Justia Bankruptcy Opinion Summaries

Chenault-Vaughan Family Partnership ("Chenault"), a royalty interest holder in a Texas mineral estate, sued Centennial Resources Operating, LLC ("Centennial"), the site operator, for wrongly withholding royalties. The Bankruptcy Court awarded summary judgment to Centennial. Chenault appealed to the District Court, where the parties consented to proceed before a Magistrate Judge. The Magistrate Judge affirmed the Bankruptcy Court’s judgment, and Chenault appealed to the United States Court of Appeals for the Third Circuit.The Third Circuit first addressed whether the Magistrate Judge had jurisdiction to enter final judgment in the bankruptcy appeal. The court concluded that, with the consent of the parties and a referral by the district court, a magistrate judge may enter final judgment in a bankruptcy appeal. This conclusion was supported by the broad consent authority granted to magistrate judges under 28 U.S.C. § 636(c), the repeal of the statutory provision that previously prohibited such referrals, and the supervisory authority retained by Article III judges.On the merits, the Third Circuit reviewed the Bankruptcy Court’s summary judgment on two claims: trespass to try title and royalties under the Texas Natural Resources Code ("TNRC"). The court affirmed the summary judgment for Centennial on the trespass-to-try-title claim, finding that Centennial did not unlawfully enter the land and dispossess Chenault, as Luxe, a cotenant, had the right to extract minerals and permit Centennial to operate.However, the court vacated the summary judgment on the TNRC claim. The court found that there were genuine disputes of material fact regarding whether Centennial was obligated to pay Unit B royalties to Chenault, particularly concerning the Division Order and Centennial’s knowledge of MDC’s non-signature on the Unit B JOA. The case was remanded to the Magistrate Judge with instructions to remand to the Bankruptcy Court for further proceedings on the TNRC claim. View "In re: MTE Holdings LLC" on Justia Law

Western Robidoux, Inc. (WRI) filed for bankruptcy and initiated adversary proceedings against Boehringer Ingelheim Animal Health USA, Inc. (BIVI) and CEVA Animal Health, LLC (CEVA). BIVI and CEVA counterclaimed, seeking $1.9 million in damages. The parties mediated and reached a settlement, which was objected to only by TooBaRoo, LLC, a creditor. The bankruptcy court overruled TooBaRoo’s objections and approved the settlement. The district court affirmed this decision, and TooBaRoo appealed.The United States Bankruptcy Court for the Western District of Missouri initially reviewed the case. The court found that WRI’s indemnity payments to BIVI and CEVA were made to maintain business relationships, which generated significant revenue for WRI. The court concluded that WRI received reasonably equivalent value for these payments, making it unlikely that the Trustee would succeed in proving fraudulent transfers. The court also noted that key witnesses for the estate were unavailable, further diminishing the likelihood of success. The bankruptcy court approved the settlement, finding it fair and in the best interest of the estate.The United States District Court for the Western District of Missouri affirmed the bankruptcy court’s decision. The district court agreed that the settlement was reasonable and that the Trustee had met the burden of proving it was in the best interest of the estate. The court found no abuse of discretion in the bankruptcy court’s approval of the settlement.The United States Court of Appeals for the Eighth Circuit reviewed the case and affirmed the lower courts' decisions. The court held that the bankruptcy court did not abuse its discretion in approving the settlement, considering the likelihood of success in litigation, the complexity and cost of continued litigation, and the interests of all creditors. The settlement was deemed fair, equitable, and in the best interest of the estate. View "TooBaRoo, LLC v. Western Robidoux, Inc." on Justia Law

Barbara McNally sued Debbie-Ann Bromfield and her husband Everald Thompson in the Superior Court for multiple claims related to a property dispute. After Thompson filed for bankruptcy, McNally and Thompson reached a settlement agreement, which included dismissing McNally's pending lawsuit. McNally filed a motion for voluntary dismissal with prejudice under Super. Ct. Civ. R. 41(a)(2), which Bromfield opposed, seeking a decision on the merits through her own summary judgment motion. The trial court granted McNally’s motion to dismiss with prejudice and denied Bromfield’s summary judgment motion as moot, reasoning that Bromfield would not suffer any legal detriment from the dismissal.Bromfield appealed, arguing that the trial court abused its discretion in granting McNally’s motion for voluntary dismissal, claiming it caused her legal prejudice. The District of Columbia Court of Appeals reviewed the case. The court noted that Bromfield was not "aggrieved" by the dismissal with prejudice of the claims against her, as she had effectively prevailed in all relevant respects. The court emphasized that it has an independent obligation to ensure its jurisdiction and that Bromfield did not suffer an infringement or denial of legal rights.The court held that Bromfield’s desire for vindication did not constitute a cognizable legal injury and that her potential future claims, such as a malicious prosecution suit, did not provide grounds for appeal. The court concluded that Bromfield had secured an unmitigated victory in the underlying proceedings and dismissed her appeal for lack of jurisdiction. View "Bromfield-Thompson v. McNally" on Justia Law

The appellants, Robin and Louie Joseph Aquilino, filed for Chapter 7 bankruptcy in April 2020 and retained the law firm Spector Gadon Rosen & Vinci P.C. (Spector Gadon) as their counsel. They agreed to pay a flat fee of $3,500 and a $335 filing fee, which Spector Gadon disclosed to the Bankruptcy Court. However, due to the complexity of the case, Spector Gadon billed the Aquilinos for additional post-petition services, resulting in a fee agreement of $113,000, which was not disclosed to the Bankruptcy Court as required by 11 U.S.C. § 329(a) and Bankruptcy Rule 2016(b).The Bankruptcy Court for the District of New Jersey found that Spector Gadon violated the disclosure requirements and sanctioned the firm by ordering the disgorgement of collected fees and cancellation of the remaining fee agreement. Spector Gadon appealed, and the United States District Court for the District of New Jersey reversed the Bankruptcy Court's decision, concluding that Spector Gadon was entitled to a jury trial under the Seventh Amendment.The United States Court of Appeals for the Third Circuit reviewed the case and determined that the Bankruptcy Court had "core" jurisdiction over the fee disclosure issue under 28 U.S.C. § 157(b)(1). The Third Circuit held that the Seventh Amendment did not entitle Spector Gadon to a jury trial in the § 329(a) proceeding because the sanctions imposed were equitable in nature, designed to restore the status quo, and did not involve legal claims. The Third Circuit also found that the Bankruptcy Court did not abuse its discretion in imposing sanctions, as it considered all relevant factors, including the Debtors' misconduct.The Third Circuit reversed the District Court's judgment and reinstated the Bankruptcy Court's sanctions order. View "In re Aquilino" on Justia Law

A bankruptcy trustee objected to the treatment of student-loan debt under two proposed Chapter 13 plans filed by Victoria Florita Durand-Day and Lavonda Latrece Evans. Durand-Day listed $113,560.65 in nonpriority unsecured claims, including two student loans totaling $54,195.00, but her plan only accounted for $71,580.65 in scheduled unsecured claims. Evans listed $106,402.00 in nonpriority unsecured claims, including twelve student loans totaling $73,927.00, but her plan only accounted for $32,475.00 in scheduled unsecured claims. Both debtors proposed to pay their student loans directly to the lenders rather than through the Chapter 13 trustee.The bankruptcy court overruled the trustee's objections and confirmed the plans, concluding that the plans satisfied 11 U.S.C. § 1325(b)(1)(A) because the student-loan obligations would be paid in full according to their contractual terms under § 1322(b)(5). The trustee appealed, and the district court affirmed the bankruptcy court's decision, holding that the payments toward the student-loan obligations were still "under the [Plans]" per § 1325(b)(1)(A) even if they continued beyond the end of the plans.The United States Court of Appeals for the Fifth Circuit reviewed the case and determined that the plans did not satisfy 11 U.S.C. § 1325(b)(1). The court held that "under the plan" means that all allowed, unsecured claims, including student-loan obligations, must be paid in full within the life of the Chapter 13 plan. The court vacated the confirmation of the plans and remanded the case for further proceedings, allowing the debtors to file new plans consistent with this decision. View "Bassel v. Durand-Day" on Justia Law

Petitioners Scott Black, George Smith, and Jerome Nadal were directors of Globe Photos, Inc., a company that owned a valuable portfolio of celebrity and musician images. In 2020, Globe filed for Chapter 7 bankruptcy, leading to the liquidation of its assets, which left nothing for unsecured creditors or shareholders. In 2023, shareholders Sean Goodchild, Mike Meader, David Morton, and Klaus Moeller sued the petitioners in Nevada state court, alleging that they breached their fiduciary duties by mismanaging Globe's assets and approving a "sham bankruptcy."The district court denied the petitioners' motion to dismiss, concluding that the shareholders had pleaded a direct cause of action rather than a derivative one. The court found that the shareholders had standing to sue and that the complaint sufficiently stated a claim for breach of fiduciary duty.The Supreme Court of Nevada reviewed the case and determined that the shareholders' claim was derivative, not direct. Under Delaware law, which governs because Globe was incorporated in Delaware, a claim is derivative if the corporation suffered the harm and would benefit from any recovery. The court found that the alleged harm was to Globe, as its assets were wasted and sold cheaply, and any recovery would benefit Globe, not the shareholders directly. Consequently, the claim belonged to Globe's bankruptcy estate, and only the bankruptcy trustee had standing to assert it.The Supreme Court of Nevada granted the petition for a writ of prohibition, instructing the district court to vacate its order denying the motion to dismiss and to enter an order granting the motion to dismiss the shareholders' claim against the petitioners. View "BLACK VS. DIST. CT." on Justia Law

Mesabi Metallics Company LLC (Mesabi) filed for Chapter 11 bankruptcy in 2016 and emerged successfully in 2017. During the bankruptcy proceedings, Mesabi initiated an adversary proceeding against Cleveland-Cliffs, Inc. (Cliffs), alleging tortious interference, antitrust violations, and civil conspiracy. Mesabi claimed Cliffs engaged in anti-competitive conduct to impede Mesabi's business operations. To facilitate discovery, the parties entered a stipulated protective order allowing documents to be designated as confidential. Mesabi later moved to unseal certain documents filed under seal to support a petition in the Minnesota Court of Appeals.The United States Bankruptcy Court for the District of Delaware, applying the common law right of access, held that Cliffs had not met the burden to keep the documents sealed. The court relied on the Third Circuit's precedent in In re Avandia, which requires a showing that disclosure would cause a clearly defined and serious injury. Recognizing potential ambiguity in the law, the Bankruptcy Court certified the question for direct appeal to the United States Court of Appeals for the Third Circuit.The Third Circuit clarified that the sealing of documents in bankruptcy cases is governed by 11 U.S.C. § 107, not the common law right of access. Section 107 imposes a distinct burden, requiring protection of trade secrets or confidential commercial information without the need for balancing public and private interests. The court vacated the Bankruptcy Court's decision and remanded for application of the correct standard under § 107. Additionally, the Third Circuit held that the Bankruptcy Court lacked jurisdiction to grant a third party's motion to intervene and unseal documents while the appeal was pending, vacating those orders as well. View "ESML Holdings Inc v. Mesabi Metallics Compay LLC," on Justia Law

John Koontz received two letters from SN Servicing Corporation (SNSC) regarding his residential mortgage loan. Koontz had previously filed for Chapter 7 bankruptcy, and his debts were discharged. The letters from SNSC stated that they were attempting to collect a debt and mentioned late fees assessed to Koontz's loan account. Koontz filed a lawsuit claiming that SNSC's actions violated the Fair Debt Collection Practices Act (FDCPA) and a similar West Virginia law.The United States District Court for the Northern District of West Virginia dismissed Koontz's complaint. The court concluded that Koontz was no longer a "consumer" with a "debt" under the FDCPA due to his Chapter 7 bankruptcy discharge. The court also found that the letters did not constitute attempts to collect a consumer debt and that Koontz failed to adequately plead a "false, deceptive, or misleading representation" under the FDCPA. Consequently, the court dismissed both the federal and state claims.The United States Court of Appeals for the Fourth Circuit reviewed the case and reversed the district court's decision in part. The appellate court held that Koontz remained a "consumer" with a "debt" under the FDCPA despite his Chapter 7 discharge, as the mortgage lien remained an enforceable obligation. The court also determined that the letters from SNSC constituted attempts to collect a debt. However, the court agreed with the district court that Koontz failed to state a claim under 15 U.S.C. § 1692e but found that he adequately stated a claim under 15 U.S.C. § 1692f. The appellate court reversed the dismissal of the state-law claim for the same reasons. The case was remanded for further proceedings. View "Koontz v. SN Servicing Corporation" on Justia Law

Fatima Shaw-McDonald filed a medical malpractice lawsuit against Eye Consultants of Northern Virginia, P.C. after suffering vision loss following cataract surgery. While the lawsuit was pending, she filed for Chapter 7 bankruptcy but did not initially disclose the lawsuit in her bankruptcy filings. Eye Consultants moved to dismiss the lawsuit, arguing that Shaw-McDonald no longer had standing to pursue it because her interest in the lawsuit had transferred to the bankruptcy trustee. Shaw-McDonald later amended her bankruptcy filings to include the lawsuit and obtained a discharge from the bankruptcy court.The circuit court dismissed the medical malpractice case, concluding that Shaw-McDonald lost standing when she filed for bankruptcy. The court relied on the precedent set by Kocher v. Campbell, which held that a plaintiff loses standing when a cause of action becomes part of the bankruptcy estate. Shaw-McDonald appealed the decision.The Court of Appeals of Virginia reversed the circuit court's decision, holding that Shaw-McDonald had standing to maintain her medical malpractice action. The court reasoned that once the bankruptcy trustee abandoned the claim, it reverted to Shaw-McDonald as if no bankruptcy petition had been filed.The Supreme Court of Virginia reviewed the case and affirmed the Court of Appeals' decision. The court held that Shaw-McDonald did not lose standing permanently when she filed for bankruptcy; rather, her standing was temporarily suspended. The court concluded that the appropriate remedy was to hold the medical malpractice case in abeyance until the bankruptcy proceedings were resolved, rather than dismissing it. The case was remanded to the Court of Appeals for further proceedings consistent with this opinion. View "Eye Consultants of Northern Virginia P.C. v. Shaw-McDonald" on Justia Law

Mary E. Buscone, a Chapter 13 debtor, appealed an order rejecting her objection to a proof of claim for a Massachusetts state-court judgment owed to Ann Tracy Botelho. In a previous Chapter 7 bankruptcy, Botelho sought a determination that her judgment against Buscone was excepted from discharge under 11 U.S.C. § 523(a)(2)(A) and (a)(4). Due to discovery abuse by Buscone and her counsel, the bankruptcy court entered a default judgment for Botelho. In her current Chapter 13 bankruptcy, Buscone objected to Botelho's proof of claim on the same grounds as before and argued that the interest rate and accrual date prescribed by Massachusetts state law should not apply to the judgment.The bankruptcy court overruled Buscone's objection, and the district court affirmed. Buscone then appealed to the United States Court of Appeals for the First Circuit. The appellate court reviewed the bankruptcy court's findings of fact for clear error and its conclusions of law de novo. The court also reviewed the application of issue preclusion and determinations of post-judgment interest rates without deference.The First Circuit rejected Buscone's arguments. It held that she was precluded from raising the same affirmative defense to Botelho's proof of claim that she asserted in her motion to dismiss Botelho's adversary proceeding in the Chapter 7 bankruptcy. The court applied an exception to the actual-litigation requirement for issue preclusion, noting that the default judgment in the Chapter 7 proceeding was entered as a sanction for Buscone's misconduct. The court also held that the post-judgment interest on the state-court judgment debt should accrue at the rate set by Massachusetts law from the date of the state-court judgment's entry. The appellate court affirmed the lower court's decision. View "Buscone v. Botelho" on Justia Law