Justia Bankruptcy Opinion Summaries

Debtor sold her home to the Deans; they discovered mold in the basement. A court entered judgment on an arbitration award to the Deans: $28,172.99, plus attorney fees of $98,722.58. The Deans filed a lien against the Debtor’s current residence. Debtor filed a bankruptcy petition, listing the Deans as secured creditors. The Bankruptcy confirmed the Debtor’s chapter 13 plan. Debtor is paying the Deans’ claim in full, with interest. The Deans filed an Adversary Proceeding, claiming damages for Sarah Dean’s respiratory problems. The Bankruptcy Court dismissed that Proceeding; the Deans did not appeal. After the confirmation of Debtor’s Plan, the Deans unsuccessfully moved to dismiss the bankruptcy case. Meanwhile, Debtor sent the Deans a letter offering a proposed payout. The letter explained that it was not admissible as evidence (Rule 408). The Deans filed the letter on the docket, unaccompanied by any pleading or explanation, then designated the letter as part of the record on appeal for their unsuccessful motion to dismiss. Debtor sought sanctions for rules violations by filing the letter and moved to strike the letter. The Bankruptcy Court granted those motions, sanctioned the Deans $5,000, and awarded Debtor attorney fees. The Deans filed another Adversary Proceeding, seeking revocation of the confirmation order (11 U.S.C. 1330(a)). Debtor filed another sanctions motion, for “meritless pleadings.” The Bankruptcy Court dismissed the second adversary proceeding and ordered the Deans to pay $2,641 in attorney’s fees for their frivolous filing. The Sixth Circuit Bankruptcy Appellate Panel affirmed. Not understanding the purpose of Chapter 13 and without legal guidance, the Deans increased expenses and delayed payment of their own claim. View "In re: Lane" on Justia Law

The Supreme Court accepted certificate of a question of law from a federal district court and answered that Seven Counties Services, Inc.'s participation in and its contributions to the Kentucky Employees Retirement System (KERS) are based on a statutory obligation, rather than a contractual obligation.In 1979, the then-Governor designated Seven Counties, a non-profit provider of mental health services, a "department" for purposes of participating in KERS, a public pension system. Thereafter, Seven Counties paid into KERS to secure retirement benefits for its employees. In 2013, Seven Counties initiated bankruptcy proceedings primarily to reject its relationship with KERS as an executory contract. KERS countered that Seven Counties should be required to comply with its statutory obligations to contribute to KERS. The bankruptcy court determined that Seven Counties' relationship with KERS was contractual and, therefore, that Seven Counties could reject the contract in bankruptcy and leave the retirement system. The Supreme Court disagreed, holding that the relationship between KERS and Seven Counties was statutory. View "Kentucky Employees Retirement System v. Seven Counties Services, Inc." on Justia Law

The Supreme Court affirmed the judgment of the trial court granting motions to dismiss Plaintiff's state law claims for vexatious litigation and unfair and deceptive business acts or practices during Plaintiff's underlying bankruptcy proceeding, holding that the trial court properly dismissed the claims for lack of subject matter jurisdiction because the claims were preempted by federal bankruptcy law.Plaintiff, who had previously filed a bankruptcy petition in the United States Bankruptcy Court, brought this action asserting claims of vexatious litigation and violation of the Connecticut Unfair Trade Practices Act, Conn. Gen. Stat. 42-110a et seq. The trial court dismissed the claims. The Supreme Court affirmed, holding that Congress implicitly preempted state law actions by occupying the field of bankruptcy law and that, in the field of law, the federal interest is so dominant that federal law is assumed to preclude enforcement of state laws on the subject. View "Metcalf v. Fitzgerald" on Justia Law

The Ninth Circuit reversed the district court's judgment affirming the bankruptcy court's judgment in favor of the chapter 7 trustee. The trustee claimed that the tax refunds should be considered part of the bankruptcy estate and the bankruptcy court agreed. However, the panel held that the trustee failed to exhaust the administrative claims process as required by the Financial Institutions Reform, Recovery, and Enforcement Act of 1989. Therefore, the panel held that the bankruptcy court did not have subject matter jurisdiction over the dispute because of the failure to exhaust. View "Waldron v. FDIC" on Justia Law

The Eleventh Circuit affirmed the bankruptcy court's denial of debtor's second motion for sanctions against Nationstar. Debtor alleged that Nationstar's conduct of sending a monthly statement to Roth to collect discharged mortgage debt was in violation of the bankruptcy code.The court held that the Informational Statement sent by Nationstar was not an improper attempt at debt collection in violation of 11 U.S.C. 524(a)(2), because there were several bases to conclude that the objective effect of the statement was not to pressure debtor to repay a discharged debt. Therefore, sanctions were not appropriate under 11 U.S.C. 105. The court noted that, even if there was a section 524 violation, sanctions under section 105 were unavailable under the Supreme Court's recent decision in Taggart v. Lorenzen, 139 S. Ct. 1795, 1801 (2019), because there was more than a fair ground of doubt as to whether the discharge order barred Nationstar's conduct. Finally, the court held that the bankruptcy court did not err by failing to hold an evidentiary hearing. View "Roth v. Nationstar Mortgage, LLC" on Justia Law

After Double Eagle filed for Chapter 11 bankruptcy, it filed suit against MarkWest and Ohio Gathering on a contract claim in Louisiana federal court. Double Eagle then assigned its claim against defendants to one of its creditors.The Fifth Circuit vacated the district court's judgment and held that the district court erred by failing to apply the time-of-filing rule to 28 U.S.C. 1334(b) in this lawsuit that was related to a bankruptcy when filed, but then the bankruptcy connection was later dissolved. The court explained that this longstanding rule promoted efficiency and thus it would be wasteful if post-filing changes in the facts determining jurisdiction required dismissal of a case to which the parties and court had already devoted resources. In this case, the related-to-bankruptcy jurisdiction that existed at the outset of this case never went away. The court also held that failing to focus on the time of filing also infected the district court’s personal jurisdiction analysis, and the section 1334(b) jurisdiction that existed when this case was filed thus means there is both subject matter and personal jurisdiction. The court rejected defendants' remaining claims and remanded for further proceedings. View "Double Eagle Energy Services, LLC v. MarkWest Utica EMG, LLC" on Justia Law

The United States Bankruptcy Court for the District of North Dakota certified a question of law to the North Dakota Supreme Court, asking whether a married debtor was entitled to an exemption up to $100,000 for his undivided one-half interest in homestead property jointly owned with a nondebtor. The Supreme Court answered the certified question “yes.” View "In re Anderson" on Justia Law

The Bankruptcy Appellate Panel reversed the bankruptcy court's grant of the Banks' motion for summary judgment challenging the validity of the other parties' liens and asserting the priority of its own lien in debtor's 2017 crops. In this case, it was difficult to determine from the record precisely what the bankruptcy court considered in reaching its conclusion that no genuine issues of material fact existed which would preclude it from granting the Bank's motion for summary judgment, or the analysis the bankruptcy court undertook. Accordingly, the panel remanded for further findings pursuant to Federal Rule of Civil Procedure 56(a)'s directive to specify the reasons for its ruling, or in the alternative, to reconsider the issue on the existence of the Solberg Farms partnership. View "Zaitz Trust, LLC v. Bremer Bank, NA" on Justia Law

Sterling owed Southlake Health Club outstanding fees ($250). In 2001, Southlake's counsel, Austgen, instituted a state court collection action. A federal bankruptcy court discharged Sterling’s debt to Southlake in 2010. Although Sterling notified Southlake of the discharge, no one notified Austgen or the Indiana court. Sterling failed to appear in the state-court collection proceedings; that court issued a warrant for her arrest. A year later, Sterling was arrested and jailed for two days. Southlake and Austgen dropped pursuit of the debt. Sterling instituted adversary proceedings in bankruptcy court, seeking to have Southlake and Austgen held in contempt for continuing to collect a debt that had been discharged, 11 U.S.C. 524. The bankruptcy court and the district court ruled against Sterling. The Seventh Circuit affirmed in part; Austgen’s lack of knowledge of the discharge prevents it from being held in contempt. Southlake, however, must be held liable for the actions taken by counsel on its behalf. Southlake, a sophisticated party, had knowledge of the discharge yet turned a blind eye to the progress of Sterling’s case. Holding otherwise “would create a loophole in the law through which creditors could avoid liability simply by remaining ignorant of their agents’ actions or by failing to notify their agents of debtors’ bankruptcy proceedings.” View "In re: Sterling" on Justia Law

After entering a settlement that released certain tort claims, plaintiff filed for Chapter 7 bankruptcy. When her debts were discharged and the bankruptcy proceedings closed, she filed suit seeking to rescind her settlement agreement as fraudulently induced and to pursue a tort action. The district court entered judgment in favor of defendants.The Fourth Circuit held that the district court's standing determination conflates Article III requirements with the distinct real-party-in-interest analysis. Rather, plaintiff has both Article III standing and the legal entitlement to pursue tort claims on her own behalf. In regard to judicial estoppel, the court also held that the district court relied on an improper presumption of bad faith, and therefore reached its conclusion without fully engaging in the necessary inquiry. Therefore, the court remanded to the district court for it to evaluate the appropriateness of judicial estoppel in light of all facts and circumstances without recourse to a presumption of bad faith. View "Martineau v. Wier" on Justia Law