Justia Civil Procedure Opinion Summaries

In this case, the plaintiff, a Chapter 11 Trustee for BK Racing, LLC, initiated an adversary proceeding against multiple defendants, including Ronald and Brenda Devine, various family trusts, and corporate entities. The defendants were accused of obstructing the bankruptcy process by failing to comply with discovery obligations, including not producing required financial documents and records, despite multiple court orders.The bankruptcy court found that the defendants willfully disregarded their discovery obligations and engaged in a pattern of obstruction and delay. As a result, the court entered a default judgment against the defendants as a discovery sanction, awarding the plaintiff $31,094,099.89. The district court affirmed this decision, noting the defendants' repeated noncompliance and the necessity of deterrence.The United States Court of Appeals for the Fourth Circuit reviewed the case. The court upheld the lower courts' decisions, finding no abuse of discretion in the entry of default judgment. The court applied the Wilson factors, determining that the defendants acted in bad faith, caused significant prejudice to the plaintiff, necessitated deterrence, and that lesser sanctions would be ineffective. The court also affirmed the decision to pierce the corporate veil, holding the defendants jointly and severally liable, based on evidence that the corporate entities were mere instrumentalities of the Devines, lacking proper corporate formalities and used to siphon funds.The Fourth Circuit concluded that the bankruptcy court's findings were not clearly erroneous and that the default judgment and the amount awarded were appropriate given the defendants' egregious conduct. The decision of the district court was affirmed. View "Smith v. Devine" on Justia Law

Alice Guan and her homeowners association (HOA), Ellingsworth Residential Community Association, Inc., were involved in a dispute after Guan failed to conform her yard to the HOA’s covenants. Ellingsworth sued Guan in state court, and Guan countersued for various state-law claims. The state court awarded Guan costs and fees, but before she could collect, Ellingsworth filed for subchapter V bankruptcy.In the Bankruptcy Court, Guan filed several motions, including objections to Ellingsworth’s subchapter V eligibility and reorganization plan, and a motion for relief from the automatic stay. The Bankruptcy Court overruled Guan’s objections, confirming Ellingsworth’s subchapter V status and reorganization plan, and denied her motion for relief from the stay. Guan appealed these decisions to the District Court.The District Court affirmed the Bankruptcy Court’s orders, finding that Ellingsworth was eligible for subchapter V as it was engaged in business activities, and that the reorganization plan was fair and equitable. The court also upheld the denial of Guan’s motion for relief from the stay, concluding that the Bankruptcy Court did not abuse its discretion and had jurisdiction over Guan’s claims.Guan also appealed the Bankruptcy Court’s denial of her motion to abstain from ruling on state law issues. The District Court dismissed this appeal for lack of jurisdiction, stating that the abstention order was not a final appealable order.The United States Court of Appeals for the Eleventh Circuit affirmed the District Court’s decisions on subchapter V eligibility, the reorganization plan, and the denial of stay relief. However, it vacated the dismissal of Guan’s abstention appeal, remanding it to the District Court for further consideration, as the denial of mandatory abstention is immediately appealable. View "Guan v. Ellingsworth Residential Community Association, Inc." on Justia Law

Hamzah Ali, a legal immigrant from Yemen and Dubai, retained Azhar Chaudhary as his attorney in February 2017 and paid him $810,000 over three months. Chaudhary claimed this was a nonrefundable retainer, while Ali asserted it was for hourly billing. The bankruptcy court found that Chaudhary did little work of value for Ali and that much of his testimony was false. Ali fired Chaudhary in October 2017 and later learned from another attorney that most of Chaudhary’s advice was misleading or false.Ali sued Chaudhary and his law firm in Texas state court in 2018 for breach of contract, quantum meruit, breach of fiduciary duty, fraud, negligence, and gross negligence. In October 2021, Riverstone Resort, an entity owned by Chaudhary, filed for Chapter 11 bankruptcy. In May 2022, Ali sued Chaudhary, his law firm, and Riverstone in bankruptcy court, alleging breach of fiduciary duty and unjust enrichment, and seeking a constructive trust over Riverstone’s property. The bankruptcy court dismissed Ali’s claims against Chaudhary and his firm, citing lack of jurisdiction or abstention, and granted a take-nothing judgment for Riverstone based on the statute of limitations.The United States District Court for the Southern District of Texas dismissed all appeals and affirmed the bankruptcy court’s judgment. Ali appealed to the United States Court of Appeals for the Fifth Circuit, arguing that the bankruptcy court erred in not equitably tolling the statute of limitations and that Chaudhary had fraudulently concealed his cause of action.The Fifth Circuit dismissed the appeals of Chaudhary, his law firm, and Riverstone, as they were not aggrieved parties. The court reversed the district court’s judgment in favor of Riverstone and remanded the case to the bankruptcy court to consider whether equitable tolling should apply due to Chaudhary’s alleged misconduct. View "Azhar Chaudhary Law v. Ali" on Justia Law

Eric Gilbert filed for Chapter 7 bankruptcy, listing his interest in retirement accounts worth approximately $1.7 million. The issue was whether these accounts could be accessed by creditors due to alleged violations of federal law governing retirement plans. The Bankruptcy Court ruled that the accounts were protected from creditors, and the District Court affirmed this decision.The Bankruptcy Court dismissed the trustee John McDonnell's complaint, which sought to include the retirement accounts in the bankruptcy estate, arguing that the accounts violated ERISA and the IRC. The court found that the accounts were excluded from the estate under § 541(c)(2) of the Bankruptcy Code, which protects interests in trusts with enforceable anti-alienation provisions under applicable nonbankruptcy law. The District Court upheld this ruling, agreeing that ERISA's anti-alienation provision applied regardless of the alleged violations.The United States Court of Appeals for the Third Circuit reviewed the case and affirmed the lower courts' decisions. The court held that the retirement accounts were excluded from the bankruptcy estate under § 541(c)(2) because ERISA's anti-alienation provision was enforceable, even if the accounts did not comply with ERISA and the IRC. The court also dismissed McDonnell's claims regarding preferential transfers and fraudulent conveyances, as the transactions in question did not involve Gilbert parting with his property. Additionally, the court found no abuse of discretion in the Bankruptcy Court's decisions to dismiss the complaint with prejudice, shorten the time for briefing, and strike certain items from the appellate record. View "In re: Gilbert" on Justia Law

The case involves Western Robidoux, Inc. (WRI), which filed for Chapter 11 bankruptcy while involved in federal litigation. Attorney Daniel Blegen, initially representing WRI and its controlling family members, moved to Spencer Fane LLP. The Chapter 7 Trustee, Jill Olsen, sought to employ Spencer Fane as special counsel for ongoing appeals in the federal litigation. Appellants TooBaRoo, LLC and InfoDeli, LLC, controlled by Breht Burri, opposed this, citing potential conflicts of interest and disproportionate legal fees.The United States Bankruptcy Court for the Western District of Missouri approved the employment of Spencer Fane as special counsel, finding no actual conflicts of interest and emphasizing procedural safeguards for potential future conflicts. The court noted Spencer Fane's expertise and cost-effectiveness. Appellants appealed this decision, arguing that the employment order was improper due to adverse interests and fee concerns.The United States Bankruptcy Appellate Panel for the Eighth Circuit reviewed the appeal. The panel first examined its jurisdiction, determining whether the bankruptcy court's order was final under 28 U.S.C. § 158(a)(1) or reviewable under 28 U.S.C. § 158(a)(3). The panel concluded that the order was not final, as the bankruptcy court retained ongoing responsibilities regarding Spencer Fane's employment and fee applications. Additionally, the panel found that delaying review would not prevent effective relief for the appellants, and a later reversal would not necessitate recommencement of the entire proceeding.The panel also declined to treat the appeal as an interlocutory appeal under 28 U.S.C. § 158(a)(3), agreeing with both parties that the criteria for such review were not met. Consequently, the appeal was dismissed for lack of jurisdiction. View "TooBaRoo, LLC v. Olsen" on Justia Law

Rose Court, LLC's predecessor defaulted on a mortgage loan secured by real property. Rose Court filed and voluntarily dismissed multiple lawsuits in state and federal courts challenging the lender's foreclosure efforts. After the foreclosure sale, Rose Court initiated an adversary proceeding in bankruptcy court against U.S. Bank, Select Portfolio Servicing, Inc. (SPS), and Quality Loan Service Corporation (Quality), alleging fraudulent transfer of the property.The bankruptcy court dismissed Rose Court's claims and denied its motion to amend the complaint to assert a fraud-based wrongful-foreclosure claim, citing the two-dismissal rule under Federal Rule of Civil Procedure 41(a)(1)(B). This rule applies when a plaintiff voluntarily dismisses the same claim twice, making any subsequent dismissal an adjudication on the merits. The court found that Rose Court had previously dismissed similar claims in state and federal court actions.The United States District Court for the Northern District of California affirmed the bankruptcy court's decision. Rose Court then appealed to the United States Court of Appeals for the Ninth Circuit, challenging the denial of leave to amend.The Ninth Circuit affirmed the district court's order. The court held that the two-dismissal rule barred Rose Court from asserting the same fraud-based wrongful-foreclosure claim for a third time. The court adopted a transactional approach, determining that a subsequent claim is the same as a previously dismissed claim if it arises from the same set of facts. The court also declined to address Rose Court's new argument, raised for the first time on appeal, that it should be allowed to amend to assert a new wrongful-foreclosure claim based on interference with its right to reinstate the loan. View "ROSE COURT, LLC V. SELECT PORTFOLIO SERVICING, INC." on Justia Law

Joseph and Jo-Lynn Jenkins Parrott filed for Chapter 13 bankruptcy in 2018, committing to a payment plan. After several amendments to their plan, the bankruptcy trustee moved to dismiss the case due to missed payments. The bankruptcy court ordered the Parrotts to catch up on payments or face dismissal. Despite extensions, the Parrotts failed to comply, leading to a dismissal order on January 29, 2020, effective February 13, 2020. The Parrotts filed a pro se notice of appeal on February 5, 2020, which was struck for lacking their attorney’s signature. They filed a second notice on February 18, 2020, after their attorney withdrew.The United States District Court for the Middle District of Florida dismissed the Parrotts' appeal, ruling it untimely and citing their failure to comply with procedural rules. The court noted the Parrotts' noncompliance with local rules and their inadequate response to an order to show cause regarding jurisdiction. The district court concluded it lacked jurisdiction and, alternatively, dismissed the case as a sanction for procedural noncompliance.The United States Court of Appeals for the Eleventh Circuit reviewed the case. It held that the Parrotts' initial notice of appeal, though defective, was timely and that the second notice cured the defect, thus conferring jurisdiction on the district court. The appellate court also found that the district court abused its discretion by dismissing the case as a sanction, noting that dismissal is a last resort and should only be used in extreme circumstances, which were not present here. The Eleventh Circuit vacated the district court's dismissal and remanded the case for consideration on the merits. View "Parrott v. Neway" on Justia Law

Debbie O'Gorman, facing foreclosure by creditor Grant Reynolds, transferred her property to the Lovering Tubbs Trust for no consideration. This transfer was intended to hinder Reynolds' foreclosure efforts. The Lovering Tubbs Trust and other entities involved in the transfer argued that the Chapter 7 Trustee lacked Article III standing to bring a claim under 11 U.S.C. § 548 because O'Gorman's creditors were not harmed by the transfer.The Bankruptcy Court granted summary judgment to the Trustee, finding that O'Gorman's transfer was fraudulent under § 548(a)(1)(A). The Bankruptcy Appellate Panel (BAP) affirmed this decision, noting that the Trustee had established a prima facie case of fraudulent transfer and that the appellants failed to present any admissible evidence to create a genuine dispute of material fact.The United States Court of Appeals for the Ninth Circuit affirmed the BAP's decision. The court held that the Trustee had Article III standing because the transfer depleted the estate's assets, causing an injury-in-fact that was redressable by the avoidance sought. The court also clarified that actual harm to creditors is not an element of a fraudulent transfer claim under § 548. The court found that the bankruptcy court properly granted summary judgment, as the Trustee provided direct and circumstantial evidence of O'Gorman's fraudulent intent, and the appellants failed to present any evidence to dispute this.The Ninth Circuit also upheld the bankruptcy court's denial of the appellants' request for a continuance to conduct discovery, noting that the appellants did not comply with the requirements of Rule 56(d) by failing to submit an affidavit or declaration specifying the facts they hoped to elicit through further discovery. The court concluded that the bankruptcy court did not abuse its discretion in this regard. View "IN RE: THE LOVERING TUBBS TRUST V. HOFFMAN" on Justia Law

Keith Edward Myers posted a negative online review about the legal services provided by Jerry M. Blevins. Blevins, representing himself, sued Myers in the Elmore Circuit Court for defamation per se, invasion of privacy, wantonness, and negligence, seeking damages and injunctive relief. The court sealed the case record and, after unsuccessful attempts to serve Myers, allowed service by publication. Myers did not respond, leading to a default judgment awarding Blevins $500,000 in compensatory damages, $1.5 million in punitive damages, and a permanent injunction against Myers.Myers later appeared in court, filing motions to unseal the record and set aside the default judgment, arguing improper service and venue, among other issues. The trial court unsealed the record but did not rule on the motion to set aside the default judgment. Myers filed for bankruptcy, temporarily staying proceedings, but the bankruptcy case was dismissed. Myers then filed a notice of appeal and a renewed motion to stop execution on his property, which the trial court granted, staying execution pending the appeal.The Supreme Court of Alabama reviewed the case. The court dismissed Myers's direct appeal as untimely regarding the default judgment and premature concerning the Rule 60(b) motion, which remained pending in the trial court. The court also dismissed Myers's challenge to the sealing of the record, noting that the trial court had already unsealed it, rendering the issue moot.Blevins's petition for a writ of mandamus to vacate the trial court's order quashing writs of execution was also dismissed as moot. The Supreme Court's resolution of the direct appeal allowed trial court proceedings, including Blevins's execution efforts, to resume, thus granting Blevins the relief he sought. View "Myers v. Blevins" on Justia Law

Plaintiff-Appellant Sonya Porretto owns Porretto Beach in Galveston, Texas. After filing for bankruptcy in 2009, her case was converted to a Chapter 7 proceeding. In 2020, the bankruptcy trustee abandoned the Porretto Beach property back to her. In 2021, Porretto filed a lawsuit against the City of Galveston Park Board of Trustees, the City of Galveston, the Texas General Land Office (GLO), and its Commissioner, alleging that their actions constituted takings without just compensation in violation of the Fifth Amendment.The U.S. District Court for the Southern District of Texas dismissed Porretto’s lawsuit. The court concluded that Porretto lacked standing to sue the GLO and its Commissioner because her complaint did not establish a causal link between their actions and her alleged injuries. The court also found that it lacked bankruptcy jurisdiction under 28 U.S.C. § 1334 and federal question jurisdiction under 28 U.S.C. § 1331, as Porretto did not invoke 42 U.S.C. § 1983 for her constitutional claims. Additionally, the court denied Porretto leave to amend her complaint and her motion for recusal of the presiding judge.The United States Court of Appeals for the Fifth Circuit reviewed the case. The court affirmed the district court’s dismissal of Porretto’s claims against the GLO and its Commissioner without prejudice, agreeing that Porretto lacked standing. However, the appellate court vacated the district court’s dismissal of Porretto’s claims against the Park Board and the City of Galveston, finding that the district court does have federal question jurisdiction over her constitutional claims despite her failure to cite § 1983. The case was remanded for the district court to consider alternative arguments for dismissal and the issue of supplemental jurisdiction over state law claims. The appellate court also affirmed the district court’s denial of Porretto’s motion for recusal and her request for reassignment to a different judge. View "Porretto v. City of Galveston" on Justia Law