Justia Civil Procedure Opinion Summaries

In August 2019, a company filed for Chapter 11 bankruptcy, with its only assets being three properties occupied by its sole member and two affiliates. Arrowhead Capital Finance, Ltd. obtained judgments against these affiliates and initiated an adversary proceeding against the debtor, seeking to hold it liable for the affiliates’ obligations. During this process, the bankruptcy trustee filed a separate adversary proceeding to recover unpaid rent from one affiliate. A settlement was reached in which Arrowhead received assignment of claims against the affiliates in exchange for releasing its own claims. The bankruptcy court approved this settlement, retaining jurisdiction over the assigned claims. Arrowhead then intervened and obtained a final judgment against the affiliates, including Royal Street Bistro, LLC (RSB).After the bankruptcy court entered judgment, RSB and another affiliate filed a notice of appeal but failed to attach a copy of the judgment as required by the bankruptcy rules. The bankruptcy court clerk issued a deficiency notice, and the corrected notice was filed ten days after the deadline. Arrowhead moved to dismiss the appeal, arguing that the failure to timely attach the judgment deprived the district court of jurisdiction. The United States District Court for the Eastern District of Louisiana dismissed the appeal, holding that the defect was jurisdictional and, alternatively, that dismissal was warranted as a discretionary sanction for noncompliance.The United States Court of Appeals for the Fifth Circuit reviewed the case. It held that failure to attach the judgment to the notice of appeal is not a jurisdictional defect under the bankruptcy rules, and that the district court abused its discretion by dismissing the appeal without considering lesser sanctions or the absence of prejudice. The Fifth Circuit reversed the district court’s dismissal and remanded the case for further proceedings. View "Royal Street Bistro v. Arrowhead Capital" on Justia Law

A group of companies that are frequently sued in asbestos litigation brought an action against several settlement trusts and a claims processing facility. These trusts were established as part of bankruptcy reorganizations by former asbestos manufacturers to handle and pay out current and future asbestos-related claims. The plaintiffs rely on information held by these trusts—specifically, data about claimants’ other asbestos exposures—to defend themselves in ongoing and anticipated lawsuits. In January 2025, the trusts announced new document retention policies that would result in the destruction of most existing claims data after one year, which the plaintiffs argued would severely impair their ability to defend against asbestos claims and seek contribution or indemnification from the trusts.Previously, the trusts notified claimants of the impending data destruction, and the plaintiffs, upon learning of this, requested that the trusts not implement the new policies. When the trusts refused, the plaintiffs filed suit in the Court of Chancery of the State of Delaware, seeking a declaratory judgment that the trusts have a duty to preserve the claims data and a permanent injunction to prevent the destruction of this information. The trusts moved to dismiss, arguing that the court lacked subject matter jurisdiction, that the plaintiffs lacked standing, and that the complaint failed to state a claim.The Court of Chancery denied the motions to dismiss. It held that it had subject matter jurisdiction because the plaintiffs sought injunctive relief and because the case fit within the court’s traditional equitable powers, including the authority to grant a bill of discovery to preserve evidence for use in litigation. The court found that the plaintiffs had standing, as they faced a concrete and imminent injury from the threatened destruction of data essential to their defense and contribution claims. The court also held that the complaint stated a claim for relief, allowing the case to proceed beyond the pleading stage. View "DBMP LLC v. Delaware Claims Processing Facility, LLC" on Justia Law

Sanchez Energy Corporation, a gas producer, underwent Chapter 11 bankruptcy in 2019 due to significant debt, with its reorganization plan confirmed in April 2020. The company, later renamed Mesquite Energy, Inc., owned valuable fossil fuel reserves in the Comanche Field, Texas, and had several high-cost contracts for gathering, processing, transporting, and marketing natural gas and natural gas liquids. Carnero G&P, L.L.C., a midstream services provider, had a contract with Sanchez to serve as a backup provider. After Sanchez’s reorganization, Mesquite entered into new agreements with other parties to lower its midstream costs, which Carnero claimed breached its surviving contract.Following the bankruptcy, Carnero filed a state court lawsuit against Mesquite and other parties, asserting state law claims based on the new agreements. The suit was removed to the United States Bankruptcy Court for the Southern District of Texas, which denied Carnero’s request to remand and ultimately dismissed the case on the pleadings, finding it had “related-to” jurisdiction under 28 U.S.C. § 1334. The bankruptcy court reasoned that the dispute pertained to the implementation of the reorganization plan and that Carnero was barred from challenging the new agreements due to its failure to object during the bankruptcy proceedings. The United States District Court for the Southern District of Texas affirmed the bankruptcy court’s decision.On appeal, the United States Court of Appeals for the Fifth Circuit reviewed the jurisdictional question de novo. The Fifth Circuit held that the bankruptcy court lacked post-confirmation “related-to” jurisdiction over Carnero’s state law contract claims, as the dispute did not pertain to the implementation or execution of the reorganization plan. The court found that the new agreements were not executory contracts under the plan and that Carnero was not barred from pursuing its claims. The Fifth Circuit reversed the lower courts’ judgments and remanded the case with instructions to remand to state court. View "Carnero G&P v. SN EF Maverick" on Justia Law

Carol Rose, a prominent figure in the American Quarter Horse industry, entered into a series of agreements with Lori and Philip Aaron in 2013. The Aarons agreed to purchase a group of Rose’s horses at an auction, lease her Gainesville Ranch with an option to buy, and employ her as a consultant. The relationship quickly soured after the auction, with both sides accusing each other of breaches. Rose locked the Aarons out of the ranch and asserted a stable keeper’s lien for charges exceeding those related to the care of the Aarons’ horses. The Aarons paid the demanded sum and removed their horses. Litigation ensued, including claims by Jay McLaughlin, Rose’s former trainer, for damages related to the value of two fillies.The bankruptcy filings by Rose and her company led to the removal of the ongoing state-court litigation to the United States Bankruptcy Court. After trial, the bankruptcy court ruled in favor of the Aarons on their breach of contract and Texas Theft Liability Act (TTLA) claims, awarding damages and attorneys’ fees, and in favor of McLaughlin on his claim. The United States District Court for the Eastern District of Texas reversed the bankruptcy court’s rulings on the Aarons’ claims and McLaughlin’s claim, vacating the damages and fee awards.On appeal, the United States Court of Appeals for the Fifth Circuit affirmed the district court’s reversal of the damages award for the Aarons’ breach of contract claim, holding that the Aarons failed to prove damages under any recognized Texas law measure. The Fifth Circuit reversed the district court’s judgment on the TTLA claim, holding that Rose’s threat to retain the Aarons’ horses for more than the lawful amount could constitute coercion under the TTLA, and remanded for further fact finding on intent and causation. The court also reversed and remanded the judgment regarding McLaughlin’s claim, finding his damages testimony legally insufficient. The court left the issue of attorneys’ fees for further proceedings. View "Rose v. Equis Equine" on Justia Law

A lender initiated a foreclosure action against a homeowner after the homeowner defaulted on a mortgage loan originally obtained in 2007. The mortgage was assigned several times before the foreclosure action began, and the lender’s predecessor filed suit in 2015. After a trial in 2018, the Vermont Superior Court, Civil Division, found in favor of the lender, concluding that the lender held the original note and mortgage at the time of filing and at trial, and that the homeowner had defaulted. The court issued a judgment of foreclosure by judicial sale, setting a redemption period for the homeowner.Following the expiration of the redemption period, the case was temporarily dismissed due to the homeowner’s bankruptcy. After the bankruptcy discharge, the lender successfully moved to reopen the case. The parties attempted mediation, which was unsuccessful. The lender then sought to substitute a new party as plaintiff due to post-judgment assignments of the mortgage, but later withdrew this request after issues arose regarding the validity of the assignments and the status of the note. The court vacated the substitution and ordered the lender to prove who the real party in interest was, warning that failure to do so would result in dismissal for lack of prosecution. After a hearing, the court found the lender failed to establish the real party in interest, dismissed the case with prejudice, and vacated the foreclosure judgment.On appeal, the Vermont Supreme Court held that the trial court abused its discretion by dismissing the case with prejudice for want of prosecution. The Supreme Court found no evidence of undue delay or failure to pursue the case by the lender, and concluded that the action could continue in the name of the original plaintiff under the applicable rules. The Supreme Court reversed the dismissal, reinstated the foreclosure judgment, and remanded for further proceedings. View "Ditech Financial LLC v. Brisson" on Justia Law

A dispute arose between a woman and her daughter regarding the daughter’s alleged misuse of property held in an irrevocable trust for which she served as trustee. The mother initiated a lawsuit in Massachusetts state court, asserting several state-law claims against her daughter and her daughter’s then-husband. Subsequently, the daughter filed for bankruptcy under Chapter 13 in the United States Bankruptcy Court for the District of Arizona, which triggered an automatic stay of the state court litigation. The bankruptcy court initially granted the mother’s motion for relief from the automatic stay and for permissive abstention, allowing the state court case to proceed. However, after delays in the state court proceedings, the daughter moved for relief from that order, and the bankruptcy court vacated its prior order and reimposed the automatic stay.After the bankruptcy court’s March 2021 order reimposing the stay, the mother filed adversary proceedings in bankruptcy court, which were consolidated and tried. The bankruptcy court ruled in favor of the daughter on all claims and entered final judgment in July 2022. The mother then appealed the March 2021 order to the United States District Court for the District of Arizona, arguing that the bankruptcy court erred in granting relief under Rule 60(b)(6) rather than Rule 60(b)(1). The district court concluded that the appeal was timely because it believed the March 2021 order was not immediately appealable, and it affirmed the bankruptcy court’s decision.The United States Court of Appeals for the Ninth Circuit held that, under Ritzen Group, Inc. v. Jackson Masonry, LLC, the bankruptcy court’s March 2021 order was a final, appealable order because it definitively resolved a discrete dispute within the bankruptcy case. Since the mother did not appeal within the required fourteen days, her appeal was untimely, and the district court lacked jurisdiction. The Ninth Circuit vacated the district court’s order and remanded with instructions to dismiss the appeal for lack of jurisdiction. View "FANTASIA V. DIODATO" on Justia Law

A dispute arose after a rare vehicle, originally owned by a Wisconsin man, was stolen and shipped to Europe. Richard Mueller inherited the vehicle and sold part of his interest to Joseph Ford. Years later, TL90108 LLC (“TL”) purchased the vehicle overseas and, upon attempting to register it in the United States, was notified that Ford and Mueller were the owners of record. Ford and Mueller sued TL in Wisconsin state court for a declaratory judgment and replevin. The trial court dismissed the case on statute-of-repose grounds, but the Wisconsin Court of Appeals reversed, and the Wisconsin Supreme Court granted review. While the appeal was pending, Ford filed for Chapter 11 bankruptcy but did not list TL as a creditor or provide it with formal notice of the bankruptcy proceedings or relevant deadlines.The United States Bankruptcy Court for the Southern District of Florida set a deadline under Federal Rule of Bankruptcy Procedure 4007(c) for creditors to file complaints objecting to the discharge of debts. TL did not file a complaint before this deadline, as it was unaware of the relevant facts supporting a fraud claim until later discovery in the Wisconsin litigation. After learning of Ford’s alleged fraud, TL moved to extend the deadline and file a complaint under 11 U.S.C. § 523(c), arguing for equitable tolling and asserting a due process violation due to inadequate notice. The bankruptcy court denied the motion, relying on the Eleventh Circuit’s precedent in In re Alton, which held that equitable tolling does not apply to Rule 4007(c) deadlines.On appeal, the United States Court of Appeals for the Eleventh Circuit affirmed the bankruptcy court’s decision. The court held that its prior decision in In re Alton remains binding and precludes equitable tolling of Rule 4007(c)’s deadline, even in light of subsequent Supreme Court decisions. The court also held that TL’s actual notice of the bankruptcy proceeding satisfied due process, and thus, the deadline could not be extended on that basis. View "TL90108 LLC v. Ford" on Justia Law

Absolute Pediatric Therapy, owned by Anthony Christopher, hired LaDonna Humphrey in May 2018 but terminated her four months later. In October 2018, Absolute and Christopher sued Humphrey in Arkansas state court, alleging various tort claims and accusing her of stealing information and making false accusations. Humphrey counterclaimed under the False Claims Act, alleging her termination was for reporting illegal activities. The litigation was contentious, and in August 2019, the state court found Humphrey in contempt and liable on all counts, awarding $3.57 million in damages to the plaintiffs.Following the state court's decision, Humphrey filed for Chapter 7 bankruptcy in September 2019. The Trustee of her bankruptcy estate proposed selling her claims, including her counterclaim and defensive appellate rights, to Absolute for $12,500. Humphrey objected to the sale of her defensive appellate rights. The bankruptcy court approved the sale, finding it reasonable and negotiated at arm's length. Humphrey did not obtain a stay of the sale but did secure a stay of the state court appeal.Humphrey appealed the bankruptcy court's order to the United States District Court for the Western District of Arkansas, which reversed the bankruptcy court's decision. The district court held that defensive appellate rights are not property of the estate under Arkansas law and found the sale not in the best interest of the estate. The district court also rejected the argument that the appeal was moot under 11 U.S.C. § 363(m) because Humphrey had obtained a stay of the state court proceedings.The United States Court of Appeals for the Eighth Circuit reviewed the case and concluded that the absence of a stay of the sale itself rendered the appeal statutorily moot under 11 U.S.C. § 363(m). The court vacated the district court's order and dismissed Humphrey's appeal from the bankruptcy court. View "Humphrey v. Christopher" on Justia Law

Rajesh Patel filed for bankruptcy in 2016, which triggered an automatic stay on all creditor actions against him. Despite this, Patel participated in an arbitration proceeding and lost. After a state court affirmed the arbitration award, Patel sought to stay the enforcement of the award in bankruptcy court, arguing that the arbitration violated the automatic stay. The bankruptcy court annulled the stay, finding that Patel had engaged in gamesmanship by participating in the arbitration without raising the stay and then attempting to use it to void the unfavorable outcome.The bankruptcy court's decision was appealed to the United States District Court for the Northern District of Georgia. The district court affirmed the bankruptcy court's annulment of the stay, rejecting Patel's argument that the annulment was contrary to the Supreme Court's decision in Roman Catholic Archdiocese of San Juan v. Acevedo Feliciano. The district court found that Acevedo, which dealt with the jurisdiction of a district court after a case was removed to federal court, did not affect the bankruptcy court's statutory authority to annul the automatic stay for cause.The United States Court of Appeals for the Eleventh Circuit reviewed the case and affirmed the lower courts' decisions. The Eleventh Circuit held that the bankruptcy court had the authority under 11 U.S.C. § 362(d)(1) to annul the automatic stay for cause. The court distinguished the case from Acevedo, noting that Acevedo addressed the removal jurisdiction of a district court and did not impact the bankruptcy court's power to annul a stay. The court also rejected Patel's procedural objections, finding that any error in the process was harmless as Patel had sufficient notice and opportunity to oppose the requested relief. View "Patel v. Patel" on Justia Law

In 2008, Andy Luu Tran granted Citizens Bank a mortgage on his Massachusetts home. In 2022, the Bank foreclosed on the property, and Herbert Jacobs was the high bidder at the auction. The Bank recorded an affidavit of sale but the foreclosure deed lacked the required signature page. Tran filed a Chapter 13 bankruptcy petition and an adversary complaint to avoid the transfer of his interest in the property due to the improperly recorded deed.The U.S. Bankruptcy Court for the District of Massachusetts granted summary judgment against Tran, holding that the only transfer at foreclosure was of Tran's equity of redemption, which was extinguished at the foreclosure auction. The court found that the properly recorded affidavit of sale provided constructive notice, making the transfer unavoidable. The U.S. District Court for the District of Massachusetts affirmed this decision.The United States Court of Appeals for the First Circuit reviewed the case. The court held that Tran's equity of redemption was extinguished at the foreclosure auction when the memorandum of sale was executed. The court also held that the properly recorded affidavit of sale provided constructive notice of the foreclosure, making the transfer of Tran's equity of redemption unavoidable under Massachusetts law. Consequently, the court affirmed the judgment of the bankruptcy court. View "Tran v. Citizens Bank, N.A." on Justia Law