Justia Bankruptcy Opinion Summaries

The doctrine of equitable mootness, which permits courts sitting in bankruptcy appeals to dismiss challenges when effective relief would be impossible, applies in the Chapter 9 context. The Eleventh Circuit held that it would be appropriate to note federalism concerns when deciding whether the doctrine should bar an appeal in a particular bankruptcy case. In this case, equitable mootness barred the ratepayers' appeal because they have never asked any court to stay the implementation of the plan that the bankruptcy court confirmed and thus no court has ever stayed the implementation of the plan. Furthermore, the County and others have taken significant and largely irreversible steps in reliance on the unstayed plan confirmed by the bankruptcy court. Finally, after considering notions of fairness by looking at the merits and the public interest, the court held that dismissing the ratepayers' appeal was appropriate. Therefore, the court reversed the district court's order and remanded for dismissal of the ratepayers' appeal from the plan confirmed by the bankruptcy court. View "Bennett v. Jefferson County" on Justia Law

The Supreme Court revoked certification in this case certified to it by a bankruptcy court to answer a question of state law because the issues were not adequately briefed and because of the potential impact of the automatic stay on the property settlement at issue in this case.The bankruptcy court certified two questions of Utah law concerning the overlap of family and bankruptcy law. The Court noted that the parties failed to provide the briefing needed to answer the questions here and that the martial property division at issue in this case may have violated the automatic stay that accompanies a bankruptcy petition’s filing. Accordingly, because of the insufficient briefing and the problematic procedural posture, the Supreme Court declined to answer the questions and revoked certification. View "In re Deborah Michelle Kiley" on Justia Law

After debtor filed for bankruptcy under Chapter 11, the trustee filed an adversary proceeding against Blue Bell to recover from Blue Bell more than $500,000 in a series of payments that Blue Bell had received from debtor during the 90-day period preceding debtor's bankruptcy filing. Blue Bell acknowledged that the payments it received from debtor constituted preferences under 11 U.S.C. 547(b), but that it had a new-value defense.The Eleventh Circuit vacated the bankruptcy court's judgment and held that the language in Charisma Investment Company, N.V. v. Airport Systems, Inc. (In re Jet Florida System, Inc.), 841 F.2d 1082 (11th Cir. 1988), relied on by the bankruptcy court was dictum and, as such, it did not bind the court. The court construed section 547(c)(4) anew, and held that it did not require new value to remain unpaid. Therefore, the court remanded for a new calculation of Blue Bell's preference liability. View "Kaye v. Blue Bell Creameries, Inc." on Justia Law

Plaintiffs suffer from asbestos disease as a result of exposure to Grace's Montana mining and processing operations and sought to hold Grace’s insurers (CNA), liable for negligence. CNA sought to enforce a third-party claims channeling injunction entered under Grace’s confirmed plan of reorganization to bar the claims. Bankruptcy Code section 524(g) allows an injunction that channels asbestos mass-tort liability to a trust set up to compensate persons injured by the debtor’s asbestos; channeling injunctions can also protect the interests of non-debtors, such as insurers.The Third Circuit rejected the Plaintiffs’ argument that the Plan and Settlement Agreement’s terms preserved all of CNA’s duties as a workers’ compensation insurer in order to avoid preempting the state’s workers’ compensation laws. The court then applied a three-part analysis: Section 524(g)(4)(A)(ii) allows injunctions to “bar any action directed against a third party who is identifiable . . . and is alleged to be directly or indirectly liable for the conduct of, claims against, or demands on the debtor [that] . . . arises by reason of one of four statutory relationships between the third party and the debtor.” CNA is identified in the Injunction, satisfying the first requirement. Analysis of the second factor requires review of the law to determine whether the third-party’s liability is wholly separate from the debtor’s liability or instead depends on it. The Bankruptcy Court must make that determination, and, with respect to the “statutory relationship” factor, should review the law and determine whether CNA’s provision of insurance to Grace is relevant legally to the Montana Claims. View "W.R. Grace & Co. v. Carr" on Justia Law

Debtor Mark Taylor sought to avoid a set of liens that the William F. Sandoval Irrevocable Trust (the “Trust”) recorded on his home, which Taylor jointly owned with his former wife. The Bankruptcy Code provided that a debtor may avoid certain liens that impair an exemption, and set forth a formula to determine the extent to which an exemption is impaired. At issue before the Tenth Circuit Court of Appeals was how that formula applied to a homestead exemption when a home is jointly owned with a non-debtor. Based on the plain language of 11 U.S.C. 522(f) and the structure of the Bankruptcy Code as a whole, the Court concluded the impairment calculation had to use the value of other liens on the home corresponding to the debtor’s percentage of ownership, rather than the full amount of the liens. View "William F. Sandoval Trust v. Taylor" on Justia Law

The Second Circuit affirmed the district court's decision affirming the bankruptcy court's dismissal of a Chapter 7 involuntary bankruptcy petition creditor filed under 11 U.S.C. 303(a) against debtor. The bankruptcy court dismissed for cause under 11 U.S.C. 707(a) after concluding that the petition was simply a judgment enforcement tactic. The court held that creditor was not substantially prejudiced by being denied access to bankruptcy remedies and that the interests of debtor and of the bankruptcy system as a whole were advanced by dismissal. View "Wilk Auslander LLP v. Murray" on Justia Law

Under Section 506(a) of the Bankruptcy Code, delivery and setup costs should not be included in the valuation of a retained mobile home in a Chapter 13 proceeding. The Fifth Circuit affirmed the district court's judgment in a Chapter 13 bankruptcy action where the bankruptcy plan allowed her to retain her mobile home and pay 21st Mortgage the secured value (plus 5% interest) over the life of the plan. The court held that, in light of the statutory requirements and the Supreme Court's determination that the "proposed disposition or use" of collateral is crucial to its valuation, delivery and setup costs must not be included in the valuation of a retained mobile home under section 506(a). Therefore, the court held that the delivery and setup costs should not be included in debtor's mobile home valuation. View "21st Mortgage Corp. v. Glenn" on Justia Law

In this consolidated appeal from adversary proceedings challenging an alleged diversion of funds to which Peaje Investments LLC (Peaje) claimed it was entitled, the First Circuit held that Peaje did not hold a statutory lien on certain toll revenues of the Puerto Rico Highways and Transportation Authority (Authority).The Authority and the Commonwealth of Puerto Rico commenced bankruptcy cases under Title III of the Puerto Rico Oversight, Management, and Economic Stability Act, 48 U.S.C. 2101-2241. Peaje, the beneficial owner of $65 million of uninsured bonds issued by the Authority, instituted adversary proceedings alleging that its bonds were secured by a lien on certain Authority toll revenues and that the Authority and the Commonwealth of Puerto Rico were diverting funds to which Peaje was entitled under the lien and using them for purposes other than paying the bonds. The First Circuit affirmed the Title III court’s primary grounds for its order denying Peaje’s request for a preliminary injunction and relief from the stay and otherwise vacated and remanded the matter, holding (1) Peaje did not hold a statutory lien on Authority toll revenues; and (2) now that it is clear that Peaje has no statutory lien, the district court’s alternative reasons for denying relief should be reconsidered de novo on an updated record. View "Peaje Investments LLC v. Puerto Rico Highways & Transportation Authority" on Justia Law

The First Circuit vacated the district court’s order denying the request for relief from a stay of actions against PREPA sought by holders of revenue bonds issued by PREPA (the bondholders), holding that the district court erred in concluding that the Puerto Rico Oversight, Management, and Economic Stability Act (PROMESA) sections 305 and 306, 48 U.S.C. 2165, 2166, precluded it from granting such relief.PREPA filed for bankruptcy under Title III of PROMESA, which triggered an automatic stay of most actions by creditors against PREPA. The bondholders, who accused PREPA of breaching a promise to seek a rate increase sufficient to cover debt payments, of failing to collect on customer accounts, and of mismanaging operations, asked for relief from the automatic stay in order to file suit to have a receiver appointed to manage PREPA and seek a rate increase sufficient to cover debt servicing. The Title III court denied the bondholders’ request for relief from the automatic stay. The First Circuit vacated the court’s order and remanded the matter for further proceedings, holding (1) the court erred in concluding that PROMESA sections 305 and 306 prohibited it from granting relief; and (2) the record was inadequate to find support upon which to rest the Title III court’s finding that “cause” did not exist under 11 U.S.C. 362(d)(1) to lift the stay. View "Puerto Rico Electric Power Authority (PREPA) v. Ad Hoc Group of PREPA Bondholders" on Justia Law

The Fifth Circuit affirmed the district court's affirmance of the bankruptcy court's judgment, holding appellants liable for a non-dischargeable judgment stemming from appellee's fraudulent misrepresentation, breach of contract, and common law fraud claims. Determining that it had jurisdiction over the appeal, the court held that there was no error in the bankruptcy court's conclusion that appellee's injuries were not only foreseeable, but directly attributable and proximately caused by Appellant Saenz's misrepresentations. Furthermore, the court could not say that the bankruptcy court clearly erred in rendering its non-dischargeable judgment or that the district court erred in affirming the bankruptcy court. View "Saenz v. Gomez" on Justia Law