Justia Bankruptcy Opinion Summaries

Plaintiff appealed the bankruptcy court's orders granting a motion to dismiss and denying his motion for retroactive approval to prosecute a derivative action complaint. The panel concluded that, based upon the record and applicable legal standards, the bankruptcy court did not abuse its discretion in denying derivative standing where there is no evidence that the trustee refused to undertake avoidance of the transfer, rather, he merely responded that he would need more information. Further, the bankruptcy court identified the complexity of the matters, including a three step process before any recovery could even be potentially available to the bankruptcy estate; the risks associated with litigation; and the expense of litigation in finding that the trustee was justified in his refusal to pursue avoidance of the partial assignment. These findings conform to the cost benefit analysis mandated by the law in this Circuit. The panel rejected plaintiff's remaining arguments and affirmed the bankruptcy court's orders. View "Larson, III v. Foster, et al." on Justia Law

The trustee appealed from the bankruptcy court's order overruling the trustee's objection to debtor's claimed exemption in the portion of his state income tax refund which came from the Minnesota Education Credit as "government assistance based on need" under section 550.37, subd. 14 of the Minnesota Statutes. The panel concluded that the Education Credit is a direct payment or subsidy to address the basic economic needs of low-income recipients in obtaining such quality education for their children where the Education Credit is available only to individuals with relatively low income, is a refundable credit, and the credit is, in large part, intended to assist low-income individuals in obtaining quality education for their children. Accordingly, the panel affirmed the bankruptcy court's order permitting debtor's claimed exemption. View "Christians v. Dmitruk" on Justia Law

Schwab filed a chapter 11 bankruptcy petition in 2010. HLP was appointed as bankruptcy counsel. Schwab’s individual directors/shareholders filed an adversary proceeding against Attorney Oscar and HLP, asserting malpractice arising from an allegedly undisclosed conflict of interest with Bank of America. The bankruptcy court dismissed, holding that the directors lacked standing to bring the claim directly or derivatively and that the claim was barred by res judicata. They did not appeal. One year after the dismissal, the directors sought to reopen the adversary proceeding on the basis of asserted newly discovered evidence of failure to disclose a conflict with Huntington National Bank. The bankruptcy court denied the motion for relief from judgment, reasoning that the directors had not challenged the prior ruling that they lacked standing and that, although other arguments were immaterial in light of lack of standing, the proffered evidence was neither new nor newly discovered. The directors “had knowledge of the specific conflict at least three years earlier than they’ve claimed in their motion for relief.” The Sixth Circuit Bankruptcy Appellate Panel affirmed. Because the directors lacked standing to be a party in the underlying complaint, they lack standing to bring a motion for relief from judgment. View "In re: SII Liquidation Co." on Justia Law

Debtors developed and sold property in “The Village of Arcadian Springs,” in Anderson, Tennessee. Plaintiffs alleged that they were fraudulently induced to purchase waterfront lots by misrepresentations concerning construction of a lake and other amenities which were never completed. After a hearing on noncompliance with discovery orders, the state court entered default judgment, stating: Plaintiffs are entitled to a Judgment pursuant to ... their Complaint including ... violation of the Tennessee Consumer Protection Act ... negligence; misrepresentation; fraud; conversion; negligent and intentional infliction of emotional distress; outrageous conduct; and deceit. The Debtors filed a Chapter 7 bankruptcy petition before a scheduled state court hearing on damages. In an adversary proceeding, the bankruptcy court compared the elements of 11 U.S.C. 523(a)(2)(A) to those of a cause of action for fraud in Tennessee, found that the fraud claims were actually litigated in the state court, that the finding of fraud was necessary to support the state judgment, and that collateral estoppel applied to the state court fraud claims, rendering them non-dischargeable under 11 U.S.C. 523(a)(2)(A). The Bankruptcy Appellate Panel affirmed, noting that the Debtors retained an attorney, filed an answer, and participated in discovery so that their repeated failures to respond properly resulted in default judgment. The fraud issues were, therefore, actually litigated. View "In re: Anderson" on Justia Law

This appeal stemmed from debtor's listing of a $575 payday loan from CIC. Debtor filed a motion for sanctions in the Bankruptcy Court, alleging that CIC willfully violated the automatic stay provision of the bankruptcy code, 11 U.S.C. 362, and seeking a return of the funds and overdraft fees, emotional distress and punitive damages, and attorneys' fees. On appeal, CIC challenged the district court's emotional distress and punitive damages awards, and debtor cross-appealed the attorneys' fees and sanctions rulings. The court concluded that the district court did not err in confirming the emotional distress award where debtor suffered significant and emotional distress as a result of CIC's actions in cashing the check and in continuing to call her post-petition. The award of punitive damages was not an abuse of discretion where the bankruptcy court reasonably concluded that CIC demonstrated reckless and callous disregard for the law. The court held that a bankruptcy petitioner, such as debtor, could collect attorneys' fees incurred litigating the violation of an automatic stay after the violator sends an e-mail conditionally offering partial reimbursement under section 362(k)(1) where the bankruptcy laws do not permit a stay violator to undermine the remedies available under section 362(k) by forcing a bankruptcy petitioner to accept a conditional offer in lieu of pursuing fair compensation and attorney's fees. Finally, the district court did not abuse its discretion in denying sanctions under its inherent authority when it declined to find that CIC acted in bad faith. View "In re: Snowden" on Justia Law

In 2000 the SEC charged First Choice and others with fraud. The district court appointed a receiver to take charge of the defendants’ assets for victims of the $31 million fraud. The receiver found that some assets had been used to acquire oil and gas leases in Texas and Oklahoma and attempted to sell them and use the proceeds to compensate the victims. Over the next 14 years, third parties sought to establish ownership interests in the leases. In this case, CRM sought to contest the receiver’s proposed sale of oil leases in Osage, Oklahoma, which it claims to have operated since 2002. The district court denied CRM’s motion to intervene and approved the sale. The Seventh Circuit affirmed, noting that CRM knew as early as 2004 that the receiver was claiming the leases, but waited until the protracted and expensive receivership was finally moving toward an end and the receiver’s assets were dwindling to take action. View "Sec. & Exch. Comm'n v. First Choice Mgmt. Servs., Inc." on Justia Law

The issue this appeal presented for the New Jersey Supreme Court's review centered on an agreement for the sale of a residential property and a subsequent lease and repurchase agreement, specifically whether the transactions collectively gave rise to an equitable mortgage, violated consumer protection statutes, or contravened its decision in "In re Opinion No. 26 of the Committee on the Unauthorized Practice of Law," (139 N.J. 323 (1995)). In 2007, defendant Barbara Felton faced foreclosure proceedings with respect to her unfinished, uninhabitable home and the land on which it was situated. Felton and plaintiff Tahir Zaman, a licensed real estate agent, entered into a written contract for the sale of the property. A week later, at a closing in which neither party was represented by counsel, Felton and Zaman entered into two separate agreements: a lease agreement under which Felton became the lessee of the property, and an agreement that gave her the option to repurchase the property from Zaman at a substantially higher price than the price for which she sold it. For more than a year, Felton remained on the property, paying no rent. She did not exercise her right to repurchase. Zaman filed suit, claiming that he was the purchaser in an enforceable land sale agreement, and that he therefore was entitled to exclusive possession of the property and to damages. Felton asserted numerous counterclaims, alleging fraud, slander of title, violations of the Consumer Fraud Act (CFA), and violations of other federal and state consumer protection statutes. She claimed that the parties’ transactions collectively comprised an equitable mortgage and constituted a foreclosure scam, entitling her to relief under several theories. She further contended that the transactions were voidable by virtue of an alleged violation of "In re Opinion No. 26." A jury rendered a verdict in Zaman’s favor with respect to the question of whether Felton knowingly sold her property to him. The trial court subsequently conducted a bench trial and rejected Felton’s remaining claims, including her contention that the transactions gave rise to an equitable mortgage and her allegation premised upon In re Opinion No. 26. An Appellate Division panel affirmed the trial court’s judgment. The Supreme Court affirmed in part and reversed in part the Appellate Division’s determination. The Court affirmed the jury’s determination that Felton knowingly sold her property to Zaman. Furthermore, the Court affirmed the trial court and Appellate Division's decisions that Felton had no claim under the CFA, that this case did not implicate "In re Opinion No. 26," and that Felton’s remaining claims were properly dismissed. The Court reversed, however, the portion of the Appellate Division’s opinion that affirmed the trial court’s dismissal of Felton’s claim that the parties’ agreements constituted a single transaction that gave rise to an equitable mortgage, adopting an eight-factor standard for the determination of an equitable mortgage set forth by the United States Bankruptcy Court in "O’Brien v. Cleveland," (423 B.R. 477 (Bankr. D.N.J. 2010)). The case was remanded to the trial court for application of that standard to this case, and, in the event that the trial court concludes that an equitable mortgage was created by the parties, for the adjudication of two of Felton’s statutory claims based on alleged violations of consumer lending laws, as well as several other claims not adjudicated by the trial court. View "Zaman v. Felton" on Justia Law

Kenneth Wynne and Allison Wynne owned and operated Wynne Fine Art, which accepted art works from creditor artists. After the Wynnes filed for bankruptcy, the trustee of the bankruptcy estates moved to sell the art works. The creditor artists commenced an adversary proceeding against the bankruptcy estate seeking a declaration that the art works were held in trust under the Massachusetts fine art consignment statute, Mass. Gen. Laws, ch. 104A, 2(b), and therefore were not the property of the bankruptcy estates. The trustee counterclaimed seeking a declaration that chapter 104A was inapplicable because when the creditor artists delivered their work to the gallery they did not provide a written statement describing the art work as required by chapter 104A, section 2(b). The United States Bankruptcy Court for the District of Massachusetts certified a question of law to the Supreme Judicial Court concerning the effect of a consignor’s failure to deliver a written statement pursuant to chapter 104A, section 2(b). The Supreme Judicial Court answered that a written statement of delivery is not a prerequisite for the formation of a consignment under chapter 104A. View "Plumb v. Casey" on Justia Law

Vantage appealed three orders from the district court and two orders from the bankruptcy court entered during the course of the Chapter 11 proceedings of twenty-one shipping companies. The orders' combined effect was to place certain shares of Vantage stock in custodia legis with the clerk of the court. The court concluded that the appeals are not moot, that the Vantage Shares are not "property of the estate," and that the Vantage Litigation is not "related to" the bankruptcy proceedings. In this case, the district court and the bankruptcy court had no subject-matter jurisdiction to enter the orders and, therefore, the court vacated and remanded for further proceedings. The court denied debtors' Motion to Dismiss Appeals. View "Vantage Drilling Co. v. TMT Procurement Corp., et al." on Justia Law

Plaintiff appealed the district court's affirmance of the bankruptcy court's orders granting debtor's motion to modify its Second Amended and Restated Chapter 11 Plan and confirming debtor's Third Amended Plan of Reorganization. The court affirmed because plaintiff failed to satisfy the person aggrieved standard where plaintiff's interest in avoiding liability is not an interest protected or regulated by the Bankruptcy Code. View "Atkinson v. Ernie Haire Ford, Inc." on Justia Law