Justia Bankruptcy Opinion Summaries

The Bankruptcy Appellate Panel affirmed the bankruptcy court's order granting defendants' motion to dismiss plaintiffs' complaint. The panel held that the bankruptcy court was correct in concluding it had "arising in" jurisdiction; the bankruptcy court had, at minimum, "related to" jurisdiction; and plaintiffs have consented to the authority of the bankruptcy court. The panel also held that the bankruptcy court had continuing jurisdiction notwithstanding the closing of the case; plaintiffs' complaint was barred by res judicata; and the bankruptcy court did not err in finding the shareholders standing rule prevented plaintiffs from asserting the claims. View "Sears v. Sears" on Justia Law

The U.S. Trustee alleged that Husain’s bankruptcy filings regularly failed to include debtors’ genuine signatures. Bankruptcy Judge Cox of the Northern District of Illinois made extensive findings, disbarred Husain, and ordered him to refund fees to 18 clients. When he did not do so, Judge Cox held him in contempt of court. The court’s Executive Committee affirmed the disbarment and dismissed the appeal from the order holding Husain in contempt but did not transfer the contempt appeal to a single judge, although 28 U.S.C. 158(a) entitles Husain to review by at least one district judge. The Seventh Circuit affirmed the disbarment and remanded the contempt appeal for decision by a single judge. The court noted extensive evidence that Husain submitted false signatures, documents that could not have been honest, and petitions on behalf of ineligible debtors; he omitted assets and lied on the stand during the hearing. The court noted that Husain’s appeal was handled under seal and stated that: There is no secrecy to maintain, no reason to depart from the strong norm that judicial proceedings are open to public view. View "In re: Husain" on Justia Law

Peregrine was a registered futures commissions merchant, a registered forex dealer member of the National Futures Association, and dealt in retail foreign currency (retailforex) and spot metal transactions. The Commodity Futures Trading Commission notified Wasendorf, Peregrine’s CEO and the Chairman of the Board, that Peregrine’s accounts were going to be electronically monitored. Wasendorf attempted suicide, after penning a statement admitting to 20 years of embezzlement. He pled guilty to misappropriating nearly $200 million from Peregrine’s segregated customer futures accounts. Peregrine filed for bankruptcy. Bodenstein was appointed as trustee. The bankruptcy of a futures commissions merchant is governed by 11 U.S.C. 761-767, which provides for the distribution of “customer property” in priority to all other claims. “Customer property” is defined as including funds received in connection with a commodity contract, which is defined in section 761(4). Bodenstein excluded one group of plaintiffs from that priority distribution, concluding that forex and spot metal transactions did not constitute “commodity contracts.” After the plaintiffs' adversary proceeding was terminated, another group of customers filed a class action adversary proceeding, alleging fraud, breach of fiduciary duty, unjust enrichment, and conversion, and seeking the imposition of a constructive trust. The bankruptcy court dismissed the action as untimely. In a consolidated appeal, the Seventh Circuit affirmed the bankruptcy court and the district court, rejecting the claims. View "Miller v. Bodenstein" on Justia Law

From 1977-1984 Banco reinsured 2% of the Insurer’s business. The Insurer stopped writing policies in 1985, went into receivership in 1986, and began liquidating in 1987. Through 1993 the liquidator complied with contractual provisions requiring balances to be calculated quarterly and statements sent. If the Insurer owed reinsurers net balances for the previous quarter, it paid them; if the reinsurers owed the Insurer, bills were sent. In 1993, the liquidator stopped sending checks or bills without explanation. In 2008, the liquidator notified Banco that Banco was owed $225,000 as the net on 1993-1999 business. For periods before 1993, the Insurer was owed $2.5 million. In 2010, Banco protested the bill as untimely. Pine bought the Insurer’s receivables and, in 2012, sued Banco. Litigation about procedural issues, arising from the fact that Banco is wholly owned by Uruguay, consumed several years. The Seventh Circuit affirmed summary judgment, holding that Pine’s claim is untimely. Each contract required scheduled netting of claims and payment of the balance. Claims against Banco accrued no later than 1993. The contracts specify application of Illinois law, which allowed 10 years (until 2003) to sue on contracts. A statute concerning insurance liquidation, 215 ILCS 5/206, does not permit a liquidator to wait until the end to net the firm’s debits and credits. View "Pine Top Receivables of Illinois, LLC v. Banco de Seguros del Estado" on Justia Law

When Eclipse, a jet aircraft manufacturer, declared bankruptcy in November 2008, it reached an agreement to sell the company to its largest shareholder, ETIRC, which would have allowed Eclipse to continue its operations. The sale required significant funding from VEB, a state-owned Russian Bank. The funding never materialized. For a month, Eclipse waited for the deal to go through with almost daily assurances that the funding was imminent. Delays were attributed to Prime Minister Putin needing “to think about it.” Eventually, Eclipse was forced to cease operations and notify its workers that a prior furlough had been converted into a layoff. Eclipse’s employees filed a class action complaint as an adversary proceeding in the Bankruptcy Court alleging that Eclipse’s failure to give them 60 days’ notice before the layoff violated the Worker Adjustment and Retraining Notification (WARN) Act, 29 U.S.C. 2101-2109, and asserting that Eclipse could invoke neither the Act’s “faltering company” exception nor its “unforeseeable business circumstances” exception. The Bankruptcy Court rejected the employees’ claims on summary judgment, holding that the “unforeseeable business circumstances” exception barred WARN Act liability. The district court and Third Circuit affirmed. Eclipse demonstrated that its closing was not probable until the day that it occurred. View "In re: AE Liquidation, Inc." on Justia Law

Certain real property was sold in violation of an automatic stay from the homeowners’ bankruptcy proceedings. Because the property was situated in Nevada, and the bankruptcy proceedings commenced in Texas, the Supreme Court was presented with a purported conflict of laws issue. Appellant sought to quiet title in the district court. Respondent disputed the validity of the sale by filing a complaint in intervention. The district court granted summary judgment for Respondent, concluding that the United States Court of Appeals for the Ninth Circuit applied, Respondent had standing as a creditor enforce the automatic stay in the homeowners’ bankruptcy, and the foreclosure sale was void due to the violation of the automatic stay. On appeal, Appellant argued that the United States Court of Appeals for the Fifth Circuit law applied. The Supreme Court affirmed, holding that summary judgment was proper because, under both the Ninth and Fifth Circuits, a sale conducted during an automatic stay in bankruptcy proceedings is invalid. View "LN Management LLC Series 5105 Portraits Place v. Green Tree Loan Servicing LLC" on Justia Law

The County of Los Angeles may not enforce a lien on the personal property of a Chapter 11 debtor in possession when the County has failed to perfect the lien as against a bona fide purchaser. In this case, the Ninth Circuit rejected Mainline's argument that this appeal was mooted by the disbursal of Mainline's bankruptcy estate and dismissal of the Chapter 11 case; 11 U.S.C. 545(2) allows a Chapter 11 debtor in possession to set aside liens against its estate; under section 545(2), Mainline may avoid the County's liens; and Cty. of Humboldt v. Grover (In re Cummins), 656 F.2d 1262 (9th Cir. 1981), remained good law. View "Los Angeles County Treasurer & Tax Collector v. Mainline Equipment, Inc." on Justia Law

The County of Los Angeles may not enforce a lien on the personal property of a Chapter 11 debtor in possession when the County has failed to perfect the lien as against a bona fide purchaser. In this case, the Ninth Circuit rejected Mainline's argument that this appeal was mooted by the disbursal of Mainline's bankruptcy estate and dismissal of the Chapter 11 case; 11 U.S.C. 545(2) allows a Chapter 11 debtor in possession to set aside liens against its estate; under section 545(2), Mainline may avoid the County's liens; and Cty. of Humboldt v. Grover (In re Cummins), 656 F.2d 1262 (9th Cir. 1981), remained good law. View "Los Angeles County Treasurer & Tax Collector v. Mainline Equipment, Inc." on Justia Law

A case becomes moot when the court can no longer grant any effectual relief to a prevailing party due to a change in circumstances. The Eighth Circuit dismissed as moot James Gretter's appeal of the district court's dismissal of his appeal from a bankruptcy court decision denying debtors' motion to assume and assign certain car-dealership agreements. The court held that the case was moot in the ordinary sense because no court, in reversing the bankruptcy court's order denying the motions to assume and assign, would order the sale of Edwards Auto Plaza to proceed. View "Gretter v. Gretter Autoland, Inc." on Justia Law

Debtors claimed an exemption for funds held in an individual retirement account (IRA). The Fifth Circuit upheld the bankruptcy court's holding that the funds had lost their exempt status because Texas law provides that funds withdrawn from a retirement account remain exempt only if rolled over into another retirement account within sixty days. In this case, debtors subsequently withdrew the funds from the IRA and did not roll them over into another IRA. Accordingly, the court affirmed the judgment. View "Hawk v. Engelhart" on Justia Law