Justia Bankruptcy Opinion Summaries

Carol Rose, a prominent figure in the American Quarter Horse industry, entered into a series of agreements with Lori and Philip Aaron in 2013. The Aarons agreed to purchase a group of Rose’s horses at an auction, lease her Gainesville Ranch with an option to buy, and employ her as a consultant. The relationship quickly soured after the auction, with both sides accusing each other of breaches. Rose locked the Aarons out of the ranch and asserted a stable keeper’s lien for charges exceeding those related to the care of the Aarons’ horses. The Aarons paid the demanded sum and removed their horses. Litigation ensued, including claims by Jay McLaughlin, Rose’s former trainer, for damages related to the value of two fillies.The bankruptcy filings by Rose and her company led to the removal of the ongoing state-court litigation to the United States Bankruptcy Court. After trial, the bankruptcy court ruled in favor of the Aarons on their breach of contract and Texas Theft Liability Act (TTLA) claims, awarding damages and attorneys’ fees, and in favor of McLaughlin on his claim. The United States District Court for the Eastern District of Texas reversed the bankruptcy court’s rulings on the Aarons’ claims and McLaughlin’s claim, vacating the damages and fee awards.On appeal, the United States Court of Appeals for the Fifth Circuit affirmed the district court’s reversal of the damages award for the Aarons’ breach of contract claim, holding that the Aarons failed to prove damages under any recognized Texas law measure. The Fifth Circuit reversed the district court’s judgment on the TTLA claim, holding that Rose’s threat to retain the Aarons’ horses for more than the lawful amount could constitute coercion under the TTLA, and remanded for further fact finding on intent and causation. The court also reversed and remanded the judgment regarding McLaughlin’s claim, finding his damages testimony legally insufficient. The court left the issue of attorneys’ fees for further proceedings. View "Rose v. Equis Equine" on Justia Law

A Minnesota resident filed for chapter 7 bankruptcy, listing her former live-in partner as a disputed creditor. After the discovery of a nonexempt interest in a lake cabin, creditors were invited to file claims. The former partner, initially acting pro se and later with counsel, filed several claims seeking reimbursement for property and funds allegedly provided to the debtor. These claims were reduced and ultimately settled for $9,000, with the debtor withdrawing her objections. Shortly thereafter, the creditor filed a new claim for $400,000, alleging personal injury torts such as assault, battery, and emotional distress, supported by a draft complaint. The debtor objected, arguing the claim was untimely, unsupported, and barred by various defenses.The United States Bankruptcy Court for the District of Minnesota sustained the debtor’s objection and disallowed the personal injury claim. The court applied the narrowest test for “personal injury tort” under 28 U.S.C. § 157(b)(5), finding the claim did not involve bodily injury and thus was not a personal injury tort. The court also found the claim barred by res judicata and judicial estoppel, reasoning that the prior settlement and proceedings precluded relitigation of the same issues.On appeal, the United States Bankruptcy Appellate Panel for the Eighth Circuit reviewed the bankruptcy court’s factual findings for clear error and its legal conclusions de novo. The panel held that, under any of the three recognized tests, the creditor’s claim was for damages for a “personal injury tort.” Therefore, the bankruptcy court erred in determining it had jurisdiction to finally adjudicate the claim. The panel reversed the bankruptcy court’s order disallowing the claim and remanded for further proceedings consistent with its opinion, directing that the district court must try the personal injury tort claim as required by statute. View "Arrieta v. Smith" on Justia Law

A debtor filed for Chapter 7 bankruptcy in the United States Bankruptcy Court for the District of Arizona, initially claiming exemptions for real property and a recreational vehicle under Arizona’s homestead law. The trustee objected, and the debtor amended his schedule to claim the same exemptions under Washington law. After the trustee objected again and the bankruptcy court sustained both objections, the debtor amended his schedule a second time, this time electing federal exemptions under 11 U.S.C. § 522(d), specifically claiming a homestead exemption for the real property and a wildcard exemption for the recreational vehicle.The bankruptcy court granted the debtor’s federal homestead exemption for the real property and the wildcard exemption for the recreational vehicle, even though the debtor had listed the RV under the homestead exemption rather than the wildcard exemption. The trustee appealed to the United States District Court for the District of Arizona, which reversed the bankruptcy court’s decision. The district court held that claim preclusion barred the debtor from asserting federal exemptions after his state law exemptions were denied and that the bankruptcy court lacked authority to grant the wildcard exemption for the RV because the debtor had not specifically claimed it.On appeal, the United States Court of Appeals for the Ninth Circuit reversed the district court’s judgment. The Ninth Circuit held that claim preclusion did not bar the debtor from amending his schedule to claim federal exemptions after the bankruptcy court ruled that state exemptions were unavailable, because bankruptcy procedure prohibits simultaneous claims of state and federal exemptions. The court also held that the bankruptcy court did not exceed its authority by granting the wildcard exemption for the RV, as the debtor’s claim was sufficient under the federal statutory scheme. The case was remanded to the district court with instructions to vacate its decision and remand to the bankruptcy court. View "WARFIELD V. NANCE" on Justia Law

After a property owner defaulted on a note secured by a deed of trust, he filed for bankruptcy in 2008, and his debt was discharged in 2009. He made no further payments on the 20-year obligation. In 2018, the interest in the deed of trust was transferred to a new entity, which initiated nonjudicial foreclosure proceedings. The property owner responded by filing a quiet title action and moved for summary judgment, arguing that the six-year statute of limitations to enforce the note and foreclose on the deed of trust began running upon the bankruptcy discharge. The trial court agreed, granted summary judgment, and quieted title in favor of the property owner.The new beneficiary appealed to the Washington Court of Appeals, Division One, which affirmed the trial court’s decision in an unpublished opinion. The beneficiary’s motions for reconsideration and petitions for review to the Washington Supreme Court were denied. Shortly after, Division One issued a published opinion in Copper Creek (Marysville) Homeowners Association v. Kurtz, which expressly disagreed with the earlier decision in this case, creating a split within the division. The beneficiary then sought relief from the quiet title judgment in the trial court under CR 60(b)(11), arguing that the divisional split and subsequent legal developments justified reopening the case. The trial court denied the motion, and the Court of Appeals affirmed.The Supreme Court of the State of Washington held that the trial court abused its discretion by applying the wrong legal standard under CR 60(b)(11). The Supreme Court determined that the combination of legal errors, the prompt actions of the beneficiary, and the divisional split constituted extraordinary circumstances justifying relief from judgment. The Supreme Court reversed the Court of Appeals and remanded the case to the trial court to vacate the quiet title judgment and for further proceedings. View "Luv v. W. Coast Servicing, Inc." on Justia Law

A lender initiated a foreclosure action against a homeowner after the homeowner defaulted on a mortgage loan originally obtained in 2007. The mortgage was assigned several times before the foreclosure action began, and the lender’s predecessor filed suit in 2015. After a trial in 2018, the Vermont Superior Court, Civil Division, found in favor of the lender, concluding that the lender held the original note and mortgage at the time of filing and at trial, and that the homeowner had defaulted. The court issued a judgment of foreclosure by judicial sale, setting a redemption period for the homeowner.Following the expiration of the redemption period, the case was temporarily dismissed due to the homeowner’s bankruptcy. After the bankruptcy discharge, the lender successfully moved to reopen the case. The parties attempted mediation, which was unsuccessful. The lender then sought to substitute a new party as plaintiff due to post-judgment assignments of the mortgage, but later withdrew this request after issues arose regarding the validity of the assignments and the status of the note. The court vacated the substitution and ordered the lender to prove who the real party in interest was, warning that failure to do so would result in dismissal for lack of prosecution. After a hearing, the court found the lender failed to establish the real party in interest, dismissed the case with prejudice, and vacated the foreclosure judgment.On appeal, the Vermont Supreme Court held that the trial court abused its discretion by dismissing the case with prejudice for want of prosecution. The Supreme Court found no evidence of undue delay or failure to pursue the case by the lender, and concluded that the action could continue in the name of the original plaintiff under the applicable rules. The Supreme Court reversed the dismissal, reinstated the foreclosure judgment, and remanded for further proceedings. View "Ditech Financial LLC v. Brisson" on Justia Law

Yellow Corporation, a major trucking company, ceased operations and filed for bankruptcy in 2023. As a result, it withdrew from several multiemployer pension plans, triggering withdrawal liability—an amount owed to the pension plans to cover unfunded vested benefits for employees. The pension plans, which had received substantial federal funds under the American Rescue Plan Act of 2021 (ARPA) to stabilize their finances, filed claims against Yellow’s bankruptcy estate for withdrawal liability. The dispute centered on how much of the ARPA funds should be counted as plan assets when calculating Yellow’s liability, as well as whether certain contractual terms could require Yellow to pay a higher withdrawal liability than statutory minimums.The United States Bankruptcy Court for the District of Delaware reviewed the claims. It upheld two regulations issued by the Pension Benefit Guaranty Corporation (PBGC): the Phase-In Regulation, which requires ARPA funds to be counted as plan assets gradually over time, and the No-Receivables Regulation, which bars plans from counting ARPA funds as assets before they are actually received. The Bankruptcy Court found these regulations to be valid exercises of PBGC’s authority and not arbitrary or capricious. It also ruled that two pension plans could enforce a contractual provision requiring Yellow to pay withdrawal liability at a higher, agreed-upon rate, rather than the rate based solely on its actual contributions.On direct appeal, the United States Court of Appeals for the Third Circuit affirmed the Bankruptcy Court’s order. The Third Circuit held that the PBGC’s regulations were valid under ARPA and ERISA, as Congress had expressly delegated authority to the PBGC to set reasonable conditions on the allocation of plan assets and withdrawal liability. The court also held that pension plans could enforce contractual terms requiring higher withdrawal liability, as the statutory scheme sets a floor, not a ceiling, for such liability. View "In re: Yellow Corporation" on Justia Law

A dispute arose between a woman and her daughter regarding the daughter’s alleged misuse of property held in an irrevocable trust for which she served as trustee. The mother initiated a lawsuit in Massachusetts state court, asserting several state-law claims against her daughter and her daughter’s then-husband. Subsequently, the daughter filed for bankruptcy under Chapter 13 in the United States Bankruptcy Court for the District of Arizona, which triggered an automatic stay of the state court litigation. The bankruptcy court initially granted the mother’s motion for relief from the automatic stay and for permissive abstention, allowing the state court case to proceed. However, after delays in the state court proceedings, the daughter moved for relief from that order, and the bankruptcy court vacated its prior order and reimposed the automatic stay.After the bankruptcy court’s March 2021 order reimposing the stay, the mother filed adversary proceedings in bankruptcy court, which were consolidated and tried. The bankruptcy court ruled in favor of the daughter on all claims and entered final judgment in July 2022. The mother then appealed the March 2021 order to the United States District Court for the District of Arizona, arguing that the bankruptcy court erred in granting relief under Rule 60(b)(6) rather than Rule 60(b)(1). The district court concluded that the appeal was timely because it believed the March 2021 order was not immediately appealable, and it affirmed the bankruptcy court’s decision.The United States Court of Appeals for the Ninth Circuit held that, under Ritzen Group, Inc. v. Jackson Masonry, LLC, the bankruptcy court’s March 2021 order was a final, appealable order because it definitively resolved a discrete dispute within the bankruptcy case. Since the mother did not appeal within the required fourteen days, her appeal was untimely, and the district court lacked jurisdiction. The Ninth Circuit vacated the district court’s order and remanded with instructions to dismiss the appeal for lack of jurisdiction. View "FANTASIA V. DIODATO" on Justia Law

Whittaker, Clark & Daniels, Inc. and its affiliates, former processors and distributors of industrial chemicals including talc, faced thousands of asbestos-related tort claims after selling their operating assets in 2004. In 2023, following a $29 million jury verdict in South Carolina for a plaintiff diagnosed with mesothelioma, the South Carolina Court of Common Pleas appointed a receiver to manage Whittaker’s assets. The receiver was granted broad authority to administer Whittaker’s assets and protect its interests, but the order did not explicitly remove the board’s authority over corporate affairs.Whittaker’s board, without consulting the receiver, authorized a bankruptcy filing in the United States Bankruptcy Court for the District of New Jersey. The receiver moved to dismiss the bankruptcy, arguing that only he had authority to file. The Bankruptcy Court denied the motion, finding the board retained authority under New Jersey law, and the United States District Court for the District of New Jersey affirmed. Meanwhile, the Official Committee of Talc Claimants intervened in an adversary proceeding, contesting whether certain successor liability claims against a nondebtor (Brenntag) were property of the bankruptcy estate. The Bankruptcy Court granted summary judgment to the debtors, holding that these claims belonged to the estate, and certified the decision for direct appeal.The United States Court of Appeals for the Third Circuit affirmed both lower courts. It held that an improperly filed bankruptcy petition is not a jurisdictional defect but may be grounds for dismissal. The court determined that under New Jersey law, the board retained authority to file for bankruptcy because the South Carolina receiver had not been recognized by a New Jersey court. The court also held that successor liability claims based on a “product line” theory are general claims belonging to the bankruptcy estate, not to individual creditors, following its precedent in In re Emoral. View "In re Whittaker Clark & Daniels Inc." on Justia Law

Eileen Adams and her husband lost their New Jersey home to foreclosure after a series of events involving the transfer and assignment of their mortgage. The mortgage, originally held by AmTrust Bank, was assigned to EverBank after AmTrust’s failure, and then to Nationstar Mortgage. Adams defaulted on the mortgage, leading EverBank to initiate foreclosure proceedings. Although Adams answered the foreclosure complaint, she did not oppose summary judgment, which was granted in favor of EverBank. Subsequent assignments and litigation ensued, but Adams and her husband ultimately lost their appeals in the New Jersey courts, including a denial of review by the Supreme Court of New Jersey.After exhausting state-court remedies, Adams and her husband filed multiple bankruptcy petitions in an effort to prevent the foreclosure sale. In the most recent Chapter 13 case, Nationstar moved for relief from the automatic stay to proceed with the sale. The United States Bankruptcy Court for the District of New Jersey granted Nationstar’s motion. Adams appealed to the United States District Court for the District of New Jersey, which affirmed the Bankruptcy Court’s order and dismissed the appeal for lack of jurisdiction under the Rooker-Feldman doctrine, reasoning that Adams was seeking to overturn a state-court judgment.The United States Court of Appeals for the Third Circuit reviewed the case and held that, while the District Court erred in applying the Rooker-Feldman doctrine to dismiss for lack of jurisdiction, Adams’s claims were nonetheless precluded under New Jersey law. The Third Circuit clarified that Rooker-Feldman is a narrow doctrine and does not bar jurisdiction in this context; instead, principles of claim preclusion apply because Adams’s arguments had already been litigated and decided in state court. The Third Circuit affirmed the District Court’s order insofar as it upheld the Bankruptcy Court’s decision to lift the automatic stay. View "In re: Adams" on Justia Law

A businessman in the coal industry, John Siegel, used a network of family-owned companies to finance a project to develop a coal shipping terminal in Oakland, California. Over several years, Siegel directed one family company, Cecelia Financial Management, to advance funds to another, Insight Terminal Solutions, which was developing the terminal. These advances were documented as loans through promissory notes, but Siegel was involved on both sides of the transactions. After Insight filed for bankruptcy in 2019, Cecelia filed a claim as a creditor for over $6 million, asserting the advances were loans. However, the new owner of Insight, Autumn Wind, argued these were actually equity contributions, not loans, and sought to have the bankruptcy court recharacterize them as such, which would subordinate Cecelia’s claim.The United States Bankruptcy Court for the Western District of Kentucky held a trial to determine the nature of the advances. During the proceedings, Siegel died, and his deposition—taken before his death but without cross-examination by the opposing party—became central. The bankruptcy court excluded Siegel’s deposition, reasoning that the lack of cross-examination opportunity rendered it inadmissible, and ultimately ruled in favor of Bay Bridge Exports (which had acquired Cecelia’s claim), declining to recharacterize the advances as equity. The Bankruptcy Appellate Panel of the Sixth Circuit affirmed this decision.The United States Court of Appeals for the Sixth Circuit reviewed the case de novo. It held that the bankruptcy court committed legal error by categorically excluding Siegel’s deposition solely due to the absence of cross-examination, misinterpreting Federal Rule of Civil Procedure 32(a). The Sixth Circuit clarified that courts have discretion, not an absolute bar, in such circumstances. The court reversed the bankruptcy court’s decision and remanded for further proceedings, instructing the lower court to reconsider the admissibility of the deposition and, if admitted, its impact on the recharacterization analysis. View "Insight Terminal Solutions v. Cecelia Fin. Mgmt." on Justia Law