Justia Bankruptcy Opinion Summaries
Dooley v. Luxfer MEL Technologies
Luxfer appealed the bankruptcy court's decision that payments to Luxfer were not protected by the ordinary course of business defense to a preference action.The Bankruptcy Appellate Panel held that it cannot make the determination of whether the bankruptcy court properly determined that preference payments did not qualify for the ordinary course of business defense without additional explanation from the bankruptcy court. Therefore, the panel remanded this matter to the bankruptcy court to set forth the method by which it adopted 47 days as the ordinary course cut-off or, alternatively, determine which preferential transfers were made in the ordinary course. Furthermore, the court held that the adversary complaint seeks not only avoidance of preferential transfers under Bankruptcy Code section 547, but also recovery under Bankruptcy Code section 550. In this case, the bankruptcy court did not address recovery under section 550, and the panel remanded for the bankruptcy court to do so. View "Dooley v. Luxfer MEL Technologies" on Justia Law
Holland v. Westmoreland Coal Co.
The Fifth Circuit affirmed the bankruptcy court's ruling that the Coal Act obligations may be modified by Section 1114 of the Bankruptcy Code, which requires a debtor to keep paying benefits unless those benefits are modified through either an agreement between the debtor and the retirees' representative or a court order. The court also held that a Section 1114 modification is allowed only if the debtor and the retirees’ representative agree or the bankruptcy court orders changes after finding that the equities favor modification. The court clarified that a court must find that the principal purpose of the transaction is not to avoid liability under the Act.In this case, Westmoreland proposed modifying its obligations under the Coal Act pursuant to Section 1114. The Trustees of the Combined Plan and the 1992 Plan responded by filing a complaint for a declaratory judgment that Coal Act obligations are not "retiree benefits" and thus cannot be modified under Section 1114. View "Holland v. Westmoreland Coal Co." on Justia Law
In re: Wilton Armetale Inc
Artesanias recorded its $900,000 judgment as a lien on Wilton’s warehouse. Artesanias learned that Wilton was insolvent and that its previous owner and North Mill, another creditor had plotted with Wilton’s law firm, Leisawitz, to plunder the company’s remaining assets. They had engineered a sale of Wilton’s non-real estate assets; allowed North Mill to file inflated judgments against Wilton; and paid Leisawitz future legal fees. North Mill tried to foreclose on the warehouse. Artesanias sued North Mill and Leisawitz, alleging they had hindered Artesanias’ ability to enforce and collect Wilton’s obligations.Wilton filed for Chapter 7 bankruptcy. The automatic stay stopped the warehouse foreclosure. The trustee entered settlements, agreeing to split the warehouse sale proceeds between North Mill and Artesanias, release the estate’s claims against North Mill, and not interfere with Artesanias’s claims against North Mill and others. All agreed that nothing in the settlements would “affect [Artesanias’s] litigation” against North Mill. After selling the warehouse, Wilton’s bankruptcy estate had few assets. Among them were legal claims against those who had allegedly plundered the company. Rather than spend the estate’s remaining assets pursuing those claims, the bankruptcy court let the trustee abandon all but professional-liability claims against Leisawitz.Artesanias’s claims against North Mill were dismissed for lack of standing. The Third Circuit vacated. Chapter 7 trustees can relinquish the statutory authority to pursue a claim back to a creditor. View "In re: Wilton Armetale Inc" on Justia Law
SE Property Holdings, LLC v. Green
After debtor filed for Chapter 7 bankruptcy, SEPH sought a judgment of nondischarge for $41 million that debtor owed. SEPH argued that debtor violated 11 U.S.C. 523(a) through two improper transactions: 1. intentionally diverting funds from SEPH by making disguised distributions to himself via sham real estate investments; and 2. purposefully withholding the Livingston Parish receivables from SEPH. The district court granted summary judgment in favor of debtor.The Fifth Circuit held that SEPH has raised a genuine dispute of material fact as to the impropriety of the Livingston Parish transaction. The court held that the bankruptcy court erred in assessing the evidence, and the issue of who to believe -- debtor (that he did receive consent) or SEPH (that no such consent was given) -- is a credibility determination for a finder of fact, not a query for summary judgment review. However, the court held that the bankruptcy court was correct to grant summary judgment in debtor's favor as to the disguised distribution transaction. Accordingly, the court affirmed in part, reversed in part, and remanded in part. View "SE Property Holdings, LLC v. Green" on Justia Law
Mather Bobka v. Toyota Motor Credit Corp.
After debtor filed for Chapter 7 bankruptcy, she wanted to keep her leased Toyota vehicle. Debtor sent Toyota a signed assumption agreement and then received her bankruptcy discharge the next day. Debtor alleged that her obligations under the lease did not survive the bankruptcy discharge because the assumption agreement had not been reaffirmed under 11 U.S.C. 524(c).The Ninth Circuit affirmed the district court's judgment affirming the bankruptcy court's determination that lease assumptions survive discharge even if they are not reaffirmed under section 524(c). The panel also held that the parties' failure to comply with the procedures does not nullify debtor's agreement to assume the vehicle lease. Furthermore, debtor and Toyota mutually waived section 365(p)'s writing and timing requirements. View "Mather Bobka v. Toyota Motor Credit Corp." on Justia Law
Hull v. Rockwell
The First Circuit affirmed the judgment of the bankruptcy court denying Chapter 7 Trustee Nathaniel Richard Hull's objection to Jeffrey Rockwell's homestead exemption listed at the time he filed for Chapter 13 bankruptcy, holding that the Bankruptcy Code dictates that Rockwell's homestead exemption maintains the status it held on the day Rockwell filed his bankruptcy petition.When he filed for Chapter 13 bankruptcy Rockwell exempted his home from the bankruptcy estate under Maine's homestead law. While the bankruptcy was proceeding, Rockwell sold that home and did not reinvest the proceeds of the sale in another homestead within six months, contrary to Maine law. When he converted his bankruptcy to a Chapter 7 proceeding, Hull objected to Rockwell's homestead exemption. The bankruptcy court denied the objection. The district court affirmed. The First Circuit affirmed, holding that exemptions are analyzed on the date the debtor files for bankruptcy and that the complete snapshot rule applies. View "Hull v. Rockwell" on Justia Law
Elbar Investments, Inc. v. Prins
This case involved an investor, Elbar, that wired money to Defendant Todd Prins, a former attorney, after the owner of a foreclosed property had declared bankruptcy. In this case, United hired Prins to conduct a foreclosure sale; Elbar wired funds to Prins; Prins stole those funds and used them to reimburse other clients.The Fifth Circuit held that the bankruptcy court properly found that Elbar violated the automatic stay thrice, and twice willfully. Furthermore, the court agreed with the bankruptcy court that Elbar is an extremely knowledgeable and sophisticated litigant that understands perfectly that its actions were a direct violation of the Bankruptcy Code. Therefore, the bankruptcy court was correct to weigh those violations against Elbar in its decision. The court also agreed with the bankruptcy court that neither Elbar's claim for equitable subrogation nor its claim for fraud in a real estate transaction warrant relief. Finally, the court rejected Elbar's claims against TransWorld and Industry including money had and received, unjust enrichment, and conversion. Because the district court failed to explain the exceptional circumstances justifying its denial of prejudgment interest, the court remanded with instructions to explain the exceptional circumstances, if any, that justify denial of prejudgment interest or to order prejudgment interest. View "Elbar Investments, Inc. v. Prins" on Justia Law
Slawson Exploration Co., Inc. v. Nine Point Energy, LLC
After Slawson entered into an oil and gas exploration and production agreement with TPC, TPC's successor-in-interest filed for bankruptcy. Slawson then filed a proof of claim seeking payment, pursuant to the Promote Obligation, on all wells in which TPC's successor-in-interest elects to participate. The bankruptcy court confirmed the reorganization claim, but gave Slawson leave to commence litigation to determine whether the Promote Obligation runs with the land and is therefore not dischargeable in bankruptcy. Slawson then filed a declaratory action against Nine Point, TPC's successor-in-interest after the bankruptcy.The Eighth Circuit affirmed the district court's grant of summary judgment to Nine Point and held that the district court did not err in determining that the Promote Obligation is not a covenant running with the land because the obligation to make a payment did not directly benefit the land. The district court also did not err by determining that the obligation was not a real property interest or an equitable servitude under North Dakota law. View "Slawson Exploration Co., Inc. v. Nine Point Energy, LLC" on Justia Law
In Re: 21st Century Oncology Holdings, Inc.
The Second Circuit affirmed the bankruptcy court's order capping appellant's claim for certain incentive payments promised by his former employer pursuant to 11 U.S.C. 502(b)(7), which limits employee claims for damages "resulting from the termination of an employment contract."The court held that appellant's right to receive the payments was accelerated as a result of his termination, and thus section 502(b)(7) applied to his claim. In this case, pursuant to appellant's contract, portions of the incentive bonuses were not in fact due prior to termination, but were accelerated as the contract expressly provides. Therefore, the court held that the plain language of section 502(b)(7) requires that the court apply it to cap appellant's claim for accelerated payments. View "In Re: 21st Century Oncology Holdings, Inc." on Justia Law
In re Harris
The Harrises filed a voluntary Chapter 13 bankruptcy petition. The bankruptcy court issued an automatic stay. The Harrises’ neighbors, the Cooleys, subsequently filed a lawsuit, seeking removal of an encroaching fence. While the state court case remained pending, the Harrises filed an adversary proceeding against the Cooleys, alleging violation of the bankruptcy court order by filing the state court complaint and that the Cooleys “continue to pursue to take control of" property of the bankruptcy estate (the fence) to which, the Harrises alleged, they were entitled by adverse possession.The bankruptcy court dismissed the Harrises’ adversary proceeding on abstention grounds. The district court and Sixth Circuit affirmed. The bankruptcy court did not abuse its discretion: the adverse possession claim is governed by state law, and in Ohio, such a claim is “disfavored.” The property at issue is not a part of the bankruptcy estate and the disposition of the Harrises’ adverse possession claim will not impact the administration of the bankruptcy proceeding. Rejecting an argument that the Cooleys knowingly violated the bankruptcy court order, the court noted that they are not creditors of the bankruptcy estate and the Harrises do not allege that they were injured by the state court action. The automatic stay provision provides that only “an individual injured by any willful violation of a stay” may recover damages, 11 U.S.C. 362(k)(1). View "In re Harris" on Justia Law