Justia Bankruptcy Opinion Summaries

The IRS challenged the district court's judgment upholding the bankruptcy court's decision to grant the objection of the reorganized Worldcom debtors to the IRS's proof of claim for taxes owed and the debtors' refund motion for the taxes WorldCom had already paid. At issue was whether WorldCom must pay federal excise taxes on the purchase of a telecommunications service that connected people using dial-up modems to the Internet. The court held that WorldCom purchased a "local telephone service" when it paid for the telecommunications service and that WorldCom must therefore pay federal communication excise taxes on those transactions. Accordingly, the court reversed and remanded for further proceedings. View "In Re: WorldCom, Inc." on Justia Law

Appellants sought to avoid and recover certain payments made by debtor, QWUSA, to appellees, noteholders, in exchange for private placement notes that had been issued by one of debtor's affiliates. On appeal, appellants challenged the district court's affirmance of the bankruptcy court's grant of appellees' motion for summary judgment. The bankruptcy court held that the payments were exempt from avoidance because they were both "settlement payments" and "transfers made... in connection with a securities contract," under 11 U.S.C. 546(e). The court affirmed the district court's judgment, concluding that the payments fell within the safe harbor for "transfers made... in connection with a securities contract." View "In re: Quebecor World (USA), Inc." on Justia Law

SEFCU, a lender, appealed from the district court's reversal of an order of the bankruptcy court and remanding the case to the bankruptcy court for further proceedings. The district court concluded that SEFCU violated the automatic stay provision of the Bankruptcy Code, 11 U.S.C. 362, when, after lawfully repossessing a vehicle belonging to debtor, it failed to deliver the vehicle to him notwithstanding its knowledge of debtor's pending petition under Chapter 13 of the Bankruptcy Code. The court concluded that SEFCU "exercised control" over "property" of debtor's bankruptcy estate in contravention of section 362 when it failed to relinquish the vehicle promptly after it learned that a Chapter 13 petition was filed. Consequently, under section 362(k), SEFCU was liable for debtor's actual damages resulting from the wrongful retention, costs, and attorneys' fees. Accordingly, the court affirmed the judgment. View "Weber v. SEFCU" on Justia Law

Morning Mist appealed from the judgment of the district court affirming the order of the bankruptcy court, which determined that the debtor had its "center of main interests" (COMI) in the British Virgin Islands (BVI), and therefore recognized debtor's liquidation in the BVI as a "foreign main proceeding" under 11 U.S.C. 1517. To determine the proper COMI, the court considered the relevant time period for weighing the interests, and the principles and factors for determining which jurisdiction predominated. The court concluded that the relevant time period was the time of the Chapter 15 petition, subject to an inquiry into whether the process had been manipulated. The relevant principle was that the COMI lies where the debtor conducts its regular business, so that the place was ascertainable by third parties. The statute included a presumption that the COMI was where the debtor's registered office was found. Among other factors that could be considered were the location of headquarters, decision-makers, assets, creditors, and the law applicable to most disputes. Applying these principles, the court affirmed the decision of the district court recognizing the BVI liquidation as a foreign main proceeding. View "Morning Mist Holdings Ltd. v. Krys" on Justia Law

FHFA, as conservator of Fannie Mae and Freddie Mac, sued UBS for fraud and misrepresentation in connection with the marketing and sale of mortgage-backed securities. The district court denied UBS's motion to dismiss and certified its decision for interlocutory appeal. The court held that the "extender statute" in section 4617(b)(12) of the Housing and Economic Recovery Act of 2008 (HERA), Pub. L. No. 110-289, 122 Stat. 2654, applied to this action, and thus concluded that the district court correctly denied UBS's motion to dismiss for untimeliness. The court further held that FHFA had standing to bring this action and the district court correctly denied UBS's motion to dismiss for lack of standing. View "Federal Housing Fin. Agency v. UBS Americas Inc." on Justia Law

Appellants, investors who lost money in the multi-billion dollar Ponzi scheme perpetrated by BLMIS, appealed from the district court's judgment affirming the bankruptcy court order affirming the trustee's denial of appellants' claims against BLMIS under the Securities Investor Protection Act (SIPA), 15 U.S.C. 78aaa et seq., based on the trustee's determination that appellants did not qualify as BLMIS "customers" under SIPA. The court agreed and affirmed the judgment, concluding that appellants could not reasonably have thought that the Feeder Funds deposited their money with or established accounts for them at BLMIS. The bankruptcy court did not err in concluding that the Feeder Funds were not BLMIS agents. View "In Re: Bernard L. Madoff Investment Securities LLC" on Justia Law

This case stemmed from bankruptcy court proceedings between MCI and CNI where MCI sought to recover from CNI allegedly unpaid telecommunications services. CNI counterclaimed. At issue on appeal was whether the district court properly granted relief under Rule 4(a)(6) to CNI when it claimed that it never received the Civil Rule 77(d) notice and therefore failed to file a timely notice of appeal. The court agreed with the district court that CNI met the express preconditions of Rule 4(a)(6). The court held that relief under the rule was discretionary and its grant in this case was inappropriate. The failure to receive Civil Rule 77(d) notice was entirely and indefensibly the fault of CNI's counsel. Granting such relief in these circumstances was at odds with the purposes and structure of the procedural scheme. Accordingly, the court reversed the order granting the motion to reopen and dismissed CNI's appeal as untimely. View "In re: WorldCom, Inc. v. MCI Worldcom Communications" on Justia Law

Defendant, convicted of substantive and conspiratorial bank fraud and tax crimes, appealed from an amended judgment resentencing him to four months' imprisonment after he was found to have willfully violated probation by failing to pay ordered restitution. Defendant, who declared bankruptcy after his initial sentencing, submitted that the automatic stay provision of the United States Bankruptcy Code, 11 U.S.C. 362(a), temporarily halted his obligation to pay restitution and barred the district court from revoking his probation of nonpayment. At issue was what effect, if any, the Bankruptcy Code's automatic stay provision had on court-ordered conditions of a criminal sentence or proceedings to address violations of those conditions. The court concluded that such orders and proceedings fell within an express exception to the automatic stay because they constituted a "continuation of the criminal action or proceeding." Defendant's alternative argument was meritless. The court dismissed the part of defendant's appeal that asked the court to modify the amended judgment to clarify that he was under no obligation to pay restitution while incarcerated, because it was unripe for adjudication. View "United States v. Colasuonno" on Justia Law

Following the bankruptcy court's confirmation of Charter's proposed plan of reorganization, LDT, as indenture trustee for certain notes issued by CCI, and a CCI shareholder, appealed the confirmation order to the district court. The court affirmed the district court's dismissal of the appeals as moot under the doctrine of equitable mootness. View "In re: Charter Communication" on Justia Law

Plaintiff commenced this action, on behalf of herself and the 181 other individuals in New York State who had received student loan collection letters from defendant. At issue was whether a debt collector's inaccurate representation to a debtor that her student loans were "ineligible" for bankruptcy discharge was a "false, misleading, or deceptive" debt collection practice, in violation of the Fair Debt Collection Practices Act (FDCPA), 15 U.S.C. 1692 et seq. The court held that it was because the least sophisticated consumer would interpret defendant's letter as representing, incorrectly, that bankruptcy discharge of her loans was wholly unavailable to her. Accordingly, the court reversed and remanded. View "Easterling v. Collecto, Inc." on Justia Law