Justia U.S. 5th Circuit Court of Appeals Opinion Summaries

Articles Posted in Bankruptcy
by
The Fifth Circuit treated the appellees' and the intervenors' joint petition for rehearing en banc as a petition for panel rehearing, granted the petition, withdrew its prior opinion, and substituted the following opinion. The court held that a creditor is not impaired by a reorganization plan simply because it incorporates the Bankruptcy Code's disallowance provisions. Because the bankruptcy court found otherwise and never reached the issue of whether the Bankruptcy Code disallows the creditors' claims for the Make-Whole Amount and the creditors' request for post-petition interest at the contractual default rates specified in the Note Agreement and the Revolving Credit Facility, the court remanded for the bankruptcy court to consider these issues. View "Ultra Petroleum Corp. v. Ad Hoc Committee of Unsecured Creditors of Ultra Resources, Inc." on Justia Law

Posted in: Bankruptcy
by
A bankruptcy court does not have authority to enforce the discharge injunctions entered in other districts. Plaintiffs sought to certify a nationwide class of those who claim their education-loan debts were validly discharged but from whom the lender continues to demand payment. The Fifth Circuit held that the bankruptcy court erred in holding that it could address contempt for violations of injunctions arising from discharges by bankruptcy courts in other districts. Therefore, the court held that, as to Shahbazi and at least those debtors whose discharges were entered by courts in other districts, the bankruptcy court in these proceedings has no authority to enforce the resulting injunction. However, the court agreed with the bankruptcy court that the particular education loans involved here, although they were obtained in order to pay expenses of education, did not qualify as an obligation to repay funds received as an educational benefit, scholarship, or stipend because their repayment was unconditional. Therefore, they were dischargeable. The court remanded for further proceedings. View "Crocker v. Navient Solutions, LLC" on Justia Law

Posted in: Bankruptcy
by
Debtor filed an adversary proceeding in bankruptcy court raising the issue of whether her bankruptcy discharge applied to a student loan. The Fifth Circuit affirmed the bankruptcy court's denial of Wells Fargo's motion to compel arbitration. The court held that its holding In re Nat'l Gypsum Co., 118 F.3d 1059, 1069 (5th Cir. 1997), -- that bankruptcy courts have discretion to refuse to compel arbitration in proceedings seeking enforcement of a discharge injunction -- remains good law following the Supreme Court's decision in Epic Systems Corp. v. Lewis, 138 S. Ct. 1612 (2018). The court held that Epic Systems shows that National Gypsum's doctrinal foundation remains sound. View "Henry v. Educational Financial Service" on Justia Law

by
Ex-wife filed suit against her ex-husband, a Chapter 7 debtor, in bankruptcy court over a debt of $32,500 plus interest. The Fifth Circuit affirmed the district court's decision reversing the bankruptcy court's ruling in favor of the ex-husband. The court held that the ex-husband's payment to the ex-wife's former attorney did not terminate his obligation to the ex-wife because the attorney was no longer authorized to transact on the ex-wife's behalf. In this case, the attorney did not have actual or apparent authority to collect on the ex-wife's behalf. View "Russell v. Russell" on Justia Law

Posted in: Bankruptcy, Family Law
by
Payments owed to a shareholder by a bankrupt debtor, which are not quite dividends but which certainly look a lot like dividends, should be treated like the equity interests of a shareholder and subordinated to claims by creditors of the debtor. The Fifth Circuit affirmed the district court's judgment and held that the deemed dividends gave the Estate benefits normally reserved for equity investors and thus subordination of all of the Estate's claims was appropriate. The court also held that the bankruptcy court did not abuse its discretion in denying discovery. Likewise, the court held that the Estate's due process right to discovery was not violated. View "French v. Linn Energy, LLC" on Justia Law

by
After Double Eagle filed for Chapter 11 bankruptcy, it filed suit against MarkWest and Ohio Gathering on a contract claim in Louisiana federal court. Double Eagle then assigned its claim against defendants to one of its creditors. The Fifth Circuit vacated the district court's judgment and held that the district court erred by failing to apply the time-of-filing rule to 28 U.S.C. 1334(b) in this lawsuit that was related to a bankruptcy when filed, but then the bankruptcy connection was later dissolved. The court explained that this longstanding rule promoted efficiency and thus it would be wasteful if post-filing changes in the facts determining jurisdiction required dismissal of a case to which the parties and court had already devoted resources. In this case, the related-to-bankruptcy jurisdiction that existed at the outset of this case never went away. The court also held that failing to focus on the time of filing also infected the district court’s personal jurisdiction analysis, and the section 1334(b) jurisdiction that existed when this case was filed thus means there is both subject matter and personal jurisdiction. The court rejected defendants' remaining claims and remanded for further proceedings. View "Double Eagle Energy Services, LLC v. MarkWest Utica EMG, LLC" on Justia Law

by
After a bankruptcy sale extinguished an easement of the Port, the Port filed an adversary proceeding against debtors, seeking to invalidate the sale and regain its easement. The district court affirmed the bankruptcy court's rejection of the Port's sovereign immunity and fraud claims. The Fifth Circuit affirmed the district court's judgment, finding no Eleventh Amendment violation or basis for a claim of fraud. In this case, the bankruptcy court approved a section 363(f) of the Bankruptcy Code sale "free and clear" of encumbrances, including the Port's easement; the bankruptcy court did not award affirmative relief nor deploy coercive judicial process against the Port and did not exercise in personam jurisdiction over the state; and any section 363(f) objection had to have been raised on direct appeal of the confirmation order and could not be raised in this collateral adversary proceeding. Furthermore, the Port failed to allege any false representation, and the district court did not abuse its discretion in denying the Port leave to amend. View "Port of Corpus Christi Authority v. Sherwin Alumina Co." on Justia Law

by
The Fifth Circuit affirmed the bankruptcy court's denial of discharge on plaintiff's student loan debt under 11 U.S.C. 523(a)(8). The court held that there was no evidence that plaintiff's present circumstances -- her deteriorating diabetic conditions and the costs associated with it, and her inability to maintain employment -- are likely to persist throughout a significant portion of the loans' repayment period. Therefore, under the Brunner standard adopted by this court in In re Gerhardt, 348 F.3d at 91, and the vast majority of other circuit courts, plaintiff was not eligible for discharge for her student loans. View "Thomas v. Department of Education" on Justia Law

by
After Whistler entered into a drilling contract with Nabors, Whistler entered into bankruptcy proceedings and rejected the contract. Nabors subsequently sought administrative priority in the bankruptcy proceeding for expenses incurred after the rejection of its contract, and the bankruptcy court granted the request in part and denied in part. The Fifth Circuit held that a creditor can establish that its expenses are attributable to the actions of the bankruptcy estate through evidence of either a direct request from the debtor-in-possession or other inducement via the knowing and voluntary post-petition acceptance of desired goods or services. The court clarified that when the debtor-in-possession induces availability and the bankruptcy estate derives a benefit from it, the ordinary cost of ensuring such availability qualifies as an administrative expense. The court remanded for the bankruptcy court to determine (1) whether Whistler induced Nabors to stay on the platform; (2) the length of time Nabors stayed on the platform because of Whistler's post-petition needs; and (3) the actual and necessary costs of staying on the platform during this time period. The court left it to the bankruptcy court to clarify its own findings regarding Nabors's provision of services. Finally, the court affirmed the bankruptcy court's denial of Nabors' requests for administrative priority in full. View "Nabors Offshore Corp. v. Whistler Energy II, LLC" on Justia Law

by
The Fifth Circuit withdrew its prior opinion and substituted the following opinion. 42 U.S.C. 405(h)—which states that no claim arising under the Social Security Act can be brought under 28 U.S.C. 1331 and 1346—does not bar bankruptcy courts from exercising their jurisdiction under section 1334 to hear Social Security claims. The court joined the Ninth Circuit, holding that the plain text of section 405(h)'s third sentence does not bar section 1334 jurisdiction and the district court erred by concluding otherwise. The court offered guidance on remand, clarifying what type of decision section 405(h)'s second sentence channels. The court believed that section 405(h)'s second sentence applied only where the would-be plaintiff is challenging a decision regarding his entitlement to benefits. Accordingly, the court reversed and remanded for further proceedings. View "Benjamin v. United States" on Justia Law

Posted in: Bankruptcy