Justia Bankruptcy Opinion Summaries

Outstanding debt for Chicago traffic tickets surpassed $1.8 billion last year. Under a 2016 Chicago ordinance, when a driver incurs the needed number of outstanding tickets and final liability determinations, Chicago is authorized to impound her vehicle and to attach a possessory lien. Many drivers cannot afford to pay their outstanding tickets and fees, let alone the liens imposed on their cars through this process. Mance incurred several unpaid parking tickets; her car was impounded and subject to a possessory lien of $12,245, more than four times her car’s value. With a monthly income of $197 in food stamps, Mance filed for Chapter 7 bankruptcy and sought to avoid the lien under 11 U.S.C 522(f). When a vehicle owner files for Chapter 7 bankruptcy, she can avoid a lien under 522(f) if the lien qualifies as judicial and its value exceeds the value of her exempt property (the car). If the lien is statutory, it is not avoidable under the same provision.The bankruptcy and district courts and the Seventh Circuit concluded that the lien was judicial and avoidable. The lien was tied inextricably to the prior adjudications of Mance’s parking and other infractions, so it did not arise solely by statute, as the Bankruptcy Code requires for a statutory lien. View "City of Chicago v. Mance" on Justia Law

Plaintiffs alleged that the energy companies’ extraction of fossil fuels and other activities were a substantial factor in causing global warming and a rise in the sea level, bringing causes of action for public and private nuisance, strict liability, strict liability, negligence, negligent failure to warn, and trespass.The court held that the district court lacked federal question jurisdiction under Sec. 1331 because, at the time of removal, the complaints asserted only state-law tort claims against the energy companies. The court held that Plaintiffs’ global-warming claims did not fall within the Grable exception to the well-pleaded complaint rule. In addition, Plaintiffs’ state law claims did not fall under the “artful-pleading” doctrine, another exception to the well-pleaded complaint rule, because they were not completely preempted by the Clean Air Act.Further, the court found Plaintiffs’ claims were not removable under the Outer Continental Shelf Lands Act. The court also held that the district court did not have subject matter jurisdiction under the federal-officer removal statute, Sec. 1442(a)(1), because the energy companies were not “acting under” a federal officer’s directions. The court then rejected the energy companies’ argument that the district court had removal jurisdiction over the complaints under Sec. 1452(a) because they were related to bankruptcy cases involving Peabody Energy Corp., Arch Coal, and Texaco, Inc. Finally, the court held that the district court did not have admiralty jurisdiction because maritime claims brought in state court are not removable to federal court absent an independent jurisdictional basis. View "COUNTY OF SAN MATEO V. CHEVRON CORP." on Justia Law

Appellants filed for Chapter 11 bankruptcy in 2009. The bankruptcy court approved a repayment plan which allowed Appellants to retain possession of a beach house, with the creditor retaining a secured claim for the total outstanding mortgage balance. Several years later, Appellees took as loan servicer for the mortgage. Despite Appellant's timely payments, Appellees mistakenly believed that the account was past due. Eventually, Appellees initiated foreclosure proceedings. Appellants filed an emergency motion for content, which the bankruptcy court granted. However, the district court reversed under Taggart v. Lorenzen, 139 S. Ct. 1795 (2019), finding Appellees acted in good faith because the error involved the previous loan servicer and Appellees based their actions on the advice of counsel.The Fourth Circuit found that both the bankruptcy court and district court erred. The standard announced in Taggart applies to an action to hold a creditor in civil contempt for violating a plan of reorganization of debts entered under Chapter 11. Nothing in the Taggart decision limits the case to Chapter 7 bankruptcy proceedings. While there are differences between Chapter 7 and Chapter 11 bankruptcies, the power of a bankruptcy court in either type of case derives from the same statutes and the same general principles.However, the Fourth Circuit also held that the district court erred in its application of Taggart. Thus, the court remanded the case for further proceedings. View "Gordon Beckhart, Jr. v. Newrez, LLC" on Justia Law

Epic Companies, LLC ("Epic") was a general contractor specializing in the decommissioning of oil platforms. Epic hired the vessel Nor Goliath to lift oil platform components out of the water. These components were then transported to shore by tugboats, which were owned by various other companies.When Epic went bankrupt, the company's suppliers filed suit in the district court to recoup their costs. Several towing companies joined in the suit, asserting maritime liens under the Commercial Instruments and Maritime Liens Act ("CIMLA") against the Nor Goliath. The towing companies claimed that they provided "necessary services" by towing the barges ashore. The district court granted summary judgment in Nor Goliath's favor.The Fifth Circuit affirmed. CIMLA provides that those who provide "necessary services" to a vessel obtain a maritime lien against the vessel and may bring a civil claim to enforce this lien. Under 46 U.S.C. Sec. 31301(4), necessary services include repairs, supplies, towage, and the use of dry dock or marine railway. Here, the Nor Goliath's role was to lift platform components out of the water and place them on barges. Thus, the Nor Goliath's necessaries were the goods and services used to accomplish this task, but not those related to Epic's larger goal of decommissioning oil platforms. Thus, the Fifth Circuit held that the towing companies did not perform necessary services to the Nor Goliath. View "Central Boat Rentals v. M/V Nor Goliath" on Justia Law

Attorney Romanzi referred a personal injury case to his employer, the Fieger law firm; meanwhile, creditors were winning default judgments against Romanzi. The case settled for $11.9 million; about $3.55 million was awarded as attorney’s fees after Romanzi quit the firm. Romanzi’s employment at the firm entitled him to a third of the fees. Before Romanzi could claim his due, his creditors forced him into Chapter 7 bankruptcy. The trustee commenced an adversary proceeding against the firm to recover Romanzi’s third of the settlement fees for the bankruptcy estate. The parties agreed to arbitration.Two of the three arbitrators found for the trustee in a single-paragraph decision that was not "reasoned" to the firm’s satisfaction. The district court remanded for clarification rather than vacating the award. On remand, the panel asked for submissions from both parties, which the trustee provided; the firm refused to participate. The arbitrators’ subsequent supplemental award, approved by the district court, awarded the trustee the fees plus interest. The Sixth Circuit affirmed, rejecting arguments that the arbitrators’ original award was compromised according to at least one factor allowing vacation under the Federal Arbitration Act, 9 U.S.C. 10(a); that the act of remanding and the powers exercised by the arbitrators on remand violated the doctrine of functus officio; and that the supplemental award should have been vacated under the section 10(a) factors. The district court’s and panel’s actions fall under the clarification exception to functus officio. View "In re: Romanzi" on Justia Law

Debtor executed a security deed for a piece of property. She acknowledged the deed to her closing attorney who certified the acknowledgment on the deed’s final page.Under Georgia law, a deed must be attested by two witnesses, and at least one of them needs to be an official such as a notary or court clerk. Here, the deed was invalid because the attorney was a notary, but he failed to attest to the deed. The error was discovered a few years later when the debtor filed for Chapter 7 bankruptcy. Under federal law, a bankruptcy trustee may void a deed if it is voidable by a bona fide purchaser. The managing trustee noticed the problem and sued the loan companies to keep the property in the bankruptcy estate. The loan companies argue that they have produced what the statute requires to save a problematic deed: an affidavit from a “subscribing witness.” Here, the court reasoned that a person becomes a subscribing witness only when she attests a deed, and the closing attorney did not do so. Therefore, the loan companies’ interest in the real property is voidable. View "Pingora Loan Servicing, LLC, et al. v. Cathy L. Scarver" on Justia Law

In 2007, Olsen granted Country Visions a 10-year right of first refusal on Wisconsin land. The right was recorded in local property records. Olsen subsequently dissolved and, in 2010, its former partners filed for bankruptcy. Country Visions was not notified and was not listed in the bankruptcy proceedings. Under an agreed plan, ADM became the owner of the Wisconsin land. Country Visions was not given an opportunity to exercise its right of first refusal. In 2015, ADM arranged to resell the property. Country Vision sought compensation in state court.ADM asked the bankruptcy court to enforce the “free and clear” sale and prohibit the state court litigation, citing 11 U.S.C. 363(m). The bankruptcy court and district court denied ADM’s request. The Seventh Circuit affirmed. Good-faith purchasers are protected by section 363(m) but ADM was not a good-faith purchaser and must defend the state court litigation. ADM had actual notice of the right, in a title report, but did not notify the bankruptcy court; as a non-party, Country Visions could not be expected to appeal the order approving the sale. View "Archer-Daniels-Midland Co. v. Country Visions Cooperative" on Justia Law

McDonald worked as an Ohio bank examiner and a loan officer. As a loan officer, McDonald obtained funds by fraudulently making loans to others. Some of the loans were unknown to the “borrowers.” McDonald filed for individual Chapter 7 bankruptcy. The U.S. Trustee argued that 11 U.S.C. 727(a)(5) prevented the discharge of his debts because McDonald had failed to satisfactorily explain the dissipation of many of his assets. McDonald produced bank statements, brokerage account statements, canceled checks, and his tax returns for 2012-2015. He did not produce his 2010-2011 tax returns, bank account records covering January-March 2010, or many canceled checks, which the court requested. More than $250,000 of McDonald’s assets were unaccounted for. At the Rule 2004 Exam, McDonald refused to testify about one loan, exercising his Fifth Amendment right against self-incrimination. He later confessed to the scheme.The bankruptcy court granted the Trustee summary judgment. The district court and Sixth Circuit affirmed. Section 727(a)(5) contains no intent requirement; it “imposes strict liability” when the debtor fails to provide a satisfactory explanation for the deficiency in assets. McDonald's threadbare recitation from memory is not enough. His testimony throughout the bankruptcy proceedings was rife with unclear, uncertain statements often couched with “likely,” “I think,” or “I don’t know.” View "Vara v. McDonald" on Justia Law

Debtor and Creditor have three children. Their decree of dissolution was entered in 2008. Domestic support and child custody issues have continued to be litigated. In 2017, Creditor obtained primary custody of the children; he filed a Motion for Child Support and Motion for Contempt in Family Court. A monthly support amount was determined. Pre-petition, the Family Court established that the parties would split the cost of the childrens' medical care and extra-curricular activities. Creditor was seeking reimbursement for Debtor’s share of incurred expenses when Debtor’s bankruptcy petition was filed. The Family Court, post-petition, found Debtor in contempt of a prior order.Debtor filed a motion with the Bankruptcy Court requesting sanctions for violation of the automatic stay for the post-petition hearing and Creditor’s collection efforts made pursuant to Family Court orders. The Bankruptcy Court found that some actions violated the automatic stay and awarded attorneys’ fees as actual damages and punitive damages. The Sixth Circuit Bankruptcy Appellate Panel affirmed. The Family Court hearing was conducted to modify a domestic support obligation; the hearing and subsequent garnishment order were excepted from the automatic stay, 11 U.S.C. 362(b)(2)(A)(ii); 362(b)(2)(C). The Family Court Judgment finding Debtor in civil contempt violated the stay and is void. An order of payment, directly to Creditor, toward a pre-petition debt, also violated the stay. View "In re: Dougherty-Kelsay" on Justia Law

Under the “individual mandate” within the Patient Protection and Affordable Care Act of 2010, non-exempt individuals must either maintain a minimum level of health insurance or pay a “penalty,” 26 U.S.C. 5000A, the “shared responsibility payment” (SRP). The McPhersons did not maintain health insurance for part of 2017, and Juntoff did not maintain health insurance in any month in 2018. They did not pay their SRP obligations. In each of their Chapter 13 bankruptcy cases, the IRS filed proofs of claim and sought priority treatment as an “excise/income tax”: for Juntoff, $1,042.39, and for the McPhersons, $1,564.The bankruptcy court confirmed their plans, declining to give the IRS claims priority as a tax measured by income. The Bankruptcy Appellate Panel reversed. DIstinguishing the Sebelius decision in which the Supreme Court determined that the SRP constituted a “penalty” for purposes of an Anti-Injunction Act analysis and a “tax” under a constitutionality analysis, the Panel concluded that the SRP is not a penalty but a tax measured by income. It is “calculated as a percentage of household income, subject to a floor based on a specified dollar amount and a ceiling based on the average annual premium the individual would have to pay for qualifying private health insurance.” View "In re: Juntoff" on Justia Law