Justia Bankruptcy Opinion Summaries

The Seventh Circuit upheld the bankruptcy court's ruling that the costs of plaintiff's attorney disciplinary proceedings imposed by the Wisconsin Supreme Court were not dischargeable under a provision of the Bankruptcy Code, 11 U.S.C. 523(a)(7). The court explained that, although there are several types of proceedings in which the Wisconsin Supreme Court may order costs, see Wis. S.C.R. 22.24(1), attorney discipline uniquely requires a "finding of misconduct" as a precondition for doing so. The court stated that the structure of Rule 22.24(1m) unambiguously singles out attorney discipline as a penal endeavor, and that conclusion has a statutory consequence under section 523(a)(7). Furthermore, the cost order amounts to compensation for actual pecuniary loss under section 523(a)(7). Finally, the court's conclusion that plaintiff's disciplinary costs are nondischaregable under section 523(a)(7) finds firm support in Supreme Court precedent and the court's own case law. View "Osicka v. Office of Lawyer Regulation" on Justia Law

After Xurex filed for Chapter 7 bankruptcy, the trustee filed suit against defendant and others for breach of fiduciary duty and civil conspiracy. The jury returned a verdict for the trustee against defendant for conspiracy to breach fiduciary duties.The Eighth Circuit affirmed the jury's verdict and the district court's denial of defendant's motions for judgment as a matter of law, a new jury trial, the entries of judgment, and all adverse rulings. The court concluded that the evidence was sufficient to support the jury's verdict finding that defendant breached a fiduciary duty and there was no error in denying defendant's Federal Rule of Civil Procedure 50(d) motion; defendant waived several arguments he now raises about the language of the verdict director and the inconsistency of the verdict; because plaintiff's damage theories for civil conspiracy and breach of fiduciary duty were the same, the district court properly entered judgment on the larger of the two amounts; and the district court did not plainly err as to the jury instructions. View "Olsen v. Kraus" on Justia Law

The Supreme Court held that a recorded judgment lien attaches to homestead property where the judgment debtor has equity in excess of the amount exempt under Arizona law.Pacific Western Bank (PWB) obtained a California judgment against Todd McLauchlan that was domesticated and recorded in Arizona. McLauchlan later filed a Chapter 7 bankruptcy petition identifying an ownership interest in a residence and claiming the statutory homestead exemption in the residence. PWB filed a proof of claim, $552,497 of which was secured by the recorded judgment lien. The remaining $115,985 was unsecured. After McLauchlan received his discharge he sold the residence and realized $56,852 in excess of the $150,000 homestead exemption. PWB filed a motion seeking a determination that McLauchlan's bankruptcy discharge did not affect its interest secured by its recorded judgment. At issue was whether, under Ariz. Rev. Stat. 33-964(B), judgment liens attach to homestead property. The Supreme Court answered in the affirmative. View "In re McLauchlan" on Justia Law

The Eleventh Circuit reversed the district court's decision affirming the bankruptcy court's order granting the Bank's objection to plaintiff's claimed bankruptcy estate exemptions. The court concluded that Roth IRAs are excluded from Georgia debtors' bankruptcy estates pursuant to federal law. The court found that the development of the caselaw in this area and the subsequent amendments to the Georgia Code reflect the Georgia Assembly's intention to clarify that both traditional IRAs as defined in 26 U.S.C. 408 and Roth IRAs as defined in section 408A are exempt from garnishment, thus subjecting IRAs to a restriction on transfer by state statute, and making both types of IRAs eligible for exclusion under the Bankruptcy Code. Accordingly, the court remanded so that the district court may reverse the order of the bankruptcy court. View "Hoffman v. Signature Bank of Georgia" on Justia Law

Debtors Julio Barrera and Maria de La Luz Moro filed for bankruptcy under Chapter 13 of the Bankruptcy Code hoping to reorganize their assets and finances. Instead of selling most of their assets to obtain an immediate discharge of their debts, they opted to keep their assets, try a reorganization plan to repay creditors, and receive a discharge later. For some time they continued to meet the terms of their reorganization plan. But they changed their minds following the sale of their home, which had appreciated in value significantly since they filed for bankruptcy. Barrera and Moro converted their Chapter 13 bankruptcy to a liquidation of their estate under Chapter 7. The Chapter 7 trustee (Trustee) claimed a right to a portion of the proceeds from the sale of the home, including the appreciation that occurred after their Chapter 13 petition was filed. The issue this case presented for the Tenth Circuit Court of Appeals' review centered on who was entitled to the proceeds from the sale of the home. Specifically, did the sale proceeds from the real property of the estate belong to the Chapter 7 estate or to the debtors? The Court concluded that under 11 U.S.C. 348(f)(1)(A), the sale proceeds from the home belonged to the debtors. View "Rodriguez v. Barrera, et al." on Justia Law

The Second Circuit vacated the district court's dismissal of plaintiff's amended complaint against McKinsey and others under the Racketeer Influenced and Corrupt Organizations Act (RICO). The complaint alleged that McKinsey filed false and misleading disclosure statements in the bankruptcy court to obtain lucrative consulting appointments and that, as a result, AlixPartners LLP lost business and profits it otherwise would have secured. The court concluded that the amended complaint plausibly alleges proximate cause with respect to all 13 bankruptcies in which McKinsey filed false statements as well as the pay-to-play scheme. Accordingly, the court remanded for further proceedings. View "Alix v. McKinsey & Co., Inc." on Justia Law

The Fifth Circuit vacated the award of attorney's fees in this bankruptcy action and remanded for further proceedings. The court held that a court may compensate an attorney under 11 U.S.C. 330(a) only for services requiring legal expertise that a trustee would not generally be expected to perform without an attorney's assistance. In this case, the bankruptcy court failed to apply the proper legal standard in two respects. First, the bankruptcy court appeared to permit Chaffe to recover for the performance of ordinary trustee duties because of the successful result of the bankruptcy proceeding. Second, the bankruptcy court ignored that the burden rests on the attorney requesting compensation under section 330(a) to justify the services rendered. View "Sylvester v. Chaffe McCall, LLP" on Justia Law

Fees are collected under 28 U.S.C. 1930 in each quarter of a chapter 11 bankruptcy based on the amount of disbursements made. The U.S. Trustee collects the fees in most districts in the country, while an arm of the Judicial Conference does so in six. In 2017, 28 U.S.C. 1930(a)(6) increased the quarterly fee chargeable for the largest chapter 11 bankruptcies, those distributing $1 million or more in a given quarter.The bankruptcy court concluded that the increase applied to disbursements in a case pending at the time the law was enacted. The Eleventh Circuit agreed that the 2017 legislation applied to pending bankruptcy cases without a due process violation and without offending the Bankruptcy Uniformity Clause. Congress expressly prescribed the temporal reach of the 2017 Amendment and included disbursements in pending cases. The quarterly fees are assessed against the users of the chapter 11 bankruptcy trustee systems to reimburse the government for its costs; the fees are not subject to the constitutional uniformity requirement applicable to taxes. The 2017 Amendment is uniform in the sense contemplated by the Bankruptcy Clause. View "United States Trustee Region 21 v. Bast Amron LLP" on Justia Law

Debtor, licensed under North Dakota’s pari-mutuel wagering system, filed for bankruptcy in 2004. Ten years later, the district court ruled that the state was not authorized to collect certain taxes from the Debtor. North Dakota agreed to pay the estate $15 million. Creditors asserted claims. Although the state constitution provides that “the entire net proceeds of such games of chance are to be devoted to educational, charitable, patriotic, fraternal, religious, or other public-spirited uses,” North Dakota did not raise the rights of any charities.In 2018, the bankruptcy court ruled on the claims. North Dakota filed a new proof of claim. The court concluded that the state lacked parens patriae authority to assert claims on behalf of charities. The Eighth Circuit Bankruptcy Appellate Panel (BAP) remanded. On remand, the state attempted to add a breach of contract claim. The bankruptcy court denied that motion and concluded that the contract claim had no merit. The court also rejected a constitutional-statutory claim.The BAP affirmed, rejecting arguments that North Dakota law requires that charities, not Debtor, recover the remaining tax settlement funds and that the court erred when it disallowed the contract claim. The state constitution concerns the legislature and does not govern the actions of private parties such as Debtor. Debtor paid the taxes originally; the reimbursement of those improperly-paid taxes should inure to the benefit of Debtor after distribution under the bankruptcy priority scheme. View "North Dakota v. Bala" on Justia Law

In the early 1900s, New York City used a Brooklyn powerhouse to provide electricity for its trolley system. In 1940, the City took ownership of the power plant and removed a smokestack, placed it in the building's basement, on top of a mechanical system that was insulated with friable asbestos-containing material, and buried it under a concrete slab. Enterprises acquired the property in 1986. An asbestos inspection by the city revealed that the property was contaminated with PCBs. The property was placed on New York’s Registry of Inactive Hazardous Waste Disposal Sites, rendering it effectively worthless. The state began remediation in 2015. The discovery of the buried smokestack and friable asbestos-containing material postponed the project indefinitely. New York City continued to tax the property according to its “best intended use” as a warehouse. Rather than paying the taxes or properly challenging their validity, Enterprises ignored them. The taxes became liens.In 2018, Enterprises filed for Chapter 11 bankruptcy and initiated an adversary proceeding against the city, alleging “continuous trespass,” and seeking a declaratory judgment that the city is responsible for the hazardous waste and resulting damage and improperly taxed the property. The bankruptcy court dismissed the adversary proceeding. The Eleventh Circuit affirmed. Even assuming the latest possible date of discovery, Enterprises’ trespass claim is time-barred. The Bankruptcy Abuse Prevention and Consumer Protection Act, 11 U.S.C. 505(a)(2)(C), prohibited the court from redetermining the tax assessments. View "5200 Enterprises Ltd. v. City of New York" on Justia Law