Justia Bankruptcy Opinion Summaries

These consolidated appeals concerned a home previously owned by debtor. On appeal, the Trustee challenged the bankruptcy court's order holding that he recover nothing from defendants on his action to avoid a transfer which occurred when defendants perfected their liens on estate property postpetition. GMAC challenged the part of the order holding that the automatic stay was not violated and that GMAC lacked standing in the matter. The bankruptcy appellate panel (BAP) concluded that GMAC did not have standing to appeal any violation of the stay because, if GMAC was aggrieved, it was either by a wrongful foreclosure by U.S. Bank or by its own failure to protect its interests, not by the registration of the judgments or the order. Therefore, the court dismissed GMAC's appeal. In regards to the Trustee's claim, the BAP affirmed the bankruptcy court's awarding of nothing to the Trustee where the estate's interest had no value in and of itself, and the loss of a right to use some sort of "leverage" to get money to which the estate was not entitled was not the basis for a cause of action. View "Seaver v. New Buffalo Auto Sales, LLC, et al." on Justia Law

Bank of America lost approximately $34 million when the Knight companies went bankrupt. BOA sued, claiming that Knight’s directors and managers looted the firm and that its accountants failed to detect the embezzlement. The district court dismissed. The accountants invoked the protection of Illinois law, 225 ILCS 450/30.1, which provides that an accountant is liable only to its clients unless the accountant itself committed fraud (not alleged in this case) or “was aware that a primary intent of the client was for the professional services to benefit or influence the particular person bringing the action” The court found that BOA did not plausibly allege that the accountants knew that Knight’s “primary intent” was to benefit the Bank in alleging that the accountants knew that Knight would furnish copies of the financial statements to lenders. The Seventh Circuit affirmed, noting BOA’s choice not to pursue its claims in the bankruptcy process. View "Bank of America, N.A. v. Knight" on Justia Law

SWT appealed the district court's holding that a lien on its principal asset held by Acceptance survived confirmation of a Chapter 11 bankruptcy reorganization plan. In light of the court's interpretation of the definition of the word "participate" and in accordance with persuasive authority from its sister circuits, the court held that meeting the participation requirement in In re Ahern Enterprises required more than mere passive receipt of effective notice. Accordingly, the court held that Acceptance's passive receipt of notice did not constitute participation within the meaning of this test and affirmed the judgment of the district court. View "Acceptance Loan Co., Inc. v. S. White Transp., Inc." on Justia Law

Debtor filed for chapter 7 bankruptcy but did not list, as one of his outstanding debts, a $350,000 arbitration award to Fiero Brothers (creditor). At issue on appeal was whether the creditor's lawyer's knowledge of the bankruptcy constituted notice to the creditor. In this instance, the lawyer learned of debtor's bankruptcy during his representation of another client and, although the lawyer continued to represent the creditor on other matters, he no longer represented the creditor in relation to the debt at issue. Under these facts, the court declined to impute the notice or actual knowledge of debtor's bankruptcy filing that the lawyer had to creditor. Accordingly, the court affirmed the BAP's ruling that the arbitration debt was nondischargeable under sections 523(a)(3) and 523(a)(6) of the Bankruptcy Code. View "In re: Cery Perle" on Justia Law

Gary and Deborah divorced in 2003 and agreed to a marital settlement. Gary purchased an annuity, to pay him $200 per month until his death; the settlement required him to pay her “$200 per month…in lieu of her interest in [the annuity].” Two years later, Gary filed for Chapter 7 bankruptcy and asked the court to discharge financial obligations to his ex-wife under the settlement. Gary attempted to blackmail Deborah into cooperation, using nude photos of her sister as a child. He is now in prison for bankruptcy fraud and possession of child pornography. 18 U.S.C. 152(6), 2252A(a)(5)(B). Deborah and the bankruptcy trustee agreed that she had an unsecured claim for $158,455.63, including $12,400 representing 62 monthly payments that the trustee had received under the annuity. Gary owned the annuity, so these payments were part of the bankruptcy estate and their inclusion in her claim was a mistake. The trustee successfully moved the bankruptcy judge to permit transfer to Deborah of $1000 in annuity payments collected since settling her claim, and to direct the company to make future payments to her directly. The Seventh Circuit reversed, directing the court either to order Deborah to return the $1000 or order the trustee to deduct it from her claim and to instruct the company to resume making payments to the trustee. View "Peel v. Peel" on Justia Law

Trustee filed an adversary complaint against Scarlett & Gucciardo to avoid as a preferential transfer under 11 U.S.C. 547, and recover under 11 U.S.C. 550, the $65,000 payment Scarlett & Gucciardo had received from Debtor. Scarlett & Gucciardo received the payment on behalf of defendant in connection with the settlement of a lawsuit. Trustee then filed a motion to amend the complaint to join defendant and to have the amended complaint "relate back" to the date of the original complaint. The bankruptcy appellate panel (BAP) concluded that the district court did not abuse its discretion in allowing Trustee to amend his complaint and to allow Trustee's amended complaint to relate back to the date of Trustee's original complaint; the $65,000 payment was not a contemporaneous exchange within the meaning of section 547(c)(1); and the payment was not made in the ordinary course of business within the meaning of section 547(c)(2)(A). Accordingly, the BAP affirmed the judgment. View "Ries v. Calandrillo" on Justia Law

Four upper-level managers at Tradesmen, a construction staffing company, formed a competing company in 2009. Tradesmen filed suit alleging breach of contract, misappropriation of trade secrets and confidential information, breach of duty of loyalty, tortious interference with contractual relations, tortious interference with business expectancy, conversion, and civil conspiracy, and seeking a declaratory judgment with respect to covenants not to compete and injunctive relief. Proceedings against one defendant were stayed, due to bankruptcy. The district court granted summary judgment to the remaining defendants, except with respect to the declaratory judgment count, but found that the covenants had already expired. The district court denied attorney’s fees. The Seventh Circuit held that because of the stay, the summary judgment ruling was not a final decision, so that it lacked jurisdiction on appeal under 28 U.S.C. 1291, except with respect to the request for injunctive relief (28 U.S.C. 1292(a)(1)). The court affirmed on that issue, reasoning that Tradesmen failed to show that it suffered any harm, let alone irreparable harm, from the remaining defendants’ actions. View "Tradesmen Int'l, Inc. v. Black" on Justia Law

In 1999, I-4 leased Florida land to Lazy Days, with an option to purchase, prohibiting assignment without written consent. In 2008, Lazy Days notified I-4 of its intention to file for Chapter 11 bankruptcy and assign the lease to LDRV. The parties negotiated a settlement agreement in 2009. I-4 consented to assignment. Lazy Days agreed not to “argue against the Bankruptcy Court abstaining from consideration of Lease interpretation issues ... except to the extent necessary in connection with the assumption and assignment of the Lease.” The agreement provided that “there is no intent to, nor is the Lease modified in any respect,” but did not state whether the purchase option survived. The Bankruptcy Court confirmed a reorganization plan incorporating the agreement and closed the case in 2010. In 2011, LDRV attempted to exercise the option. The parties each filed state court lawsuits and LDRV moved to reopen in Bankruptcy Court, which held that the anti-assignment provision was unenforceable and that refusal to honor the option violated the agreement. The district court vacated. The Third Circuit reversed, holding that the Bankruptcy Court properly exercised jurisdiction; the agreement’s exception applied because the proceeding was “in connection with ... assignment of the Lease.” The court rejected arguments that the parties agreed to waive application of 11 U.S.C. 365(f)(3) and that the Bankruptcy Court committed an unconstitutional taking and denied I-4 due process. View "In Re: Lazy Days' RV Ctr., Inc." on Justia Law

Stern represented Allen in a discrimination suit, after which they became romantically involved. Allen and her husband had separated and had executed a settlement agreement awarding Allen $95,000, to be paid in installments. A month later, Allen visited a bankruptcy attorney, Losey, giving Stern’s name as “friend/referral” on an intake form. In filing for bankruptcy, Allen did not disclose the marital settlement. While her bankruptcy was pending, Allen received the money. A month after her bankruptcy discharge, Allen transferred the settlement proceeds to Stern, who opened a CD in his name. The attorney for Allen’s ex-husband informed the bankruptcy trustee that Allen failed to disclose the settlementand the discharge was revoked. Allen pleaded guilty to making a false declaration in a bankruptcy proceeding, 18 U.S.C. 152(3). She told a grand jury that Stern had not referred her to Losey and was convicted of making a material false statement in a grand jury proceeding, 18 U.S.C. 1623. The court admitted Losey’s client-intake form as evidence of perjury. Stern was convicted of conspiring to commit money laundering, 18 U.S.C. 1956(h). The Seventh Circuit affirmed Allen’s conviction, holding that the intake form was not a communication in furtherance of legal representation and was not subject to attorney-client privilege. Reversing Stern’s conviction, the court held that the judge erred in excluding Stern’s testimony about why he purchased the CDs. View "United States v. Stern" on Justia Law

This dispute arose when plaintiffs sought payment from defendant for a loan plaintiffs provided to defendant's company. On appeal, defendant challenged the district court's judgment affirming the bankruptcy court's order granting plaintiffs' motion for an extension of time to file a nondischargeability complaint. Under existing case law, the court concluded that the bankruptcy court erred by sua sponte extending the time for plaintiffs to file a nondischargeability complaint after the deadline had already passed and by doing so without either a showing or a finding of cause. Accordingly, the court reversed and remanded with instructions. View "Willms v. Sanderson" on Justia Law