Justia Bankruptcy Opinion Summaries

Tower Homes, LLC retained William Heaton and his law firm (collectively, Heaton) for legal guidance in developing a residential common ownership project. The project eventually failed, and Tower Homes entered Chapter 11 bankruptcy protection. The plan of reorganization and confirmation order stated that the trustee and bankruptcy estate retained all legal claims. The trustee subsequently entered into a stipulation with a group of creditors (collectively, the Creditors) permitting the Creditors to pursue any legal malpractice claims in the Tower Homes’ name. The bankruptcy court then entered an order authorizing the trustee to permit the Creditors to pursue Tower Homes’ legal malpractice claim in Tower Homes’ name. The Creditors subsequently filed a legal malpractice lawsuit against Heaton, naming Tower Homes as plaintiff. The district court granted summary judgment in favor of Heaton, concluding that the stipulation and order constituted an impermissible assignment of a legal malpractice claim to the Creditors. The Supreme Court affirmed, holding (1) the stipulation and order constituted an assignment, which is prohibited under Nevada law; and (2) the Creditors may bring a debtor’s legal malpractice claim pursuant to 11 U.S.C. 1123(b)(3)(B) when certain conditions are met, but those conditions were not met in this case. View "Tower Homes, LLC v. Heaton" on Justia Law

After confirmation of debtor's Chapter 13 bankruptcy plan, he received notice that his work-related travel reimbursement would be withheld at the request of the DOR for the payment of a domestic support obligation (DSO). Because the DOR attempted to intercept a payment to debtor after confirmation of his plan, the bankruptcy court found the DOR in contempt for violating the bankruptcy court’s confirmation order and awarded attorney’s fees to debtor as a result. The district court affirmed the bankruptcy court’s order of contempt and award of attorney’s fees. This case involves the interplay between two sections of the Bankruptcy Code: 11 U.S.C. 362 and 1327. The court concluded that, while the text of section 326(b)(2)(C) appears to permit DSO collection efforts post-petition, the legislative history lacks any suggestion that Congress intended the exception to abrogate the binding effect of section 1327(a). Rather, a plain reading of section 1327(a) makes clear that the binding effect of a confirmed plan encompasses all issues that could have been litigated in debtor's case - including whether the DOR could intercept debtor's reimbursement payment. Accordingly, because debtor's plan fell silent on the issue of whether the DOR could intercept debtor's reimbursement payment, the DOR was prohibited from taking such action. Therefore, the court affirmed the judgment. View "FL Dep't of Revenue v. Gonzalez" on Justia Law

Coles sued to recover an overdue loan that he had extended to a real estate investment company, Cascade. The loan was guaranteed by Glaser and Taylor. That case was settled when Cascade ostensibly paid off the loan, and Coles, in return, executed a release. Shortly after the settlement, Cascade filed for bankruptcy. Coles was forced to surrender most of the settlement proceeds to the bankruptcy trustee as a preferential payment. In a second suit, against Glaser and Taylor, the trial court found that the defendants had breached the settlement agreement and entered judgment in favor of Coles. The court of appeal affirmed, holding that a debt of a contractual co-obligor is not extinguished by another co- obligor's​ pre-bankruptcy payment to a creditor that is later determined to be a bankruptcy preference. View "Coles v. Glaser" on Justia Law

The creditors of a Chapter 7 bankruptcy debtor filed an adversary complaint, arguing that assets held by the debtor’s wife and business (defendants) rightfully belonged to the estate under 11 U.S.C. 542(a). The bankruptcy court recommended, and the district court granted, judgment on the pleadings, saying that the defendants were alter egos of the debtor and the corporate veils should be pierced and the assets “brought into the Debtor’s bankruptcy estate.” Three weeks later, the defendants, having failed to timely appeal the bankruptcy court’s turnover order, appealed the district court’s order remanding the case to the bankruptcy court to implement the district court’s ruling requiring that the defendants’ assets be turned over to the debtor’s estate. The defendants cited 28 U.S.C. 157(c)(1), arguing that the turnover claim was not a “core proceeding,” so only the district court could enter a final order resolving the claim. The Seventh Circuit dismissed their appeal. Core proceedings involve bankruptcy law; non‐core proceedings are proceedings that relate to a bankruptcy but arise under some other body of law. The turnover of the defendants’ assets to the debtor’s estate and their liquidation for the benefit of the defendants is a core proceeding; the limitations on the bankruptcy court’s authority are irrelevant. View "Gemini Int'l, Inc. v. BCL-Burr Ridge, LLC" on Justia Law

Debtor is the mother of a minor who was held in juvenile detention in Orange County for more than a year. At issue is whether a mother’s debt to Orange County arising from her son’s involuntary juvenile detention is a “domestic support obligation” (DSO) and thus excepted from discharge in bankruptcy. The court concluded that it is not. Debtor's debt is not in the nature of domestic support simply because it represents in part the costs of her son’s basic needs. Where the principal purpose of the County’s custody over debtor’s son is public safety, not the son’s domestic well-being or welfare, the debt does not qualify as a DSO. Accordingly, the court reversed the bankruptcy appellate panel's decision. View "Rivera v. Orange Cnty. Prob. Dept." on Justia Law

In each of three cases, a debtor filed for Chapter 13 bankruptcy, represented by counsel. During the bankruptcy proceedings, a debt collector submitted a proof of claim for a “stale” debt, for which the statute of limitations had expired. As required by Bankruptcy Rule 3001, the proof of claim filed by the debt collector accurately noted the origin of the debt, the date of the last payment, and the date of the last transaction. Each debtor objected to the claim; each was disallowed and eventually discharged. Each debtor brought a separate suit against the debt collector, alleging that the act of filing a proof of claim on a time‐barred debt constituted a false, deceptive, misleading, unfair, or unconscionable means of collecting a debt in violation of the Fair Debt Collection Practices Act, 15 U.S.C. 1692. The Seventh Circuit affirmed dismissal of the cases. The debt collectors’ conduct was not deceptive or misleading. The information contained in the proof of claim was not misleading, but set forth accurate and complete information about the status of the debts. View "Owens v. LVNV Funding, LLC" on Justia Law

Kip Kaler, as trustee of the debtor's bankruptcy estate, brought suit against Louie Slominski to avoid a land lease that Slominski and the debtor had entered. The Bankruptcy Appellate Panel (BAP) held that the bankruptcy court incorrectly calculated the setoff but affirmed its judgment in all other respects. Despite Slominski's failure to raise his double-recovery argument before the bankruptcy court, the BAP considered it. The court, however, will independently review the bankruptcy court's decision and is not bound by the BAP's decision. The court has discretion to consider a new argument in exceptional circumstances but the court is not convinced to do so on this record. The court concluded that the bankruptcy court did not abuse its discretion in refusing to grant the trustee a new trial based on the newly discovered evidence where the newly discovered evidence - consisting primarily of unexecuted lease documents found on a computer not belonging to Slominski - did not undermine its conclusion that Slominski acted in good faith. Accordingly, the court affirmed the judgment of the BAP. View "Kaler v. Slominski" on Justia Law

In these consolidated appeals, debtor filed numerous, frivolous challenges to the settlement and the district court entered a pre-filing injunction barring him from filing any new civil actions in the district court without court permission. At issue is whether the injunction encompasses appeals to the district court from bankruptcy court. The court concluded that, as written, the injunction does not cover those appeals with sufficient clarity, and that the district court thus erred in striking these three appeals for violating the pre-filing injunction. Nonetheless, the court affirmed the district court's dismissal of two of the three appeals (adversary proceeding numbers 14-10024 and 14-10043) for failure to state a claim, and remanded for the district court to resolve the third appeal (number 14-10014). View "US ex rel. Yelverton v. Federal Ins. Co." on Justia Law

Reynal Caldwell appeals the grant of summary judgment in favor of his ex-wife, Theresa Caldwell Lavender, and her attorney Alan E. DeWoskin and his law firm. Caldwell also appeals the denial of his motion for summary judgment. The court concluded that the district court erred in granting summary judgment to DeWoskin and Lavender based on the Rooker-Feldman doctrine because Caldwell's claims challenge the actions taken by DeWoskin and Lavender in seeking and executing state contempt orders, rather than the state court orders themselves. The court remanded to the bankruptcy court to determine whether Caldwell’s claims are precluded based on the state court’s determination that the automatic stay did not bar its contempt proceedings. View "Caldwell v. Dewoskin" on Justia Law

The Chapter 7 trustee appeals from the bankruptcy court’s judgment and order in favor of Sunset Cove on issues of turnover and preference. The bankruptcy appellate panel (BAP) concluded that the posting of the execution application and order on the boat slip at issue was sufficient as a notice of levy and created a valid lien on the boat slip under Missouri law. The sheriff’s failure to give required notice to the debtor did not invalidate the levy or the lien. In this case, the trustee did not present to the bankruptcy court any evidence of prejudice to the debtor or the estate as a result of the lack of notice. Accordingly, the BAP affirmed the bankruptcy court's judgment. View "Rouse v. Sunset Cove Condo." on Justia Law