Justia Bankruptcy Opinion Summaries

A Debtor is appealing a bankruptcy court order dated June 30, 2022 (the “Order”) which disposes of a multitude of matters that were before the court. At the core of this appeal are the Debtor’s repeated motions to reopen his case. A bankruptcy court's decision whether to reopen a bankruptcy case is reviewed for an abuse of discretion.    The Eighth Circuit affirmed. The court explained that after reviewing the Order and the underlying record, it saw no need to address every one of the matters addressed by the bankruptcy court. The court wrote that Debtor states in his Appellant Brief that the bankruptcy court “blanket” denied all 27 of his motions, the Order itself belies that accusation – the court based its ruling on a thorough legal analysis of the individual pleadings and why denial of each was appropriate. A few of the matters involve letters or notices on which the Debtor is not seeking relief. With regard to many of the others, the Debtor mischaracterizes the facts or the law. Further, the court explained that the Bankruptcy Court’s analysis of each of the matters it considered in the Order was thorough and legally sound. View "Bryan Reichel v. Mary Jo A. Jensen-Carter" on Justia Law

The Court of Appeals held that, for purposes of New York's Uniform Commercial Code (UCC) 9-406, an "assignee" includes the holder of a presently exercisable security interest in an assignor's receivables.New Style Contractors, Inc. engaged Checkmate Communications LLC as a subcontractor. Pursuant to a promissory note and security agreement, Checkmate could borrow up to $3 million from Worthy Lending LLC. Checkmate granted Worthy a security interest in its assets, and Worthy filed a UCC-1 financing statement against Checkmate perfecting its secured position regarding Checkmate's assets. Worthy then sent New Style a notice of its security interest and collateral assignment in the New Style accounts. When Checkmate defaulted on the note and filed for bankruptcy. Worthy brought this action against New Style pursuant to UCC 9-607, alleging that Worthy was entitled to recover all amounts New Style owed to Checkmate after New Style's receipt of the notice of assignment. Supreme Court dismissed the complaint. The Appellate Division affirmed, concluding that Worthy did not have an independent cause of action against New Style pursuant to UCC 9-607 because the statute does not authorized a secured creditor as distinct from an assigned, to recover from a nonparty debtor like New Style. The Court of Appeals reversed, holding that the language of the statute required reversal. View "Worthy Lending LLC v. New Style Contractors, Inc." on Justia Law

The IRS held a secured claim on the debtor’s real property arising from a tax penalty lien. The debtor claimed a $150,000 homestead exemption in the property under Arizona law. The trustee sought to avoid the tax penalty lien on the debtor’s exempt property and preserve it for the benefit of the estate pursuant to 11 U.S.C. Sections 724(a) and 551.   The Ninth Circuit reversed the district court’s decision affirming the bankruptcy court’s summary judgment in favor of a Chapter 7 trustee who brought an adversary proceeding seeking to avoid an Internal Revenue Service tax lien on property subject to a homestead exemption and to preserve the value of the lien for the benefit of the bankruptcy estate.   The panel held that Section 724(a) concerns the trustee’s avoidance of qualifying liens attached to the property of the estate at the time of distribution. When a debtor exempts a property interest under 11 U.S.C. Section 522, the exemption withdraws that property interest from the bankruptcy estate and, thus, from the reach of the trustee for distribution to creditors. Accordingly, because exempt property is not “property of the estate” which may be “distributed,” a trustee may not avoid a lien under Section 724(a) attached to exempt property which is no longer part of the estate. The panel held that it follows that a trustee is not permitted to preserve the tax lien for the benefit of the estate under Section 551, which provides for automatic preservation of certain avoided liens, including liens avoided under Section 724(a). View "IN RE: SANDRA TILLMAN, ET AL V. LAWRENCE WARFIELD, ET AL" on Justia Law

Pocket Plus, LLC, sued Pike Brands, LLC (“Running Buddy”) for trade-dress infringement of Pocket Plus’s portable pouch. The district court granted summary judgment to Running Buddy and awarded it a portion of its requested attorney fees. Pocket Plus appealed the summary judgment, and both parties appeal the attorney fees award.   The Eighth Circuit affirmed. The court wrote there is no genuine dispute that Pocket Plus’s trade dress is functional and thus not protected by trademark law. To grant trade-dress protection for Pocket Plus would be to hand it a monopoly over the “best” portable-pouch design. Trademark law precludes that. Further, Running Buddy argued that the district court abused its discretion in awarding only a portion of the requested fees. The court found no abuse of discretion in finding that this was an exceptional case. It considered the appropriate law, reviewed the litigation history, held a hearing, and explained its decision. View "Pocket Plus, LLC v. Pike Brands, LLC" on Justia Law

=This appeal arises from Appellee’s efforts to avoid, in bankruptcy, a judgment lien recorded in 2014 against his Carlsbad, California home. The Ninth Circuit affirmed the bankruptcy court’s judgment in favor of Appellee and against the Chapter 7 Trustee. The panel was called upon to decide how the Bankruptcy Code’s procedure for avoiding judgment liens that “impair[] an exemption to which the debtor would have been entitled,” 11 U.S.C. Section  522(f)(1), interacts with California’s homestead exemption, which allows a debtor to claim a limited exemption in bankruptcy in connection with his primary residence.   The issue gained complexity here because the amount of California’s homestead exemption increased significantly between the time the lien on Appellee’s home was recorded in 2014 and the time he filed for bankruptcy in 2021. Under California law, the exemption Appellee could claim would be fixed at the 2014 amount. Appellee argued that the Bankruptcy Code requires looking to the exemption he could have claimed, but for the lien, at the time he filed his bankruptcy petition. The panel held that in deciding whether a judgment lien impairs a debtor’s California homestead exemption, the Bankruptcy Code requires courts to determine the amount of the exemption to which the debtor would have been entitled in the absence of the lien at issue. Thus, the bankruptcy court correctly applied the $600,000 homestead exemption available in 2021, which, consequently, allowed Appellee to avoid the entirety of the judgment lien placed on his home. View "CHRISTOPHER BARCLAY V. DEJAN BOSKOSKI" on Justia Law

In 2017, Congress passed an amendment to the statute setting forth quarterly fees in bankruptcy cases, 28 U.S.C. Sec. 1930. The 2017 Amendment increased quarterly fees in judicial districts in which the United States Trustee Program oversees bankruptcy administration.Debtors challenged the Bankruptcy Court's ruling rejecting their constitutional challenge to quarterly fees imposed during the pendency of their bankruptcy proceeding. The Bankruptcy Court rejected Debtors’ argument that the 2017 Amendment violated the uniformity requirement of the Bankruptcy Clause of the United States Constitution.The Second Circuit reversed, finding the 2017 Amendment is a bankruptcy law subject to the uniformity requirement of the Bankruptcy Clause. The court also held that, under the version of Sec. 1930 in effect prior to the 2020 Act, the 2017 Amendment violated the uniformity requirement. View "In re Clinton Nurseries" on Justia Law

In this installment of a series of cases before the Court regarding the Puerto Rico Oversight, Management, and Economic Stability Act, 48 U.S.C. 2101-2241, the First Circuit dismissed the appeal, holding that this Court lacked jurisdiction over the appeal.After the court overseeing Title III proceedings confirmed a plan of adjustment for the Commonwealth's debts, Appellants challenged the Title III court's findings of fact and conclusions of law, making arguments focused on obtaining retirement benefits that Appellants believed they were entitled to. The First Circuit dismissed the appeal, holding that the arguments offered by Appellant to support the First Circuit's jurisdiction in this appeal were unavailing. View "Financial Oversight & Management Bd. v. Cooperativa de Ahorro y Credito" on Justia Law

Appellant Smart Capital Investments1 leased several floors of a commercial building in downtown Los Angeles to Appellee Hawkeye Entertainment, LLC. After a rocky relationship developed, Smart Capital took steps to terminate the lease alleging that Hawkeye had committed numerous breaches. Hawkeye failed to resolve Smart Capital’s concerns and filed for Chapter 11 bankruptcy, seeking to assume the lease under 11 U.S.C. Section 365 to prevent eviction. The bankruptcy court allowed Hawkeye to assume the lease over Smart Capital’s objection, and the district court affirmed. Smart Capital now appeals, arguing that the bankruptcy court erred by not requiring Hawkeye to provide “adequate assurances of future performance” of the lease, as required under 11 U.S.C. Section 365.   The Ninth Circuit affirmed the district court’s order affirming the bankruptcy court’s order allowing Hawkeye Entertainment, LLC, a Chapter 11 debtor, to assume an unexpired commercial lease under 11 U.S.C. Section 365. The panel held that Section 365(b)(1) applies where a default has occurred, regardless of whether that default has been resolved or is ongoing. The panel also held that “default” was not limited to material defaults that would trigger forfeiture of the lease under California landlord-tenant law. The panel concluded, therefore, that Section 365(b)(1) was triggered in this case. The panel further held, however, that the bankruptcy court’s failure to analyze Section 365(b)(1)’s curative requirements was harmless error. View "IN RE: SMART CAPITAL INVS. I, LLC, ET AL V. HAWKEYE ENTERTAINMENT, LLC, ET AL" on Justia Law

Stanley filed for Chapter 13 bankruptcy, indicating there was no money owed to him, including “Claims against third parties, whether or not you have filed a lawsuit or made a demand for payment.” The question provided examples of possible claims: “Accidents, employment disputes, insurance claims, or rights to sue.” Stanley’s bankruptcy plan provided that there would be “no future modification of dividend to unsecured creditors below 100%.” Before and after filing for bankruptcy, Stanley had problems with his employment at FCA. Stanley claims FCA violated the Family and Medical Leave Act (FMLA), resulting in the termination of his employment one week after his bankruptcy filing. The Union filed grievances on Stanley’s behalf—one before he filed for bankruptcy and one after. Both were withdrawn.Stanley filed an FMLA interference lawsuit several months after the approval of his bankruptcy case. In response to FCA’s settlement letter, which raised the issue of disclosure in bankruptcy, Stanley updated his bankruptcy asset disclosure to include: Employment terminated post-petition in violation of FMLA with “unknown” value. The Sixth Circuit affirmed summary judgment for FCA; judicial estoppel barred Stanley’s claim. Stanley had motives for concealing his employment suit although his bankruptcy plan did not provide for a discharge of his debts. Stanley’s creditors did not have a complete, accurate picture of Stanley’s assets when considering whether to object to his plan, 11 U.S.C. 1324. View "Stanley v. FCA US, LLC" on Justia Law

Ultra Petroleum Corp. (HoldCo) and its affiliates, including its subsidiary Ultra Resources, Inc. (OpCo), entered Chapter 11 bankruptcy deep in the hole. But during the bankruptcy process, these debtors (collectively, Ultra) hit it big—as natural gas prices soared, they became supremely solvent. Ultra proposed a $2.5 billion bankruptcy plan. It provided that OpCo’s creditors would be paid—in full and in cash—their outstanding principal and all interest that had accrued before bankruptcy, plus interest on both at the Federal Judgment Rate for the duration of the bankruptcy proceeding. Two groups of creditors complain that the plan falls some $387 million short.   The issue on appeal is whether the Bankruptcy Code precludes the creditors’ claims for the Make-Whole Amount; second, even if it does, whether the traditional solvent-debtor exception applies; and third, whether post-judgment interest is to be calculated at the contractual or Federal Judgment rate.   The Fifth Circuit affirmed the bankruptcy court’s judgment. The court held the Bankruptcy Code disallows the Make-Whole Amount as the economic equivalent of unmatured interest. But because Congress has not clearly abrogated the solvent-debtor exception, the court held that it applies to this case. And the solvent-debtor exception demands that Ultra pay what it promised now that it is financially capable. The court further held, given Ultra’s solvency, post-petition interest is to be calculated according to the agreed-upon contractual rate. View "Ultra Petro Corp v. Ad Hoc Com" on Justia Law