Justia Bankruptcy Opinion Summaries

In 2005, Banks, a construction worker, wanted to flip houses, but did not have capital. John, a mortgage broker, suggested that they purchase homes from distressed owners at inflated prices, with the sellers promising to return money above what they owed their own lenders. Owners cooperated rather than face foreclosure. Banks renovated the houses using funds received from sellers and resold them. Johns collected a broker’s fee. When they purchased a house from owners in bankruptcy, they wanted a mortgage to secure payment from the sellers and informed the trustee of the bankruptcy estate. Despite protestations by the trustee, the sale went through, and Banks used the rinsed equity to pay off sellers’ creditors through the trustee. The sellers’ lawyer discovered the scheme, which led to indictments. Johns was convicted of making false representations to the trustee regarding the second mortgage and for receiving property from a debtor with intent to defeat provisions of the Bankruptcy Code. With enhancements for financial loss and for targeting vulnerable victims, Johns was sentenced to 30 months. The Seventh Circuit affirmed the conviction, rejecting challenges to sufficiency of the evidence and jury instructions, but remanded for clarification of sentencing enhancements. View "United States v. Johns" on Justia Law

The three cases before before the Tenth Circuit on appeal arose from bankruptcy proceedings initiated by debtor Steve Paige in 2005. Search Market Direct, Inc. (SMDI) and ConsumerInfo.com (ConsumerInfo).both sought control of the internet domain name "freecreditscore.com" (the Domain Name), which once belonged to Paige. SMDI purchased the Domain Name from a third party shortly after Paige filed for bankruptcy. In May 2006, the estate's trustee Gary E. Jubber instituted an Adversary Proceeding (AP) to recover it. In December 2006, the bankruptcy court entered a Sale Order approving an Asset Purchase Agreement (APA) under which ConsumerInfo agreed to provide funds to repay the estate's creditors and litigate the AP in exchange for the estate's promise to give ConsumerInfo the Domain Name if it was recovered. The bankruptcy court resolved the Adversary Proceeding in the Liquidating Trustee's favor in 2009. The Liquidating Trustee transferred the Domain Name to ConsumerInfo and a Joint Plan was otherwise substantially consummated. Over objections from SMDI, the Trustee and his law firm received compensation for their work on behalf of the estate. Upon review, the Court rejected SMDI's arguments for reversing the bankruptcy court's confirmation of the Joint Plan, for depriving ConsumerInfo of the Domain Name, and for denying the Trustee and his firm certain fees. The Court reversed the district court's mootness ruling in the Adversary Appeal; in all other regards the Court affirmed the district court's decisions upholding the bankruptcy court's judgments in the Confirmation Appeal and Adversary Appeal. View "Search Market, et al v. Jubber, et al" on Justia Law

Debtor filed a voluntary petition for Chapter 7 bankruptcy relief. Subsequently, Trustee filed an adversary proceeding against Debtor seeking denial of Debtor's discharge under 11 U.S.C. 727(a)(2)(B) and (a)(4)(A), alleging that certain non-disclosures by Debtor constituted false oaths that would merit denial of Debtor's discharge. The bankruptcy court entered judgment in favor of Trustee and against Debtor, denying Debtor's discharge and determining that Trustee established a cause of action under section 727(a)(4)(A). The Eighth Circuit Court of Appeals affirmed, holding that the bankruptcy court properly denied Debtor's discharge under 727(a)(4)(A), as Debtor violated his obligation of full and complete disclosure under the statute. View "Kaler v. Charles" on Justia Law

In this direct appeal from the United States Bankruptcy Court for the Eastern District of North Carolina, the Fourth Circuit addressed a question of first impression in the circuit courts of appeal: in light of the 2005 amendments to the Bankruptcy Code, codified in Bankruptcy Abuse Prevention and Consumer Protection Act ("BAPCPA"), how is the "household" size of a debtor seeking bankruptcy relief to be calculated under Chapter 13. Petitioner Tanya Johnson filed a voluntary petition for Chapter 13; upon receiving notice of Petitioners motion for confirmation of the plan, Petitioner's ex-husband objected because he felt the plan overstated Petitioner's household size and monthly expenses. As a result, the ex-husband maintained that Petitioner's disposable monthly income was insufficient to make payments to two unsecured loans for which he and Petitioner were jointly liable. In examining the parties' dispute, the bankruptcy court observed that the Code does not define "household," there was no binding precedent on point, and that other bankruptcy courts followed three different approaches to define that term. Finding no error in the bankruptcy court's method of calculating the Petitioner's household size based on how many individuals operate as an "economic unit" with the Petitioner, the Fourth Circuit affirmed the bankruptcy court's order denying the Petitioner's motion for confirmation with leave to amend the Debtor's "disposable income calculation and plan to reflect the household size [of five]." View "Johnson v. Zimmer" on Justia Law

Plaintiffs commenced an arbitration proceeding against Defendant pursuant to terms of a written agreement between the parties. Eber subsequently filed for Chapter 7 bankruptcy protection, and the arbitration was automatically stayed. Plaintiffs then filed a complaint for determination that debts are nondischargeable and for damages. Thereafter, Plaintiffs filed a motion for relief from automatic stay in the bankruptcy court proceeding and a motion to compel arbitration in the adversary proceeding. Both motions were denied. The bankruptcy court found that Plaintiffs' claims were discharged. The Ninth Circuit Court of Appeals affirmed, holding (1) the district court did not abuse its discretion in denying Plaintiffs' motion to compel arbitration because granting the motion would have conflicted with the underlying purposes of the Bankruptcy Code; and (2) the Court did not need address the denial of Plaintiffs' motion for relief from the automatic stay because the stay had already dissolved before the bankruptcy judge ruled on the motion. View "Ackerman v. Eber" on Justia Law

Plaintiff Erik Nielsen appealed from an order of the bankruptcy court finding his student loan obligations to Educational Credit Management Corporation (ECMC) to be nondischargeable. Nielsen and his spouse filed a joint voluntary Chapter 7 case in 2009. In 2010, Nielsen commenced an adversary proceeding seeking a determination that his student loans were dischargeable based upon undue hardship. A motion to intervene was granted as to ECMC. After a trial, the bankruptcy court found that Nielsen failed to meet his burden of proof and denied his complaint. The Eighth Circuit Court of Appeals affirmed, holding (1) the bankruptcy court did not err in any of its factual findings, and (2) Nielsen failed to meet his burden of proving undue hardship under the totality of his financial circumstances. View "Nielsen v. ACS, Inc." on Justia Law

Losing money on every box fan it sold, Lakewood authorized CAM to practice Lakewood’s patents and put its trademarks on completed fans. Lakewood was to take orders; CAM would ship to customers. CAM was reluctant to gear up for production of about 1.2 million fans that Lakewood estimated it would require during the 2009 season. Lakewood provided assurance by authorizing CAM to sell the 2009 fans for its own account if Lakewood did not purchase them. Months later, Lakewood’s creditors filed an involuntary bankruptcy petition against it. The court-appointed trustee sold Lakewood’s business. Jarden bought the assets, including patents and trademarks. Jarden did not want Lakewood-branded fans CAM had in inventory, nor did it want CAM to sell them in competition with Jarden’s products. Lakewood’s trustee rejected the executory portion of the CAM contract, 11 U.S.C. 365(a). CAM continued to make and sell Lakewood fans. The bankruptcy judge found the contract ambiguous, relied on extrinsic evidence, and concluded that CAM was entitled to make as many fans as Lakewood estimated for the 2009 season and sell them bearing Lakewood’s marks. The Seventh Circuit affirmed, rejecting an argument that CAM had to stop making and selling fans once Lakewood stopped having requirements. View "Sunbeam Prods, Inc. v. Chicago Am. Mfg." on Justia Law

In 1957, Dominic opened an Italian restaurant, “Dominic’s.” It closed in 2007, but daughter-in-law, Anne, continues to market “Dominic’s Foods of Dayton.” In 2007, Christie, a granddaughter, contracted to operate a restaurant with Powers and Lee, a former Dominic’s chef. In pre-opening publicity, they promised to bring back original Dominic’s recipes. They named the business “Dominic’s Restaurant, Inc.” and registered with the Ohio Secretary of State. Anne brought claims of trademark infringement, trademark dilution, unfair practices, unfair competition, tortious interference with contract, conversion, misappropriation of business property, breach of contract, fraudulent and/or negligent misrepresentation, and breach of implied covenant of good faith and fair dealing. The district court concluded that defendants had engaged in infringing behavior before and after entry of a TRO. Powers and Lee later closed the restaurant and withdrew registration of the name, but motions continued, arising out of efforts to open under another name. The district court eventually granted default judgment against defendants, rejecting a claim that proceedings were automatically stayed by Powers’ bankruptcy filing. The Sixth Circuit affirmed. The stay does not protect a debtor’s tortious use of his property and, while the stay would bar assessment of damages, it would not bar injunctive relief. View "Dominic's Rest. of Dayton, Inc. v. Mantia" on Justia Law

Sandra Emas owned a life insurance policy issued by ReliaStar. The policy named her estate as the beneficiary. When Emas died intestate, she left her son, Jaysen McCleary, as her only heir. McCleary was appointed the administrator of his mother's estate. McCleary later filed for personal bankruptcy. McCleary, as the administrator of the estate, subsequently filed suit against ReliaStar, alleging that ReliaStar had wrongfully refused to pay the estate benefits under Emas's insurance policy. ReliaStar moved for summary judgment, arguing that Emas's interest in any cause of action against ReliaStar passed immediately to McCleary upon her death. The district court granted summary judgment in favor of ReliaStar. The Eighth Circuit Court of Appeals affirmed, holding (1) the estate was functionally closed, and McCleary could not bring a suit on behalf of a closed estate; and (2) there was not an issue of fact as to whether McCleary sold the estate's interest in his bankruptcy proceedings, as McCleary had the authority to sell the estate's interest in its claims against ReliaStar. View "McCleary v. Reliastar Life Ins. Co." on Justia Law

The debtors are limited partnerships that own real estate on which they operate low-income housing. In their Chapter 11 cases, the bankruptcy court concluded that, for purposes of determining the value of the secured portion of the bank’s claims under 11 U.S.C. 506(a), determination of the fair market value of various apartment complexes included consideration of the remaining federal low-income housing tax credits. The court also concluded that various rates and figures used by the bank’s appraiser were more accurate. The Sixth Circuit affirmed. A major component of the value of the bank’s claims was determination was whether the value of the remaining tax credits would influence the price offered by a hypothetical willing purchaser of the property that serves as collateral for the claims. View "In re: Creekside Senior Apts" on Justia Law