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Federal law does not prevent a bona fide shareholder from exercising its right to vote against a bankruptcy petition just because it is also an unsecured creditor. The Fifth Circuit affirmed the bankruptcy court's dismissal of the bankruptcy petition as unauthorized. The court held that, under these circumstances, the issue of corporate authority to file a bankruptcy petition was left to state law. In this case, the debtor was a Delaware corporation, governed by that state's General Corporation Law, and the court found nothing that would nullify the shareholder's right to vote against the bankruptcy petition. View "Franchise Services of North America, Inc. v. United States Trustee" on Justia Law

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In 2013, Jackson filed a voluntary Chapter 7 bankruptcy petition. The bankruptcy court lifted the automatic stay on Jackson’s residence. The bank foreclosed on Jackson’s residence in May 2014. Jackson’s right to redeem the property expired six months later. In October 2014, the Chapter 7 Trustee filed a no-asset report; in February 2015, Jackson obtained a discharge. Jackson submitted letters to the bankruptcy court in December 2016, stating that the account number for a creditor had changed; requesting “reconsideration of House being exempt in the bankruptcy case”; requesting a “sign[ed] court Order stating that the amended Scheduled have been listed, dismissed and entered”; and requesting reconsideration of an order denying her request to transfer the case. After a hearing, the bankruptcy court denied all of Jackson’s request and directed the Clerk to “prepare and enter a final decree discharging the trustee and closing the case promptly but not earlier than twenty-eight days after the entry” of that January 26, 2017 order. Jackson filed her Notice of Appeal 28 days later on February 23. On February 24, the Clerk docketed a “Text Order of Final Decree” which referenced the discharge and closed the case. The Sixth Circuit Bankruptcy Appellate Panel, sua sponte, raised the issue and found that the appeal was filed late under 28 U.S.C. 158(c)(2), Supreme Court precedent indicates that the statutory time requirements are jurisdictional in nature. View "In re Jackson" on Justia Law

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Charles Erwin appeals from an amended judgment entered in favor of Alerus Financial, N.A., for $5,265,653.09. Starting in 2012 Alerus made a series of loans totaling more than $15 million to Diverse Energy Systems, LLC. The loan agreement specified "Events of Default," including the failure to pay the indebtedness, the insolvency of the borrower or guarantor or the commencement of bankruptcy proceedings. Erwin was Diverse's chief executive officer, and he signed multiple personal guaranties, promising to be personally responsible for payment of up to $4 million of Diverse's debt owed to Alerus. In September 2015 Diverse filed for bankruptcy. In May 2016 Alerus sued Erwin for breach of contract and unjust enrichment, alleging Diverse was in default under the loan agreement and Erwin failed to make payment on the amount due under the guaranties. Alerus alleged Diverse's indebtedness exceeded $12 million and under the guaranties Erwin was liable for at least $4 million in principal and interest. On September 6, 2016, Erwin filed an answer to Alerus' complaint. Alerus moved for summary judgment, arguing Diverse defaulted on its loan obligations and Erwin breached the guaranty contracts by failing to pay the amounts due under the guaranties. Alerus also filed an affidavit in support of its motion from an Alerus employee, which it claimed showed the total outstanding principal and interest on the loans to Diverse. Erwin argued on appeal to the North Dakota Supreme Court the district court abused its discretion by failing to rule on his motion to amend his answer and entering judgment without allowing him to conduct discovery on Alerus' damage claims. Finding no reversible error, the Supreme Court affirmed the amended judgment. View "Alerus Financial, N.A. v. Erwin" on Justia Law

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The trustee's adversary complaint contesting the basis for debtor's exemptions qualified as an objection to those exemptions under Federal Rules of Bankruptcy Procedure 4003. The Ninth Circuit affirmed a bankruptcy court's turnover order denying debtor's claimed exemptions. In this case, before filing a petition in bankruptcy, debtor transferred his interests in two properties into a tenancy-by-the-entirety estate, and subsequently claimed an exemption for those interests under 11 U.S.C. 522(b)(3). The panel rejected debtor's argument that the trustee had failed to make a timely objection to his claimed exemptions, and therefore the exemptions were valid notwithstanding the avoidance of the transfer. View "Lee v. Field" on Justia Law

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The Fourth Circuit affirmed the district court's decision affirming the bankruptcy court's ruling denying the bankruptcy trustee's objection to exemptions claimed by debtors. In this case, the district court concluded that the applicable bankruptcy statute authorized debtors to utilize Louisiana's state law statutory scheme to exempt personal property in West Virginia from debtors' bankruptcy estate. The court agreed with the well-reasoned analysis of the district court that the bankruptcy court correctly adopted the state-specific interpretation of 11 U.S.C. 522(b)(3)(A). The court explained that the district court's adoption of the state-specific approach was consistent with the rulings of at least two sister appellate courts that have addressed the issue. View "Sheehan v. Ash" on Justia Law

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NPC’s adversary proceeding against the Chapter 7 Trustee and his surety alleged that the trustee breached his fiduciary duties with respect to one of the Debtor’s assets, a former Benton Harbor manufacturing facility. NPC’s attorney (Demorest) served five non-parties with subpoenas duces tecum under Federal Rule of Civil Procedure 45. The ensuing discovery dispute, including several motions, hearings, and orders, resulted in an award of attorney fees and costs to the non-parties, $104,770.00 to one group and $61,417.50 to another. After a subsequent finding of civil contempt for failure to pay, payment was made and the bankruptcy court ordered payment of an additional $4,725.00 in attorney fees and costs incurred in connection with the contempt proceedings. The district court and Sixth Circuit affirmed. The bankruptcy court specifically found, after a case-specific inquiry, that the subpoenas issued to the non-parties were unduly burdensome, given the undisputedly broad scope of the requests and the temporal reach of the requests. As an experienced commercial litigator, Demorest would have known that complying with such subpoenas would involve considerable time and resources, implicate significant concerns about customer privacy, and require review for privileged communications and attorney work product. The bankruptcy court did not abuse its discretion in finding that sanctions were warranted. View "New Products Corp. v. Dickinson Wright PLLC" on Justia Law

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The Committee, which represented more that 400 clergy sexual abuse claimants, appealed the district court's decision affirming the bankruptcy court's denial of the Committee's motion for substantive consolidation of debtor, the Archdiocese, and over 200 affiliated non-profit non-debtors (Targeted Entities). The Eighth Circuit held that the Targeted Entities were entitled to the protections under 11 U.S.C. 303(a), and could not be involuntarily substantively consolidated with the Archdiocese. In this case, the Committee failed to plausibly allege sufficient facts to negate the non-profit non-debtor status of the Targeted Entities. View "The Official Committee of Unsecured Creditors v. The Archdiocese of Saint Paul and Minneapolis" on Justia Law

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In Jansen’s bankruptcy case, Gleason brought an adversary proceeding, 11 U.S.C. 523(a)(2)(A), regarding a default judgment ($400,000) obtained in a case involving a phony investment scheme. Gleason unsuccessfully argued that Jansen was not entitled to relitigate that judgment. A bench trial revealed that Gleason gave $141,000 to Jansen’s company, Baytree, for closing costs in a business acquisition. The deal never closed and Jansen never fully refunded the money. Gleason’s checks, endorsed by “Talcott Financial … D/B/A Baytree,” were deposited, then disappeared. Jansen later pleaded guilty to unrelated money-skimming charges, involving a bank account in the name of Talcott Financial, which was involuntarily dissolved in 1999. Jansen testified that the “Talcotts” were two different businesses with separate accounts. The bankruptcy court credited Jansen’s story and concluded the debt was dischargeable. Meanwhile, Jansen tried to withdraw his guilty plea. Despite a warning that invoking the privilege against self-incrimination could lead to an adverse inference for bankruptcy purposes, Jansen asserted that privilege repeatedly. Gleason filed the “merits appeal,” then found publicly-available records in previous litigation, including bank statements. The bankruptcy court declined Gleason's motion for relief from the judgment, reasoning the evidence, easily found on PACER, was not new. Gleason then filed a “Rule 60 appeal.” After procedural confusion, during which the merits appeal was dismissed, the district court and Seventh Circuit affirmed. The district court’s mistaken assumption that it could reach the merits of the case in the later-filed Rule 60 appeal is not enough to revive the dismissed merits appeal. View "Gleason v. Jansen" on Justia Law

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The Eighth Circuit affirmed the imposition of sanctions on Ross. H. Briggs for contempt of an order and for misleading the bankruptcy court. The court held that the bankruptcy court had authority to enter sanctions for events that occurred while trying to enforce the order compelling turnover and the show-cause orders; the bankruptcy court did not abuse its discretion in holding Briggs in contempt where the bankruptcy court gave Briggs multiple opportunities to comply with the order compelling turnover, specifically outlining methods of compliance; Briggs's contempt was a sufficient basis for the sanctions; not invoking Rule V of the district court's disciplinary-enforcement rules was not a due process violation; and neither Local Rule 2094(B) nor Rule VII provided a basis for the bankruptcy court's chief judge to hear Briggs's reinstatement motion. View "Briggs v. Hon. Charles Rendlen" on Justia Law

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The Eleventh Circuit vacated the district court's dismissal of First National's deficiency claims and remanded for the district court to consider, in the first instance, whether the dismissal of defendant's Chapter 11 case without a discharge had any effect on First National's ability to pursue its deficiency claims. After the parties had filed their briefs in this appeal, defendant moved the bankruptcy court to dismiss his Chapter 11 case and the bankruptcy court granted the motion to dismiss. The court explained that, given the dismissal of defendant's underlying bankruptcy petition, none of defendant's debts or liabilities were discharged and the automatic stay was terminated. View "First National Bank of Oneida, N.A. v. Brandt" on Justia Law