Justia Bankruptcy Opinion Summaries

The district court affirmed a bankruptcy court's confirmation of a Chapter 11 plan of reorganization under 11 U.S.C. 524(g), a special provision for the reorganization of companies facing substantial asbestos-related liability. Appellants were several insurance companies that did not reach settlements with Thorpe and Pacific, together with Debtors in bankruptcy court, and who were denied standing to challenge the reorganization plan. The court affirmed the district court's conclusion that the plan preempted appellants' state law contract rights; disagreed with the position of Debtors that the appeal was equitably moot; and in reaching the merits, reversed the district court's conclusion that appellants lacked standing. The court remanded to the district court with instructions that it return the case to the bankruptcy court to give appellants the opportunity to present their proof and argument. View "In re: Thorpe Insulation Co." on Justia Law

Vegas Diamond and Johnson Investments appealed from the district court's order granting the Ex Parte Motion to Dissolve Temporary Restraining Order filed by the FDIC as receiver for La Jolla Bank. The district court determined that 12 U.S.C. 1821(j), the anti-injunction provision of the Financial Institutions Reform, Recovery and Enforcement Act of 1989 precluded a court from enjoining the FDIC from conducting a trustee's sale of the real properties. The court held that the appeal was moot because the real properties were sold during the pendency of the appeal. View "Vegas Diamond Properties, LLC, et al. v. La Jolla Bank FSB, et al." on Justia Law

This case was related to certain documents produced in discovery and filed in the bankruptcy court, containing allegations that Father M and D, two priests who were not parties to the Portland Archdiocese's bankruptcy case, had sexually abused children. The bankruptcy court held that the discovery documents at issue could be disclosed to the public, because the public's interest in disclosure of these discovery documents outweighed the priests' privacy interest under Rule 26(c) and that the documents filed in court could be disclosed because they did not contain "scandalous" allegations for purposes of 11 U.S.C. 107(b). The court affirmed the bankruptcy court's ruling as to the release of discovery documents disclosing Father M's name under Rule 26(c), because the public's serious safety concerns could not be addressed if Father M's name was redacted. But because the record did not reflect the existence of any similar significant public interest that required the disclosure of Father D's name, the court held that Father D's name must be redacted from any discovery documents that were released. Finally, because of the mandatory duty to keep scandalous material confidential at the request of a party under section 107(b), the court reversed the decision to release the punitive damages memorandum and attached documents.

This case arose when the SEC instituted an enforcement action against several companies, which, among other things, led to the court appointment of a receiver. Debtor was an attorney who represented some of the defendants in this enforcement action. At issue was whether the exception to discharge in 11 U.S.C. 523(a)(19) applied when the debtor himself was not culpable for the securities violation that caused the debt. The bankruptcy court held that the debt was subject to discharge; the district court disagreed and held that the debt was excepted from discharge in bankruptcy. The court held that section 523(a)(19) prevented the discharge of debts for securities-related wrongdoings only in cases where the debtor was responsible for that wrongdoing and debtors who could have received funds derived from a securities violation remained entitled to a complete discharge of any resulting disgorgement order. Therefore, the court reversed the judgment of the district court.

This case stemmed from credit agreements Lehman entities entered into with Palmdale Hills, LLC entities. Palmdale filed for chapter 11 bankruptcy in November 2008 and Lehman subsequently filed eight motions for relief from Palmdale's stay to foreclose on the collateral securing the loans that were in default. The court held that the Bankruptcy Appellate Panel (BAP) correctly held that Lehman had standing to appeal the bankruptcy court's finding that the automatic stay did not prevent equitably subordinating Lehman's claims. The court also held that the BAP correctly determined that the appeal was not moot. The court further held that the BAP correctly determined that Lehman's automatic stay prevented Lehman's claims from being subordinated. Accordingly the court affirmed the BAP's judgment.

Appellants appealed the district court's order affirming the bankruptcy court's decision that they were not entitled to subrogation pursuant to the provisions of 11 U.S.C. 509. With one clarification regarding appellants' predecessor in interest and one exception regarding the creditor, the court adopted the bankruptcy court's discussion and determination denying appellants' assertion that they were entitled to subrogation pursuant to section 509.

This case stemmed from a bankruptcy appeal of a tax debt owed by debtor to the California Franchise Tax Board (FTB). The bankruptcy court and the Bankruptcy Appellate Panel (BAP) found that the debt was not excepted from discharge in debtor's Chapter 7 bankruptcy proceeding. At issue was whether, as a consequence of debtor's prior Chapter 13 Bankruptcy case, the lookback period was suspended and the tax debt was not discharged. The court held that when the bankruptcy court confirmed debtor and debtor's husband's Chapter 13 plan, the estate property revested in debtor and became debtor's property, thus lifting the applicable stay provisions. Since this revesting occurred before the tax debt became due, no stay precluded the FTB from collection on the debt under 11 U.S.C. 362. Consequently, the tax debt was not excepted from the Chapter 7 discharge, and the principles of equitable tolling did not apply to extend the lookback period as the FTB was neither precluded from collecting on the tax debt nor did it actively try to protect its claim. Accordingly, the court held that the debt was discharged and affirmed the BAP.

Debtor filed a Chapter 11 Bankruptcy petition in 1998 and submitted a plan of reorganization ("Plan"), continuing to operate as a debtor-in-possession. Article X of the confirmed Plan provided for the discharge of all debts pursuant to which debtor was the "primary obligor." In 2007, the IRS contacted debtor's principal officers regarding potential assessment of a Trust Fund Recovery Penalty ("TFRP") pursuant to 26 U.S.C. 6672. At issue was whether the collection of a TFRP from the principal officers violated the express terms of Article X discharging such claims. The court affirmed the bankruptcy court's dismissal of the action for lack of jurisdiction where the relief sought by debtor would effectively preclude the IRS's collection of a section 6672 assessment and therefore, fell squarely within the reach of the Anti-Injunction Act, 26 U.S.C. 7421(a), and the court's holding in American Bicycle Ass'n v. United States. The court also held that, in light of the well-established principle that section 6672 liability was a separate and distinct liability, the court agreed with the bankruptcy court's alternative holding that, although a corporation could be the primary obligor on its own underlying tax obligation, it was not the primary obligor on the separate and distinct assessment under section 6672. Rather, the corporate officers were the primary obligors on the TFRP liabilities, as these liabilities were assessed independently under section 6672 for the officers' own willful conduct. Accordingly, the judgment of the bankruptcy court was affirmed.