Justia Bankruptcy Opinion Summaries

SHF acquired the vestiges of Sholom Rubashkin's bankrupt Agriprocessors, now rebranded Agri Star. Debtor, Nevel, is owned by Rubashkin's brother. At issue on appeal was whether SHF has any rights to a well located on land owned by Nevel. The bankruptcy court concluded that SHF did not and the district court affirmed. SHF appealed and Nevel moved to dismiss the appeal based on the so-called "equitable mootness" doctrine. The court concluded that the district court did not err in concluding that SHF had no rights to the well. The bankruptcy court correctly found that SHF never acquired any rights to the well because Agriprocessors' trustee was deemed to have rejected the contract as a matter of law. Accordingly, the court affirmed the district court's judgment and denied the motion to dismiss. View "Agri Star Meat & Poultry, et al. v. Nevel Properties Corp." on Justia Law

Drillers filed a mineral lien on Debtor's well after Drillers performed work on the well and were never paid. The bankruptcy court dismissed Drillers' constructive trust and equitable lien claims and granted summary judgment to Debtors on Drillers' mineral contractor's and subcontractor's lien claims. The district court affirmed. The court affirmed the dismissal of Drillers' constructive trust and equitable lien claims. However, the court reversed and remanded the grant of summary judgment on Drillers' mineral subcontractors' lien claims because Drillers submitted sufficient evidence to survive summary judgment. The court held that it is possible under Texas law for an owner to also be a contractor, and for a laborer to secure liens against both the contracting and non-contracting owners. Viewed in the light most favorable to Drillers, the facts demonstrate that Drillers were subcontractors with regard to Debtors. View "Endeavor Energy Resources, L.P, et al. v. Heritage Consolidated, L.L.C., et al." on Justia Law

McClendon was the president and sole shareholder of NIA Insurance, for which Springfield served as Chief Financial Officer. In 2007, McClendon accused Springfield of theft and fired him. NIA and McClendon sued Springfield in Texas state court, claiming theft and conversion. Springfield answered and counterclaimed, alleging defamation. The suit court jury determined that Springfield was entitled to $341,000 in actual damages for defamation. Later, McClendon filed a voluntary petition for Chapter 11 bankruptcy. Springfield filed a successful adversary proceeding, seeking to have the debt arising from the jury award declared non-dischargeable under 11 U.S.C. 523(a)(6). The bankruptcy court determined that McClendon inflicted a willful and malicious injury upon Springfield. The district court and Fifth Circuit affirmed, rejecting challenges to the sufficiency of the evidence and that the bankruptcy court impermissibly shifted the burden of proof to McClendon. View "McClendon v. Springfield" on Justia Law

Debtor Lisa Galaz filed an adversary proceeding in bankruptcy court against her ex-husband, appellant Raul Galaz, for fraudulently transferring the assets of Artist Rights Foundation, LLC ("ARF") to a Texas limited liability company managed by Raul's father. Raul, a former California attorney, founded ARF in 1998 with Julian, a music producer, in order to collect royalties for the music of the Ohio Players. Raul and Julian secured all rights to the Ohio Players' music catalogue and exploited those rights, but from 1998 until 2005 the rights did not generate any revenue. In 2002, Lisa and Raul divorced and executed a divorce decree under which Raul assigned half of his 50% interest in ARF to Lisa. Because Raul transferred half of his interest to Lisa without Julian's consent, in violation of ARF's written operating agreement, Lisa received an economic interest in ARF with no management or voting rights. In 2005, without obtaining prior consent from either Lisa or Julian, Raul assigned all of ARF's rights to the entity Segundo Suenos. Soon thereafter, the royalties for the Ohio Players' music began to generate a substantial amount of revenue. From the time of ARF's transfer in June 2005 until trial in February 2010, Segundo Suenos's gross revenue from the Ohio Players' royalties totaled nearly one million dollars. Neither Julian nor Lisa received any share of the profits despite their interests in ARF. In 2007, Lisa filed for Chapter 13 bankruptcy. In April 2008 she brought an adversary proceeding against Raul and Segundo Suenos, asserting claims under the Bankruptcy Code and the Texas Uniform Fraudulent Transfer Act ("TUFTA"), and asserted that Raul, as a managing member of ARF, breached his fiduciary duties to Lisa when he transferred ARF's assets to Segundo Suenos. Defendants filed a third-party complaint against Julian, who in turn asserted seven counterclaims against Defendants, including breach of fiduciary duty and fraudulent conversion. After a bench trial, the bankruptcy court found that the transfer of assets from ARF to Segundo Suenos was invalid, that it constituted a fraudulent transfer under TUFTA, that Raul owed fiduciary duties to Julian and had breached those duties, and that Raul owed no fiduciary duties to Lisa. The court entered judgment for Lisa and Julian, awarding both actual and exemplary damages. Raul and Segundo Suenos unsuccessfully appealed the judgment to the district court. The district court vacated and remanded the damages awards, however, for further consideration of Segundo Suenos's alleged expenses and for redetermination of both the actual and exemplary damages. Appellants Raul and Segundo Suenos appealed the district court's decisions. "Because rapidly evolving case law has limited bankruptcy courts' jurisdiction," the Fifth Circuit vacated the district court's order and remanded the case with separate instructions for each judgment creditor. View "Galaz, et al v. Galaz, et al" on Justia Law

This appeal stemmed from an adversary proceeding initiated by Appellant James Vaughn within his Chapter 11 bankruptcy. Appellant sought a declaration that his taxes assessed for the years 1999 and 2000 were dischargeable. After a trial, the bankruptcy court determined the taxes were not dischargeable because Appellant had filed a fraudulent tax return and sought to evade those taxes. The bankruptcy court's decision was affirmed by the federal district court on appeal. Appellant appealed the district court's order affirming the bankruptcy court's decision. Finding no reversible error, the Tenth Circuit affirmed the district court's affirming of the bankruptcy court's decision. View "In re: Vaughn, et al" on Justia Law

The Debtors were account holders at Wells Fargo. When Wells Fargo discovered that the Debtors had filed a voluntary Chapter 7 bankruptcy petition, it placed a “temporary administrative pledge” on their accounts and requested instructions from the Chapter 7 trustee regarding the distribution of account funds, a portion of which the Debtors claimed as exempt under Nevada Revised Statutes 21.090(1)(g). The Debtors brought an adversary proceeding, which the bankruptcy court dismissed. The district court affirmed, holding that they did not state a claim for a willful violation of 11 U.S.C. 362(a)(3), which prohibits “any act to obtain possession of property of the estate or of property from the estate or to exercise control over property of the estate.” Before the account funds revested in the Debtors, they remained estate property, and the Debtors had no right to possess or control them. The administrative pledge could cause the Debtors no injury before the account funds revested. After the account funds revested in the Debtors, they lost their status as estate property and thus were no longer subject to section 362(a)(3). View "In re: Mwangi" on Justia Law

In this fraudulent conveyance action, Linda Mastro, a nonclaimant to the bankruptcy estate, appealed the district court's judgment. The court held that the bankruptcy court had authority to enter judgment based on the parties' consent. However, the court concluded that the district court erred as a matter of law when it determined that the fugitive disentitlement doctrine applied to Linda's civil bankruptcy appeal; the district court's dismissal of Linda's civil bankruptcy appeal was based solely on Linda's blatant disregard for the authority of the judicial system; but disregard for the authority of a different court does not constitute a "necessity" capable of justifying the rule of disentitlement in these circumstances; the court declined to consider the merits of Linda's appeal in the first instance where the district court dismissed the bankruptcy appeal without reaching the merits; and therefore, the court reversed and remanded with instructions. View "Mastro v. Rigby, Jr." on Justia Law

The Plaintiffs sued Payday Financial, Webb, an enrolled member of the Cheyenne River Sioux Tribe, and other entities associated with Webb, alleging violations of civil and criminal statutes related to loans that they had received from the defendants. The businesses maintain several websites that offer small, high-interest loans to customers. The entire transaction is completed online; a potential customer applies for, and agrees to, the loan terms from his computer. The district court dismissed for improper venue, finding that the loan agreements required that all disputes be resolved through arbitration conducted by the Cheyenne River Sioux Tribe on their Reservation in South Dakota. Following a limited remand, the district court concluded that, although the tribal law could be ascertained, the arbitral mechanism detailed in the agreement did not exist. The Seventh Circuit held that the action should not have been dismissed because the arbitral mechanism specified in the agreement is illusory. Rejecting an alternative argument that the loan documents require that any litigation be conducted by a tribal court on the Cheyenne River Sioux Tribe Reservation, the court stated that tribal courts have a unique, limited jurisdiction that does not extend generally to the regulation of nontribal members whose actions do not implicate the sovereignty of the tribe or the regulation of tribal lands. View "Jackson v. Payday Fin., LLC" on Justia Law

In 1996, Robinson pleaded guilty to mail fraud and aiding and abetting. The district court sentenced Robinson to 97.5 months of imprisonment and ordered him to pay criminal restitution of $286,875. A year later, Robinson pleaded guilty to a second set of criminal violations, resulting in convictions of wire fraud and aiding and abetting. The district court imposed a 24-month term of imprisonment and again ordered Robinson to pay restitution, this time $100,000. Robinson paid only $7,779.44 of the first judgment and $200 of the second before filing for bankruptcy under Chapter 13. The government, under the criminal restitution judgments, is a lien creditor. Filing for bankruptcy triggered the automatic stay, which suspends all activities related to the collection and enforcement of prepetition debts, 11 U.S.C. 362(a). The bankruptcy court denied the government’s motion to bypass the stay under 18 U.S.C. 3613(a), which provides that the government may enforce a judgment imposing restitution “notwithstanding any other Federal law.” The district court reversed, reasoning that it did not matter whether the debtor or the bankruptcy estate holds nominal title to the property because section 3613(a) allows the government to enforce a restitution order against all property of the person ordered to pay. The Sixth Circuit affirmed; section 3613 supersedes the automatic stay and allows the government to enforce restitution orders against property included in the bankruptcy estate. View "Robinson. v. United States" on Justia Law

Debtor appealed the the Bankruptcy Appellate Panel's (BAP) decision affirming a decision of the bankruptcy court approving a settlement between the Chapter 7 trustee and the City of Maplewood, and denying debtor's motion to set aside the settlement. The court affirmed the judgment, concluding that debtor did not have standing because she did not have a pecuniary interest in the bankruptcy court's order. View "Peoples v. Radloff" on Justia Law