Justia Bankruptcy Opinion Summaries

Articles Posted in US Court of Appeals for the First Circuit
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The First Circuit affirmed the order of the bankruptcy court granting creditor Schleicher & Stebbins Hotels, LLC (S&S) relief from an automatic stay imposed by section 362 of the Bankruptcy Code, holding that the bankruptcy court properly granted relief from the automatic stay.In the bankruptcy proceedings of debtor Old Cold, LLC, Old Cold listed S&S as the only secured creditor and Mission Product Holdings, Inc. as an unsecured creditor. Eventually, S&S filed a motion for relief from the automatic stay imposed in the bankruptcy proceedings, arguing that it had valid, first-priority, perfected liens on the debtor's assets, that the debtor lacked equity in its remaining property, and that the property was not needed to effect a reorganization. The bankruptcy court granted the stay relief motion. Mission appealed. The First Circuit affirmed, holding that the bankruptcy court did not commit clear error in granting relief from the automatic stay. View "Mission Product Holdings, Inc. v. Schleicher & Stebbins Hotels" on Justia Law

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The First Circuit affirmed the judgment of the bankruptcy court denying Chapter 7 Trustee Nathaniel Richard Hull's objection to Jeffrey Rockwell's homestead exemption listed at the time he filed for Chapter 13 bankruptcy, holding that the Bankruptcy Code dictates that Rockwell's homestead exemption maintains the status it held on the day Rockwell filed his bankruptcy petition.When he filed for Chapter 13 bankruptcy Rockwell exempted his home from the bankruptcy estate under Maine's homestead law. While the bankruptcy was proceeding, Rockwell sold that home and did not reinvest the proceeds of the sale in another homestead within six months, contrary to Maine law. When he converted his bankruptcy to a Chapter 7 proceeding, Hull objected to Rockwell's homestead exemption. The bankruptcy court denied the objection. The district court affirmed. The First Circuit affirmed, holding that exemptions are analyzed on the date the debtor files for bankruptcy and that the complete snapshot rule applies. View "Hull v. Rockwell" on Justia Law

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In this case, a byproduct of litigation stemming from the derailment of a Montreal, Maine & Atlantic Railway, Ltd. (MMA) freight train carrying crude oil in Lac-Megantic, Quebec, the First Circuit affirmed the district court's entry of judgment in favor of Robert Keath, the estate representative of MMA, and against creditor Wheeling & Lake Erie Railway Company, holding that, giving due deference to the fact-finder's resolution of the burden of proof, the judgment must be affirmed.One month after the derailment, MMA filed a voluntary petition for protection under Chapter 11 of the Bankruptcy Code. Wheeling instituted an adversary proceeding in the bankruptcy court against MMA and the estate representative, seeking a declaratory judgment regarding the existence and priority of its security interest in certain property of the MMA estate. The case involved intricate questions concerning secured transactions, carriage of goods, and corporate reorganization. After a settlement, the bankruptcy court ruled in favor of the estate representative. The First Circuit affirmed, holding (1) ultimately, this case turned on principals relating to the allocation of the burden of proof and the deference due to the finder of fact; and (2) giving due deference to the fact-finder's resolution of the burden of proof issue, the district court's judgment must be affirmed. View "Wheeling & Lake Erie Railway Co. v. Keach" on Justia Law

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Given the fundamental change in the facts of this case since the appeal was first filed and briefed the First Circuit remanded this action to the district court for reconsideration of its ruling dismissing the claims as unripe.In 2017, two groups of health centers filed adversary complaints in the Financial Oversight and Management Board's Title III case seeking a declaration that their claims against the Commonwealth seeking to collect payments under federal Medicaid law were non-dischargeable under PROMESA and that those claims may not otherwise be impaired in any matter. The magistrate judge recommended that the complaints be dismissed without prejudice as unripe. The district court held that Appellants' requests for declaratory relief were not ripe for review because there was no evidence that the Commonwealth would seek to discharge or impair their claims through the Title III proceeding. After the health centers appealed and the appeal was briefed, circumstances materially changed because the Commonwealth filed an amended proposed plan of adjustment. The First Circuit remanded the case to the district court for reconsideration of its ripeness ruling in light of the changed circumstances and any other matters the court deemed relevant. View "Corporacion de Servicios v. Commonwealth of Puerto Rico" on Justia Law

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In this case arising out of a petition for bankruptcy filed by the Montreal Maine & Atlantic Railway (MMA) the First Circuit affirmed the decision of the Bankruptcy Appellate Panel (BAP) upholding the judgment of the bankruptcy court ruling that certain claims filed by creditor railroads should be given priority status pursuant to 11 U.S.C. 1171(b) because they were "Six Months Rule" claims, holding that the claims at issue were priority claims under section 1171(b).In their claims, the creditor railroads sought to recover their share of payments that the MMA was to collect for charges that had been billed to customers that had shipped freight on routes that covered rail systems owned by the MMA and the creditor railroads. The creditor railroads argued that their claims qualified as Six Months Rule claims and so must be paid in full before other claims because the MMA incurred the debt for their share of these payments so close in time to the MMA's bankruptcy. The bankruptcy court agreed with the creditor railroads and concluded that the claims were entitled to priority under section 1171(b). The BAP affirmed. The First Circuit affirmed, holding that the claims were priority claims under the statute. View "Keach v. New Brunswick Southern Railway Co. Ltd." on Justia Law

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In this bankruptcy case, the First Circuit vacated the decision of the Bankruptcy Appellate Panel (BAP) and remanded with instructions that the case be returned to the bankruptcy court, holding that the bankruptcy court misapplied the standard for fraudulent intent and that the BAP exceeded the bounds of appellate review by engaging in fact-finding when it reversed the bankruptcy court.After Edward Stewart filed relief Chapter 7 bankruptcy Joseph and Sheila DeWitt filed a proof of claim, indicating that they held an unsecured claim for $558,335. The DeWitts then commenced an adversary proceeding seeking to exempt their unsecured claim from discharge. The bankruptcy court concluded that the DeWitts' unsecured claim was dischargeable. The BAP reversed. The First Circuit vacated the BAP's reversal of the bankruptcy court's judgment, holding (1) the BAP erred when it reweighed the evidence and conducted its own fact-finding; and (2) the bankruptcy court erred when determining what is required to prove "intent to deceive." View "Dewitt v. Stewart" on Justia Law

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The First Circuit affirmed the judgment of the Title III court granting summary judgment against Bondholders, who owned bonds issued in 2008 by the Employees Retirement System of the Government of the Commonwealth of Puerto Rico (the System), and in favor of the Financial Oversight and Management Board for Puerto Rico (the Board), holding that the Bondholders did not have security interest in certain of the System's assets.In 2016, the System filed Title III petitions for bankruptcy protections offered under the Puerto Rico Oversight, Management, and Economic Stability Act (PROMESA), 48 U.S.C. 2101-2241, and PROMESA's Title III, 2161-2177. The System subsequently filed two lawsuits against the Bondholders seeking declaratory relief on the validity, priority, extent and enforceability of the Bondholders' asserted security interest in the System's postpetition assets, including employer contributions to the System received postpetition. The Title III court granted summary judgment against the Bondholders. The First Circuit affirmed, holding (1) 11 U.S.C. 552(a) prevents the Bondholders' security interest from attaching to postpetition employers' contributions; (2) the Bondholders did not have special revenue bonds under 11 U.S.C. 902(2)(A) or (D); and (3) Congress intended section 552 to apply retroactively. View "Employees Retirement System v. Andalusian Global Designated, Employees Retirement System" on Justia Law

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In this appeal of a bankruptcy court's decision on the merits of all the claims before it the First Circuit dismissed in part Appellant's appeal from the district court's decision affirming the bankruptcy court rulings and awards on the merits, holding that Appellant's appeal of the damages award was untimely and that the amount of attorneys' fees awarded by the bankruptcy court was appropriate.After the bankruptcy court issued its decision, Appellant waited 237 days - after the bankruptcy court decided a motion for attorneys' fees and costs incurred by the prevailing party - to file a notice of appeal. The district court affirmed the bankruptcy court rulings and awards on the merits. The First Circuit dismissed in part Appellant's appeal and affirmed in part the district court's decision, holding (1) Appellant's notice of appeal from the bankruptcy court's order of damages was untimely and therefore must be dismissed; and (2) the bankruptcy court's determination as to attorneys' fees was not an abuse of discretion. View "PC Puerto Rico, LLC v. Empresas Martinez Valentin Corp." on Justia Law

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In this case concerning the potential liability of two private equity funds for pension fund withdrawal owed by a company owned by the two funds when the company went bankrupt, the First Circuit reversed the judgment of the district court holding the two funds jointly and severally responsible for the company's withdrawal liability, holding that summary judgment should be granted to the two funds.At issue was whether two private equity funds, Sun Capital Partners III, LP (Sun Fund III) and Sun Capital Partners IV, LP (Sun Fund IV), were liable for $4.5 million in pension fund withdrawal liability owed by a brass manufacturing company that was owned by the Sun Funds when the manufacturing company went bankrupt. Under the Multiemployer Pension Plan Amendments Act, the issue of liability depended on whether the two funds had created an implied partnership-in-fact that constituted a control group. That question, in turn, depended on the application of the partnership test in Luna v. Commissioner, 42 T.C. 1067 (1964). The district court that there was an implied partnership-in-fact constituting a control group. The First Circuit reversed, holding that the Luna test was not met in this case and that there was no firm indication of congressional intent to impose liability on the private investors. View "Sun Capital Partners III, LP v. New England Teamsters & Trucking Industry Pension Fund" on Justia Law

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The First Circuit reversed the judgment of the district court dismissing these appeals brought by Appellant seeking to keep money owed to the Commonwealth of Massachusetts based on the fugitive disentitlement doctrine, holding that the district court dismissed the appeal prematurely and that the early dismissal was an abuse of discretion.Thomas Sheedy bought Carol Thibodeau's house and gave it to Appellant Donald Kupperstein, an attorney licensed in Massachusetts. The state court reversed the sale, but Appellant kept collecting rent. Appellant fought to keep the money, and by the time these appeals reached the First Circuit Appellant had defied seven state court orders, four arrest warrants, and numerous contempt sanctions. Appellant filed for bankruptcy in hopes that the Bankruptcy Code's automatic stay would stop the state court from enforcing its orders. The bankruptcy court subsequently lifted the stay, then Appellant "went AWOL." The district court dismissed Appellant's appeal based on the rule that a fugitive forfeits the right to appeal the judgment he's fleeing. The First Circuit held that reversal was required because the district court's inherent power to protect its own proceedings was not implicated in this case. The Court then remanded the case for the district court to decide the merits of Appellant's appeals. View "Kupperstein v. Schall" on Justia Law