Justia Bankruptcy Opinion Summaries

The First Circuit affirmed the judgment of the bankruptcy court dismissing Appellant's voluntary petition for relief under title 11 of the United States Code, holding that the district court did not err in dismissing the petition on the ground that Appellant failed to serve certain quarterly reports on the United States Trustee pursuant to the Bankruptcy Court's confirmation order.The bankruptcy court dismissed Appellant's case on two grounds - that he failed to pay certain fees to the U.S. Trustee pursuant to 28 U.S.C. 1930(a)(6) and that he failed to serve the quarterly reports on the U.S. Trustee. The First Circuit affirmed on the second of the two grounds, holding that the bankruptcy court did not err by dismissing Appellant's case for failure to comply with the confirmation order because that order required that Appellant serve quarterly reports on the U.S. Trustee only while his case was "open." View "Brown v. Harrington" on Justia Law

A Mississippi trial court dismissed David Saunders’s claims against the National Collegiate Athletic Association (NCAA) based on judicial estoppel because Saunders did not list these claims in his prior Chapter 7 bankruptcy. Until December 2010, Saunders served as football operations coordinator at the University of Mississippi. From January 2011 to October 2014, Saunders worked as an assistant football coach for the University of Louisiana. Based on Saunders’s alleged rule violations while at each institution, the NCAA conducted separate investigations and enforcement proceedings against both schools. The NCAA concluded Saunders had violated NCAA rules while at Louisiana. As punishment, the NCAA issued a show-cause directive to any NCAA member institution that may want to employ Saunders in an athletics position from January 2016 to January 2024. Saunders retained an attorney to represent him in NCAA proceedings. The attorney insisted financial strain prevented Saunders from traveling to defend himself personally. After a second show-cause directive, Saunders and his attorney discussed suing the NCAA, but at that time he did not pursue a lawsuit. Months later, Saunders filed a voluntary petition for Chapter 7 bankruptcy averring he had no claims against third parties. Saunders received a bankruptcy discharge in July 2018. Almost two years later, Saunders sued the NCAA: it was not until another football coach sued the NCAA, and made it past the summary judgment stage, that Saunders believed he had an actual shot at taking on the NCAA in court. The NCAA simultaneously filed an answer and a motion for summary judgment. In both, it asserted Saunders’s claims were barred by the doctrine of judicial estoppel because Saunders had not disclosed these claims against the NCAA in his 2018 bankruptcy proceedings. The court ruled that Saunders’s claims against the NCAA belonged to Saunders’s bankruptcy estate, so the bankruptcy trustee was substituted as the real party in interest and plaintiff in the action. Further, while judicial estoppel did not bar the trustee from pursuing these claims for the benefit of the bankruptcy estate, Saunders himself was barred by judicial estoppel from pursuing his claims against the NCAA, including the declaratory-relief claim abandoned by the bankruptcy trustee. The Mississippi Supreme Court concluded the trial court erred for two reasons: (1) the trial judge erred by estopping Saunders from pursuing this type of declaratory relief; and (2) it was error for the trial court to presume Saunders should be estopped based on his mere knowledge of the facts giving rise to his claims against the NCAA, coupled with his failure to list these claims on his bankruptcy schedule. View "Saunders v. National Collegiate Athletic Association" on Justia Law

The TLA Claimholders, who assert unsecured claims against Tam Linhas Aéreas S.A. (“TLA”), an affiliate of LATAM Airlines Group S.A. (“LATAM”), a large South American airline holding company, appealed from an order of the district court, affirming a June 18, 2022 order of the United States Bankruptcy Court confirming LATAM’s reorganization plan. The plan of reorganization provides that the Appellants’ claims will be paid in full, except for any post-petition interest. The Bankruptcy Court determined that such treatment rendered the claims unimpaired under Section 1124(1) of the Bankruptcy Code, because Section 502(b)(2) of the Code provides that “unmatured interest” may be excluded from a claim. It also determined that the affiliate, TLA, was insolvent, so that the solvent-debtor exception—an equitable doctrine permitting the payment of post-petition interest by a solvent debtor in limited circumstances—did not apply. On appeal, the TLA Claimholders contend that, unless they receive post-petition interest, their claims are “impaired” under Section 8 1124(1). They also argue that TLA is solvent and that its solvency makes the solvent debtor exception applicable. They further contended that the Bankruptcy Court’s test for assessing solvency was legally flawed.   The Second Circuit affirmed. The court held that 1) a claim is not impaired under 11 U.S.C. Section 1124(1) when it is altered by operation of the Bankruptcy Code, and (2) the Bankruptcy Court did not err in its assessment of TLA’s solvency. The district court did not abuse that discretion in determining that the Debtors’ analyses and the corrected Waterfall Analysis were more probative on the question of TLA’s solvency than the Discounted Cash Flow Analysis. View "In re LATAM Airlines Group S.A." on Justia Law

Plaintiff filed for bankruptcy under Chapter 11 of the United States Bankruptcy Code (Chapter 11) amid multiple client claims against her for fraud, embezzlement and misappropriation. After she settled the claims against her, the bankruptcy court dismissed the bankruptcy case. Plaintiff then, without seeking leave from the bankruptcy court, sued her court-approved bankruptcy counsel for malpractice in state court. The superior court sustained bankruptcy counsel’s demurrer to Plaintiff’s first amended complaint without leave to amend and entered a judgment dismissing the lawsuit with prejudice. On appeal, Plaintiff contends the superior court erred in concluding that it lacked jurisdiction under the Barton doctrine   The Second Appellate District reversed the judgment of the superior court sustaining bankruptcy counsel’s demurrer to Plaintiff’s first amended complaint without leave to amend and entered a judgment dismissing the lawsuit with prejudice. The court held that Plaintiff demonstrated a reasonable possibility that she can amend her complaint to state a cause of action, and the trial court’s dismissal with prejudice would preclude her even from later seeking leave from the bankruptcy court to refile View "Akhlaghpour v. Orantes" on Justia Law

Before his daughter (Julie) filed her chapter 7 bankruptcy petition, Wood opened bank accounts in her name with himself as custodian or joint account holder. He, his wife (Margaret), Julie, and another daughter, Jennifer, also held interests in a real estate joint venture. Wood admitted that the transferred money out of the accounts he controlled because Julie’s ex-mother-in-law and principal creditor (Gerstenecker), wanted to collect on a judgment. He removed Julie from the Joint Venture.The bankruptcy court denied Julie's motion to convert to Chapter 13. The trustee filed a complaint against Wood, Jennifer, and Margaret seeking to avoid and recover the transfers on preference and fraudulent conveyance theories. The bankruptcy court refused to approve a settlement of that proceeding, citing the paltry recovery for Gerstenecker, The defendants failed to raise a genuine issue as to any material fact regarding Julie’s ownership in the bank accounts, her share of the Joint Venture, and other elements of various claims under 11 U.S.C. 544, 547, 548, 550. The Sixth Circuit Bankruptcy Appellate Panel affirmed. The bankruptcy court properly entered summary judgment regarding the transfers of the bank accounts and the Joint Venture on the theory of actual intent to hinder, delay, and defraud Gerstenecker. View "In re: Wood" on Justia Law

PIRS Capital, LLC (“PIRS”), appeals the district court’s order that affirmed the bankruptcy court’s April 2021 order denying PIRS’s motion to set aside a January 2018 default judgment in the amount of $157,214. PIRS argues it is entitled to this extraordinary post-judgment relief because the bankruptcy trustee did not properly serve her adversary's complaint seeking recovery of preferential transfers. PIRS relies on provisions of Rule 7004(b)(3) of the Federal Rules of Bankruptcy Procedure, the bankruptcy counterpart to Rule 60(b) of the Federal Rules of Civil Procedure.   The Eighth Circuit affirmed. The court held that here, consistent with Espinosa, the bankruptcy court and the district court concluded the bankruptcy court had at least an arguable basis for jurisdiction. First, the trustee arguably complied with Rule 7004(b)(3) by serving PIRS in the manner directed in its Proof of Claim, a direction reinforced by the trustee’s diligent research of PIRS on the DOS website. Second, the trustee sent the summons and complaint by certified mail, return the receipt requested and received the receipt showing the summons and complaint was actually received by a PIRS employee at its Suite 403 address. The Supreme Court in Espinosa expressly stated that receiving actual notice “more than satisfied [PIRS’s] due process rights.”   Further, the court wrote that even if Rule 60(b)(6) relief is not precluded under Kemp, it agrees with the district court that “the circumstances that led to PIRS’s failure to defend were of its own making [and therefore] PIRS cannot establish the existence of exceptional circumstances” that warrant Rule 60(b)(6) relief. View "PIRS Capital, LLC v. Renee Williams" on Justia Law

Appellant Sanare Energy Partners, L.L.C. agreed to purchase a mineral lease and related interests from Appellee PetroQuest Energy, L.L.C. Later, PetroQuest filed bankruptcy, and Sanare filed an adversary suit in that proceeding. Sanare argued that the lack of certain third-party consents rendered PetroQuest liable for costs associated with some “Assets” whose transfer the sale envisioned. The bankruptcy court and the district court each disagreed with Sanare.   The Fifth Circuit affirmed. The court explained that the Properties are “Assets” under the PSA, including section 11.1, even if the Bureau’s withheld consent prevented record title for the Properties from transferring to Sanare. This conclusion is plain from the PSA’s text, which excludes Customary Post-Closing Consents such as the Bureau’s from the category of consent failures that alter the parties’ bargain. Consent failures that do not produce a void-ab-initio transfer also do not alter the parties’ bargain, so the Agreements, too, are Assets under the PSA’s plain text. View "Sanare Energy v. Petroquest" on Justia Law

The First Circuit dismissed certain Credit Unions' challenge to the district court's rejection of their objections to the Modified Eighth Amended Title III Joint Plan of Adjustment of the Commonwealth of Puerto Rico, the Employees Retirement System of the Government of the Commonwealth of Puerto Rico, and the Puerto Rico Public Buildings Authority (the confirmation order) and the findings of fact and conclusions of law in connection with the confirmation order (the FF/CL), holding that dismissal was warranted.The final debt restructuring plan at issue in this appeal was the product of evolving plans about how to resolve the initial petition for debt restructuring filed by Puerto Rico's Financial Oversight and Management Board on behalf of the Commonwealth and several of its agencies and instrumentalities pursuant to Title III of the Puerto Rico Oversight, Management, and Stability Act. Six Credit Unions appealed to challenge the confirmation order and FF/CL. The First Circuit dismissed the Credit Unions' challenges, holding that because the Court has now affirmed the dismissal of the Credit Union' adversary claims, the appeal from the confirmation order and the FF/CL was moot. View "Financial Oversight & Management Bd. For Puerto Rico v. Cooperativa de Ahorro y Credito" on Justia Law

The First Circuit affirmed the judgment of the district court dismissing the claims brought by six Credit Unions against the Commonwealth of Puerto Rico and several of its agencies and instrumentalities, holding that the district court properly dismissed the claims.In this adversary proceeding brought as part of broader proceedings underway to restructure the Commonwealth's debts under Title III of the Puerto Rico Oversight, Management, and Stability Act, the Credit Unions argued that Defendants induced and forced them to invest in worthless government-issued securities and that Defendants failed to disclosure their knowledge that these would be losing investments. The district court dismissed the claims. The First Circuit affirmed, holding that the Credit Unions' claims were properly dismissed. View "Cooperativa de Ahorro y Credito Abraham Rosa v. Financial Oversight & Management Bd. for Puerto Rico" on Justia Law

The First Circuit affirmed the judgment of the district court affirming the ruling of the bankruptcy court that the tax liabilities relevant to this appeal had not been discharged, holding that, under the subjective version of the so-called "Beard test," Appellant never filed "returns" for the tax years at issue.The IRS assessed tax believed to be due from Appellant, including penalties and interest, for tax year 1997 in the amount of $30,568 and tax year 2000 in the amount of $46,344. Appellant did not pay the overdue taxes and later filed a chapter 13 petition for bankruptcy. In 2017, Appellant received a discharge. At issue was whether Appellant's discharge covered his debts to the IRS. The bankruptcy court concluded that the tax liabilities at issue had not been discharged. The district court affirmed. The First Circuit affirmed, holding that, applying the Beard test that Appellant urged the bankruptcy court to adopt, Appellant's filings did not represent "an honest and reasonable attempt to satisfy the requirements of the Federal income tax law." View "Kriss v. United States" on Justia Law