Justia Bankruptcy Opinion Summaries

Chapter 11 Debtor, an LLC, held certain parcels of undeveloped land that were included within property-owners' improvement districts (the Districts) formed in accordance with Arkansas law. After Debtor entered into bankruptcy, secured creditor National Bank of Arkansas (the Bank) filed a motion with the bankruptcy court seeking a ruling that a proposed state court action against the Districts would not violate the automatic stay. The bankruptcy court determined (1) the automatic stay applied to the Bank's proposed action and that relief from the stay was unwarranted, and (2) the Bank's motion was barred by laches. The bankruptcy appellate panel (BAP) affirmed. The Eighth Circuit Court of Appeals reversed, holding (1) the automatic stay did not apply to the Bank's proposed action against the Districts because the Districts were neither property of the Debtor nor debtors themselves, the Bank's action would only impact the value of the estate in some undetermined and indirect manner, and the action would not divest the Debtor of its property; and (2) the doctrine of laches did not apply in this situation because there was no showing of detrimental reliance by the Debtor upon the Bank's failure to raise this particular challenge in a more timely fashion. View "Nat'l Bank of Ark. v. Panther Mtn. Land Dev. " on Justia Law

From the 1930s through the 1970s, Skinner manufactured ship engines and parts, allegedly containing asbestos. Merchant mariners began bringing injury claims in the 1980s. In 1998, AC acquired all of Skinner’s common stock. Based on lack of cash flow to maintain operations or service secured debt, Skinner and AC filed petitions for Chapter 11 bankruptcy in 2001; more than 29,000 asbestos claims were pending against Skinner. The Bankruptcy Court converted to Chapter 7 on the basis that the plan was patently unconfirmable. Insurers, legal representative for future asbestos claimants, Maritime Asbestosis Legal Clinic, and the Trustee, joined an appeal. The Third Circuit affirmed. The court properly found, based on the disclosure statement hearing, that the fifth plan was patently unconfirmable under 11 U.S.C. 1129(a)(3) because its success is entirely contingent on speculative future litigation, and because it asks third-party asbestos claimants, who were not a cause of the bankruptcy, to serve as the sole funding source for attorneys and other creditors, under circumstances involving inherent conflict of interest and inequitable procedural provisions. Given the futility of pursuit of a Chapter 11 plan and mounting liabilities, the court acted within its discretion by converting the case. View "In Re: Am. Capital" on Justia Law

In this core adversary proceeding, a Chapter 7 bankruptcy Trustee appealed an order of the Bankruptcy Appellate Panel (BAP) denying his turnover action on the ground that an unjust enrichment claim exceeds the scope of 11 U.S.C. 542(a), a remedy limited to recovering property of the bankruptcy estate in the possession, custody, or control of a third party. The Eighth Circuit Court of Appeals affirmed, holding (1) the BAP correctly concluded that the Court's In re NWFX decisions did not recognize unjust enrichment as a basis for collecting a debt under section 542(a); and (2) thus, the Trustee's claim for unjust enrichment based upon a debt owed was beyond the scope of section 542(a). View "Lovald v. Falzerano" on Justia Law

Orton filed a Chapter 7 petition. On Schedule A (realty), he listed his one-eighth interest in vacant land that is subject to an oil and gas lease, stating fair market value as $34,000 and claiming an exemption for $4,250 (1/8). On Schedule B (personal property), Orton listed his one-fourth interest in royalty interest in the oil and gas lease, assigning a fair market value of $1; no well has been drilled. On Schedule C (claimed exemptions), Orton claimed wildcard exemptions, 11 U.S.C. 522(d)(5), for $4,250 and $1. No party objected. The Trustee moved to close the case and to except Orton’s royalty interest from abandonment, preserving ability to recover any future royalties for the estate. Orton objected, claiming that he had successfully, permanently removed the assets from the estate, securing for himself future appreciation, free from creditors’ claims. The Bankruptcy Court held that the Trustee was entitled to pursue any future increase in value above the amount stated in Schedule C. The district court and Third Circuit affirmed. The Trustee, not the Debtor, is entitled to post-petition appreciation in value of estate assets that surpasses the amount exempted. Orton had exempted only an interest, not the asset itself, and was entitled to only the amount listed in Schedule C, not to future appreciation. View "In Re:Orton" on Justia Law

The business proprietor, Calabrese, filed for reorganization of the business under Chapter 11 of the Bankruptcy Code. After failure to confirm a reorganization plan, the bankruptcy was converted to Chapter 7. He also filed an individual petition under Chapter 13. The State of New Jersey Department of Taxation filed several secured proofs of claim in the individual bankruptcy. As proprietor of a restaurant, Calabrese was required to collect sales tax from customers. N.J. Stat. 54:32B-3(c)(1), 54:32B-12(a), 54:32B-14(a). Calabrese successfully moved to have the claims reclassified as unsecured. New Jersey filed amended proofs alleging that Calabrese owes $63,437.19 in taxes collected while operating his business from 2003 to 2009. The Bankruptcy Court held the taxes at issue are trust fund taxes under 11 U.S.C. 507(a)(8)(C) rather than excise taxes under 507(a)(8)(E) and, therefore, not dischargeable. The district court and Third Circuit affirmed. Public policy concerns weigh against Calabrese, primarily because sales taxes collected by a retailer never become the property of the retailer; it retains those funds in trust for the state. View "In Re: Calabrese" on Justia Law

These four adversary proceedings involved suits by Chapter 7 bankruptcy trustees against the Lower Sioux Indian Community (the Tribe) and its subsidiary, Dakota Finance Corporation (together, Defendants). In three of the adversaries, the trustees pursued the Tribe and the debtors for turnover of ongoing tribal revenue payments owed to the debtors under the Tribe's ordinances and the Indian Gaming Regulatory Act. In one of the adversaries, the trustee was seeking to avoid a lien asserted by Dakota Finance Corporation on the ongoing revenue payments owed to one debtor as being unperfected. Absent the filing of a bankruptcy case, the creditors of these debtors would be prohibited by the Tribe's sovereign immunity from, for example, garnishing those revenues. The issue here was whether the filing of bankruptcy by Tribe members serves to make the debtors' ongoing revenues from the tribe available to the respective trustees for the benefit of their creditors. The bankruptcy court held that Defendants were protected by sovereign immunity and dismissed the adversaries as to those parties. The Eighth Circuit Court of Appeals affirmed, holding that the bankruptcy court did not err in concluding that Defendants were protected by sovereign immunity and were, therefore, immune from these suits against them. View "Dietz v. Lower Sioux Indian Cmty." on Justia Law

These four adversary proceedings involved suits by Chapter 7 bankruptcy trustees against the Lower Sioux Indian Community (the Tribe) and its subsidiary, Dakota Finance Corporation (together, Defendants). In three of the adversaries, the trustees pursued the Tribe and the debtors for turnover of ongoing tribal revenue payments owed to the debtors under the Tribe's ordinances and the Indian Gaming Regulatory Act. In one of the adversaries, the trustee was seeking to avoid a lien asserted by Dakota Finance Corporation on the ongoing revenue payments owed to one debtor as being unperfected. Absent the filing of a bankruptcy case, the creditors of these debtors would be prohibited by the Tribe's sovereign immunity from, for example, garnishing those revenues. The issue here was whether the filing of bankruptcy by Tribe members serves to make the debtors' ongoing revenues from the tribe available to the respective trustees for the benefit of their creditors. The bankruptcy court held that Defendants were protected by sovereign immunity and dismissed the adversaries as to those parties. The Eighth Circuit Court of Appeals affirmed, holding that the bankruptcy court did not err in concluding that Defendants were protected by sovereign immunity and were, therefore, immune from these suits against them. View "Bucher v. Dakota Fin. Corp." on Justia Law

These four adversary proceedings involved suits by Chapter 7 bankruptcy trustees against the Lower Sioux Indian Community (the Tribe) and its subsidiary, Dakota Finance Corporation (together, Defendants). In three of the adversaries, the trustees pursued the Tribe and the debtors for turnover of ongoing tribal revenue payments owed to the debtors under the Tribe's ordinances and the Indian Gaming Regulatory Act. In one of the adversaries, the trustee was seeking to avoid a lien asserted by Dakota Finance Corporation on the ongoing revenue payments owed to one debtor as being unperfected. Absent the filing of a bankruptcy case, the creditors of these debtors would be prohibited by the Tribe's sovereign immunity from, for example, garnishing those revenues. The issue here was whether the filing of bankruptcy by Tribe members serves to make the debtors' ongoing revenues from the tribe available to the respective trustees for the benefit of their creditors. The bankruptcy court held that Defendants were protected by sovereign immunity and dismissed the adversaries as to those parties. The Eighth Circuit Court of Appeals affirmed, holding that the bankruptcy court did not err in concluding that Defendants were protected by sovereign immunity and were, therefore, immune from these suits against them. View "Bucher v. Dakota Fin. Corp." on Justia Law

These four adversary proceedings involved suits by Chapter 7 bankruptcy trustees against the Lower Sioux Indian Community (the Tribe) and its subsidiary, Dakota Finance Corporation (together, Defendants). In three of the adversaries, the trustees pursued the Tribe and the debtors for turnover of ongoing tribal revenue payments owed to the debtors under the Tribe's ordinances and the Indian Gaming Regulatory Act. In one of the adversaries, the trustee was seeking to avoid a lien asserted by Dakota Finance Corporation on the ongoing revenue payments owed to one debtor as being unperfected. Absent the filing of a bankruptcy case, the creditors of these debtors would be prohibited by the Tribe's sovereign immunity from, for example, garnishing those revenues. At issue here was whether the filing of bankruptcy by Tribe members serves to make the debtors' ongoing revenues from the tribe available to the respective trustees for the benefit of their creditors. The bankruptcy court held that Defendants were protected by sovereign immunity and dismissed the adversaries as to those parties. The Eighth Circuit Court of Appeals affirmed, holding that the bankruptcy court did not err in concluding that Defendants were protected by sovereign immunity and were, therefore, immune from these suits against them. View "Bucher v. Dakota Fin. Corp." on Justia Law

Nathan Reuter filed for bankruptcy under Chapter 11 and proposed a Chapter 11 plan that would settle nine creditors' claims. The nine creditors in turn objected to the Chapter 11 plan and filed an adversary proceeding against Reuter, asserting that their claims against him were non-dischargeable in bankruptcy. The bankruptcy court held the claims non-dischargeable and granted the nine creditors' motion to convert to a Chapter 7 bankruptcy. The Bankruptcy Appellate Panel affirmed in all respects. The Eighth District Court of Appeals affirmed, holding that the bankruptcy court did not err in its finding Reuter's debts to the nine creditors non-dischargeable in bankruptcy. View "Reuter v. Cutcliff" on Justia Law