Articles Posted in US Court of Appeals for the Fifth Circuit

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The bankruptcy trustee invoked both equitable and statutory mootness to try and block an appeal of a bankruptcy court's approval of a sale of key estate assets, including a settlement necessary to facilitate the transaction. The Fifth Circuit held that equitable mootness was inappropriate, because the settlement and sale were not sufficiently complex. However, the court held that 11 U.S.C. 363(m) made the bankruptcy court's approval the final word on the subject when the objector did not obtain a stay of that ruling. In this case, the bankruptcy court noted that there was no way to sever the settlement from the sale and that they were mutually dependent. Accordingly, the court affirmed the district court's dismissal of the appeal. View "New Industries, Inc. v. Byman" on Justia Law

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The Fifth Circuit affirmed the district court's dismissal of Jeffrey Baron's bankruptcy adversary proceeding under Rule 12(b)(6) against the trustee responsible for administering the bankruptcy estate of Ondova Limited Company. The court held that the trustee was entitled to absolute immunity for all actions taken pursuant to a court order, and entitled to qualified immunity for all other acts within the scope of his trustee duties. Furthermore, claims against the trustee's attorneys also failed because the attorneys were covered by both derivative trustee immunity and independent attorney immunity; the breach of fiduciary duty claim failed because Baron did not plausibly plead gross negligence; and Baron failed to raise the new causes of action contained within his proposed amended complaint in his briefs or argue that the district court erred in finding these claims unsuccessful. View "Baron v. Sherman" on Justia Law

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The Fifth Circuit reversed the bankruptcy court's order requiring debtors, Ultra Petroleum, to pay certain creditors a contractual Make-Whole Amount and postpetition interest at a contractual default rate. In this case, debtors entered bankruptcy insolvent and now are solvent. At issue was whether the creditors were impaired by a plan that paid them everything allowed by the Bankruptcy Code. The court held that a creditor is not impaired by a reorganization plan simply because it incorporates the Bankruptcy Code's disallowance provisions. Because the bankruptcy court found otherwise, it did not address whether the Bankruptcy Code disallows the Make-Whole Amount or post-petition interest, and if not, how much debtors must pay the Class 4 Creditors. Therefore, the court reversed in part, vacated in part, and remanded for the bankruptcy court to answer these issues in the first instance. View "Ultra Petroleum Corp. v. Ad Hoc Committee of Unsecured Creditors of Ultra Resources, Inc." on Justia Law

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Before Buccanneer filed for bankruptcy, the company fired its CEO, who then filed a claim for breach of contract in the bankruptcy. The CEO later dropped the claim and filed a tortious interference with contract claim in state court against Buccaneer's secured creditor, Meridian. After Meridian moved to federal court, the bankruptcy court sent the tortious interference claim back to state court. The Fifth Circuit held that the tortious interference claim alleging a direct injury to the CEO was not property of the estate, and thus there was no basis for bankruptcy court jurisdiction. Therefore, the court affirmed the judgment remanding the case back to state court. View "Meridian Capital CIS Fund v. Burton" on Justia Law

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This appeal stemmed from RPD's purchase of a patent license from multiple debtors in bankruptcy sales of their estates. Tech Pharm alleged that RPD did not have rights under the license to Tech Pharm's patented invention. The bankruptcy court held that RPD did not have rights and the district court agreed. The Fifth Circuit affirmed the district court's judgment and held that the patent license was a rejected executory contract and could not have been transferred by the bankruptcy sales in question. In this case, because the license agreement was an executory contract deemed rejected by operation of law, RPD could not and did not acquire the license from any of the Grapevine, Western Pennsylvania, and Waco estates—and no bankruptcy court order held otherwise. Finally, the court held that the bankruptcy court did not exceed its authority in addressing RPD's rights through purchase of the OnSite machines, and did not err in reading the license agreement to require that third parties operate OnSite machines in the same locations where they were placed at the time of sale. View "RPD Holdings, LLC v. Tech Pharmacy Services" on Justia Law

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The Fifth Circuit affirmed the bankruptcy court's finding that proceeds of debtor's liability police were property of the bankruptcy estate. The court held that, in limited circumstances such as the one here, where a siege of tort claimants threaten debtor's estate over and above the policy limits, the proceeds are property of the estate. In this case, over $400 million in related claims threatened debtor's estate over and above the $5 million insurance policy limit, giving rise to an equitable interest of debtor in having the proceeds applied to satisfy as much of those claims as possible. View "Martinez v. OGA Charters, LLC" on Justia Law

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Under Section 506(a) of the Bankruptcy Code, delivery and setup costs should not be included in the valuation of a retained mobile home in a Chapter 13 proceeding. The Fifth Circuit affirmed the district court's judgment in a Chapter 13 bankruptcy action where the bankruptcy plan allowed her to retain her mobile home and pay 21st Mortgage the secured value (plus 5% interest) over the life of the plan. The court held that, in light of the statutory requirements and the Supreme Court's determination that the "proposed disposition or use" of collateral is crucial to its valuation, delivery and setup costs must not be included in the valuation of a retained mobile home under section 506(a). Therefore, the court held that the delivery and setup costs should not be included in debtor's mobile home valuation. View "21st Mortgage Corp. v. Glenn" on Justia Law

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The Fifth Circuit affirmed the district court's affirmance of the bankruptcy court's judgment, holding appellants liable for a non-dischargeable judgment stemming from appellee's fraudulent misrepresentation, breach of contract, and common law fraud claims. Determining that it had jurisdiction over the appeal, the court held that there was no error in the bankruptcy court's conclusion that appellee's injuries were not only foreseeable, but directly attributable and proximately caused by Appellant Saenz's misrepresentations. Furthermore, the court could not say that the bankruptcy court clearly erred in rendering its non-dischargeable judgment or that the district court erred in affirming the bankruptcy court. View "Saenz v. Gomez" on Justia Law

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Both the text of the bankruptcy statute and precedent support the conclusion that homestead proceeds that debtors acquire post-petition generally revest in them upon voluntary dismissal of their Chapter 13 case. The Fifth Circuit reversed the district court's judgment as to the disbursement of proceeds from the sale of a homestead. In this case, debtors sold their Texas homestead and did not use the sale proceeds to purchase another home. The bankruptcy court determined that debtors were entitled to the return of the homestead proceeds because they voluntarily dismissed their case, but the district court concluded that the proceeds should remain with the trustee for distribution to creditors in the dismissed bankruptcy proceeding. The court affirmed the district court's judgment regarding debtors' motion to dismiss and the trustee's motion to modify. Finally, the court reinstated the bankruptcy court's order directing the trustee to return the homestead proceeds to debtors. View "Viegelahn v. Lopez" on Justia Law

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The Fifth Circuit affirmed the district court's judgment in favor of Fifth Third in an action brought by plaintiffs, alleging that the bank foreclosed on a property in violation of the automatic stay imposed during Plaintiff Ricardo's Chapter 13 bankruptcy. The court held that plaintiffs were judicially estopped from claiming a stay violation because Ricardo failed to amend his bankruptcy schedules to disclose the quitclaim deed or his putative claims against Fifth Third. Likewise, the district court did not abuse its discretion in denying plaintiffs' motion for a new trial. Finally, plaintiffs failed to show that the district court abused its discretion in excluding several of their exhibits. View "Fornesa v. Fifth Third Mortgage Co." on Justia Law