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

This appeal arose when plaintiffs filed suit against defendants, alleging that defendants violated various Louisiana securities laws, among other state law claims. On appeal, defendants challenged the district court's order of remand on the basis that the district court lacked the discretion to abstain from hearing the case. The court concluded that the district court could not permissively abstain and equitably remand under 28 U.S.C. 1334(c)(1) and 1452(b) without considering the Chapter 15 bankruptcies at issue. Accordingly, the court reversed the district court’s decision to remand the case to state court and remanded to the district court for consideration under its bankruptcy jurisdiction. View "Firefighters' Retirement Sys, v. Citco Group" on Justia Law

Plaintiffs filed suit against the bankruptcy trustee of BFG's estate under 28 U.S.C. 1334(c), alleging that the trustee committed gross negligence and breached his fiduciary duty while acting as trustee by failing to pursue an action against Nationwide. Section 1334(c) provides that district courts may hear proceedings “arising under title 11 or arising in or related to a case under title 11." The district court dismissed the case because plaintiffs failed to obtain leave from the bankruptcy court that appointed the trustee before filing suit against him. The court concluded that the Barton doctrine continues to apply regardless of whether plaintiffs’ claims qualify as Stern claims. The court rejected plaintiffs' contention that the Barton doctrine does not apply when a party brings suit in the court that exercises supervisory authority over the bankruptcy court that appointed the trustee. Accordingly, the court affirmed the judgment, rejecting plaintiffs' argument that Barton is satisfied by filing suit in the district court with supervisory authority over the bankruptcy court. View "Villegas v. Schmidt" on Justia Law

Husky filed an adversary proceeding against debtor, objecting to the discharge of a contractual debt owed to Husky by Chrysalis - of which debtor was a shareholder. The court affirmed the district court's judgment that the bankruptcy court properly denied all relief sought by Husky because the debt was dischargeable. In this case, the statutory exceptions to discharge raised by Husky are inapplicable, and Husky cannot rely upon general principles of equity to expand those exceptions. Although another provision of the Bankruptcy Code, Section 727(a)(2), may have applied to redress the conduct of which Husky complains, Husky failed to raise that provision. View "Husky Int'l Elec., Inc. v. Ritz" on Justia Law

Appellant Robert Templeton invested in certain limited partnerships formed under the auspices of American Housing Foundation (debtor), which was in the business of developing low-income housing projects. American Housing Foundation issued guaranties of Templeton’s investments, and ultimately filed for Chapter 11 bankruptcy. Templeton asserted claims against American Housing Foundation in bankruptcy based on the guaranties and based on various state law causes of action related to his investments. The bankruptcy court issued a judgment subordinating those claims “pursuant to the provisions of 11 U.S.C. [section] 510(b).” The court also voided, as preferential, transfers made to Templeton within 90 days of the bankruptcy filing. However, the bankruptcy court refused to void allegedly fraudulent transfers. Templeton and the bankruptcy trustee, Walter O'Cheskey, cross-appealed to the district court, which affirmed the bankruptcy court’s judgment in its entirety. The parties then cross-appealed to the Fifth Circuit Court of Appeals. After review, the Fifth Circuit affirmed the subordination of Templeton's claims, and reversed the bankruptcy court's rulings on the alleged preferential and fraudulent transfers, and remanded the case for further proceedings. View "Templeton v. O'Cheskey" on Justia Law

Baker Hughes Oilfield Operations, Inc., an undersecured creditor in this bankruptcy proceeding appeals the refusal to allow it to promote its unsecured claim to secured status claim under Bankruptcy Code section 1111(b)(2). Baker Hughes and other creditors filed a petition for involuntary Chapter 7 bankruptcy against R. L. Adkins, Corp. in 2011 and the case was converted into a Chapter 11 proceeding shortly thereafter. Scott Oils, Inc. proposed to purchase the mineral properties of the debtor and filed its Second Amended Plan of Organization. The Plan proposed the sale of substantial mineral interests, some 90 mineral leases and several wells, to Scott Oils “pursuant to Bankruptcy Code Section 363,” in exchange for over 3.4 million dollars. The Plan recognized that Baker Hughes had a lien on four of these mineral leases and one well. The full claim of Baker Hughes in the well was shown to be $321,506.28 but only a secured $38,753.22 interest. Four other creditors were shown to have secured interests in the same well. Baker Hughes filed for an election pursuant to section 1111(b) to have its claim treated as secured to the full extent. Scott Oils replied by pointing to the terms of the statute that denied the election where “such property is sold under [section] 363 of this title or is to be sold under the Plan.” Several days of hearing on confirmation of the Plan were held in April of 2013 and the Plan was confirmed in May. Baker Hughes did not appear at the hearing on confirmation and did not object or appeal any act or decision of the bankruptcy court prior to the confirmation. Nor was the confirmation appealed. Following the confirmation, Baker Hughes continued to pursue its Section 1111 claim and argued that either it had the right to make a credit bid at the sale of the collateral or be granted election sought under 1111(b). Finding no reversible error in the bankruptcy or district courts' rejection of Baker Hughes' claim, the Fifth Circuit affirmed. View "Baker Hughes Oilfield Oprt Inc v. Torres" on Justia Law

After their bankruptcy was converted from a chapter 11 reorganization to a chapter 7 liquidation, appellants Marco and Roxanne Cantu sued their bankruptcy attorney Ellen Stone relating to her representation prior to the conversion of their case. The chapter 7 trustee, Michael Schmidt, intervened in the action against Stone contending that the claims belonged to the estate. The parties eventually settled the malpractice case and the funds were deposited into the court registry pending a determination whether the settlement proceeds belonged to the Cantus individually or to the bankruptcy estate. The bankruptcy court held that the proceeds belonged to the estate, and the district court affirmed. The Fifth Circuit agreed with the bankruptcy court's analysis that the estate suffered injuries from Stone’s representation that would have allowed it to assert claims against her prior to conversion, and affirmed. View "Cantu v. Schmidt" on Justia Law

Appellant and her law firm appealed the bankruptcy court's contempt order holding them in civil contempt for failing to pay sanctions imposed for prior misconduct. The misconduct stemmed from appellant's misconduct in her legal representation of debtor during bankruptcy proceedings. The court concluded that the bankruptcy court retained jurisdiction to enforce the sanctions orders through any appropriate means, including a civil contempt order; the court rejected appellant's contention that she was "threatened" with imprisonment and concluded that the order does not violate the prohibition on imprisonment for a debt; and the order was not an abuse of the bankruptcy court's discretion because appellant is not protected by her alleged membership in her LLC where she was found in civil contempt for failure to pay sanctions that she owed because of her own misconduct in prior bankruptcy proceedings. Accordingly, the court affirmed the order. View "Garrett v. Coventry II DDR" on Justia Law

The Trustee of the Vallecito bankruptcy estate appealed the district court's affirmance of the bankruptcy court's judgment in favor of various owners of overriding royalty interests (appellees) to a lease that the trustee seeks to sell on behalf of the bankruptcy estate. The court concluded that the bankruptcy court did not abuse its discretion in excluding a letter submitted by an attorney in the Navajo Nation Department of Justice, stating that any "purported overriding royalty interest is invalid under the applicable provisions of the Navajo Nation Code and is completely void." The court agreed with the district court that the letter was untrustworthy, in large part because it was drafted by the trustee's counsel and was prepared after the trustee's counsel provided the Navajo Nation official with only one side of the story; the court concluded that the bankruptcy court properly held that the trustee could not raise the lack of approval by the Navajo Nation to void the contracts between Appellees and Briggs-Cockerham; and the court found no error in the district court's disposition of the trustee's additional arguments in a lis pendens filing. Accordingly, the court affirmed the judgment. View "Morton v. Yonkers, et al." on Justia Law

Holt and TAUG, subcontractors of the bankrupt Seiber, appealed the district court's affirmance of a prior bankruptcy court order, holding that the funds of an interpleader action, filed by EnCana, were property of the bankruptcy estate of Seiber, not EnCana, because the interpleader action extinguished the earlier construction liens of Holt and TAUG. The court upheld the validity of TAUG's chapter 56 lien where TAUG had a valid mineral lien against EnCana's property at the time EnCana was discharged from further liability to Seiber; as to Holt, the district court did not err in holding EnCana's interpleader and its deposited funds automatically satisfied its liability to Seiber, thus transferring legal possession of the funds to Seiber and the bankruptcy estate; the district court and bankruptcy courts erred in failing to draw the distinction between the act of depositing funds into the district court registry and the judicial act of discharging the depositor of any further liability; simply depositing interpleader funds does not automatically mean that the funds have been legally accepted, ownership thereof transferred, and the interpleader relieved of further duty to the court or further obligation to the parties of the dispute; the court need not address whether chapter 56 allows the liens to extend to the funds because the bankruptcy court entered an order, separate from this appeal, ruling on the interpleader and discharging EnCana; and, therefore, the court vacated and remanded for further proceedings. View "Holt Texas, Ltd., et al. v. Zayler" on Justia Law

Vantage appealed three orders from the district court and two orders from the bankruptcy court entered during the course of the Chapter 11 proceedings of twenty-one shipping companies. The orders' combined effect was to place certain shares of Vantage stock in custodia legis with the clerk of the court. The court concluded that the appeals are not moot, that the Vantage Shares are not "property of the estate," and that the Vantage Litigation is not "related to" the bankruptcy proceedings. In this case, the district court and the bankruptcy court had no subject-matter jurisdiction to enter the orders and, therefore, the court vacated and remanded for further proceedings. The court denied debtors' Motion to Dismiss Appeals.View "Vantage Drilling Co. v. TMT Procurement Corp., et al." on Justia Law