Justia Bankruptcy Opinion Summaries

Articles Posted in US Court of Appeals for the Eighth Circuit
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PIRS Capital, LLC (“PIRS”), appeals the district court’s order that affirmed the bankruptcy court’s April 2021 order denying PIRS’s motion to set aside a January 2018 default judgment in the amount of $157,214. PIRS argues it is entitled to this extraordinary post-judgment relief because the bankruptcy trustee did not properly serve her adversary's complaint seeking recovery of preferential transfers. PIRS relies on provisions of Rule 7004(b)(3) of the Federal Rules of Bankruptcy Procedure, the bankruptcy counterpart to Rule 60(b) of the Federal Rules of Civil Procedure.   The Eighth Circuit affirmed. The court held that here, consistent with Espinosa, the bankruptcy court and the district court concluded the bankruptcy court had at least an arguable basis for jurisdiction. First, the trustee arguably complied with Rule 7004(b)(3) by serving PIRS in the manner directed in its Proof of Claim, a direction reinforced by the trustee’s diligent research of PIRS on the DOS website. Second, the trustee sent the summons and complaint by certified mail, return the receipt requested and received the receipt showing the summons and complaint was actually received by a PIRS employee at its Suite 403 address. The Supreme Court in Espinosa expressly stated that receiving actual notice “more than satisfied [PIRS’s] due process rights.”   Further, the court wrote that even if Rule 60(b)(6) relief is not precluded under Kemp, it agrees with the district court that “the circumstances that led to PIRS’s failure to defend were of its own making [and therefore] PIRS cannot establish the existence of exceptional circumstances” that warrant Rule 60(b)(6) relief. View "PIRS Capital, LLC v. Renee Williams" on Justia Law

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A Debtor is appealing a bankruptcy court order dated June 30, 2022 (the “Order”) which disposes of a multitude of matters that were before the court. At the core of this appeal are the Debtor’s repeated motions to reopen his case. A bankruptcy court's decision whether to reopen a bankruptcy case is reviewed for an abuse of discretion.    The Eighth Circuit affirmed. The court explained that after reviewing the Order and the underlying record, it saw no need to address every one of the matters addressed by the bankruptcy court. The court wrote that Debtor states in his Appellant Brief that the bankruptcy court “blanket” denied all 27 of his motions, the Order itself belies that accusation – the court based its ruling on a thorough legal analysis of the individual pleadings and why denial of each was appropriate. A few of the matters involve letters or notices on which the Debtor is not seeking relief. With regard to many of the others, the Debtor mischaracterizes the facts or the law. Further, the court explained that the Bankruptcy Court’s analysis of each of the matters it considered in the Order was thorough and legally sound. View "Bryan Reichel v. Mary Jo A. Jensen-Carter" on Justia Law

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Pocket Plus, LLC, sued Pike Brands, LLC (“Running Buddy”) for trade-dress infringement of Pocket Plus’s portable pouch. The district court granted summary judgment to Running Buddy and awarded it a portion of its requested attorney fees. Pocket Plus appealed the summary judgment, and both parties appeal the attorney fees award.   The Eighth Circuit affirmed. The court wrote there is no genuine dispute that Pocket Plus’s trade dress is functional and thus not protected by trademark law. To grant trade-dress protection for Pocket Plus would be to hand it a monopoly over the “best” portable-pouch design. Trademark law precludes that. Further, Running Buddy argued that the district court abused its discretion in awarding only a portion of the requested fees. The court found no abuse of discretion in finding that this was an exceptional case. It considered the appropriate law, reviewed the litigation history, held a hearing, and explained its decision. View "Pocket Plus, LLC v. Pike Brands, LLC" on Justia Law

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Plaintiff fell victim to a massive Ponzi scheme. Plaintiff sued JP Morgan and Richter Consulting. Plaintiff’s principal theory is that these firms aided and abetted fraud. And even if they did not, the complaint alleges that the transfers to JP Morgan were fraudulent.   The Eighth Circuit affirmed the district court’s dismissal of Plaintiff's complaint. The court explained that early on, JP Morgan agreed to pay over $30 million to settle a group of claims filed by the trustees. To protect the settlement, two courts issued bar orders preventing creditors like Plaintiff from asserting any claims that belong or belonged to one or more of the bankruptcy trustees. Those orders, along with general bankruptcy-standing doctrine, prevent Plaintiff from pursuing JP Morgan separately. The same goes for the fraudulent-transfer claims against JP Morgan.   Further, Plaintiff’s aiding-and-abetting claim against Richter Consulting under New York law cannot move forward either, but for a different reason. The court explained that viewed in the light most favorable to Plaintiff, the allegations in the complaint describe no more than constructive knowledge of the fraud. View "Ritchie Spec. Cred. Investments v. JPMorgan Chase & Co." on Justia Law

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Defendant and her then-husband bought a condo for $525,000 with the intention of making it their primary residence. To finance the purchase, the couple took out a mortgage with the Plaintiff bank. Defendant did not sign the note but consented to her husband doing so. The mortgage contained a "future advances" clause, which granted Plaintiff a security interest in the Mortgage covering future funds Defendant's husband might borrow.Four years later, Defendant's husband borrowed additional funds from Plaintiff to keep his business afloat. Defendant did not sign the note. A few months later, Defendant's husband filed for Chapter 7 bankruptcy and the condo was sold for $650,000, approximately $250,000 of which was deposited in escrow. The couple divorced and Defendant moved out of the state.In Defendant's husband's bankruptcy case, the court held a portion of the escrowed sale proceeds must pay down his business notes pursuant to the mortgage’s future advances clause and that he could not claim a homestead exemption. Plaintiff was granted summary judgment on its claims that Defendant's proceeds were also subject to the future advances clause and that Plaintiff could apply those proceeds to Defendant's husband's business note.Defendant appealed on several grounds, including unconscionability, contract formation, and public policy, all of which the court rejected, affirming the district court's granting of summary judgment to Plaintiff. View "Sanborn Savings Bank v. Connie Freed" on Justia Law

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Appellees were the sole owners of an electrical company. Appellant is a general contractor and hired Appellee’s company to do electrical work on various projects. Appellee’s company contracted with suppliers and submitted periodic pay applications to Appellant requesting payment for work completed and supplies purchased. When Appellee’s company went out of business its suppliers filed construction liens against the properties relating to the projects for amounts the company owed them and brought lawsuits against the owners of the projects to foreclose upon their liens. Appellant was required to defend the lawsuits and indemnify the project owners and alleges that these lawsuits resulted in damages due to misrepresentations Appellee’s company made about whether its suppliers were being paid. Appellant obtained a default judgment against the company, however, the bankruptcy court granted the Appellee's motion to dismiss concluding that Appellant did not have a valid claim for a debt owed by the Appellee’s personally.   The Eighth Circuit reversed the bankruptcy court’s grant of summary judgment to the Appellees. The court found that summary judgment was inappropriate on the ground that Appellant has not shown that it has a claim against the Appellees personally because it cannot pierce the corporate veil. Because Appellees do not argue that there is no genuine dispute of material fact about whether Appellant can prove that Appellees committed a Nebraska tort, such as fraudulent misrepresentation, the bankruptcy court improperly granted summary judgment. View "Lund-Ross Constructors, Inc. v. Jay Buchanan" on Justia Law

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After Xurex filed for Chapter 7 bankruptcy, the trustee filed suit against defendant and others for breach of fiduciary duty and civil conspiracy. The jury returned a verdict for the trustee against defendant for conspiracy to breach fiduciary duties.The Eighth Circuit affirmed the jury's verdict and the district court's denial of defendant's motions for judgment as a matter of law, a new jury trial, the entries of judgment, and all adverse rulings. The court concluded that the evidence was sufficient to support the jury's verdict finding that defendant breached a fiduciary duty and there was no error in denying defendant's Federal Rule of Civil Procedure 50(d) motion; defendant waived several arguments he now raises about the language of the verdict director and the inconsistency of the verdict; because plaintiff's damage theories for civil conspiracy and breach of fiduciary duty were the same, the district court properly entered judgment on the larger of the two amounts; and the district court did not plainly err as to the jury instructions. View "Olsen v. Kraus" on Justia Law

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Debtor, licensed under North Dakota’s pari-mutuel wagering system, filed for bankruptcy in 2004. Ten years later, the district court ruled that the state was not authorized to collect certain taxes from the Debtor. North Dakota agreed to pay the estate $15 million. Creditors asserted claims. Although the state constitution provides that “the entire net proceeds of such games of chance are to be devoted to educational, charitable, patriotic, fraternal, religious, or other public-spirited uses,” North Dakota did not raise the rights of any charities.In 2018, the bankruptcy court ruled on the claims. North Dakota filed a new proof of claim. The court concluded that the state lacked parens patriae authority to assert claims on behalf of charities. The Eighth Circuit Bankruptcy Appellate Panel (BAP) remanded. On remand, the state attempted to add a breach of contract claim. The bankruptcy court denied that motion and concluded that the contract claim had no merit. The court also rejected a constitutional-statutory claim.The BAP affirmed, rejecting arguments that North Dakota law requires that charities, not Debtor, recover the remaining tax settlement funds and that the court erred when it disallowed the contract claim. The state constitution concerns the legislature and does not govern the actions of private parties such as Debtor. Debtor paid the taxes originally; the reimbursement of those improperly-paid taxes should inure to the benefit of Debtor after distribution under the bankruptcy priority scheme. View "North Dakota v. Bala" on Justia Law

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The Bankruptcy Appellate Panel dismissed debtors' appeal of the bankruptcy court's orders based on lack of standing. In this case, debtors challenged the bankruptcy court's orders (1) granting in part and denying in part the chapter 7 trustee's application to pay her law firm as attorney for the trustee, and (2) denying debtors' motion to remove the trustee, among other findings not at issue here. The court concluded that debtors are not personally aggrieved by the orders and therefore lack standing to appeal them. View "Levitt v. Jacoway" on Justia Law

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The Eighth Circuit affirmed the bankruptcy appellate panel's decision affirming the bankruptcy court's determination that debtor's debt to Lariat is excepted from discharge because it was obtained by actual fraud. The court explained that, although Lariat's claim was partially disallowed against debtor's bankruptcy estate under 11 U.S.C. 502(b)(6), the landlord cap does not foreclose Lariat's argument that the claim should be excepted from discharge under section 523(a)(2)(A). Therefore, Lariat's claim is excepted from discharge under section 523(a)(2)(A) to the extent that it was obtained by actual fraud. In this case, the bankruptcy court did not clearly err in finding that debtor had received a fraudulent transfer from her husband, and the record supports the bankruptcy court's finding that debtor participated in the scheme with the requisite wrongful intent. View "Lariat Companies, Inc. v. Wigley" on Justia Law