Justia Bankruptcy Opinion Summaries

Articles Posted in US Court of Appeals for the Eleventh Circuit
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Creditors obtained a $1.6 million default judgment against Rodney Dorand and sought to satisfy the judgment with funds from Dorand's individual retirement account, held by Morgan Stanley. An Alabama court approved the transfer of funds, but before the transfer occurred, Dorand filed for Chapter 7 bankruptcy, asserting that the retirement account was exempt property of his bankruptcy estate. The bankruptcy court agreed with Dorand. The United States Court of Appeals for the Eleventh Circuit affirmed this decision, stating that the Alabama judgment did not extinguish Dorand’s interest in his account before he filed his bankruptcy petition.Rodney Dorand had been sued by creditors for damages arising from a failed condominium development. After the state court issued a writ of garnishment to Morgan Stanley, Dorand argued that the retirement account was exempt from garnishment, but the state court rejected this argument. However, before the funds were transferred, Dorand filed for bankruptcy. The bankruptcy court determined that the retirement account was Dorand’s exempt property and that the Alabama judgment against garnishee Morgan Stanley “does not affect the [retirement account’s] exempt status.”The Alabama judgment did not terminate all of Dorand's interests in his property. While the judgment had given Morgan Stanley a limited right to transfer Dorand’s funds, it had not exercised that right before Dorand filed for bankruptcy. The Court of Appeals affirmed that the retirement account was part of Dorand’s bankruptcy estate, as Dorand had an interest in the retirement account when he filed for bankruptcy. View "The Alabama Creditors v. Dorand" on Justia Law

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In this case heard by the United States Court of Appeals for the Eleventh Circuit, the appellant, Kai Hansjurgens, contested the revival of a bankruptcy judgment against him in favor of Donald Bailey. More than a decade earlier, Bailey had obtained a bankruptcy judgment against Hansjurgens for tortious interference with a contract, which Hansjurgens had not paid. To prevent the judgment from expiring under Georgia law, Bailey filed a motion to revive the judgment, which was granted by the bankruptcy court. Hansjurgens argued that the revival proceedings violated his due process rights and did not strictly comply with Georgia's scire facias procedures, which are used to revive dormant judgments.The court found that the Federal Rules of Civil Procedure, specifically Rule 69(a), only require the revival proceedings to "accord with" or substantially comply with state procedures, rather than strictly comply. The court further noted that the purpose of scire facias, providing notice to the party and an opportunity to present objections, had been served through mailed notices to Hansjurgens at several addresses. The court also observed that Georgia's scire facias procedures did not fit squarely within the federal court system, and requiring strict compliance would be impractical.Therefore, the court held that the bankruptcy court had properly revived the judgment and that the proceedings did not violate due process. It affirmed the district court's revival order. View "Hansjurgens v. Bailey" on Justia Law

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In this case, the United States Court of Appeals for the Eleventh Circuit dealt with the question of when an order finding contempt becomes a final, appealable order. The case arose from a dispute between Robert A. Sweetapple and Asset Enhancement, Inc., in which Sweetapple was found in contempt by a bankruptcy court for violating an automatic stay. The bankruptcy court awarded Asset Enhancement attorney's fees and costs for filing and prosecuting its motion for contempt, but did not specify the amount. The amount was later determined in a subsequent order. Sweetapple appealed the contempt order to the district court, but the district court dismissed his appeal as untimely, reasoning that the contempt order was a final, appealable order when it was issued, not when the amount of the attorney's fees was later determined. Sweetapple then appealed to the Eleventh Circuit.The Eleventh Circuit held that the contempt order did not become a final, appealable order until the bankruptcy court issued the later order setting the amount of attorney's fees to be awarded. The court reasoned that this rule avoided the risk of disrupting ongoing proceedings and was consistent with its precedent. Accordingly, since Sweetapple filed his appeal within fourteen days of the bankruptcy court's issuance of the later order, his appeal of the contempt order was timely and the district court had jurisdiction over the appeal. The court vacated the district court's dismissal of Sweetapple's appeal and remanded the case to the district court for further proceedings. View "Sweetapple v. Asset Enhancement, Inc." on Justia Law

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Defendant, petitioned for Chapter 7 bankruptcy and listed PRN Real Estate & Investments, Ltd. (“PRN”) as his primary creditor. PRN sought to exempt debts that Defendant owes PRN from being discharged. The bankruptcy court granted judgment for Defendant on all of PRN’s claims and fully discharged Defendant’s debt. The district court affirmed.   The Eleventh Circuit affirmed in part and reversed the bankruptcy court’s rulings and remanded for further proceedings. The court explained that it agrees with each of the bankruptcy court’s rulings except one: that PRN pleaded a viable discharge exception in Count 3. The court explained that Congress gave PRN the right to request an exception of COLP’s contribution debt, if PRN can prove that Defendant fraudulently obtained COLP’s money and, as a result, became responsible for COLP’s contribution debt. PRN has pleaded facts that, if proven, meet these requirements. The Trustee’s action to avoid the same fraudulent transfer does not preempt PRN’s right to seek a discharge exception. Because the bankruptcy court dismissed PRN’s claim based on non-viability and lack of standing, the bankruptcy court did not rule on the merits of Defendant’s motion for summary judgment. Thus, the court remanded the case for the bankruptcy court to determine in the first instance whether any facts material to Count 3 are genuinely disputed and, if not, whether Defendant is entitled to judgment on Count 3. See Fed. R. Civ. P. 56(a). View "PRN Real Estate & Investments, Ltd. v. William W. Cole, Jr." on Justia Law

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The bankruptcy proceeding underlying this case was initiated by Wilkes & McHugh, P.A. (“Wilkes”), for relief against Fundamental Long Term Care, Inc. (“FLTCI”) on behalf of the Estate of Juanita Jackson. The Jackson Estate had obtained judgments of $55 million against Trans Health, Inc. (“THI”) and Trans Health Management, Inc. (“THMI”). The trustee of the Debtor’s estate (the “Trustee”) employed Steven M. Berman and Shumaker, Loop & Kendrick, LLP (“Shumaker”) as special litigation counsel. According to Wilkes, when the Trustee employed Shumaker it was not disinterested as required by Section 327(a). On remand, the Bankruptcy Court held that Berman’s omissions did not warrant sanctions under Rule 2014. The Probate Estates appealed the District Court’s decision.   The Eleventh Circuit affirmed. The court wrote that Wilkes, in representing the Probate Estates, sought huge sums in the form of damages in state court against the companies affiliated with the decedents’ nursing homes. After having received one multimillion-dollar judgment in Jackson, Wilkes realized that the powers that be in the THI corporate structure had executed a bust-out scheme to separate THMI’s liabilities from its assets and to hide those assets to avoid paying the Jackson judgment. Once the Bankruptcy Court appointed a trustee for FLTCI, Wilkes could then use the Trustee and the Trustee’s strongarm power to enhance its own discovery and pursue causes of action that it would not be able to pursue alone, attempting to get at THMI’s assets through FLTCI. The court wrote that it is clear that the idea that Shumaker had a bias against Wilkes and the Probate Estates is baseless. View "Estate of Arlene Townsend, et al v. Steven Berman, et al" on Justia Law

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In 2008, Debtors Mosaic Management Group, Inc., Mosaic Alternative Assets, Ltd., and Paladin Settlements, Inc. filed for Chapter 11 bankruptcy in the Southern District of Florida, a “UST district” in which the U.S. Trustee program operates. In June 2017, the bankruptcy court confirmed a joint Chapter 11 plan, under which most of the Debtors’ assets were transferred to an Investment Trust managed by an Investment Trustee. The issue before the court is the appropriate remedy for the constitutional violation the Supreme Court found in Siegel. The Debtors in this case—being debtors in a U.S. Trustee district—have been required to pay higher fees than a comparable debtor in one of the six BA districts in Alabama or North Carolina.   The Eleventh Circuit vacated and remanded. The court concluded that Reich, Newsweek, Bennett, McKesson, and the long line of similar state tax cases are closely analogous to the instant case and provide strong precedent supporting the refund remedy urged upon us by the Debtors. Accordingly, the court held that the appropriate remedy in this case for the constitutional violation identified in Siegel is the refunds that the Debtors in this case seek. View "United States Trustee Region 21 v. Bast Amron LLP" on Justia Law

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SE Property Holdings, LLC (“SEPH”) obtained a deficiency judgment against Neverve LLC (“Neverve”) after Neverve defaulted on loans secured by a mortgage on its property. Following this judgment, Neverve received the proceeds from an unrelated settlement. But Neverve transferred those proceeds to attorneys representing Neverve’s principal in payment of attorney’s fees relating to the principal’s personal bankruptcy proceedings. SEPH then sued Neverve based on Neverve’s allegedly fraudulent transfer of those settlement proceeds. The district court granted summary judgment in favor of Neverve, finding that the Florida Uniform Fraudulent Transfer Act’s (“FUFTA”) “catch-all” provision did not allow for (1) an award of money damages against the transferor, (2) punitive damages, or (3) attorney’s fees. The court also granted summary judgment in favor of Neverve on SEPH’s equitable lien claim, as Neverve no longer possessed the settlement proceeds at issue.   The Eleventh Circuit affirmed. The court held that based on the narrow interpretation of FUFTA in Freeman v. First Union National Bank, 865 So. 2d 1272 (Fla. 2004), the court believes the Florida Supreme Court would determine that FUFTA’s catch-all provision does not allow for an award of money damages against the transferor, an award of punitive damages, or an award of attorney’s fees. Thus, the district court was correct in granting summary judgment in favor of Neverve on SEPH’s FUFTA claims. And the court concluded that the district court did not err in granting summary judgment in favor of Neverve on SEPH’s equitable lien claim. View "SE Property Holdings, LLC v. Neverve LLC" on Justia Law

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Plaintiffs commenced this adversary proceeding in the United States Bankruptcy Court for the Southern District of Florida against UBS Financial Services Inc. and UBS Credit Corp. (together, “UBS”), to recover funds UBS had frozen in one of its accounts to satisfy debts owed by Plaintiffs. After the bankruptcy court granted partial summary judgment in favor of Plaintiffs on all of the claims but one – Plaintiffs’ unjust enrichment claim -- UBS appealed to the district court, which affirmed. UBS appealed to the Eleventh Circuit urging it to apply a more “flexible” interpretation of finality in the bankruptcy arena.   The Eleventh Circuit dismissed the appeal. The court wrote it is bound to dismiss this appeal because the same concepts of finality apply in appeals taken from adversary proceedings as in appeals taken from standard civil actions. The bankruptcy court left Plaintiffs’ unjust enrichment claim open and awaiting trial, so we cannot assert jurisdiction based on the finality of the bankruptcy court’s order. Further, the court wrote, it cannot find that any of the three recognized exceptions to the final judgment rule -- the collateral order doctrine, the practical finality doctrine, or the marginal finality doctrine -- allows the court to reach the merits of UBS’s appeal. While, under the doctrine of cumulative finality, the subsequent entry of final judgment may cure a premature notice of appeal, the parties’ effort to finally resolve the underlying proceeding, in this case, falls flat. View "Lorenzo Esteva, et al v. UBS Financial Services Inc., et al" on Justia Law

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The case arises out of the insolvency of the Crescent Bank and Trust Company (“Crescent”) and the conduct of its customer lawyer, a manager of his law firm, Morris Hardwick Schneider, LLC (“Hardwick law firm”). In 2009, Crescent, a Georgia bank, made the lawyer a loan for $631,276.71. The lawyer, as his law firm’s manager, signed a security agreement that pledged, as collateral, his law firm’s certificate of time deposit (“CD”) for $631,276.71. When Crescent failed, the Federal Deposit Insurance Corporation (“FDIC”), as receiver, took over and sold the lawyer’s loan and CD collateral to Renasant Bank. The lawyer then made loan payments to Renasant, and Renasant held the CD collateral. Landcastle sued Renasant (as successor to the FDIC and Crescent), claiming Renasant was liable for $631,276.71, the CD amount. Landcastle’s lawsuit seeks to invalidate the Hardwick law firm’s security agreement.   The Eleventh Circuit reversed the district court’s ruling. The court explained that Landcastle’s lack-of-authority claims are barred under D’Oench because they rely on evidence that was outside Crescent’s records when the FDIC took over and sold the lawyer’s loan and CD collateral to Renasant. The court concluded that the lawyer’s acting outside the scope of his authority did not render the security agreement void but, at most, only voidable. A voidable interest is sufficient to pass the CD security agreement to the FDIC and to trigger the D’Oench shield View "Landcastle Acquisition Corp. v. Renasant Bank" on Justia Law

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Appellee’s confirmed bankruptcy plan purported to modify the rights of Appellant Creditor Mortgage Corporation of the South’s (“MCS”) mortgage on Appellee’s residence. In fact, her plan purported to eradicate all remaining outstanding payments on her mortgage, beyond MCS’s claims for past-due arrearages. The bankruptcy court had confirmed Appellee’s Plan without objection and that 11 U.S.C. Section 1327 (the “finality” provision) renders confirmed plans final, the bankruptcy court granted Appellee’s motion, and the district court affirmed. On appeal, at issue was which provision wins— antimodification or finality—when the two clash in the scenario this case presents.   The Eleventh Circuit reversed and remanded the district court’s ruling holding that release of MCS’s lien before its loan had been repaid in full violates Section 1322(b)(2)’s antimodification clause. The court held that under Supreme Court and Eleventh Circuit precedent, it read the antimodification provision as an ironclad “do not touch” instruction for the rights of holders of homestead mortgages. So a bankruptcy plan cannot modify the rights of a mortgage lender whose claim is secured by the debtor’s principal residence by providing for release of the homestead-mortgagee’s lien before the mortgagee has recovered the full amount it is owed. View "Mortgage Corporation of the South v. Judith Lacy Bozeman" on Justia Law