Justia Bankruptcy Opinion Summaries

In 2007, Nelson, a minority shareholder and major creditor of RTI sued CHSWC alleging conspiracy with RTI’s majority shareholders to use RTI’s Chapter 11 bankruptcy to enrich themselves, tortious interference with RTI’s loan contract with Nelson, and abusing the bankruptcy process. The Bankruptcy Court found that RTI’s Chapter 11 petition was not filed in bad faith. The district court dismissed Nelson’s federal suit and remanded state law claims to state court. The Seventh Circuit concluded that because RTI had no assets and had terminated business, the adversary proceeding was moot; reversed the remand of state-law claims; and held that dismissal of the abuse-of-process claim did not require dismissal of state-law claims. On remand the district court dismissed, reasoning that the state law claims were predicated on allegation that RTI’s bankruptcy filing was improper, and finding “undisputed facts” and that partial recharacterization of Nelson’s debt as equity was proper. The Seventh Circuit affirmed, reasoning that nothing of legal significance happened after the last appeal. View "Nelson v. Welch" on Justia Law

Pursuant to the Bankruptcy Code, a debtor must file a statement of intention indicating whether she intends to surrender or retain personal property that secures a debt, and if a debtor fails to timely do so, the automatic stay terminates and the property is removed from the estate unless the chapter 7 trustee obtains a determination that the property is of consequential value or benefit to the estate. In this case, Debtor did not file a statement of intention with respect to personal property that was pledged to Creditor, and the chapter 7 Trustee did not seek a determination that the property was of value or benefit to the estate. However, Trustee appealed the bankruptcy court's ruling that 11 U.S.C. 362(h) terminated the automatic stay on all of the debtor's personal property secured by Creditor's claim and not just on personal property scheduled as securing the claim. The Ninth Circuit affirmed and adopted in full the opinion of the Bankruptcy Appellate Panel, holding that under the unambiguous language of section 362(h), all personal property secured by a scheduled debt is released from the automatic stay if a debtor fails to timely file and comply with her statement of intention. View "Samson v. W. Capital Partners, LLC" on Justia Law

As one of the largest developers in Cincinnati, Erpenbeck defrauded buyers and banks out of nearly $34 million. Erpenbeck pled guilty to bank-fraud in 2003, received a 300-month sentence, and was ordered to forfeit proceeds: $33,935,878.02, 18 U.S.C. 982(a). The FBI later learned that Erpenbeck had given a friend more than $250,000 in cash. The friend put the cash in a cooler and buried it on a golf course. Agents unearthed the cooler. The government sought forfeiture of the cash and posted online notice in 2009. Three months later, the trustee of Erpenbeck’s bankruptcy estate contacted an Assistant U.S. Attorney, told her the estate had an interest in the cash and asked about the government's plans. The attorney did not mention the forfeiture proceedings. Because no one asserted an interest, the district court entered an order vesting title to the cash in the government, 21 U.S.C. 853(n)(7). The trustee sought to stay the order in November 2010. The district court denied the motion because the trustee did not file a timely petition. The Sixth Circuit vacated. Even though the trustee’s interest in the cash was "far from a mystery," the government did not take even the "modest step" of sending a certified letter. View "United States v. Erpenbeck" on Justia Law

Local telephone companies initiated twenty separate suits against Halo before ten state public utility commissions (PUCs) and Halo filed for bankruptcy as a result of this collective action. The telephone companies requested that the bankruptcy court determine that the various PUC actions were not subject to the automatic stay provided by the Bankruptcy Code at 11 U.S.C. 362(a), because they were excepted under section 362(b)(4), or that the bankruptcy court modify the automatic stay for cause, pursuant to section 362(d)(1). The court agreed with the bankruptcy court's holding that the exception to the automatic stay in section 362(b)(4) applied to the state commission proceedings, allowing the telephone companies to proceed with their litigation in the PUCs, but holding that the state adjudicative bodies could not issue any ruling or order to liquidate the amount of any claim against Halo, and that the bodies could not take any action that affected the debtor-creditor relationship between Halo and any creditor or potential creditor. View "Halo Wireless, Inc. v. Alenco Communications, Inc., et al." on Justia Law

In the 1990s debtors owned a business that failed and incurred liabilities from unpaid taxes. They had a monthly payment obligation to the IRS. Husband obtained employment; 2003 to 2009, his yearly gross income was between $53,000 and $59,000. In addition, he receives $1,300 per month from a settlement annuity. Wife was employed as a bookkeeper until 1999. In 2000, she pled guilty to felony embezzlement of funds from her former employer and was sentenced to probation and required to pay restitution of $800 per month. Before her indictment wife obtained employment as a bookkeeper for plaintiff, began embezzling, and deposited stolen funds to Debtors’ joint bank accounts. By 2006, she had embezzled $283,391.88 from plaintiff and forged credit card purchases of $2,821.43. In 2007, she embezzled $328,516.10. In 2008, she embezzled $11,230.21. She stole goods valued at $127,156 from her employer. Debtors spent accordingly. The Bankruptcy Court entered an order excepting debt owed to plaintiff from discharge under 11 U.S.C. 523(a)(6), finding that husband conspired with wife to convert embezzled funds and other property. The Sixth Circuit affirmed, holding that Debtors’ conduct constituted willful and malicious injury to plaintiff. View "In re: Cottingham" on Justia Law

Debtor appealed an order of the bankruptcy court sustaining the chapter 7 trustee's objection to debtor's claimed homestead exemption. The court concluded that the bankruptcy court identified debts debtor incurred prior to October 2007, when the property at issue became his homestead. Debtor had not challenged that finding on appeal. Pursuant to Iowa Code 561.21(1), therefore, the house could be sold to satisfy those debts, notwithstanding debtor's claimed homestead exemption. Accordingly, the court affirmed the order. View "Shirley v. Smith" on Justia Law

In this direct appeal from the Bankruptcy Court, the court addressed whether, in light of the 2005 amendments to the Bankruptcy Code, 11 U.S.C. 101 et seq., codified by the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA), Pub. L. No. 109-8, 119 Stat. 23, the absolute priority rule continued to apply to individual debtors in possession proceeding under Chapter 11. The court answered in the affirmative. The court concluded that the absolute priority rule as it applied to individual debtors in Chapter 11 had not been abrogated by BAPCPA and affirmed the bankruptcy court's order denying plan confirmation. View "In Re: Ganess Maharaj" on Justia Law

The bank appealed the judgment of the bankruptcy court dismissing its complaint against debtor. At issue was whether the requisite elements of a claim of nondischargeability under 11 U.S.C. 523(a)(2)(A) have been satisfied. The court held that the record supported the bankruptcy court's finding that there was no evidence that debtor made a false statement to the bank prior to the bank's advancing the funds at issue. Accordingly, the court affirmed the judgment dismissing the bank's complaint against debtor. View "Montgomery Bank, N.A. v. Steger" on Justia Law

Appellee commenced adversary proceedings against debtors, alleging that the debts owed to him were non-dischargeable pursuant to 11 U.S.C. 523(a)(2)(A) and (a)(2)(B). At issue was the proper construction of the phrase "respecting the debtor's...financial condition" as it appeared in sections 523(a)(2)(A) and (a)(2)(B). Because the court agreed with the bankruptcy court's interpretation and found no clear error in that court's determination that the debtors obtained an advance of money through actual fraud, the court affirmed the judgment. View "Bandi, et al. v. Becnel" on Justia Law

The Chapter 7 trustee for the bankruptcy estate of Stacey Williams appealed the district court's grant of summary judgment to Gate Gourmet on Williams' claim of pregnancy discrimination, race discrimination, retaliation, and state law negligence. The court held that the district court improperly granted summary judgment on Williams' Title VII, 42 U.S.C. 2000e et seq., claim for pregnancy discrimination because Williams had presented enough circumstantial evidence to allow a jury to reasonably infer that her supervisor's action in terminating her because of her pregnancy and his inaction in not attempting to find her a light-duty job were a violation of Title VII. The district court properly granted summary judgment to Gate Gourmet on Williams' Title VII and 42 U.S.C. 1981 race discrimination claims because she had not shown a genuine issue of material fact about whether Gate Gourmet intentionally discriminated against her based on her race. Summary judgment was improperly granted against Williams' Title VII and section 1981 retaliation claims because there was a reasonable inference that the statutorily protected filing of and refusal to settle the EEOC charge caused Gate Gourmet to deny Williams a light-duty position, which was a materially adverse action. The court affirmed in part, reversed in part, vacated in part, and remanded. View "Williams v. Gate Gourmet, Inc." on Justia Law