Justia Bankruptcy Opinion Summaries

The First Circuit affirmed the decision of the district court dismissing the complaint brought by the plan administrator of R&G Financial Corporation (Administrator) alleging that negligence and breach of fiduciary duties owed to R&G Financial (the Holding Company) caused the failure of R-G Premier Bank of Puerto Rico (the Bank) and the Holding Company's resultant loss of its investment in the Bank, holding that the complaint must be dismissed because the claims the Administrator asserted for the Holding Company were the Federal Deposit Insurance Corporation's (FDIC) under 12 U.S.C. 1821(d)(2)(A).R&G Financial entered Chapter 11 bankruptcy after the Bank, its primary subsidiary, failed. Previously, Puerto Rican regulators had closed the Bank and named the FDIC as the Bank's receiver. After the Bank failed, the Administrator filed this suit against six of the Holding Company's former directors and officers and their insurer. The FDIC intervened. The district court dismissed the complaint. The First Circuit affirmed on different grounds, holding that, under section 1821(d)(2)(A), the FDIC succeeded to the Administrator's claims. View "Zucker v. Rodriguez" on Justia Law

The First Circuit affirmed the decision of the district court dismissing Appellants' amended complaint in an adversary proceeding arising within the debt adjustment proceeding that the Financial Oversight and Management Board (Board) commenced on behalf of the Puerto Rico Highway and Transportation Authority (PRHTA) under Title III of the Puerto Rico Oversight, Management, and Economic Stability Act (PROMESA), 48 U.S.C. 2161-2177, holding that Appellants were not entitled to the relief they sought.Appellants were financial guarantee insurers that had insured bonds from PRHTA. After the enactment of PROMESA, the Board certified a financial plan by which the PRHTA pledged special revenues to be diverted into the general revenues of Puerto Rico. Payments to the PRHTA bondholders continued, but after the PRHTA defaulted on a scheduled bond payment, the funds ceased to be distributed. Appellants initiated adversary proceedings claiming, among other things, that sections 922(d) and 928 of the Bankruptcy Code required PRHTA to remit payment of special revenues to bondholders during the pendency of the Title III proceedings. The district court dismissed the complaint. The First Circuit affirmed, holding that sections 922(d) and 928(a) permit, but do not require, continued payment during the pendency of the bankruptcy proceedings, and therefore, the district court properly dismissed the complaint. View "Assured Guaranty Corp. v. Commonwealth of Puerto Rico" on Justia Law

The First Circuit reversed the order of the district court ruling that the automatic stay provision of the Puerto Rico Oversight, Management, and Economic Stability Act (PROMESA) did not apply to proceedings to determine the amount of federal court-ordered payments that the Commonwealth owed to several federally qualified health centers (FQHCs) per a 2010 injunction, holding that the automatic stay applied in this case.In 2003, several FQHCs sought to enjoin the Secretary of the Department of Health of Puerto Rico from failing to reimburse them for their reasonable costs of providing services to Medicaid patients. In 2018, the Commonwealth filed a motion notifying the district court that the Commonwealth had filed for bankruptcy under Title III of PROMESA and, therefore, the litigation was subject to the automatic stay. The district court ruled that the automatic stay did not apply. The First Circuit reversed, holding that certain provisions of PROMESA did not preclude the automatic stay’s application in this case. View "Migrant Health Center, Inc. v. Commonwealth of Puerto Rico" on Justia Law

Trucking, owned by Bourdow, his wife, and their sons, sold and transported dirt, stone, and sand throughout lower Michigan and engaged in construction site preparation and excavation. Trucking employed other members of the Bourdow family. Trucking executed collective bargaining agreements (CBAs), under which it made fringe benefit payments to the Union’s pension fund (Fund). Experiencing financial difficulties, Trucking terminated its CBA. In 2012, the Fund informed Trucking that it had incurred withdrawal liability ($1,163,279) under the Employee Retirement Income Security Act (ERISA), 29 U.S.C 1381(a). Trucking missed its first withdrawal liability payment. The Fund filed suit, which was stayed when Trucking filed for Chapter 7 bankruptcy. The Fund filed a proof of claim. Trucking did not object; the claim was allowed, 11 U.S.C. 502(a). The Fund received $52,034. Contracting was incorporated the day after Trucking missed its first withdrawal payment; it bid on its first project two days before Trucking's bankruptcy filing. Contracting engages in construction site preparation and excavation in lower Michigan. Contracting is owned by the Bourdow sons; it employs other family members and retains the services of other professionals formerly retained by Trucking. The Fund sought to recover the outstanding withdrawal liability, alleging that Contracting was created to avoid withdrawal liability, and is responsible for that liability under 29 U.S.C 1392(c), and that Contracting is the alter ego of Trucking. The Sixth Circuit affirmed summary judgment in favor of the Fund, applying the National Labor Relations Act’s alter-ego test and citing the factors of business purpose, operations, customers, supervision, ownership, and intent to evade labor obligations. View "Trustees of Operating Engineers Local 324 v. Bourdow Contracting, Inc." on Justia Law

Hernandez filed a voluntary Chapter 7 bankruptcy petition in December 2016, reporting one sizable asset: a pending workers’ compensation claim valued at $31,000. To place that claim beyond the reach of creditors, she listed it as exempt under section 21 of the Illinois Workers’ Compensation Act, 820 ILCS 305/21, applicable via 11 U.S.C. 522(b). Two days after filing for bankruptcy, Hernandez settled the claim. Hernandez owed significant sums to three healthcare providers who treated her work-related injuries. The providers objected to her claimed exemption, arguing that 2005 amendments to the Illinois Act enable unpaid healthcare providers to reach workers’ compensation awards and settlements. The bankruptcy court denied the exemption and the district judge affirmed. The Seventh Circuit certified to the Illinois Supreme Court the question: Whether the Illinois Workers’ Compensation Act, as amended, allows care-provider creditors to reach the proceeds of workers’ compensation claims. The court noted that Section 21 has been interpreted by bankruptcy courts to create an exemption for these assets; 2005 amendments imposed a new fee schedule and billing procedure for care providers seeking remuneration. The Illinois Supreme Court has not addressed the interplay between these competing components of state workers’ compensation law. View "Hernandez v. Marque Medicos Fullerton, LLC" on Justia Law

Chicago makes a car’s owner, rather than its driver, liable for many fines, including those for speeding, running a red light, and illegal parking. After their Chapter 13 bankruptcy payment plans were confirmed, the seven debtors incurred, and failed to pay, at least 72 fines aggregating almost $12,000. The debtors argued that a Chapter 13 plan does not provide for the payment of post-petition fines and that the automatic stay of 11 U.S.C. 362 prevented their cars from being towed or booted. The bankruptcy court ordered that the vehicles were the property of the estate for the duration of the payment plan. Reversing the order, the Seventh Circuit noted that the holding could be seen as permission to violate traffic laws with the fines never to be paid. The court noted that, while a Chapter 13 petition transfers most of the debtor’s assets to the bankruptcy estate, upon the confirmation of a payment plan, 11 U.S.C. 1327(b) presumptively returns that property to the debtor, who becomes personally responsible for the expenses of maintaining the property. The bankruptcy court gave no explanation for departing from that scheme. View "City of Chicago v. Marshall" on Justia Law

U.C.C. 9-319(a), which grants a consignee "rights and title to the goods," also grants the consignee an interest in the proceeds of those goods that were generated prior to bankruptcy. The Ninth Circuit affirmed the bankruptcy appellate panel's decision affirming the bankruptcy court's grant of summary judgment for the bankruptcy trustee who brought an adversary proceeding seeking avoidance of transfers.Under settled bankruptcy law, if a consignee files for bankruptcy, any consigned "goods" in its possession become property of the bankruptcy estate unless the seller has previously provided public notice of its interest in the goods (normally by filing a document known as a "financing statement") and thereby "perfected" its interest. The panel held that this rule also extended to the proceeds from goods sold that are held by the consignee on the date it files for bankruptcy. View "IPC (USA), Inc. v. Ellis" on Justia Law

Oakes filed a Chapter 7 bankruptcy petition in 2013, including Franklin, Ohio real property, valued at $160,000. PNC holds a mortgage lien on the property, which was filed in 2003. That mortgage lien was not executed in accordance with the Ohio law; Oakes’ signatures were not acknowledged before a notary public. In 2013, Ohio Rev. Code 1301.401(C) was enacted, providing that “Any person contesting the validity or effectiveness of any transaction referred to in a public record is considered to have discovered that public record and any transaction referred to in the record as of the time that the record was first filed with the secretary of state or tendered to a county recorder for recording.” The Chapter 7 Bankruptcy Trustee sought to avoid the PNC mortgage because it was not properly recorded. In the meantime, the Ohio Supreme Court held that O.R.C. 1301.401 applied to all recorded mortgages and acts to provide constructive notice of a recorded mortgage, even if that mortgage was deficiently executed. The bankruptcy court denied PNC’s motion for judgment, finding that the statutory constructive notice had no effect on a trustee’s avoidance powers as a judicial lien creditor. The Bankruptcy Appellate Panel and Sixth Circuit affirmed. A bankruptcy trustee may avoid a deficiently executed mortgage when acting as a judicial lien creditor. View "Harker v. PNC Mortgage Co." on Justia Law

In 2010, Kermit Jackson filed a complaint against Jennifer Crow arising from a 2008 automobile collision. No substantive action took place in the trial court until 2016 when Crow moved for summary judgment. In the interim, Crow filed for bankruptcy in 2014 listing Jackson as a potential unsecured creditor with a claim of unknown value. Jackson filed a proof of claim with the bankruptcy court and eventually received his pro rata share of the distribution of Crow’s assets. Crow received a bankruptcy discharge in 2014, releasing her from personal liability on the claim. Afterwards, Jackson proposed to move forward with this case against Crow as a nominal defendant, seeking to secure a judgment in order to recover from Crow’s insurer, rather than Crow personally. Crow’s motion for summary judgment argued that: (1) allowing Jackson’s case to go forward against her violated the permanent discharge injunction of 11 U.S.C. secs. 524 and 727; (2) even if this procedure did not violate the Bankruptcy Code’s permanent injunction, naming her as a nominal defendant was (a) not permitted by Idaho case law, the Idaho Rules of Civil Procedure, and Idaho’s no-direct-action rule, and (b) violated the Bankruptcy Code’s policy of providing her a financial “fresh start.” In a case of first impression, the district court ruled in favor of Crow, reasoning that allowing the case to proceed against Crow would violate 11 U.S.C. 524 by impermissibly causing negative economic consequences for Crow. The district court further reasoned that allowing Jackson to proceed directly against Crow’s insurer would violate the no-direct-action rule and permitting Jackson to proceed against Crow nominally was not permitted by the Idaho Rules of Civil Procedure or this Court’s precedent. The Idaho Supreme Court concluded the district court erred in granting Crow summary judgment: the district court misapplied the no-direct-action rule in this case. The judgment was vacated and the matter remanded for further proceedings. View "Jackson v. Crow" on Justia Law

After a settlement in his divorce proceeding, Debtor filed a Chapter 13 bankruptcy petition. Debtor was subsequently confined to jail for failure to pay the court-approved settlement. Debtor filed an adversary complaint seeking damages under 11 U.S.C. 362(k) for violations of the automatic stay by his former wife, Skurko, and her attorney, Gentile, by allowing the post-petition sentencing portion of a pre-petition contempt proceeding to continue despite knowing that the automatic stay was in effect. The bankruptcy court found no violation because the two did not take affirmative action post-petition to try to collect the debt, and there was no affirmative action they could take to prevent the domestic relations judge from jailing Debtor for nonpayment because the contempt motion was already ruled upon. The Sixth Circuit Bankruptcy Appellate Panel reversed. Upon the filing of Debtor’s bankruptcy, it was incumbent upon Gentile and Skurko to seek relief from the stay or to obtain a bankruptcy court determination that the stay did not apply. A creditor cannot sit idly by, appear at a collection proceeding, and allow the debtor to be jailed because he did not pay the judgment creditor’s dischargeable debt. The burden was on the creditor and her attorney to stop the proceeding once the bankruptcy was filed. View "In re Lawrence Wohleber, Jr." on Justia Law