Justia Bankruptcy Opinion Summaries

In this case concerning the potential liability of two private equity funds for pension fund withdrawal owed by a company owned by the two funds when the company went bankrupt, the First Circuit reversed the judgment of the district court holding the two funds jointly and severally responsible for the company's withdrawal liability, holding that summary judgment should be granted to the two funds.At issue was whether two private equity funds, Sun Capital Partners III, LP (Sun Fund III) and Sun Capital Partners IV, LP (Sun Fund IV), were liable for $4.5 million in pension fund withdrawal liability owed by a brass manufacturing company that was owned by the Sun Funds when the manufacturing company went bankrupt. Under the Multiemployer Pension Plan Amendments Act, the issue of liability depended on whether the two funds had created an implied partnership-in-fact that constituted a control group. That question, in turn, depended on the application of the partnership test in Luna v. Commissioner, 42 T.C. 1067 (1964). The district court that there was an implied partnership-in-fact constituting a control group. The First Circuit reversed, holding that the Luna test was not met in this case and that there was no firm indication of congressional intent to impose liability on the private investors. View "Sun Capital Partners III, LP v. New England Teamsters & Trucking Industry Pension Fund" on Justia Law

In this writ of error the Supreme Court held that state courts lack jurisdiction to extend the automatic stay provision of the federal bankruptcy code, 11 U.S.C. 362(a)(1), to motions proceedings against nondebtor plaintiffs in foreclosure actions and overruled Equity One, Inc. v. Shivers, 93 A.3d 1167 (Conn. 2014), on that ground. U.S. Bank National Association brought a foreclosure action against Jacquelyn Crawford. The trial court ordered a foreclosure by sale and appointed Douglas Evans as the committee for sale. Before the sale could be completed Crawford declared bankruptcy and the foreclosure action was stayed. Evans then filed a motion seeking to recover from the bank fees and expenses he incurred in preparing for the sale. Relying exclusively on Shivers, which ruled that courts have authority to extend the application for the automatic stay to nondebtors in unusual circumstances, the trial court concluded that Evans's motion for fees and expenses was stayed. Evans then filed this writ of error. The Supreme Court granted the writ, holding (1) state courts do not have jurisdiction to change the status quo by modifying the reach of the automatic stay provision; and (2) Shivers must be overruled. View "U.S. Bank National Ass'n v. Crawford" on Justia Law

The Bankruptcy Appellate Panel dismissed debtor's appeal of the bankruptcy court's order granting the trustee's motion to approve her proposed sale of certain assets to the bank. The panel held that the sale authorized by the bankruptcy court could not be undone and thus the appeal was moot. Furthermore, the panel held that debtor did not have a financial stake in the bankruptcy court's order and thus lacked standing to appeal the order. View "Belew v. Rucker" on Justia Law

This case arose out of the 2009 bankruptcy of Old GM, which resulted in a sale under 11 U.S.C. 363 of the bulk of its assets to a new entity that has continued the business (the new General Motors). The New General Motors assumed the liability of Old GM with respect to post‐Sale accidents involving automobiles manufactured by Old GM. The claims assumed included those by persons who did not transact business with Old GM, such as individuals who never owned Old GM vehicles and persons who bought Old GM cars after the Sale. At issue was whether the New General Motors was liable for punitive damages with respect to such claims.The Second Circuit held that the new General Motors did not contractually assume liability for punitive damages in its predecessor's bankruptcy sale, and thus the Post-Closing Accident Plaintiffs may not assert claims for punitive damages based on the predecessor's conduct. Accordingly, the court affirmed the district court's decision affirming the bankruptcy court's decision on the issue of punitive damages. View "In re Motors Liquidation Co." on Justia Law

The First Circuit reversed the judgment of the district court dismissing these appeals brought by Appellant seeking to keep money owed to the Commonwealth of Massachusetts based on the fugitive disentitlement doctrine, holding that the district court dismissed the appeal prematurely and that the early dismissal was an abuse of discretion.Thomas Sheedy bought Carol Thibodeau's house and gave it to Appellant Donald Kupperstein, an attorney licensed in Massachusetts. The state court reversed the sale, but Appellant kept collecting rent. Appellant fought to keep the money, and by the time these appeals reached the First Circuit Appellant had defied seven state court orders, four arrest warrants, and numerous contempt sanctions. Appellant filed for bankruptcy in hopes that the Bankruptcy Code's automatic stay would stop the state court from enforcing its orders. The bankruptcy court subsequently lifted the stay, then Appellant "went AWOL." The district court dismissed Appellant's appeal based on the rule that a fugitive forfeits the right to appeal the judgment he's fleeing. The First Circuit held that reversal was required because the district court's inherent power to protect its own proceedings was not implicated in this case. The Court then remanded the case for the district court to decide the merits of Appellant's appeals. View "Kupperstein v. Schall" on Justia Law

The First Circuit reversed the judgment of the bankruptcy court granting summary judgment in favor of Sacred Heart University and allowing the university to retain tuition payments made by Steven and Lori Palladino for their adult child's college education, payments that were made while the Palladinos were legally insolvent, holding that none of the classes of transactions that confer value were present in this case.The Palladinos paid $64,565 in tuition to Sacred Heart before pleading guilty to fraud in connection with operating a Ponzi scheme. The Palladinos and their closely held company later filed chapter 7 bankruptcy petitions. The bankruptcy trustee for the bankrtupcy estate filed a four-count adversary complaint against Sacred Heart seeking to claw back the Palladinos' tuition payments to Sacred Heart. The bankruptcy court granted summary judgment in Sacred Heart's favor on all counts of the complaint, including the constructive fraud claim. Specifically, the court found that the Palladinos paid their daughter's tuition because "they believed that a financially self-sufficient daughter offered them an economic benefit," which satisfied 11 U.S.C. 548(a)(1)(B)(I)'s reasonably equivalent value standard. The First Circuit reversed, holding the law did not allow the payments, which were not for value by insolvent creditors, to be clawed back by the trustee. View "DeGiacomo v. Sacred Heart University, Inc." on Justia Law

In a previous appeal, the Seventh Circuit held that the confirmation of a Chapter 13 payment plan causes the debtor’s assets, including automobiles, to revert to the debtor’s personal ownership unless the judge has made a debtor-specific finding under 11 U.S.C.1327(b). After bankruptcy judges confirmed their Chapter 13 payment plans, the debtors used their cars in ways that led to fines for running red lights, illegal parking, and similar offenses. They refused to pay, observing that the confirmed plans do not require them to pay fines (as opposed to other expenses). Chicago argued that the fines were administrative expenses of the estates in bankruptcy, as long as the vehicles remain assets of the estates, and entitled to priority payment, 11 U.S.C. 507(a)(2). On rehearing, the Seventh Circuit ruled in favor of the city, holding that automotive fines incurred by estates during confirmed Chapter 13 payment plans should be treated as administrative expenses that must be paid promptly and in full. The question is whether operating a vehicle is necessary to earn the money needed to perform the Chapter 13 plan. The debtors insisted that cars are essential. View "City of Chicago v. Marshall" on Justia Law

The Second Circuit affirmed the district court's orders affirming the bankruptcy court's award of monetary sanctions pursuant to its inherent power. Appellant filed a Chapter 7 petition in bankruptcy court for his client but ultimately failed to prosecute the case. The bankruptcy court then issued multiple orders to show cause, which appellant failed to comply with, and then the bankruptcy court ultimately sanctioned him.The court held, as a matter of first impression, that bankruptcy courts possess inherent power to sanction attorneys in appropriate circumstances. In this case, appellant's challenges to the bankruptcy court's exercise of that power failed for the reasons set forth in a separately-filed summary order. View "In re: Alba Sanchez" on Justia Law

The First Circuit affirmed the decision of the district court adopting bankruptcy court orders arising out of the bankruptcies of TelexFree, LLC, TelexFree, Inc., and Telexfree Financial, Inc. (collectively, TelexFree), one of the biggest Ponzi-pyramid schemes in United States history, holding that the bankruptcy court did not err in ruling that Appellant's unjust enrichment claims were stayed pursuant to 11 U.S.C. 362(a)(3).At issue in this case was who would be allowed to seek to recover payments made by new participants in the scheme to the existing participants who recruited them (the contested funds). While Trustee Stephen Darr attempted to recoup the contested funds through avoidance actions, victims represented by the Plaintiffs' Interim Executive Committee (PIEC) asserted unjust enrichment claims to recover the same amounts. The district court stayed the unjust enrichment claims under section 362(a)(3), thus permitting the trustee to pursue the contested funds and to stop PIEC's efforts to pursue those funds. The First Circuit affirmed, holding that the arguments the PIEC raised on appeal were not persuasive. View "Darr v. Plaintiffs' Interim Executive Committee" on Justia Law

Plaintiffs filed suit against Rushmore, seeking class certifications on claims arising under the Fair Debt Collection Practices Act (FDCPA) and the Florida Consumer Protection Practices Act (FDCCPA). Plaintiffs alleged that Rushmore made false, deceptive, and misleading representations when it sent mortgage statements and attempted to collect on their mortgage debt after they received a Chapter 7 discharge. The district court denied class certification.The Eleventh Circuit held that the district court abused its discretion because at the first step of the predominance analysis it erroneously classified the question of whether the Bankruptcy Code precluded or preempted the FDCPA and FCCPA claims as raising an individual, rather than common, issue. Therefore, the court vacated the district court's judgment and remanded for the district court to reconsider plaintiffs' class certification motion in light of the court's conclusion that this question was common to all class members. View "Sellers v. Rushmore Loan Management Services, LLC" on Justia Law