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

Flugence filed for Chapter 13 bankruptcy protection in 2004 and a plan was confirmed. In 2007, she was injured in a car accident and hired an attorney. Weeks later an amended Chapter 13 plan was confirmed. In 2008 Flugence sued for personal injury. Months later, Flugence was discharged. She never disclosed to the bankruptcy court that she might prosecute a personal-injury claim. The personal-injury defendants discovered the non-disclosure and had the bankruptcy case reopened. The bankruptcy court declared that although Flugence was estopped from pursuing the claim on her own behalf, her bankruptcy trustee was not estopped and could pursue the claim for the benefit of creditors. The district court reversed with respect to estopping Flugence, stating that Flugence did not have a potential cause of action prior to her initial application for bankruptcy protection, and relied on her attorney’s advice concerning disclosure. The Fifth Circuit reinstated the bankruptcy court holding. There is a continuing duty to disclose in a Chapter 13 proceeding and Flugence met all elements of estoppel. Nothing requires that recovery be limited strictly to the amount owed creditors; after a claim is prosecuted and creditors and fees have been paid, any remaining recovery must be returned to the personal-injury defendants. View "Flugence v. Axis Surplus Ins. Co." on Justia Law

Appellant appealed the judgment of the district court affirming the final judgment entered by the bankruptcy court on certain state-law counterclaims that appellant filed against appellees, attorneys who were authorized by the bankruptcy court to represent appellant in a separate lawsuit. The court concluded that the bankruptcy court was within its authority to enter a final judgment on appellant's state-law counterclaims for malpractice and breach of fiduciary duty, as these claims were necessarily resolved in the course of ruling on appellees' fee applications; the court agreed with the bankruptcy court that these claims failed on the merits; the court upheld the final judgment on the fee applications; the court held that the bankruptcy court erred in entering a final judgment on appellant's Texas Deceptive Trade Practices Act state-law counterclaim because it was not necessary to resolve it in the course of ruling on the attorneys' fee applications. Accordingly, the court affirmed in part, reversed in part, and remanded for further proceedings. View "Frazin v. Haynes & Boone, L.L.P., et al." on Justia Law

Lamesa filed suit against Liberty Mutual alleging that Liberty Mutual was liable under a federally-required surety bond for the alleged misconduct of its principal, a trustee in a Chapter 7 bankruptcy proceeding. On appeal, Liberty Mutual appealed the district court's decision to affirm the bankruptcy court's judgment that the trustee had committed gross negligence and Liberty Mutual, as the trustee's surety, was liable for damages under the terms of the bond. The court held that the controlling limitations period in this case was provided by 11 U.S.C. 322(d). Because Liberty Mutual did not contest that Lamesa's claim was timely under that provision, the court affirmed the bankruptcy court's conclusion that Lamesa's suit was not time-barred. On the merits, the court concluded that the bankruptcy court's finding that the trustee was grossly negligent in performing her duties was not clearly erroneous; expert testimony was not necessary to establish that the trustee failed to meet her standard of care; and Liberty Mutual failed to demonstrate that the district court's damage award was clearly erroneous. Accordingly, the court affirmed the judgment of the district court. View "Liberty Mutual Ins. Co. v. USA by Lamesa National Bank" on Justia Law

SWT appealed the district court's holding that a lien on its principal asset held by Acceptance survived confirmation of a Chapter 11 bankruptcy reorganization plan. In light of the court's interpretation of the definition of the word "participate" and in accordance with persuasive authority from its sister circuits, the court held that meeting the participation requirement in In re Ahern Enterprises required more than mere passive receipt of effective notice. Accordingly, the court held that Acceptance's passive receipt of notice did not constitute participation within the meaning of this test and affirmed the judgment of the district court. View "Acceptance Loan Co., Inc. v. S. White Transp., Inc." on Justia Law

This case stemmed from a dispute involving a Master Services Agreement (MSA) between BHP and Deep Marine. At issue on appeal was whether Underwriters could enforce BHP's contractual insurance, defense, and indemnity obligations to Deep Marine after Deep Marine's bankruptcy discharge. The court concluded that, even assuming arguendo that the MSA required indemnification against liability and that Deep Marine will eventually be held liable, Underwriters still could not prevail because BHP's indemnification obligation runs only to Deep Marine; Deep Marine would not, and could not, incur any loss in the Duval action, so Underwriters could not seek indemnification from BHP; because BHP had agreed to continue providing Deep Marine with a nominal defense, Underwriters would not have a breach of contract claim against BHP; the additional insured and primary insurance requirements do not apply BHP's self-insurance; BHP's only obligation was an indemnification obligation to Deep Marine; unlike Underwriters, it had no secondary liability to injured tort victims, like Duval; and Duval had no claim against BHP and, therefore, tender under Federal Rule of Civil Procedure 14(c) was improper. Accordingly, the court affirmed the judgment. View "Duval v. Northern Assurance Co." on Justia Law

Debtor's Chapter 13 case was converted to Chapter 11 after a creditor filed a claim that caused his scheduled debts to exceed the debt ceiling for Chapter 13 cases. The denial of confirmation of debtor's organization plan was certified for appeal from the bankruptcy court pursuant to 28 U.S.C. 158(d)(2)(A)(i) and (ii). At issue on appeal was whether Chapter 11's absolute priority rule, 11 U.S.C. 1129(b)(2)(B), as amended by the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA), Pub. L. No. 109-8, 119 Stat. 23, applied in such individual debtor cases. Using standard tools of statutory interpretation, and in accord with two other circuits, the court held that it did and affirmed the bankruptcy court's order denying confirmation. View "In the Matter of Philip Lively" on Justia Law

Debtors, Schlotzsky's Inc. and certain affiliates, filed for Chapter 11 bankruptcy protection and appellants were one of the creditors. On appeal, appellants challenged the denial of their motion to pursue post-confirmation causes of action on behalf of the reorganized debtor. The court concluded that the joint plan of liquidation (Plan) did not specifically reserve the state law claims that appellants wished to assert. Without this specific reservation, the Plan Administrator - and, by extension, appellants - lacked standing to pursue the proposed claims. Thus, the claims were not colorable, and the bankruptcy court did not err in denying appellants' motion to pursue causes of action on behalf of debtors. Accordingly, the court affirmed the judgment. View "Wooley, et al v. Faulkner, et al" on Justia Law

Debtor filed for leave to appeal the bankruptcy court's interlocutory judgment in the district court. While the motion was pending, the bankruptcy court, sua sponte, certified its judgment for direct appeal to this court, pursuant to 28 U.S.C. 158(d)(2)(A)(i) and (iii). The court agreed with the bankruptcy court's ruling on cross-motions for partial summary judgment in favor of FGB that the Multiple Indebtedness Mortgage that FGB recorded was valid and that the property underlying that mortgage, the Deluxe Motel, secured both the loan FGB made to debtor and the loan FGB made to a second entity. Accordingly, the court affirmed the judgment and remanded for further proceedings. View "Hari Aum, L.L.C. v. First Guaranty Bank" on Justia Law

IPS and MPES challenged the district court's final judgment, reversing and vacating the bankruptcy court's amended judgment, that their mechanics' liens on the property of debtor did not pertain to materials or labor supplied before the date on which Metrobank perfected its deed of trust lien, September 1, 2006. Hajoca and Crescent challenged the bankruptcy court's determination that their mechanics' liens also did not pertain to materials or labor supplied before September 1, 2006, which the district court upheld. The court concluded that the bankruptcy court clearly erred in determining that IPS and MPES had supplied materials or labor before September 1, 2006. The court also concluded that the bankruptcy court correctly determined that Hajoca and Crescent had not supplied materials or labor before September 1, 2006. Accordingly, the court affirmed the final judgment of the district court, which reversed and vacated the amended judgment of the bankruptcy court. View "First National Bank, et al v. Crescent Electrical Supply Co., et al" on Justia Law

Appellant, a former TWL employee, commenced a class action adversary proceeding within TWL's bankruptcy suit, alleging violations of the Worker Adjustment and Retraining Notification Act, 29 U.S.C. 2101-2109. The district court affirmed the bankruptcy court's order denying appellant's related motion for class certification and dismissed the adversary proceeding. Because the reasons for the bankruptcy court's order were unclear, the court vacated in toto the orders and remanded to the district court to remand to the bankruptcy court for reconsideration. The court expressed no view as to the outcome the bankruptcy court should reach on remand in reconsidering appellant's motion for reclassification and the Trustee's motion to dismiss the adversary proceeding. View "Teta v. TWL Corp., et al" on Justia Law