Justia Bankruptcy Opinion Summaries

Articles Posted in U.S. 10th Circuit Court of Appeals
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Plaintiff David Newsome, a litigation trustee appointed by the bankruptcy court, administered the legal claims of Mahalo Energy (USA), Inc. He brought suit against the corporation's former directors and officers for alleged breaches of fiduciary duty. All defendants are Canadian citizens. The defendants moved to have the case dismissed for lack of personal jurisdiction. The district court granted that motion. At issue before the Tenth Circuit was whether or not the district court erred in granting that motion. The Tenth Circuit concluded that defendants cultivated sufficient contacts with the US (specifically, Oklahoma) to justify getting sued there. Furthermore, the Court held that the "fiduciary shield doctrine" did not apply in this case. The Court reversed as to individual defendants, and remanded the case for further proceedings. However, the Court affirmed dismissal with regard to the company's law firm: as an out-of-state firm that performed all of its relevant services out-of-state on an out-of-state transaction, it did not meet the minimum threshold of contact with the forum state to justify personal jurisdiction there. View "Newsome, et al v. Gallacher, et al" on Justia Law

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Pro se appellant John Schoppe petitioned the Tenth Circuit for review of a Tax Court decision that found him liable for tax deficiencies for the years 2002-2007. While the case was proceeding before the Tenth Circuit, Petitioner filed a voluntary bankruptcy petition. That filing prompted the Court to request a supplemental briefing from the parties on whether the automatic bankruptcy stay would apply to appellant's appeal before the Tenth Circuit. Finding that 11 U.S.C. 362(a)(1) of the Bankruptcy Code did not stay this appeal, the Court reviewed the Tax Court decision and affirmed it. View "Schoppe v. CIR" on Justia Law

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Plaintiff-Appellant Eric Rajala, Trustee of the bankruptcy estate of Generation Resources Holding Company, LLC (GRHC), appealed a district court order which granted motions by Defendants-Appellees FreeStream Capital, LLC (FreeStream) and Lookout Windpower Holding Co., LLC (LWHC) to distribute approximately $9 million held in escrow. The amount represented part of the purchase price of a wind power project allegedly developed by GRHC. The Trustee claimed that GRHC had been left with $5 million in debt while the individual Defendants-Appellees and their affiliated entities received some $13 million in proceeds from the sale of several wind power projects, unburdened by the debt. The issue on appeal before the Tenth Circuit was what constituted property of the bankruptcy estate and whether allegedly fraudulently transferred property was subject to the Bankruptcy Code's automatic stay before a trustee recovers the property through an avoidance action. The district court held that allegedly fraudulently transferred property was not part of the bankruptcy estate until recovered and therefore was beyond the reach of the automatic stay. Upon review, the Tenth Circuit affirmed: "[i]n the end, we need not pass upon the constitutionality of such a broad reading. . . . This interpretation gives Congress's chosen language its ordinary meaning, and abides by the rule against surplusage. Further, our reading does not undermine the Bankruptcy Code's goal of equitable distribution, as there exist[s] alternative means of protecting estate assets." View "Rajala v. Garnder" on Justia Law

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The issue before the Tenth Circuit in this case was one of first impression: whether the 2005 amendments to the Bankruptcy code exempted Chapter 11 debtors from the absolute priority rule. The bankruptcy court answered this question affirmatively, and therefore confirmed the Debtors' proposed plan of reorganization over certain creditors' objections that the plan violated the absolute priority rule. On appeal, the bankruptcy appellate panel certified the case for direct appeal. The Tenth Circuit reversed the bankruptcy court's order confirming the plan: "here, the statutory language and legislative history lack any clear indication that Congress intended to erode a pillar of creditor bankruptcy protection." The case was remanded for further proceedings. View "Dill Oil Company, LLC, et al v. Stephens, et al" on Justia Law

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William Satterfield brought suit against Patrick J. Malloy III, the court-appointed trustee of Satterfield's Chapter 7 bankruptcy estate. The district court concluded that the suit was barred because Satterfield's claims were based on actions Malloy took as trustee and Satterfield did not first obtain permission from the bankruptcy court. Satterfield contended that the controlling case law did not apply because Malloy's actions were ultra vires. Upon review, the Tenth Circuit rejected this contention; because Malloy's allegedly wrongful actions were conducted as part of Malloy's duties as trustee. Furthermore, the Court held that Satterfield's action was not authorized by 28 U.S.C. 959 because Malloy was not carrying on the business of the estate, but simply administering its liquidation. View "Satterfield v. Malloy" on Justia Law

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Debtor Peter Woodman filed two timely notices of appeal from an adverse decision by the bankruptcy court. One appeal was heard by the bankruptcy appellate panel (BAP), which dismissed the appeal a month later for failure to prosecute. The other was heard by the district court, which decided to consider the matter despite the prior BAP ruling but ruled against Mr. Woodman on the merits. He appealed the district court's judgment. Finding that the district court lacked jurisdiction to hear his appeal, the Tenth Circuit Court of Appeals vacated the district court's judgment. View "Woodman v. Aspen Hills Properties, et al" on Justia Law

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Debtor Fred Fausett Cranmer filed a Chapter 13 repayment plan, which excluded Social Security income (SSI) from the projected disposable income calculation. The bankruptcy trustee objected to the plan on that basis. The bankruptcy court denied confirmation of the plan, concluding, inter alia, SSI must be included in the projected disposable income calculation and Cranmer's failure to do so meant he did not propose his plan in good faith. Cranmer appealed and the district court reversed. Upon review, the Tenth Circuit Court of Appeals concluded that SSI need not be included in the calculation of projected disposable income and Cranmer's failure to include it was not grounds for finding he did not propose his plan in good faith. View "Anderson v. Cranmer" on Justia Law

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The issue before the Tenth Circuit Court of Appeals in this case concerned whether the amount of a federal tax refund equivalent to the "nonrefundable" portion of the child tax credit was exempt from a bankruptcy debtor's estate under Colorado law. The Bankruptcy Panel for the Tenth Circuit held that the disputed funds were exempt; upon review, the Tenth Circuit Court of Appeals disagreed and reversed, finding that the nonrefundable portion was "property" of the bankruptcy estate within the meaning of 11 U.S.C. 541(a). View "In re: Borgman, et al" on Justia Law

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Tracy Broadcasting is a Nebraska corporation that operated an FM radio station in Wyoming. In 2008, Tracy Broadcasting executed a promissory note for a $1,596,100 loan from Valley Bank & Trust Company (Valley Bank). The note was secured by an agreement dated December 13, 2007, which granted Valley Bank a security interest in various assets, including Tracy Broadcasting's general intangibles and their proceeds. In 2009, Spectrum Scan, LLC obtained a judgment in Nebraska federal court against Tracy Broadcasting in the amount of $1,400,000. Seven months later, Tracy Broadcasting filed a petition under Chapter 11 in Colorado bankruptcy court. The two primary creditors of Tracy Broadcasting were Valley Bank and Spectrum Scan, which was unsecured. The most valuable asset listed was the broadcasting license. The schedules stated that the “proceeds” of the license were “secured to Valley Bank.” Spectrum Scan brought an adversary action to determine the extent of Valley Bank’s security interest. The bankruptcy court ruled that Valley Bank had no priority in the proceeds of the sale of Tracy Broadcasting’s license. The United States District Court for the District of Colorado affirmed. The issue before the Tenth Circuit centered on whether a creditor with a security interest in the general intangibles (and their proceeds) had priority over unsecured creditors in the proceeds of the sale of the license. The bankruptcy court and the district court held that it did not. Upon review, the Tenth Circuit disagreed: "Federal law permits a licensee to grant a security interest in the economic value of its license, and Nebraska law recognizes that a security interest in the proceeds of a license sale attaches when the licensee enters into the security agreement, regardless of whether a sale is contemplated at that time." View "Tracy Broadcasting Corp. v. Spectrum Scan, LLC" on Justia Law

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Stephanie and Kenneth Woolsey attempted to discharge a second mortgage on their home held by Citibank, N.A. through Chapter 13 bankruptcy. In their plan, they took the position that the bankruptcy code voided Citibank’s lien because it was unsupported by any current value in the home. The bank objected to the Woolseys’ plan and eventually persuaded the bankruptcy court to reject it. The district court affirmed the bankruptcy court, and the Woolseys appealed to the Tenth Circuit. In their argument on appeal, "[t]hey choose to pursue instead and exclusively a line of attack long foreclosed by Supreme Court precedent. To be sure, the Woolseys argue[d] vigorously and with some support that the Supreme Court ha[d] it wrong. But, as Justice Jackson reminds us, whether or not the Supreme Court is infallible, it is final." The Tenth Circuit was "obliged" to apply the Supreme Court's current case law and affirmed the district and bankruptcy court's decisions. View "Woolsey, et al v. Citibank, N.A." on Justia Law