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

Appellant in his capacity as Litigation Trustee for the Erickson Litigation Trust, appeals the dismissal of his avoidance and recovery claims under the bankruptcy laws. In broad terms, these claims seek avoidance of settlement releases approved in Delaware state court, as well as two payments related to Erickson Air-Crane, Inc.’s acquisition of Evergreen Helicopters, Inc. (EHI) (the “Evergreen Transaction”).   The Fifth Circuit affirmed the dismissal of the claims relating to the settlement releases and reversed in part the dismissal of the payments relating to the Evergreen Transaction itself. The court concluded that consistent with Besing and Erlewine, there was reasonable equivalence as a matter of law. The Delaware settlement “should not be unwound by the federal courts merely because of its unequal division of [settlement proceeds].” Further, the court wrote that Appellant’s attempt to attack the Delaware releases as actually fraudulent transfers also fails. The court wrote it saw no error in the lower court's conclusion that Appellant failed to adequately plead actual fraud, and his arguments on appeal do not convince the court otherwise. Moreover, the court found that acting in his specific capacity, Appellant is not enjoined by the Delaware settlement from asserting creditor claims that arose only under the Bankruptcy Code. View "Ogle v. Morgan, et al" on Justia Law

Mary and James Nelson, a married couple with daughters, formed Longspar limited partnership in 2008; each had a 0.5% general partner interest. The limited partners were Mary and trusts that had been established for their daughters. The Nelsons also formed a trust in 2008. Mary was the settlor, James was the trustee. James and the daughters were the beneficiaries. In 2008-2009, Mary transferred her Longspar limited partner interests to the trust in a gift (valued at $2,096,000.00) and then a sale for $20,000,000. An accountant valued a 1% Longspar limited partner interest at $341,000. The Nelsons used that value to convert the dollar values in the transfer agreements to percentages of limited partner interests—6.14% for the gift and 58.65% for the sale. Those percentages were then listed on Longspar’s records, included in Longspar’s amended partnership agreement, and listed on the Nelsons’ gift tax returns.The IRS audited the Nelsons’ tax returns. The Nelsons amended their records and reallocated previous distributions. The Commissioner issued Notices of Deficiency listing $611,708 in gift tax for 2008 and $6,123,168 for 2009. The Tax Court found that the proper valuation of a 1% Longspar limited partner interest was $411,235; the transfer documents' language was not a valid formula clause that could support reallocation; Mary had transferred the percentage of interests that the appraiser had determined to have the values stated in the transfer documents; those percentages were fixed once the appraisal was completed. The Fifth Circuit affirmed; the Nelsons each owed $87,942 in gift tax for 2008 and $920,340 for 2009. View "Nelson v. Commissioner of Internal Revenue" on Justia Law

In 2016, Great American filed an interpleader action seeking to determine the proper beneficiary of two annuities belonging to decedent. The district court granted summary judgment in favor of the daughter (Ava), rejecting the widow and stepson's (Alita and Craig) claims. The Fifth Circuit then determined that material issues of fact existed, vacated the district court's summary judgment in favor of Ava, and remanded the case for trial. While those proceedings were pending, Ava and her sister, Phyllis, filed another suit in 2018 claiming entitlement to other assets belonging to the decedent, including life insurance proceeds, an individual retirement account (IRA), and mineral rights. Both cases were consolidated for trial where the district court again held in favor of Ava and Phyllis.The Fifth Circuit affirmed, concluding that the district court's finding of undue influence as to Craig is amply supported by the record; appellants' claim that the district court erred in imposing a requirement that appellants must prove that decedent received independent advice from a disinterested third party before making the beneficiary changes to his policies and accounts is without merit; while the district court did not require evidence relating to disinterested third parties, it did require some form of clear and convincing evidence from which it could conclude that the transfers were decedent's true, untampered, intent; and the district court did not, as appellants, contend, impose a burden of clear and convincing evidence on Alita.The court also concluded that the record is clear that the district court did not award damages based on a theory of unjust enrichment. Rather, the district court awarded damages based on a finding of undue influence on Craig's part. The court further concluded that the district court did not err by imposing joint and several liability on appellants. Finally, in regards to the disposition of real property in Arkansas, the district court did not err in ordering Craig to convey the improperly obtained mineral interests back to Ava and Phyllis. View "Tanner v. Mitchell" on Justia Law

Plaintiffs-Appellants Walter “Gil” Goodrich (individually and in his capacity as the executor of his father—Henry Goodrich, Sr.’s— succession), Henry Goodrich, Jr., and Laura Goodrich Watts brought suit against Defendant-Appellee United States of America. Plaintiffs claimed that, in an effort to discharge Henry Sr.’s tax liability, the Internal Revenue Service (“IRS”) wrongfully levied their property, which they had inherited from their deceased mother, Tonia Goodrich, subject to Henry Sr.’s usufruct. A magistrate judge previously determined Plaintiffs were not the owners of money seized by the IRS, and that represented the value of certain liquidated securities. The Fifth Circuit determined that whether Plaintiffs were in fact owners of the disputed funds was an issue governed by Louisiana law. The Fifth Circuit declined further review until the Louisiana Supreme Court had a chance to review the ownership issue in the first instance. View "Goodrich, et al v. United States" on Justia Law

The Commission issued the Estate a notice of deficiency, determining that the Estate had a $491,750.00 tax liability which differed from the Estate's tax return valuation. The Fifth Circuit affirmed the tax court's decision sustaining the Commission's determinations. The court held that the Estate holds a substituted limited partnership interest in SILP.The court also held that the Notice of Deficiency (including its attachments) fulfills the statutory requirement under 28 U.S.C. 6212. However, even assuming arguendo that the notice description was inadequate, the court could not invalidate it on that basis because Internal Revenue Code 7522(a) explicitly prohibits it from setting aside a notice for lacking the descriptive element. Finally, the court rejected the Estate's argument under the Administrative Procedure Act as without merit. View "Estate of Frank D. Streightoff v. Commissioner" on Justia Law

This appeal arose out of disputes related to trusts formed by the late Texas oil baron, H.L. Hunt. At issue was the settlement involving plaintiff, H.L.'s grandson, in which he agreed to not contest the last will and testament of his father in exchange for a nine-figure payout. After his father's death, plaintiff challenged the will in Texas probate court, lost, and appealed. Plaintiff's sisters then asked the federal court to enforce the settlement agreement and to enjoin plaintiff's will challenges, which the district court granted.The Fifth Circuit held that plaintiff's appeal of the injunction was mostly moot, because the Texas appeals court has lost jurisdiction over plaintiff's state appeal and plaintiff has withdrawn his failed will challenges in the probate court. In this case, the terms of the injunction related to those probate proceedings have been irrevocably fulfilled. However, in regard to the terms of the injunction that prohibit plaintiff from challenging his father's will ever again, those terms were not moot. As to those terms, the court held that plaintiff's challenges failed.Accordingly, the court dismissed the appeal as to the following, already-fulfilled terms of the injunction: its prohibition on contesting plaintiff's will in the current probate proceedings; its prohibition on appealing the probate court's order regarding the settlement agreement; its prohibition on appealing the probate court's admission of the will; and its obligation to dismiss or withdraw his claims in probate court, including through appeal. The court affirmed the remainder of the order, including the following, future-looking terms of the injunction: its prohibition on contesting plaintiff's will "in any manner," in any court; and its prohibition on "filing, pursuing, or prosecuting any action . . . that violates the terms of the Settlement Agreement or Final Judgment." The court remanded to the district court for consideration of whether the sisters were entitled to additional costs and fees. View "Hill v. Washburne" on Justia Law

Payments owed to a shareholder by a bankrupt debtor, which are not quite dividends but which certainly look a lot like dividends, should be treated like the equity interests of a shareholder and subordinated to claims by creditors of the debtor. The Fifth Circuit affirmed the district court's judgment and held that the deemed dividends gave the Estate benefits normally reserved for equity investors and thus subordination of all of the Estate's claims was appropriate. The court also held that the bankruptcy court did not abuse its discretion in denying discovery. Likewise, the court held that the Estate's due process right to discovery was not violated. View "French v. Linn Energy, LLC" on Justia Law

Plaintiff filed suit against Wells Fargo and JPMorgan for breach of fiduciary duty after the banks served as trustees for plaintiff's trusts. The district court dismissed all but one of plaintiff's claims, finding a breach as to the remaining claim. The Fifth Circuit held that because plaintiff neither pleaded nor tried his case on the frivolous-lawsuit theory, and because Wells Fargo did not consent to a post-trial amendment, it was improper for the district court to award damages against Wells Fargo on that theory. The court also held that plaintiff's claim that he should have received insurance proceeds upon the House Trust's termination was time-barred; the court declined to consider plaintiff's claim that Wells Fargo double-billed the trusts; plaintiff's claim that Wells Fargo breached its fiduciary duty by using trust funds to pay for legal expenses was time-barred; the court rejected plaintiff's claim that Wells Fargo breached a fiduciary duty by failing to advise him; and plaintiff's claim that JPMorgan breached a fiduciary duty by failing to convey title to certain mineral interests was time-barred. View "Jones, Jr. v. Wells Fargo Bank" on Justia Law

Plaintiff, daughter of Martin Schmidt, filed suit against Wells Fargo in Texas state court for negligence, promissory estoppel, and conversion. After removal to federal court, the district court granted summary judgment based on California Probate Code 13106(a), which discharges the holder of funds “from any further liability with respect to the money or property” upon receipt of an affidavit conforming to certain statutory requirements. The court concluded that, because plaintiff has failed to probate her father’s will, the only statutory claim that she may possibly have is under California’s laws of intestate succession, which give a decedent’s surviving children a share in the estate not passing to the decedent’s surviving spouse. A claim under the laws of intestacy, however, is inferior to a claim under the laws of testate succession, and it is questionable whether a claim to a percentage of an estate equates to a claim to specific assets in the estate, like the Wells Fargo bank accounts at issue here. The court also noted that plaintiff has waived any argument based on intestate succession by failing to raise the issue in the district court or in her briefs on appeal. Therefore, the court held that it is immaterial that plaintiff gave Wells Fargo actual notice or whether she reasonably and detrimentally relied on any representation by Wells Fargo’s Houston employees. The California legislative scheme grants Wells Fargo immunity from any injury that plaintiff may have suffered from the disbursement of funds to her stepmother. Accordingly, the court affirmed the judgment. View "Di Angelo v. Wells Fargo" on Justia Law

Rebecca Breaux brought an age discrimination action against her employer ASC Industries on May 6, 2012. On May 24, 2013, Breaux’s attorney Lurlia Oglesby filed a statement in accordance with Rule 25(a)(3) noting that Breaux had died. The district court stayed the action pending the substitution of parties. After the ninety days allotted for the substitution of a party passed without any motion being filed, ASC Industries moved for the action to be dismissed. On the next business day, September 3, 2013, the district court granted ASC Industries’ motion to dismiss. On October 1, 2013, Oglesby filed a motion on behalf of Breaux’s estate to alter or amend the judgment of dismissal. The issue this case presented for the Fifth Circuit's centered on whether personal service of a suggestion of death on a deceased-plaintiff’s estate was required in order for the ninety-day time limit to run for the substitution of a party under Federal Rule of Civil Procedure ("Rule") 25. The Court held that personal service was required. View "Sampson v. ASC Industries" on Justia Law