Justia Bankruptcy Opinion Summaries

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In this case, a byproduct of litigation stemming from the derailment of a Montreal, Maine & Atlantic Railway, Ltd. (MMA) freight train carrying crude oil in Lac-Megantic, Quebec, the First Circuit affirmed the district court's entry of judgment in favor of Robert Keath, the estate representative of MMA, and against creditor Wheeling & Lake Erie Railway Company, holding that, giving due deference to the fact-finder's resolution of the burden of proof, the judgment must be affirmed. One month after the derailment, MMA filed a voluntary petition for protection under Chapter 11 of the Bankruptcy Code. Wheeling instituted an adversary proceeding in the bankruptcy court against MMA and the estate representative, seeking a declaratory judgment regarding the existence and priority of its security interest in certain property of the MMA estate. The case involved intricate questions concerning secured transactions, carriage of goods, and corporate reorganization. After a settlement, the bankruptcy court ruled in favor of the estate representative. The First Circuit affirmed, holding (1) ultimately, this case turned on principals relating to the allocation of the burden of proof and the deference due to the finder of fact; and (2) giving due deference to the fact-finder's resolution of the burden of proof issue, the district court's judgment must be affirmed. View "Wheeling & Lake Erie Railway Co. v. Keach" on Justia Law

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Plaintiff filed suit against Bay Point in state court and added DCT as a plaintiff in an amended complaint, alleging that Bay Point's foreclosure of two properties caused him to lose the collateral's value exceeding the debt balance, and to suffer mental anguish. After Bay Point removed to bankruptcy court, the district court affirmed the bankruptcy court's order in favor of Bay Point. Plaintiff and DCT appealed, but then the district court granted DCT's motion to dismiss. The Eleventh Circuit held that plaintiff lacked Article III standing, because he failed to allege a particularized, actual injury. Furthermore, plaintiff was not a person aggrieved. Therefore, plaintiff may not appeal the district court's decision affirming the bankruptcy court's order. View "Thakkar v. Bay Point Capital Partners, LP" on Justia Law

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After debtors filed a voluntary petition for relief under Chapter 7 of the Bankruptcy Code, the United States Trustee objected to the discharge in bankruptcy. The Bankruptcy Appellate Panel (BAP) affirmed the bankruptcy court's denial of discharge. The Eighth Circuit affirmed and agreed with the BAP that the bankruptcy court did not err in denying debtors a discharge in bankruptcy under 11 U.S.C. 727(a)(3) based on its findings that debtors unjustifiably failed to keep adequate records of financially significant watch and jewelry transactions. In a consumer bankruptcy, the debtor has a greater duty to keep records of a sudden and large dissipation of assets. In this case, debtors' return of twenty-seven valuable watches and the Kwait bridal collection ring to a judgment creditor was such a sudden and large dissipation of assets. View "Snyder v. Dykes" on Justia Law

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David and his parents, Don and Martha, were named as defendants in an unfair competition lawsuit brought by MarketGraphics, a company with which Don had previously been associated. Before MarketGraphics could proceed to judgment, Don and Martha filed for Chapter 7 bankruptcy. When MarketGraphics obtained a judgment against David, he filed his own Chapter 7 proceedings. The MarketGraphics judgment included findings that the defendants “willfully or knowingly” violated the Tennessee Consumer Protection Act, willfully infringed upon MarketGraphics’s copyrighted works, acted in concert with Don to violate Don’s non-compete agreement with MarketGraphics, and wrongfully impaired goodwill among Memphis customers. In David’s bankruptcy proceeding, MarketGraphics initiated adversary proceedings, asserting that its claim should be exempted from discharge under 11 U.S.C. 523(a)(6), which prevents a debtor from discharging claims for injuries he willfully and maliciously caused. The bankruptcy court denied MarketGraphics’s request. The Sixth Circuit affirmed. Nothing in the record of these proceedings or the proceedings for the underlying judgment supports a finding that David acted with the requisite intent under section 523(a)(6) to harm MarketGraphics. The court rejected MarketGraphics’s contention that it was precluded from reviewing that issue in the first instance. Even assuming that the common law claims facially demonstrate “willful and malicious” injury, the underlying judgment is too vague to carry preclusive effect. View "MarketGraphics Research Group, Inc. v. Berge" on Justia Law

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The bankruptcy appellate panel affirmed the bankruptcy court's dismissal of appellants' adversary proceeding against appellees, individually and in their capacity as assignees of Beresford. The panel held that the bankruptcy court correctly determined that the North Dakota state courts possessed concurrent jurisdiction to decide appellants' quiet title action and interpret the Chapter 12 Plan, as well as the incorporated settlement agreement and Beresford Deed. The panel also held that the bankruptcy court properly determined that it must apply North Dakota law (including the parol evidence statute) to determine ownership of the farm, because property interests are created and defined by state law. Furthermore, because the state courts had jurisdiction and determined property interests in accordance with North Dakota law, and because the bankruptcy court properly decided that it would be constrained to follow that law, preemption under the United States Constitution or federal bankruptcy laws does not apply. Finally, the panel held that the Rooker-Feldman doctrine applies and the bankruptcy court correctly concluded that it lacked subject matter jurisdiction to review appellants' claim of ownership, and appellants' claims and causes of action were barred by the doctrine of res judicata. The panel rejected appellants' remaining claims as without merit. View "Finstad v. Gord" on Justia Law

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Given the fundamental change in the facts of this case since the appeal was first filed and briefed the First Circuit remanded this action to the district court for reconsideration of its ruling dismissing the claims as unripe. In 2017, two groups of health centers filed adversary complaints in the Financial Oversight and Management Board's Title III case seeking a declaration that their claims against the Commonwealth seeking to collect payments under federal Medicaid law were non-dischargeable under PROMESA and that those claims may not otherwise be impaired in any matter. The magistrate judge recommended that the complaints be dismissed without prejudice as unripe. The district court held that Appellants' requests for declaratory relief were not ripe for review because there was no evidence that the Commonwealth would seek to discharge or impair their claims through the Title III proceeding. After the health centers appealed and the appeal was briefed, circumstances materially changed because the Commonwealth filed an amended proposed plan of adjustment. The First Circuit remanded the case to the district court for reconsideration of its ripeness ruling in light of the changed circumstances and any other matters the court deemed relevant. View "Corporacion de Servicios v. Commonwealth of Puerto Rico" on Justia Law

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After debtor made unauthorized and fraudulent transfers of funds during the Chapter 13 proceeding, the bankruptcy court converted the proceedings to Chapter 7 in response, and then debtor argued that the transferred funds were no longer in the estate. The Ninth Circuit affirmed the Bankruptcy Court and the Bankruptcy Appellate Panel's determination that the transferred funds should remain property of the Chapter 7 estate, which would mean that the Chapter 7 trustee had authority to recover them. The panel held that debtor transferred the funds with the fraudulent purpose of avoiding payments to creditors and those funds remained within his constructive possession or control. Therefore, the funds should be considered property of the converted estate under 11 U.S.C. 348(f)(1)(A). View "Brown v. Barclay" on Justia Law

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The Bankruptcy Appellate Panel affirmed the bankruptcy court's orders dismissing debtors' individual chapter 13 cases with a bar to re-filing for 180 days. The panel held that the bankruptcy court did not abuse its discretion where debtors acted in bad faith. In this case, debtors have filed eight chapter 13 bankruptcy petitions between 2010 and 2018, and the bankruptcy court found that debtors' filings were part of a long-running scheme to manipulate and abuse the Bankruptcy Code and the bankruptcy system to the extreme detriment of their creditors, particularly Wilmington Savings. View "Steiner v. Wilmington Savings Fund Society" on Justia Law

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The Bankruptcy Appellate Panel reversed the bankruptcy court's order denying BOM's motion under 11 U.S.C. 506(b) for allowance of postpetition default interest. The panel held that the bankruptcy court erred in applying a liquidated damages analysis and ruling the default interest rate was an unenforceable penalty under Missouri law; the panel made no decision as to whether and when the default interest rates under the notes at issue were triggered under the facts of this case, because such decisions are mixed questions of law and fact that are best left for the bankruptcy court to decide in the first instance; the panel endorsed the view that post-Ron Pair, the pre-confirmation interest rate to be applied under section 506(b) to an oversecured creditor whose claim is evidenced by a promissory note or similar loan agreement is the contract (both non-default and default) rate set forth in the note or loan agreement, to the extent enforceable under applicable law; the panel held that, absent state law to the contrary, a liquidated damages vs. penalty analysis is not applicable and should not be applied to a default interest rate set forth in a promissory note or similar loan agreement; and the panel followed the rule that equitable considerations should be used sparingly and only in exceptional circumstances. Accordingly, the panel remanded for further proceedings. View "The Bank of Missouri v. Family Pharmacy, Inc." on Justia Law

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The Bankruptcy Appellate Panel affirmed the bankruptcy court's decision applying the contemporaneous exchange for new value preference defense under Bankruptcy Code 547(c)(1) to except payments by debtor to Wells Fargo from avoidance as preferences. The panel held that new value was provided by the release of Wells Fargo's junior liens where a senior lienholder voluntarily released its liens for less than full payment of its debt; Wells Fargo provided new value to debtor when the IRS, a secured creditor senior to Wells Fargo, was paid from the proceeds of a sale of debtor's assets and voluntarily released its liens; a $100,000 payment made by debtor to Wells Fargo one day before a sale closing was intended to be a contemporaneous exchange; and Wells Fargo's release of claims against Phillips 66 and KCRC resulted in new value to debtor intended by the parties to be a contemporaneous exchange. View "Lauter v. Wells Fargo Bank" on Justia Law