Articles Posted in Bankruptcy

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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

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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

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Vendors and contractors provided materials and services in connection with an offshore mineral lease. Under the Louisiana Oil Well Lien Act, La. Rev. Stat. 9:4863(A)(1), 9:4864(A)(1), they secured liens on the lessee’s operating interest upon the commencement of labor. They timely recorded the liens. The lessee later sold “term overriding royalty interests” to OHA. In the lessee’s subsequent bankruptcy proceeding, the service providers intervened, seeking to enforce their liens on OHA’s royalty interests. The district court agreed with the bankruptcy court and dismissed their complaints, concluding that the statute that created the liens extinguished them via a safe-harbor provision. The Fifth Circuit affirmed. The safe-harbor question is one of statutory interpretation: Was OHA’s purchase of the overriding royalties a purchase of “hydrocarbons that are sold or otherwise transferred in a bona fide onerous transaction by the lessee or other person who severed or owned them” at severance? The royalties were “sold,” the transaction was “bona fide,” and the seller was a “lessee.” OHA purchased more than an interest in proceeds; it purchased an interest in the to-be-produced hydrocarbons themselves. A purchase of overriding royalties is a purchase of “hydrocarbons” under the statute, so the lienholders’ failure to provide pre-purchase notice renders their liens extinguished. View "OHA Investment Corp. v. Schlumberger Technology Corp." on Justia Law

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Comcast loaned the Network $100 million, secured by a lien on substantially all of the Network's tangible and intangible assets, including an Affiliation Agreement. Pursuant to the Agreement, a Comcast subsidiary agreed to pay the Network to carry the Network's content on its cable systems. The Network involuntarily entered into bankruptcy; Comcast elected to treat its entire claim as secured before a plan or reorganization was confirmed; and then the bankruptcy court conducted a valuation of the Network's assets, including the Agreement. The bankruptcy court concluded that the Agreement had no value and the district court affirmed. The Fifth Circuit held, however, that the district court did not consider the value of Comcast's collateral in light of the reality of the plan of reorganization and accordingly deducted waived Network liabilities from the Agreement's value. Accordingly, the court remanded for further proceedings. View "Houston SportsNet Finance, LLC v. Houston Astros, LLC" on Justia Law

Posted in: Bankruptcy

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Comcast loaned the Network $100 million, secured by a lien on substantially all of the Network's tangible and intangible assets, including an Affiliation Agreement. Pursuant to the Agreement, a Comcast subsidiary agreed to pay the Network to carry the Network's content on its cable systems. The Network involuntarily entered into bankruptcy; Comcast elected to treat its entire claim as secured before a plan or reorganization was confirmed; and then the bankruptcy court conducted a valuation of the Network's assets, including the Agreement. The bankruptcy court concluded that the Agreement had no value and the district court affirmed. The Fifth Circuit held, however, that the district court did not consider the value of Comcast's collateral in light of the reality of the plan of reorganization and accordingly deducted waived Network liabilities from the Agreement's value. Accordingly, the court remanded for further proceedings. View "Houston SportsNet Finance, LLC v. Houston Astros, LLC" on Justia Law

Posted in: Bankruptcy

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In this consolidated appeal stemming from the bankruptcy of nineteen companies that were tenants-in-common of a student housing development called the Reserve, the Fifth Circuit reversed in part and affirmed in part the bankruptcy court's judgment. The court reversed the bankruptcy court's reduction of UTSA's share of net proceeds from 21.17% to 3.14%, based on serious procedural deficiencies, the lack of notice to UTSA regarding the imposition of a constructive trust, and the remedy's violation of the terms of the Code. The court held, however, that the bankruptcy court did not err in reducing Woodlark's proof of claims from $510,475,98 to $410,097.78. The court remanded for further proceedings. View "UTSA Apartments, LLC v. UTSA Apartments 8 LLC" on Justia Law

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In this consolidated appeal stemming from the bankruptcy of nineteen companies that were tenants-in-common of a student housing development called the Reserve, the Fifth Circuit reversed in part and affirmed in part the bankruptcy court's judgment. The court reversed the bankruptcy court's reduction of UTSA's share of net proceeds from 21.17% to 3.14%, based on serious procedural deficiencies, the lack of notice to UTSA regarding the imposition of a constructive trust, and the remedy's violation of the terms of the Code. The court held, however, that the bankruptcy court did not err in reducing Woodlark's proof of claims from $510,475,98 to $410,097.78. The court remanded for further proceedings. View "UTSA Apartments, LLC v. UTSA Apartments 8 LLC" on Justia Law

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The proceeds of a homestead sold after the filing of a petition for Chapter 7 bankruptcy remain exempt from the debtor's estate if they are not reinvested within the time frame required to invoke the proceeds rule of Texas homestead law. In Hawk v. Engelhart, 871 F.3d 287 (5th Cir. 2017), the Fifth Circuit held that funds withdrawn from an exempted retirement account after the filing of a Chapter 7 bankruptcy do not lose their exempt status even if the money is not redeposited in a similar account within 60 days pursuant to Texas's proceeds rule. In this case, the court saw no reason why Hawk's analysis should not apply to Texas's homestead exemption. Therefore, the homestead here was exempt because it was owned at the commencement of debtor's bankruptcy. Accordingly, the court reversed the district court's judgment and reinstated the bankruptcy court's order dismissing the adversary proceeding. View "Lowe v. DeBerry" on Justia Law

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The Fifth Circuit affirmed the district court's decision vacating and remanding the bankruptcy court's order calling for a reduction in the trustee's requested fee. Determining that creditors have standing, the court held that the percentage amounts listed in 8 U.S.C. 326 are presumptively reasonable for Chapter 7 trustee awards. The court found the reasoning in Mohns, Inc. v. Lanser, 522 B.R. 594, 601 (E.D. Wis.), persuasive in addressing the statutory provisions at issue. Therefore, the court remanded for redetermination of the award. View "Caillouet v. JFK Capital Holdings, LLC" on Justia Law

Posted in: Bankruptcy

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The Fifth Circuit affirmed the district court's decision vacating and remanding the bankruptcy court's order calling for a reduction in the trustee's requested fee. Determining that creditors have standing, the court held that the percentage amounts listed in 8 U.S.C. 326 are presumptively reasonable for Chapter 7 trustee awards. The court found the reasoning in Mohns, Inc. v. Lanser, 522 B.R. 594, 601 (E.D. Wis.), persuasive in addressing the statutory provisions at issue. Therefore, the court remanded for redetermination of the award. View "Caillouet v. JFK Capital Holdings, LLC" on Justia Law

Posted in: Bankruptcy