Justia Bankruptcy Opinion Summaries

The Supreme Court reversed the judgment of the district court granting summary judgment by substituting other remedies in place of an equitable lien placed by the bankruptcy court on real property located at 10512 Loma Portal Avenue, holding that, based on the preclusive effect of prior court orders, an equitable lien was the only available remedy to satisfy Respondent's interest concerning the property.At issue before the Supreme Court was the preclusive effect of the multiple court orders in this case and the equitable remedies available under those orders. The Supreme Court remanded the case for further proceedings, holding (1) an equitable lien placed on property to satisfy a debt permits the lien holder to enforce the value of the equitable lien against the debtor's property even where that property has been subsequently transferred to a nondebtor spouse during divorce proceedings; (2) the district court erred by substituting other remedies in place of the equitable lien; and (3) genuine issues of material fact remained as to the value of the equitable lien placed on the property, as well as the value of the property itself. View "Holland v. Barney" on Justia Law

Plaintiff, in his capacity as Litigation Administrator of the post-confirmation estates (the “Litigation Administrator”) of Post-Confirmation Debtor Décor Holdings, Inc. (“Décor Holdings”), appeals the district court’s order, vacating the bankruptcy court’s entry of default judgment against Defendant Sumec Textile Company Limited (“Sumec”) and remanding the case for further proceedings. The district court’s order re-opened an adversary proceeding that the Litigation Administrator initiated against Sumec to avoid preferential payments of $694,048.84 that Décor Holdings and its affiliated debtors (collectively, the “debtors”) made to Sumec in the ninety-day period before it filed for bankruptcy.   The Second Circuit dismissed for lack of jurisdiction. The court explained that notwithstanding the Litigation Administrator’s practical concerns regarding his ability to effectuate service on Sumec and ultimately collect on any judgment, the court sees no basis to apply the collateral order doctrine to hear an appeal challenging the vacatur of a default judgment which can be reviewed, if necessary, upon the entry of a final judgment in the adversary proceeding. Further, the court explained that this is not a situation where the only remaining questions involve relief and enforcement of the holding; rather, the adversary proceeding is at its infancy, with issues of service of process and the actual merits of the action (assuming service is effectuated) still to be resolved on remand. Thus, the dicta in Stone regarding the general rules of appealability has no application to the circumstances in this appeal. View "In re: Décor Holdings, Inc., et al." on Justia Law

Defendant, petitioned for Chapter 7 bankruptcy and listed PRN Real Estate & Investments, Ltd. (“PRN”) as his primary creditor. PRN sought to exempt debts that Defendant owes PRN from being discharged. The bankruptcy court granted judgment for Defendant on all of PRN’s claims and fully discharged Defendant’s debt. The district court affirmed.   The Eleventh Circuit affirmed in part and reversed the bankruptcy court’s rulings and remanded for further proceedings. The court explained that it agrees with each of the bankruptcy court’s rulings except one: that PRN pleaded a viable discharge exception in Count 3. The court explained that Congress gave PRN the right to request an exception of COLP’s contribution debt, if PRN can prove that Defendant fraudulently obtained COLP’s money and, as a result, became responsible for COLP’s contribution debt. PRN has pleaded facts that, if proven, meet these requirements. The Trustee’s action to avoid the same fraudulent transfer does not preempt PRN’s right to seek a discharge exception. Because the bankruptcy court dismissed PRN’s claim based on non-viability and lack of standing, the bankruptcy court did not rule on the merits of Defendant’s motion for summary judgment. Thus, the court remanded the case for the bankruptcy court to determine in the first instance whether any facts material to Count 3 are genuinely disputed and, if not, whether Defendant is entitled to judgment on Count 3. See Fed. R. Civ. P. 56(a). View "PRN Real Estate & Investments, Ltd. v. William W. Cole, Jr." on Justia Law

Appellee attempted to use an “inversion table” located at an Anytime Fitness franchise. The equipment allegedly failed, and Appellee suffered neuromuscular injuries. Appellee filed a personal injury suit in Louisiana court against the franchise owner, Thornhill Brothers Fitness, LLC (“Thornhill”). An amended complaint named an additional defendant, franchisor Anytime Fitness, LLC (“Anytime”). Thornhill agreed to assign all rights it had “against Anytime Fitness LLC” to the Appellees, including any rights arising from “the indemnity agreement contained in the Franchise Agreement” between Thornhill and its franchise parent, Anytime. Anytime then protested in the bankruptcy court. The bankruptcy court vacated its prior order and allowed Anytime a hearing. But in July 2022, the bankruptcy court entered a new order ratifying the actions it took originally. Anytime appealed that July 2022 order and the district court affirmed.  At issue on appeal is whether 11 U.S.C. Section 365(f) or any other portion of Title 11, authorizes a bankruptcy court’s approval of a debtor’s partial assignment of an executory contract.   The Fifth Circuit wrote that it does not and reversed the bankruptcy court’s contrary order and remanded. The court explained that it does not construe any other provision of the Code to permit circumvention of the court’s interpretation of Section 365(f). It’s true that the Code contains various catch-all provisions. But those catch-alls do not create substantive powers not committed to the bankruptcy court by some other section. The court wrote that since the bankruptcy court order at issue here does not satisfy Section 365, it does not matter whether it satisfied Jackson Brewing. View "Anytime Fitness v. Thornhill Brothers" on Justia Law

Facing foreclosure, Ralph and Paula Isom entered into a deed in lieu of foreclosure agreement with Farms, LLC (“Farms”). The Isoms then leased the real property (a farm and various houses) back from Farms, subsequently defaulted on their obligations under the lease agreement, and filed a Chapter 11 bankruptcy, which was later converted to a Chapter 7. During the Isoms’ bankruptcy, Farms also acquired several third-party claims against the Isoms from other independent creditors of the Isoms. The bankruptcy court denied the Isoms a discharge, and after the bankruptcy case closed, Farms sued the Isoms personally, alleging three counts of breach of contract. Following a one-day bench trial, the district court awarded Farms a judgment of $1,281,501.68 as to Count III—related to Farms’ purchase of the third-party claims—but concluded that Farms’ remaining two claims related to the lease were barred by the applicable statute of limitations. The Isoms appealed, arguing the district court erred in determining the applicable statute of limitations as to Count III. Farms cross-appealed, arguing the district court erred in applying the statutes of limitation as to Counts I and II. After review, the Idaho Supreme Court affirmed the district court’s judgment as to Count III but reversed and vacated the judgment on Counts I and II. View "Farms, LLC v. Isom" on Justia Law

Plaintiff Breanne Martin alleged she was injured when a large metal gate fell on her while she was on a residential rental property located in Alpine, California. Martin initially filed claims for negligence and premises liability against the owners of the property. But upon learning that the owners had previously filed a bankruptcy petition, Martin amended her complaint to add the court-appointed bankruptcy trustee, Leslie Gladstone, as a defendant. Gladstone demurred to Martin’s complaint, asserting that application of federal statutory and common law demonstrated that Martin could not state a cause of action against her. The trial court rejected Gladstone’s argument regarding application of the "Barton" doctrine, but accepted her argument regarding the abandonment of the property at issue; the court sustained Gladstone’s demurrer on this ground and entered judgment in favor of Gladstone. On appeal, Martin contended the trial court erred in concluding that Gladstone’s abandonment of the relevant property after the accident prevented Gladstone from being held liable for Martin’s injuries. Martin further argued the trial court correctly determined it could not conclude as a matter of law that the Barton doctrine applied to divest the trial court of subject matter jurisdiction over Martin’s claims. The Court of Appeal agreed with Martin’s appellate contentions and reversed the trial court’s judgment. View "Martin v. Gladstone" on Justia Law

Plaintifff Pattyann Larsen filed employment discrimination and other claims against her former employer shortly after her debts had been discharged by the federal bankruptcy court, but she had failed to list those claims as assets in her bankruptcy case. The trial court granted defendant’s motion for summary judgment, concluding that the bankruptcy trustee—not plaintiff— was the real party in interest. The court then denied plaintiff’s motion to substitute the bankruptcy trustee as plaintiff and dismissed the case based on its conclusion that plaintiff’s attempt to pursue this action in her own name was not an “honest and understandable mistake.” The Court of Appeals affirmed, concluding that the trial court had not abused its discretion in denying substitution. THe Oregon Supreme Court reversed: under ORCP 26 A, a motion to substitute the real party in interest as the plaintiff, if granted, would require plaintiff to amend the complaint under ORCP 23 A. “We have interpreted the standard specified in that rule—leave to amend ‘shall be freely given when justice so requires’—to mean that leave to amend should be granted absent any unfair prejudice to the nonmoving party. The text, context, and legislative history of ORCP 26 A confirm that the standards governing leave to amend the pleadings under ORCP 23 A also apply in deciding whether to allow substitution of the real party in interest under ORCP 26 A.” Defendant did not contend that it would be unfairly prejudiced if the bankruptcy trustee were to be substituted as the plaintiff in this case. The Supreme Court concluded that, because the trial court applied the wrong legal standard, it abused its discretion in denying substitution and dismissing this case. View "Larsen v. Selmet, Inc." on Justia Law

This litigation stems from the bankruptcy of Imperial Petroleum Recovery Corporation (“IPRC”). IPRC once marketed microwave separation technology (“MST”) machines, which purported to recover usable oil from various emulsions. The Carmichael parties held security interests in IPRC’s assets—including its MST units. The Carmichaels filed an involuntary Chapter 7 liquidation proceeding against IPRC. After various proceedings, the amended judgment cut the actual damages owed to the Carmichaels to $4,000, cut the fee and cost award to around $92,000, and made no provision for post-judgment interest. All told, the sum due to the Carmichael parties declined roughly 96%, from over $2.3 million to approximately $96,000. The Carmichaels appealed to the district court. The district court affirmed.   The Fifth Circuit affirmed in part, vacated in part, and remanded. The court wrote that the bankruptcy court’s factual findings related to the assigned assets were not clearly erroneous. The court wrote that the district court’s damages award nevertheless rested on clearly erroneous factual findings. The court explained that the Carmichaels are entitled to post-judgment interest pursuant to 28 U.S.C. Section 1961. Finally, the court disposed of the Carmichaels’ contention that the bankruptcy court’s judgment did not provide adequate declaratory relief. The court wrote that applying a preponderance standard and viewing the record holistically, it is persuaded that the Carmichaels’ damages for reassembly exceed $4,000. But the court wrote that it does not attempt to specify the Carmichaels’ reassembly damages here. Instead, the court remanded so that the bankruptcy court may consider the Carmichaels’ asserted damages under the correct standard of proof. View "Carmichael v. Balke" on Justia Law

The First Circuit affirmed the judgment of the bankruptcy court denying Debtor a discharge pursuant to 11 U.S.C. 727(a)(3) for Debtor's failure to keep or preserve records and declined to decide whether a denial was warranted under 11 U.S.C. 727(a)(4) holding that the bankruptcy court properly denied a discharge under section 727(a)(3).Plaintiff filed a Chapter 7 bankruptcy petition. Defendant, who held an unsatisfied judgment against Plaintiff, commenced an adversary proceeding seeking to deny Plaintiff a discharge on five separate grounds. The bankruptcy court denied Plaintiff a discharge pursuant to section 727(a)(3) and also found that the discharge should be denied under section 727(a)(4). The First Circuit affirmed, holding that the bankruptcy court properly denied a discharge pursuant to section 727(a)(3). View "Hernandez v. Shove" on Justia Law

After a fatal truck accident claimed the lives of members of two families, the victims' families filed a personal injury action against the trucking company. The trucking company's insurer ultimately transferred $1 million to the law firm representing one of the families. The insurer then notified the other family that the policy limits had been exhausted. That same day, the insurer submitted two checks: one to the victim's family and one to the law firm.The family that was not party to the settlement filed an involuntary bankruptcy petition against the trucking company. The trustee brought an adversary proceeding against the other victim's family and their law firm, seeking to avoid and recover the transfer of the policy proceeds pursuant to 11 U.S.C. Secs. 547 and 550 of the Bankruptcy Code. The bankruptcy court denied the law firm's motion to dismiss.On appeal, the family that settled and the law firm argued that the district court erred in determining that the trucking company held an equitable property interest in the policy proceeds. The Fifth Circuit affirmed, finding that these facts fit the "limited circumstances" under which the policy proceed are considered the property of the estate. View "Law Office of Rogelio Solis v. Curtis" on Justia Law