Justia Bankruptcy Opinion Summaries

Appellees filed a state court action, alleging that Peace caused property damage when he interfered with the water flow to the Appellees' Cleves, Ohio property. That lawsuit was stayed when Peace filed a chapter 7 bankruptcy petition. Appellees had already hired Abercrombie to provide an expert report, which was filed in the state litigation. After Peace’s bankruptcy filing, Appellees filed an adversary proceeding under 11 U.S.C. 523(a)(6), alleging that Peace owed them a non-dischargeable debt. The bankruptcy court agreed. Peace filed an untimely notice of appeal. The Bankruptcy Appellate Panel dismissed. Peace filed a Rule 60(b) motion for relief from judgment, asserting that Appellees’ expert witness, Abercrombie, committed fraud by giving false testimony and that Peace’s discovery that Abercrombie’s data sources were nonexistent was “new evidence.” The bankruptcy court denied the motion as untimely and stated that Peace failed to show that his evidence could not have been discovered with reasonable diligence and there was no clear proof that Abercrombie’s testimony was false. The Bankruptcy Appellate Panel affirmed. Peace made substantially similar arguments to the bankruptcy court in his initial post-trial brief. The bankruptcy court acted within its discretion in treating the motion as an attempt to relitigate issues previously decided and as an improper substitute for an appeal. View "In re Peace" on Justia Law

Fulson was the indirect equity owner of the Chapter 7 Debtor, based on his ownership of Nicole Gas, the Debtor’s sole owner. While Debtor’s bankruptcy was pending Fulson filed a state court complaint against the Columbia Gas entities under the Ohio Corrupt Practices Act (OCPA), alleging that the companies caused him indirect injury by harming Debtor; the only damages Fulson pled were those Debtor suffered—he did not claim any unique individual damages. Ransier, as Bankruptcy Trustee, eventually settled those claims on behalf of Debtor’s estate. Appellants, representing Fulson's probate estate, unsuccessfully objected. Ransier moved for contempt against Appellants, arguing that Fulson had merely a derivative claim based on Debtor’s injury, for damages that duplicated Debtor’s damages, that the claim became the property of Debtor’s bankruptcy estate, and that Appellants violated Debtor’s automatic stay. The Bankruptcy Court agreed, rejecting an argument that the claim was for “indirect” injury that fell within OCPA’s “directly or indirectly injured” language. The Bankruptcy Court held Appellants in contempt for violating 11 U.S.C. 362(a)(3) and awarded Ransier $91,068.00. The Ohio Supreme Court declined to answer the certified question: Whether a shareholder of a corporation has standing to bring a claim individually (as opposed to merely derivatively) under OCPA. The Bankruptcy Appellate Panel Judge then affirmed the contempt order and sanction award. OCPA did not provide Fulson an individual claim against the Columbia Gas entities. View "In re: Nicole Gas Production, Ltd." on Justia Law

Perkins has actively operated a 200-acre Kentucky farm since 1970. Her operation expanded to cultivate approximately 9,500 acres in various partnerships. Perkins encountered financial trouble in 2014. The partnerships filed Chapter 11 bankruptcy cases. Perkins retired from teaching. The Chapter 11 bankruptcies were dismissed after liquidating substantially all of the partnerships’ assets and making over four million dollars of payments to BB&T. In 2016 Perkins sought Chapter 12 bankruptcy protection. Creditors' proofs of claim totaled $4,012,908.79. In the preceding year, Perkins received $279,000 of gross income from her farm, $764,472 from her partnerships, $161,571 of capital gains from equipment sales, and $132,360 from wages, pension, and social security. BB&T objected to her plan, which projected that $18,950 could be paid annually to unsecured creditors over the plan’s five-year life and that a Chapter 7 liquidation would produce no payments to unsecured creditors. The plan proposed to pay BB&T annual installments over 20 years at 4.5% interest. The bankruptcy court rejected BB&T’s objection and confirmed the plan. The Bankruptcy Appellate Panel affirmed. Chapter 12 relief, 11 U.S.C. 109(f), is available to family fishermen and family farmers, defined as an “individual . . . engaged in a farming operation whose aggregate debts do not exceed $4,153,150,” and who receives more than half of her gross income from “such farming operation.” The bankruptcy court properly found Perkins to be a family farmer and confirmed the plan as feasible, providing proper treatment to secured claims, and meeting the best interests of creditors test. View "In re: Perkins" on Justia Law

The proceeds of a homestead sold after the filing of a petition for Chapter 7 bankruptcy remain exempt from the debtor's estate if they are not reinvested within the time frame required to invoke the proceeds rule of Texas homestead law. In Hawk v. Engelhart, 871 F.3d 287 (5th Cir. 2017), the Fifth Circuit held that funds withdrawn from an exempted retirement account after the filing of a Chapter 7 bankruptcy do not lose their exempt status even if the money is not redeposited in a similar account within 60 days pursuant to Texas's proceeds rule. In this case, the court saw no reason why Hawk's analysis should not apply to Texas's homestead exemption. Therefore, the homestead here was exempt because it was owned at the commencement of debtor's bankruptcy. Accordingly, the court reversed the district court's judgment and reinstated the bankruptcy court's order dismissing the adversary proceeding. View "Lowe v. DeBerry" on Justia Law

The Second Circuit affirmed the bankruptcy court's denial of Credit One's motion to compel arbitration on the basis of a clause in the cardholder agreement between Credit One and debtor. The court held that debtor's claim was not arbitrable because the dispute concerned a core bankruptcy proceeding and arbitrating the matter would present an inherent conflict with the goals of the Bankruptcy Code. In this case, the successful discharge of debt was not merely important to the Bankruptcy Code, it was its principal goal. The court explained that an attempt to coerce debtors to pay a discharged debt was thus an attempt to undo the effect of the discharge order and the bankruptcy proceeding itself. View "In re Orrin S. Anderson" on Justia Law

Lakeridge. a corporation with a single owner (MBP), filed for Chapter 11 bankruptcy, owing U.S. Bank $10 million and MBP $2.76 million. Lakeridge submitted a reorganization plan, proposing to impair the interests of both. U.S. Bank refused, blocking Lakeridge’s reorganization through a consensual plan, 11 U.S.C. 1129(a)(8). Lakeridge then turned to a “cramdown” plan, which would require consent by an impaired class of creditors that is not an “insider” of the debtor. An insider “includes” any director, officer, or “person in control” of the entity. MBP, unable to provide the needed consent, sought to transfer its claim to a non-insider. Bartlett, an MBP board member and Lakeridge officer, offered MBP’s claim to Rabkin for $5,000. Rabkin purchased the claim and consented to Lakeridge’s proposed reorganization. U.S. Bank objected, arguing that Rabkin was a nonstatutory insider because he had a “romantic” relationship with Bartlett. The Bankruptcy Court, Ninth Circuit, and Supreme Court rejected that argument. The Ninth Circuit correctly reviewed the Bankruptcy Court’s determination for clear error (rather than de novo), as “mixed question” of law and fact: whether the findings of fact satisfy the legal test for conferring non-statutory insider status. The standard of review for a mixed question depends on whether answering it entails primarily legal or factual work. Using the Ninth Circuit’s legal test for identifying such insiders (whether the transaction was conducted at arm’s length, i.e., as though the parties were strangers) the mixed question became: Given all the basic facts, was Rabkin’s purchase of MBP’s claim conducted as if the two were strangers? Such an inquiry primarily belongs in the court that has presided over the presentation of evidence, i.e., the bankruptcy court. View "U. S. Bank N. A. v. Village at Lakeridge, LLC" on Justia Law

After a Montana state court issued a series of judgments against Donald Tangwall and his family, the family members transferred two pieces of property to the “Toni 1 Trust,” a trust allegedly created under Alaska law. A Montana state court and an Alaska bankruptcy court found that the transfers were made to avoid the judgments and were therefore fraudulent. Tangwall, the trustee of the Trust, then filed this suit, arguing that Alaska state courts have exclusive jurisdiction over such fraudulent transfer actions under AS 34.40.110(k). The Alaska Supreme Court concluded this statute could not unilaterally deprive other state and federal courts of jurisdiction, therefore it affirmed dismissal of Tangwall’s complaint. View "Toni 1 Trust v. Wacker" on Justia Law

Valley agreed to purchase Bedford Downs’ stock for $55 million if it got the last harness-racing license in Pennsylvania, Valley got the license and arranged for Credit Suisse to wire $55 million to third-party escrow agent Citizens Bank. Bedford Downs shareholders, including Merit, deposited their stock certificates into escrow. Citizens disbursed the $55 million according to the agreement. Merit received $16.5 million. Valley was unable to achieve its goal of opening a racetrack casino and, with its parent company, Centaur, filed for Chapter 11 bankruptcy. FTI, the trustee, sought to avoid the transfer to Merit for the sale of Bedford stock, arguing that it was constructively fraudulent under 11 U.S.C. 548(a)(1)(B). Merit contended that the section 546(e) safe harbor barred FTI from avoiding the transfer because it was a “settlement payment . . . made by or to (or for the benefit of)” two “financial institutions,” Credit Suisse and Citizens Bank. The Seventh Circuit held that section 546(e) did not protect transfers in which financial institutions served as mere conduits. A unanimous Supreme Court affirmed. The only relevant transfer for purposes of the 546(e) safe harbor is the transfer that the trustee seeks to avoid and not its component parts. FTI sought to avoid the Valley-to-Merit transfer; neither Valley or Merit is a covered entity, so the transfer falls outside of the 546(e) safe harbor. View "Merit Management Group, LP v. FTI Consulting, Inc." on Justia Law

The Fourth Circuit affirmed the bankruptcy court's denial of the receiver's motion to dismiss creditor's bankruptcy petition for cause under 11 U.S.C. 707(a). The court held that the bankruptcy court did not abuse its discretion in denying the motion to dismiss where creditor's decision to file for bankruptcy did not arise to the level of bad faith. The court noted that the standard of review was of paramount importance here where the court did not ask whether it necessarily would have reached the same result as the bankruptcy court, but did note the bankruptcy court's greater familiarity with creditor's case and the fact that the bankruptcy court gave good and sound reasons for ruling as it did. View "Janvey v. Romero" on Justia Law

SPV, the assignee of Optimal Strategic, filed suit against UBS and its affiliated entities and individuals (collectively, Access), alleging that UBS and Access aided and abetted the Bernard L. Madoff Investment Securities LLC and Bernard L. Madoff by sponsoring and providing support for two European-based feeder funds. The district court subsequently denied SPV's motion to remand the matter to state court and then granted separate motions to dismiss the complaint. The Second Circuit held that it had jurisdiction over this appeal; this litigation was "related to" the Madoff/BLMIS bankruptcies; the USB defendants lacked sufficient contacts with the United States to allow the exercise of general jurisdiction; the connections between the USB Defendants, SPV's claims, and its chosen New York forum were too tenuous to support the exercise of specific jurisdiction; and the court rejected SPV's two different theories of proximate cause. View "SPV OSUS Ltd. v. UBS AG" on Justia Law