Articles Posted in Bankruptcy

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This appeal stemmed from RPD's purchase of a patent license from multiple debtors in bankruptcy sales of their estates. Tech Pharm alleged that RPD did not have rights under the license to Tech Pharm's patented invention. The bankruptcy court held that RPD did not have rights and the district court agreed. The Fifth Circuit affirmed the district court's judgment and held that the patent license was a rejected executory contract and could not have been transferred by the bankruptcy sales in question. In this case, because the license agreement was an executory contract deemed rejected by operation of law, RPD could not and did not acquire the license from any of the Grapevine, Western Pennsylvania, and Waco estates—and no bankruptcy court order held otherwise. Finally, the court held that the bankruptcy court did not exceed its authority in addressing RPD's rights through purchase of the OnSite machines, and did not err in reading the license agreement to require that third parties operate OnSite machines in the same locations where they were placed at the time of sale. View "RPD Holdings, LLC v. Tech Pharmacy Services" on Justia Law

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The Fifth Circuit affirmed the bankruptcy court's finding that proceeds of debtor's liability police were property of the bankruptcy estate. The court held that, in limited circumstances such as the one here, where a siege of tort claimants threaten debtor's estate over and above the policy limits, the proceeds are property of the estate. In this case, over $400 million in related claims threatened debtor's estate over and above the $5 million insurance policy limit, giving rise to an equitable interest of debtor in having the proceeds applied to satisfy as much of those claims as possible. View "Martinez v. OGA Charters, LLC" on Justia Law

Posted in: Bankruptcy

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Under Section 506(a) of the Bankruptcy Code, delivery and setup costs should not be included in the valuation of a retained mobile home in a Chapter 13 proceeding. The Fifth Circuit affirmed the district court's judgment in a Chapter 13 bankruptcy action where the bankruptcy plan allowed her to retain her mobile home and pay 21st Mortgage the secured value (plus 5% interest) over the life of the plan. The court held that, in light of the statutory requirements and the Supreme Court's determination that the "proposed disposition or use" of collateral is crucial to its valuation, delivery and setup costs must not be included in the valuation of a retained mobile home under section 506(a). Therefore, the court held that the delivery and setup costs should not be included in debtor's mobile home valuation. View "21st Mortgage Corp. v. Glenn" on Justia Law

Posted in: Bankruptcy

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The Fifth Circuit affirmed the district court's affirmance of the bankruptcy court's judgment, holding appellants liable for a non-dischargeable judgment stemming from appellee's fraudulent misrepresentation, breach of contract, and common law fraud claims. Determining that it had jurisdiction over the appeal, the court held that there was no error in the bankruptcy court's conclusion that appellee's injuries were not only foreseeable, but directly attributable and proximately caused by Appellant Saenz's misrepresentations. Furthermore, the court could not say that the bankruptcy court clearly erred in rendering its non-dischargeable judgment or that the district court erred in affirming the bankruptcy court. View "Saenz v. Gomez" on Justia Law

Posted in: Bankruptcy

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Both the text of the bankruptcy statute and precedent support the conclusion that homestead proceeds that debtors acquire post-petition generally revest in them upon voluntary dismissal of their Chapter 13 case. The Fifth Circuit reversed the district court's judgment as to the disbursement of proceeds from the sale of a homestead. In this case, debtors sold their Texas homestead and did not use the sale proceeds to purchase another home. The bankruptcy court determined that debtors were entitled to the return of the homestead proceeds because they voluntarily dismissed their case, but the district court concluded that the proceeds should remain with the trustee for distribution to creditors in the dismissed bankruptcy proceeding. The court affirmed the district court's judgment regarding debtors' motion to dismiss and the trustee's motion to modify. Finally, the court reinstated the bankruptcy court's order directing the trustee to return the homestead proceeds to debtors. View "Viegelahn v. Lopez" on Justia Law

Posted in: Bankruptcy

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The Fifth Circuit affirmed the district court's judgment in favor of Fifth Third in an action brought by plaintiffs, alleging that the bank foreclosed on a property in violation of the automatic stay imposed during Plaintiff Ricardo's Chapter 13 bankruptcy. The court held that plaintiffs were judicially estopped from claiming a stay violation because Ricardo failed to amend his bankruptcy schedules to disclose the quitclaim deed or his putative claims against Fifth Third. Likewise, the district court did not abuse its discretion in denying plaintiffs' motion for a new trial. Finally, plaintiffs failed to show that the district court abused its discretion in excluding several of their exhibits. View "Fornesa v. Fifth Third Mortgage Co." on Justia Law

Posted in: Bankruptcy

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The Fifth Circuit treated appellant's motion to amend its opinion as a petition for panel rehearing and granted the petition. The court withdrew the prior opinion and substituted the following opinion. This appeal stemmed from a bankruptcy court order approving a trustee's application to employ special counsel. The court held that appellant lacked standing to object to the trustee's application to employ SBPC because his indirect interest in the order failed to meet the strict requirements for a "person aggrieved" under the exacting test for bankruptcy standing or a creditor under 11 U.S.C. 327(c). Accordingly, the court affirmed the judgment. View "Furlough v. Cage" on Justia Law

Posted in: Bankruptcy

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Fallon Family, as part of a settlement agreement with Goodrich, executed a ratification of a previously disputed mineral lease in favor of Goodrich. Goodrich then filed a Chapter 11 bankruptcy proceeding. The Fallon Family argued that because the bankrupt Goodrich failed to make payments under the promissory note made part of the settlement agreement, the Fallon Family had the right to dissolve the settlement agreement on grounds of non-payment, thus divesting Goodrich of its interest in the lease. The Fifth Circuit affirmed the bankruptcy court's holding that when Goodrich filed for bankruptcy, the debtor-in-possession became vested under 11 U.S.C. 544(a) with all the rights and powers of a bona fide purchaser of the real property rights of Goodrich, including the ratified lease. The court held that the lease as ratified may not be dissolved for nonpayment of the obligations in the settlement agreement because the public record reflects that consideration had been fully paid, and a third party was not placed on notice of the remaining payments. View "Fallon Family, L.P. v. Goodrich Petroleum Corp." on Justia Law

Posted in: Bankruptcy

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NOV purchased industrial-strength "desert-proof" air conditioners from Technicool for use on specialty oil-and-gas rigs, for more than $3 million. After multiple units failed, NOV, represented by SBPC, sued Technicool in Texas state court. Technicool filed for Chapter 7 bankruptcy. NOV sought relief from the automatic stay and was allowed to join Technicool’s owner, Furlough, to its state suit. NOV, again represented by SBPC, filed a claim in the bankruptcy case, representing 93 percent of the total claims. After learning that Furlough had formed other companies, the Trustee sought to consolidate the businesses and pierce the corporate veil and to employ SBPC as special counsel under 11 U.S.C. 327(a). Furlough objected, arguing that SBPC’s representation of NOV was a disqualifying “interest adverse to the estate.” In an engagement letter, signed by SBPC, NOV agreed to transfer to the bankruptcy estate funds it recovered from Furlough in state court. The bankruptcy court, district court, and Fifth Circuit held that Furlough lacked standing to object. Furlough cannot show that he was “directly and adversely affected pecuniarily by the order of the bankruptcy court.” SBPC’s appointment does not directly affect whether the bankruptcy court approves NOV’s claim. Under section 327(c), “a person is not disqualified for employment . . . solely because of such person’s employment by or representation of a creditor, unless there is objection by another creditor or the United States trustee, [and] an actual conflict of interest.” View "Furlough v. Cage" on Justia Law

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Federal law does not prevent a bona fide shareholder from exercising its right to vote against a bankruptcy petition just because it is also an unsecured creditor. The Fifth Circuit affirmed the bankruptcy court's dismissal of the bankruptcy petition as unauthorized. The court held that, under these circumstances, the issue of corporate authority to file a bankruptcy petition was left to state law. In this case, the debtor was a Delaware corporation, governed by that state's General Corporation Law, and the court found nothing that would nullify the shareholder's right to vote against the bankruptcy petition. View "Franchise Services of North America, Inc. v. United States Trustee" on Justia Law