Justia Bankruptcy Opinion Summaries

In this consolidated appeal stemming from the bankruptcy of nineteen companies that were tenants-in-common of a student housing development called the Reserve, the Fifth Circuit reversed in part and affirmed in part the bankruptcy court's judgment. The court reversed the bankruptcy court's reduction of UTSA's share of net proceeds from 21.17% to 3.14%, based on serious procedural deficiencies, the lack of notice to UTSA regarding the imposition of a constructive trust, and the remedy's violation of the terms of the Code. The court held, however, that the bankruptcy court did not err in reducing Woodlark's proof of claims from $510,475,98 to $410,097.78. The court remanded for further proceedings. View "UTSA Apartments, LLC v. UTSA Apartments 8 LLC" on Justia Law

The Bankruptcy Appellate Panel (BAP) affirmed the bankruptcy court's orders dismissing the trustee's complaint and denying leave to file a further amended complaint. The panel held that the ultimate issue presented was whether the finality of an auction sale order, together with statutory provisions and procedural rules, effectively defeated the trustee's claims. The panel held that the bankruptcy court properly dismissed the adversary proceeding; the trustee's allegations in the amended complaint against defendants were inconsistent with the specific findings of the sale order; the findings regarding proper notice, lack of collusion, good faith, fair and reasonable consideration, etc., were all necessary and integral to the bankruptcy court's approval of the sale; the panel rejected the trustee's claim of privity as irrelevant; the trustee's reliance on Czyzewski v. Jevic Holding Corp., ___ U.S. ___, 137 S. Ct. 973 (2017), where the Supreme Court held that structured dismissals must follow the same priority rules as required for a Chapter 11 plan confirmation, was misplaced; and whether the trustee liked the specific findings of the sale order or not, they were the detailed findings of the bankruptcy court and were not appealed and thus final. The panel rejected the trustee's remaining claims. View "Fulmer v. Fifth Third Equipment Finance Co." on Justia Law

Blake is a below‐median income debtor who filed for Chapter 13 bankruptcy. In her proposed bankruptcy plan, Blake sought to retain her annual earned income tax credit and a portion of her tax over‐withholdings. Trustee Marshall objected to confirmation of Blake’s plan, arguing that Blake is required to turn over her entire tax refund for use as additional plan payments. The bankruptcy court confirmed the plan over Marshall’s objection, reasoning that tax credits are income under the Bankruptcy Code that must be taken into account when calculating the debtor’s projected disposable income for plan payments but that Blake could retain her tax refund if she prorated it as monthly income and offset it with reasonably necessary expenses to be incurred throughout the year. The Seventh Circuit affirmed. Tax credits are income under the Bankruptcy Code; below‐median income debtors may prorate their annual income tax refund and associated expenses. By confirming Blake’s plan, the bankruptcy court implicitly found, based on the totality of the circumstances, that her plan was proposed in good faith. The court’s approach did not make the plan less feasible and promotes the purposes of Chapter 13. View "Marshall v. Blake" on Justia Law

The Eighth Circuit affirmed the district court's decision affirming the bankruptcy court's finding that funds investors transferred to TSF were part of TSF's Chapter 7 bankruptcy estate. The court held that Judge Hastings, the new bankruptcy judge, did not exceed the scope of the BAP's mandate by revisiting Judge Mahoney's, the retired bankruptcy judge, factual findings; Judge Hastings did not abuse her discretion by declining to apply the law-of-the-case doctrine; and Judge Hastings did not clearly err in finding that the investors failed to show, by clear and convincing evidence, that TSF held the funds in trust. View "Allison v. Centris Federal Credit Union" on Justia Law

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