Articles Posted in Bankruptcy

by
The Ninth Circuit affirmed the Bankruptcy Appellate Panel's opinion reversing the bankruptcy court's order entering contempt sanctions against creditors for knowingly violating the discharge injunction in the Chapter 7 case. The panel held that creditors did not knowingly violate the discharge injunction because they had a subjective good faith belief that the discharge injunction did not apply to their state-court claim for post-petition attorneys' fees. The panel explained that creditors' subjective good faith belief, even if unreasonable, insulated them from a finding of contempt. View "In re Taggert" on Justia Law

Posted in: Bankruptcy

by
Gilman filed a voluntary Chapter 7 bankruptcy petition. Phillips was a creditor. Gilman identified properties in Van Nuys and Northridge, describing the Northridge property as “in escrow” and claiming a household exemption for the Van Nuys property, and stating “Debtor has Cancer and has not been able to work.” He did not list any contracts relating to the sale of the Van Nuys property. Gilman would later admit that escrow was open on that property when he filed for bankruptcy. Phillips filed an adversary proceeding, alleging fraud, and objected to Gilman’s homestead exemption. Gilman did not oppose the objection and did not appear at the hearing. The bankruptcy court sustained Phillips’ objections. Gilman filed an amended Schedule C, claiming a reduced exemption and obtained Rule 60(b) relief, based on his counsel’s mistaken failure to oppose Phillips’ objections. The bankruptcy court held that escrow did not eliminate Gilman’s right to a homestead exemption. The Ninth Circuit held that it had jurisdiction to review the district court’s order affirming the grant of the homestead exemption; that the bankruptcy court did not abuse its discretion in granting Rule 60(b) relief from judgment on the ground of excusable neglect; and that the bankruptcy court erred in concluding that the debtor established his claim to a homestead exemption under California law without determining whether the debtor intended to continue to reside in the property. View "Phillips v. Gilman" on Justia Law

by
An election under 11 U.S.C. 1111(b)(2) does not require that a due-on-sale clause be included in a reorganization plan. 11 U.S.C. 1129(a)(10), which requires that at least one impaired class accept a cramdown plan, applies on a per plan basis, rather than a per debtor basis. In this case, the Ninth Circuit affirmed the district court's decision affirming the bankruptcy court's order that approved the Chapter 11 cramdown reorganization plan of five related entities (debtors). View "In the Matter of Transwest Resort Properties, Inc." on Justia Law

Posted in: Bankruptcy

by
Under Gibbs v. Legrand, post-discovery delay does not preclude equitable tolling but is still relevant to assessing a party's "overall diligence." The Ninth Circuit affirmed the Bankruptcy Appellate Panel's decision reversing the bankruptcy court's dismissal as time-barred of a bankruptcy estate's claims seeking avoidance of fraudulent transfers and affirming the bankruptcy court's dismissal of other claims based on transfers not made by debtor. The panel held that neither court correctly applied the law on equitable tolling. In this case, the estate's overall diligence, combined with the extraordinary circumstances preventing earlier discovery of the subject transfers, warranted equitable tolling. View "Milby v. Templeton" on Justia Law

Posted in: Bankruptcy

by
A housing loan, made by an employer to an employee as a key part of a compensation package, qualified as a non-consumer debt. The Ninth Circuit affirmed the Bankruptcy Appellate Panel's decision affirming the bankruptcy court's denial of creditor's motion to dismiss debtor's Chapter 7 bankruptcy petition for abuse under 11 U.S.C. 707(b)(1). As a preliminary matter, the panel held that the bankruptcy court's order denying creditor's motion to dismiss under section 707(b) was final and appealable. On the merits, the panel held that the bankruptcy court did not err by finding that the housing loan was a non-consumer debt. The panel agreed with the bankruptcy court that debtor incurred the housing loan primarily for a non-consumer purpose connected to furthering his career. View "Aspen Skiing Co. v. Cherrett" on Justia Law

Posted in: Bankruptcy

by
The Ninth Circuit affirmed the district court's reversal of the bankruptcy court's grant of summary judgments for defendants in two adversary proceedings seeking recovery of fraudulent transfers. The panel applied the dominion test and held that defendants were initial transferees under 11 U.S.C. 550(a)(1) and thus not entitled to the safe harbor under section 550(b)(1) for subsequent transferees. Therefore, the Committee could recover the funds from both the corporate cheat and those parties to whom he first made payments from the corporate account. The panel remanded for further proceedings. View "In the Matter of WallDesign" on Justia Law

Posted in: Bankruptcy

by
11 U.S.C. 502(b)(4) acts as a federal cap on a fee already determined pursuant to state law. The Ninth Circuit affirmed the district court's reversal of the bankruptcy court's decision reducing a claim for pre-petition attorneys' fees under section 502(b)(4). Section 502(b)(4) limits claims for services rendered by the debtor's attorney to the extent that such claims exceed the reasonable value of such services. The panel explained that the proper mode of analysis was: (1) an acknowledgment or determination that the fee contract was breached; (2) an assessment of the damages for the breach under state law; (3) a determination under section 502(b)(4) of reasonableness of the damages claim afforded by state law; and (4) a reduction of the claim by whatever extent, if any, it is deemed excessive. The panel also held that the section 502(b)(4) cap limits fees for services already performed. The Full Faith and Credit Act requires, in the circumstances of this case, that the judgment of the state court confirming the arbitration award be given full faith and credit in the bankruptcy proceeding. View "McProud v. Siller" on Justia Law

Posted in: Bankruptcy

by
The Ninth Circuit vacated the district court's affirmance of the bankruptcy court's order enforcing a stipulated agreement in adversary proceedings seeking to debar an attorney from submitting claims to asbestos trusts. The trusts were created through the Chapter 11 bankruptcy proceedings of entities exposed to significant asbestos liability. In Golden v. California Emergency Physicians Medical Group, 782 F.3d 1083 (9th Cir. 2015), the panel held that assessing the validity of a settlement agreement is a question of state contract law. In this case, the district court never addressed whether federal law governed this case, and it was unclear whether the district court was even aware that the trusts contended that federal law controlled its decision. Furthermore, the district court also did not apply Golden to the settlement at issue. Accordingly, the court remanded so that the district court can decide whether federal or state law governs (including whether the federal law argument has been waived), and what impact, if any, Golden has on this case. View "Mandelbrot v. J.T. Thorpe Settlement Trust" on Justia Law

by
The Ninth Circuit held that 11 U.S.C. 363(f), authorizing a trustee to sell a debtor's assets free and clear of third-party interests, applied in this case, and did not conflict with section 365(h), which protects the rights of lessees, because the trustee did not "reject" the leases. The panel affirmed the district court's judgment affirming the bankruptcy court's decision that a bankruptcy trustee's sale of a debtor's property was free and clear of unexpired leases. Therefore, section 363(f)(1) authorized the sale of SHP's property free and clear of the Pinnacle and Opticom leases. Since the trustee did not reject the leases, section 365 was not implicated. View "Pinnacle Restaurant at Big Sky LLC v. CH SP Acquisitions, LLC" on Justia Law

Posted in: Bankruptcy

by
11 U.S.C. 106(a)(1)'s abrogation of sovereign immunity "with respect to" 18 U.S.C. 544(b)(1) extends to the derivative “applicable law.” In this case, the Trustee invoked Idaho's Uniform Fraudulent Transfer Act (UFTA) as the "applicable law" to bring an 11 U.S.C. 544(b)(1) adversary action to avoid $17 million in tax payments that debtor fraudulently transferred to the IRS. The panel held that the government could not rely on sovereign immunity to prevent the avoidance of the tax payments at issue. The panel addressed the Trustee's cross-appeal in a concurrently filed memorandum disposition. View "In re DBSI, Inc." on Justia Law

Posted in: Bankruptcy