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

Debtor owned a candle factory with three outstanding mortgages. Southwest had the largest security interest. After the trustee unsuccessfully attempted to sell the property and realize the equity for the estate, the trustee abandoned the property to Southwest. At issue on appeal is whether the estate or the secured creditor should pay the property’s maintenance expenses incurred while the trustee was trying to sell the property. The bankruptcy court granted a surcharge against the property for those expenses in the form of a priming lien. The court concluded that, to the extent that a trustee holds an asset longer than necessary to determine and realize its value, and the value turns out to be less than the creditor’s secured interest, the creditor can challenge the necessity of the costs incurred by the trustee. In this case, the bankruptcy court did not clearly err in finding that Southwest received a direct and quantifiable benefit from the trustee’s stewardship of the property. Accordingly, the court affirmed the judgment. View "Southwest Securities, FSB v. Segner, Jr." on Justia Law

Plaintiffs filed a personal injury suit against defendants for alleged workplace injuries to Helen Allen. Defendants argued that the suit should be barred by judicial estoppel because plaintiffs failed to disclose the personal injury claim during their concurrent Chapter 13 bankruptcy proceeding.The district court granted defendants' motion for summary judgment. The court concluded that its precedent clearly establishes that the district court did not abuse its discretion when it dismissed plaintiffs’ claims based on judicial estoppel and provided a trustee with the opportunity to “pursue for the benefit of creditors a judgment or cause of action that the debtor fails to disclose in bankruptcy.” The court modified the district court’s judgment to clarify that the district court may reopen the present case and substitute a Chapter 7 trustee for plaintiffs if the trustee decides to pursue the claim within a reasonable period of time. Accordingly, the court affirmed the judgment as modified. View "Allen v. C & H Distributors, L.L.C.," on Justia Law

This case arose out of an alleged power of attorney agreement between appellant and KSRP, which was signed by appellee, an officer and 50% owner of PYK, the general partner of KSRP. On appeal, appellant challenged the district court's order and judgment dismissing his claims against appellee, arguing that the bankruptcy court and district court lacked "related to" jurisdiction under 28 U.S.C. 1331 because appellee's cross-claims for indemnity and contribution against KSRP had no possibility of succeeding. The court concluded that the pleadings are sufficient to support "related to" jurisdiction. In this case, appellee's allegations in his notice of removal and the facts alleged in appellant's pleadings in state court sufficiently show that appellee's contractual indemnity claim against KSRP was not immaterial and made solely for the purpose of obtaining jurisdiction or wholly insubstantial and frivolous. Accordingly, the court affirmed the judgment. View "Collins v. Sidharthan" on Justia Law

After debtor, a successful surgeon, died during the pendency of his bankruptcy case, debtor's estranged spouse and debtor's personal representative claimed various allowances and exemptions under the Texas Estates Code in debtor’s bankruptcy case pursuant to Bankruptcy Code 501, 502, and 522. The bankruptcy court ruled that neither was entitled to relief. The court dismissed the appeal to the extent that debtor's spouse seeks a probate allowance to be paid out of debtor's bankruptcy estate because the court lacked appellate jurisdiction to decide this issue. The court does not review bankruptcy court orders that have not been reviewed by the district court. The court affirmed in all other respects. View "Brown v. Sommers" on Justia Law

W. Steve Smith, trustee of a complex Chapter 7 estate, appealed the bankruptcy court's removal of him as trustee. Smith also appealed his removal from all of his other pending cases. Smith had traveled with his wife and children to New Orleans for an oral argument related to his work as trustee, billing the the firm for work that included estate funds for trip expenses. The district court affirmed. The court concluded that the bankruptcy court applied a proper legal standard, and its determination that Smith’s conduct violated that standard was not clearly erroneous. Therefore, the bankruptcy court did not abuse its discretion in finding cause sufficient to remove Smith as trustee. The court rejected Smith's notice argument as well as his as-applied constitutional argument to section 324(b) of the Bankruptcy Code. Finally, the court's ruling moots the issue of whether the bankruptcy and district courts wrongly refused to stay his removal pending appeal. Accordingly, the court affirmed the judgment. View "Smith v. Robbins" on Justia Law

The Committee appealed a consolidated district court judgment affirming several bankruptcy court judgments. The court held that the bankruptcy court did not abuse its discretion in approving the Settlement Agreement - a compromise the Trustee made in discharge of his fiduciary duty. The court affirmed the Trustee’s conclusion that the estate’s best interests were better served by the Settlement Agreement than by continued litigation to determine the absolute value of Chase’s secured collateral; for purposes of 11 U.S.C. 502(b), although the bankruptcy court did not adequately determine the amount of Chase’s allowed claim, its error was harmless; the bankruptcy court did not abuse the discretion afforded it by Rule 3012 in declining the Committee’s request to undertake a “more precise determination of value;” and the bankruptcy court did not err in denying the Motion to Value simultaneously with its approval of the Settlement Agreement. Accordingly, the court affirmed the district court’s consolidated judgment affirming the bankruptcy court’s orders approving the Settlement Agreement, denying the Claim Objection, and denying the Motion to Value. View "Official Comm. of Unsecured Creditors v. Chase Capital Corp." on Justia Law

This case arose from a contractual dispute between Netsphere and Jeffrey Baron in 2009. One of Baron's companies, Ondovoa, declared bankruptcy, automatically staying the district court action. As proceedings continued, both the bankruptcy court and the bankruptcy trustee became increasingly concerned over Baron’s failure to pay his current or former lawyers. Eventually, on the recommendation of the bankruptcy court, the district court appointed a receiver over Baron. The court reversed and remanded for the district court to reconsider all receivership fees and expenses. Before this mandate issued, the district court entered several orders approving interim fee applications submitted by the receiver and its counsel. After the mandate issued, and the case was remanded, the district court then entered an order reconsidering the fees it had previously awarded to the receiver, its counsel, and the Ondova bankruptcy trustee. It also authorized new payments to the receiver and to one of its counsel. Both parties appealed the various fee orders. The court dismissed the appeal for want of appellate jurisdiction because 28 U.S.C. 1292(a)(2) does not confer upon the court appellate jurisdiction to review these fee orders and the collateral order doctrine does not provide a basis for appellate jurisdiction. View "Netsphere, Inc. v. Baron" on Justia Law

Plaintiff filed a qui tam action against GSD&M under the False Claims Act (FCA), 31 U.S.C. 3730, alleging that GSD&M misrepresented its profits and overhead during contract negotiations with the Air Force. At the time of filing, plaintiff was the debtor in a confirmed Chapter 13 bankruptcy plan and he failed to disclose his FCA claims to the bankruptcy court. The district court dismissed the FCA claims under the doctrine of judicial estoppel and plaintiff appealed, arguing that judicial estoppel should not apply because he had no motive to conceal his FCA claims from the bankruptcy court, especially given that his repayment plan required repaying 100% of the principal of his debts. The court affirmed the judgment, concluding that the district court did not abuse its discretion in dismissing the claims because the district court's findings, that plaintiff knew about his claims while his bankruptcy was still pending and had a motive to conceal, are supported by the record. The court rejected plaintiff's remaining claims and affirmed the judgment. View "Long v. GSD&M Idea City, LLC" on Justia Law

Riverbend filed a Proof of Claim in the bankruptcy proceeding of debtor, owner of a condominium in Riverbend. Debtor filed a Motion to Avoid Riverbend's Lien on the grounds that after deducting the balance of the first mortgage and the Louisiana homestead exemption, there was only $8,000 left to which Riverbend's lien could attach. The bankruptcy court held that the privilege created by La. Rev. Stat. 9:1123.115(1) on a Louisiana condominium for all unpaid sums assessed by the condominium association against the condominium owner is a statutory lien (as distinguished from a security interest) and is therefore subject to bifurcation under 11 U.S.C. 1322(b)(2). Riverbend appealed the bankruptcy court's decision. The court affirmed the district court’s affirmance of the bankruptcy court’s order. View "Riverbend Condo. Ass'n v. Green" on Justia Law

Plaintiffs filed suit against Abide, alleging that Abide violated their Fourth Amendment rights while serving as the bankruptcy trustee for plaintiffs’ bankrupt estate and the bankrupt estate of their closely held corporation. The district court dismissed the complaint for lack of subject-matter jurisdiction. The court held that when a bankruptcy trustee acts pursuant to an order by the district court, and the trustee’s actions pursuant to that order are the basis of the claim, the district court has jurisdiction to entertain a suit with respect to that conduct. Because the court held that the district court should not have dismissed plaintiffs’ complaint, the district court may consider Abide’s 12(b)(6) motion in the first instance. The court vacated and remanded for further proceedings. View "Carroll, Jr. v. Abide" on Justia Law