Recent Cases
Clark’s Crystal Springs Ranch LLC v. Gugino (In re Clark), — B.R. — (9th Cir. BAP March 2016)
Issue: Was substantive consolidation of the debtor, his LLC and trust into a single chapter 7 appropriate under the facts here? Holding: Yes. creditors dealt with the entities as a single economic unit and did not rely on their separate identity in extending credit [and] the affairs of the debtor are so entangled that consolidation will benefit all creditors. Judge Terry Myers, Idaho Jury, Kirscher, Faris Opinion by Jury The chapter 12 debtor operated a family farm which was purportedly owned and managed by an LLC which was, in turn, purportedly owned by a trust. The case was converted to…
Husky International Electronics, Inc. v. Ritz, ___ S.Ct.___, 2016 WL 2842452 (May 16, 2016) (case no. 15-145)
The United States Supreme Court, in Husky International Electronics, Inc. v. Ritz, on 5/16/16, reversed a 5th circuit Court of appeals case, In re Ritz, 787 F.3d 312 (5th Cir., May 22, 2015) and resolved a split among Circuit Courts nationwide, by the US Supreme Court ruling that the term “actual fraud” in Bankruptcy Code 11 USC § 523(a)(2)(A) encompasses forms of fraud, like fraudulent conveyance schemes, that can be effected without a false representation. In Husky, the US Supreme Court ruled that anything that counts as “fraud” and is done with wrongful intent is “actual fraud,” although “the term…
Scheer v. State Bar of California (In re Scheer), ___F.3d ___, case no.14-56662 (9th Cir. April 14, 2016)
The Ninth Circuit wrote an opinion on April 14 indirectly saying that the Supreme Court should overrule Kelly v. Robinson, where the high court held in 1986 that criminal restitution imposed as a condition for probation is nondischargeable under Section 523(a)(7). Writing for the appeals court, Circuit Judge John B. Owens said that Kelly "untether[ed] statutory interpretation from the statutory language." That approach, he said, "has gone the way of NutraSweet and other relics of the 1980s and led to considerable confusion." He then went on to cite circuit court decisions from around the country that distinguish Kelly to the…
CFPB v. Chance Edward Gordon, 819 F.3d 1179 (9th Cir. 4/14/2016)
CFPB v. Chance Edward Gordon, 819 F.3d 1179 (9th Cir. 4/14/2016): Defendant Gordan on 11/17/16 filed his Petition for Certiorari, requesting the US Supreme Court to grant review by the US Supreme Court of the 9th Circuit’s decision against defendant Gordon. The 9th Circuit decision affirmed Gordon’s liability for Gordon having committed deceptive practices in connection with offering/providing/charging for mortgage modification services. The petition addresses the ratification of government action alleged to be ultra vires at the time the action was taken, as well as a subject-matter jurisdiction question regarding whether federal courts’ Article III jurisdiction exists when the federal…
Shalaby v. Mansdorf (In re Nakhuda) (B.A.P. 9th Cir. 2016)
Debtor’s attorney sanctioned by Bankruptcy Court, sua sponte (sua sponte means on the Court’s own motion, instead by a party bringing a Motion for sanctions) for multiple errors, including that debtor attorney did not have debtor client’s original signature on the bankruptcy petition, schedules, other required bankruptcy documents, which is required if the debtor’s attorney efiles the bankruptcy case with “/s/” signatures for debtor, instead of with ink signed signature. In addition, bankruptcy court sanctioned debtor attorney for: “(1) making arguments not warranted by existing law or non-frivolous arguments for its extension, modification or reversal; (2) failing to ensure that…
Whatley v. Stijakovich-Santilli (In re Stijakovich-Santilli), 542 B.R. 245 (9th Cir. BAP 2015)
The U.S. Bankruptcy Appellate Panel of the Ninth Circuit (“BAP”) construed Rule 4003(b)(2) of the Federal Rules of Bankruptcy Procedure (“FRBP”), which extends the period for a trustee to object to exemptions where the exemption was fraudulently asserted, and held that a debtor fraudulently asserts an exemption when the debtor knowingly misrepresents a material fact that supports the claim of exemption and the trustee justifiably relies on a misrepresentation. A trustee can justifiably rely on that misrepresentation even if the trustee could have uncovered the fraud had the trustee carefully investigated. In determining whether a debtor fraudulently asserted an exemption,…
In re Murray
In re Murray, 543 B.R. 484 (Bankr. S.D. N.Y. 2016), issued an opinion dismissing an involuntary bankruptcy case brought by a single creditor. In Murray, this creditor, the Wilk Auslander LLP law firm, was the assignee of a judgment obtained from its client (after the client did not pay its fees). The law firm sought to enforce upon its the judgment. To that end, the firm, as Murray’s sole creditor, filed an involuntary chapter 7 bankruptcy proceeding. Shortly after, Murray, filed a motion to dismiss the case under section 707(a), alleging the firm brought the petition in bad faith. Murray…
Double Bogey, L.P. v. Enea, 794 F.3d 1047 (9th Cir. 2015) (Double Bogey)
In Double Bogey, L.P. v. Enea, 794 F.3d 1047 (9th Cir. 2015) ("Double Bogey"), the U.S. Court of Appeals for the Ninth Circuit held in a published opinion that the debtors, who were the sole officers and shareholders of a corporation, could not have their debts determined non-dischargeable under 11 U.S.C. Section 523(a)(4) solely on the basis that the debtors were found to be the alter ego of the corporation under applicable California law. The Ninth Circuit determined that California’s alter ego doctrine acts as a procedural mechanism rather than providing for "trust-like" obligations that would create a fiduciary relationship.…
In re Village Green I, GP, ___F.3d___, 2016 Westlaw 325163 (6th Cir. 2016)
The Sixth Circuit has held that a cramdown plan of reorganization was not propounded in good faith due to the artificial impairment of small claims held by two creditors who were closely connected to the Chapter 11 debtor, especially since the debtor had sufficient funds on hand to pay those creditors in full immediately. This is a circuit split issue: 9th Circuit and 6th Circuit are split on the issue of "artificial impairment." See, e.g., In re L & J Anaheim Associates, 995 F.2d 940 (9th Cir. 1993), holding that the definition of "impairment" under § 1124 did not necessarily…
Zachary v. California Bank & Trust
Zachary v. California Bank & Trust, ___F.3d ___, 2016 WL 360519 (9th Cir. Jan. 28, 2016), the U.S. Court of Appeals for the Ninth Circuit ( "9th Circuit") held that the absolute priority rule, codified in section 1129(b)(2)(B)(ii) of the Bankruptcy Code, continues to apply to individual chapter 11 cases following the enactment, in 2005, of the Bankruptcy Abuse Prevention and Consumer Protection Act ("BAPCPA 2005"). In so holding, the Ninth Circuit overruled the decision of the U.S. Bankruptcy Appellate Panel for the Ninth Circuit (the "BAP") in In re Friedman, 466 B.R. 471 (9th Cir. BAP 2012) ("Friedman"), and…