissory estoppel and unjust enrichment. The district court dismissed, reasoning that CSI was estopped, as a result of its bankruptcy claim, from suing Trumpf. The Seventh Circuit reversed, reasoning that Lynch has not prevailed on that claim and that the claim is not inconsistent with Trumpf guaranteeing payment. Filing a claim in bankruptcy does not foreclose claims against non-bankrupt obligors, 11 U.S.C. 524(e). View "CSI Worldwide, LLC v. Trumpf, Inc." on Justia Law
In re Kapsinow
The Supreme Court answered a question certified to it by the United States Bankruptcy Court for the District Court of Rhode Island by holding that R.I. Gen. Laws 9-26-4(11) permits a debtor to claim an exemption for an inherited Individual Retirement Annuity (IRA). Lynette Kapsinow filed a Chapter 7 bankruptcy petition seeking, under Rhode Island law, to exempt an inherited IRA pursuant to section 9-26-4(11). The inherited IRA was inherited by Kapsinow from her late mother. The bankruptcy court certified to the Supreme Court the question about the availability of an exemption in bankruptcy with respect to the inherited IRA. The Supreme Court answered that a debtor may claim an exemption in an inherited IRA, including one inherited from a non-spouse, pursuant to section 9-267-4(11). View "In re Kapsinow" on Justia Law
Rose v. Select Portfolio Servicing, Inc.
Plaintiff filed suit against defendants, asserting a claim to quiet title and separately seeking a declaratory judgment that the statute of limitations had expired on defendants' power to foreclose on certain real property. Defendants counterclaimed for judicial foreclosure. The district court denied plaintiff's motion for summary judgment, granted summary judgment for defendants, and entered a final judgment and order of foreclosure. The Fifth Circuit affirmed, holding that 11 U.S.C. 362(c)(3)(A) terminates the automatic stay only with respect to the debtor; it does not terminate the stay with respect to the property of the bankruptcy estate. The court also held that Texas's statute of limitations does not bar defendants' claim for judicial foreclosure. Under the interpretation of section 362(c)(3)(A) that the court adopted, plaintiff's successive filings did not terminate the action with respect to the property of the bankruptcy estate. Therefore, the court held that the stay with respect to the property at issue in this case lasted the duration of the bankruptcy proceedings (269 days), and the statute of limitations was tolled for at least the same. Accordingly, defendants' counterclaim for judicial foreclosure was filed within the 269-day tolling period. View "Rose v. Select Portfolio Servicing, Inc." on Justia Law
Briggs v. Rendlen
Appellant attempted to appeal two bankruptcy court orders to the district court by filing a single notice of appeal. The district court struck the notice of appeal as violating the local bankruptcy court rule. The Eighth Circuit held that, although Local Bankruptcy Rule 8001(A) was valid, the district court erred by treating the rule as a jurisdictional requirement without providing appellant an opportunity to cure the defect by filing separate notices of appeal for each order and paying the accompanying fees. Accordingly, the court reversed and remanded for further proceedings. View "Briggs v. Rendlen" on Justia Law
Saccameno v. U.S. Bank National Association
Around 2009, Saccameno defaulted on her mortgage. U.S. Bank began foreclosure proceedings. She began a Chapter 13 bankruptcy plan under which she was to cure her default over 42 months while maintaining her monthly mortgage payments, 11 U.S.C. 1322(b)(5). In 2011, Ocwen acquired her previous servicer. Ocwen, inexplicably, informed her that she owed $16,000 immediately. Saccameno continued making payments based on her plan. Her statements continued to fluctuate. In 2013, the bankruptcy court issued a notice that Saccameno had completed her payments. Ocwen never responded; the court entered a discharge order. Within days an Ocwen employee mistakenly treated the discharge as a dismissal and reactivated the foreclosure. For about twp years, Saccameno and her attorney faxed her documents many times and spoke to many Ocwen employees. The foreclosure protocol remained open. Ocewen eventually began rejecting her payments. Saccameno sued, citing breach of contract; the Fair Debt Collection Practices Act; the Real Estate Settlement Procedures Act; and the Illinois Consumer Fraud and Deceptive Business Practices Act (ICFDBPA), citing consent decrees that Ocwen previously had entered with regulatory bodies, concerning inadequate recordkeeping, misapplication of payments, and poor customer service. The jury awarded $500,000 for the breach of contract, FDCPA, and RESPA claims, plus, under ICFDBPA, $12,000 in economic, $70,000 in non-economic, and $3,000,000 in punitive damages. The Seventh Circuit remanded. While the jury was within its rights to punish Ocwen, the amount of the award is excessive. View "Saccameno v. U.S. Bank National Association" on Justia Law
Ultra Petroleum Corp. v. Ad Hoc Committee of Unsecured Creditors of Ultra Resources, Inc.
The Fifth Circuit treated the appellees' and the intervenors' joint petition for rehearing en banc as a petition for panel rehearing, granted the petition, withdrew its prior opinion, and substituted the following opinion. The court held that a creditor is not impaired by a reorganization plan simply because it incorporates the Bankruptcy Code's disallowance provisions. Because the bankruptcy court found otherwise and never reached the issue of whether the Bankruptcy Code disallows the creditors' claims for the Make-Whole Amount and the creditors' request for post-petition interest at the contractual default rates specified in the Note Agreement and the Revolving Credit Facility, the court remanded for the bankruptcy court to consider these issues. View "Ultra Petroleum Corp. v. Ad Hoc Committee of Unsecured Creditors of Ultra Resources, Inc." on Justia Law
State of Montana Department of Revenue v. Blixseth
A claim is subject to a bona fide dispute as to amount within the meaning of 11 U.S.C. 303(b)(1) even if a portion of that claim is undisputed. The Ninth Circuit affirmed the bankruptcy and district court's decisions holding that the MDOR lacked standing to file the involuntary Chapter 7 bankruptcy petition against debtor. Section 303(b)(1) states that petitioning creditor's claims must not be contingent or the subject of a bona fide dispute as to liability or amount. In this case, the MDOR's claim for the 2004 tax year was subject to a bona fide dispute as to amount notwithstanding debtor's concession that the deduction challenged in Audit Issue 4 was improper. However, because all other petitioning creditors have withdrawn from the proceedings, the panel remanded to the bankruptcy court to determine whether this case should be dismissed under section 303(j)(3). View "State of Montana Department of Revenue v. Blixseth" on Justia Law