Justia Bankruptcy Opinion Summaries

Articles Posted in U.S. 5th Circuit Court of Appeals
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The Gartleys filed an adversary proceeding in bankruptcy court against their former business partner, debtor, and his wife, co-debtor. The court concluded that In re Strangel remained good law, and the failure to file a timely notice of appeal in the district court leaves the district court without jurisdiction to hear the appeal. Because the district court did not have jurisdiction to hear debtor's appeal, the court dismissed the appeal for lack of jurisdiction, vacated the decision of the district court, and remanded with instructions to dismiss the appeal. View "Smith v. Gartley" on Justia Law

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Appellant was involved in two lawsuits with appellees and both lawsuits resulted in sanctions against him and an award of attorney's fees in favor of appellees. After appealing, appellant filed a voluntary petition for relief under Chapter 7 of the Bankruptcy Code. At issue was whether defensive appellate rights were considered property under Texas law. The court affirmed the district court's determination that defensive appellate rights were property under Texas law and saleable by the bankruptcy estate. View "Croft v. Lowry, et al." on Justia Law

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BPRE filed for Chapter 11 bankruptcy relief and then filed an adversary complaint in the bankruptcy court alleging various state-law tort and contract claims against RML. The bankruptcy court entered a final judgment denying relief and the district court affirmed. In Stern v. Marshall, the Supreme Court determined that the bankruptcy court lacked the constitutional authority to enter final judgment on the debtor's state-law counterclaim even thought the statute conferred such authority. Although the strict holding in Stern limited bankruptcy-court authority in one isolated respect and the question presented was a narrow one, its sweeping reasoning was broad and logically must be applied to BPRE's claims here. Therefore, the court vacated the district court's judgment and remanded, concluding that the bankruptcy court lacked Article III standing to enter final judgment on BPRE's claims. View "BP RE, L.P. v. RML Waxahachie Dodge, L.L.C., et al." on Justia Law

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After South Louisiana Ethanol filed for bankruptcy, CHS filed suit contending that South Louisiana Ethanol's option contract with Plaquemines constituted the assignment of a litigious right under Louisiana law, entitling CHS to redeem the litigious right by reimbursing Plaquemines for the cost of the option contract plus interest. The district court granted Plaquemines's motion to dismiss. The court concluded that the sale fit within the statutory judicial-sale exception to redemption, as described by Bluefields S.S. Co. v. Lala Ferreras Cangelosi S.S. Co. and its predecessors. Accordingly, the court affirmed the judgment of the district court, holding that the law at issue did not apply to judicial sales. View "CHS, Inc. v. Plaquemines Holdings, L.L.C." on Justia Law

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Flugence filed for Chapter 13 bankruptcy protection in 2004 and a plan was confirmed. In 2007, she was injured in a car accident and hired an attorney. Weeks later an amended Chapter 13 plan was confirmed. In 2008 Flugence sued for personal injury. Months later, Flugence was discharged. She never disclosed to the bankruptcy court that she might prosecute a personal-injury claim. The personal-injury defendants discovered the non-disclosure and had the bankruptcy case reopened. The bankruptcy court declared that although Flugence was estopped from pursuing the claim on her own behalf, her bankruptcy trustee was not estopped and could pursue the claim for the benefit of creditors. The district court reversed with respect to estopping Flugence, stating that Flugence did not have a potential cause of action prior to her initial application for bankruptcy protection, and relied on her attorney’s advice concerning disclosure. The Fifth Circuit reinstated the bankruptcy court holding. There is a continuing duty to disclose in a Chapter 13 proceeding and Flugence met all elements of estoppel. Nothing requires that recovery be limited strictly to the amount owed creditors; after a claim is prosecuted and creditors and fees have been paid, any remaining recovery must be returned to the personal-injury defendants. View "Flugence v. Axis Surplus Ins. Co." on Justia Law

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Appellant appealed the judgment of the district court affirming the final judgment entered by the bankruptcy court on certain state-law counterclaims that appellant filed against appellees, attorneys who were authorized by the bankruptcy court to represent appellant in a separate lawsuit. The court concluded that the bankruptcy court was within its authority to enter a final judgment on appellant's state-law counterclaims for malpractice and breach of fiduciary duty, as these claims were necessarily resolved in the course of ruling on appellees' fee applications; the court agreed with the bankruptcy court that these claims failed on the merits; the court upheld the final judgment on the fee applications; the court held that the bankruptcy court erred in entering a final judgment on appellant's Texas Deceptive Trade Practices Act state-law counterclaim because it was not necessary to resolve it in the course of ruling on the attorneys' fee applications. Accordingly, the court affirmed in part, reversed in part, and remanded for further proceedings. View "Frazin v. Haynes & Boone, L.L.P., et al." on Justia Law

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Lamesa filed suit against Liberty Mutual alleging that Liberty Mutual was liable under a federally-required surety bond for the alleged misconduct of its principal, a trustee in a Chapter 7 bankruptcy proceeding. On appeal, Liberty Mutual appealed the district court's decision to affirm the bankruptcy court's judgment that the trustee had committed gross negligence and Liberty Mutual, as the trustee's surety, was liable for damages under the terms of the bond. The court held that the controlling limitations period in this case was provided by 11 U.S.C. 322(d). Because Liberty Mutual did not contest that Lamesa's claim was timely under that provision, the court affirmed the bankruptcy court's conclusion that Lamesa's suit was not time-barred. On the merits, the court concluded that the bankruptcy court's finding that the trustee was grossly negligent in performing her duties was not clearly erroneous; expert testimony was not necessary to establish that the trustee failed to meet her standard of care; and Liberty Mutual failed to demonstrate that the district court's damage award was clearly erroneous. Accordingly, the court affirmed the judgment of the district court. View "Liberty Mutual Ins. Co. v. USA by Lamesa National Bank" on Justia Law

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SWT appealed the district court's holding that a lien on its principal asset held by Acceptance survived confirmation of a Chapter 11 bankruptcy reorganization plan. In light of the court's interpretation of the definition of the word "participate" and in accordance with persuasive authority from its sister circuits, the court held that meeting the participation requirement in In re Ahern Enterprises required more than mere passive receipt of effective notice. Accordingly, the court held that Acceptance's passive receipt of notice did not constitute participation within the meaning of this test and affirmed the judgment of the district court. View "Acceptance Loan Co., Inc. v. S. White Transp., Inc." on Justia Law

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This case stemmed from a dispute involving a Master Services Agreement (MSA) between BHP and Deep Marine. At issue on appeal was whether Underwriters could enforce BHP's contractual insurance, defense, and indemnity obligations to Deep Marine after Deep Marine's bankruptcy discharge. The court concluded that, even assuming arguendo that the MSA required indemnification against liability and that Deep Marine will eventually be held liable, Underwriters still could not prevail because BHP's indemnification obligation runs only to Deep Marine; Deep Marine would not, and could not, incur any loss in the Duval action, so Underwriters could not seek indemnification from BHP; because BHP had agreed to continue providing Deep Marine with a nominal defense, Underwriters would not have a breach of contract claim against BHP; the additional insured and primary insurance requirements do not apply BHP's self-insurance; BHP's only obligation was an indemnification obligation to Deep Marine; unlike Underwriters, it had no secondary liability to injured tort victims, like Duval; and Duval had no claim against BHP and, therefore, tender under Federal Rule of Civil Procedure 14(c) was improper. Accordingly, the court affirmed the judgment. View "Duval v. Northern Assurance Co." on Justia Law

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Debtor's Chapter 13 case was converted to Chapter 11 after a creditor filed a claim that caused his scheduled debts to exceed the debt ceiling for Chapter 13 cases. The denial of confirmation of debtor's organization plan was certified for appeal from the bankruptcy court pursuant to 28 U.S.C. 158(d)(2)(A)(i) and (ii). At issue on appeal was whether Chapter 11's absolute priority rule, 11 U.S.C. 1129(b)(2)(B), as amended by the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA), Pub. L. No. 109-8, 119 Stat. 23, applied in such individual debtor cases. Using standard tools of statutory interpretation, and in accord with two other circuits, the court held that it did and affirmed the bankruptcy court's order denying confirmation. View "In the Matter of Philip Lively" on Justia Law