Justia Bankruptcy Opinion Summaries

Articles Posted in US Court of Appeals for the First Circuit
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In this case before the United States Court of Appeals for the First Circuit, five groups of current and former public employees in the Commonwealth of Puerto Rico (the "Commonwealth") appealed an order by the court overseeing the Commonwealth-wide debt restructuring litigation (the "Title III court") on their motions to secure administrative-expense priority for their back pay claims. The back pay claims arose from allegations that their public employers failed to adjust their wages upward, a violation of Puerto Rico law. The Title III court had previously rejected efforts to assert administrative-expense priority for back pay for work performed before the commencement of the Commonwealth's debt restructuring case under Title III of the Puerto Rico Oversight, Management, and Economic Stability Act ("PROMESA").The appellate court affirmed the Title III court's decision. The appellate court agreed that the pre-petition work claims did not qualify for administrative-expense priority under § 503(b)(1)(A)(ii) of the Bankruptcy Code, which is incorporated into PROMESA, because they were not "wages and benefits awarded pursuant to a judicial proceeding . . . as back pay attributable to any period of time occurring after commencement of the case under this title." The appellate court also held that the Title III court did not abuse its discretion in deferring its decision on administrative-expense status for back pay claims concerning work performed post-petition but for which there has not yet been any judgment in the underlying commonwealth court and agency proceedings. View "Abraham Gimenez Plaintiff Group v. FOMB" on Justia Law

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In this case, the United States Court of Appeals for the First Circuit considered an appeal from a ruling by the United States District Court for the District of Puerto Rico concerning the restructuring of debts of the Commonwealth of Puerto Rico's public power company (PREPA) under Title III of the Puerto Rico Oversight, Management, and Economic Stability Act (PROMESA). The appellants, GoldenTree Asset Management and Syncora Guarantee (the "Bondholders"), held around $1 billion of PREPA's roughly $8 billion in bonds and sought relief from the automatic stay on actions against PREPA's estate, hoping to appoint a receiver for PREPA.The Bondholders argued that the automatic stay lifted by operation of law, because the district court denied their latest motion for relief without first noticing and holding a hearing within the timeframe prescribed by 11 U.S.C. § 362(e)(1). However, the appellate court held that the Bondholders waived their right to a prompt notice and hearing on that motion for relief. The court reasoned that the Bondholders accepted a litigation schedule that postponed any hearing on their request for leave to seek the appointment of a receiver until after a parallel proceeding about whether—and to what extent—the Bondholders had any collateral to protect in the first place. The court therefore affirmed the judgment of the Title III court. View "GoldenTree Asset Management LP v. Financial Oversight and Management Board" on Justia Law

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The First Circuit affirmed the judgment of the bankruptcy court denying Debtor a discharge pursuant to 11 U.S.C. 727(a)(3) for Debtor's failure to keep or preserve records and declined to decide whether a denial was warranted under 11 U.S.C. 727(a)(4) holding that the bankruptcy court properly denied a discharge under section 727(a)(3).Plaintiff filed a Chapter 7 bankruptcy petition. Defendant, who held an unsatisfied judgment against Plaintiff, commenced an adversary proceeding seeking to deny Plaintiff a discharge on five separate grounds. The bankruptcy court denied Plaintiff a discharge pursuant to section 727(a)(3) and also found that the discharge should be denied under section 727(a)(4). The First Circuit affirmed, holding that the bankruptcy court properly denied a discharge pursuant to section 727(a)(3). View "Hernandez v. Shove" on Justia Law

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The First Circuit dismissed as moot the appeal brought by the Milk Industry Regulatory Office of the Commonwealth of Puerto Rico (ORIL) challenging two bankruptcy court orders, holding that the action became moot prior to the judgment of the Bankruptcy Appellate Panel (BAP) for the First Circuit affirming the bankruptcy court orders on the merits.The first order at issue granted Luis Manuel Ruiz Ruiz permission to enter a lease in the course of his bankruptcy proceedings, and the second order denied ORIL's motion for reconsideration of that permission. The BAP affirmed the orders on the merits. The First Circuit dismissed ORIL's appeal as moot, vacated the judgment of the BAP, and remanded the case to the BAP with instructions to dismiss ORIL's appeal as moot, holding (1) this case was moot, and there was no exception to the mootness doctrine to save this appeal from dismissal; and (2) the balance of the equities weighed against vacated of the bankruptcy court orders at issue. View "Milk Industry Regulatory Office v. Ruiz Ruiz" on Justia Law

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The First Circuit affirmed the order of the bankruptcy court rejecting the valuation method espoused in the Bankruptcy Appellate Panel's (BAP) decision in Snyder v. Rockland Tr. Co., 249 B.R. 40 (1st Cir. B.A.P. 2000), and concluding that Nataly Minkina could avoid a judicial lien under the formula set forth in 11 U.S.C. 522(f), holding that there was no error.At issue was the propriety of the Snyder valuation method for a debtor's interest in property held as a Massachusetts tenant by the entirety for purposes of the lien avoidance formula of section 522(f). Minkina moved to avoid a judicial lien on the grounds that the lien impaired her homestead exemption pursuant to section 522(f). The bankruptcy court departed from the Snyder approach in granting Minkina's motion to avoid. The First Circuit affirmed, holding (1) the BAP's decision in Snyder both misapplied Massachusetts law and impermissibly deviated from the plain text of section 522; and (2) the bankruptcy court's analysis in this case was proper. View "Rodgers, Powers & Schwartz, LLP v. Minkina" on Justia Law

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The First Circuit affirmed the rulings of the bankruptcy court in this adversary proceeding brought by Ann Tracy Botelho against her neighbor and business partner, Mary E. Buscone, during Mary's bankruptcy proceedings, holding that there was no error in the challenged rulings.In 2012, Mary and Ann opened up a frozen yogurt shop together. The business ceased operations in 2014, and Ann filed for bankruptcy. In 2018, after Ann received a Chapter 7 discharge, Ann sued Mary in state court, resulting in a default judgment. The court attached a lien for the judgment amount plus interest to Mary's home. Mary then brought her own Chapter 7 case, listing in her schedules Ann's claim against her. Ann subsequently initiated an adversary proceeding seeking a determination that her claim against Mary was non-dischargeable. A prolonged discovery dispute ensued resulting in another default judgment against Mary as a sanction for her failure to comply with discovery orders. The bankruptcy appellate panel largely affirmed the bankruptcy court's rulings. The First Circuit affirmed, holding that the district court did not err in denying Mary's motion for summary judgment, granting Ann's second motion to compel, and denying Mary's motion for reconsideration. View "Botelho v. Buscone" on Justia Law

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The First Circuit affirmed the order of the bankruptcy court determining that Donald Kupperstein knowingly and fraudulently omitted and misrepresented material facts in his Chapter 7 bankruptcy petition and related schedules, requiring that Kupperstein be denied a discharge, holding that there was no error.Kupperstein filed in bankruptcy court a voluntary petition for relief under Chapter 7. Appellees commenced adversary proceedings seeking the denial of Kupperstein's bankruptcy discharge under 11 U.S.C. 523, 727(a)(4)(A) on the grounds that Kupperstein had engaged in clear and blatant misconduct. The bankruptcy court denied a discharge and granted summary judgment for Appellees. The district court affirmed. The First Circuit affirmed, holding (1) the bankruptcy court did not err in denying Kupperstein's motion for leave to file a belated response to Appellees' joint statement of facts in support of their motion for summary judgment; and (2) the bankruptcy court did not err in granting Appellees' joint motion for summary judgment. View "Kupperstein v. Schall" on Justia Law

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The First Circuit affirmed the judgment of the Title III court dismissing this adversary proceeding for lack of jurisdiction, holding that the district court properly dismissed the action.The Financial Oversight and Management Board for Puerto Rico determined that the the University of Puerto Rico (UPR) Retirement System - the entity that administers the university's pension plan - was heading toward insolvency and therefore issued fiscal plans for UPR that, inter alia, identified the options UPR had for adjusting its continuing accrual of obligations to the Retirement System. Plaintiffs filed this adversary proceeding seeking to block any pension changes. The Title III court dismissed the complaint for lack of jurisdiction. The First Circuit affirmed, holding that the district court did not err in granting dismissal pursuant to Fed. R. Civ. P. 12(b)(1). View "Asociacion Puertorriquena de Profesores Univ. v. University of Puerto Rico" on Justia Law

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The First Circuit affirmed the judgment of the bankruptcy court dismissing Appellant's voluntary petition for relief under title 11 of the United States Code, holding that the district court did not err in dismissing the petition on the ground that Appellant failed to serve certain quarterly reports on the United States Trustee pursuant to the Bankruptcy Court's confirmation order.The bankruptcy court dismissed Appellant's case on two grounds - that he failed to pay certain fees to the U.S. Trustee pursuant to 28 U.S.C. 1930(a)(6) and that he failed to serve the quarterly reports on the U.S. Trustee. The First Circuit affirmed on the second of the two grounds, holding that the bankruptcy court did not err by dismissing Appellant's case for failure to comply with the confirmation order because that order required that Appellant serve quarterly reports on the U.S. Trustee only while his case was "open." View "Brown v. Harrington" on Justia Law

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The First Circuit dismissed certain Credit Unions' challenge to the district court's rejection of their objections to the Modified Eighth Amended Title III Joint Plan of Adjustment of the Commonwealth of Puerto Rico, the Employees Retirement System of the Government of the Commonwealth of Puerto Rico, and the Puerto Rico Public Buildings Authority (the confirmation order) and the findings of fact and conclusions of law in connection with the confirmation order (the FF/CL), holding that dismissal was warranted.The final debt restructuring plan at issue in this appeal was the product of evolving plans about how to resolve the initial petition for debt restructuring filed by Puerto Rico's Financial Oversight and Management Board on behalf of the Commonwealth and several of its agencies and instrumentalities pursuant to Title III of the Puerto Rico Oversight, Management, and Stability Act. Six Credit Unions appealed to challenge the confirmation order and FF/CL. The First Circuit dismissed the Credit Unions' challenges, holding that because the Court has now affirmed the dismissal of the Credit Union' adversary claims, the appeal from the confirmation order and the FF/CL was moot. View "Financial Oversight & Management Bd. For Puerto Rico v. Cooperativa de Ahorro y Credito" on Justia Law