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The Ninth Circuit affirmed the district court's decision affirming the bankruptcy court's summary judgment denying discharge of two individual Chapter 11 debtors' debt arising from a state-court judgment for fraud and misrepresentation. The panel held that the Chapter 11 plan provided for the liquidation of all or substantially all of the property of the bankruptcy estate under 11 U.S.C. 1141(d)(3)(A); debtors did not engage in business after consummation of the Chapter 11 plan, because they were simply employees in businesses owned or operated by others; and, assuming that section 1141(d)(3) does not require that the debtor engage in a pre-petition business, the statute was not satisfied by mere employment in someone else's business after consummation of a Chapter 11 plan. View "Hyun J. Um v. Spokane Rock I, LLC" on Justia Law

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After initiating Chapter 11 bankruptcy proceedings, Debtors entered into an Agreement: NextEra would acquire Debtors’ 80% interest in Oncor, the largest electricity transmission and distribution system in Texas, for approximately $9.5 billion. The Agreement obligated Debtors to pay NextEra $275 million if NextEra did not ultimately acquire Debtors’ interest in Oncor and Debtors either sold to someone else or otherwise emerged from bankruptcy, with several exceptions. If the Public Utility Commission of Texas (PUCT) did not approve the merger, payment would not be triggered if the Agreement was “terminated . . . by [NextEra] . . . and the receipt of PUCT Approval (without the imposition of a Burdensome Condition) [wa]s the only condition . . . not satisfied or waived in accordance with this Agreement.” About a year after approving the Agreement, and after PUCT expressed concern about the condition, the bankruptcy court granted a motion for reconsideration and disallowed the Termination Fee in the event that the PUCT declines to approve the transaction and, as a result, the agreement is terminated, regardless of whether the Debtors or NextEra subsequently terminates the agreement. Were it not for that order, NextEra would be entitled to the $275 million. The Third Circuit affirmed, rejecting NextEra’s arguments that the motion was untimely and, alternatively, that the motion should have been denied on the merits because the termination fee provision, as originally drafted, was an allowable administrative expense under 11 U.S.C. 503(b). View "In re: Energy Future Holdings" on Justia Law

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After debtor filed for bankruptcy, she sought to exempt a property tax refund of $1,500, asserting that she could exempt the refund as government assistance based on need under Minnesota law. The Eighth Circuit affirmed the bankruptcy appellate panel's decision sustaining the trustee's objection to the amended exemption. The court held that the property tax refund did not fit within the Minnesota Legislature's definition of government assistance based on need and was therefore not exempt. View "Hanson v. Seaver" on Justia Law

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A bankruptcy court has no authority under federal law to deny an exemption on a ground not specified in the bankruptcy code. Therefore, the Bankruptcy Appellate Panel affirmed the bankruptcy court's decision overruling the trustee's object to debtor's second amended claim of exemptions. View "Rucker v. Belew" on Justia Law

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The Eighth Circuit affirmed the bankruptcy appellate panel's (BAP) decision affirming the bankruptcy court's dismissal of Korley Sears and Robert Sears' claims in a protracted family dispute. The court held that this case, at a minimum, was related to a case under Title 11 and the bankruptcy court had subject matter jurisdiction on this basis. The court also held that plaintiffs impliedly consented to the bankruptcy court's entry of the dismissal order; and the BAP correctly determined that the shareholder standing rule barred plaintiffs' claims because they alleged only injuries that were derivative of debtor AFY. View "Sears v. Sears" on Justia Law

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Younge, an African-American man, was fired by WPHL, a Tribune television station. Younge claims WPHL subjected him to a hostile work environment because it scheduled him to train under a white co-worker who used racial epithets and that he was wrongfully terminated because of his race and/or color. Younge filed a complaint with the Pennsylvania Commission on Human Relations but chose to litigate in Bankruptcy Court after Tribune filed a Chapter 11 bankruptcy petition. That court disallowed his claims. In the district court, Younge challenged, for the first time, the Bankruptcy Court’s jurisdiction. The district court held he impliedly consented to jurisdiction and that the court correctly disallowed his claims. The Third Circuit affirmed. Younge voluntarily submitted to the Bankruptcy Court's jurisdiction: he filed a proof of claim, a response to Tribune’s objection, and a supplemental response, and appeared at a hearing. The Bankruptcy Court’s proceedings did not abridge his right to procedural due process, his right to a jury trial, or his right to counsel. The court rejected Younge’s Commerce Clause argument that the Bankruptcy Court’s local-counsel requirement inures to the disadvantage of out-of-state litigants. The lower courts correctly decided Younge’s hostile work environment claim. Younge did not prove respondeat superior liability. The record did not touch on WPHL’s knowledge of racial animus—a key facet of Younge’s claim-- and WPHL offered a legitimate, nondiscriminatory reason for his termination. Younge failed to demonstrate pretext. View "Tribune Media Co. v. Younge" on Justia Law

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Sovereign immunity does not preclude an award of emotional distress damages against the United States for willful violation of an automatic stay. The Ninth Circuit reversed the district court's judgment reversing the bankruptcy court's award of damages to debtors for the IRS's violation of the Bankruptcy Code's automatic stay. The panel held that Congress waived sovereign immunity for a "money recovery" under certain bankruptcy provisions, including 11 U.S.C. 362(k), which allows an individual to recover "actual damages" for a willful violation of the automatic stay. The panel remanded with instructions to consider the government's challenges on the merits. View "Hunsaker v. United States" on Justia Law

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The Ninth Circuit affirmed the district court's decision affirming the bankruptcy court's dismissal of a Chapter 11 petition filed by the former board members of Sino. The panel held that the bankruptcy court properly dismissed the action because plaintiffs lacked corporate authority under Nevada law when they filed the petition where a receiver appointed by the Nevada state court already had removed them from the corporation's board of directors. Therefore, plaintiffs were not authorized to file the petition on behalf of the corporation. View "Sino Clean Energy, Inc. v. Seiden" on Justia Law

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The Fifth Circuit affirmed the bankruptcy court's finding that proceeds of debtor's liability police were property of the bankruptcy estate. The court held that, in limited circumstances such as the one here, where a siege of tort claimants threaten debtor's estate over and above the policy limits, the proceeds are property of the estate. In this case, over $400 million in related claims threatened debtor's estate over and above the $5 million insurance policy limit, giving rise to an equitable interest of debtor in having the proceeds applied to satisfy as much of those claims as possible. View "Martinez v. OGA Charters, LLC" on Justia Law

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Seven Counties, a nonprofit provider of mental health services, attempted to file for Bankruptcy Code Chapter 11 reorganization. For decades, Seven Counties has participated in Kentucky’s public pension plan (KERS). Because the rate set for employer contributions has drastically increased in recent years, Seven Counties sought to reject its relationship with KERS in bankruptcy. The bankruptcy court and the district court both held that Seven Counties is eligible to file under Chapter 11 and that the relationship between Seven Counties and KERS is based on an executory contract that can be rejected. The Sixth Circuit affirmed in part. Seven Counties is only eligible to be a Chapter 11 debtor if it is a “person” under 11 U.S.C. 109(a); a “governmental unit” is generally excluded from the category of “person.” Because the Commonwealth does not exercise the necessary forms of control over Seven Counties for it to be considered an instrumentality of the Commonwealth, Seven Counties is eligible to file. Seven Counties characterized its relationship with KERS as contractual, such that, to the extent it is executory, it may be rejected in bankruptcy, 11 U.S.C. 365. KERS argued the relationship is purely statutory, similar to an assessment, such that it cannot be rejected. The Sixth Circuit certified the question of the nature of the relationship to the Kentucky Supreme Court. View "Kentucky Employees. Retirement System v. Seven Counties.Services, Inc." on Justia Law