Justia Bankruptcy Opinion Summaries

Debtors filed for Chapter 13 bankruptcy relief and proposed a plan to pay nondischargeable state and federal tax debts before other unsecured creditors. The bankruptcy court rejected the plan and the Bankruptcy Appellate Panel (BAP) affirmed. Applying the four-part test for unfair discrimination in In re Leser, the court concluded that the plan unfairly discriminated against other unsecured creditors, leaving the unsecured creditors with little or nothing. The court rejected debtors' argument that their post-petition tax preparation fees should be treated as pre-confirmation legal fees or trustee administration fees where debtors did not file their pre-petition tax returns on time. Accordingly, the court affirmed the judgment of the bankruptcy court. View "Copeland, et al. v. Fink" on Justia Law

Starr, AIG's former principal shareholder, filed suit against the FRBNY for breach of fiduciary duty in its rescue of AIG during the fall 2008 financial crisis. The district court dismissed Starr's claims and Starr appealed. The suit challenged the extraordinary measures taken by FRBNY to rescue AIG from bankruptcy at the height of the direst financial crisis in modern times. In light of the direct conflict these measures created between the private duties imposed by Delaware fiduciary duty law and the public duties imposed by FRBNY's governing statutes and regulations, the court held that, in this suit, state fiduciary duty law was preempted by federal common law. Accordingly, the court affirmed the judgment of the district court. View "Starr Int'l Co. v. Federal Reserve Bank of New York" on Justia Law

In this appeal, the Tenth Circuit considered a novel question: Does issue preclusion apply in bankruptcy court to a final determination in district court that a party waived an issue? Upon review of the circumstances of this case and the applicable statutes, the Court concluded issue preclusion did not apply to the waiver finding here. The Court reversed the judgment of the Bankruptcy Appellate Panel and remanded this case for the bankruptcy court to reinstate its order. View "Clark v. Zwanziger" on Justia Law

This dispute arose out of a complicated bankruptcy proceeding. On appeal, Lender challenged the district court's judgment which, in relevant part, disallowed Lender's claim for a contractual prepayment consideration. Applying Colorado law, a lender was not entitled to a prepayment penalty when the lender chooses to accelerate the note. Absent a clear contractual provision to the contrary or evidence of the borrower's bad faith in defaulting to avoid a penalty, a lender's decision to accelerate acts as a waiver of a prepayment penalty. In this instance, the plain language of the contract plainly provided that no Prepayment Consideration was owed unless there was an actual prepayment, whether voluntary or involuntary. Accordingly, the acceleration of the Note due to GCMM's default by nonpayment under Article 4 did not trigger the obligation to pay the Prepayment Consideration under Article 6. View "Bank of New York Mellon v. GC Merchandise Mart, L.L.C., et al." on Justia Law

Aaroma acquired certain assets and liabilities of Emoral, a manufacturer of diacetyl, a chemical used in the food flavoring industry. The parties were aware of potential claims arising from exposure to diacetyl. Their agreement stated that Aaroma was not assuming liabilities related to “Diacetyl Litigation,” and was not purchasing Emoral’s corresponding insurance coverage. Emoral filed for bankruptcy. The Trustee and Aaroma entered into an agreement, under which Aaroma paid $500,000 and the Trustee released Aaroma from any “causes of action . . . that are property of the Debtor’s Estate.” In response to objections by the Diacetyl Claimants, the parties added that their agreements would not “operate as a release of, or a bar to prosecution of any claims held by any person which do not constitute Estate’s Released Claims.” The Bankruptcy Court approved the settlement without resolving whether the Diacetyl claims constituted “Estate’s Released Claims.” The Diacetyl Claimants filed individual complaints, alleging that Aaroma was a “mere continuation” of Emoral. The Bankruptcy Court held that the Diacetyl claims were not property of the estate. The district court reversed, finding that the claim for successor liability was a “generalized” claim belonging to the estate because a finding that Aaroma was a “mere continuation” of Emoral would benefit Emoral’s creditors generally. The Third Circuit affirmed. Because the Diacetyl claim belongs to the bankruptcy estate, it falls within the “Estate’s Released Claims.” The Diacetyl Plaintiffs have no apparent recourse against Aaroma. View "In re: Emoral, Inc." on Justia Law

C.W. Mining Company filed for Chapter 7 bankruptcy. This case arose from the sale of assets from the company's bankruptcy estate. The four appellants did business with C.W. Mining before its involuntary bankruptcy. Appellants claimed bankruptcy trustee should not have sold certain assets to plaintiff Rhino Energy, LLC. The Tenth Circuit surmised that the question for each appellant in this case was whether relief could be granted that would not impact the sale's validity. The Court: (1) dismissed Rhino and its wholly owned subsidiary, Castle Valley Mining, LLC, from the appeals, finding no appeal sought any relief affecting either entity; (2) agreed with the district court with regard to appellee Kenneth Rushton (the bankruptcy trustee in this case), that ANR Company's appeal, COP Coal Development Company's first appeal, and Hiawatha Coal Company's first appeal were all moot; (3) affirmed the district court on COP's and Hiawatha's second appeals; and (4) reversed with regard to Charles Reynolds' appeal. View "ANR Company, Inc. v. C.O.P. Coal Development Co." on Justia Law

In 2002, the developer of a timeshare real estate venture (Developer) and Ernesto Brito and Marigloria Del Valle (together, Appellees) entered into a purchase agreement pursuant to which the Developer transferred a “period of ownership” of seven days to a unit of the timeshare regime to Appellees. In 2009, the Developer filed for Chapter 11 bankruptcy protection and listed Appellees as secured creditors in its bankruptcy schedules. Appellees filed a proof of claim asserting a security interest over the real property. Appellant-bank, the holder of a mortgage over the timeshare property, filed an adversary proceeding against Appellees seeking a declaratory judgment that Appellees did not possess a valid lien over the timeshare property. Appellant moved for summary judgment, contending that Appellees did not have a real property interest because the applicable formalities of the Puerto Rico Timeshare and Vacation Club Act had not been satisfied. The bankruptcy court denied the motion, and the Bankruptcy Appellate Panel affirmed. The First Circuit Court of Appeals affirmed, holding that the bankruptcy court correctly concluded that Appellees held property rights in the real property. View "Scotiabank de P.R. v. Burgos" on Justia Law

New Energy operated a South Bend ethanol plant. In bankruptcy, it proposed to sell assets by auction, which was held in 2013. A joint venture, New Energy, submitted the winning bid of $2.5 million. New Energy, the trustee, and the Department of Energy, the largest creditor, asked the bankruptcy court to confirm this result. Natural Chem, which had not participated in the auction, opposed confirmation, arguing that establishment of the joint venture amounted to collusion. The Bankruptcy Court confirmed the sale. Natural Chem did not seek a stay and the sale closed. A district judge affirmed, observing that after the closing only a protest by the trustee permits a sale to be undone on grounds that “the sale price was controlled by an agreement among potential bidders,” 11 U.S.C.363(n). The Seventh Circuit affirmed, concluding that Natural Chem did not suffer an injury and that, under section 363, any injury would not be redressable. Collusion is a form of monopsony that depresses the price realized at auctions and would have made it easier for Natural Chem to secure the property. A reduction in the bid would have harmed New Energy’s creditors, not Natural Chem, which is why the trustee rather than a bidder is the right party to protest collusive sales. View "In re: New Energy Corp." on Justia Law

Acting as receiver, the FDIC conveyed substantially all of WaMU's assets and liabilities to JPMorgan Chase, including certain long-term real-estate leases. At issue was whether the owners of the leased tracts could enforce the leases against Chase by virtue of the FDIC's conveyance. The court held that, in the interest of maintaining uniformity in the construction and enforcement of federal contracts, the landlords did not qualify as third-party beneficiaries. The court concluded, however, that the landlords have "standing" to prove the content of the Agreement and that the Agreement, properly construed, was a complete "assignment" sufficient to create privity of estate under Texas law. Accordingly, the court affirmed the judgment of the district court. View "Excel Willowbrook, L.L.C., et al. v. JPMorgan Chase Bank, N.A., et al." on Justia Law

Debtor appealed the bankruptcy court's order, affirmed by the bankruptcy appellate panel, granting summary judgment in favor of the trustee regarding debtor's homestead exemption. The court affirmed, concluding that debtor never asserted an intention to move back into the property at issue nor had he refuted his statement at the 11 U.S.C. 341 meeting that he did not expect to live at the property at any point in the future. Further, denying the homestead exemption did not violate Article XXI, section 4 of the South Dakota Constitution where debtor removed himself from the property with no fixed or actual intent to return. View "Paul, Jr. v. Allred" on Justia Law