Justia Bankruptcy Opinion Summaries
Gardens Regional Hospital & Medical Center Liquidating Trust v. California
After Gardens Regional filed for bankruptcy, the State deducted certain "fees"—which Gardens Regional had failed to pay to the State—from various payments that the State was obligated to make to Gardens Regional under its Medicaid program. The bankruptcy court and the Ninth Circuit Bankruptcy Appellate Panel (BAP) both agreed that the deductions were permissible recoupments rather than impermissible setoffs.Although the bankruptcy court and the BAP held that all of the State's withholdings of unpaid Hospital Quality Assurance Fee (HQAF) amounts constituted legitimate instances of equitable recoupment rather than setoff, the Ninth Circuit held that the bankruptcy court and BAP's holding rested on an overly generous conception of what qualifies as "the same transaction or occurrence" for purposes of recoupment. The test remains whether the relevant rights being asserted against the debtor are sufficiently logically connected to the debtor's countervailing obligations such that they may be fairly said to constitute part of the same transaction.The panel affirmed the judgment of the BAP insofar as it holds that California's deduction of unpaid HQAF assessments from the supplemental payments made to Gardens Regional was permissible under the doctrine of equitable recoupment, but the panel reversed its judgment as to the fee-for-service payments. The panel remanded to the BAP with instructions to remand to the bankruptcy court for further proceedings. View "Gardens Regional Hospital & Medical Center Liquidating Trust v. California" on Justia Law
North Dakota v. Bala
The Bankruptcy Court denied the State's claim filed on behalf of unnamed charities for lack of standing, and denied the State's claim on behalf of Team Makers on the equitable doctrine of laches.The Bankruptcy Appellate Panel (BAP) held that the State failed to show the requisite injury to a substantial segment of North Dakota's population, and affirmed its ruling that the State did not have parens patriae standing to file a claim on behalf of Team Makers and other charities. While the panel agreed with the Bankruptcy Court that finality is a very important interest, particularly in a case of this duration, the panel held that laches does not apply to tardily-filed claims that are filed in time to permit distribution under Section 726(a) of the Bankruptcy Code. Accordingly, the panel affirmed in part, reversed in part, and remanded for reconsideration. View "North Dakota v. Bala" on Justia Law
Kelley v. Boosalis
This case arose from a Ponzi scheme perpetrated by Thomas Petters from 1994 to 2008 through his company, PCI. These appeals involve the Trustee’s separate claw back claims against defendants. The Trustee asserted claims under 11 U.S.C. 544(b)(1), which permits a trustee to "avoid any transfer of an interest of the debtor . . . that is voidable under applicable law by a creditor holding an unsecured claim." In this case, the applicable law is the Minnesota Uniform Fraudulent Transfers Act (MUFTA).The Eighth Circuit held that the district court erred in applying the Supreme Court of Minnesota's controlling MUFTA decision in Finn v. Alliance Bank, 860 N.W.2d 638 (Minn. 2015), and the Minnesota law of void contracts. Therefore, the court reversed summary judgment against Papadimos and Kanios. The court also reversed and remanded in the Boosalis case because the district erred in instructing the jury on the MUFTA elements of "good faith" and "reasonably equivalent value." In both cases, the court held that the district court erred in concluding that Minnesota rather than federal law governed the award of prejudgment interest. The court rejected defendants' other arguments. View "Kelley v. Boosalis" on Justia Law
In re: Pena
Pena filed for Chapter 11 bankruptcy in 2012, then owning 30 parcels of real estate. After Pena used cash collateral in an unauthorized manner, the bankruptcy court converted his case to a Chapter 7 bankruptcy and appointed a trustee, who managed Pena’s California rental properties. The trustee tendered the rents as cash collateral to the security holders of the respective security interests. The security holders did not accept the funds. In 2014, the trustee abandoned the rental parcels as part of her administration of the bankruptcy estate; her unsuccessful efforts to distribute the rents ended in 2016. She deposited $52,000 in unclaimed funds in the bankruptcy court registry and closed Pena’s bankruptcy case, listing the unclaimed funds (and their rightful owners) in her final account. Pena did not object to the court’s decree approving the trustee’s actions.In 2018, Pena unsuccessfully sought to recover the funds without reopening the bankruptcy. The bankruptcy court noted that when the bankruptcy closed, Pena still had $411,000 in unpaid, unsecured debt. The Bankruptcy Appellate Panel affirmed. The Ninth Circuit affirmed, finding that Pena had prudential standing and was a “person aggrieved” and that the absence of an opposing party, due to the trustee’s dismissal did not prevent it from exercising jurisdiction. The trustee did not abandon the rents by abandoning the properties from which they were collected; the funds remained the property of the bankruptcy estate and did not constitute an estate surplus. View "In re: Pena" on Justia Law
Ridgeway v. Stryker Corp.
In 2001-2013, Ridgeway worked for Stryker, which believed that Ridgeway intended to use its confidential business information at his next job. Stryker sued Ridgeway. A jury found that Ridgeway had breached his contractual obligations, breached his fiduciary duty, and violated Michigan’s Uniform Trade Secrets Act (MUTSA) and that the MUTSA violation was willful and malicious for purposes of an award of attorney’s fees. Ridgeway filed a Chapter 11 bankruptcy. The automatic stay caused by the filing of the petition prevented Stryker from making an attorney’s fee request in the Michigan proceedings. Stryker filed a proof of claim for $2,272,369.54, supported by hundreds of pages of time entries; the amount claimed and the corresponding time entries do not just relate to the lawyers’ work on the MUTSA claim. Stryker argued that, under the “Common Core” doctrine, its win on the MUTSA claim entitles it to attorney’s fees for all of its claims. Ridgeway argued that fee recovery under the Common Core doctrine “is reserved for fee awards in civil rights cases.”The bankruptcy court allowed Stryker’s proof of claim, including fees claimed under the Common Core doctrine. The district court and Fifth Circuit affirmed. Ridgeway has not shown that Michigan law requires statutory attorney’s fees to be “proved at trial.” The court upheld the striking of Ridgeway's "Common Core" objection as a sanction. Ridgeway did not comply with a court order to specify to which charges his objection applied. View "Ridgeway v. Stryker Corp." on Justia Law
Black v. Pension Benefit Guaranty Corp.
Title IV of the Employee Retirement Income Security Act of 1974 (ERISA) creates an insurance program to protect employees’ pension benefits. The Pension Benefit Guaranty Corporation (PBGC)—a wholly-owned corporation of the U.S. government—is charged with administering the pension-insurance program. PBGC terminated the “Salaried Plan,” a defined-benefit plan sponsored by Delphi by an agreement between PBGC and Delphi pursuant to 29 U.S.C. 1342(c). Delphi had filed a voluntary Chapter 11 bankruptcy petition and had stopped making contributions to the plan. The district court rejected challenges by retirees affected by the termination.The Sixth Circuit affirmed. Subsection 1342(c) permits termination of distressed pension plans by agreement between PBGC and the plan administrator without court adjudication. Rejecting a due process argument, the court stated that the retirees have not demonstrated that they have a property interest in the full amount of their vested, but unfunded, pension benefits. PBGC’s decision to terminate the Salaried Plan was not arbitrary and capricious. View "Black v. Pension Benefit Guaranty Corp." on Justia Law
In re: Sisk
The Ninth Circuit previously reversed, in part, bankruptcy appellate panel decisions. The court subsequently denied the debtors’ applications, as prevailing parties, for attorney fees under the Equal Access to Justice Act, 28 U.S.C. 2412(d). The EAJA did not authorize attorney fees because a bankruptcy court does not fall within the EAJA’s definition of “United States,” and uncontested Chapter 13 bankruptcy cases are not “civil actions brought by or against the United States.” The EAJA is a limited waiver of the government’s sovereign immunity; it must be strictly construed in favor of maintaining immunity not specifically and clearly waived. View "In re: Sisk" on Justia Law
McDaniel v. Navient Solutions
Plaintiffs-appellees Byron and Laura McDaniel claimed they discharged some private student loans in their Chapter 13 bankruptcy. Defendant-Appellant Navient Solutions, LLC (“Navient”), the loans’ creditor, moved to dismiss the McDaniels’ claim under Federal Rule of Civil Procedure 12(b)(6), contending that the loans were excepted from discharge under 11 U.S.C. 523(a)(8)(A)(ii). This case raised a question of first impression to the Tenth Circuit of whether an educational loan constituted “an obligation to repay funds received as an educational benefit,” within the meaning of section 523(a)(8)(A)(ii). The Court concluded that it did not, therefore, the Court affirmed the bankruptcy court’s interlocutory order denying Navient’s motion, and remanded the case for further proceedings. View "McDaniel v. Navient Solutions" on Justia Law
Diaz v. Viegelahn
The Fifth Circuit held that section 4.1 of the Local Plan, which requires debtors in the Western District of Texas turn over to the bankruptcy trustee any tax refund amounts they receive in excess of $2,000, is invalid because it abridges debtors' substantive rights and conflicts with the Supreme Court's guidance on 11 U.S.C. 1325(b)(2).In this case, the bankruptcy court confirmed debtor's revised Chapter 13 plan which did not strike Section 4.1 or contain any nonstandard provision in Section 8. Therefore, the court vacated the bankruptcy court's confirmation of debtor's revised plan and remanded to allow her to file a new plan. View "Diaz v. Viegelahn" on Justia Law
In re: Tribune Co.
In Tribune’s reorganization bankruptcy plan, Senior Noteholders were assigned their own class (1E) of unsecured creditors. When they did not accept the Plan but other classes did, the Bankruptcy Court confirmed it under the cramdown provision.The provision at issue, 11 U.S.C. 1129(b)(1), provides: Notwithstanding section 510(a) … [making subordination agreements enforceable in bankruptcy to the extent they would be in nonbankruptcy law], if all of the applicable requirements of subsection (a) of this section  other than paragraph (8) [which requires that each class of claims has accepted the plan] are met with respect to a plan, the court, on request of the proponent of the plan, shall confirm the plan notwithstanding the requirements of such paragraph  if the plan does not discriminate unfairly, and is fair and equitable, with respect to each class of claims or interests that is impaired under, and has not accepted, the plan.The Third Circuit agreed with the district court that the text of section 1129(b)(1) supplants strict enforcement of subordination agreements. When “cramdown plans play with subordinated sums, the comparison of similarly situated creditors is tested through a more flexible unfair discrimination standard.” Subsection 1129(b)(1) does not require subordination agreements to be enforced strictly. The difference in the Senior Noteholders’ recovery is not material. Although the Plan discriminates, it is not presumptively unfair. View "In re: Tribune Co." on Justia Law