Justia Bankruptcy Opinion Summaries

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The Ninth Circuit affirmed the Bankruptcy Appellate Panel's decision affirming the bankruptcy court's rejection of debtor's attempt to exempt two assets from her estate. The panel clarified that a bankruptcy court's prior rejection of claimed exemptions carries preclusive weight, even after Law v. Siegel, 571 U.S. 415 (2014). The panel explained that Law does not bar courts from denying exemptions on the judicially created doctrines of issue and claim preclusion where, as here, the debtor is not statutorily entitled to the exemptions.The panel also held that the bankruptcy court properly deemed debtor's claims precluded. In this case, debtor's initial and amended exemptions are legally identical where her amended schedule sought to exempt the same assets as her earlier one; the bankruptcy court's initial, unappealed orders denying debtor's exemptions were final orders establishing the parties' rights as to the assets in question; and debtor was obviously a party to the proceeding in which her claims had originally been rejected. The panel noted that, regardless of whether the claims remained contingent or had been reduced to a settlement post-petition, debtor's interest in them remained the same. View "Albert v. Golden" on Justia Law

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On three separate occasions, Smith filed a Chapter 13 bankruptcy petition shortly before a scheduled foreclosure sale of his home, thereby preventing the sale, then moved for the dismissal of his bankruptcy case shortly afterward. The bankruptcy court dismissed Smith’s cases, notwithstanding his bad faith, because 11 U.S.C. 1307(b) plainly commanded the court to dismiss them. The bankruptcy court apparently did not exercise its power to sanction Smith for filing the petitions in patent bad faith, nor did the lender promptly seek relief from the stay on the ground that “the filing of the petition was part of a scheme to delay, hinder, or defraud creditors” 11 U.S.C. 362(d)(4)(B). A few months after the third filing, however, the bankruptcy court invoked its putative equitable powers and reinstated Smith’s most recent bankruptcy case, and lifted the automatic stay for a period of two years.The Sixth Circuit reversed. A court may exercise its equitable powers only in furtherance of the Bankruptcy Code’s provisions, not in circumvention of them. Nothing in section 1307 renders dismissal discretionary in cases where the debtor filed the bankruptcy petition in bad faith. View "Smith v. U.S. Bank National Association" on Justia Law

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In 2007, plaintiffs-respondents Jason Rubin and Cira Ross, as cotrustees of the Cira Ross Qualified Domestic Trust (judgment creditors) obtained a civil judgment against defendant-appellant David Ross (judgment debtor). In 2009, Ross filed for voluntary Chapter 7 bankruptcy. In April 2019, following an order denying judgment debtor a discharge in bankruptcy, judgment creditors filed for renewal of their judgment pursuant to Code of Civil Procedure sections 683.120 and 683.130. Ross moved to vacate the judgment on the ground that judgment creditors failed to seek renewal within the 10-year time period proscribed in Code of Civil Procedure section 683.130. The trial court denied the motion, concluding that judgment creditor’s renewal was timely because title 11 United States Code section 108(c) provided for an extension of time within which to seek renewal. Ross appealed, arguing that judgment creditors were not precluded from seeking renewal by his bankruptcy proceeding and, therefore, section 108(c) 2 did not apply to provide an extension of time to seek renewal of their judgment. The Court of Appeal agreed that judgment creditors were not barred from seeking statutory renewal of their judgment during the pendency of judgment debtor’s bankruptcy proceeding, but concluded that the extension provided for in section 108(c) applied regardless. Thus, the Court affirmed the trial court’s order. View "Rubin v. Ross" on Justia Law

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The First Circuit dismissed Plaintiffs' appeal for want of jurisdiction, holding that the Federal Rules of Bankruptcy Procedure (the bankruptcy rules), and not the Federal Rules of Civil Procedure (the civil rules), govern cases that have come within the federal district court's jurisdiction as cases "related to" a pending bankruptcy proceeding. 28 U.S.C. 1334(b).In this case arising from the derailment and explosion in Lac-Megantic, Canada, Plaintiffs brought thirty-nine separate suits against several defendants. The derailment occurred on the watch of Montreal, Maine and Atlantic Railway (MMA). MMA sought the protection of the bankruptcy court. Plaintiffs' suits were removed to federal district court. Plaintiffs subsequently joined Canadian Pacific Railway Company as an additional defendant. The suits were centralized in the District of Maine. The district court later granted Plaintiffs' request to dismiss their claims against all defendants except Canadian Pacific pursuant to a settlement agreement that was part of MMA's plan of liquidation. The district court entered judgment for Canadian Pacific. Plaintiffs moved for reconsideration of their motion to file an amended complaint. The district court denied the motion as untimely. The First Circuit dismissed Plaintiffs' appeal, holding that the Bankruptcy Rules governed the procedural aspects of this case, Plaintiffs' motion to reconsider was untimely, and the attempted appeal was untimely. View "Roy v. Canadian Pacific Railway Co." on Justia Law

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Appellee Highpointe Energy filed a quiet title action in Oklahoma against appellants the Viersens, and others. The disputed property concerned mineral interests from two different chains of title: one chain stemmed from a bankruptcy proceeding, while the other chain arose from a mortgage foreclosure proceeding and subsequent sheriff's sale. The trial court determined that the chain resulting from the foreclosure/sheriff's sale was superior to the bankruptcy chain. The Viersens appealed. The Oklahoma Supreme Court held that because the bankruptcy purchasers could secure no greater rights in the disputed property than the bankruptcy trustee held, the purchasers from the mortgage foreclosure proceeding held the superior title. View "Highpointe Energy v. Viersen" on Justia Law

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The First Circuit affirmed the judgment of the Title III court holding that Claimants, who invested in mutual funds that owned bonds issued by the Commonwealth of Puerto Rico and filed proofs of claim in the Commonwealth's Title III case, lacked standing to recover damages directly from the Commonwealth for losses suffered by the mutual funds, holding that there was not a basis in law for this lawsuit.The Claimants alleged that they had a right to recover damages directly from the Commonwealth for losses suffered by the mutual funds in those investments. The title III court concluded that Claimants lacked standing because they did not own any bonds issued by the Commonwealth and that the Claimants' ownership interest in the mutual funds did not give them a right to recover against the Commonwealth. The Title III court subsequently denied the Claimants' motions for reconsideration. The First Circuit affirmed, holding that the Title III court did not err in its standing analysis, either in its initial decision disallowing the Claimants' claims or in its consideration of the two motions for reconsideration. View "Diaz Mayoral v. Financial Oversight & Management Board for Puerto Rico" on Justia Law

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Venoco operated a drilling rig off the coast of Santa Barbara, transporting oil and gas to its Onshore Facility for processing. Venoco did not own the Offshore Facility but leased it from the California Lands Commission. Venoco owned the Onshore Facility with air permits to use it. Following a 2015 pipeline rupture, Venoco filed for Chapter 11 bankruptcy and abandoned its leases, relinquishing all rights in the Offshore Facility.Concerned about public safety and environmental risks, the Commission took over decommissioning the rig and plugging the wells, paying Venoco $1.1 million per month to continue operating the Offshore and Onshore Facilities. After a third-party contractor took over operations, the Commission agreed to pay for use of the Onshore Facility. The Commission, as Venoco’s creditor, filed a $130 million claim for reimbursement of plugging and decommissioning costs. Before the confirmation of the liquidation plan, Venoco and the Commission unsuccessfully negotiated a potential sale of the Onshore Facility to the Commission. The Commission stopped making payments, arguing it could continue using the Onshore Facility without payment under its police power.After the estates’ assets were transferred to a liquidation trust, the Trustee filed an adversary proceeding, claiming inverse condemnation, against California. The district court affirmed the bankruptcy court’s rejection of California's assertion of Eleventh Amendment sovereign immunity. The Third Circuit affirmed. By ratifying the Bankruptcy Clause of the U.S. Constitution, states waived their sovereign immunity defense in proceedings that further a bankruptcy court’s exercise of its jurisdiction over the debtor's and the estate's property. View "In re Venoco, LLC" on Justia Law

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Debtors appealed the bankruptcy court's order rejecting their constitutional challenge to quarterly fees imposed during the pendency of their bankruptcy proceeding. Congress passed in 2017 an amendment to the statute setting forth quarterly fees in bankruptcy cases, 28 U.S.C. 1930. The 2017 Amendment increased quarterly fees in judicial districts in which the United States Trustee Program oversees bankruptcy administration (UST Districts). In 2020, Congress passed the Bankruptcy Administration Improvement Act of 2020, which requires that UST Districts and BA Districts, judicial districts in which judicially appointed bankruptcy administrators perform the same function, charge equal fees.The Second Circuit held that the 2017 Amendment is a bankruptcy law subject to the uniformity requirement of the Bankruptcy Clause. The court also held that, under the version of section 1930 in effect prior to the 2020 Act, the 2017 Amendment violated the uniformity requirement. In this case, the court concluded that debtors have standing to bring its constitutional challenge and to seek reimbursement because it filed for bankruptcy in a UST District prior to October 1, 2018; qualified for and paid a fee increase pursuant to the 2017 Amendment due to the size of its disbursements; and paid more than a similarly situated debtor (with the same filing date and disbursement size) would owe in a BA District, where the increased fee schedule had not yet been implemented by the Judicial Conference. The court explained that, prior to the 2020 Act, the 2017 Amendment was unconstitutionally nonuniform on its face because it mandated a fee increase in UST Districts but only permitted a fee increase in BA Districts. Accordingly, the court reversed the bankruptcy court's judgment and directed the bankruptcy court to provide debtors with a refund of the amount of quarterly fees paid in excess of the amount debtors would have paid in a BA District during the same time period. View "In re: Clinton Nurseries" on Justia Law

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Cohen entered into a work-for-hire agreement with SLP, a special purpose entity formed by TWC to make the film, Silver Linings Playbook. Cohen was to receive $250,000 in fixed initial compensation and contingent future compensation of roughly 5% of the movie’s net profits. The movie was released to critical acclaim in 2012. TWC purports to own all the rights pertaining to the movie, including the Cohen Agreement.In 2017, following a flood of sexual misconduct allegations against its co-founder, Harvey Weinstein, TWC filed for Chapter 11 bankruptcy. The bankruptcy court approved TWC’s Asset Purchase Agreement with Spyglass, 11 U.S.C. 363. Spyglass sought a declaratory judgment that the Cohen Agreement and had been sold to Spyglass. If the Cohen Agreement were an executory contract, assumed and assigned under section 365, Spyglass would be responsible for approximately $400,000 in previously unpaid contingent compensation. If Spyglass instead purchased the Cohen Agreement as a non-executory contract, Spyglass would be responsible only for obligations on a go-forward basis. Other writers, producers, and actors with similar works-made-for-hire contracts made similar arguments.The bankruptcy court granted Spyglass summary judgment. The district court and Third Circuit affirmed. Cohen’s remaining obligations under the Agreement are not material and the parties did not clearly avoid New York’s substantial performance rule; the Cohen Agreement is not an executory contract. View "The Weinstein Co. Holdings, LLC v. Spyglass Media Group, LLC." on Justia Law

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In March 2018, following sexual misconduct allegations against TWC’s co-founder Harvey Weinstein, TWC sought bankruptcy protection. TWC and Spyglass signed the Asset Purchase Agreement (APA). The sale closed in July 2018. Spyglass paid $287 million. Spyglass agreed to assume all liabilities associated with the Purchased Assets, including some “Contracts.” The APA identifies “Assumed Contracts,” as those Contracts that Spyglass would designate in writing, by November 2018.In May 2018, TWC filed an Assumed Contracts Schedule, with a disclaimer that the inclusion of a contract did not constitute an admission that such contract is executory or unexpired. A June 2018 Contract Notice, listed eight Investment Agreements as “non-executory contracts that are being removed from the Assumed Contracts Schedule.” The Investment Agreements, between TWC and Investors, had provided funding for TWC films in exchange for shares of future profits. Spyglass’s November 2018 Contract Notice listed nine Investment Agreements as “Excluded Contracts,”In January 2019, the Investors requested payments from Spyglass--their asserted share of a film’s profits. The Bankruptcy Court rejected the Investors’ claim that Spyglass bought all the Investment Agreements under the APA. The district court and Third Circuit affirmed. The Investment Agreements are not “Purchased Assets” and the associated obligations are not “Assumed Liabilities.” The Investment Agreements are not executory contracts under the Bankruptcy Code. View "The Weinstein Co. Holdings, LLC v. Y Movie, LLC" on Justia Law