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

Appellants, the Edwards Family Partnership (“EFP”) and Beher Holdings Trust (“BHT”), two companies owned by Edwards and collectively referred to as the “Edwards entities” and Appellee, the trustee who presently manages Dickson’s former company, Community Home Financial Services Corporation (“CHFS”), each raised various issues on appeal relating to the business relationship between EFP, BHT, and CHFS. The dispute revolved around two business transactions: (1) the initial home improvement loans from Edwards to CHFS and (2) a subsequent arrangement of seven mortgage portfolios of subprime loans (the “Mortgage Portfolios”) purchased as “joint ventures” between Edwards and CHFS.   The Fifth Circuit affirmed the district court’s and bankruptcy courts’ conclusion that the Appellant’s right to repayment for their funding of certain mortgage portfolios was barred by the statute of frauds.  Appellants argued the “statute of frauds does not apply to agreements already fully performed by one party; or to agreements capable of being fully performed within 15 months, even if performance is not expected.” The court reasoned that the bankruptcy court’s determination that CHFS could not repay the Edwards entities until it had collected on the underlying loans in the Portfolios,which would take more than five years, based on the terms of the loan agreement is plausible in light of the record. View "Edwards Family Partnership, et al v. Johnson" on Justia Law

Epic Companies, LLC ("Epic") was a general contractor specializing in the decommissioning of oil platforms. Epic hired the vessel Nor Goliath to lift oil platform components out of the water. These components were then transported to shore by tugboats, which were owned by various other companies.When Epic went bankrupt, the company's suppliers filed suit in the district court to recoup their costs. Several towing companies joined in the suit, asserting maritime liens under the Commercial Instruments and Maritime Liens Act ("CIMLA") against the Nor Goliath. The towing companies claimed that they provided "necessary services" by towing the barges ashore. The district court granted summary judgment in Nor Goliath's favor.The Fifth Circuit affirmed. CIMLA provides that those who provide "necessary services" to a vessel obtain a maritime lien against the vessel and may bring a civil claim to enforce this lien. Under 46 U.S.C. Sec. 31301(4), necessary services include repairs, supplies, towage, and the use of dry dock or marine railway. Here, the Nor Goliath's role was to lift platform components out of the water and place them on barges. Thus, the Nor Goliath's necessaries were the goods and services used to accomplish this task, but not those related to Epic's larger goal of decommissioning oil platforms. Thus, the Fifth Circuit held that the towing companies did not perform necessary services to the Nor Goliath. View "Central Boat Rentals v. M/V Nor Goliath" on Justia Law

The Fifth Circuit affirmed the bankruptcy court's judgment and held that, under the particular circumstances presented here, Ultra Resources is not subject to a separate public-law obligation to continue performance of its rejected contract, and that 11 U.S.C. 1129(a)(6) did not require the bankruptcy court to seek FERC's approval before it confirmed Ultra Resource's reorganization plan.Applying In re Mirant Corp., 378 F.3d 511 (5th Cir. 2004), the court concluded that the power of the bankruptcy court to authorize rejection of a filed-rate contract does not conflict with the authority given to FERC to regulate rates; rejection is not a collateral attack upon the contract's filed rate because that rate is given full effect when determining the breach of contract damages resulting from the rejection; and in ruling on a rejection motion, bankruptcy courts must consider whether rejection harms the public interest or disrupts the supply of energy, and must weigh those effects against the contract's burden on the bankrupt estate. Because Mirant clearly holds that rejection of a contract is not a collateral attack on the filed rate, the court concluded that FERC does not have the authority to compel continued performance and continued payment of the filed rate after a valid rejection. The court rejected any further arguments to the contrary. View "Federal Energy Regulatory Commission v. Ultra Resources" on Justia Law

The Fifth Circuit reversed the district court's judgment reversing the bankruptcy court's denial of claimants' motions seeking leave to file their respective proofs of claim. Considering the four Pioneer factors, the court concluded that the bankruptcy court did not abuse its discretion in determining that claimants failed to meet their burden of proving excusable neglect. Although the danger-of-prejudice factor weighs in favor of claimants, the bankruptcy court did not abuse its discretion by holding that the length-of-delay factor weighs in favor of debtors. Furthermore, the bankruptcy court did not abuse its discretion by determining that the reason-for-the-delay factor and the good faith factor weighs in debtors' favor. Given the exceptionally deferential standard of review applicable here, and because the prejudice factor does not outweigh the other three Pioneer factors, the court cannot say that the bankruptcy court abused its discretion. View "West Wilmington Oil Field Claimants v. Nabors Corporate Services, Inc." on Justia Law

The bankruptcy court authorized the Chapter 11 trustee to sell the debtor’s Bourbon Street, New Orleans property free and clear of all claims, liens, and interests under 11 U.S.C. Sec. 363(f). Two lessees of the property, together with the sole owner of the debtor, filed objections to the sale and an alternative request seeking either adequate protection under Section 363(e) or rejection of the leases, all of which the bankruptcy court denied. The lessees, insiders of the debtor company, executed and recorded leases(for below-market rates) junior to the rights of the mortgagee AMAG. Had there been no bankruptcy, AMAG could have foreclosed under state law and wiped out the junior interests.The Fifth Circuit denied the objectors’ petition for mandamus relief. Bankruptcy Code sections 363(f)(1) and 365(h)(1)(A)(ii), qualify what a debtor can do. The Code recognizes and defers to state law. The essential state law rights of the tenants, in this case, are limited by the senior mortgagee’s prior lien on the property; neither Section 363(e) nor 365(h)(1)(A)(ii) offers protection. View "In Re: Royal Street Bistro, L.L.C." on Justia Law

In an action arising from the bankruptcy of CISH, the Fifth Circuit affirmed the bankruptcy court's sanction of appellants. Appellants had filed an adversary proceeding asserting causes of action that the bankruptcy court had placed in trust for CISH's creditors, but the bankruptcy court concluded that by attempting to seize control of trust property, appellants had knowingly violated its order confirming the liquidation plan.The court concluded that it lacked jurisdiction to review the dismissal order because appellants did not file a notice of appeal on the adversary docket and the notice of appeal did not comply with the requirements of the bankruptcy rules for appealing the adversary proceeding. In regard to the punitive sanctions, appellants failed to allege an injury-in-fact and the court lacked jurisdiction. Finally, because the bankruptcy court had jurisdiction over the Cleveland Imaging bankruptcy case, it had jurisdiction to enter the sanctions order, too; likewise, the court has jurisdiction to consider appellants' appeal; appellants have standing to appeal the sanctions order; the bankruptcy court did not err in finding that appellants violated its confirmation order by filing their adversary proceeding and contentions to the contrary lack merit; and clear and convincing evidence supported the bankruptcy court's finding of bad faith. View "Kreit v. Quinn" on Justia Law

The Fifth Circuit affirmed the district court's judgment affirming the bankruptcy court's orders in these consolidated cases arising out of the bankruptcy of PFO and a dispute over the validity and scope of the bankruptcy court's orders prohibiting one non-debtor, VSP, from asserting claims against two non-debtors, Hillair Capital Investments L.P. and Hillair Capital Management L.L.C.The court found that the bankruptcy court had jurisdiction to enter the Lift Stay Order and it retained jurisdiction to interpret and enforce its orders, as it did in the 2019 orders. The court concluded that the bankruptcy court would not have abused its discretion in refusing to abstain under 28 U.S.C. 1334(c)(2) as there was no timely motion for abstention. The court also concluded that the district court correctly interpreted the Lift Stay Order as prohibiting VSP's assertion of claims against Hillair in the California Action. Finally, the court affirmed the award of attorneys' fees and the earlier bankruptcy court's orders. View "VSP Labs v. Hillair Capital Investments, LP" on Justia Law

The Fifth Circuit vacated the award of attorney's fees in this bankruptcy action and remanded for further proceedings. The court held that a court may compensate an attorney under 11 U.S.C. 330(a) only for services requiring legal expertise that a trustee would not generally be expected to perform without an attorney's assistance. In this case, the bankruptcy court failed to apply the proper legal standard in two respects. First, the bankruptcy court appeared to permit Chaffe to recover for the performance of ordinary trustee duties because of the successful result of the bankruptcy proceeding. Second, the bankruptcy court ignored that the burden rests on the attorney requesting compensation under section 330(a) to justify the services rendered. View "Sylvester v. Chaffe McCall, LLP" on Justia Law

Dean filed a Chapter 7 voluntary petition. The trustee for the estate did not have sufficient unencumbered funds to retain counsel to pursue claims for the estate. Reticulum, a creditor, agreed to fund the trustee’s litigation in exchange for a share of any of litigation proceeds. The bankruptcy court approved the agreement. The district court affirmed. Dean appealed, contending that the agreement undermined the statutory ranking system for distribution of the estate’s property by allowing Reticulum to move ahead of other creditors.The Fifth Circuit dismissed the appeal for lack of standing. Bankruptcy standing may be addressed even when it was not raised below. The court employed the “person aggrieved” test, a “more exacting standard than traditional constitutional standing.” The appellant must show that he is “directly, adversely, and financially impacted by” the exact order being appealed as opposed to the proceedings more generally. In a Chapter 7 bankruptcy, the debtor-out-of-possession typically has no concrete interest in how the bankruptcy court divides up the estate. A debtor may retain bankruptcy standing by showing that defeat of the order on appeal would affect his bankruptcy discharge. The approval of the litigation funding agreement did not affect whether Dean’s debts will be discharged. View "Dean v. Seidel" on Justia Law

BVS, a company owned by Palasota, and Palasota separately filed voluntary Chapter 11 bankruptcy petitions. An amended 2015 “joint” reorganization plan described the amounts BVS owed a secured creditor, Prosperity, and provided that Prosperity would have an Allowed Secured Claim of $1,812,472.43, to be paid based upon a 120-month amortization with interest at 5% per annum. Commencing on November 8, 2015, BVS was to make 59 equal payments of $19,224.72; the 60th payment would be of all outstanding principal and interest. Palasota, individually and on behalf of BVS, signed the 2015 Plan, which was confirmed. For 38 consecutive months, BVS made payments, which Prosperity applied to BVS’s principal and interest obligations.BVS then stopped making its monthly payments and, in 2019, again filed for bankruptcy. In the second bankruptcy, Prosperity filed a proof of claim for $1,333,695.84. After a hearing, the bankruptcy court allowed Prosperity’s claim. The district court and Fifth Circuit affirmed. BVS’s claim objection is barred by res judicata because Prosperity’s claim in the second bankruptcy—as it relates to whether Prosperity’s claim in the 2015 Plan was correct—arises out of the same transaction that was the subject of the 2015 Plan and BVS could have made this argument in the first bankruptcy but did not. View "BVS Construction, Inc. v. Prosperity Bank" on Justia Law