Justia Bankruptcy Opinion Summaries

Plaintiff Tutor Perini Building Corp. appealed from the district court’s order affirming an order of the United States Bankruptcy Court, which held that Plaintiff may not use 11 U.S.C. Section 365(b)(1)(A) to assert a “cure claim” against the Trustee for the Trustee’s assumption of an unexpired lease to which Plaintiff was neither a party nor a third-party beneficiary.   The Second Circuit affirmed. The court held that a creditor who seeks to assert a “cure claim” under Section 365(b)(1)(A) must have a contractual right to payment under the assumed executory contract or unexpired lease in question, and the court agreed that Plaintiff is not a third-party beneficiary of the assumed lease. The court explained that Tutor Perini’s expansive view of the priority rights conferred by 11 U.S.C. Section 365(b)(1)(A) is inconsistent with applicable principles of Bankruptcy Code interpretation, and its third-party beneficiary argument is inconsistent with controlling principles of New York contract law. View "In re: George Washington Bridge" on Justia Law

Attorney and his law firm, Pesner Kawamato Conway, P.C. (collectively, Conway), appealed the district court’s order rejecting the bankruptcy court’s report and recommendation to enjoin Smith Development, Inc.’s legal malpractice suit against Conway and to impose sanctions for violating the Barton doctrine and the automatic stay.   The Fourth Circuit dismissed the appeal, finding that it lacks subject-matter jurisdiction because the district court’s decision rests on the abstention principles. The court explained that Conway suggests the district court had no authority to enter an abstention order because, under Barton, the district court itself lacked jurisdiction over Smith Development’s malpractice claims. However, the court wrote that this argument fares no better than the first. Barton concerns subject-matter jurisdiction over a separate action, not jurisdiction over the proceedings in which a party seeks Barton protection in the first place. And even if the court accepted the argument’s doubtful premise, it fails on its own logic because the bankruptcy court issued a report and recommendation to the district court, thereby authorizing the district court to rule on the matter. Further, the court found that even if it recognized a narrow exception to Section 1334(d)’s clear jurisdictional bar, the district court’s order would not fall within it. View "Martin Conway v. Smith Development, Inc." on Justia Law

The Supreme Court affirmed the order of the circuit court dismissing Petitioner's complaint stemming from the suspension of his hospital clinical privileges and medical staff membership under W. Va. R. Civ. P. 12(b)(1) and 12(b)(6), holding that the circuit court did not err.Petitioner, a self-employed physician, held clinical privileges and medical staff membership with Herbert J. Thomas Memorial Hospital Association and Thomas Health System, Inc. (collectively, Thomas Hospital) until they were suspended in 2019. Petitioner brought this action raising claims related to the suspension. The suspension, however, occurred before Thomas Hospital's Chapter 11 bankruptcy confirmation order and reorganization plan. The circuit court dismissed the complaint for failure to state a claim. The Supreme Court affirmed, holding that the circuit court properly dismissed the complaint. View "Katrib v. Herbert J. Thomas Memorial Hospital Ass'n" on Justia Law

The Debtor filed a chapter 13 bankruptcy petition. The chapter 13 trustee moved to convert the Debtor’s case to chapter 7 or to dismiss the case with a bar to refiling. The Debtor requested that the motion be denied. After the Conversion Hearing, while the matter was still pending, the Debtor filed chapter 13 plan amendments, amended schedules, and an amended bankruptcy petition, all seeking relief under chapter 13. The bankruptcy court entered a Conversion Order. The Debtor subsequently unsuccessfully sought reconsideration, dismissal, withdrawal, suspension, abstention, or other relief and did not cooperate with the Trustee as required (11 U.S.C. 521), resulting in civil contempt, sanctions, and default judgments.Two years after conversion, the Debtor filed a “Motion to Withdraw Pursuant to [sic] U.S.C. 1307(b) and Debtor’s Request to Dismiss Prior to Conversion,” claiming for the first time that she had orally moved to dismiss her case during the Conversion Hearing. Instead of filing a brief or other information as requested by the court, the Debtor sought various forms of relief. The bankruptcy court denied the Debtor’s Motion for Injunctive and Other Relief as a “delay tactic.” The Debtor continued to seek various relief. The Sixth Circuit Bankruptcy Appellate Panel affirmed; the Debtor’s assertion that she requested dismissal of the chapter 13 case before conversion is false and 11 U.S.C. 1307 does not grant a debtor an absolute right to dismiss a case post-conversion. View "In re: Skandis" on Justia Law

Peraica represented Dordevic in her Chapter 7 bankruptcy proceeding and submitted a Statement of Financial Affairs (Rule 2016 disclosure) in which he reported that Dordevic had paid him $5,000. As the Trustee learned during discovery, Dordevic had actually paid Peraica $21,500. The Trustee informed Peraica that he needed to file an updated Rule 2016 fee disclosure. Peraica instead sent the Trustee an informal accounting document listing $21,500 in fees. The Trustee responded: “The Rule 2016 disclosures actually need to be filed with the Court” by submitting “an official form.” Peraica repeatedly ignored the Trustee’s reminders. The Trustee filed a motion, 11 U.S.C. 329, to examine the fees. Peraica failed to respond; the Trustee then requested that all fees be forfeited. The bankruptcy court granted the motion.The district court and Seventh Circuit affirmed. Beyond Peraica’s brazen disregard of the Trustee’s advice, Peraica’s proffered explanation for not updating his fee disclosure lacking, if not false. Peraica had been involved in more than 350 bankruptcy cases in the Northern District of Illinois alone. The bankruptcy court ordered Peraica to disgorge all past fees as a penalty for his blatant lack of compliance with his obligations. There is no leeway for partial or incomplete disclosure. View "Peraica v. Layng" on Justia Law

The Supreme Court answered two questions of law certified by the United States Bankruptcy Court for the District of Hawai'i concerning a putative class action alleging wrongful foreclosure.Specifically, the Court answered (1) an action alleging a wrongful nonjudicial foreclosure of land court property that seeks only damages against the foreclosing lender is not barred by the entry of a transfer certificate of title to a buyer at a foreclosure sale; and (2) the pendency of a putative class action tolls the time during which a class member may commence an individual action, and the time for commencing an individual action is tolled until a clear denial of class certification. View "Yanagi v. Bank of America" on Justia Law

Kimball entered annexation agreements with Illinois municipalities and contracted separately with Fidelity as a surety to issue bonds securing performance on those obligations. Fidelity required Kimball to indemnify it. In 2008, Kimball filed for Chapter 11 bankruptcy relief before it satisfied its development obligations. The municipalities and Fidelity filed proofs of claim.Fidelity voted in favor of Kimball's reorganization plan. The confirmation order released the claims of every party that voted for the plan; an injunction prohibited those entities from seeking payment on their claims. Kimball’s assets, “free and clear of any and all liens, claims, encumbrances, and interests,” went into a trust that sold its development interests to TRG. The bankruptcy court later allowed the municipalities to sue Kimball to establish liability in order to recover the proceeds of the performance bonds.The municipalities sued Fidelity in state court to collect on the bonds. Fidelity interpleaded TRG. TRG asked the bankruptcy court to enforce the Kimball plan confirmation order and injunction against Fidelity and alleged “knowing and intentional violation of the confirmation order.” The bankruptcy court held Fidelity in contempt of that order, concluded that the order extinguished Kimball’s duty to indemnify Fidelity, and awarded TRG $9.5 million in sanctions, The district court and Seventh Circuit affirmed. The bankruptcy court undertook a careful and detailed analysis in finding Fidelity in contempt and assessing sanctions based on TRG's costs. There was no legal or factual error. View "Fidelity and Deposit Company of Maryland v. TRG Venture Two, LLC" on Justia Law

The First Circuit affirmed the rulings of the bankruptcy court in this adversary proceeding brought by Ann Tracy Botelho against her neighbor and business partner, Mary E. Buscone, during Mary's bankruptcy proceedings, holding that there was no error in the challenged rulings.In 2012, Mary and Ann opened up a frozen yogurt shop together. The business ceased operations in 2014, and Ann filed for bankruptcy. In 2018, after Ann received a Chapter 7 discharge, Ann sued Mary in state court, resulting in a default judgment. The court attached a lien for the judgment amount plus interest to Mary's home. Mary then brought her own Chapter 7 case, listing in her schedules Ann's claim against her. Ann subsequently initiated an adversary proceeding seeking a determination that her claim against Mary was non-dischargeable. A prolonged discovery dispute ensued resulting in another default judgment against Mary as a sanction for her failure to comply with discovery orders. The bankruptcy appellate panel largely affirmed the bankruptcy court's rulings. The First Circuit affirmed, holding that the district court did not err in denying Mary's motion for summary judgment, granting Ann's second motion to compel, and denying Mary's motion for reconsideration. View "Botelho v. Buscone" on Justia Law

The First Circuit affirmed the order of the bankruptcy court determining that Donald Kupperstein knowingly and fraudulently omitted and misrepresented material facts in his Chapter 7 bankruptcy petition and related schedules, requiring that Kupperstein be denied a discharge, holding that there was no error.Kupperstein filed in bankruptcy court a voluntary petition for relief under Chapter 7. Appellees commenced adversary proceedings seeking the denial of Kupperstein's bankruptcy discharge under 11 U.S.C. 523, 727(a)(4)(A) on the grounds that Kupperstein had engaged in clear and blatant misconduct. The bankruptcy court denied a discharge and granted summary judgment for Appellees. The district court affirmed. The First Circuit affirmed, holding (1) the bankruptcy court did not err in denying Kupperstein's motion for leave to file a belated response to Appellees' joint statement of facts in support of their motion for summary judgment; and (2) the bankruptcy court did not err in granting Appellees' joint motion for summary judgment. View "Kupperstein v. Schall" on Justia Law

Kate and David Bartenwerfer remodeled the house they jointly owned. David oversaw the project. Kate remained largely uninvolved. They sold the house to Buckley, attesting that they had disclosed all material facts. Buckley discovered undisclosed defects and won a California state court judgment, leaving the Bartenwerfers jointly responsible for more than $200,000. The Bartenwerfers filed for Chapter 7 bankruptcy. Buckley filed an adversary complaint, alleging that the state-court judgment debt was non-dischargeable as “any debt . . . for money . . . to the extent obtained by . . . false pretenses, a false representation, or actual fraud,” 11 U.S.C. 523(a)(2)(A).The Bankruptcy Court imputed David's fraudulent intent to Kate, citing their legal partnership to renovate and sell the property. The Bankruptcy Appellate Panel held that section 523(a)(2)(A) barred Kate from discharging the debt only if she knew or had reason to know of David’s fraud. The Ninth Circuit reversed.The Supreme Court affirmed. Section 523(a)(2)(A) precludes Kate from discharging a debt obtained by fraud, regardless of her own culpability. The passive voice in section 523(a)(2)(A) removes the actor; fraud liability is not limited to the wrongdoer. The fraud of one partner should be imputed to other partners, who “received and appropriated the fruits of the fraudulent conduct.” Section 523(a)(2)(A) takes the debt as it finds it, so if California did not extend liability to honest partners, it would have no role. Fraud liability generally requires a special relationship with the wrongdoer and, even then, defenses are available. View "Bartenwerfer v. Buckley" on Justia Law