Recent Cases
SE Property Holdings LLC v. Gaddy (In re Gaddy)
SE Property Holdings LLC v. Gaddy (In re Gaddy), ___F.3d___ (11th Cir. Sept. 29, 2020) appeal #19-11699: 11th Circuit Court of Appeals holds that for a debt to be held nondischargeable per 11 USC 523(a)(2)(A), the debtor’s fraud must have occurred before the debt arises. Therefore, fraudulent transfers that the debtor made, after the debtor incurred the debt (debt was that debtor personally guaranteed a 12 million dollar loan), did NOT make the debt nondischargeable per 11 USC 523(a)(2)(A). However, that did not leave the creditor with no remedy, in this case, because the creditor could have timely brought an…
Jalbert v. Gryaznova (In re Bicom NY LLC), ___BR___ (Bankr. S.D.N.Y. Sept. 21, 2020), bky case #19-1311
Fraudulent Transfer Law Doesn’t Victimize Innocent Parties, Bankruptcy Judge Wiles Says “Bare legal ownership” of a bank account isn’t enough to turn the account holder into the initial transferee of a fraudulent transfer made into the account, according to the interpretation of Second Circuit law by Bankruptcy Judge Michael E. Wiles of Manhattan. In substance, Judge Wiles said that Section 550(a)(1) is not a “gotcha” statute. “Strict liability,” he said, “is appropriate as a way of addressing wrongs, not as a way of victimizing innocent parties.” The defendant, a Russian citizen, said she needed a bank account in the U.S.…
In re Goodrich Quality Theaters Inc.
In re Goodrich Quality Theaters Inc., ___BR___ (Bankr. W.D. Mich. Sept. 16, 2020), case number 20-00759: Michigan Bankruptcy Judge Prefers Dismissal of Chapter 11 case, to conversion of Chapter 11 case to Chapter 7, if Conversion to Chapter 7 will NOT Benefit General Unsecured Creditors, even though Office of US Trustee wanted case converted to Chapter 7, instead of Chapter 11 case being dismissed. The debtor, a corporation, used the chapter 11 case to sell its assets. The debtor and secured creditors judged the chapter 11 case a success, even though unsecured creditors got ZERO, from the assets of the…
Hull v. Rockwell (In re Rockwell)
Hull v. Rockwell (In re Rockwell), ___F.3d___ (1st Cir. July 30, 2020, appeal #19-2074) sets up a Circuit Split among US Circuit Courts, which may eventually get decided by the US Supreme Court, about whether a bankruptcy debtor must reinvest homestead exemption funds in a new residence, within 6 months after the bankruptcy debtor receives the homestead exemption amount, or LOSE the exemption. In re Rockwell US First Circuit Ct of Appeals 7/30/20 case is contrary to US Ninth Cir Ct of Appeals case, In re Jacobson, 676 F.3d 1193 (9th Cir. 2012), also contrary to 5th Cir. Frost decision…
In re Specialty Shops Holding Corp.
In re Specialty Shops Holding Corp.,___F.4th___ (US District Court, District of Nebraska July 24, 2020; case number 18-405): 11 USC 546( c ) allows a creditor, which has sold goods to a debtor, shortly before the debtor files bankruptcy, to reclaim the creditor’s goods from the debtor, where the debtor has failed to pay for the goods. Specialty Shops hold that a creditor doesn’t get the goods back, it only gets a only has a general unsecured claim, if a secured lender already has a lien on the goods sought to be reclaimed, at the time the debtor files bankruptcy.…
Merriman v. Fattorini (In re Merriman)
Merriman v. Fattorini (In re Merriman), ___BR___ (B.A.P. 9th Cir. July 13, 2020, appeal 19-1245): 9th Circuit BAP holds that the US Supreme Court’s Acevedo opinion, which is viewed as barring federal courts, in most circumstances, from entering orders nunc pro tunc, does NOT bar a Bankruptcy Court from granting an order annulling the bankruptcy automatic stay retroactively (even though doing so is a nunc pro tunc order). In Merriman, the Ninth Circuit Bankruptcy Appellate Panel held that this year’s Acevedo decision from the Supreme Court does not bar bankruptcy courts from annulling the automatic stay. Except in unusual circumstances,…
In re Cherry, ___F.3d ___ (7th Cir. July 6, 2020, appeal number 19-1534)
US Court of Appeals for the Seventh Circuit Requires the Bankruptcy Court to Make Specific Findings for why the Bankruptcy Court is confirming a Chapter 13 plan that contains a plan provision that is expressly allowed by 11 USC 1322(b)—the Bankruptcy Code Section that lists what provisions a Chapter 13 plan may contain. This is a poorly reasoned decision, which, happily, is not what the US Court of Appeals for our Circuit, the 9th Circuit, or the 9th Circuit BAP, or bankruptcy courts in the 9th Circuit, require. There is nothing in 11 USC 1322(b) that would require a Bankruptcy…
Rockstar Inc. v. Schultz
In Rockstar Inc. v. Schultz,___F.3d___ (9th Cir. June 25, 2020 (not for publication), appeal from BAP to 9th Circuit Court of Appeals #19-60031) and Schultz v. Keyword Rockstar Inc. (In re Schultz) (also not for publication), ___BR___ (B.A.P. 9th Cir. June 4, 2019, appeal to BAP #18-1269), the 9thCircuit Court of Appeals and the 9th Circuit BAP Draw Opposite Conclusions from the Same Testimony. The BAP reversed the Bankruptcy Court trial decision, the 9th Circuit Court of Appeals reversed the BAP. For the 9th Circuit Court of Appeals, scant evidence is enough to uphold the trial court’s findings of fact.…
Blixseth v. Credit Suisse, ___F3d___16-35304 (9th Cir. June 11, 2020): Ninth Circuit 6/11/20 Decision in Blixseth v. Credit Suisse, Now Permits Nonconsensual, Third-Party Releases in Chapter 11 Plans, which is a BIG change in Ninth Circuit law
Aligning with the Third Circuit, the Ninth Circuit says that lower courts were reading its prior decisions too broadly. The Ninth Circuit had been generally understood as categorically banning nonconsensual, third-party releases in chapter 11 plans. Narrowing, if not repudiating, three earlier opinions in a published decision on June 11, the Ninth Circuit explicitly aligned itself with the Third Circuit by permitting nonconsensual, third-party releases in chapter 11 plans that exculpate participants in the reorganization from claims based on actions taken during the case. In her opinion for the appeals court, Ninth Circuit Judge Marsha S. Berzon quoted the Third…
In re Cumbess
In re Cumbess, ___F.3d___ 2020 WL 2897260 (11th Cir. 2020),. In this 6/3/20 published decision, the US Court of Appeals for the Eleventh Circuit holds that if a trustee does not assume a personal property lease before confirmation of a Chapter 13 plan, the leased property is no longer property of the estate and cannot be assumed by the debtor in the confirmed plan on behalf of the estate. No such decision by the Ninth Circuit Court of Appeals, so far. Only time will tell whether Circuit Courts, other than the Eleventh Circuit, will take this same position.