Recent Cases
McCoy v. Mississippi State Tax Comm’n
McCoy v. Mississippi State Tax Comm’n, 666 F.3d 924 (5th Cir. 2012) held that if a tax return of a debtor was filed even ONE day late, the taxes reported in that return cannot be discharged. Case is referred to as the “McCoy rule,” or the “McCoy test”. In a nutshell, this 5th Circuit rule provides that if the debtor’s tax return was filed late, even by one day, it is invalid and the tax cannot be dischargeable. The rule has been adopted in the 1st, 5th, and 10th circuits, but rejected in the 11th Circuit. Expect that eventually the…
In re Emerge Energy Services LP, ___BR___ (Bky Ct D. Del 12/5/19) case #19-11563 December 10, 2019: Failure to Opt Out Won’t Justify Imposing Third-Party Releases, Delaware Bky Judge Says
Saying she is in the minority in her district, a new Delaware judge ruled that allowing creditors to opt out won’t permit a plan to impose nonconsensual, third-party releases. Disagreeing with some of her colleagues in Delaware, a newly appointed bankruptcy judge refused to approve third-party releases binding creditors and equity holders who receive no distribution in a chapter 11 plan but had been given the option of opting out from the releases. In her December 5 opinion, Bankruptcy Judge Karen B. Owens could not conclude that the failure to opt out represented consent to granting the releases, under the…
U.S. Bank NA v. Saccameno, ___F.3d___ (7th Cir. Nov. 27, 2019) (case number 19-1569)
American Bankruptcy Institute (ABI) reports on this case as follows: Seventh Circuit Limits Punitive Damages to Total Compensatory Damages of $582,000 Despite atrocious mortgage servicing, the circuit court cut a jury’s $3 million award of punitive damages to $582,000. As a matter of constitutional law, the Seventh Circuit reduced punitive damages from $3 million to $582,000 when the jury had awarded the debtor $582,000 in compensatory damages as a consequence of the mortgage servicer’s “reprehensible conduct” and its “obstinate refusal” to correct its mistakes. The story told by Circuit Judge Amy J. St. Eve in her November 27 opinion would…
DeGiacomo v. Sacred Heart Univ. Inc. (In re Palladino), ___F.3d___ (1st Cir. Nov. 12, 2019), case number 17-1334
US Court of Appeals for the First Circuit held, on 11/12/19, that where parents pay the college tuition of an adult child (child over 18 years old) to the college, that the parent paying that payment is a gift transfer, and that college can be sued for receiving a fraudulent transfer, if the parent files bankruptcy, after making the tuition payment, to get the tuition payment back from the college. ABI article on 11/15/19 describes this case as follows: The First Circuit starkly held – without any ifs, ands, or buts – that college tuition paid by an insolvent parent…
Ronnoco Coffee v. Westfeldt Brothers Inc., ___ F.4th___ (8th Cir. Sept. 19, 2019), case No. 18-1498
US Court of Appeals for the 8th Circuit Finds No Successor Liability for Buyer which Buys Debtor’s Assets from Bank, at a foreclosure sale held by the Bank, and then Buyer Continues the Business that debtor used to run, using debtor’s employees, and some of debtor’s executives: Bottom Line: Buyer Continuing debtor’s business after buying the assets from the lender at a foreclosure sale doesn’t bring successor liability to Buyer. Through a properly structured purchase of a debtor’s assets at a private foreclosure sale, a purchaser has no successor liability to a debtor’s unpaid creditors, the Eighth Circuit held. The…
Hackler v. Arianna Holdings Company, ___F.3d___ (3rd Cir. 9/12/19)
Re: Avoiding Tax Sales in Bankruptcy: Not All Foreclosures Are Equal When asked whether a foreclosure sale can be avoided in bankruptcy, the first answer that comes to many practitioners’ minds is “no” because of the Supreme Court’s opinion in BFP v. Resolution Trust Corp.[1] The correct answer, though, is a much more nuanced “it depends.” The Third Circuit’s Sept. 12, 2019, precedential opinion in Hackler v. Arianna Holdings Company LLC[2] is an excellent reminder why. The facts in Hackler are relatively straightforward. The Hacklers failed to pay taxes on a parcel they owned in New Jersey, which resulted in…
East West Bank vs. Altadena Lincoln Crossing, LLC
East West Bank vs. Altadena Lincoln Crossing, LLC, 2019 Westlaw 1057044 (US District Court, CD CA 2019): A district court in California has held that a state statute invalidating contractual penalty provisions was inapplicable to a default interest rate clause contained in loan documents. Facts: A lender and a commercial borrower entered into two related real estate construction loan agreements, both of which contained clauses increasing the base interest rate by 5% in the event of default. The agreements also contained late fee provisions, which were intended to compensate the lender for any additional administrative costs arising from late payments.…
Garvin v. Cook Investments NW, SPNWY, LLC, 922 F.3d 1031 (9th Cir. 2019)
The U.S. Trustee argued that a chapter 11 plan was “proposed by …means forbidden by law” because one of five debtors’ income was from lease of its real property to a marijuana grower. Debtors and property were located in Washington state in which marijuana is legal. Leasing property to a marijuana grower is illegal under federal law. Click here for more information
Klein v. Good (In re Good
Klein v. Good (In re Good), ___BR___, 2018 Bankr. LEXIS 3609 (9th Cir. BAP 2018) ( BAP No. WW-18-1125-KuTaB) , (9th Cir. BAP 2018), which is a case about a homestead exemption claimed by bankruptcy debtors, that a Chapter 7 trustee objected to, unsuccessfully: Summary: The United States Bankruptcy Appellate Panel for the Ninth Circuit held that in a case converted from chapter 13 to chapter 7, the relevant date for determining a debtor’s homestead exemption was fixed on the date of the chapter 13 filing. The BAP affirmed the bankruptcy court’s ruling denying the chapter 7 trustee’s objection to…
In Ritzen Group Inc. v. Jackson Masonry LLC
In Ritzen Group Inc. v. Jackson Masonry LLC, the US Supreme Court, on 5/20/19, granted the Petition for Certioraris, to decide the question of what Is or Is not a ‘Final, Appealable Order’, in a bankruptcy case. In Davis v. Tyson Prepared Foods Inc, the US Supreme Court, also on 5/20/19, denied the petition for certiorari in that case, thereby declining to review and decide whether a creditor or other non-debtor passively holding property of the estate violates the automatic stay under § 362(a).