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Case Summaries

[05/15] Midland Funding, LLC v. Johnson
In an action under the Fair Debt Collection Practices Act, 15 U.S.C. sections 1692e and 1692f, arising out of a Chapter 13 bankruptcy case in which a creditor filed a claim asserting that debtor owed a credit-card debt and noting that the last time any charge appeared on debtor’s account was more than 10 years ago, which exceeded the 6-year statute of limitations, the Eleventh Circuit Court of Appeals’ decision that the FDPA applied to the case is reversed where the filing of a proof of claim that is obviously time barred is not a false, deceptive, misleading, unfair, or unconscionable debt collection practice within the meaning of the Fair Debt Collection Practices Act.

[05/08] In re: Giacchi
In an appeal involving the issue of whether Internal Revenue Service Forms 1040, filed after the IRS has made an assessment of the taxpayer’s liability, constitute ‘returns’ for purposes of determining the dischargeability in bankruptcy of tax debts under 11 U.S.C. section 523(a)(1)(B), the district court’s judgment affirming the bankruptcy court’s order denying discharge of years covered by the 1040s is affirmed where: 1) debtor’s belated filings after assessment are not an honest and reasonable effort to comply with the tax law under the Beard test and, as such, the filings do not constitute returns; and 2) because debtor’s tax debts for tax years 2000, 2001, and 2002 are debts for tax obligations for which no return was filed, the debts are not dischargeable in bankruptcy pursuant to 11 U.S.C. section 523(a)(1)(B).

[05/04] In re: Lehman Bros.
In a Chapter 11 bankruptcy appeal by thousands of former employees of debtor who held restricted stock units that were rendered worthless after the filing, the district court’s judgment sustaining debtor’s objections to the claims, on grounds that the claims must be subordinated to the claims of general creditors pursuant to 11 U.S.C. section 510(b) because the former arise from the purchase or sale of securities, is affirmed where the claims at issue must be subordinated pursuant to 11 U.S.C. section 510(b) because, within the meaning of that statute: 1) restricted stock units are securities; 2) the claimants acquired them in a purchase; and 3) the claims for damages arise from that purchase or the asserted rescission thereof.

[05/02] In re: The Trustees of Conneaut Lake PArk, Inc.
In a bankruptcy case involving 40 Pa. Stat. section 638, which prohibits insurance companies from paying fire insurance proceeds to a ‘named insured’ unless the local municipality certifies that no delinquent taxes are owed on the property where the insured structure was located, the District Court’s judgment reversing the Bankruptcy Court grant of summary judgment to the Taxing Authorities and holding that ‘named insured’ as used in Section 638 includes only those who own the structure at issue and are responsible for the delinquent taxes, is reversed where this interpretation contravenes the text of the statute.

[04/20] Mastan v. Salamon
In a Chapter 11 case, the Bankruptcy Appellate Panel’s decision affirming the bankruptcy court’s order disallowing a claim is affirmed where under 11 U.S.C. section 1111(b), those who hold non-recourse liens on real property are granted recourse against the bankruptcy estate upon the filing of the bankruptcy petition.

[04/20] In re Tronox Inc.
In an appeal of a district court order enforcing a permanent anti?suit injunction issued after a bankruptcy settlement, involving the toxic tort claims of than 4,300 individuals who allege significant injuries from the operation of a wood?treatment plant in Avoca, Pennsylvania between 1956 and 1996, the appeal is dismissed for lack of jurisdiction where the claims are barred by the injunction because they are generalized ‘derivative’ claims that fall within the property of the bankruptcy estate.

[04/20] Porter v. Nabors Drilling USA, L.P.
In a lawsuit asserting a claim under California’s Private Attorney General Act of 2004 (PAGA), the court grants defendant’s motion to recognize an automatic stay, triggered by its filing for reorganization under Chapter 11 of the Bankruptcy Code, where the exception to an automatic stay established in 11 U.S.C section 362(b)(4), described as the governmental regulatory or governmental unit exception, did not apply to a claim brought by a private party under PAGA.

[04/20] Privitera v. Curran
In a Chapter 7 liquidation proceeding involving a creditor-plaintiff’s attempt to avail herself of two exemptions from debt discharge, the bankruptcy court’s denial of plaintiff’s motion for leave to amend the complaint is affirmed where an adequate basis existed for the bankruptcy court’s denial of the plaintiff’s motion to amend: the new claim, like the old claim, would have been futile.

[04/14] Brown Media Corporation v. K&L Gates, LLP
In an action asserting claims for breach of fiduciary duty, tortious interference, and common law fraud against a law firm and two of its former partners, brought by unsuccessful bidders in a bankruptcy proceeding, alleging that defendants used their prior representation of the plaintiffs to undermine the plaintiffs’ attempt to acquire assets in a bankruptcy sale, the district court’s dismissal of the complaint on res judicata grounds is reversed where plaintiffs could not have brought their claims during the bankruptcy proceedings, and this present action will not disturb the orders of the bankruptcy court.

[04/10] In Re: Lansaw
In a case arising out of repeated violations of the bankruptcy automatic stay of debt collection activities, 11 U.S.C. section 362(a), committed by debtors’ landlord, the district court’s judgment in favor of debtors and award of damages under section 362(k)(1) are affirmed where:1) section 362(k)(1) authorizes the award of emotional-distress damages and the debtors presented sufficient evidence to support such an award; and 2) debtors were properly awarded punitive damages.

[04/05] PNC v. Sturba
In a creditor’s claim based on a promissory note on real property in California, that would be barred by a four-year California statute of limitations but not by a six-year Ohio statute of limitations, the Bankruptcy Appellate Panel’s reversal of the bankruptcy court’s ruling that a creditor’s claim was timely is reversed where: 1) under federal common law, the contractual choice-of-law provision did not expressly include the statute of limitations and therefore was silent on the issue; 2) under section 142 of the Restatement (Second) of Conflict of Laws, the statute of limitations of the forum state, California, would generally apply; and 3) exceptional circumstances, however, directed the application of the Ohio statute of limitations because the unique strictures of the Bankruptcy Code meant that, through no fault of the creditor, the only forum for its claim was the Northern District of California.

[04/04] Lex Claims, LLC v. Padilla
In a second set of bankruptcy appeals involving the automatic stay provision of the Puerto Rico Oversight, Management, and Economic Stability Act (PROMESA), 48 U.S.C. sections 2101-2241, which employs language very similar to that of the bankruptcy stay statute, the district court’s decision that four claims included in the plaintiffs’ Second Amended Complaint are not within the scope of PROMESA’s temporary stay is reversed where it erred in this determination.

[04/03] Dingley v. Yellow Logistics, LLC
In an Chapter 7 bankruptcy case, the BAP’s decision is affirmed on different grounds where the bankruptcy court erred by sanctioning creditors for violating the automatic stay by pursuing civil contempt proceedings against the debtor based on his failure to pay discovery sanctions in a state court action, because civil contempt proceedings are exempted from the automatic stay under the Bankruptcy Code’s government regulatory exemption, 11 U.S.C. section 362(b)(4), when, as here, the contempt proceedings are intended to effectuate the court’s public policy interest in deterring litigation misconduct.

[03/31] First Community Bank v. Gaughan
In an adversary proceeding brought by a creditor against a Chapter 7 bankruptcy trustee, seeking a declaration that the creditor had an enforceable judgment lien on real property, thereby granting it priority over the proceeds of the trustee’s sale of the property, the district court’s reversal of the bankruptcy court’s summary judgment in favor of a creditor is reversed where: 1) applying California’s choice-of-law rules, California law, rather than Arizona law, governed; and thus 2) the debtor’s interest in the real property at issue was subject to enforcement of the judgment lien.

[03/30] LVNV Funding, LLC v. Harling
In a Chapter 13 bankruptcy appeal of a bankruptcy court order which disallowed its claims as an unsecured creditor in two proceedings, the court order is affirmed over creditor’s claim that the bankruptcy court’s Chapter 13 plan confirmation orders barred the objections to creditor’s claims because those objections were filed after entry of the Confirmation Orders.

[03/30] Im Re: Linear Electric Co., Inc.
In a case concerning the relationship between the New Jersey Construction Lien Law and federal bankruptcy law, presenting the question of whether a supplier can file a construction lien under New Jersey law when the contractor has filed a petition for bankruptcy, which automatically stays any act to create or perfect any lien against the contractor’s property, the district court’s decision affirming the bankruptcy court’s decision that the automatic stay prevented filing the liens is affirmed where: 1) the accounts receivable were part of the bankruptcy estate because they complied with the definition of property of the estate under 11 U.S.C. section 541; and 2) the ability of a supplier to create a construction lien depended on the existence of the bankrupt contractor’s accounts receivable.

[03/27] Goat Island South Condominium v. IDC Clambakes, Inc.
In a bankruptcy appeal in a decades-long litigation over the Regatta Club, a lucrative banquet facility which was constructed on a parcel of land at a time when the validity of the development rights to that parcel was in dispute, the district court’s decision, which found clear error in the bankruptcy court’s characterization of the benefit conferred on debtor as merely a ground lease and in its unjust enrichment analysis, is reversed where the bankruptcy court properly decided: 1) to award no equitable relief to the Associations, where no implied-in-fact contract existed between the parties; and 2) as to unjust enrichment, there is nothing in the America opinions to suggest that their holding regarding the Regatta Club’s ownership should bear on the question of whether principles of equity entitle the Associations to even more relief than the Rhode Island Supreme Court already afforded them. Thus there wa no abuse of discretion in the bankruptcy court’s ultimate decision that the Associations failed to meet their burden of showing that inequity would result if debtor did not pay them for the use and occupancy of the Regatta Club during the claim period.

[03/24] Gugliuzza v. Federal Trade Commission
In an adversary proceeding brought by the Federal Trade Commission, the district court’s order which reversed in part a bankruptcy court’s grant of summary judgment against a bankruptcy debtor and remanded for further fact-finding, the appeal is dismissed where the court lacks jurisdiction to review the district court’s order.

[03/23] Carmack v. Reynolds
In response to a certified question from the Ninth Circuit Court of Appeal, in an underlying bankruptcy case in which a debtor who was to receive money from a family spendthrift trust declared bankruptcy before receiving his first trust payment, and the bankruptcy trustee seeks to determine what interest the bankruptcy estate has in the trust, the Court concludes that a bankruptcy trustee, standing as a hypothetical judgment creditor, can reach a beneficiary’s interest in a trust that pays entirely out of principal in two ways: 1) it may reach up to the full amount of any distributions of principal that are currently due and payable to the beneficiary, unless the trust instrument specifies that those distributions are for the beneficiary’s support or education and the beneficiary needs those distributions for either purpose; and 2) separately, the bankruptcy trustee can reach up to 25 percent of any anticipated payments made to, or for the benefit of, the beneficiary, reduced to the extent necessary by the support needs of the beneficiary and any dependents.

[03/22] Czyzewski v. Jevic Holding Corp.
In consolidated appeals arising out of lawsuits filed against a Chapter 11 bankruptcy debtor that declared bankruptcy after it was purchased in a leveraged buyout, the Third Circuit Court of Appeals’ decision affirming the Bankruptcy Court’s approval of a settlement agreement, which called for a structured dismissal of debtor’s Chapter 11 bankruptcy, nonpayment of Worker Adjustment and Retraining Notification (WARN) claims, and payment to lower-priority general unsecured creditors — thereby violating the Bankruptcy Code’s priority rules by paying general unsecured claims ahead of WARN claims — is reversed where: 1) petitioners have Article III standing; and 2) Bankruptcy courts may not approve structured dismissals that provide for distributions that do not follow ordinary priority rules without the consent of affected creditors.

[03/07] Schoenmann v. Bank of the West
In an adversary proceeding brought by a chapter 7 bankruptcy trustee, the district court’s order affirming the bankruptcy court’s summary judgment in favor of the defendant is reversed where courts may account for hypothetical preference actions within a hypothetical chapter 7 liquidation when such an inquiry is factually warranted, is supported by appropriate evidence, and the action would not contravene an independent statutory provision.

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