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

This appeal arose from eleven notices of final partnership administrative adjustment (FPAAs) issued by the IRS with respect to three Limited Liability Companies (LLCs) treated as partnerships for tax purposes. The IRS claimed that the partnerships' transactions provided one partner with an illegal tax shelter to avoid taxes on his unrelated personal capital gain of the same approximate amount. The court affirmed the district court's determinations that (1) the FOCus transactions lacked economic substance and must be disregarded for tax purposes; (2) the negligence penalty was applicable and the partnerships were not entitled to the reasonable cause defense; and (3) the valuation misstatement penalty was inapplicable. The court vacated and rendered judgment for plaintiffs as to the remaining claims addressing the FPAAs premised on the government's alternative theory under Treasury Regulation 1.701-2 and the district court's approval of the alternative substantial understatement penalty. View "Nevada Partners Fund, et al. v. United States" 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

Three cases related to the Mexican reorganization of Vitro S.A.B. de C.V., a corporation organized under the laws of Mexico, were consolidated before the court. The Ad Hoc Group of Vitro Noteholders, a group of creditors holding a substantial amount of Vitro's debt, appealed from the district court's decision affirming the bankruptcy court's recognition of the Mexican reorganization proceeding and Vitro's appointed foreign representatives under Chapter 15 of the Bankruptcy Code. Vitro and one of its largest third-party creditors each appealed directly to the court the bankruptcy court's decision denying enforcement of the Mexican reorganization plan because the plan would extinguish the obligations of non-debtor guarantors. The court affirmed in all respects the judgment of the district court affirming the order of the bankruptcy court in No. 12-10542, and the court affirmed the order of the bankruptcy court in Nos. 12-0689 and 12-10750. The temporary restraining order originally entered by the bankruptcy court, the expiration of which was stayed by the court, was vacated, effective with the issuance of the court's mandate in Nos. 12-10689 and 12-10750. View "Ad Hoc Group of Vitro Noteholders v. Vitro S.A.B. de C.V." on Justia Law

Maude Williams passed away in May 2000, leaving behind both a substantial fortune and incomplete estate-planning documents. Originally believing this omission precluded transfer of the relevant estate property to a limited partnership, her Estate paid over $147 million in federal taxes. The Estate later discovered Texas state authorities supporting that Williams sufficiently capitalized the limited partnership before her death, entitling the Estate to a substantial refund. In this refund suit, the Estate claimed a further substantial deduction for interest on the initial payment, which it retroactively characterized as a loan from the limited partnership to the Estate for payment of estate taxes. The district court upheld both the Estate's contentions. The court affirmed, holding that the district court correctly concluded that Williams' intent on forming the partnership was sufficient under Texas law to transfer ownership of the Community Property bonds to the partnership. The district court also correctly concluded that the post hoc restructuring of the transfer as a loan from the partnership back to the Estate for tax purposes was a necessarily incurred administrative expense; the Estate retained substantial illiquid land and mineral assets that justified the loan, and the loan did not constitute an "indirect use" of the Community Property bonds. View "Keller, et al v. United States" on Justia Law

This case arose when American Airlines filed a lawsuit alleging state-law causes of action for breach of contract and tortious interference with prospective business relations. On appeal, Sabre challenged the district court's award of attorney's fees to American pursuant to 28 U.S.C. 1447(c). The court affirmed the district court's ruling, finding that the district court did not abuse its discretion in awarding attorney's fees to American based on its assessment that Sabre did not have objectively reasonable grounds to believe removal of the case from state court to federal district court was legally proper. View "American Airlines, Inc. v. Sabre, Inc., et al." on Justia Law

Defendant United Polychem, Inc. (UPC) and Lynne Van Der Wall (collectively, Appellants) and Plaintiff Westlake Petrochemicals, LLC (Westlake) appealed different results of a jury trial. At the core of the trial was an agreement between UPC as buyer and Westlake as seller of ethylene, a petroleum product. The jury found that (1) the parties had formed a binding contract, (2) UPC breached that contract, and, as a result, (3) UPC was liable to Westlake for $6.3 million in actual damages and $633,200 in attorneys fees. The district court also held Van Der Wall jointly and severally liable under the terms of a guaranty agreement. The Fifth Circuit Court of Appeals affirmed in part and reversed and remanded in part, holding (1) a binding contract was established, (2) the district court applied the incorrect measure of damages, and (3) Van Der Wall, as UPC's president, was not jointly and severally liable with UPC for the jury verdict under the terms of the guaranty. The Court vacated the damages award and remanded for the district court to calculate the damages under Tex. Bus. & Com. Code Ann. 2.708(b). View "Westlake Petrochemicals, LLC v. United Polychem, Inc." on Justia Law

Plaintiff sued defendants, the City and the Zoning Board, for violations of the Fifth Amendment Takings Clause and for denying her procedural due process and equal protection under the Fourteenth Amendment. The Board had decided to revoke the permits it had given her to operate her Sno Cone hut at a certain intersection. The court held that the district court was justified in dismissing plaintiff's equal protection claim where plaintiff failed to state a viable equal protection claim. The court held, however, that the district court erred in dismissing plaintiff's procedural due process claim where plaintiff's property right in the business permits the Board granted to her merited the protection of procedural due process before the Board revoked it. View "Bowlby v. City of Aberdeen, Mississippi, et al." on Justia Law

These consolidated cases sought judicial review of notices of final partnership administrative adjustment (FPAA) issued to Bemont and BPB. Following the review of the district court, the government appealed the ruling on the partnerships' motion for partial summary judgment disallowing the 40% valuation misstatement penalty, and the ruling post trial holding that the FPAA issued to Bemont for the 2001 tax year was time-barred. The partnerships appealed the district court's judgment upholding the imposition of the 20% substantial understatement and negligence penalties. The court reversed the judgment of the district court that the FPAA as to the 2001 tax year was untimely; affirmed the judgment of the district court in all other respects including disallowing the 40% valuation misstatement penalty and upholding the 20% negligence penalty for both 2001 and 2002. View "Bemont Investments, L.L.C., et al. v. United States" on Justia Law

This case arose when Mirant, an energy company, sought to expand its European operations by acquiring nine power islands from General Electric. When the power island deal fell through, Mirant made payments pursuant to a guaranty and soon thereafter sought bankruptcy protection. Mirant, as debtor-in-possession, sued Commerzbank and other lenders in bankruptcy court to avoid the guaranty and to recover the funds Mirant paid pursuant to the guaranty. After Mirant's bankruptcy plan was confirmed MCAR, plaintiff, substituted into the case for Mirant. Commerzbank and other lenders, defendants, filed a motion to dismiss based on Rules 12(b)(1) and 12(b)(6). The district court subsequently denied defendants' motion to dismiss based on plaintiff's alleged lack of standing. Thereafter, the district court granted summary judgment for defendants. Both sides appealed. While the court agreed that the district court correctly determined that there was standing to bring the avoidance claim, the court vacated the judgment of dismissal because the district court erroneously applied Georgia state law rather than New York state law to the avoidance claim. View "MC Asset Recovery LLC v. Commerzbank A.G., et al." on Justia Law

Karen Cook was appointed receiver over the assets of a number of related corporations and individuals, who the SEC alleged violated multiple federal securities laws. Cook discovered that before the SEC filed its civil complaint, the corporate entities involved had made charitable contributions to the American Cancer Society (ACS). Cook moved to recover the donations on behalf of the receivership, arguing that they qualified as fraudulent transfers under Texas' Uniform Fraudulent Transfer Act (TUFTA), Tex. Bus. & Co. Code 24.005(a). The court held that the receiver's attempt to liken the scheme in question to a "Ponzi-like fraud," and therefore reduce her burden to proving "presumed intent to defraud," failed for lack of evidence. Accordingly, the court reversed the judgment of the district court. View "The American Cancer Society v. Cook" on Justia Law