Cadle Co. v. Moore, III, et al.

Over the creditor's protests, the trustee sought to settle the claims at issue, and the creditor ultimately re-acquired them at auction. The bankruptcy court then found that the creditor had paid the trustee's attorney's fees even after the two had become adverse over the settlement issue, and dismissed the adversary proceeding based on its inherent power to sanction a party for abuse of judicial process. The district court affirmed and the creditor appealed. The court concluded that the bankruptcy court had constitutional authority to enter final judgment in this adversary proceeding; because the creditor failed to file a timely motion requesting the bankruptcy court to abstain, and because the claims at issue were "core" in nature, the district court's decision not to abstain was proper; and because the bankruptcy court failed to find by clear and convincing evidence that the creditor acted in bad faith, it erred in invoking its inherent sanction power. Accordingly, the court reversed and remanded for further proceedings. View "Cadle Co. v. Moore, III, et al." on Justia Law