Justia Bankruptcy Opinion Summaries

In 2004, Laura Sheedy refinanced property she owned. For the transaction, Sheedy executed a promissory note and mortgage in favor of Washington Mutual Bank (WAMU). The mortgage was eventually assigned to Deutsche Bank National Trust Company. JPMorgan Chase National Association (Chase) serviced the loan. Deutsche Bank subsequently commenced foreclosure proceedings. Thereafter, in 2010, Sheedy filed for protection under Chapter 13 of the Bankruptcy Code. As part of her plan, Sheedy raised a series of allegations of lender liability. In 2011, Sheedy filed this adversary proceeding to have the bankruptcy court resolve her lender liability claims, adding that Deutsche Bank and Chase (together, the Secured Creditors) were liable for fraud deceit, and misrepresentation on the basis that WAMU provided her with inaccurate or false information concerning the terms of the note and the mortgage. The bankruptcy court granted summary judgment in favor of the Secured Creditors. The district court affirmed. The First Circuit affirmed, holding that all of Sheedy’s claims were either time-barred or without merit. View "Sheedy v. Deutsche Bank Nat’l Trust Co." on Justia Law

Knight is a licensed attorney, and the charges against him stem from his representation of a Barber in a bankruptcy proceeding, in 2008-2010. Knight was convicted of conspiracy to commit bankruptcy fraud, 18 U.S.C. 371 and 157; aiding and abetting bankruptcy fraud; aiding and abetting the making of a false statement in relation to a bankruptcy case; and five counts of aiding and abetting money laundering, 18 U.S.C. 1957 and 2. The district court granted Knight a new trial on the conspiracy, bankruptcy fraud, and money laundering counts, granted his motion for judgment of acquittal on the false statement count, and conditionally granted him a new trial on the false statement count in the event of reversal on appeal. The Eighth Circuit reversed the acquittal on the false statement charge, but affirmed the decision to grant Knight a new trial on all counts of conviction, noting evidence that Knight and Barber used the IOLTA to keep Barber's creditors from learning that he had money available and evidence concerning a sham entity that was used to divert money to Barber's own pocket. View "United States v. Knight" on Justia Law

The Hospital had to pay a Hospital Assessment Fee (HAF) as part of an Indiana program designed to increase Medicaid reimbursements to eligible hospitals. After it failed to pay its HAF, the Indiana Family and Social Services Administration (FSSA) began withholding Medicaid reimbursements. On June 19, 2012, the Hospital filed for Chapter 11 bankruptcy. FSSA continued to withhold reimbursements in satisfaction of its HAF debt. The Hospital filed an adversary complaint against FSSA claiming that the HAF was a pre-petition claim subject to the automatic stay. The bankruptcy court agreed, ruling the HAF was an “act to collect, assess, or recover a claim against the debtor that arose before the commencement of the case,” 11 U.S.C. 362(a)(6), and was subject to the stay. FSSA was ordered to repay the full amount it had withheld. The district court reversed as to the HAF for fiscal year 2013. The Seventh Circuit reversed, finding that the 2013 HAF, like the 2012 HAF, is a pre-petition claim subject to the automatic stay. FSSA was aware of its claims against the Hospital—for both fiscal years 2012 and 2013—well before it filed for bankruptcy View "Unsecured Creditors' Comm. v. Ind. Family & Soc.Servs. Admin." on Justia Law

The Lapideses renewed a loan from Venture Bank secured by a third mortgage on their home. Howard subsequently filed for Chapter 7 bankruptcy. After Howard’s personal debts were discharged, the Lapideses executed two “Change in Terms Agreements,” each of which extended the maturity date of the loan for six months. When Howard ceased making payments under these agreements, Venture Bank sought a declaratory judgment that the agreements were valid and enforceable. Howard counterclaimed that Venture Bank’s efforts to obtain payments after his discharge violated the discharge injunction under 11 U.S.C. 524(a)(2). The bankruptcy court denied Venture Bank’s claim for a declaratory judgment and awarded Howard damages and attorney’s fees. The district court and Eighth Circuit affirmed, upholding a finding that Howard’s payments were not voluntary within the meaning of section 524(f) and did not comply with the requirements of a reaffirmation agreement under section 524(c). The post-discharge agreements served no purpose other than reaffirmation agreements in which Howard agreed to repay all of his discharged personal debt and lacked consideration. View "Venture Bank v. Lapides" on Justia Law

Schwartz was hired as an executive of Barclays, which lent him $400,000 and promised to forgive the loan in equal installments on the first through seventh anniversaries of his start date. Before the second anniversary, the company fired him, which made the unforgiven principal immediately due. Schwartz refused to pay. An arbitrator sided with Barclays and ordered Schwartz to pay $568,568, which included attorneys’ fees plus interest. In response, Schwartz petitioned for bankruptcy under Chapter 7. Between the announcement of the arbitration award and the filing of the bankruptcy petition the Schwartzes spent thousands of dollars on inessential consumer goods and services, including tickets to Disney World, private school tuition, and a monthly payment for a Range Rover. Learning of these expenditures, Barclays, the Schwartzes’ principal creditor and the only active opponent of granting a discharge, moved to dismiss. The court dismissed the petition under 11 U.S.C. 707(a), “for cause.” The Seventh Circuit affirmed, finding that “for cause” embraces conduct that, while not a violation of required procedures, avoids repayment of debt without an adequate reason. The Schwartzes failed to pay as much of their indebtedness as they could without hardship. View "Schwartz v. Barclays Capital, Inc." on Justia Law

Creditor extended to Debtor a line of credit, and Debtor granted Creditor, pursuant to an agreement, a security interest in payments due to Debtor under an insurance policy. The agreement provided that Maine law governed all rights under the agreement. Insurer subsequently issued a commercial property insurance policy to Debtor. After a freight train owned by Debtor derailed, Creditor filed a claim under the policy, which Insurer denied. Debtor then filed for Chapter 11 bankruptcy. Creditor instituted an adversary proceeding seeking a declaration regarding the priority of its asserted security interest in any payments due under the policy. Insurer subsequently settled with Debtor and the trustee requiring Insurer to pay $3,800,000 to Debtor in satisfaction of all claims under the policy. Creditor objected to approval of the proposed settlement, arguing that the agreement granted it a first-priority security interest in the settlement. The bankruptcy court concluded that Debtor was entitled to the settlement proceeds free and clear of Creditor’s asserted interest because Creditor had failed to perfect its interest under Maine law. The bankruptcy appellate panel affirmed. The First Circuit affirmed, holding that the courts below did not err in concluding that Debtor was entitled to the proposed settlement payment free and clear of Creditor’s asserted security interest. View "Wheeling & Lake Erie Ry. v. Keach" on Justia Law

Zell orchestrated a leveraged buy-out (LBO) of the Tribune Company, which published the Chicago Tribune and the Los Angeles Times. In an LBO, a purchaser acquires an entity using debt secured by assets of the acquired entity. The transaction saddled the company with an additional $8 billion of debt. Tribune subsidiaries guaranteed the LBO debt. The holders of pre-LBO debt had recourse only against Tribune, not against the subsidiaries. Tribune sought Chapter 11 bankruptcy protection in 2008. Aurelius, a hedge fund specializing in distressed debt, bought $2 billion of the pre-LBO debt and participated in the bankruptcy. The Committee of Unsecured Creditors obtained permission to pursue claims of breach of fiduciary duty and fraudulent conveyance against the LBO lenders, directors and officers of old Tribune, and Zell. The Bankruptcy Court discussed possible plans at length, concluding that it was uncertain that litigation would result in full avoidance of the LBO, the only result that could result in greater recovery than settlement. A plan was confirmed over Aurelius’s objection. A requested stay was conditioned on Aurelius posting a $1.5 billion bond. Aurelius was unsuccessful in obtaining expedited review. The plan was consummated. Appeals were dismissed as equitably moot. The Third Circuit agreed that Aurelius’s appeal, which sought to undo the crucial component of the consummated plan, was moot, but reversed with respect to trustees representing pre-LBO debt, who sought disgorgement from other creditors of $30 million; their requested relief would neither jeopardize the $7.5 billion plan of reorganization nor harm third parties who have justifiably relied on plan confirmation. View "In re: Tribune Media Co." on Justia Law

Angie Moffo lived rent free for eight years in a home owned by her brother-in-law, Doug Rich. After Rich filed for Chapter 7 bankruptcy, the appointed bankruptcy trustee, Stephen Rupp, filed suit against Moffo for back rent under Utah’s Uniform Fraudulent Transfer Act, asserting that Rich had defrauded his creditors by allowing Moffo to live in the house rent free after he became insolvent. The district court concluded that Moffo was the recipient of a fraudulent transfer and entered a $34,200 judgment against Moffo. The Supreme Court vacated the judgment entered against Moffo, holding that Rich did not transfer an asset to Moffo within the scope of the Act because the home was fully encumbered by a mortgage, and any rents were not the property of Rich. Remanded with instructions to enter summary judgment in favor of Moffo. View "Rupp v. Moffo" on Justia Law

This case arose from a contractual dispute between Netsphere and Jeffrey Baron in 2009. One of Baron's companies, Ondovoa, declared bankruptcy, automatically staying the district court action. As proceedings continued, both the bankruptcy court and the bankruptcy trustee became increasingly concerned over Baron’s failure to pay his current or former lawyers. Eventually, on the recommendation of the bankruptcy court, the district court appointed a receiver over Baron. The court reversed and remanded for the district court to reconsider all receivership fees and expenses. Before this mandate issued, the district court entered several orders approving interim fee applications submitted by the receiver and its counsel. After the mandate issued, and the case was remanded, the district court then entered an order reconsidering the fees it had previously awarded to the receiver, its counsel, and the Ondova bankruptcy trustee. It also authorized new payments to the receiver and to one of its counsel. Both parties appealed the various fee orders. The court dismissed the appeal for want of appellate jurisdiction because 28 U.S.C. 1292(a)(2) does not confer upon the court appellate jurisdiction to review these fee orders and the collateral order doctrine does not provide a basis for appellate jurisdiction. View "Netsphere, Inc. v. Baron" on Justia Law

Plaintiff filed a qui tam action against GSD&M under the False Claims Act (FCA), 31 U.S.C. 3730, alleging that GSD&M misrepresented its profits and overhead during contract negotiations with the Air Force. At the time of filing, plaintiff was the debtor in a confirmed Chapter 13 bankruptcy plan and he failed to disclose his FCA claims to the bankruptcy court. The district court dismissed the FCA claims under the doctrine of judicial estoppel and plaintiff appealed, arguing that judicial estoppel should not apply because he had no motive to conceal his FCA claims from the bankruptcy court, especially given that his repayment plan required repaying 100% of the principal of his debts. The court affirmed the judgment, concluding that the district court did not abuse its discretion in dismissing the claims because the district court's findings, that plaintiff knew about his claims while his bankruptcy was still pending and had a motive to conceal, are supported by the record. The court rejected plaintiff's remaining claims and affirmed the judgment. View "Long v. GSD&M Idea City, LLC" on Justia Law