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

Appellee attempted to use an “inversion table” located at an Anytime Fitness franchise. The equipment allegedly failed, and Appellee suffered neuromuscular injuries. Appellee filed a personal injury suit in Louisiana court against the franchise owner, Thornhill Brothers Fitness, LLC (“Thornhill”). An amended complaint named an additional defendant, franchisor Anytime Fitness, LLC (“Anytime”). Thornhill agreed to assign all rights it had “against Anytime Fitness LLC” to the Appellees, including any rights arising from “the indemnity agreement contained in the Franchise Agreement” between Thornhill and its franchise parent, Anytime. Anytime then protested in the bankruptcy court. The bankruptcy court vacated its prior order and allowed Anytime a hearing. But in July 2022, the bankruptcy court entered a new order ratifying the actions it took originally. Anytime appealed that July 2022 order and the district court affirmed.  At issue on appeal is whether 11 U.S.C. Section 365(f) or any other portion of Title 11, authorizes a bankruptcy court’s approval of a debtor’s partial assignment of an executory contract.   The Fifth Circuit wrote that it does not and reversed the bankruptcy court’s contrary order and remanded. The court explained that it does not construe any other provision of the Code to permit circumvention of the court’s interpretation of Section 365(f). It’s true that the Code contains various catch-all provisions. But those catch-alls do not create substantive powers not committed to the bankruptcy court by some other section. The court wrote that since the bankruptcy court order at issue here does not satisfy Section 365, it does not matter whether it satisfied Jackson Brewing. View "Anytime Fitness v. Thornhill Brothers" on Justia Law

This litigation stems from the bankruptcy of Imperial Petroleum Recovery Corporation (“IPRC”). IPRC once marketed microwave separation technology (“MST”) machines, which purported to recover usable oil from various emulsions. The Carmichael parties held security interests in IPRC’s assets—including its MST units. The Carmichaels filed an involuntary Chapter 7 liquidation proceeding against IPRC. After various proceedings, the amended judgment cut the actual damages owed to the Carmichaels to $4,000, cut the fee and cost award to around $92,000, and made no provision for post-judgment interest. All told, the sum due to the Carmichael parties declined roughly 96%, from over $2.3 million to approximately $96,000. The Carmichaels appealed to the district court. The district court affirmed.   The Fifth Circuit affirmed in part, vacated in part, and remanded. The court wrote that the bankruptcy court’s factual findings related to the assigned assets were not clearly erroneous. The court wrote that the district court’s damages award nevertheless rested on clearly erroneous factual findings. The court explained that the Carmichaels are entitled to post-judgment interest pursuant to 28 U.S.C. Section 1961. Finally, the court disposed of the Carmichaels’ contention that the bankruptcy court’s judgment did not provide adequate declaratory relief. The court wrote that applying a preponderance standard and viewing the record holistically, it is persuaded that the Carmichaels’ damages for reassembly exceed $4,000. But the court wrote that it does not attempt to specify the Carmichaels’ reassembly damages here. Instead, the court remanded so that the bankruptcy court may consider the Carmichaels’ asserted damages under the correct standard of proof. View "Carmichael v. Balke" on Justia Law

After a fatal truck accident claimed the lives of members of two families, the victims' families filed a personal injury action against the trucking company. The trucking company's insurer ultimately transferred $1 million to the law firm representing one of the families. The insurer then notified the other family that the policy limits had been exhausted. That same day, the insurer submitted two checks: one to the victim's family and one to the law firm.The family that was not party to the settlement filed an involuntary bankruptcy petition against the trucking company. The trustee brought an adversary proceeding against the other victim's family and their law firm, seeking to avoid and recover the transfer of the policy proceeds pursuant to 11 U.S.C. Secs. 547 and 550 of the Bankruptcy Code. The bankruptcy court denied the law firm's motion to dismiss.On appeal, the family that settled and the law firm argued that the district court erred in determining that the trucking company held an equitable property interest in the policy proceeds. The Fifth Circuit affirmed, finding that these facts fit the "limited circumstances" under which the policy proceed are considered the property of the estate. View "Law Office of Rogelio Solis v. Curtis" on Justia Law

AKD Investments, LLC (AKD), filed for bankruptcy. At that time, Magazine Investments I, LLC (Magazine), held the notes on AKD’s main asset, a building on Magazine Street in New Orleans, Louisiana. After Magazine resumed foreclosure proceedings, AKD sought permission from the bankruptcy court to obtain financing to pay off Magazine’s notes and thereby avoid the looming foreclosure sale of the building. In a February 2015 order, the bankruptcy court authorized the transaction, and the parties performed under the order. The bankruptcy court confirmed AKD’s reorganization plan in April 2017. In August 2020, AKD brought this action against Magazine as a core proceeding within the still-open bankruptcy case. AKD alleged that it had overpaid Magazine in 2015 and sought to recoup the overpayment. But the bankruptcy court granted summary judgment to Magazine. AKD contends that the bankruptcy court erred in applying the law-of-the-case doctrine because the 2015 order did not actually decide the amount AKD owed Magazine.   The Fifth Circuit affirmed. The court explained that the bankruptcy court’s 2015 Order is internally contradictory. Its meaning is, therefore, ambiguous as to the question at hand: Whether the Order actually decided the correct amount that AKD owed to Magazine. Accordingly, we defer to the bankruptcy court’s reasonable interpretation of its Order—that it did—and affirm its invocation of the law-of-the-case doctrine to grant Magazine summary judgment as to AKD’s claim here. View "AKD Invsts v. Magazine Invsts I" on Justia Law

Inmarsat Global Limited and related entities(collectively, “Inmarsat”) operate a satellite network providing communications services to remote locations, including ships at sea. Inmarsat sells the services at retail to end-users and at wholesale to distributors. Speedcast International Limited was a leading Inmarsat distributor, purchasing Inmarsat’s services and providing them to its own customers. Speedcast is the debtor in the bankruptcy. Several contracts governed the business relationship among the parties. Their last contract terminated all of the creditors’ claims against the debtor except for narrowly defined “Permitted Claims.” The creditors sought a reversal of the district and bankruptcy court’s conclusion that a particular claim was not a permitted one.   The Fifth Circuit affirmed, holding that the Termination Agreement’s definitions of Released Claims and Permitted Claims are unambiguous. Consequently, the court wrote that it need not consider any extrinsic evidence. The court found Inmarsat’s pricing argument unpersuasive. The Shortfall Amount is not a payment for services delivered by Inmarsat to Speedcast. The SAA provides that the Shortfall Amount is part of the performance that Speedcast promised “[i]n exchange for” Inmarsat agreeing to grant a 30% discount. The Shortfall Amount, in turn, is not levied on the services that Inmarsat delivered to Speedcast; it is levied due to the customers Speedcast failed to provide. View "Inmarsat Global v. SpeedCast Intl" on Justia Law

Bouchard Transportation Company and its affiliates (collectively “Bouchard”)—debtors in bankruptcy—prepared to sell some of their assets at an auction. Fearing the auction would go poorly, Bouchard solicited a “stalking horse bidder” to start the auction and set a floor price. In exchange, Bouchard agreed to pay the stalking horse bidder a $3.3 million break-up fee and to reimburse expenses up to $1.5 million. The question is whether those payments were a permissible use of estate funds. As the bankruptcy and district courts found, the stalking horse payments were lawful under both applicable provisions of the Bankruptcy Code—they provided an actual benefit to the estate and were issued in the reasonable exercise of business judgment.
The Fifth Circuit affirmed the district court’s judgment affirming the bankruptcy court’s order that Bouchard pay Hartree a break-up fee and a capped expense reimbursement. The court explained that Bouchard’s payment to the stalking horse bidder is justified under either the stringent administrative-expense standard or the more relaxed business judgment rule. The court further wrote that there is “no basis to conclude that the board did not thoroughly review the presentation and make a well-reasoned, careful decision to designate Hartree as the stalking-horse bidder.” In signing the Hartree purchase agreement, Bouchard acted well within the bounds of reasonable business judgment. Section 363(b) does not require more. View "Official Committee v. Hartree" on Justia Law

The bankruptcy court, administering a complex bankruptcy, dismissed NexPoint Advisors, LP’s objection to professional fees paid to myriad organizations. NexPoint appealed to the district court, sitting as an appellate court. The district court dismissed for lack of standing to appeal. NexPoint appealed.   The Fifth Circuit affirmed. The court held that NexPoint failed to establish that the adversary proceeding “directly, adversely, and financially impacts” it beyond anything other than mere speculation. Further, the court held that: Lexmark does not expressly reach prudential concerns in bankruptcy appeals and brought no change relevant here. The court wrote by failing to raise the Cajun Electric argument simultaneously, NexPoint waived its right to do so here. Finally, the court wrote that Collins, when read in conjunction with the “party in interest” language from Bankruptcy Code Sections 330 and 1109, still fails to engage the court’s longstanding precedent that appellate standing in bankruptcy actions is afforded only to a “person aggrieved.” View "NexPoint Advisors v. Pachulski Stang" on Justia Law

Appellee won a multi-million-dollar arbitration award (the “Award”) against his former attorney and son-in-law, Appellant. Appellant soon filed for bankruptcy and sought to discharge the amounts awarded against him. Appellee objected under 11 U.S.C. Section 523(a) (“Exceptions to Discharge”) and sought summary judgment, arguing that (i) the Award is entitled to preclusive effect based on the doctrine of collateral estoppel and (ii) the Award found that all the elements of Section 523(a) were met. The bankruptcy court granted summary judgment with respect to the bulk of the Award. The district court affirmed, and Appellant appealed.   The Fifth Circuit affirmed. The court explained that Appellant argued that the court should recognize a fourth requirement that has no basis in our precedent, to the effect that collateral estoppel is inappropriate where an arbitration award contains a “disclaimer” like the one in the Award. The court reasoned that it need not decide whether a “disclaimer” could ever render collateral estoppel inappropriate. The court held merely that this “disclaimer” does not do so. Further, the court wrote that at no place in his 53-page, single-spaced award does the arbitrator provide an “express instruction” to future tribunals not to grant the Award preclusive effect. View "Amberson v. McAllen" on Justia Law

On emerging from Chapter 11 reorganization effective February 9, 2021, Chesapeake Energy Corporation tested the limits of the bankruptcy court’s post-confirmation jurisdiction by asking it to settle two prebankruptcy purported class actions covering approximately 23,000 Pennsylvania oil and gas leases. The Fifth Circuit consolidated the Proof of Claim Lessors’ appeal from the preliminary approval order with the appeal from the final approval order. At issue is whether the bankruptcy and district courts had jurisdiction under 28 U.S.C. Section 1334 to hear and decide these “class” claims.   The Fifth Circuit vacated and remanded the bankruptcy and district court judgments with instructions to dismiss. The court explained that no proofs of claim were filed for class members, and every feature of the settlements conflicts with Chesapeake’s Plan and Disclosure Statement. Handling these forward-looking cases within the bankruptcy court, predicated on 28 U.S.C. Section 1334(a) or (b), rather than in the court where they originated, exceeds federal bankruptcy post-confirmation jurisdiction. View "Sarnosky v. Chesapeake" on Justia Law

Appellant Texxon Petrochemicals, LLC (“Texxon”) filed for bankruptcy. In that proceeding, Texxon filed a motion to assume executory contract, alleging that it entered into a contract with Getty Leasing in 2018 to purchase the property. Getty Leasing objected to the motion. After an evidentiary hearing, the bankruptcy court denied the motion on the grounds that, for multiple reasons, there was no valid contract to assume. The district court affirmed, finding there was insufficient evidence to show that, as required under Texas law, the alleged contract was sufficient as to the property identity or comprised an unequivocal offer or acceptance. Texxon appealed. Getty Leasing primarily contends that the appeal is mooted by the dismissal of the underlying bankruptcy proceeding.   The Fifth Circuit affirmed. The court held that the brief email exchange did not demonstrate an offer or acceptance, as required for a contract to be binding under Texas law. Texxon fails to show that the email exchange satisfied any of the three required elements of an offer. A statement that a party is “interested” in selling a property is not an offer to sell that property—it is an offer to begin discussions about a sale. Nor were the terms of the offer clear or definite. Finally, the alleged offer failed to identify the property to be conveyed. For these reasons, Texxon is unable to show the existence of a binding contract. View "Texxon v. Getty Leasing" on Justia Law