Justia Bankruptcy Opinion Summaries

The district court affirmed the bankruptcy court's ruling that the non-debtor release provision in NHF's Chapter 11 reorganization plan was unenforceable. The court concluded that NHF has failed to demonstrate that it faces exceptional circumstances justifying the enforcement of the Release Provision in its Reorganization Plan. NHF failed to make the necessary showing to support the risk of donor litigation, nor has it carried its broader burden of justifying the non-debtor release of its Reorganization Plan.View "National Heritage Foundation v. Behrmann" on Justia Law

In this case, the issue this case posed to the New Jersey Supreme Court was presented by the United States Court of Appeals for the Third Circuit: whether, under New Jersey law, a tax sale certificate purchaser holds a tax lien. In 1998, plaintiff Princeton Office Park, L.P. purchased a 220,000 square foot commercial building on thirty-seven acres of land in the Township of Lawrence. Princeton Office Park did not satisfy its real estate tax obligation to the Township of Lawrence. By 2005, Princeton Office Park owed the Township of Lawrence in back taxes and unpaid penalties. The Township conducted a public auction of municipal tax liens. Defendant Plymouth Park Tax Services, LLC bid on a tax sale certificate for Princeton Office Park’s property. As the owner of the tax sale certificate following the public auction, Plymouth Park paid municipal real estate taxes and charges for Princeton Office Park’s property through the second quarter of 2008. By operation of law, Plymouth Park’s additional payments were added to the sum required for Princeton Office Park to redeem the tax sale certificate owned by Plymouth Park. The redemption amount accrued interest at a rate of eighteen percent following the sale. In 2007, Plymouth Park filed a tax lien foreclosure action against Princeton Office Park seeking to enjoin Princeton Office Park from exercising any right of redemption of the certificate, and requesting a declaration that Plymouth Park was the owner in fee simple of the disputed property. The Chancery Division entered an order establishing a deadline by which Princeton Office Park could redeem the certificate. While Plymouth Park’s foreclosure action was pending in the Chancery Division, Princeton Office Park filed a voluntary Chapter 11 bankruptcy petition. Plymouth Park filed an initial proof of claim in the Bankruptcy Court, citing “taxes” as the basis for its claim. Plymouth Park then objected to Princeton Office Park’s Plan of Reorganization. The United States Bankruptcy Court ruled in favor of Princeton Office Park. The United States District Court for the District of New Jersey affirmed, substantially adopting the reasoning of the United States Bankruptcy Court. The District Court construed the Tax Sale Law to confer on the purchaser of a tax sale certificate a lien, but not a lien that would permit the holder of the certificate to collect unpaid taxes owed to the municipality. Plymouth Park appealed to the United States Court of Appeals for the Third Circuit. The New Jersey Supreme Court answered the Third Circuit's question in the affirmative: the purchaser of a tax sale certificate possesses a tax lien on the encumbered property. View "In re: Princeton Office Park v. Plymouth Park Tax Services, LLC" on Justia Law

This bankruptcy appeal concerned whether Charles Kane and Harley Kane may discharge in Chapter 7 bankruptcy a $2 million judgment entered by a Florida state court in favor of creditors. The court concluded that the bankruptcy court did not clearly err in concluding that the state court judgment arose from a "willful and malicious injury" by the Kanes, and therefore the bankruptcy court correctly allowed the Stewart Firms, under 11 U.S.C. 523(a)(6), to prevent the Kanes from discharging the state court judgment. The court also concluded that the bankruptcy court properly determined that Harley Kane's misconduct in the Kane Firm's Chapter 11 case barred his own discharge in Chapter 7 under 11 U.S.C. 727(a)(7) and 727(a)(2) taken together. Accordingly, the court affirmed the judgment of the district court.View "Kane, et al. v. Stewart Tilghman Fox & Bianchi, et al." on Justia Law

This appeal arose from contempt sanctions issued by the bankruptcy court against the Diazes for failing to transfer a Mexican coastal villa to Kismet. The court concluded that: (1) the bankruptcy court had jurisdiction to substitute Axolotl as transferee; (2) the bankruptcy court did not violate due process in imposing certain sanctions; (3) the ACJ was sufficiently specific to support a finding of contempt; (4) even if "legal impossibility" excused noncompliance, the Diazes have not demonstrated that compliance with the ACJ was legally impossible; (5) the bankruptcy court's findings of contempt for the period up to November 25 were not clearly erroneous; (6) the Diazes' claim that the bankruptcy court lacked jurisdiction to quantify fees and costs in its order of December 18, 2008 was moot where the order was vacated by the district court; and (7) the bankruptcy court properly abrogated attorney-client privilege where Mr. Diaz implicitly waived privilege with regard to communications on certain subjects. The court also concluded that the district court did not err in vacating the compulsory sanctions of $25,000 per day for the period from November 26, 2008 to December 4, 2008. Finally, the court granted requests for judicial notice. Accordingly, the court affirmed the judgment of the district court.View "In re: Icenhower" on Justia Law

After an Attorney’s representation of the Debtor in this current action ended, the Debtor was left owing the Attorney $62,000. The Debtor later filed petition for bankruptcy protection and listed the amount owing to the attorney among her scheduled debts. The Attorney filed an adversary proceeding asserting that the debt was nondischargeable because it had been incurred through false pretenses and a false representation. The bankruptcy court dismissed the adversary proceeding, concluding that the Attorney had not carried her burden of proving her claims. The Bankruptcy Appellate Panel upheld the dismissal. The First Circuit affirmed, holding that the bankruptcy court did not err in determining that the Attorney failed to carry her burden of proving that the debt was nondischargeable.View "deBenedictis v. Brady-Zell" on Justia Law

Parmalat, a large Italian food and dairy company, entered bankruptcy in Italy and Bondi was appointed “extraordinary commissioner,” the equivalent of a bankruptcy trustee. In 2004 Bondi instituted, in New York, a proceeding under the since-repealed section 304 of the U.S. Bankruptcy Code to enjoin any action against Parmalat with respect to property involved in the Italian bankruptcy, to consolidate claims against the company. Months later, Bondi filed suit in Illinois, against Thornton, an accounting company, claiming that Thornton contributed to the collapse of Parmalat by conducting fraudulent audits of in violation of Illinois tort law. The case was removed to federal court. The New York district court declined to abstain in light of the Illinois suit and granted Thornton summary judgment, on the ground that the doctrine of in pari delicto barred Parmalat’s claim against the accounting company. The Second Circuit vacated and remanded with instructions to remand to Illinois state court. The Illinois district court declined to remand to state court and upheld the in pari delicto ruling. The Seventh Circuit held that the district court was required to remand to the state court, but noted that the New York litigation remained unresolved.View "Bondi v. Grant Thornton Int'l" on Justia Law

Spaine was a seasonal employee from 2008 until 2011, helping low-income and disabled persons register for housing assistance. Spaine alleges that she was harassed and unfairly disciplined because of her race and that she was told, when her 2011 employment ended, that instead of being reinstated automatically as in the past, she would have to reapply the next year. Spaine interpreted this as termination. She filed suit under 42 U.S.C. 1981 alleging that she was harassed and eventually fired because she is African American. Months after filing that complaint, Spaine filed a petition under Chapter 7 of the bankruptcy code. Spaine was represented by counsel in the discrimination suit, but was without a lawyer in the bankruptcy case. On a schedule of personal property, Spaine was required to list contingent and unliquidated claims of all types. She listed nothing. In the separate financial statement, Spaine was required to list lawsuits to which she was party within the preceding year. She listed two eviction suits, but did not list her discrimination suit. A transcript of the creditors’ meeting shows that Spaine told the bankruptcy trustee about her discrimination lawsuit at the first opportunity after filing her incomplete schedules. Spaine also subsequently filed an affidavit indicating that she told the bankruptcy judge about the suit. The employer alleged that Spaine was trying to conceal the suit. Spaine successfully moved to reopen her bankruptcy. The discrimination suit was dismissed on estoppel grounds. The Seventh Circuit reversed, finding that material facts remained in dispute.View "Spaine v. Kane-Richards" on Justia Law

The principal issue in this case was whether, after an automatic stay in bankruptcy has been lifted and a creditor was permitted to foreclose on real property, federal or state law governed an oversecured creditor's recovery of attorneys' and other fees from the sale proceeds. A corollary issue was whether the bankruptcy court has jurisdiction over the sale proceedings for purposes of determining the creditor's right to recover attorneys' fees and the Deed of Trust trustee's right to recover a contractually specified commission for conducting the non-judicial foreclosure sale. The bankruptcy court held that it had jurisdiction but the district court reversed. The court reversed, concluding that federal law governs what is to be distributed to a secured claimant that is oversecured. The court discerned no intent from 11 U.S.C. 506(b) that oversecured creditors who are permitted to foreclose are to be treated differently from oversecured creditors whose claims are satisfied within the bankruptcy proceeding. In this instance, the bankruptcy court's order lifting the stay allowed Wells Fargo to foreclose on the property in accordance with state law foreclosure procedures. It did not give the Deed of Trust any further authority and did not have the effect of insulating the debtor or any of the creditors from the reach of section 506(b). Lifting the automatic stay to allow Wells Fargo to foreclose was not tantamount to an abandonment of the property. The court concluded that the bankruptcy court was within its discretion in finding that there was no documentation of the time that was spent and no testimony as to what was a reasonable fee. Based on this record, the court could not say that the bankruptcy court erred in finding under section 506(b) that the amount of attorneys' fees Wells Fargo sought was not substantiated and therefore was not shown to be reasonable. Even under Texas law, Wells Fargo would bear the burden of demonstrating that the fees it requested were reasonable. The court remanded for further proceedings.View "Wells Fargo Bank, N.A., et al. v. 804 Congress, L.L.C." on Justia Law

The issues on appeal to the Tenth Circuit in this case stem from pollution at a four-square-mile area in Denver where Debtor-ASARCO, Union Pacific Railroad Company, and Pepsi-Cola Metropolitan Bottling Company., Inc. all operated facilities. All companies allegedly contributed to the release of hazardous substances at the site. The Environmental Protection Agency brought a Comprehensive Environmental Response, Compensation and Liability Act (CERCLA) action against debtor-ASARCO which was pending when the company filed for Chapter 11 bankruptcy protection. The EPA filed proofs of claim in the bankruptcy case seeking recovery of ASARCO's portion of the cleaning expenses. ASARCO moved to settle the claims to resolve its CERCLA liabilities. ASARCO sought contribution from Union Pacific and Pepsi. The district court ruled: (1) that ASARCO's direct contribution claim was time-barred under CERCLA section 113 (42 U.S.C. ß 9613); (2) that post-bankruptcy ASARCO was not a subrogee of pre-bankruptcy ASARCO; (3) and that ASARCO could not bring a subrogation claim. ASARCO appealed all three of these rulings. Finding no reversible error, the Tenth Circuit affirmed the district court.View "Asarco LLC v. Union Pacific, et al" on Justia Law

Jack Irwin owed a warehouse that Shade rented to store personal property. West Gate Bank held notes payable from Shade that were secured by Shade’s personal property. Shade later defaulted on the notes. Irwin and West Gate subsequently agreed to move Shade’s personal property pursuant to an “Abandonment” document. When Shade filed for bankruptcy, the bankruptcy court approved distribution of the proceeds in Shade’s personal property to West Gate, concluding that the Abandonment document was not an assignment or release of West Gate’s perfected security interest. Thereafter, Irwin filed this action against West Bank in district court alleging that West Gate breached its obligations under the Abandonment document by failing to pay the proceeds to Irwin. The district curt entered judgment in favor of West Gate. The Supreme Court affirmed, holding (1) the district court’s determination regarding the preclusive effect of the bankruptcy court’s ruling with respect to an assignment or release of West Gate’s security interest in Shade’s property was not relevant to this appeal; and (2) the district court did not err in concluding that the Abandonment document was not an enforceable contract or a warranty.View "Irwin v. West Gate Bank" on Justia Law