Justia Bankruptcy Opinion Summaries

Appellant, a Chapter 7 debtor, appealed the district court's order affirming the bankruptcy court's ruling that certain of his debts were nondischargeable under 11 U.S.C. 523(a)(4). At issue was whether loans obtained from a limited partnership that appellant managed in his capacity as officer and director of the partnership's corporate general partner were incurred through defalcation while acting as a fiduciary to the partnership. The court affirmed and held that even if the existence of the loans themselves were not a defalcation, the bankruptcy court did not err in further concluding that appellant recklessly breached his duty to the partnership by failing to protect against the increasing financial risk created by those loans by ensuring that the partnership perfected its liens on the pledged collateral, particularly when the failure accrued to his benefit.

Homeowners fell behind on their mortgage and the bank initiated foreclosure. The homeowners filed a Chapter 13 bankruptcy. The judge denied their motion for rescission of the mortgage and for damages, based on noncompliance with state laws. The district court and First Circuit affirmed. The homeowners signed right-to-cancel forms required under the Massachusetts Consumer Credit Cost Disclosure Act, modeled after the federal Truth in Lending Act (15 U.S.C. 1635); technical flaws in the form cannot serve as a basis for invalidating a transaction five years later. Similarly, a slight delay in receipt of a required high-cost loan disclosure did not justify rescission five years later.

In 2009 the bankruptcy court revoked a 2000 Chapter 7 discharge, finding fraud with respect to a 1997 divorce settlement. The district court and First Circuit affirmed. While the debtor "largely avoided explicit false statements," the debtor allowed the trustee and the court to believe that he was turning over whatever he received to secured creditors, which was not true, and he withheld information about accelerated payments under the divorce settlement.

This appeal asks whether the bankruptcy court correctly determined that an operating agreement between the Debtor C.W. Mining Company (CWM) and Appellant C.O.P. Coal Development Company (COP) was property of the debtor's bankruptcy estate, and could therefore be sold off by the trustee. Appellant claims that the agreement automatically terminated shortly after the bankruptcy petition was filed, and that the bankruptcy court erred in including it. The terms of the operating agreement provided that it should cancel should CWM default on its payments to COP before the close of business on January 8, 2008. On that day, at 3:36PM, an involuntary bankruptcy petition was filed against CWM in bankruptcy court. CWM argued to the bankruptcy court that the operating agreement automatically terminated with the filing of the bankruptcy petition, but the court disagreed. The trustee assumed the operating agreement and sold mine assets. This Court affirmed the lower court's decision, finding that the operating agreement did not automatically terminate, and could be sold by the bankruptcy trustee.

Plaintiff-Appellant Mauerhan and the Chapter 7 Bankruptcy Trustee brought suit against Mauerhan's former employer Defendant-Appellee Wagner Corporation alleging a violation of the Americans with Disabilities Act (ADA). The lower court granted Defendant's motion for summary judgment, and Plaintiffs appealed. Mauerhan had tested positive for drug use and was fired from Defendant's employ, but was told he may return if he was able to complete a rehabilitation program. Mauerhan completed the program, but Defendant's job duties and compensation would be less than what it previously had been. Mauerhan declined Defendant's offer. Later that year, Mauerhan filed for Chapter 7 bankruptcy, and received a discharge of his debts by the end of the year. After filing for bankruptcy, but before the case was closed, Mauerhan learned that he had a viable claim of discrimination against Defendant under the ADA, and filed it with the EEOC. The Bankruptcy Trustee learned of the claim, and moved to amend Mauerhan's bankruptcy petition to include the claim in the bankruptcy estate. The lower court found that Mauerhan had only abstained from drugs for one month, too short to receive protection from the ADA at the time Mauerhan asked to be rehired. On appeal, this Court upheld the lower court's grant of summary judgment.

The debtors obtained confirmation of a Chapter 13 plan. The trustee sought dismissal because of their recalcitrance; they willfully failed to comply with an order requiring monthly reporting of income. The debtors converted to Chapter 7. The bankruptcy court denied discharge. The district court and Tenth Circuit affirmed. A Chapter 13 confirmation order is a lawful order of a court and pre-conversion misconduct justifies denial of discharge. The court interpreted a statutory reference to "the case" as referring to both the pre- and post- conversion proceedings.

The district court dismissed a pro se debtor's claims against creditors, a collection firm, and credit reporting agencies, holding that expiration of the limitations period on the original debt did not prohibit assignment of or attempt to collect the debt, which had not been extinguished by bankruptcy. The Third Circuit affirmed. Although the debt is unenforceable under state law, it was not extinguished; the Fair Debt Collection Practices Act, 15 U.S.C. 1692e, does not prohibit attempts to obtain voluntary payment. Communications did not include any threat to litigate and did not amount to fraud. Nor did the collection agency violate the Act by obtaining a credit report or violate RICO by any of its actions.

Appellant, a chapter 7 debtor, appealed an order affirming the bankruptcy court's ruling that certain of his debts were nondischargeable under 11 U.S.C. 523(a)(4). At issue was whether appellant's debts, which were loans obtained from a partnership that he managed in his capacity as officer and director of the partnership's corporate general partner, were incurred through defalcation while he was acting as a fiduciary to the partnership. The court affirmed the order and held that appellant willfully neglected a duty owed to the partnership in connection with the loans where he acted in a fiduciary capacity to the partnership and where, even if the existence of the loans themselves were not a defalcation, the bankruptcy court did not err in concluding that appellant recklessly breached his duty to the partnership by failing to protect it against the increasing financial risks of those loans.

A Chapter 11 bankruptcy petition, filed in May 2005, was dismissed; the order was mailed on October 5, 2006. Notice of appeal was sent by first-class and electronic mail on October 16, but was not filed until October 19. Despite failure to file within 10 days as required by Fed. R. Bankr. P. 8002(a), the district court docketed the appeal. In May 2007 the court dismissed the appeal for failure to comply with another rule. While appeal of the dismissal was pending, the trustee moved for dismissal for untimely filing. The Third Circuit remanded to the district court for dismissal. Unlike other bankruptcy rules, the time for appeal is incorporated into the statute (28 U.S.C. 158(c)(2) and is jurisdictional.

The company was established in 1998 to develop systems for high-speed Internet connections for home computers. After a decision to not respond to an acquisition offer, the company was in financial trouble by 2000 and took an $11 million loan for 90 days and a second loan for $9 million, on which it defaulted. The company exchanged its assets for stock in an amount that would have satisfied creditors and preferred stockholders. The stock, the company's only asset in bankruptcy, fell to a value less than the claims of creditors. Common shareholders brought suit. The district court entered summary judgment for the defendants. The Seventh Circuit reversed and remanded, stating that the company's failure was not likely solely the result of the "burst of the dot-com bubble." Even if the directors were excused from liability for failure to exercise due care, as permitted by Delaware law, there was evidence of disloyalty, which was not excused. Evidence of disloyalty switched the burden of proving "entire fairness" with respect to the loans on the directors. There was enough evidence of causation and that certain preferred stockholders (venture capital groups) aided and abetted the directors to submit the question to a jury.