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

Spencer Committee appealed two orders of the district court: (1) the denial of the Spencer Committee's appeal of the bankruptcy court's confirmation order of the reorganization plan (Plan) by debtor on the grounds of equitable mootness and (2) the denial of the Spencer Committee's motion for a new trial de novo of its fraud claims. The court concluded that, (1) the Spencer Committee appeared before the bankruptcy court and did not obtain a stay, (2) the Plan had been substantially consummated, and (3) the Spencer Committee's requested relief would adversely impact the success of the Plan or the rights of third parties not before the court. Accordingly, on the grounds of equitable mootness, the court affirmed the district court's order granting debtor's motion to dismiss.

This case stemmed from SL Management's Chapter 11 bankruptcy petition where Texas Capital appeared as a creditor in SL Management's bankruptcy suit. During the pendency of SL Management's bankruptcy case, Texas Capital filed an action in Texas state court to enforce guarantee agreements between it and plaintiff, a member of SL Management. The Texas state court entered a default judgment against plaintiff and Texas Capital initiated collection proceedings against plaintiff in Louisiana state court and registered the Texas judgment. In response to the collection action, plaintiff filed the instant action seeking a declaration that SL Management's debt to Texas Capital was fully satisfied by the surrender of collateral. The court subsequently held that the Rooker-Feldman doctrine was not implicated and proceeded to consider whether plaintiff's claim for declaratory relief was barred by res judicata. The court held that res judicata barred the assertion of plaintiff's claims for declaratory judgment. Accordingly, the court reversed the judgment of the district court and rendered judgment in favor of Texas Capital.

Spencer Committee appealed two orders of the district court: (1) the denial of the Spencer Committee's appeal of the bankruptcy court's confirmation order of the reorganization plan (Plan) by Idearc on the grounds of equitable mootness and (2) denial of the Spencer Committee's motion for a trial de novo of its fraud claims. The court held that the Spencer Committee appeared before the bankruptcy court and did not obtain a stay; the Plan had been substantially consummated; and the Spencer Committee's requested relief would adversely impact the success of the Plan or the rights of third parties not before the court. Accordingly, on the grounds of equitable mootness, the court affirmed the district court's order granting Idearc's motion to dismiss the Spencer Committee's appeal of the Confirmation Order of the Plan.

In the Chapter 13 case of appellees, Countrywide sought the recovery of attorney's fees incurred in connection with the bankruptcy as well as a determination that compliance with Federal Bankruptcy Procedure 2016 was not necessary for the recovery of such fees. The bankruptcy court held that Countrywide was not entitled to recover its attorney's fees and determined that there was no justiciable issue to resolve regarding the applicability of Bankruptcy Rule 2016 because Countrywide had already complied with the rule. The district court affirmed. The court held that the bankruptcy court and district court misconstrued the provision of the contract governing the availability of attorney's fees and that Countrywide was entitled to recover the fees sought in its Fee Application. Like the bankruptcy and district courts, however, the court declined to address whether Bankruptcy Rule 2016 applied. Accordingly, the court reversed and remanded for further proceedings.

Bankruptcy trustee and nondebtor spouse appealed the bankruptcy court's grant of summary judgment to H.D. Smith. The trustee and spouse argued that the bankruptcy court erred in holding that H.D. Smith had an enforceable lien against the proceeds of the sale of the debtor's homestead property in excess of the homestead exemption. The court held that, regardless of whether the lien attached prior to the bankruptcy proceedings, the trustee took the property with the state-law character it had in the debtor's hands: a property with an unenforceable lien. Therefore, the court reversed the district court's grant of summary judgment. The court also held that because it concluded that H.D. Smith's lien was unenforceable, it need not consider whether enforcing the lien would violate 11 U.S.C. 362 or 11 U.S.C. 549. The court also did not consider the issues that the spouse argued in her briefing regarding homestead rights.

The bankruptcy court issued an order that authorized the debtor to reimburse qualified bidders for expenses incurred in connection with the sale of a substantial asset of the debtor's estate. Debtor and debtor's parent companies subsequently appealed the bankruptcy court's reimbursement order. As a preliminary matter, the court held that it had jurisdiction over the appeal where, in settling this "discrete dispute," the reimbursement order was sufficiently separable from the rest of the bankruptcy proceeding to be appealable as a "final" order under 28 U.S.C. 158(a) and (d). The court also held that, based on the record, the bankruptcy court did not err in issuing the reimbursement order under the business judgment standard in section 363(b) of the Bankruptcy Code. Accordingly, the judgment of the district court was affirmed.

This case arose when debtor, a former firefighter, and his wife, filed a Chapter 7 bankruptcy petition, but failed to disclose on their bankruptcy schedules either his judgment against the City of Arlington (an asset of the estate) or his associated legal fees (a liability of the estate). At issue was whether judicial estoppel barred a blameless bankruptcy trustee from pursuing a judgment that the debtor, having concealed the judgment during bankruptcy, was himself estopped from pursuing. The court held that it did not. The court concluded that this result upheld the purpose of judicial estoppel, which in this context was to protect the integrity of the bankruptcy process, by adhering to basic tenets of bankruptcy law and by preserving the assets of the bankruptcy estate for equitable distribution to the estate's innocent creditors.

This bankruptcy appeal involved parties that have a business history extending from at least April 27, 2005 where appellee and the Secretary of Lothian Oil signed two agreements which would lead to proofs of claim 164 and 171. At issue was whether the bankruptcy court could recharacterize a claim as equity rather than debt. The court held that because Texas law would not have recognized appellee's claims as asserting a debt interest, the bankruptcy court correctly disallowed them as debt and recharacterized the claims as equity interests. Moreover, because insiders and non-insiders alike could mischaracterize their claims in contravention of state law, the court declined to limit recharacterization to insider claims. The court further held that the other assertions of error were without merit.

This case arose when elderly widow Dorothy Chase Stewart filed for bankruptcy in 2007 and Wells Fargo Bank filed a proof of claim with the bankruptcy court reciting debts owed from an outstanding mortgage on Ms. Stewart's house. The bankruptcy court subsequently found that Wells Fargo's mortgage claims exhibited systematic errors arising from its highly automated, computerized loan-administration program and issued an injunction requiring Wells Fargo to audit every proof of claim it had filed on or filed after April 13, 2007; to provide a complete loan history on every account and file that history with the appropriate court; and "to amend...proofs of claim already on file to comply with the principles established in this case and [In re] Jones." Wells Fargo appealed, challenging the claim amount and the injunction. The court vacated the injunction as exceeding the reach of the bankruptcy court. Because neither the injunction nor the calculation of Ms. Stewart's debt was properly before the court, the court dismissed as moot Wells Fargo's appeal of legal rulings underlying the bankruptcy court's interpretation of the mortgage.

Texas Wyoming Drilling, Inc. (TWD) filed a voluntary petition for bankruptcy under Chapter 11 and filed its disclosure statement and plan, which eliminated all of TWD's shareholders' stock interests in TWD. Central to this dispute were the terms of the plan and statement; namely, whether the terms preserved TWD's claims against Laguna Madre Oil & Gas II, LLC et al. A few months after confirmation of the plan, TWD sued 32 of its former shareholders, including appellants here, for pre-petition dividend payments that were allegedly fraudulent transfers under 11 U.S.C. 544, 548, and 550, and the Texas Business and Commerce Code, alleging that the former shareholders had received dividends and other transfers equaling millions of dollars while TWD was insolvent (Avoidance Actions). Laguna subsequently appealed the bankruptcy court's denial of its motion for summary judgment. The court held that the bankruptcy court properly denied Laguna's motion for summary judgment because the plan adequately preserved the Avoidance Actions and the claims were not barred by judicial estoppel or res judicata. Accordingly, the court affirmed the judgment.