Justia Bankruptcy Opinion Summaries

This appeal arose from the dismissal of a medical malpractice action filed by plaintiff Nicole Alward against defendants Emery Johnston, M.D., Gary Fleischer, M.D., Tung Thuy Nguyen, M.D., Elliot Hospital, and Southern New Hampshire Medical Center. Following a second back surgery, plaintiff consulted with two different attorneys about a potential medical malpractice claim. Ultimately, both attorneys advised the plaintiff that they were unwilling to represent her in a medical malpractice action against the treating physicians and hospitals. As a result, plaintiff believed that her potential claim had no value. Plaintiff then consulted with a bankruptcy attorney, Mark Cornell, in April 2015. She informed Cornell about her potential medical malpractice claim and that other attorneys had declined to pursue it. When Cornell drafted the plaintiff’s petition for chapter 7 bankruptcy, he did not list the potential medical malpractice claim on the plaintiff’s schedule of assets. Cornell also failed to advise plaintiff that she needed to disclose this potential claim to the bankruptcy trustee. At her ex-husband’s suggestion, in February 2016, plaintiff consulted with a third law firm, Swartz & Swartz, P.C., which agreed to represent her and pursue the medical malpractice claim. Plaintiff filed the underlying medical malpractice action against defendants in June 2016. The bankruptcy court issued its order discharging her case in July 2016. In October, defendants moved to dismiss the medical malpractice action, arguing plaintiff should have been judicially estopped from pursuing her medical malpractice claim because she failed to disclose it on her schedule of assets in the bankruptcy case. Plaintiff immediately consulted with new bankruptcy counsel, who moved to reopen her bankruptcy case to "administer a potential asset" and appoint a new trustee. The bankruptcy court granted the motion and appointed a new trustee. Plaintiff then resisted defendants' motion to dismiss, which was denied by the trial court. The trial court ultimately dismissed the case, holding plaintiff was judicially estopped from bringing her medical malpractice claim. The New Hampshire Supreme Court concluded the trial court erred in applying judicial estoppel to this matter, reversed and remanded for further proceedings. View "Alward v. Johnston" on Justia Law

The Ninth Circuit reversed the district court's denial of debtors' motion under 11 U.S.C. 362(k) for attorneys' fees incurred on appeal in successfully challenging the bankruptcy court's award of attorneys' fees to debtors for a willful violation of an automatic stay. The panel held that section 362(k) also authorizes attorneys' fees and costs to the debtor incurred on appeal in successfully challenging an initial award made pursuant to section 362(k).The panel also held that the district court abused its discretion by denying the motion on the alternative ground that debtors failed to comply with a local rule. In this case, the memorandum of points and authorities filed with the district court sufficiently clarified the attorneys' fees and costs. The panel remanded for further proceedings. View "Easley v. Collection Service of Nevada" on Justia Law

At issue was whether 11 U.S.C. 362(c)(3)(A) terminates the automatic stay as to actions against property of the bankruptcy estate.Maine’s Bureau of Revenue Services (MRS) had a claim for a tax debt owed by Leland Smith, a repeat Chapter 13 bankruptcy filer. At issue int his appeal was the scope of the termination of the Bankruptcy Code’s automatic stay for repeat filers like Smith who file a second petition for bankruptcy within a year of the dismissal of a prior bankruptcy case. Thirty days after the filing of his bankruptcy petition, some part of the stay had terminated under section 362(c)(3)(A). Smith argued that the stay only terminated as to actions against the debtor and the debtor’s property, not as to actions against the property of the bankruptcy estate. The bankruptcy court ruled that the automatic stay had terminated in full, including as to property of the estate, and the district court affirmed. The First Circuit affirmed, holding that section 362(c)(3)(A) terminates the entire stay thirty days after the filing of a second petition. View "Smith v. State of Maine Bureau of Revenue Services" on Justia Law

The Ninth Circuit dismissed objector's appeal of the bankruptcy court's order denying his objection to confirmation of a Chapter 9 petition, by the City of Stockton, as equitably moot. In this case, objector filed an inverse condemnation claim against the City in state court and the plan classified the claim as a general unsecured claim.The panel held that objector did not seek a stay of confirmation at any stage; the plan has been substantially consummated; the relief of undoing plan confirmation would bear unduly on innocent third parties; and the bankruptcy court could not fashion relief without undoing the confirmed plan. On the merits, the panel held that the Takings Clause exempted objector's unsecured claim from reorganization. In reality, objector's purported property interest was a claim for monetary relief. View "Cobb v. City of Stockton" on Justia Law

The Bankruptcy Appellate Panel dismissed appellants' appeal of the bankruptcy court's denial of their "Amended Motion for Determination that Confirmation Order Does Not Bar a State Court Action Relating to the Springfield, Illinois Coal Contract." The panel held that the bankruptcy court's order was not final, and thus the panel did not have jurisdiction to review it. In this case, the bankruptcy court did not direct entry of a final judgment or expressly determine there was no just reason for delay in entering a final judgment. View "Frakes v. Arch Coal, Inc." on Justia Law

For a debt to be "provided for" by a plan under 11 U.S.C. 1328(a), the bankruptcy plan must make a provision for or stipulate to the debt in the plan. The Eleventh Circuit affirmed the bankruptcy court and district court, holding that debtor's bankruptcy plan did not discharge the Credit Union's mortgage. In this case, debtor's plan did nothing more than state that the Credit Union's mortgage would be paid outside the plan, but it was not "provided for" and was not discharged.The court further held that, even if the debt was provided for, discharge of the debt would violate section 1322(b)(2) by modifying the Credit Union's right under the original loan documents to obtain a deficiency judgment against debtor. Finally, the issue of whether the Credit Union's failure to file a proof of claim for its first mortgage resulted in the mortgage's discharge was not preserved for appeal. View "Dukes v. Suncoast Credit Union" on Justia Law

When Revel entered Chapter 11 bankruptcy, its tenant, IDEA, continued to operate nightclubs and a beach club on Revel's Atlantic City casino premises. IDEA sought to protect its right to continue operating by filing an adversary proceeding. Polo became the defendant in the proceeding (and IDEA’s landlord) when the court approved a Purchase Agreement. The Sale Order authorized Polo’s purchase of Revel’s assets “free and clear of all liens, claims, encumbrances and other interests of any kind” under 11 U.S.C. 363(f). The Order contained carve-out provisions that expressly preserved certain rights relating to IDEA’s continued use of the casino premises under the Lease. After entering the Order, the Bankruptcy Court granted Revel’s long-pending motion to reject the Lease retroactively. IDEA filed a notice of its election to retain its rights as a tenant under section 365(h), as expressly allowed by the Sale Order. In an omnibus order, the Bankruptcy Court clarified major aspects of the post-petition landlord–tenant relationship between IDEA and Polo. The Third Circuit affirmed the Bankruptcy Court and the district court. IDEA is permitted to reduce its rental obligations under a tenant-protective provision, 11 U.S.C. 365(h), the Lease, and the doctrine of equitable recoupment, regardless whether its rights arose before or after Revel filed for bankruptcy and regardless whether they arose before or after Revel rejected the Lease. View "Revel AC Inc v. IDEA Boardwalk, LLC" on Justia Law

In 2008, IMMC filed a Chapter 11 bankruptcy petition in the District of Delaware. The liquidating trustee filed an adversary proceeding, alleging that Appellees, IMMC’s former officers and directors, had breached their fiduciary duties by pursuing a risky and costly litigation strategy in an unrelated suit against a competitor, overcompensating themselves in the process. In 2011, the Bankruptcy Court held that it lacked jurisdiction to hear the adversary proceeding, rejecting arguments that the adversary proceeding was a “core” proceeding or that the adversary proceeding was a non-core proceeding “related to” a Chapter 11 case. The trustee did not appeal. The Bankruptcy Court then considered the trustee’s request to transfer the adversary proceeding to the Eastern District of Pennsylvania under 28 U.S.C. 1631 and concluded that it lacked authority to transfer the adversary proceeding. The district court and Third Circuit agreed. The Bankruptcy Court lacked authority over the claims in the adversary proceeding. Exercising jurisdiction over the adversary proceeding so as to transfer it under section 1631 would have been ultra vires, regardless of whether bankruptcy courts fall under section 610’s definition of courts as referenced in section 1631. The court noted that bankruptcy courts have limited authority. View "IMMC Corp. v. Erickson" on Justia Law

In May 1995, Charlene’s parents created CJPM Family Partnership, Ltd. Charlene’s parents are the general partners. Charlene, her parents, and her siblings are limited partners of CJPM. Philip and Charlene married in June 1995. CJPM made three loans to Philip totaling $150,000, which were credited against Charlene’s partnership interest. Philip did not repay the debt. The two divorced in 2011. Their stipulated dissolution judgment awarded Charlene all interest to any community interest in CJPM, assigned to Philip, as his separate obligation, his debt to CJPM, and required Philip to indemnify Charlene from that debt. Philip filed for Chapter 7 bankruptcy. All of his debts, including his CJPM loan, were discharged. Years later, Charlene unsuccessfully moved to reopen bankruptcy proceedings to obtain a ruling that Philip’s debt to CJPM was nondischargeable. Charlene then moved to recover Philip’s CJPM debt in state court. The trial court determined that Philip’s CJPM debt was nondischargeable under the 11 U.S.C. 523(a)(15) exemption and calculated that Philip owes Charlene $345,963. The court of appeal affirmed. When the nature of a debt is such that its discharge will directly and adversely impact the finances of the debtor’s spouse or former spouse, it is nondischargeable in bankruptcy, even if it is not directly payable to the spouse. View "Marriage of Vaughn" on Justia Law

Wilson filed her voluntary Chapter 7 bankruptcy petition in December 2013, electing to take the federal exemptions and listing the “wildcard” exemption. Wilson’s condominium was valued at $250,000 and was subject to a $246,440 mortgage. Wilson listed her exemption as $3,560, the equity in her home as of the petition date. The value of the property increased. In July 2016, Wilson amended her Schedule C, claiming “100% of fair market value, up to any applicable statutory limit,” stating the value of the property at $412,500, and listing Washington’s homestead exemption as the basis for the amended exemption. The bankruptcy court held that an amendment to update the value of an exemption in light of post-petition changes in value was not permitted. The district court and the Ninth Circuit affirmed. Declining to decide whether the definition of the value of exemptions in 11 U.S.C. 522(a)(2) applies to state law exemptions as well as to federal ones, the court concluded that under section 541(a)(1) the debtor’s interests in property transfer to the bankruptcy estate as of the commencement of the bankruptcy action. Following this transfer, any appreciation enures to the bankruptcy estate. The debtor’s exemption was limited to her equity in the property as of the date of her bankruptcy petition. View "Wilson v. Rigby" on Justia Law