Justia Bankruptcy Opinion Summaries

Appellee’s confirmed bankruptcy plan purported to modify the rights of Appellant Creditor Mortgage Corporation of the South’s (“MCS”) mortgage on Appellee’s residence. In fact, her plan purported to eradicate all remaining outstanding payments on her mortgage, beyond MCS’s claims for past-due arrearages. The bankruptcy court had confirmed Appellee’s Plan without objection and that 11 U.S.C. Section 1327 (the “finality” provision) renders confirmed plans final, the bankruptcy court granted Appellee’s motion, and the district court affirmed. On appeal, at issue was which provision wins— antimodification or finality—when the two clash in the scenario this case presents.   The Eleventh Circuit reversed and remanded the district court’s ruling holding that release of MCS’s lien before its loan had been repaid in full violates Section 1322(b)(2)’s antimodification clause. The court held that under Supreme Court and Eleventh Circuit precedent, it read the antimodification provision as an ironclad “do not touch” instruction for the rights of holders of homestead mortgages. So a bankruptcy plan cannot modify the rights of a mortgage lender whose claim is secured by the debtor’s principal residence by providing for release of the homestead-mortgagee’s lien before the mortgagee has recovered the full amount it is owed. View "Mortgage Corporation of the South v. Judith Lacy Bozeman" on Justia Law

Bankruptcy trustees can recover some transfers made to outside parties during the 90 days before the debtor files a petition, 11 U.S.C. 547(b)(4)(A). Warsco, the trustee in the Harris bankruptcy, discovered that about $3,700 had been paid to Creditmax during those 90 days under a garnishment order, which was issued by an Indiana state court more than 90 days before Harris filed his bankruptcy petition. Warsco began an adversary proceeding to recover the $3,700Creditmax argued that the definition of a “transfer” under section 547 depends on state law and that under Indiana law a “transfer” occurs when a garnishment order is entered, not when money is paid. The bankruptcy court denied the Trustee’s application. The Seventh Circuit overruled and remanded the decision, citing a 1992 Supreme Court holding that federal rather than state law defines the meaning of “transfer.” The “transfer” occurs when money changes hands. View "Warsco v. Creditmax Collection Agency, Inc." on Justia Law

Electric Reliability Council of Texas, Inc. (“ERCOT”) determines market-clearing prices unless otherwise directed by the Public Utility Commission of Texas (“PUCT”). ERCOT is the sole buyer and seller of all energy in Texas. According to the operative complaint, during winter storm Uri ERCOT and the PUCT allegedly “intervened in the market for wholesale electricity by setting prices [that were] orders of magnitude higher than what market forces would ordinarily produce.”   Just Energy, a retail energy provider, purports that after the storm, ERCOT “floored” it with invoices totaling approximately $335 million. Just Energy commenced bankruptcy proceedings in Canada and filed this Chapter 15 case in the United States Bankruptcy Court for the Southern District of Texas, Houston Division. Just Energy challenges its invoice obligations. At the hearing on ERCOT’s motion to dismiss, the bankruptcy court stated that it would strike various language like, “subject to reduction only after a finding by the Court concerning a legally appropriate energy price per megawatt hour as proven by expert testimony, if appropriate, but in no event greater than the price per megawatt hour in effect after market forces took effect.” By striking this and similar language sprinkled throughout the complaint, the court concluded that “this change solves the abstention problem.”    The Fifth Circuit disagreed and vacated the bankruptcy court’s order and remanded with instructions to determine the appropriate trajectory of this case after abstention. The court explained that abstention under Burford6\ is proper because: (1) the doctrine applies in the bankruptcy context; and (2) four of the five Burford factors counsel in favor of abstention. View "Electric Reliability v. Just Energy" on Justia Law

Just before the Chapter 11 reorganization plans of Caribevision Holdings, Inc. and Caribevision TV Network, LLC was set to be confirmed, the debtors filed an emergency motion to modify the plans under 11 U.S.C. Section 1127(a). The initial plans called for equity in the reorganized companies to be split between four shareholders: R.D.B., Pegaso Television Corp., E.B., and Vasallo TV Group. The modification, after being approved by the bankruptcy court, stripped the first three of their equity and allocated full ownership to the fourth—a company controlled by the debtors’ Chief Executive Officer. the three ousted shareholders, who collectively call themselves the Pegaso Equity Holders, now challenge the bankruptcy court’s order granting the debtors’ emergency motion to modify the reorganization plans. They contend that they were entitled to a revised disclosure statement and a second opportunity to vote on the plans under Federal Rule of Bankruptcy Procedure 3019(a)—a procedural protection the bankruptcy court did not provide them.   The Eleventh Circuit reversed the order granting the debtor’s emergency motion to modify the reorganization plans, reversed in part the bankruptcy court’s order confirming the reorganization plans to the extent that it adopts the modification, and remanded to the bankruptcy court to fashion an equitable remedy. The court held that the bankruptcy court erred in granting the debtor’s modification without first requiring that the debtor provide the Pegaso Equity Holders with a revised disclosure statement and a second opportunity to cast a ballot. View "Emilio Braun, et al. v. America-CV Station Group, Inc., et al." on Justia Law

Plaintiff alleged that private educational loan was discharged in bankruptcy. He sued Experian under the Fair Credit Reporting Act (FCRA) for reporting the loan was due and owing. The district court concluded the loan was not discharged in bankruptcy and later declined to set aside summary judgment when Plaintiff proffered newly discovered evidence.   The Second Circuit held that the kind of legal inaccuracy alleged by Plaintiff is not cognizable as an “inaccuracy” under the FCRA, thus the court affirmed, on an alternative ground, the district court’s order granting summary judgment in favor of Experian. Accordingly, the court dismissed as moot Plaintiff’s appeal of the denial of his motion for an indicative judgment. The court explained that Plaintiff has failed to allege an inaccuracy within the plain meaning of section 1681e(b) of the FCRA. The unresolved legal question regarding the application of section 523(a)(8)(A)(i) to Plaintiff’s educational loan renders his claim non-cognizable under the FCRA. The court noted that the holding does not mean that credit reporting agencies are never required by the FCRA to accurately report information derived from the readily verifiable and straightforward application of law to facts. However, the inaccuracy that Plaintiff alleged does not meet this statutory test because it evades objective verification. There is no bankruptcy order explicitly discharging this debt. View "Mader v. Experian" on Justia Law

Ryan sought worker’s compensation and entered into a settlement with his employer, calling for "$150,000 to Rodney Ryan, minus attorney fees and costs listed below; $400,000 to the Trust Account of Fortune & McGillis for disbursement to medical providers and lienholders, it being understood that from any balance remaining Mr. Ryan shall receive 80% and Fortune & McGillis shall receive 20%.” Fortune, Ryan’s law firm, received $30,000 in fees. The employer agreed to fund a Medicare Set Aside for Ryan’s future medical expenses. A state administrative law judge approved the Settlement.Weeks later, before any of the $400,000 was distributed to his doctors, Ryan filed for bankruptcy and attempted to exempt the $400,000 from the estate, citing Wisconsin Statutes 102.27(1), which says no “claim for [worker’s] compensation, or compensation awarded, or paid, [may] be taken for the debts of the party entitled thereto.” Ryan owed more than $800,000 in unpaid medical bills. His medical creditors cited Section 102.26(3)(b)(2), “[a]t the request of the claimant[,] medical expense[s], witness fees[,] and other charges associated with the claim may be ordered paid out of the amount awarded.” The district court and Sixth Circuit affirmed the bankruptcy court holding that Ryan could not exempt the $400,000. The Order created an express trust in favor of the doctors with Fortune as trustee. There were also "grounds to impose a constructive trust because allowing Ryan to keep the $400,000 would have amounted to unjust enrichment.” View "Ryan v Branko Prpa MD LLC" on Justia Law

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