Justia Bankruptcy Opinion Summaries

Representatives of certain unsecured creditors of the Chapter 11 debtor Tribune Company appealed the district court's grant of a motion to dismiss their state law, constructive fraudulent conveyance claims brought against Tribune's former shareholders. The district court held that appellants lacked statutory standing under the Bankruptcy Code.The Second Circuit affirmed the dismissal of appellants' state law, constructive fraudulent conveyance claims on preemption grounds rather than standing grounds. The court held that appellants were not barred by the Bankruptcy Code's automatic stay provision from bringing claims while avoidance proceedings against the same transfers brought by a party exercising the powers of a bankruptcy trustee on an intentional fraud theory are ongoing, because appellants have been freed from its restrictions by orders of the bankruptcy court and by debtors' confirmed reorganization plan. However, the court held that appellants' claims were preempted by section 546(e) of the Bankruptcy Code, because this section shields certain transactions from a bankruptcy trustee's avoidance powers, including, inter alia, transfers by or to a financial institution in connection with a securities contract, except through an intentional fraudulent conveyance claim. View "In re: Tribune Company Fraudulent Conveyance Litigation" on Justia Law

The bankruptcy appellate panel affirmed the bankruptcy court's order dismissing debtor's request for relief for alleged violations of the automatic stay and discharge injunction. In this case, debtor's 2019 request did not clearly identify the matters at issue and how they were related to specific automatic stay or discharge injunction violations. Furthermore, debtor provided nothing to show that she was complaining of debts that were derived from something other than matters concerning the children and incidental court orders. Therefore, the panel held that debtor failed to state a cause of action based on an automatic stay violation and a discharge injunction violation. View "Doughty v. Douglas" on Justia Law

The Fifth Circuit withdrew its previously filed opinion and substituted the following opinion.The court held that its holding in In re Nat'l Gypsum Co., 118 F.3d 1059, 1069 (5th Cir. 1997), that bankruptcy courts have discretion to refuse to compel arbitration in proceedings seeking enforcement of a discharge injunction, remains good law following the Supreme Court's decision in Epic Sys., 138 S. Ct. at 1623-24. In this case, the court affirmed the bankruptcy court's denial of Wells Fargo's motion to compel arbitration of a dispute over whether debtor's discharge applied to a student loan. View "Henry v. Educational Financial Service" on Justia Law

Burciaga lost his job and filed for bankruptcy a week later. On the date the bankruptcy proceeding began, Burciaga’s former employer owed him approximately $24,000 for unused vacation time. Illinois treats vacation pay as a form of wages. Exemptions for debtors in Illinois rest on state law, 11 U.S.C. 522(b)(2). Burciaga asked the district court to treat 85% of the vacation pay as exempt from creditors’ claims. Illinois permits creditors to reach 15% of unpaid wages but forbids debt collection from the rest. The Chapter 7 Trustee, objected. The bankruptcy judge and district court sided with the Trustee. The Seventh Circuit reversed, finding nothing ambiguous about Illinois law or section 522(b)(2) and (3)(A); 85% of unpaid wages are exempt from creditors’ claims in Illinois, and vacation pay is a form of wages. View "Burciaga v. Moglia" on Justia Law

A contractor and the prime contractor, involved in repainting the Queensboro Bridge, became embroiled in a dispute. The subcontractor stopped work. The parties sued each other for breach of contract. The subcontractor filed for bankruptcy. At the final pre-trial conference on an adversary proceeding, the parties entered into a stipulation that if the Bankruptcy Court determined that the subcontractor was the breaching party, then “all of the [p]arties’ pending claims will be withdrawn and disposed of in their entirety with prejudice” and the adversary proceeding “shall be deemed to be finally concluded in all respects.” Following a bench trial, the Bankruptcy Court concluded that the subcontractor was the breaching party and ordered compliance with the stipulation. Instead, the subcontractor appealed. The district court concluded that the subcontractor had released its claims and waived its right to appeal and modified the Bankruptcy Court’s order to make it a dismissal of the adversary proceeding with prejudice. The Third Circuit affirmed. The stipulation’s language confirms an intent to end all pending claims based on the Bankruptcy Court ruling: a party that seeks to appeal must make its intent to do so clear at the time of the stipulation setting the manner for resolution. View "L&L Painting Co., Inc. v. Odyssey Contracting Corp." on Justia Law

FES distributes electricity, buying it from its fossil-fuel and nuclear electricity-generating subsidiaries. FES and a subsidiary filed Chapter 11 bankruptcy. The bankruptcy court enjoined the Federal Energy Regulatory Commission (FERC) from interfering with its plan to reject certain electricity-purchase contracts that FERC had previously approved under the Federal Power Act, 16 U.S.C. 791a or the Public Utilities Regulatory Policies Act, 16 U.S.C. 2601, applying the ordinary business-judgment rule and finding that the contracts were financially burdensome to FES. The counterparties were rendered unsecured creditors to the bankruptcy estate. The Sixth Circuit agreed that the bankruptcy court has jurisdiction to decide whether FES may reject the contracts, but held that the injunction was overly broad (beyond its jurisdiction) and that its standard for deciding rejection was too limited. The public necessity of available and functional bankruptcy relief is generally superior to the necessity of FERC’s having complete or exclusive authority to regulate energy contracts and markets. The bankruptcy court exceeded its authority by enjoining FERC from “initiating or continuing any proceeding” or “interfer[ing] with [its] exclusive jurisdiction,” given that it did not have exclusive jurisdiction. On remand, the bankruptcy court must reconsider and decide the impact of the rejection of these contracts on the public interest—including the consequential impact on consumers and any tangential contract provisions concerning such things as decommissioning, environmental management, and future pension obligations—to ensure that the “equities balance in favor of rejecting the contracts.” View "In re: FirstEnergy Solutions Corp." on Justia Law

Trumpf, the U.S. subsidiary of an international business, hired Lynch to handle Trumpf’s appearance at a Chicago trade show. Lynch subcontracted with CSI for some of the services. CSI claims that it told Trumpf that it was unsure of Lynch’s reliability and that Trumpf agreed to pay CSI directly or guarantee the payment. There was no written agreement between Trumpf and CSI. Lynch did not pay CSI, which claimed $530,000 in Lynch’s ensuing bankruptcy. CSI also sued Trumpf, asserting promissory estoppel and unjust enrichment. The district court dismissed, reasoning that CSI was estopped, as a result of its bankruptcy claim, from suing Trumpf. The Seventh Circuit reversed, reasoning that Lynch has not prevailed on that claim and that the claim is not inconsistent with Trumpf guaranteeing payment. Filing a claim in bankruptcy does not foreclose claims against non-bankrupt obligors, 11 U.S.C. 524(e). View "CSI Worldwide, LLC v. Trumpf, Inc." on Justia Law

The Supreme Court answered a question certified to it by the United States Bankruptcy Court for the District Court of Rhode Island by holding that R.I. Gen. Laws 9-26-4(11) permits a debtor to claim an exemption for an inherited Individual Retirement Annuity (IRA).Lynette Kapsinow filed a Chapter 7 bankruptcy petition seeking, under Rhode Island law, to exempt an inherited IRA pursuant to section 9-26-4(11). The inherited IRA was inherited by Kapsinow from her late mother. The bankruptcy court certified to the Supreme Court the question about the availability of an exemption in bankruptcy with respect to the inherited IRA. The Supreme Court answered that a debtor may claim an exemption in an inherited IRA, including one inherited from a non-spouse, pursuant to section 9-267-4(11). View "In re Kapsinow" on Justia Law

Plaintiff filed suit against defendants, asserting a claim to quiet title and separately seeking a declaratory judgment that the statute of limitations had expired on defendants' power to foreclose on certain real property. Defendants counterclaimed for judicial foreclosure. The district court denied plaintiff's motion for summary judgment, granted summary judgment for defendants, and entered a final judgment and order of foreclosure.The Fifth Circuit affirmed, holding that 11 U.S.C. 362(c)(3)(A) terminates the automatic stay only with respect to the debtor; it does not terminate the stay with respect to the property of the bankruptcy estate. The court also held that Texas's statute of limitations does not bar defendants' claim for judicial foreclosure. Under the interpretation of section 362(c)(3)(A) that the court adopted, plaintiff's successive filings did not terminate the action with respect to the property of the bankruptcy estate. Therefore, the court held that the stay with respect to the property at issue in this case lasted the duration of the bankruptcy proceedings (269 days), and the statute of limitations was tolled for at least the same. Accordingly, defendants' counterclaim for judicial foreclosure was filed within the 269-day tolling period. View "Rose v. Select Portfolio Servicing, Inc." on Justia Law

Appellant attempted to appeal two bankruptcy court orders to the district court by filing a single notice of appeal. The district court struck the notice of appeal as violating the local bankruptcy court rule.The Eighth Circuit held that, although Local Bankruptcy Rule 8001(A) was valid, the district court erred by treating the rule as a jurisdictional requirement without providing appellant an opportunity to cure the defect by filing separate notices of appeal for each order and paying the accompanying fees. Accordingly, the court reversed and remanded for further proceedings. View "Briggs v. Rendlen" on Justia Law