Justia Bankruptcy Opinion Summaries

The Ninth Circuit vacated the district court's affirmance of the bankruptcy court's order enforcing a stipulated agreement in adversary proceedings seeking to debar an attorney from submitting claims to asbestos trusts. The trusts were created through the Chapter 11 bankruptcy proceedings of entities exposed to significant asbestos liability. In Golden v. California Emergency Physicians Medical Group, 782 F.3d 1083 (9th Cir. 2015), the panel held that assessing the validity of a settlement agreement is a question of state contract law. In this case, the district court never addressed whether federal law governed this case, and it was unclear whether the district court was even aware that the trusts contended that federal law controlled its decision. Furthermore, the district court also did not apply Golden to the settlement at issue. Accordingly, the court remanded so that the district court can decide whether federal or state law governs (including whether the federal law argument has been waived), and what impact, if any, Golden has on this case. View "Mandelbrot v. J.T. Thorpe Settlement Trust" on Justia Law

11 U.S.C. 502(b)(4) acts as a federal cap on a fee already determined pursuant to state law. The Ninth Circuit affirmed the district court's reversal of the bankruptcy court's decision reducing a claim for pre-petition attorneys' fees under section 502(b)(4). Section 502(b)(4) limits claims for services rendered by the debtor's attorney to the extent that such claims exceed the reasonable value of such services. The panel explained that the proper mode of analysis was: (1) an acknowledgment or determination that the fee contract was breached; (2) an assessment of the damages for the breach under state law; (3) a determination under section 502(b)(4) of reasonableness of the damages claim afforded by state law; and (4) a reduction of the claim by whatever extent, if any, it is deemed excessive. The panel also held that the section 502(b)(4) cap limits fees for services already performed. The Full Faith and Credit Act requires, in the circumstances of this case, that the judgment of the state court confirming the arbitration award be given full faith and credit in the bankruptcy proceeding. View "McProud v. Siller" on Justia Law

Defendant Anice Plikaytis appealed an order awarding her attorneys' fees in a breach of contract action brought by plaintiff Debra Roth. In the published portion of its opinion, the Court of Appeal agreed with Plikaytis's contention that the trial court erred when it declined to consider previously filed documents she incorporated by reference as part of her motion. In the unpublished portions of the opinion, the Court discussed Plikaytis's arguments that: (1) the court failed to apply the lodestar method; (2) erroneously denied fees for equitable and cross-claims and for obtaining relief from bankruptcy stays; and (3) substantially reduced her award without explanation. The Court of Appeal concluded the trial court erred by denying fees for obtaining bankruptcy stay relief that related to the breach claim and failing to provide an adequate justification for significantly reducing the number of hours allowed. Accordingly, the trial court was affirmed in part, reversed in part, and the matter remanded with directions. View "Roth v. Plikaytis" on Justia Law

The Ninth Circuit held that 11 U.S.C. 363(f), authorizing a trustee to sell a debtor's assets free and clear of third-party interests, applied in this case, and did not conflict with section 365(h), which protects the rights of lessees, because the trustee did not "reject" the leases. The panel affirmed the district court's judgment affirming the bankruptcy court's decision that a bankruptcy trustee's sale of a debtor's property was free and clear of unexpired leases. Therefore, section 363(f)(1) authorized the sale of SHP's property free and clear of the Pinnacle and Opticom leases. Since the trustee did not reject the leases, section 365 was not implicated. View "Pinnacle Restaurant at Big Sky LLC v. CH SP Acquisitions, LLC" on Justia Law

The Bankruptcy Appellate Panel affirmed the bankruptcy court's judgment denying debtor a discharge of his debts. The panel held that the bankruptcy court's finding that debtor failed to make timely installment payments was based on his procrastination, rather than the inclement weather, was not clearly erroneous; debtor's argument under Article 2 of Iowa's uniform commercial code failed because the parties' agreement was not subject to it; even if the parties' agreement were subject to Article 2, the settlement agreement's default provision was not a liquidated damages clause; and the panel rejected debtor's remaining issues that were not raised before the bankruptcy court. View "Charles Gabus Motors, Inc. v. Tirrell" on Justia Law

The Fifth Circuit granted debtors' petition for panel rehearing and withdrew the previously filed opinion. The court denied debtors' petition for rehearing en banc.The court held that the bankruptcy court erred in ordering debtors to turn over the liquidated funds from an IRA to the trustee. In this case, the property interest was "withdrawn from the estate" when the exemptions were allowed, and there was no provision under which debtors' subsequently acquired interests in amounts distributed from the IRA could become part of the estate. Accordingly, the court reversed the bankruptcy court's order requiring debtors' to turn over the liquidated funds to the trustee and remanded for further proceedings. View "Hawk v. Engelhart" on Justia Law

The Fifth Circuit affirmed the district court's determination that it lacked jurisdiction to consider debtor's appeal of the bankruptcy court's decision in debtor's adversary proceeding. The court also affirmed the bankruptcy court's decision to reopen his main bankruptcy proceeding to allow the DOE and ECMC to file proofs of claim. In this case, the amended statement of issues and designation of record could not fairly be called a notice of appeal within the meaning of Federal Rule of Bankruptcy Procedure 8003(3). Furthermore, allowing DOE and ECMC to reopen the main bankruptcy proceeding served to establish their standing in the adversary proceeding and enabled debtor, should he have prevailed, to obtain a discharge against the correct entities. Likewise, the bankruptcy court did not err by allowing DOE and ECMC to file proofs of claim. View "Dorsey v. US Department of Education" on Justia Law

11 U.S.C. 106(a)(1)'s abrogation of sovereign immunity "with respect to" 18 U.S.C. 544(b)(1) extends to the derivative “applicable law.” In this case, the Trustee invoked Idaho's Uniform Fraudulent Transfer Act (UFTA) as the "applicable law" to bring an 11 U.S.C. 544(b)(1) adversary action to avoid $17 million in tax payments that debtor fraudulently transferred to the IRS. The panel held that the government could not rely on sovereign immunity to prevent the avoidance of the tax payments at issue. The panel addressed the Trustee's cross-appeal in a concurrently filed memorandum disposition. View "In re DBSI, Inc." on Justia Law

In 2008, Purdy borrowed from Citizens First, using his dairy cattle as collateral. Purdy refinanced in 2009, executing an “Agricultural Security Agreement" that granted Citizens a purchase money security interest in “all . . . Equipment, Farm Products, [and] Livestock (including all increase and supplies) . . . currently owned [or] hereafter acquired.” Citizens perfected this security interest by filing with the Kentucky Secretary of State. Purdy and Citizens executed two similar security agreements in 2010 and 2012, which were perfected. After the 2009 refinancing, Purdy increased the size of his herd, entering into “Dairy Cow Lease” agreements with Sunshine. The parties also executed security agreements and Sunshine filed financing statements. In 2012, milk production became less profitable. Purdy sold off cattle, including many bearing Sunshine’s brand, and filed a voluntary Chapter 12 bankruptcy petition. Both Citizens and Sunshine sought relief from the stay preventing the removal of the livestock. In 2014, the Sixth Circuit held that Citizens failed to demonstrate that the "Leases” were actually security agreements in disguise. On remand, the bankruptcy court determined that all cattle sold at a 2014 auction were subject to Citizens’ security interest. The district court affirmed, awarding Citzens $402,354.54. The Sixth Circuit affirmed; the bankruptcy court did not contravene its mandate by holding a hearing on the question of ownership. View "Sunshine Heifers, LLC v. Citizens First Bank" on Justia Law

DZ Bank filed an adversary action against the Meyers in bankruptcy court, alleging that the Meyers had fraudulently transferred assets in order to place them out of the bank's reach. The Ninth Circuit reversed the district court's decision affirming the bankruptcy court's judgment in favor of the bank. The panel held that, although the bankruptcy court correctly found that the Meyers engaged in fraudulent transfers under the Washington Uniform Fraudulent Transfer Act and thus committed fraud to the bank's detriment, the bankruptcy court erred by limiting relief to the amount of the collateralized debt. The panel explained that the bankruptcy court should have granted relief for the full $385,000 that the bank would have recovered. View "DZ Bank AG Deutsche Zentral-Genossenschaft Bank v. Meyer" on Justia Law