Justia Bankruptcy Opinion Summaries

The Lansaws operated a daycare in space leased from Zokaites. After they entered into a new lease with a different landlord, but before they moved, Zokaites served them with a Notice for Distraint, claiming a lien against personal property for unpaid rent. The following day, the Lansaws filed for bankruptcy, triggering the automatic stay, 11 U.S.C. 362(a). Zokaites’s attorney was notified of the filing on August 17, 2006. On August 21, Zokaites and his attorney entered the daycare during business hours, by following a parent, and photographed the Lansaws’ personal property. On August 27, Zokaites entered after business hours, using his key, then padlocked the doors, leaving a note stating that Zokaites would not unchain the doors unless Mrs. Lansaw’s mother agreed that she had not been assaulted by Zokaites, the Lansaws reaffirmed their lease with Zokaites, and the Lansaws ceased removing property from the daycare. The Lansaws removed the chains and slept in the building. Zokaites locked the door from the outside and left with the Lansaws’ keys. The Lansaws called the police. Meanwhile, Zokaites attorney communicated by phone and letter with the new landlord, stating that, if the new lease was not terminated, Zokaites would sue the new landlord. In an adversary proceeding, the Bankruptcy Court awarded the Lansaws attorney fees ($2,600), emotional-distress damages ($7,500) and punitive damages ($40,000) under 11 U.S.C. 362(k)(1). The district court and Third Circuit affirmed. Section 362(k)(1) authorizes the award of emotional-distress damages; the Lansaws presented sufficient evidence to support the award. View "In re: Lansaw" on Justia Law

Plaintiffs-appellants David and Lee Ann Lankford unwittingly invested in a Ponzi scheme operated by Vaughan Company Realtors (VCR), wherein investors paid money to VCR in return for interest-bearing promissory notes. After the Ponzi scheme collapsed, VCR filed for bankruptcy under Chapter 11 of the Bankruptcy Code. Unlike many others, the Lankfords actually profited from their investment. So the court-appointed trustee of VCR’s bankruptcy estate, Judith Wagner, brought an adversary proceeding against them in the United States Bankruptcy Court for the District of New Mexico. Through this and related “clawback” proceedings, the trustee sought to avoid, or undo, pre-bankruptcy fraudulent transfers and thus recoup fictitious profits from investors with net gains for the benefit of all of VCR’s creditors. The Lankfords filed this lawsuit against the bankruptcy trustee and her counsel without first applying for and receiving permission under "Barton v. Barbour," (104 U.S. 126 (1881)), and its progeny (the “Barton doctrine”). The district court concluded that "Barton" barred the suit and dismissed for lack of subject matter jurisdiction. Finding no reversible error, the Tenth Circuit Court of Appeals affirmed. View "Lankford v. Wagner" on Justia Law

The Trustee filed suit against Officers of NRMC alleging that the Officers breached their fiduciary duty of care, loyalty, and good faith. The district court has not been able to identify clear controlling precedents from the Supreme Court of Mississippi that would resolve this case. Therefore, the court certified the following questions of law to the Supreme Court of Mississippi regarding the Mississippi Tort Claims Act (MTCA), Miss. Code Ann. 11-46-1, et seq. 1) Does the MTCA furnish the exclusive remedy for a bankruptcy trustee standing in the shoes of a public hospital corporation against the employees or directors of that public corporation? 2) If the answer to the foregoing question is affirmative, does the MTCA permit the trustee to pursue any of the claims identified in his complaint against the officers and directors of NRMC in their personal capacity? View "Lefoldt, Jr. v. Rentfro" on Justia Law

This was the First Circuit’s second set of appeals involving the automatic stay provision of the Puerto Rico Oversight, Management, and Economic Stability Act (PROMESA). Here, the parties disputed whether four claims included in Plaintiffs’ second amended complaint were within the scope of PROMESA’s temporary stay. Plaintiffs conceded that the majority of their claims were subject to the stay, but the district court allowed the suit to proceed on the four counts at issue, all of which were purportedly brought under various provisions of PROMESA. On appeal, Appellants challenged this ruling. The First Circuit reversed the district court’s holding that the PROMESA stay did not apply to Plaintiffs’ first, second, third, and twelfth causes of action, as the claims at issue plainly constituted attempts to exercise control over revenues of the Commonwealth of Puerto Rico. View "Lex Claims, LLC v. Garcia-Padilla" on Justia Law

When debtors filed for bankruptcy in 2013, PNC Bank filed a claim based on a 2007 note. Debtors objected, contending that the claim was barred by California's applicable four-year statute of limitations. PNC argued, however, that the claim was timely because the promissory note's choice of Ohio law incorporated Ohio's six-year limitations period. The bankruptcy judge agreed that Ohio's six-year limitations applied to this case. The Bankruptcy Appellate Panel reversed. The court concluded that where a choice-of-law provision does not expressly include the statute of limitations, the court has construed it as silent on the issue. The court explained that where no statute of limitations is provided for a federal cause of action, the law of limitations of the forum state is followed. However, in this case, the court reasoned that the application of Section 142 of the Restatement (Second) of Conflict of Laws compels the conclusion that California's shorter statute of limitations does not apply, because this case presents the sort of "exceptional circumstances" under which the 1988 version of the Second Restatement looks past the law of the forum, and applies a longer foreign limitations period. Accordingly, the court reversed and remanded to the bankruptcy court for further proceedings. View "PNC Bank v. Sterba" on Justia Law

At issue in this case was whether a corporation's release of a debt constituted a constructively fraudulent transfer under the Uniform Fraudulent Transfer Act (UFTA). The debt that was released had previously been owed to the corporation by a landscaping business that was a creditor of two other corporations owned by the same shareholder. The other corporations debts to the landscaping business were extinguished in exchange for the release. The trial court concluded that the transfer was constructively fraudulent under N.J.S.A.25:2-27(a) because the corporation relinquished its sole asset without receiving reasonably equivalent value in return. An Appellate Division panel reversed that determination. The panel held that the transfer benefited the debtor corporation's sole shareholder because it extinguished the debts of two other corporations that she owned. The Appellate Division determined that the transfer was therefore made for reasonably equivalent value and that it was not constructively fraudulent under N.J.S.A.25:2-27(a). The New Jersey Supreme Court held that the Appellate Division panel improperly ignored the distinction between the corporation that was the debtor for purposes of N.J.S.A.25:2-27(a) and its shareholder, as well as the distinction between the debtor corporation and the other corporate entities that the shareholder owned. The Court concluded the evidence fully supported the trial court's determination the corporation did not receive reasonably equivalent value in exchange for the disputed transfer. Accordingly, the Appellate Division's judgment was reversed and the case remanded to the panel for its consideration of issues that it did not reach. View "Motorworld, Inc. v. Benkendorf" on Justia Law

Debtor was the former owner and operator of two towing companies, Yellow Logistics and Yellow Express. In this case, the bankruptcy court sanctioned the companies for violating the automatic stay by pursuing civil contempt proceedings against debtor based on his failure to pay discovery sanctions in a state court action. The court held that under In re Berg, civil contempt proceedings are exempted from the automatic stay under the Bankruptcy Code's government regulatory exemption, when, as here, the contempt proceedings are intended to effectuate the court's public policy interest in deterring litigation misconduct. Therefore, the court concluded that the bankruptcy court erred, and affirmed the decision of the Bankruptcy Appellate Panel (BAP), though on a different basis than that discussed by the BAP. View "Dingley v. Yellow Logistics, LLC" on Justia Law

This appeal arose out of two separate Chapter 13 bankruptcy proceedings that followed a similar pattern. On appeal, LVNV argued that the bankruptcy court's Chapter 13 plan confirmation orders barred the objections to LVNV's claims because those objections were filed after entry of the Confirmation Orders. The court held that debtors' objections to LVNV's proofs of claim as an unsecured creditor were not barred by the doctrine of res judicata; when the bankruptcy court confirmed debtors' Chapter 13 plans, it only considered treatment of unsecured creditors as a single class; there was no adjudication of the claim of any individual unsecured creditor as part of plan confirmation; determining the validity of individual unsecured claims was a distinctly separate process under section 502 both in procedure and timing; and thus an essential element of application of res judicata was simply absent from the Chapter 13 plan confirmation as to unsecured creditors like LVNV. Because res judicata did not apply in the bankruptcy court's later determination of contested unsecured claims under section 502, the court affirmed the judgment of the bankruptcy court. View "LVNV Funding, LLC v. Harling" on Justia Law

Suppliers sold electrical materials to Linear, which Linear incorporated into construction projects. The developers did not pay Linear for its work and Linear did not pay Suppliers. In July 2015, Linear filed a voluntary Chapter 11 bankruptcy petition; two weeks later, Suppliers filed construction liens on the developments into which Linear had incorporated the materials purchased from Suppliers. The bankruptcy court discharged the liens as violating the automatic stay that resulted from the bankruptcy petition. Linear then collected the full amounts owed by the developers. The bankruptcy court held that the construction liens were void ab initio for violation of the automatic stay. The district court and Third Circuit affirmed. Under New Jersey law, if a supplier sells materials on credit to a construction contractor and the contractor incorporates those materials into property owned by a third party without paying the supplier, the supplier can file for a lien on the third-party property. The courts rejected Suppliers’ argument that the liens attached to the third-party properties, not to the property of the bankruptcy estate. The courts reasoned that, under state law, the ability to create and the value of the liens depend on the amount that the contractor owes the suppliers--the value of the contractor’s accounts receivable--and fall within the definition of property of the estate, 11 U.S.C. 541. View "In re: Linear Electric Co., Inc." on Justia Law

The district court granted a request for entry of a charging order against a personal guarantor and judgment debtor’s transferable interest in an LLC. The judgment debtor and intervenor filed a motion to quash alleging that multiple levies and garnishments were improper. The district court granted the motion to quash. The Supreme Court affirmed in part and reversed in part, holding (1) the entry of the charging order was proper; but (2) the district court erred in granting the motion to quash because it is proper to have multiple levies and garnishments at the same time so long as they are under a single execution. Remanded. View "DuTrac Community Credit Union v. Hefel" on Justia Law