Justia Bankruptcy Opinion Summaries

Articles Posted in US Court of Appeals for the Fifth Circuit
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In this adversary proceeding, the Fifth Circuit held that appellant received fraudulently transferred funds and had an obligation to return the transferred funds to debtor, the transferor, for the benefit of his creditors. The court explained that appellant could satisfy that obligation by transferring the funds back to him prior to his bankruptcy filing, and nothing required her to hold onto the funds until after he filed for bankruptcy. Furthermore, if appellant had satisfied her obligation, there was nothing left for the trustee to recover. Accordingly, the court vacated the district court's judgment holding otherwise and remanded for further proceedings. View "Whitlock v. Lowe" on Justia Law

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The Fifth Circuit withdrew its previously filed opinion and substituted the following opinion. The court held that its holding in In re Nat'l Gypsum Co., 118 F.3d 1059, 1069 (5th Cir. 1997), that bankruptcy courts have discretion to refuse to compel arbitration in proceedings seeking enforcement of a discharge injunction, remains good law following the Supreme Court's decision in Epic Sys., 138 S. Ct. at 1623-24. In this case, the court affirmed the bankruptcy court's denial of Wells Fargo's motion to compel arbitration of a dispute over whether debtor's discharge applied to a student loan. View "Henry v. Educational Financial Service" on Justia Law

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Plaintiff filed suit against defendants, asserting a claim to quiet title and separately seeking a declaratory judgment that the statute of limitations had expired on defendants' power to foreclose on certain real property. Defendants counterclaimed for judicial foreclosure. The district court denied plaintiff's motion for summary judgment, granted summary judgment for defendants, and entered a final judgment and order of foreclosure. The Fifth Circuit affirmed, holding that 11 U.S.C. 362(c)(3)(A) terminates the automatic stay only with respect to the debtor; it does not terminate the stay with respect to the property of the bankruptcy estate. The court also held that Texas's statute of limitations does not bar defendants' claim for judicial foreclosure. Under the interpretation of section 362(c)(3)(A) that the court adopted, plaintiff's successive filings did not terminate the action with respect to the property of the bankruptcy estate. Therefore, the court held that the stay with respect to the property at issue in this case lasted the duration of the bankruptcy proceedings (269 days), and the statute of limitations was tolled for at least the same. Accordingly, defendants' counterclaim for judicial foreclosure was filed within the 269-day tolling period. View "Rose v. Select Portfolio Servicing, Inc." on Justia Law

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The Fifth Circuit treated the appellees' and the intervenors' joint petition for rehearing en banc as a petition for panel rehearing, granted the petition, withdrew its prior opinion, and substituted the following opinion. 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 and never reached the issue of whether the Bankruptcy Code disallows the creditors' claims for the Make-Whole Amount and the creditors' request for post-petition interest at the contractual default rates specified in the Note Agreement and the Revolving Credit Facility, the court remanded for the bankruptcy court to consider these issues. View "Ultra Petroleum Corp. v. Ad Hoc Committee of Unsecured Creditors of Ultra Resources, Inc." on Justia Law

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A bankruptcy court does not have authority to enforce the discharge injunctions entered in other districts. Plaintiffs sought to certify a nationwide class of those who claim their education-loan debts were validly discharged but from whom the lender continues to demand payment. The Fifth Circuit held that the bankruptcy court erred in holding that it could address contempt for violations of injunctions arising from discharges by bankruptcy courts in other districts. Therefore, the court held that, as to Shahbazi and at least those debtors whose discharges were entered by courts in other districts, the bankruptcy court in these proceedings has no authority to enforce the resulting injunction. However, the court agreed with the bankruptcy court that the particular education loans involved here, although they were obtained in order to pay expenses of education, did not qualify as an obligation to repay funds received as an educational benefit, scholarship, or stipend because their repayment was unconditional. Therefore, they were dischargeable. The court remanded for further proceedings. View "Crocker v. Navient Solutions, LLC" on Justia Law

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Debtor filed an adversary proceeding in bankruptcy court raising the issue of whether her bankruptcy discharge applied to a student loan. The Fifth Circuit affirmed the bankruptcy court's denial of Wells Fargo's motion to compel arbitration. The court held that its holding In re Nat'l Gypsum Co., 118 F.3d 1059, 1069 (5th Cir. 1997), -- that bankruptcy courts have discretion to refuse to compel arbitration in proceedings seeking enforcement of a discharge injunction -- remains good law following the Supreme Court's decision in Epic Systems Corp. v. Lewis, 138 S. Ct. 1612 (2018). The court held that Epic Systems shows that National Gypsum's doctrinal foundation remains sound. View "Henry v. Educational Financial Service" on Justia Law

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Ex-wife filed suit against her ex-husband, a Chapter 7 debtor, in bankruptcy court over a debt of $32,500 plus interest. The Fifth Circuit affirmed the district court's decision reversing the bankruptcy court's ruling in favor of the ex-husband. The court held that the ex-husband's payment to the ex-wife's former attorney did not terminate his obligation to the ex-wife because the attorney was no longer authorized to transact on the ex-wife's behalf. In this case, the attorney did not have actual or apparent authority to collect on the ex-wife's behalf. View "Russell v. Russell" on Justia Law

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Payments owed to a shareholder by a bankrupt debtor, which are not quite dividends but which certainly look a lot like dividends, should be treated like the equity interests of a shareholder and subordinated to claims by creditors of the debtor. The Fifth Circuit affirmed the district court's judgment and held that the deemed dividends gave the Estate benefits normally reserved for equity investors and thus subordination of all of the Estate's claims was appropriate. The court also held that the bankruptcy court did not abuse its discretion in denying discovery. Likewise, the court held that the Estate's due process right to discovery was not violated. View "French v. Linn Energy, LLC" on Justia Law

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After Double Eagle filed for Chapter 11 bankruptcy, it filed suit against MarkWest and Ohio Gathering on a contract claim in Louisiana federal court. Double Eagle then assigned its claim against defendants to one of its creditors. The Fifth Circuit vacated the district court's judgment and held that the district court erred by failing to apply the time-of-filing rule to 28 U.S.C. 1334(b) in this lawsuit that was related to a bankruptcy when filed, but then the bankruptcy connection was later dissolved. The court explained that this longstanding rule promoted efficiency and thus it would be wasteful if post-filing changes in the facts determining jurisdiction required dismissal of a case to which the parties and court had already devoted resources. In this case, the related-to-bankruptcy jurisdiction that existed at the outset of this case never went away. The court also held that failing to focus on the time of filing also infected the district court’s personal jurisdiction analysis, and the section 1334(b) jurisdiction that existed when this case was filed thus means there is both subject matter and personal jurisdiction. The court rejected defendants' remaining claims and remanded for further proceedings. View "Double Eagle Energy Services, LLC v. MarkWest Utica EMG, LLC" on Justia Law

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After a bankruptcy sale extinguished an easement of the Port, the Port filed an adversary proceeding against debtors, seeking to invalidate the sale and regain its easement. The district court affirmed the bankruptcy court's rejection of the Port's sovereign immunity and fraud claims. The Fifth Circuit affirmed the district court's judgment, finding no Eleventh Amendment violation or basis for a claim of fraud. In this case, the bankruptcy court approved a section 363(f) of the Bankruptcy Code sale "free and clear" of encumbrances, including the Port's easement; the bankruptcy court did not award affirmative relief nor deploy coercive judicial process against the Port and did not exercise in personam jurisdiction over the state; and any section 363(f) objection had to have been raised on direct appeal of the confirmation order and could not be raised in this collateral adversary proceeding. Furthermore, the Port failed to allege any false representation, and the district court did not abuse its discretion in denying the Port leave to amend. View "Port of Corpus Christi Authority v. Sherwin Alumina Co." on Justia Law