Justia Bankruptcy Opinion Summaries

The city at the center of this case, after decades of financial distress and unsuccessful efforts to revitalize its economy through projects like a waste facility and a casino, declared bankruptcy in 2022. Prior to the bankruptcy filing, the city had pledged certain revenue streams—including payments from a casino, a waste facility, and agreements with the county—to secure debt issued through complex arrangements. These pledges were established through city ordinances and related contracts with creditors, including a trust indenture and a contribution agreement. The revenue streams and contractual rights to payment became the focal point of disputes in the bankruptcy proceedings.Bankruptcy Judge Ashely M. Chan of the United States Bankruptcy Court for the Eastern District of Pennsylvania heard adversary claims from the city against its creditors. The creditors asserted that their liens on the pledged revenues survived the bankruptcy, arguing that their interests were statutory liens or arose from special revenues or proceeds exempt from discharge. The Bankruptcy Court held that the creditors had properly perfected their interests but determined that their liens were consensual, not statutory, and thus cut off by 11 U.S.C. § 552(a). The court also found that the pledged revenues were not "special revenues" under bankruptcy law and ordered that certain excess funds be transferred to the city. The creditors appealed these determinations.On appeal, the United States Court of Appeals for the Third Circuit affirmed the Bankruptcy Court's rulings on three key issues: the liens were not statutory and thus did not survive the bankruptcy; the pledged revenues were not special revenues; and the Trust Indenture required excess funds to be transferred to the city. However, the appellate court remanded for further proceedings on whether certain contract language conveyed a right to payment from which post-petition proceeds could be derived, and whether the creditors’ interests extended to pre-petition accrued amounts not yet paid to the city. View "City of Chester v. PHCC LLC" on Justia Law

Romero owned a home in Chicago but failed to pay property taxes from 2018 to 2021, resulting in Cook County holding a lien on his property. Rather than foreclosing, the county conducted a tax sale, at which Corona Investments acquired a Certificate of Purchase for Romero’s property in November 2021. This certificate gave Corona the right to take title after a waiting period unless Romero redeemed the property by paying the outstanding taxes plus penalty interest. Romero had until October 2024 to redeem, but filed for Chapter 13 bankruptcy one week before the deadline, triggering an automatic stay and preventing Corona from seeking a tax deed.In the United States Bankruptcy Court for the Northern District of Illinois, the judge determined that Corona Investments held a secured claim of $26,134.95 in the bankruptcy proceeding. The bankruptcy court classified Corona's claim as a "tax claim" under 11 U.S.C. § 511(a), which meant that the interest rate on the claim would be governed by applicable nonbankruptcy law. The court found that the relevant rate was 18%, as provided by 35 ILCS 200/21-15 of the Illinois Property Tax Code. The court rejected arguments for applying a lower redemption rate or the rate determined by the "formula approach" from Till v. SCS Credit Corp.The United States Court of Appeals for the Seventh Circuit reviewed the bankruptcy court’s decision. The Seventh Circuit affirmed, holding that a tax sale purchaser’s secured claim qualifies as a “tax claim” under 11 U.S.C. § 511(a), and that the applicable nonbankruptcy law—the Illinois Property Tax Code—provides an 18% annual interest rate for such claims in Cook County. The court also declined to impose sanctions related to briefing errors, concluding they did not materially affect the appeal. View "Romero v Corona Investments, LLC" on Justia Law

With Purpose, Inc., a financial technology start-up, filed for Chapter 7 bankruptcy in February 2023. Prior to the bankruptcy, With Purpose, Inc. and the Ayers parties, who included a co-founder and early investors, were engaged in arbitration with claims and counterclaims involving both With Purpose, Inc. and Toby Neugebauer, another co-founder. When the bankruptcy was filed, the Ayers parties ceased pursuing claims against the debtor in line with the automatic stay, but continued to pursue claims—including seeking depositions and filing supplemental claims—against Neugebauer. Neugebauer failed to appear for several depositions and ultimately sought relief in bankruptcy court to enforce the automatic stay.The United States Bankruptcy Court for the Northern District of Texas found that the Ayers parties had willfully violated the automatic stay by pursuing certain claims and depositions against Neugebauer, specifically a breach-of-fiduciary-duty claim belonging to the bankruptcy estate. The bankruptcy court awarded Neugebauer actual damages, including attorneys’ fees. The United States District Court for the Northern District of Texas affirmed the bankruptcy court’s rulings, rejecting arguments that Neugebauer lacked prudential standing, that the violation was not willful, and that the damages award was excessive.The United States Court of Appeals for the Fifth Circuit reviewed the case. It held that Neugebauer, as a creditor, had standing to enforce the automatic stay under 11 U.S.C. § 362(k) and Fifth Circuit precedent. The court concluded that the Ayers parties willfully violated the automatic stay by pursuing estate property claims and depositions against Neugebauer. It further determined that the award of actual damages, including attorneys’ fees, was not clearly erroneous. The Fifth Circuit affirmed the decisions of the bankruptcy and district courts. View "Ayers v. Neugebauer" on Justia Law

A major radio broadcasting company sought to purchase national radio audience data from a market research firm, which is the sole supplier of such data in the United States. The broadcaster also desired to buy the firm’s local radio audience data in select markets, while sourcing local data from a competitor in other markets. In 2024, the research firm instituted a policy requiring national broadcasters to purchase its local data in every market where they operate in order to access the full national report. This policy forced the broadcaster to choose between buying all local data from the firm or losing access to the essential national data product.The broadcaster sued in the United States District Court for the Southern District of New York, alleging that the firm’s policy constituted an unlawful tying arrangement under the Sherman Act. After discovery and a hearing, the district court found that the firm used its monopoly power in the national data market to coerce customers into buying local data products, resulting in anticompetitive effects in local markets by excluding competitors. The district court granted a preliminary injunction prohibiting the firm from enforcing its tying policy and from charging commercially unreasonable rates for the national report as a standalone product. The firm’s subsequent counterclaims and the broadcaster’s bankruptcy petition led the district court to stay litigation of the counterclaims, but not the broadcaster’s claims.The United States Court of Appeals for the Second Circuit reviewed the district court’s order for abuse of discretion. The appellate court held that constructive tying—where pricing effectively conditions the purchase of one product on another—can violate the Sherman Act. It affirmed the district court’s findings regarding coercion, anticompetitive effects, irreparable harm, and the tailored injunction, and held that the bankruptcy did not require a stay of the appeal. The preliminary injunction was affirmed. View "Cumulus Media New Holdings Inc. v. The Nielsen Co. (US), LLC" on Justia Law

After Hurricane Ida and other storms struck Louisiana, thousands of residents hired a Houston-based law firm under contingent fee contracts to pursue damage claims. Concerns emerged regarding the firm’s handling of these cases, leading to disciplinary and sanction actions by multiple courts. The Louisiana Supreme Court suspended the firm’s lead attorney’s license and stayed the firm’s cases in state courts. Subsequently, the firm withdrew or was discharged from virtually all remaining cases, and successor law firms resolved many claims. The firm filed for bankruptcy and asserted claims against successor law firms for attorney fees and costs from settlements, sparking disputes over the validity of its contracts in light of alleged misconduct.The United States District Court for the Southern District of Texas, after a jury demand by a successor firm, withdrew the case from bankruptcy court and certified several questions to the Supreme Court of Louisiana. The parties agreed that Louisiana substantive law governs the fee dispute. No factual findings were made about the misconduct allegations; the federal court and Louisiana Supreme Court addressed questions hypothetically.The Supreme Court of Louisiana held that a contingent fee contract formed as a result of unethical or illegal conduct by an attorney is absolutely null, and the attorney cannot recover fees or costs, even on a quasi-contract or quantum meruit basis. If an attorney engages in misconduct after a valid contract is formed, recovery of fees and costs is governed by the Saucier v. Hayes Dairy Products, Inc. and O’Rourke v. Cairns framework, which allows for fee allocation based on the nature and gravity of the misconduct. The Court clarified that any person, including successor law firms, may assert absolute nullity of such contracts. The Court also declined to address procedural questions governed by federal law, such as whether a judge or jury should determine fee reductions in federal court. View "IN RE: MMA LAW FIRM, PLLC" on Justia Law

A debtor in bankruptcy, Scarlett Bowman, challenged the ability of a passive trust, Towd Point Mortgage Trust 2016-4, U.S. Bank National Association, to collect interest and fees on a mortgage loan it held, arguing that Towd was not licensed under the Maryland Mortgage Lender Law. The asset at issue was a residential property subject to a note and deed of trust assigned to Towd, a passive trust that did not originate the loan but simply held it. It was undisputed that Towd was unlicensed, but the parties disputed whether a license was required under the relevant Maryland law.Previously, the United States Bankruptcy Court for the District of Maryland certified questions to the Supreme Court of Maryland, because the issue of whether passive trusts were required to be licensed under the Maryland Mortgage Lender Law had not been settled by any controlling appellate decision. The dispute arose after the Appellate Court of Maryland’s decision in Estate of Brown v. Ward, 261 Md. App. 385 (2024), which held that passive trusts could be required to obtain a license as “credit grantors” under a different statutory scheme (OPEC), but did not address the Mortgage Lender Law itself. Following Brown and regulatory guidance, the state’s financial regulator attempted to require licensure of passive trusts for all mortgage loans. In response, the Maryland General Assembly enacted the Maryland Secondary Market Stability Act of 2025 to clarify that passive trusts were exempt from licensure under the Mortgage Lender Law.The Supreme Court of Maryland held that the Maryland Mortgage Lender Law did not require passive trusts to obtain a mortgage lender license before the effective date of the Secondary Market Stability Act. Brown did not interpret or change the Mortgage Lender Law’s requirements. Because passive trusts were never subject to the law’s licensing requirement, the subsequent legislative exemption was a clarification rather than a restoration or retroactive change. The court answered the certified question in the negative and did not reach the remaining questions. View "In re: Bowman" on Justia Law

The case concerns actions taken by the former CEO of a prominent cryptocurrency exchange and a related trading firm. The defendant, who exercised substantial control over both entities, was accused of misappropriating billions of dollars of customer funds. These funds, which customers believed would be safely held and used only for authorized transactions, were instead funneled to the trading firm and used for various unauthorized purposes, including investments, political contributions, and purchases of real estate. The collapse of cryptocurrency markets in 2022, followed by a rapid loss of customer confidence and mass withdrawals, ultimately led to the bankruptcy of both the exchange and the trading firm.After the bankruptcy, the defendant was indicted in the United States District Court for the Southern District of New York on several counts of fraud and conspiracy. The government’s case was supported by testimony from the defendant’s close associates, who described how the defendant orchestrated the transfer and misuse of customer funds, and by business records and communications. The defendant argued that he believed all customers would ultimately be repaid and that he acted in good faith. The jury found the defendant guilty on all counts, and the district court sentenced him to 25 years in prison, imposed a three-year term of supervised release, and ordered a forfeiture of approximately $11 billion.On appeal to the United States Court of Appeals for the Second Circuit, the defendant challenged the district court’s evidentiary rulings, jury instructions, discovery-related decisions, and the forfeiture order. The Second Circuit held that the district court did not err in its evidentiary rulings, instructions, or discovery decisions, and that the forfeiture was authorized and not constitutionally excessive. The judgment of the district court was affirmed. View "U.S. v. Bankman-Fried" on Justia Law

Two individuals attended a demonstration in San Juan, Puerto Rico, on May 1, 2018, where they allege that officers of the Puerto Rico Police Bureau used excessive force against them, including the use of tear gas and rubber bullets. In April 2019, they filed lawsuits in the United States District Court for the District of Puerto Rico, asserting violations of their constitutional rights and seeking both injunctive and monetary relief. The suits named the then-Governor and other officials and employees of the Commonwealth, including police officers, as defendants, with claims brought against some defendants in their personal capacities.During this time, the Commonwealth of Puerto Rico was undergoing bankruptcy-like restructuring under Title III of PROMESA, and, in 2022, the Title III court confirmed a Plan of Adjustment, which discharged certain claims against the Commonwealth and enjoined pursuit of those claims. The district court stayed the plaintiffs’ lawsuit pending a determination of whether the Plan discharged their claims. On September 30, 2025, the Title III court held that the Plan did not discharge personal-capacity claims against Commonwealth officials or employees, thus allowing the plaintiffs to proceed. The Financial Oversight and Management Board appealed this decision.The United States Court of Appeals for the First Circuit reviewed the Title III court’s factual findings for clear error and its legal conclusions de novo. The appellate court held that the discharge and related injunction in the confirmed Plan of Adjustment do not apply to claims against Commonwealth officers or employees sued in their personal capacities. The court reasoned that discharging such claims would amount to a non-consensual third-party release, which the Plan expressly does not provide. Accordingly, the First Circuit affirmed the Title III court’s decision in full. View "Hernandez Zorilla v. FOMB" on Justia Law

Thomas Keathley and his wife filed for Chapter 13 bankruptcy in December 2019. During the bankruptcy proceedings, they were required to disclose all assets, including any claims against third parties. In August 2021, while the bankruptcy case was still open, Keathley was involved in a car accident with an employee of Buddy Ayers Construction, Inc. He hired a personal injury attorney and told his bankruptcy counsel that he intended to file a lawsuit, but neither he nor his counsel disclosed this potential claim to the Bankruptcy Court. Later, Keathley filed a negligence lawsuit in federal district court without updating his bankruptcy disclosures.Buddy Ayers Construction moved for summary judgment in the U.S. District Court for the Northern District of Mississippi based on judicial estoppel, arguing Keathley was barred from bringing the lawsuit because he had not disclosed the claim to the Bankruptcy Court. When faced with the motion, Keathley amended his bankruptcy filings to include the claim and submitted affidavits asserting the omission was inadvertent. The District Court, following Fifth Circuit precedent, granted summary judgment for Buddy Ayers Construction, finding the omission was not inadvertent because Keathley knew of the facts and had a potential motive to conceal the claim. The United States Court of Appeals for the Fifth Circuit affirmed, though a concurring judge questioned whether this approach furthered the goals of judicial estoppel.The Supreme Court of the United States reviewed the case and held that courts must examine the totality of the circumstances to determine whether a debtor’s omission in bankruptcy was inadvertent or mistaken for purposes of judicial estoppel. The Court found that the Fifth Circuit’s rule—which considered only whether the debtor knew of the claim and had a motive to conceal—was too rigid and overly broad for an equitable doctrine. The Supreme Court vacated the Fifth Circuit’s judgment and remanded the case for further proceedings. View "Keathley v. Buddy Ayers Construction, Inc." on Justia Law

Two individuals filed Chapter 13 bankruptcy petitions, each proposing repayment plans that prioritized payment of their attorneys’ fees before distributing funds to nonpriority unsecured creditors, such as the City of Chicago. Both debtors had below-median incomes and lived in Illinois. One plan proposed to pay secured and priority creditors, the trustee, and attorneys’ fees, with any leftover funds distributed pro rata to nonpriority unsecured creditors. The other plan left no remaining funds for nonpriority unsecured creditors after paying attorneys’ fees.The City of Chicago objected to both plans in the United States Bankruptcy Court for the Northern District of Illinois. The City argued that these plans violated 11 U.S.C. § 1325(b)(1)(B) because they allocated projected disposable income to attorneys’ fees, claiming that bankruptcy attorneys are not unsecured creditors, and thus should not receive such payments. Alternatively, the City argued that even if attorneys are unsecured creditors, they were ineligible for payment because they had not filed proofs of claim. The bankruptcy court overruled the City’s objections, confirming both plans. The court adopted its reasoning from previous cases, finding that attorneys’ fees could be paid during the commitment period and that attorneys did not need to file proofs of claim for payment.On appeal, the United States Court of Appeals for the Seventh Circuit affirmed the bankruptcy court’s decision. The Seventh Circuit held that Chapter 13 plans may provide for the payment of attorneys’ fees before or at the same time as payments to nonpriority unsecured creditors during the commitment period, as required by other sections of the Bankruptcy Code. The court also held that bankruptcy attorneys, as holders of administrative priority claims, are not required to file proofs of claim to receive payment under the plan. View "City of Chicago v Falkner" on Justia Law