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

The principal issue in this case was whether, after an automatic stay in bankruptcy has been lifted and a creditor was permitted to foreclose on real property, federal or state law governed an oversecured creditor's recovery of attorneys' and other fees from the sale proceeds. A corollary issue was whether the bankruptcy court has jurisdiction over the sale proceedings for purposes of determining the creditor's right to recover attorneys' fees and the Deed of Trust trustee's right to recover a contractually specified commission for conducting the non-judicial foreclosure sale. The bankruptcy court held that it had jurisdiction but the district court reversed. The court reversed, concluding that federal law governs what is to be distributed to a secured claimant that is oversecured. The court discerned no intent from 11 U.S.C. 506(b) that oversecured creditors who are permitted to foreclose are to be treated differently from oversecured creditors whose claims are satisfied within the bankruptcy proceeding. In this instance, the bankruptcy court's order lifting the stay allowed Wells Fargo to foreclose on the property in accordance with state law foreclosure procedures. It did not give the Deed of Trust any further authority and did not have the effect of insulating the debtor or any of the creditors from the reach of section 506(b). Lifting the automatic stay to allow Wells Fargo to foreclose was not tantamount to an abandonment of the property. The court concluded that the bankruptcy court was within its discretion in finding that there was no documentation of the time that was spent and no testimony as to what was a reasonable fee. Based on this record, the court could not say that the bankruptcy court erred in finding under section 506(b) that the amount of attorneys' fees Wells Fargo sought was not substantiated and therefore was not shown to be reasonable. Even under Texas law, Wells Fargo would bear the burden of demonstrating that the fees it requested were reasonable. The court remanded for further proceedings. View "Wells Fargo Bank, N.A., et al. v. 804 Congress, L.L.C." on Justia Law

Appellant and his children brought tort claims against Placid in connection with the allegedly asbestos-related illness and death of his wife. On appeal, appellants challenged the district court's affirmance of the bankruptcy court's grant of Placid's motion for summary judgment. The court affirmed, concluding that appellants were unknown creditors whose pre-petition claims were discharged by Placid's constructive notice and that Placid's notice was not substantively deficient. The court has never required bar date notices to contain information about specific potential claims and neither the Bankruptcy Court nor Rules require bar date notices to apprise creditors of potential claims. The court held that because a bar date notice need not inform unknown claimants of the nature of their potential claims, Placid's notices were substantively sufficient to satisfy due process. View "Williams, Sr., et al. v. Placid Oil Co." on Justia Law

These appeals concerned a suit filed under the False Claims Act (FCA), 31 U.S.C. 3729 et seq., and two bankruptcy proceedings. The district court concluded that the bankruptcy trustee had exclusive standing to assert the FCA claims at issue because those claims belonged to the bankruptcy estate. The court agreed with the district court that only the trustee had standing to prosecute the FCA lawsuit; affirmed the district court's dismissal under Rule 12(b)(6); and concluded that the district court did not abuse its discretion in denying the motion for reconsideration. View "Westbrook Navigator L.L.C., et al v. Navistar, Inc., et al." on Justia Law

Hess sought to enforce debtor's guaranty on a contract between Hess and Premier. Debtor was a member in Premier and served as guarantor of the agreement. The agreement stated that Hess would provide certain management services related to the operation of the Fluker Pit. The bankruptcy court held that Premier breached the contract in bad faith, but the court limited the damages award to $375,000. Hess appealed to the district court, which overruled the bankruptcy court and awarded Hess the full value of the contract - $1.5 million. Debtor appealed. The court concluded that a Louisiana court would find that the bad faith damage clause did not enhance the damages owed Hess beyond the time the Fluker Pit closed. Instead, giving full effect to the bad faith damages provision, the court found that Hess was only able to establish as a "direct consequence" of the breach damages up until the November 12th date. Awarding Hess damages beyond that point would not serve the provision's purpose of conferring damages consequentially linked to bad faith breach, but instead would punitively award damages unconnected with the facts surrounding the breach. Further, Louisiana's rule on mitigation makes clear that a non-breaching party must take "reasonable efforts to mitigate the damage caused by the obligor's failure to perform." This demonstrates that damages are not set in stone, and strengthened the court's conclusion that post-breach events may effect the amount of damages award. Accordingly, the court reversed and remanded. View "Hess Mgmt. Firm, L.L.C., et al. v. Bankston, et al." on Justia Law

A non-debtor spouse contended that her homestead rights in the Texas residence that she shares with her husband, the debtor in bankruptcy, precluded a forced sale of the property and alternatively, that if a sale occurred, she must be compensated for the loss of her homestead interest in the property. The bankruptcy court held that the non-debtor spouse's homestead rights were limited to the dollar amount of the exemption in 11 U.S.C. 522(p) and that there was no unconstitutional taking of the value of the non-debtor spouse's interest in the homestead. The court affirmed the district court's affirmance of the bankruptcy court's holdings. View "Kim, et al. v. Dome Entertainment Center, Inc." on Justia Law

Debtor challenged the district court's determination that proceeds from the post-certification sale of an exempted homestead revert to the estate if not reinvested within six months. The "snapshot rule" of bankruptcy law holds that all exemptions are determined at the time the bankruptcy petition is filed, and that they do not change due to subsequent events. In re Zibman held that proceeds from the pre-petition of a sale of a Texas homestead are not permanently immune from bankruptcy creditors. Under the court's precedent, the sale of the homestead voided the homestead exemption and the failure to reinvest the proceeds within six months voided the proceeds exemption, regardless of whether the sale occurred pre- or post- petition. This interpretation of 11 U.S.C. 522(c) is in accordance with Texas law and the decisions of the court. Accordingly, the court affirmed the district court's judgment. View "Viegelahn v. Frost" on Justia Law

Amzak appealed the district court's summary judgment on its loan loss claims against its title insurance policy provider and related entities. The court concluded that Amzak failed to show that it suffered actual loss because of a failure of title and STL could not be held responsible for any harm suffered by Amzak. The court formalized the holding in First State Bank v. American Title and likewise rejected the guarantee rationale of Citicorp Savings of Illinois v. Stewart Title Guaranty Co., and agreed with the district court's rejection of Amzak's argument that STL breached the title policy at the time of the loan because its mortgage was voidable at that time. The court also disposed of Amzak's negligence claim where STL's delay in making a complete filing of Amzak's mortgage was not a legal cause of Amzak's loss. Accordingly, the court affirmed the judgment of the district court. View "Amzak Capital Mgmt. v. Stewart Title" on Justia Law

CULS appealed the dismissal of its petition for involuntary bankruptcy filed against Green Hills under 11 U.S.C. 303. Congress has made clear that a claimholder did not have standing to file an involuntary petition if there was a bona fide dispute as to liability or amount of the claim. The court affirmed the bankruptcy court's dismissal on the alternative ground that CULS lacked standing to bring the involuntary petition where CULS' claim was subject to a bona fide dispute. The court denied Green Hills' motion for sanctioning CULS for filing a frivolous appeal and concluded that sanctions were not appropriate in this case where CULS' contentions, while not ultimately meritorious, were not entirely unreasonable. Accordingly, the court affirmed the bankruptcy court's dismissal, granted CULS' motion for judicial notice of an order denying in part another motion by CULS for summary judgment, and denied Green Hills' motion for sanctions. View "Credit Union Liquidity Servs. v. Green Hills Dev. Co." on Justia Law

This dispute arose out of a complicated bankruptcy proceeding. On appeal, Lender challenged the district court's judgment which, in relevant part, disallowed Lender's claim for a contractual prepayment consideration. Applying Colorado law, a lender was not entitled to a prepayment penalty when the lender chooses to accelerate the note. Absent a clear contractual provision to the contrary or evidence of the borrower's bad faith in defaulting to avoid a penalty, a lender's decision to accelerate acts as a waiver of a prepayment penalty. In this instance, the plain language of the contract plainly provided that no Prepayment Consideration was owed unless there was an actual prepayment, whether voluntary or involuntary. Accordingly, the acceleration of the Note due to GCMM's default by nonpayment under Article 4 did not trigger the obligation to pay the Prepayment Consideration under Article 6. View "Bank of New York Mellon v. GC Merchandise Mart, L.L.C., et al." on Justia Law

Acting as receiver, the FDIC conveyed substantially all of WaMU's assets and liabilities to JPMorgan Chase, including certain long-term real-estate leases. At issue was whether the owners of the leased tracts could enforce the leases against Chase by virtue of the FDIC's conveyance. The court held that, in the interest of maintaining uniformity in the construction and enforcement of federal contracts, the landlords did not qualify as third-party beneficiaries. The court concluded, however, that the landlords have "standing" to prove the content of the Agreement and that the Agreement, properly construed, was a complete "assignment" sufficient to create privity of estate under Texas law. Accordingly, the court affirmed the judgment of the district court. View "Excel Willowbrook, L.L.C., et al. v. JPMorgan Chase Bank, N.A., et al." on Justia Law