Justia Bankruptcy Opinion Summaries

This was an appeal by Triology from an order of the bankruptcy court holding that certain funds held by Trilogy constituted sale proceeds which were subject to the mechanic liens of J.E. Dunn. The court held that the bankruptcy court's decision was not based on clearly erroneous factual findings or erroneous legal conclusion and affirmed the judgment. View "Trilogy Development Co. v. J.E. Dunn Construction Co., et al." on Justia Law

Plaintiff asserted federal claims under Title VII of the Civil Rights Act of 1964, 42 U.S.C. 2000e et seq., and under 42 U.S.C. 1981, as well as a state-law claim for intentional infliction of emotional distress, asserting that his employer subjected him to racial discrimination. At the time plaintiff filed both his EEOC charge and his complaint initiating the instant case, plaintiff was a debtor in a Chapter 13 proceeding, having filed a petition for bankruptcy. The employer subsequently moved for summary judgment, arguing that plaintiff should be judicially estopped from pursuing his claims against the employer because he failed to disclose those claims to the bankruptcy court. The district court granted the motion, dismissing plaintiff's case, and plaintiff appealed. The court held that the district court did not abuse its discretion in applying judicial estoppel to plaintiff's claims after finding that plaintiff failed to create a fact issue regarding his purported inadvertence. Accordingly, the court affirmed the judgment. View "Love v. Tyson Foods, Inc." on Justia Law

In 2002 Bell established mutual funds and raised about $2.5 billion for investment. Most of the firms to which the funds routed money were controlled by Petters. He was running a Ponzi scheme. There was no inventory. New investments paid older debts, with some money siphoned off for personal use. When Petters was caught in 2008, the funds collapsed; about 60% of the money was gone. The funds' bankruptcy trustee filed suit against the funds' auditor, alleging negligence. The district court dismissed without deciding whether the auditor had acted competently, invoking the doctrine of in pari delicto, based on Bell's knowledge of the scheme. The Seventh Circuit vacated, noting that Bell was not stealing funds and that the extent of his knowledge cannot be determined at this stage. An allegation that Bell was negligent but not criminally culpable in 2006 and 2007 makes the claim against the auditor sufficient. View "Peterson v. McGladrey & Pullen, LLP" on Justia Law

This was an adversary proceeding arising out of a Chapter 11 bankruptcy of debtors. The trustee filed suit against A&R, the former debtors' counsel, seeking disgorgement of the attorney's fees awarded during the bankruptcy. The bankruptcy court ordered a sanction for A&R's failure to adequately disclose various connections it had to the debtors and creditors, but found that A&R did not have a disqualifying adverse interest. The trustee appealed, arguing that A&R was not disinterested and that all legal fees should have been disgorged. The court held that, under the totality of the circumstances, A&R did not have a disqualifying interest; given the bankruptcy court's factual findings were reasonable based on the record, the court concluded that the bankruptcy court did not commit clear error in ordering disgorgement of only a portion of the retainer; and the bankruptcy's court's decision to deny the amendment was not an abuse of discretion. Accordingly, the court affirmed the judgment. View "Waldron v. Adams & Reese, L.L.P." on Justia Law

The company, formed in 2003 to franchise stores, was forced into reorganization bankruptcy under Chapter 11. The bankruptcy judge granted a motion to convert to Chapter 7 liquidation, over objection by a five percent shareholder who had been the company’s president (Wallis). The judge rejected allegations of fraud and a request that the court compel franchisees to pay what Wallis claimed they owed. The district court and Seventh Circuit affirmed, first holding that it had jurisdiction although the bankruptcy case has not been closed. The court rejected an argument that, because creditors’ claims were based on contracts that were subject to arbitration, they were outside the jurisdiction of bankruptcy court. The court noted that Wallis has filed eight appeals to the district court and five to the Seventh Circuit, "all pro se and frivolous. Enough is enough. The next time he files a frivolous appeal he will be sanctioned." View "Wallis v. USA Baby, Inc." on Justia Law

This case required the court to determine whether a mortgage company violated Hawaii state law when it did not publicly announce the postponement of a foreclosure sale of property owned by appellant, and if so, to ascertain the proper remedy for that violation. The court held that the lack of public announcement did violate Hawaii's nonjudicial foreclosure statute, and this defect was a deceptive practice under state law. Accordingly, the court affirmed the bankruptcy court's avoidance of the foreclosure sale. However, the court remanded to the bankruptcy court for a proper calculation of attorney's fees and damages under Hawaii Revised Statute 480-13. View "Kekauoha-Alisa, et al. v. Ameriquest Mortgage Co., et al." on Justia Law

Debtor had unsecured liabilities of almost $15,000 and anticipated disposable income of about $100 per month. He visited an attorney, who indicated that he would not file a Chapter 7 proceeding until the debtor paid the anticipated legal fee ($2,300). If debtor chose the Chapter 13 alternative, he could pay over time as part of the Chapter 13 plan. The attorney estimated that fees associated with a Chapter 13 proceeding would total $4,100. Not having fees for a Chapter 7 filing, the debtor opted for Chapter 13 and paid $500 on account. The attorney submitted a “fee only” Chapter 13 plan that called for payment of $100 per month for 36 months to the bankruptcy estate. Of the total $3,600, only about $300 would be available to general creditors. The bankruptcy court rejected the plan as not submitted in good faith. The debtor opted to convert to Chapter 7; the attorney moved for an award of $2,872. The bankruptcy court awarded $299, which required him to disgorge more than $200. The district court affirmed. Noting a division in the circuits, the First Circuit reversed, holding that fee-only plans are not per se in bad faith.View "Berliner v. Pappalardo" on Justia Law

Debtor appealed an order of the bankruptcy court sustaining the objection of the Chapter 7 trustee to her claimed exemption of her interest in an annuity. The court concluded that res judicata applied to the debtor's claim of an exemption; and even if res judicata did not apply the bankruptcy court properly disallowed the debtor's claimed exemption. The court also affirmed the bankruptcy court's decision on the bases that: (1) it properly determined that the record did not show that the Company was "authorized to do business" as a "stipulated premium" or "assessment plan" insurance company, as required for Mo. Rev. Stat. 377.330 and 377.090 to apply to the annuity; and (2) the annuity was not insurance, as required for any of the three statutes at issue. View "Bryan v. Stanton" on Justia Law

Debtors engaged the attorney to represent them in bankruptcy proceedings. They owed more than $115,000 in unsecured debt with no realistic prospect of payment. In a retainer agreement, he estimated that legal fees plus court costs would total around $4,000. Debtors paid $3,684 on account. Their Chapter 13 plan, 11 U.S.C. 1321-1322, was approved by the bankruptcy court and the lawyer filed an application requesting an additional $8,173.36 in attorneys' fees and expenses. The trustee objected. The bankruptcy court set the total fee and expense figure at $3,684, finding that the case was relatively uncomplicated. The district court and First Circuit affirmed, agreeing that the attorney billed an excessive number of hours. View "Sullivan v. Pappalardo" on Justia Law

This case arose when Mirant, an energy company, sought to expand its European operations by acquiring nine power islands from General Electric. When the power island deal fell through, Mirant made payments pursuant to a guaranty and soon thereafter sought bankruptcy protection. Mirant, as debtor-in-possession, sued Commerzbank and other lenders in bankruptcy court to avoid the guaranty and to recover the funds Mirant paid pursuant to the guaranty. After Mirant's bankruptcy plan was confirmed MCAR, plaintiff, substituted into the case for Mirant. Commerzbank and other lenders, defendants, filed a motion to dismiss based on Rules 12(b)(1) and 12(b)(6). The district court subsequently denied defendants' motion to dismiss based on plaintiff's alleged lack of standing. Thereafter, the district court granted summary judgment for defendants. Both sides appealed. While the court agreed that the district court correctly determined that there was standing to bring the avoidance claim, the court vacated the judgment of dismissal because the district court erroneously applied Georgia state law rather than New York state law to the avoidance claim. View "MC Asset Recovery LLC v. Commerzbank A.G., et al." on Justia Law