Justia Bankruptcy Opinion Summaries
Kearney v. Unsecured Creditors Committee
Appellant Victor Kearney was the lifetime income beneficiary of two spendthrift trusts when he filed for bankruptcy in 2017. The United States Trustee’s office appointed an unsecured creditors committee (“UCC”) which proposed a reorganization plan contemplating a one-time trust distribution to pay off appellant's debts. After a New Mexico state court modified the trusts to authorize the distribution, the bankruptcy court approved the plan. Appellant appealed. The Bankruptcy Appellate Panel (“BAP”) of the Tenth Circuit concluded that the bankruptcy court did not deny appellant due process, made no errors in its findings of fact, and did not abuse its discretion in settling appellant's claims. On appeal of that decision, appellant argued that using spendthrift trust assets to fund the reorganization plan violated the trusts’ spendthrift provision and the law, and that approving the settlement of his claims amounted to an abuse of the bankruptcy court’s discretion. Finding no reversible error, the Tenth Circuit affirmed the BAP. View "Kearney v. Unsecured Creditors Committee" on Justia Law
Reynolds v. Behrman Capital IV L.P.
The Chapter 7 trustee for the bankruptcy estates of Atherotech Inc. and Atherotech Holdings, appeals the dismissal of his complaint for lack of personal jurisdiction. After removal from Alabama state court, the district court applied the doctrine of derivative jurisdiction articulated in Lambert Run Coal Co. v. Baltimore & O.R. Co., 258 U.S. 377, 382 (1922), and ruled that because the state court did not have personal jurisdiction over defendants under Alabama's long-arm statute, it too lacked personal jurisdiction. The district court concluded that the trustee could not rely on Bankruptcy Rule 7004(d) (which looks to a defendant's national contacts and permits nationwide service of process) to establish personal jurisdiction. The district court also denied as futile the trustee's motion to transfer the case.The Eleventh Circuit reversed and concluded that the trustee did not waive his right to appeal the district court's dismissal of MidCap for lack of personal jurisdiction by failing to name MidCap in the amended complaint because amendment would have been futile. Under the circumstances of this case, the trustee did not waive his right to appeal the district court's dismissal of Mid Cap from the original complaint for lack of personal jurisdiction.The court also concluded that the doctrine of derivative jurisdiction does not apply to removed cases in which the state court lacked personal jurisdiction over the defendants. The court explained that the district court could exercise jurisdiction following removal notwithstanding the state court's lack of personal jurisdiction over defendants under Alabama's long-arm statute. The court reasoned that the district court could look to Bankruptcy Rule 7004(d) to decide whether personal jurisdiction existed. Furthermore, the district court could consider the trustee's alternative request for a transfer to the Southern District of New York pursuant to 28 U.S.C. 1406 even if there was no personal jurisdiction over defendants under Alabama's long-arm statute. The court remanded for further proceedings. View "Reynolds v. Behrman Capital IV L.P." on Justia Law
Jackson v. ING Bank, FSB
The First Circuit affirmed the decision of the bankruptcy court declaring a foreclosure void and awarding Appellant damages but denying relief on her remaining claims, holding that Appellant's challenges on appeal were either waived or otherwise unavailing.After two attempts to foreclose the mortgage on a condominium that Appellant purchased she filed a six-count adversary complaint in the bankruptcy court naming five defendants, the financial institutions and law firms connected with the foreclosure. The bankruptcy court granted summary judgment as to one count in favor of Appellant, voiding one of the foreclosures, but denied the remaining claims. The First Circuit affirmed, holding that Appellant's challenges were either waived or baseless. View "Jackson v. ING Bank, FSB" on Justia Law
Rohe v. Wells Fargo Bank, N.A.
Petitioner filed suit alleging that, after she filed for bankruptcy, Wells Fargo violated the automatic bankruptcy stay by continuing with foreclosure proceedings against her in the Florida state courts. Furthermore, Wells Fargo and the state courts acted contrary to federal law governing removal by continuing with the same state court proceedings after petitioner sought to remove the state case to the bankruptcy court. Petitioner filed a petition for a writ under the All Writs Act in the district court, seeking an order declaring that certain actions of the state courts were void and granting her damages against Wells Fargo and its counsel.The Eleventh Circuit affirmed the district court's dismissal of plaintiff's complaint, finding that this case is not the kind of case in which an order under the Act could properly be issued because there is no underlying proceeding over which the district court has jurisdiction and the integrity of which the district court would be in an appropriate position to protect by making such an order. In this case, dismissal was proper because the Act does not empower the district court to issue the order sought by the petition. View "Rohe v. Wells Fargo Bank, N.A." on Justia Law
Radiance Capital v. Crow
This case arose from a bankruptcy filing by Thomas Crow, who owned substantial property and investment accounts in Wyoming. His bankruptcy petition sought an exemption for approximately $2 million contained in a Fidelity account, which he claimed was jointly held with his wife (who did not file for bankruptcy) and therefore was shielded from creditors under Wyoming law. The Trustee and a creditor, Radiance Capital Receivables Nineteen, L.L.C., objected to the claimed exemption. After a hearing, the bankruptcy court upheld the exemption, and a Bankruptcy Appellate Panel (BAP) affirmed. On appeal, Radiance appealed the BAP’s affirmance. Crow argued the Tenth Circuit lacked jurisdiction over this appeal because the BAP’s affirmance of the bankruptcy court’s ruling on the claimed exemption was not “final” within the meaning of 28 U.S.C. 158(d)(1). Radiance also challenged the BAP’s affirmance of the bankruptcy court’s ruling that an adversary proceeding was required to determine the amount of joint debt held by the Crows before any portion of the Fidelity account must be turned over to the Trustee. Finding it had jurisdiction, and deciding on the merits, the Tenth Circuit Court of Appeals affirmed. Applying Wyoming law, Court concluded the Crows jointly held the Fidelity account with a right of survivorship (“tenancy by the entirety” at common law) and was therefore exempt from the bankrupt estate. Furthermore, the tenancy by the entirety was not severed by the Crows’ subsequent conduct. The Court determined Radiance lacked standing to challenge that portion of the BAP’s ruling with regard to the adversary proceeding, and therefore dismissed that aspect of its appeal. View "Radiance Capital v. Crow" on Justia Law
Mojave Desert Holdings, LLC v. Crocs, Inc.
Crocs's Design Patent 789, titled “Footwear,” has a single claim for the “ornamental design for footwear.” Crocs sued Dawgs for infringement, Dawgs sought inter partes reexamination (IPE) under 35 U.S.C. 311. The district court stayed its proceedings. The examiner rejected the claim as anticipated, 35 U.S.C. 102(b). While an appeal to the Patent Trial and Appeal Board was pending, Dawgs filed for Chapter 11 bankruptcy. The bankruptcy court approved the sale of all of its assets to a new entity, Holdings, “not free and clear of any Claims Crocs . . . may hold for patent infringement occurring post-Closing Date by any person ... or any defenses Crocs may have in respect of any litigation claims that are sold.” The bankruptcy court authorized the distribution of the net sale proceeds and dismissed Dawgs’s bankruptcy case. Holdings assigned all rights, including explicitly the claims asserted by Dawgs in the infringement action and the IPE, to Mojave. Dawgs dissolved but continued to exist for limited purposes, including “prosecuting and defending suits" and "claims of any kind.”The Board declined to change the real-party-in-interest from the IPE requestor to Mojave, then reversed the examiner’s rejection of the patent’s claim. The Federal Circuit granted the motion to substitute. The assignments indicate that Mojave is Dawgs's successor-in-interest; as such, Mojave has standing. If the Board precludes substitution on the basis of a transfer in interest because of a late filing, it would defeat the important interest in having the proper party before the Board. View "Mojave Desert Holdings, LLC v. Crocs, Inc." on Justia Law
Luebbert v. Global Control Systems, Inc.
The Eighth Circuit took this opportunity to clarify its jurisprudence about exceptions to discharge under 11 U.S.C. 523(a)(6) and concluded that a judgment for an intentional tort is not necessary to find judgment debt for a breach of contract nondischargeable. The willfulness requirement is met when the bankruptcy court finds facts showing that the debtor's conduct accompanying the breach of contract amounted to an intentional tort against the creditor. The court perceived that this aligns with the core of the analyses performed by the Ninth and Fifth Circuits.In this case, debtor sought to discharge hundreds of thousands of dollars in judgment debt in bankruptcy after a breach of contract lawsuit indebted him to his former employer. The court affirmed the bankruptcy court's determination that the debt resulted from his infliction of a willful and malicious injury on his former employer and so was non-dischargeable under 11 U.S.C. 523(a)(6). In this case, debtor's conduct amounted to an intentional tort under Missouri law. View "Luebbert v. Global Control Systems, Inc." on Justia Law
Deutsche Bank Trust Co. v. U.S. Energy Development Corp.
Texas and Oklahoma oil and gas producers challenge the bankruptcy court's grant in part and denial in part of Deutsche Bank's motion for partial summary judgment in a lien priority dispute. The competing security interests arose out of proceeds from the sale of oil that debtor purchased from appellants before declaring bankruptcy.The Fifth Circuit affirmed the bankruptcy court's order, holding that the bankruptcy court did not err in holding that the warranty of title did not waive the Producers' rights to assert a lien under either Texas UCC 9.343 or the Oklahoma Lien Act; because the warranties did not waive Producers' claims to proceeds in the hands of debtor, the Bank's reliance is misplaced on cases where producers attempted to collect from purchasers downstream of the first purchasers; and following Fishback Nursery, Inc. v. PNC Bank, N.A., 920 F.3d 932, 939-40 (5th Cir. 2019), Delaware law governs the competing priorities under either Texas choice of law or the federal independent judgment test. The court affirmed the bankruptcy court's conclusion that the Bank's interests in the disputed collateral prime any interests held by the Texas Producers. Furthermore, the bankruptcy court correctly dismissed the Producers' affirmative defenses of estoppel, unclean hands, and waiver. View "Deutsche Bank Trust Co. v. U.S. Energy Development Corp." on Justia Law
In re Murray Energy Holdings Co.
Coal companies (last signatory operators) must provide health and retiree benefits through individual employer plans (IEPs), 26 U.S.C. 9711(a), (b); the 1992 Plan provides benefits for retirees who do not receive benefits through a company’s IEP, section. Last signatory operators fund and provide security for the 1992 Plan. If the 1992 Plan assumes responsibility for IEP benefits, the Plan may assert that a prior employer must pay the benefits.A CONSOL entity sold mining operations to Debtors in 2013. Debtors provided healthcare and retiree benefits to about 2,200 Beneficiaries under an IEP. Debtors filed chapter 11 petitions in 2019, having negotiated agreements that compelled Debtors to minimize their liabilities to the Beneficiaries. To address the Coal Act obligations, the Trustee appointed a committee to represent Debtors’ retirees. Debtors and the Retiree Committee ultimately agreed that the parties would cooperate to transition the Beneficiaries from the IEP to the 1992 Plan to assure no coverage gap. The 1992 Plan would receive $12.5 million from the posted security. Debtors would cooperate in the Plan’s efforts to hold CONSOL responsible as the last signatory operator for those Beneficiaries who transferred to Debtors in 2013.The bankruptcy court approved the Settlement over CONSOL’s objection and confirmed Debtors’ Chapter 11 Plan. The order reserved CONSOL’s right to dispute its potential Coal Act liability for the Benefits, stating that its approval of the Settlement "in no way constitutes a finding that CONSOL is the last signatory operator.”The Sixth Circuit Bankruptcy Appellate Panel dismissed an appeal, finding that CONSOL lacks standing. Whether an order directly and adversely affects an appellant’s pecuniary interests is interpreted narrowly; “person aggrieved” standing does not arise from concerns about separate litigation unrelated to an interest protected by the Bankruptcy Code. View "In re Murray Energy Holdings Co." on Justia Law
Carpenter v. Amos
The Bankruptcy Appellate Panel affirmed the bankruptcy court's entry of summary judgment in favor of Flesner Wentzel, debtor's ex-wife's attorney, and confirmation of debtor's Sixth Amendment Chapter 13 plan.On de novo review, the panel identified no error in the bankruptcy court's conclusion that the attorney fees imposed on debtor by the state court are domestic support obligations under the bankruptcy code and are therefore not dischargeable pursuant to 11 U.S.C. 523(a)(5). In this case, the bankruptcy court engaged in a specific and detailed analysis of the undisputed facts and legal authority. Therefore, confirmation of debtor's Sixth Amended Plan that provided for priority treatment of Flesner's attorney fee claims as domestic support obligations was appropriate. View "Carpenter v. Amos" on Justia Law