Justia Bankruptcy Opinion Summaries

The Architectural Works Copyright Protection Act of 1990 (AWCPA)1 extended copyright protection to “architectural works,” defined in 17 U.S.C. Section 101 as “the design of a building as embodied in any tangible medium of expression, including a building, architectural plans, or drawings.” The principal question raised by this appeal is whether First Security Bank & Trust Company (the “Bank”), which purchased an uncompleted building in a sale approved by the bankruptcy court in the property owner’s Chapter 7 liquidation proceeding, infringed the architect’s copyright in the building by completing the building without the permission of the building’s architect, Cornice & Rose (“C&R”).   The Eighth Circuit affirmed. The court agreed with the district court there was no actionable infringement because C&R’s infringement claims are precluded by the bankruptcy court’s order approving the sale. The court explained that C&R makes no showing on appeal that the district court would have reached a different result (i.e., denied summary judgment) had it been allowed to file a sur-reply. In other words, the argument is entirely procedural. Further, it ignores that sur-replies are viewed with disfavor and that a party appealing the denial of leave to file a discretionary pleading has a heavy burden to prove that the adverse procedural ruling mattered. Here, even if C&R’s contention that DSC and WWA raised new or additional arguments in the supplemental affidavit is fairly debatable. Thus, the court concluded that the denial of permission to file the requested sur-reply in a thoroughly litigated case was a textbook example of harmless error. View "Cornice & Rose International, LLC v. Four Keys" on Justia Law

USA Sales, a California tobacco distributor, filed for Chapter 11 bankruptcy in 2016. As a Chapter 11 debtor in a UST district, federal law required USA Sales to pay quarterly fees to the UST. 28 U.S.C. Section 1930(a)(6). USA Sales sued for a refund of all excess fees paid, arguing that the 2017 Act violated the Bankruptcy Clause and also that the 2017 Act did not apply because USA Sales had filed for bankruptcy before the Act took effect. The district court agreed with both arguments and ordered a refund.   The Ninth Circuit affirmed the district court’s refund order, the panel held that USA Sales, Inc., was entitled to a refund for the unconstitutional statutory fees it paid as a bankruptcy debtor under the Bankruptcy Judgeship Act of 2017. The panel held that the 2017 Act applied to USA Sales’s bankruptcy proceeding, even though its case was already pending when the Act took effect. Turning to the remedy, and agreeing with other circuits, the panel held that U.S. Trustee district debtors are entitled to a refund of excess fees paid during the nonuniform period of statutory rates. Accordingly, USA Sales was entitled to a refund of the unconstitutional fees it paid in excess of those it would have paid in a Bankruptcy Administrator district from January 2018, when the 2017 Act fee provision took effect, to November 2019, when the bankruptcy court approved a structured dismissal of USA Sales’s case. View "USA SALES, INC. V. OFFICE OF THE U.S. TRUSTEE" on Justia Law

Inmarsat Global Limited and related entities(collectively, “Inmarsat”) operate a satellite network providing communications services to remote locations, including ships at sea. Inmarsat sells the services at retail to end-users and at wholesale to distributors. Speedcast International Limited was a leading Inmarsat distributor, purchasing Inmarsat’s services and providing them to its own customers. Speedcast is the debtor in the bankruptcy. Several contracts governed the business relationship among the parties. Their last contract terminated all of the creditors’ claims against the debtor except for narrowly defined “Permitted Claims.” The creditors sought a reversal of the district and bankruptcy court’s conclusion that a particular claim was not a permitted one.   The Fifth Circuit affirmed, holding that the Termination Agreement’s definitions of Released Claims and Permitted Claims are unambiguous. Consequently, the court wrote that it need not consider any extrinsic evidence. The court found Inmarsat’s pricing argument unpersuasive. The Shortfall Amount is not a payment for services delivered by Inmarsat to Speedcast. The SAA provides that the Shortfall Amount is part of the performance that Speedcast promised “[i]n exchange for” Inmarsat agreeing to grant a 30% discount. The Shortfall Amount, in turn, is not levied on the services that Inmarsat delivered to Speedcast; it is levied due to the customers Speedcast failed to provide. View "Inmarsat Global v. SpeedCast Intl" on Justia Law

Farmer William Topp raises crops and livestock in Monroe County, Iowa. After several rough years, he filed for Chapter 12 bankruptcy—intended for “family farmers.” Farm Credit Services of America had financed part of Topp’s farm operation and filed a $595,000 claim as a secured creditor. The claim arose from five loans of various durations, with interest rates ranging from 3.5% to 7.6%. Together, the loans were secured by $1.45 million of Topp’s real estate. This bankruptcy appeal arises from a dispute between the farmer and his creditor over their proposed repayment plan. The two could not agree on the appropriate discount rate that should apply to the farmer’s deferred payments so as to satisfy the creditor’s present claim. The bankruptcy court sided with the farmer.   The Eighth Circuit affirmed. The court explained that the bankruptcy court studied the Till/Doud relationship and the prevalence of postTill decisions using the prime rate. The court considered the length of the proposed maturity period, the fact that Farm Credit’s claim was substantially over-secured, and the overall risk of nonpayment. In the end, the court approved a 4% rate—the treasury rate plus 2% for risk. By focusing on the starting rate rather than the ultimate rate, Farm Credit has failed to show that the bankruptcy court clearly erred in its determination that a 4% rate was sufficient to ensure full payment on “the value, as of the effective date of the plan,” of the secured claim. View "Farm Credit Services of America v. William Topp" on Justia Law

Defendants Citigroup Inc. and Citibank, N.A. (collectively, “Citi”) appealed from the bankruptcy court’s order granting in part and denying in part Citi’s motion, pursuant to Federal Rule of Bankruptcy Procedure 7012, to dismiss Plaintiff’s amended complaint, or, alternatively, to strike or dismiss the nationwide class action allegations therein. On appeal, Citi advanced s two primary arguments. First, Citi argues that a bankruptcy court’s civil contempt power is limited to the enforcement of its own orders and, therefore, that the Bankruptcy Code does not authorize one bankruptcy court to adjudicate the claims of a nationwide class of former debtors seeking to hold Citi in contempt of discharge orders entered by other bankruptcy courts across the country. Second, Citi argues that Plaintiff’s claim for violation of her discharge order and injunction under 11 U.S.C. Section 524(a)(2) fails to satisfy the civil contempt standard under Taggart v. Lorenzen, 139 S. Ct. 1795 (2019).The Second Circuit affirmed in part and reversed in part the bankruptcy court’s order and remanded the case to the bankruptcy court. The court explained that the Bankruptcy Code does not authorize a bankruptcy court to enforce another bankruptcy court’s discharge injunction. Further, the court wrote that there is no Section 524 “affirmative act” deficiency here. An intentional and systematic refusal to update the credit report upon the debtor’s request constitutes “an act to collect” under Section 524(a)(2), where, objectively, it has the practical effect of improperly coercing the debtor into paying off a discharged debt. View "In re: Kimberly Bruce" on Justia Law

In this appeal concerning the state's Emergency Mortgage Assistance Program (EMAP), Conn. Gen. Stat. 8-265cc through 8-265kk, which is designed to assist homeowners in avoiding foreclosure, the Supreme Court concluded that the EMAP notice requirement in section 8-265ee(a) is not jurisdictional in nature and that section 8-265ee(a) requires that a mortgagee provide an EMAP notice for each foreclosure action initiated.At issue on certified appeal were two questions relating to the requirement set forth in section 8-265ee(a) that mortgagees provide notice to homeowners to inform them of the resources available under EMAP. The Supreme Court concluded (1) an EMAP notice sent before the commencement of a prior foreclosure action by the predecessor mortgagee is not jurisdictional; and (2) an EMAP notice sent before the commencement of a prior foreclosure action by the predecessor mortgagee was not valid for a subsequent action initiated by the successor mortgagee. View "KeyBank, N.A. v. Yazar" on Justia Law

From 2014-2018, the Affordable Care Act’s individual mandate instructed most Americans to purchase health insurance, 26 U.S.C. 5000A(a) Juntoff opted not to buy the minimum health insurance and failed to make his Shared Responsibility Payment of 2.5% of the taxpayer’s income, subject to a floor and a ceiling. After he declared bankruptcy, the IRS tried to collect the Payment from him and filed a proof of claim in bankruptcy court. The agency asked for priority above other debtors under a provision that covers bankruptcy “claims” by “governmental units” for any “tax on or measured by income,” 11 U.S.C. 507(a)(8)(A). The bankruptcy court denied the request, reasoning that the Shared Responsibility Payment was not a “tax on or measured by income” but was a penalty. The Bankruptcy Appellate Panel reversed.The Sixth Circuit ruled in favor of the government. The Shared Responsibility Payment is a “tax” under section 507(a)(8) and is “measured by income.” View "In re: Juntoff" on Justia Law

Debtors, husband and wife filed for Chapter 13 bankruptcy. They listed their home among their assets with a value of $500,000, a mortgage with an outstanding balance of $375,077, and a homestead exemption of $124,923. The bankruptcy court confirmed a Chapter 13 plan, but after roughly twenty months, which included a temporary job loss and deferral of mortgage payments due to the pandemic, the husband contracted Parkinson’s Disease, and the couple could no longer make their required payments. Debtors exercised their right to convert to Chapter 7. In the interim, their home had risen in value by an estimated $200,000. The Chapter 7 trustee (“Trustee”) filed a motion to sell Debtors home to recover the value for creditors.   The Ninth Circuit affirmed the district court’s order which affirmed the bankruptcy court’s order, the panel held that post-petition, pre-conversion increases in the equity of an asset belonging to the bankruptcy estate rather than to debtors who, in good faith, convert their Chapter 13 reorganization petition into a Chapter 7 liquidation. The panel held that the plain language of Section 348(f)(1)(A), coupled with the Ninth Circuit’s previous interpretation of 11 U.S.C. Section 541(a), compelled the conclusion that any appreciation in the property value and corresponding increase in equity belonged to the estate upon conversion. The panel looked to the definition of “property of the estate” in Section 541(a), which addresses the contents of the bankruptcy estate upon filing under either Chapter 7 or Chapter 13, and the court’s prior opinions holding that the broad scope of Section 541(a) means that post-petition appreciation inures to the bankruptcy estate, not the debtor. View "IN RE: JOHN CASTLEMAN, SR., ET AL V. DENNIS BURMAN" on Justia Law

Petitioners moved to quash trial subpoenas issued by the United States Bankruptcy Court for the Central District of California, requiring them to testify via contemporaneous video transmission from their home in the U.S. Virgin Islands. The bankruptcy court denied their motions, and the Petitioners sought mandamus relief from this court. Petitioners argued that Federal Rule of Civil Procedure 45(c)(1) prohibits the bankruptcy court from compelling them to testify, even remotely, where they reside out of state over 100 miles from the location of the trial.   The Ninth Circuit granted the petition. The panel held that the bankruptcy court erred in refusing to quash the trial subpoenas because, under the plain meaning of the text of the Rules, the geographic limitations of Rule 45(c) apply even when a witness is permitted to testify by contemporaneous video transmission. The panel concluded that Rule 45(c) governs the court’s power to require a witness to testify at trial and focuses on the location of the proceeding, while Rule 43(a) governs the mechanics of how trial testimony is presented. Weighing the Bauman factors to determine whether issuance of a writ of mandamus was appropriate, the panel concluded that the third factor, clear error, weighed in favor of granting mandamus relief. The panel concluded that the fifth Bauman factor also weighed in favor because the petition presented an important issue of first impression. The panel held that the third and fifth Bauman factors were sufficient on their own to warrant granting mandamus relief in this case. View "IN RE: JOHN KIRKLAND, ET AL V. USBC, LOS ANGELES" on Justia Law

Bouchard Transportation Company and its affiliates (collectively “Bouchard”)—debtors in bankruptcy—prepared to sell some of their assets at an auction. Fearing the auction would go poorly, Bouchard solicited a “stalking horse bidder” to start the auction and set a floor price. In exchange, Bouchard agreed to pay the stalking horse bidder a $3.3 million break-up fee and to reimburse expenses up to $1.5 million. The question is whether those payments were a permissible use of estate funds. As the bankruptcy and district courts found, the stalking horse payments were lawful under both applicable provisions of the Bankruptcy Code—they provided an actual benefit to the estate and were issued in the reasonable exercise of business judgment.
The Fifth Circuit affirmed the district court’s judgment affirming the bankruptcy court’s order that Bouchard pay Hartree a break-up fee and a capped expense reimbursement. The court explained that Bouchard’s payment to the stalking horse bidder is justified under either the stringent administrative-expense standard or the more relaxed business judgment rule. The court further wrote that there is “no basis to conclude that the board did not thoroughly review the presentation and make a well-reasoned, careful decision to designate Hartree as the stalking-horse bidder.” In signing the Hartree purchase agreement, Bouchard acted well within the bounds of reasonable business judgment. Section 363(b) does not require more. View "Official Committee v. Hartree" on Justia Law