Recent Cases
In re LTL Management LLC, ___BR___, 21-30589 (Bankr. D.N.J. Feb. 25, 2022)
In re LTL Management LLC, ___BR___, 21-30589 (Bankr. D.N.J. Feb. 25, 2022): Johnson & Johnson Subsidiary Survives a Motion to Dismiss—for being a bad faith bankruptcy filing– the bankruptcy filed by the subsidiary that J& J created, put all the talc claim cancer lawsuits into, and then had subsidiary (LTL Management LLC) filed bankruptcy. J&J created the LTL Management LLC subsidiary, put the talc tort claim suits into the subsidiary, have the subsidiary file bankruptcy and the parent company does NOT file bankruptcy, has come to be referred to as the “Texas 2 Step”, because this procedure was first used…
In re Royal Street Bistro, LLC, ___ F. 4th ___., 2022 WL 499938 (5th Cir.Court of Appeals 2/16/22)
In a published order denying a petition for writ of mandamus to compel a district court to grant a stay pending appeal of a bankruptcy sale order, the Fifth Circuit Court of Appeals ruled that a chapter 11 trustee could sell real property free and clear of leasehold interests which were junior to the rights of a mortgagee which could have foreclosed out those interests in a state court proceeding, but for the bankruptcy. In doing so, the Court rejected alternative arguments relied upon by the bankruptcy court and the district court. Debtor Royal Street Bistro filed a Chapter 11…
Patterson v. Mahwah Bergen Retail Group Inc.
Patterson v. Mahwah Bergen Retail Group Inc.,___BR___, (E.D. Va. Jan. 13, 2022; appeal from bankruptcy court to district court number 21-167): It is becoming more common for confirmation of Chapter 11 plans, which grant non-debtors releases, are reversed on appeal. In Patterson, a District Judge, Virginia, on appeal from bankruptcy court to district court, emphatically rejects confirmation of a chapter 11 Plan which grants broad releases to non-debtor Third Parties. In a scorching opinion, US District Judge David Novak of Richmond, Va., set aside confirmation of a chapter 11 plan that contained “extremely broad third-party (non-debtor) releases” and said that…
Fraudulent Transfer and Turnover Claims
In Pereira v. Urthbox, Inc., et al. (In re Try the World, Inc.), ___BR___, 2021 WL 3502607 (Bankr. S.D.N.Y. 8/9/21), the U.S. Bankruptcy Court for the Southern District of New York held that fraudulent transfer and turnover claims are “core” non-arbitrable claims and denied a motion to compel arbitration as to those claims.
In re Purdue Pharma
In In re Purdue Pharma, ___ F.Supp.4th___ (US District Court, Southern District of New York 12/16/21 decision, in appeal LC 21-07532 from Bankruptcy court to District Court, the US District Court Judge overturned the Order confirming debtor Purdue Pharma’s Chapter 11 Plan, because of the releases plan gave nondebtors (Sackler family). the US District Court ruled that the Bankruptcy court had no statutory power to impose non-consensual releases–by creditors which had NOT voted to accept the plan– of creditors’ direct claims against non-debtors for opioid damages. Sacklers paying 4.35 billion dollars into plan did NOT fix that fatal problem. Moral…
Sienega v. State of California Franchise Tax Board (In re Sienega)
Sienega v. State of California Franchise Tax Board (In re Sienega), ___F.4th___ (9th Circuit Court of Appeals 12/6/21): In Sienega, the Ninth Circuit Court of Appeals NARROWLY defines what is the equivalent of a tax return for dischargeability purposes, pursuant to 11 USC 523(a)(1)(B) of the Bankruptcy Code. Bad news for debtors who do not file tax returns on time, as failing to file a tax return on time prevents a debtor from seeking to discharge that tax debt in bankruptcy. Interpreting the hanging paragraph in Section 523(a), the Ninth Circuit sticks to the Beard test in deciding whether something…
Hawker v. Eastport Holdings LLC (In re GYPC Inc.), ___BR___ (Bankr. W.D. Ohio, Nov. 22, 2021, bankruptcy case 19-3054)
Bankruptcy Judge Decision holding that the US Supreme Court Taggart case means there is no strict liability for violating a corporate debtor’s automatic stay. Instead, the debtor must present persuasive authority before a creditor can be held in contempt for violating the automatic stay protecting a corporate debtor. Bankruptcy Court found that the creditor took an “ill-advised” action in violation of the automatic stay in a corporate debtor’s chapter 11 case but refused to hold the creditor in contempt, applying Taggart v. Lorenzen, 139 S. Ct. 1795 (2019), the Supreme Court held that there can be no sanctions for civil…
Jackson v. Le Centre On Fourth LLC (In re Le Centre On Fourth LLC), ___F4th___ (11th Cir. Nov. 15, 2021), appeal No. 20-12785
11th Circuit Court of Appeals expands Espinosa case reasoning, to say that a debtor’s failure to give notice–as required by FRBP Rule 2002(c)(3)–to creditors, that the bankruptcy debtor’s proposed plan would give releases to non-debtor third parties, not just to the bankruptcy debtor, is NOT fatal, so long as the proposed Plan was served on all creditors, and the Plan stated that the Plan, if confirmed, would give release to non-debtor third parties, not just to debtor. The 11th Circuit decision said Circuit was analogizing to the reasoning of the Espinosa case.
Stuart v. City of Scottsdale (In re Stuart), ___BR___ (B.A.P. 9th Cir. Nov. 10, 2021, appeal No. 21-1063): Creditor which obtained an attachment before the debtor filed bankruptcy, has NO Duty to Release that Attachment, when debtor files bankruptcy, holds 9th Circuit BAP, relying on the US Supreme Court Fulton case
The BAP decision may have a hint that failure to stop proceedings after bankruptcy can be an automatic stay violation, even after Fulton. Concluding that the Supreme Court’s Fulton decision overruled prior Ninth Circuit authority, the Ninth Circuit Bankruptcy Appellate Panel held that a creditor no longer violates any provision of the automatic stay in Section 362(a) by maintaining the status quo and declining to vacate a prepetition attachment. While the decision under Section 362(a)(3) is no surprise given that Fulton addressed the same subsection, the November 10 BAP opinion is noteworthy for finding no stay violations under any other…
In re Summit Financial Inc.
In re Summit Financial Inc., ___BR___ (Bankr. C.D. Cal. Nov. 5, 2021, bankruptcy case number 21-12276): Bankruptcy Court (Bankruptcy Judge Scott Clarkson) held it is improper for debtor’s attorney to put a “Disclaimer” on Debtor’s bankruptcy Schedules and Statement of Financial Affairs, because the “Disclaimer” contravened the debtor’s statutory obligation to update its schedules and statement of affairs. Judge Clarkson ruled that a debtor and debtor’s attorney cannot disclaim responsibilities that the bankruptcy debtor (and the bankruptcy debtor’s attorney) owe pursuant to the Bankruptcy Code and the Federal Rules of Bankruptcy Procedure (here the debtor’s statutory obligation to update its…