Justia Bankruptcy Opinion Summaries

The trustee's adversary complaint contesting the basis for debtor's exemptions qualified as an objection to those exemptions under Federal Rules of Bankruptcy Procedure 4003. The Ninth Circuit affirmed a bankruptcy court's turnover order denying debtor's claimed exemptions. In this case, before filing a petition in bankruptcy, debtor transferred his interests in two properties into a tenancy-by-the-entirety estate, and subsequently claimed an exemption for those interests under 11 U.S.C. 522(b)(3). The panel rejected debtor's argument that the trustee had failed to make a timely objection to his claimed exemptions, and therefore the exemptions were valid notwithstanding the avoidance of the transfer. View "Lee v. Field" on Justia Law

The Fourth Circuit affirmed the district court's decision affirming the bankruptcy court's ruling denying the bankruptcy trustee's objection to exemptions claimed by debtors. In this case, the district court concluded that the applicable bankruptcy statute authorized debtors to utilize Louisiana's state law statutory scheme to exempt personal property in West Virginia from debtors' bankruptcy estate. The court agreed with the well-reasoned analysis of the district court that the bankruptcy court correctly adopted the state-specific interpretation of 11 U.S.C. 522(b)(3)(A). The court explained that the district court's adoption of the state-specific approach was consistent with the rulings of at least two sister appellate courts that have addressed the issue. View "Sheehan v. Ash" on Justia Law

NPC’s adversary proceeding against the Chapter 7 Trustee and his surety alleged that the trustee breached his fiduciary duties with respect to one of the Debtor’s assets, a former Benton Harbor manufacturing facility. NPC’s attorney (Demorest) served five non-parties with subpoenas duces tecum under Federal Rule of Civil Procedure 45. The ensuing discovery dispute, including several motions, hearings, and orders, resulted in an award of attorney fees and costs to the non-parties, $104,770.00 to one group and $61,417.50 to another. After a subsequent finding of civil contempt for failure to pay, payment was made and the bankruptcy court ordered payment of an additional $4,725.00 in attorney fees and costs incurred in connection with the contempt proceedings. The district court and Sixth Circuit affirmed. The bankruptcy court specifically found, after a case-specific inquiry, that the subpoenas issued to the non-parties were unduly burdensome, given the undisputedly broad scope of the requests and the temporal reach of the requests. As an experienced commercial litigator, Demorest would have known that complying with such subpoenas would involve considerable time and resources, implicate significant concerns about customer privacy, and require review for privileged communications and attorney work product. The bankruptcy court did not abuse its discretion in finding that sanctions were warranted. View "New Products Corp. v. Dickinson Wright PLLC" on Justia Law

The Committee, which represented more that 400 clergy sexual abuse claimants, appealed the district court's decision affirming the bankruptcy court's denial of the Committee's motion for substantive consolidation of debtor, the Archdiocese, and over 200 affiliated non-profit non-debtors (Targeted Entities). The Eighth Circuit held that the Targeted Entities were entitled to the protections under 11 U.S.C. 303(a), and could not be involuntarily substantively consolidated with the Archdiocese. In this case, the Committee failed to plausibly allege sufficient facts to negate the non-profit non-debtor status of the Targeted Entities. View "The Official Committee of Unsecured Creditors v. The Archdiocese of Saint Paul and Minneapolis" on Justia Law

In Jansen’s bankruptcy case, Gleason brought an adversary proceeding, 11 U.S.C. 523(a)(2)(A), regarding a default judgment ($400,000) obtained in a case involving a phony investment scheme. Gleason unsuccessfully argued that Jansen was not entitled to relitigate that judgment. A bench trial revealed that Gleason gave $141,000 to Jansen’s company, Baytree, for closing costs in a business acquisition. The deal never closed and Jansen never fully refunded the money. Gleason’s checks, endorsed by “Talcott Financial … D/B/A Baytree,” were deposited, then disappeared. Jansen later pleaded guilty to unrelated money-skimming charges, involving a bank account in the name of Talcott Financial, which was involuntarily dissolved in 1999. Jansen testified that the “Talcotts” were two different businesses with separate accounts. The bankruptcy court credited Jansen’s story and concluded the debt was dischargeable. Meanwhile, Jansen tried to withdraw his guilty plea. Despite a warning that invoking the privilege against self-incrimination could lead to an adverse inference for bankruptcy purposes, Jansen asserted that privilege repeatedly. Gleason filed the “merits appeal,” then found publicly-available records in previous litigation, including bank statements. The bankruptcy court declined Gleason's motion for relief from the judgment, reasoning the evidence, easily found on PACER, was not new. Gleason then filed a “Rule 60 appeal.” After procedural confusion, during which the merits appeal was dismissed, the district court and Seventh Circuit affirmed. The district court’s mistaken assumption that it could reach the merits of the case in the later-filed Rule 60 appeal is not enough to revive the dismissed merits appeal. View "Gleason v. Jansen" on Justia Law

The Eighth Circuit affirmed the imposition of sanctions on Ross. H. Briggs for contempt of an order and for misleading the bankruptcy court. The court held that the bankruptcy court had authority to enter sanctions for events that occurred while trying to enforce the order compelling turnover and the show-cause orders; the bankruptcy court did not abuse its discretion in holding Briggs in contempt where the bankruptcy court gave Briggs multiple opportunities to comply with the order compelling turnover, specifically outlining methods of compliance; Briggs's contempt was a sufficient basis for the sanctions; not invoking Rule V of the district court's disciplinary-enforcement rules was not a due process violation; and neither Local Rule 2094(B) nor Rule VII provided a basis for the bankruptcy court's chief judge to hear Briggs's reinstatement motion. View "Briggs v. Hon. Charles Rendlen" on Justia Law

The Eleventh Circuit vacated the district court's dismissal of First National's deficiency claims and remanded for the district court to consider, in the first instance, whether the dismissal of defendant's Chapter 11 case without a discharge had any effect on First National's ability to pursue its deficiency claims. After the parties had filed their briefs in this appeal, defendant moved the bankruptcy court to dismiss his Chapter 11 case and the bankruptcy court granted the motion to dismiss. The court explained that, given the dismissal of defendant's underlying bankruptcy petition, none of defendant's debts or liabilities were discharged and the automatic stay was terminated. View "First National Bank of Oneida, N.A. v. Brandt" on Justia Law

The Ninth Circuit affirmed the Bankruptcy Appellate Panel's opinion reversing the bankruptcy court's order entering contempt sanctions against creditors for knowingly violating the discharge injunction in the Chapter 7 case. The panel held that creditors did not knowingly violate the discharge injunction because they had a subjective good faith belief that the discharge injunction did not apply to their state-court claim for post-petition attorneys' fees. The panel explained that creditors' subjective good faith belief, even if unreasonable, insulated them from a finding of contempt. View "In re Taggert" on Justia Law

The Bankruptcy Appellate Panel affirmed the bankruptcy court's orders confirming debtors' chapter 13 plan. In order for the anti-modification provisions of 8 U.S.C. 1322(b)(2) to apply, creditors' claim must both be secured only by an interest in real property and the real property must be the debtor's principal residence. The panel held that debtors could modify creditor's secured plan because debtors' manufactured home was not a fixture under Iowa law. In this case, the panel saw no reason to disturb the bankruptcy court's finding that debtors' testimony was credible and that they did not intend to make the home a permanent accession to the real estate. View "The Paddock, LLC v. Bennett" on Justia Law

At issue was whether the proceeds of a multi-million-dollar sale of certain railroad lines constituted property of the bankruptcy estate.Debtor purchased the assets of several United States and Canadian railways. Debtor obtained loans from the Federal Railroad Administration (FRA) and Railway and received funds from Investors. Debtor later proposed to sell 233 miles of track to the State of Maine. To make this possible, Debtor and the FRA amended the existing loan agreement so that the FRA provided a limited waiver of its senior lien over the lines in exchange for a replacement lien on certain of Debtor’s property in Canada. The limited waiver was conditioned on Debtor’s agreement that, upon closing of the sale, Debtor was to pay the FRA, Investors, and Railway certain sums in a “waterfall of disbursements.” After Maine purchased the lines, Debtor distributed the proceeds in accordance with the waterfall provision of the amendment. Debtor subsequently filed a voluntary petition for protection under Chapter 11 of the Bankruptcy Code. The Trustee instituted an adversary proceeding against Railway seeking to avoid its waterfall disbursement as constructively fraudulent under section 5(b) of Maine’s Uniform Fraudulent Transfer Act. The bankruptcy court dismissed the complaint with prejudice for failure to state an actionable claim. The First Circuit affirmed, holding that the waterfall disbursement to Railway did not consist of property of Debtor’s estate because this was a case in which a senior lien holder imposed conditions that precluded Debtor from exercising effective control over the sale proceeds. View "Keach v. Wheeling & Lake Erie Railway Co." on Justia Law