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A housing loan, made by an employer to an employee as a key part of a compensation package, qualified as a non-consumer debt. The Ninth Circuit affirmed the Bankruptcy Appellate Panel's decision affirming the bankruptcy court's denial of creditor's motion to dismiss debtor's Chapter 7 bankruptcy petition for abuse under 11 U.S.C. 707(b)(1). As a preliminary matter, the panel held that the bankruptcy court's order denying creditor's motion to dismiss under section 707(b) was final and appealable. On the merits, the panel held that the bankruptcy court did not err by finding that the housing loan was a non-consumer debt. The panel agreed with the bankruptcy court that debtor incurred the housing loan primarily for a non-consumer purpose connected to furthering his career. View "Aspen Skiing Co. v. Cherrett" on Justia Law

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The Ninth Circuit affirmed the district court's reversal of the bankruptcy court's grant of summary judgments for defendants in two adversary proceedings seeking recovery of fraudulent transfers. The panel applied the dominion test and held that defendants were initial transferees under 11 U.S.C. 550(a)(1) and thus not entitled to the safe harbor under section 550(b)(1) for subsequent transferees. Therefore, the Committee could recover the funds from both the corporate cheat and those parties to whom he first made payments from the corporate account. The panel remanded for further proceedings. View "In the Matter of WallDesign" on Justia Law

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Petitioner Ann Hardegger filed a complaint in the district court seeking contribution from respondents Daniel and Cheryl Clark, for their proportionate share of a payment she made to the Internal Revenue Service (“IRS”) in full satisfaction of the parties’ joint and several tax liabilities. In October 2010, the Clarks filed a joint voluntary Chapter 7 bankruptcy petition and gave notice to their creditors, including the Hardeggers. The Hardeggers did not file a proof of claim in the bankruptcy proceeding, and the bankruptcy court granted the Clarks a discharge. In Hardegger’s case, the district court found the Clarks responsible for one-half of the IRS indebtedness and entered summary judgment in Hardegger’s favor. A division of the court of appeals reversed, however, concluding that Hardegger’s contribution claim constituted a pre-petition debt that had been discharged in the Clarks’ bankruptcy case. Applying the “conduct test,” under which a claim arises for bankruptcy purposes at the time the debtor committed the conduct on which the claim is based, the Colorado Supreme Court concluded that Hardegger’s claim for contribution arose when the parties’ jointly owned company incurred federal tax withholding liability between 2007 and 2009, rendering Hardegger and Clark potentially responsible for that debt. Because this conduct occurred before the Clarks filed their bankruptcy petition in 2010, Hardegger’s claim constituted a pre-petition debt that was subject to discharge. View "Hardegger v. Clark" on Justia Law

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J&S sought Chapter 7 bankruptcy protection. The estate's largest asset was an Altoona, Pennsylvania building, in which Phoenician previously operated a restaurant. Trustee Swope rejected Phoenician’s lease to facilitate the building's sale. Phoenician attempted to remove property from the closed restaurant; Swope objected. After learning that Phoenician had canceled its insurance and that heating could be an issue with anticipated frigid weather, Swope met with Phoenician’s principal, Obeid and a contractor. Obeid gave Swope a key to the premises; the contractor recommended that the thermostat be set to 60 degrees. Obeid did not do so, the pipes burst, and the property flooded. A disaster restoration company refused to work on the property. Swope asked for another meeting to assess the damage. Obeid demanded that the meeting be rescheduled and held without J&S's principal, Focht; Swope declined, tried to inspect the premises, and discovered the key Obeid had given her did not work. Focht then had the locks changed. Swope retained the only key and provided both parties with only “supervised access.” Phoenician unsuccessfully sought to regain possession. The court indicated that Swope was protected by the automatic stay, which precluded Phoenician from interfering with the property, and dismissed Phoenician’s suit against Swope under 42 U.S.C. 1983 for wrongful eviction, claiming Fourth and Fourteenth Amendment violations. The Third Circuit agreed that Swope was entitled to qualified immunity and took appropriate action to preserve the Estate Property without violating clearly-established law. View "J & S Properties, LLC v. Phoenician Meditteranean Villa, LLC" on Justia Law

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The First Circuit reversed the district court’s order denying Appellant’s motion to intervene in an adversary proceeding arising within the Commonwealth’s debt adjustment case under Title III of the Puerto Rico Oversight, Management, and Economic Stability Act (PROMESA), 48 U.S.C. 2161-2177, holding that 11 U.S.C. 1109(b) provides an “unconditional right to intervene” within the meaning of Fed. R. Civ. P. 24(a)(1). Appellant, the Official Committee of Unsecured Creditors (UCC), intervened in an adversary proceeding initiated by Plaintiffs within a larger case brought by the Financial Oversight and Management Board on behalf of the Commonwealth. The Board had commenced quasi-bankruptcy proceedings to restructure the Commonwealth’s debt under a part of PROMESA referred to as Title III. The district court denied the UCC’s motion to intervene with respect both to intervention as of right and to permissive intervention. The First Circuit reversed, holding that section 1109(b) provided the UCC with an unconditional right to intervene in the adversary proceeding. View "Assured Guaranty Corp. v. Official Committee of Unsecured Creditors" on Justia Law

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Telecommunications retailer OneStar paid its supplier, MCI, $1.9 million during the 90 days before OneStar was forced into bankruptcy. OneStar’s bankruptcy trustee sought to recapture those payments under 11 U.S.C. 547(b), which generally allows debtors to avoid payments made during the 90-day “preference period.” MCI asserted affirmative defenses under 11 U.S.C. 547(c): that the payments were unavoidable because MCI offset them by subsequently providing OneStar with new value--additional telecommunications services--and the payments occurred in the ordinary course of business. The trustee contended that the new value was canceled because, one week before the bankruptcy filing, OneStar assigned its contract with MCI to a newly-formed affiliate, releasing MCI from its contractual obligations to OneStar. MCI was now obligated to provide services to the affiliate, which then relayed those services to OneStar. The bankruptcy judge rejected Verizon’s ordinary-course defense but ruled that the new value MCI advanced during the preference period sufficed to make OneStar’s preferential payments unavoidable; the debt assignment to the newly-formed affiliate was irrelevant. The district judge and Seventh Circuit affirmed. A debtor’s assignment of debt and contractual rights to an affiliate does not have the effect of repaying a creditor for new value. MCI advanced subsequent new value that remained unpaid, so OneStar’s preferential transfers are unavoidable. View "Verizon Business Global, LLC v. Levin" on Justia Law

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The Bankruptcy Appellate Panel affirmed the bankruptcy court's order holding that CRP holds a judicial lien against the real property of debtor and avoiding that lien under Bankruptcy Code 522(f)(1). The panel held that CRP's recording of its judgment fastened an existing, but presently unenforceable lien on the property. Furthermore, the fact that an unenforceable lien exists was buttressed by CRP's belief that upon the death of debtor's wife, it will have an enforceable lien that will survive the bankruptcy. View "CRP Holdings v. O'Sullivan" on Justia Law

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When a plaintiff takes inconsistent positions by pursuing in district court a civil claim that he failed to disclose as an asset in his bankruptcy proceedings, a district court may apply judicial estoppel to bar the plaintiff's civil claim if it finds that the plaintiff intended to make a mockery of the judicial system. When determining whether a plaintiff who failed to disclose a civil lawsuit in bankruptcy filings intended to make a mockery of the judicial system, a district court should consider all the facts and circumstances of the case. The Eleventh Circuit reasoned that the court should look to factors such as the plaintiff's level of sophistication, his explanation for the omission, whether he subsequently corrected the disclosures, and any action taken by the bankruptcy court concerning the nondisclosure. The court overruled portions of Barger v. City of Cartersville, 348 F.3d 1289 (11th Cir. 2003), and Burnes v. Pemco Aeroplex, Inc., 291 F.3d 1282 (11th Cir. 2002), that permit a district court to infer intent to misuse the courts without considering the individual plaintiff and the circumstances surrounding the nondisclosure. Accordingly, the court remanded for consideration of whether the district court abused its discretion in light of this new standard. View "Slater v. United Steel Corp." on Justia Law

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The Ninth Circuit vacated the district court's affirmance of the bankruptcy court's order enforcing a stipulated agreement in adversary proceedings seeking to debar an attorney from submitting claims to asbestos trusts. The trusts were created through the Chapter 11 bankruptcy proceedings of entities exposed to significant asbestos liability. In Golden v. California Emergency Physicians Medical Group, 782 F.3d 1083 (9th Cir. 2015), the panel held that assessing the validity of a settlement agreement is a question of state contract law. In this case, the district court never addressed whether federal law governed this case, and it was unclear whether the district court was even aware that the trusts contended that federal law controlled its decision. Furthermore, the district court also did not apply Golden to the settlement at issue. Accordingly, the court remanded so that the district court can decide whether federal or state law governs (including whether the federal law argument has been waived), and what impact, if any, Golden has on this case. View "Mandelbrot v. J.T. Thorpe Settlement Trust" on Justia Law

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11 U.S.C. 502(b)(4) acts as a federal cap on a fee already determined pursuant to state law. The Ninth Circuit affirmed the district court's reversal of the bankruptcy court's decision reducing a claim for pre-petition attorneys' fees under section 502(b)(4). Section 502(b)(4) limits claims for services rendered by the debtor's attorney to the extent that such claims exceed the reasonable value of such services. The panel explained that the proper mode of analysis was: (1) an acknowledgment or determination that the fee contract was breached; (2) an assessment of the damages for the breach under state law; (3) a determination under section 502(b)(4) of reasonableness of the damages claim afforded by state law; and (4) a reduction of the claim by whatever extent, if any, it is deemed excessive. The panel also held that the section 502(b)(4) cap limits fees for services already performed. The Full Faith and Credit Act requires, in the circumstances of this case, that the judgment of the state court confirming the arbitration award be given full faith and credit in the bankruptcy proceeding. View "McProud v. Siller" on Justia Law