Justia Civil Procedure Opinion Summaries

Rumsey Land Company, LLC (“Rumsey”) owned a property subject to a first deed of trust held by Pueblo Bank & Trust Company, LLC (“PBT”). In 2010, Rumsey filed for bankruptcy. Resource Land Holdings, LLC (“RLH”) offered to purchase the property, but the bankruptcy court did not approve the sale. Shortly thereafter, PBT purchased the property at a bankruptcy auction. PBT then transferred the land to RLH. In 2015, Rumsey discovered that during the bankruptcy proceedings, RLH had entered a loan purchase agreement to purchase PBT’s interest in the property. The agreement eventually led to litigation in state court between RLH and PBT, which culminated with a settlement agreement allowing RLH to purchase Rumsey’s property from PBT for $4.75 million. Rumsey believed the loan agreement, lawsuit, and settlement influenced the price at its bankruptcy auction. It initiated this adversarial proceeding in bankruptcy court against RLH and PBT (collectively “Defendants”), alleging: (1) fraudulent concealment in violation of state law; and (2) collusive bidding activities in violation of 11 U.S.C. 363(n). The case was transferred to federal district court, which granted summary judgment to defendants on both claims. The Tenth Circuit affirmed finding: (1) Rumsey forfeited its arguments about PBT’s duty to disclose its transaction with RLH and did not argue plain error on appeal; and (2) in the section 363(n) collusive bidding claim, it was time-barred by a one-year limitations period in Federal Rule of Civil Procedure 60(c)(1), and Rumsey failed to demonstrate a genuine dispute of material face as to whether Defendants intended to control the sale price at the bankruptcy auction. View "Rumsey Land Company v. Resource Land Holdings" on Justia Law

Appellant, Joseph Petrick, contracted with a homeowner, Donna Sabia, to perform remodeling work. Sabia paid Appellant a deposit of $1,750.00 plus $300.00 to cover the cost of city permits. Appellant began some of the contracted work at which time Sabia paid an additional $1,750.00 to Appellant. That same day, Appellant and Sabia’s son, Carmen Fazio, who also resided in the home, entered into a second contract for Appellant to do some painting in the home. As consideration, Fazio purchased a $600.00 saw for Appellant. Appellant and Fazio entered into a third contract to install siding on the exterior of the home. Fazio paid Appellant $2,300.00 to purchase materials. Appellant did not finish the work; Appellant eventually advised Sabia and Fazio that he could not complete the jobs but would refund $4,950.00 within a week. Appellant never refunded any money or the saw, nor did he ever purchase the siding materials or obtain the permits from the city. Appellant filed for Chapter 7 bankruptcy. In his petition, Appellant listed Sabia and Fazio as creditors. The bankruptcy court issued a discharge order in March 2016. In October 2015, a City of Scranton Police Detective filed a criminal complaint charging Appellant with theft by deception and deceptive business practices. After a bench trial, the court found Appellant guilty of theft by deception and not guilty of deceptive business practices. The court sentenced Appellant to a term of incarceration of three to eighteen months. Appellant was also ordered to pay $6,700.00 in restitution. Appellant filed a motion for reconsideration of his sentence, which the trial court denied. On appeal, the Superior Court affirmed the trial court’s judgment of sentence. On appeal to the Pennsylvania Supreme Court, Appellant argued that the portion of his sentencing order requiring him to pay restitution was illegal because the debt was discharged in bankruptcy. Appellant argued that the Bankruptcy Code specified that the filing of a petition operated as an automatic stay of any action to recover a debt that preceded the filing. The Supreme Court found the mandatory restitution order served criminal justice goals, and were distinct from civil debt liability with respect to discharge in bankruptcy. “This distinction is unaffected by the temporal relationship between the proceedings in the bankruptcy court and the criminal prosecution. Additionally, it is unaffected by a creditor’s participation in the bankruptcy proceedings.” The Court determined there was no indication in this case the restitution award was improperly sought by the prosecutor or awarded by the sentencing court. Accordingly, it affirmed the Superior Court. View "Pennsylvania v. Petrick" on Justia Law

The Supreme Court affirmed the judgment of the trial court granting motions to dismiss Plaintiff's state law claims for vexatious litigation and unfair and deceptive business acts or practices during Plaintiff's underlying bankruptcy proceeding, holding that the trial court properly dismissed the claims for lack of subject matter jurisdiction because the claims were preempted by federal bankruptcy law.Plaintiff, who had previously filed a bankruptcy petition in the United States Bankruptcy Court, brought this action asserting claims of vexatious litigation and violation of the Connecticut Unfair Trade Practices Act, Conn. Gen. Stat. 42-110a et seq. The trial court dismissed the claims. The Supreme Court affirmed, holding that Congress implicitly preempted state law actions by occupying the field of bankruptcy law and that, in the field of law, the federal interest is so dominant that federal law is assumed to preclude enforcement of state laws on the subject. View "Metcalf v. Fitzgerald" on Justia Law

After Double Eagle filed for Chapter 11 bankruptcy, it filed suit against MarkWest and Ohio Gathering on a contract claim in Louisiana federal court. Double Eagle then assigned its claim against defendants to one of its creditors.The Fifth Circuit vacated the district court's judgment and held that the district court erred by failing to apply the time-of-filing rule to 28 U.S.C. 1334(b) in this lawsuit that was related to a bankruptcy when filed, but then the bankruptcy connection was later dissolved. The court explained that this longstanding rule promoted efficiency and thus it would be wasteful if post-filing changes in the facts determining jurisdiction required dismissal of a case to which the parties and court had already devoted resources. In this case, the related-to-bankruptcy jurisdiction that existed at the outset of this case never went away. The court also held that failing to focus on the time of filing also infected the district court’s personal jurisdiction analysis, and the section 1334(b) jurisdiction that existed when this case was filed thus means there is both subject matter and personal jurisdiction. The court rejected defendants' remaining claims and remanded for further proceedings. View "Double Eagle Energy Services, LLC v. MarkWest Utica EMG, LLC" on Justia Law

Sterling owed Southlake Health Club outstanding fees ($250). In 2001, Southlake's counsel, Austgen, instituted a state court collection action. A federal bankruptcy court discharged Sterling’s debt to Southlake in 2010. Although Sterling notified Southlake of the discharge, no one notified Austgen or the Indiana court. Sterling failed to appear in the state-court collection proceedings; that court issued a warrant for her arrest. A year later, Sterling was arrested and jailed for two days. Southlake and Austgen dropped pursuit of the debt. Sterling instituted adversary proceedings in bankruptcy court, seeking to have Southlake and Austgen held in contempt for continuing to collect a debt that had been discharged, 11 U.S.C. 524. The bankruptcy court and the district court ruled against Sterling. The Seventh Circuit affirmed in part; Austgen’s lack of knowledge of the discharge prevents it from being held in contempt. Southlake, however, must be held liable for the actions taken by counsel on its behalf. Southlake, a sophisticated party, had knowledge of the discharge yet turned a blind eye to the progress of Sterling’s case. Holding otherwise “would create a loophole in the law through which creditors could avoid liability simply by remaining ignorant of their agents’ actions or by failing to notify their agents of debtors’ bankruptcy proceedings.” View "In re: Sterling" on Justia Law

Two federal district courts certified questions of law to the Alaska Supreme Court involving the state’s “mineral dump lien” statute. In 1910, the United States Congress passed Alaska’s first mineral dump lien statute, granting laborers a lien against a “dump or mass” of hard-rock minerals for their work creating the dump. The mineral dump lien statute remained substantively unchanged since, and rarely have issues involving the statute arisen. The Supreme Court accepted certified questions from both the United States District Court and the United States Bankruptcy Court regarding the scope of the mineral dump lien statute as applied to natural gas development. Cook Inlet Energy, LLC operated oil and gas wells in southcentral Alaska. In November 2014, Cook Inlet contracted with All American Oilfield, LLC to “drill, complete, engineer and/or explore three wells” on Cook Inlet’s oil and gas leaseholds. All American began work soon thereafter, including drilling rig operations, digging holes, casing, and completing the gas wells. When All American concluded its work the following summer, Cook Inlet was unable to pay. In June 2015 All American recorded liens against Cook Inlet, including a mine lien under AS 34.35.125 and a mineral dump lien under AS 34.35.140. In October, after its creditors filed an involuntary petition for relief, Cook Inlet consented to Chapter 11 bankruptcy proceedings. In January 2016 All American filed an adversary proceeding in the bankruptcy court “to determine the validity and priority of its secured claims.” The bankruptcy court found that All American has a valid mine lien against the three wells. But the court denied All American’s asserted mineral dump lien against unextracted gas remaining in natural reservoirs. The court also concluded that All American’s mine lien was subordinate to Cook Inlet’s secured creditors’ prior liens, which would have consumed all of Cook Inlet’s assets and leave All American with nothing. All American appealed to the federal district court, which, in turn, certified questions regarding the Alaska mineral dump lien statute. The Alaska Supreme Court concluded the statutory definition of “dump or mass” reflected that a mineral dump lien could extend only to gas extracted from its natural reservoir, that the lien may cover produced gas contained in a pipeline if certain conditions are met, and that to obtain a dump lien laborers must demonstrate that their work aided, broadly, in gas production. View "In re: Cook Inlet Energy, LLC, Gebhardt, v. Inman" on Justia Law

A 401k plan that a debtor, like the one in this case, creates and controls with the avowed purpose of protecting his assets from creditors is not a plan principally designed and used for retirement purposes, thereby rendering the funds in that plan fully exempt from levy. The Court of Appeal held that debtor's transferred funds to that 401(k) plan did not negate the partially exempt status those funds previously held while in the individual retirement accounts. Accordingly, the court reversed the trial court's ruling declaring that the funds were fully exempt from levy and remanded for the trial court to assess the extent of the partial exemption. View "O'Brien v. AMBS Diagnostics, LLC" on Justia Law

Novak was the sole shareholder of CMCG. By 2008, CMCG’s solvency was questionable. In 2012 Novak committed suicide, leaving CMCG to Comess, who filed a voluntary Chapter 7 petition weeks later. For four years before the bankruptcy filing, Comess and Hathaway, another friend of Novak’s, had received significant payments from CMCG, though they were not employees. Hathaway received $45,400.81; she runs a small yoga studio and her email correspondence indicated that the payments were personal gifts.The trustee brought an avoidance action and sought discovery sanctions against Hathaway. The bankruptcy judge determined that the women had received money from CMCG while it was insolvent, that Novak typically failed to record the transactions, that CMCG did not receive reasonably equivalent value in exchange, and that the transfers were voidable under 11 U.S.C. 548 and the Illinois Uniform Fraudulent Transfer Act (IUFTA), which applied under section 544(b)(1) because CMCG had unsecured creditors at the time of the conveyances, the IRS and a credit-card company. The judge declined to impose sanctions for Hathaway’s failure to respond to interrogatories and produce tax returns but imposed sanctions ($11,187.25) for Hathaway’s delay and failure to comply with court orders concerning emails causing the Trustee to expend additional time and resources.The district judge and Seventh Circuit affirmed, rejecting arguments concerning trial exhibits for evaluating CMCG's financial health; challenging the finding that CMCG did not receive reasonably equivalent value; and that CMCG did not have IUFTA “creditors.” The court noted Hathaway's violations of appellate procedure. View "Fox v. Hathaway" on Justia Law

Debtors sought sanctions against Kreisler, alleging that the law firm violated the automatic stay arising from their bankruptcy petition by filing a lien against Lorraine’s home. The couple had voluntarily dismissed a prior bankruptcy petition just a few months earlier, so the bankruptcy judge denied their motion based on 11 U.S.C. 362(c)(3), which lifts the automatic stay after 30 days in the case of a successive petition. Bankruptcy courts are divided over the proper interpretation of section 362(c)(3), so the judge certified her order for direct appeal but the Debtors never filed a petition for permission to appeal as required by Rule 8006(g) of the Federal Rules of Bankruptcy Procedure. The Seventh Circuit dismissed the appeal. Rule 8006(g) is a mandatory claim-processing rule, and if properly invoked, it must be enforced. Because Kreisler properly objected, the appeal must be dismissed. View "Wade v. Kreisler Law, P.C." on Justia Law

Taggart owned an interest in an Oregon company. That company and its other owners (respondents) sued, claiming that Taggart had breached the company’s operating agreement. Before trial, Taggart filed for Chapter 7 bankruptcy. The Bankruptcy Court issued a discharge order that released Taggart from liability for most pre-bankruptcy debts. The Oregon state court subsequently entered judgment against Taggart in the pre-bankruptcy suit and awarded attorney’s fees to respondents. The Bankruptcy Court found respondents in civil contempt for collecting attorney’s fees in violation of the discharge order. The Bankruptcy Appellate Panel and the Ninth Circuit applied a subjective standard to hold that a “creditor’s good faith belief” that the discharge order does not apply to the claim precludes a finding of contempt, even if that belief was unreasonable. The Supreme Court vacated. Neither a standard akin to strict liability nor a purely subjective standard is appropriate. A court may hold a creditor in civil contempt for violating a discharge order if there is no fair ground of doubt as to whether the order barred the creditor’s conduct. Civil contempt principles apply to the bankruptcy statutes, which specify that a discharge order “operates as an injunction,” 11 U.S.C. 524(a)(2), and that a court may issue any “order” or “judgment” that is “necessary or appropriate” to “carry out” other bankruptcy provisions. A party’s subjective belief that she was complying with an order ordinarily will not insulate her from civil contempt if that belief was objectively unreasonable. The Court remanded, noting that subjective intent is not always irrelevant. Civil contempt sanctions may be warranted when a party acts in bad faith, and a party’s good faith may help to determine an appropriate sanction. View "Taggart v. Lorenzen" on Justia Law