Justia Civil Procedure Opinion Summaries

Robert Allen Stanford operated a billion-dollar Ponzi scheme through various entities in Texas and Antigua. In 2009, a federal district court appointed an equity receiver (the "Receiver") to manage the assets of the Stanford entities, handle claims from defrauded investors, and pursue claims against third parties. This appeal concerns a settlement with Societe Generale Private Banking (Suisse) S.A. ("SGPB"), which included a bar order preventing future Stanford-related claims against the Swiss bank. Two individuals appointed by an Antiguan court to liquidate one of the Stanford entities argued that the bar order should not apply to their claims against SGPB.The United States District Court for the Northern District of Texas approved the settlement and issued the bar order. The Joint Liquidators objected, arguing that the district court lacked personal jurisdiction over them. They filed their objection in a related Chapter 15 proceeding rather than the main SEC action, leading to a jurisdictional dispute. The district court held a hearing, during which it indicated that any participation by the Joint Liquidators' counsel would be considered a waiver of their jurisdictional objection. The court approved the settlement and entered the bar order, prompting the Joint Liquidators to appeal.The United States Court of Appeals for the Fifth Circuit reviewed the case. The court held that the district court did not have the necessary personal jurisdiction to bind the Joint Liquidators with its bar order. The court emphasized that injunctions require in personam jurisdiction, which the district court lacked over the Joint Liquidators. The court vacated the district court's scheduling order and the bar order as it applied to the Joint Liquidators, and remanded the case for further proceedings consistent with its opinion. View "Dickson v. Janvey" on Justia Law

Andrew Delaney, a lawyer acting pro se, filed a Chapter 7 bankruptcy petition in the Eastern District of New York, listing $1,110 in assets and $44,434 in liabilities. He later sought to dismiss his petition, arguing that he was not a debtor as defined by 11 U.S.C. § 109(a) and that venue was improper. The bankruptcy court denied his motion, stating that dismissal would not be in the interest of all parties, particularly his creditors, and that the trustee had made progress in achieving a modest settlement.Delaney appealed the bankruptcy court's denial to the United States District Court for the Eastern District of New York. The district court dismissed his appeal for lack of appellate jurisdiction, concluding that the denial of a motion to dismiss a bankruptcy petition is not a final order that can be appealed as of right under 28 U.S.C. § 158(a)(1). The district court also treated Delaney's notice of appeal as a motion for leave to appeal under 28 U.S.C. § 158(a)(3) and denied it.The United States Court of Appeals for the Second Circuit reviewed the case and determined that it too lacked jurisdiction over Delaney’s appeal. The court held that the bankruptcy court's order denying Delaney's motion to dismiss was nonfinal because it did not finally dispose of any discrete disputes within the larger bankruptcy case. Consequently, the district court's dismissal of the appeal left significant further proceedings in the bankruptcy court. As a result, the Second Circuit dismissed Delaney’s appeal for lack of appellate jurisdiction. View "Delaney v. Messer" on Justia Law

The case involves a court-appointed receiver tasked with distributing funds recovered from a Ponzi scheme orchestrated by Kevin Merrill, Jay Ledford, and Cameron Jezierski. The scheme defrauded over 230 investors of more than $345 million. The appellants, comprising institutional and individual investors, were among the victims. The institutional investors, known as the Dean Investors, frequently withdrew and reinvested their funds, while the individual investors, known as the Connaughton Investors, invested through a third-party fund and later received settlements from that fund.The United States District Court for the District of Maryland approved the receiver's distribution plan, which used the "Rising Tide" method to allocate funds. This method ensures that no investor recovers less than a certain percentage of their principal investment, but it deducts pre-receivership withdrawals from the recovery amount. The Dean Investors objected to this method, arguing that their reinvested withdrawals should not be counted against them. The Connaughton Investors objected to the plan's "Collateral Offset Provision," which counted third-party settlements as withdrawals, reducing their distribution from the receiver.The United States Court of Appeals for the Fourth Circuit reviewed the case and affirmed the district court's decision. The court found no abuse of discretion in the district court's approval of the distribution plan. It held that the Rising Tide method without the Maximum Balance approach was appropriate, as it ensured a fair distribution to more claimants. The court also upheld the Collateral Offset Provision, reasoning that it prevented the Connaughton Investors from receiving a disproportionately higher recovery compared to other victims. The court emphasized the need for equitable distribution and the administrative feasibility of the receiver's plan. View "CCWB Asset Investments, LLC v. Milligan" on Justia Law

The case involves Edgar Reyes-Colón, who was subjected to an involuntary Chapter 11 bankruptcy petition filed by Banco Popular de Puerto Rico in 2006. The bankruptcy court dismissed the petition in 2016, finding that Banco Popular failed to join the requisite number of creditors. Reyes-Colón subsequently filed a motion for attorney's fees and costs under 11 U.S.C. § 303(i)(1) and initiated an adversary proceeding alleging bad faith under 11 U.S.C. § 303(i)(2).The bankruptcy court denied Reyes-Colón's motion for attorney's fees, ruling it lacked subject-matter jurisdiction as the motion was filed after the case was closed. Reyes-Colón appealed to the District Court for the District of Puerto Rico, which affirmed the bankruptcy court's decision, adding that the motion was untimely under local rules requiring such motions to be filed within fourteen days after the issuance of the mandate. Reyes-Colón then appealed to the United States Court of Appeals for the First Circuit.The First Circuit held that the bankruptcy court had jurisdiction over post-dismissal § 303(i) motions, as such motions necessarily require post-dismissal jurisdiction. However, the court affirmed the denial of the attorney's fees motion on the grounds that it was untimely, as it was filed 365 days after the mandate issued, far exceeding the fourteen-day limit set by local rules.Regarding the adversary proceeding, Reyes-Colón filed a motion for withdrawal of reference to have the district court adjudicate the case. The district court denied the motion as untimely, conflating the timeliness of the motion for withdrawal with the timeliness of the § 303(i) motion. The First Circuit vacated this decision, clarifying that the timeliness of the motion for withdrawal should be measured from the filing of the adversary proceeding, not the dismissal of the involuntary petition. The case was remanded for further consideration of whether there is cause to withdraw the reference. View "Reyes-Colon v. Banco Popular de Puerto Rico" on Justia Law

Vista-Pro Automotive, LLC, a Nashville-based auto-parts corporation, entered bankruptcy proceedings in 2014. In February 2015, Vista-Pro initiated an adversary proceeding against Coney Island Auto Parts Unlimited, Inc., a New York corporation, to recover approximately $50,000 in unpaid invoices. Vista-Pro mailed a summons and complaint to Coney Island's Brooklyn address, but without addressing it to any specific individual. Coney Island did not respond, leading the bankruptcy court to enter a default judgment against it in May 2015. In April 2016, the trustee appointed for Vista-Pro sent a demand letter to Coney Island's CEO, Daniel Beyda, to satisfy the default judgment. Coney Island acknowledged receipt of this letter.Coney Island later moved to vacate the default judgment in October 2021, arguing that the judgment was void due to improper service, as the summons and complaint were not addressed to an individual as required by Bankruptcy Rule 7004(b)(3). The Southern District of New York bankruptcy court denied the motion, instructing Coney Island to seek relief from the Middle District of Tennessee court. In July 2022, Coney Island filed a motion under Federal Rule of Civil Procedure 60(b)(4) to vacate the default judgment, claiming it was void. Both the bankruptcy court and the district court denied the motion as untimely, noting Coney Island's unreasonable delay in filing the motion.The United States Court of Appeals for the Sixth Circuit reviewed the case and affirmed the lower courts' decisions. The court held that Rule 60(b)(4) motions, which seek to vacate void judgments, must be filed within a "reasonable time" as stipulated by Rule 60(c)(1). The court found that Coney Island's delay in filing the motion was unreasonable, given that it had actual notice of the default judgment by April 2016 but did not move to vacate it until July 2022. The court emphasized that its precedent requires adherence to the reasonable-time limitation for Rule 60(b)(4) motions, even if the judgment is alleged to be void. View "In re Vista-Pro Automotive, LLC" on Justia Law

Ricky Hughes, a railroad employee, was injured twice at work during his Chapter 13 bankruptcy proceedings. He did not disclose these potential personal injury lawsuits to the bankruptcy court. About 19 months after his bankruptcy closed, Hughes filed a personal injury lawsuit against his employer and other defendants. The district court granted summary judgment against Hughes based on standing and judicial estoppel, as he had not disclosed the potential lawsuit in his bankruptcy.The United States Court of Appeals for the Eighth Circuit found that Hughes had standing to bring the lawsuit. The court reasoned that the claims vested with Hughes, as per Section 1327 of the Bankruptcy Code, which provides that estate assets vest with the debtor. The court rejected the defendants' argument that Section 554(d), which provides that undisclosed estate assets that have not been expressly abandoned remain property of the estate, should control.The court also applied the doctrine of judicial estoppel, which prevents a party from asserting a position in a case that is clearly inconsistent with a position it took in a previous case. The court found that judicial estoppel applied to claims arising from the first incident but not the second. The court reasoned that when Hughes was injured for the second time, he had already made all of the payments required under his five-year plan, and there was no permissible statutory basis to modify the plan. Therefore, the bankruptcy court did not rely on the second nondisclosure, and there was no risk of inconsistent court determinations or threats to judicial integrity. The court affirmed in part, reversed in part, and remanded the case for further proceedings. View "Hughes v. Wisconsin Central, Ltd." on Justia Law

The case involves the Office of the United States Trustee and a group of Chapter 11 debtors, John Q. Hammons Fall 2006, LLC, et al. The issue at hand is the remedy for a constitutional violation identified in a previous case, Siegel v. Fitzgerald, where a statute was found to violate the Bankruptcy Clause’s uniformity requirement as it allowed different fees for Chapter 11 debtors depending on the district where their case was filed. The government argued for prospective parity as the appropriate remedy, while the debtors argued for a refund.The Bankruptcy Court found no constitutional violation and did not address the remedial question. The Tenth Circuit reversed this decision, finding that the fee statute permitting nonuniform fees violated the Bankruptcy Clause and ordered a refund of the debtors’ quarterly fees. The U.S. Trustee sought certiorari, which was granted by the Supreme Court.The Supreme Court reversed the Tenth Circuit's decision. The Court agreed with the government that the appropriate remedy for the constitutional violation is prospective parity. The Court held that requiring equal fees for otherwise identical Chapter 11 debtors going forward aligns with congressional intent, corrects the constitutional wrong, and complies with due process. The Court rejected the debtors' argument for a refund, stating that such a remedy would require undercutting congressional intent and transforming a program that Congress designed to be self-funding into a significant bill for taxpayers. The Court concluded that neither remedial principles nor due process requires such an outcome. View "United States Trustee v. John Q. Hammons Fall 2006, LLC" on Justia Law

Edward Johnson filed for bankruptcy relief under Chapter 13 and made payments to the bankruptcy trustee, Marilyn O. Marshall, under his proposed repayment plan. However, the bankruptcy court never confirmed his plan due to his inability to address an outstanding loan and his domestic support obligations, and ultimately dismissed his case for unreasonable delay. Before returning Johnson's undisbursed payments, the trustee deducted a percentage fee as compensation. Johnson filed a motion requesting that the trustee disgorge her fee, which the bankruptcy court granted, reasoning that the trustee did not have statutory authority to deduct her fee because Johnson's plan was not confirmed. The trustee appealed this decision.The United States Court of Appeals for the Seventh Circuit reviewed the case de novo. The court analyzed the statutory text and agreed with the Ninth and Tenth Circuits that the United States Bankruptcy Code requires the Chapter 13 trustee to return her fee when the debtor's plan is not confirmed. The court found that neither of the two exceptions in § 1326(a)(2) of the Bankruptcy Code applied to the trustee's fee. The court also rejected the trustee's argument that § 1326(b) authorized her to keep her fee when making pre-confirmation adequate protection payments to creditors, as this provision only addresses payments made after a plan has been confirmed. The court further found that the trustee had no right to keep her fee under 28 U.S.C. § 586(e)(2), which only addresses the source of funds that may be accessed to pay standing trustee fees.The court concluded that the Chapter 13 trustee must return her fee when the debtor's plan is not confirmed, affirming the decision of the bankruptcy court. View "Marshall v. Johnson" on Justia Law

A group of retirement and pension funds filed a consolidated putative securities class action against PG&E Corporation and Pacific Gas & Electric Co. (collectively, PG&E) and some of its current and former officers, directors, and bond underwriters (collectively, Individual Defendants). The plaintiffs alleged that all the defendants made false or misleading statements related to PG&E’s wildfire-safety policies and regulatory compliance. Shortly after the plaintiffs filed the operative complaint, PG&E filed for Chapter 11 bankruptcy, automatically staying this action as against PG&E but not the Individual Defendants. The district court then sua sponte stayed these proceedings as against the Individual Defendants, pending completion of PG&E’s bankruptcy case.The district court for the Northern District of California issued a stay of the securities fraud action against the Individual Defendants, pending the completion of PG&E's Chapter 11 bankruptcy case. The court reasoned that the stay would promote judicial efficiency and economy, as well as avoid the potential for inconsistent judgments. The plaintiffs appealed this decision, arguing that the district court abused its discretion by entering the stay.The United States Court of Appeals for the Ninth Circuit held that it had jurisdiction over this interlocutory appeal under the Moses H. Cone doctrine because the stay was both indefinite and likely to be lengthy. The appellate court found that the district court abused its discretion in ordering the stay as to the Individual Defendants. The court held that when deciding to issue a docket management stay, the district court must weigh three non-exclusive factors: the possible damage that may result from the granting of a stay, the hardship or inequity that a party may suffer in being required to go forward, and judicial efficiency. The appellate court vacated the stay and remanded for the district court to weigh all the relevant interests in determining whether a stay was appropriate. View "PUBLIC EMPLOYEES RETIREMENT ASS'N OF NEW MEXICO V. EARLEY" on Justia Law

The case involves a dispute arising from the financial fallout of Winter Storm Uri, which severely impacted Texas's electrical grid in 2021. The Electric Reliability Council of Texas (ERCOT), responsible for managing the grid, took measures including manipulating energy prices to incentivize production. This resulted in Entrust Energy, Inc., receiving an electricity bill from ERCOT of nearly $300 million, leading to Entrust's insolvency and subsequent bankruptcy filing. ERCOT filed a claim seeking payment of the invoice, which was challenged by Anna Phillips, the trustee of the Entrust Liquidating Trust. The trustee argued that ERCOT's price manipulation violated Texas law, that ERCOT was grossly negligent in its handling of the grid during the storm, and that ERCOT's transitioning of Entrust’s customers to another utility was an uncompensated taking in violation of the Fifth Amendment.The bankruptcy court declined to abstain from the case and denied ERCOT’s motion to dismiss all claims except for the takings claim. ERCOT appealed to the United States Court of Appeals for the Fifth Circuit, arguing that the bankruptcy court should have abstained under the Burford doctrine, which allows federal courts to abstain from complex state law issues to avoid disrupting state policies.The Fifth Circuit found that the bankruptcy court erred in refusing to abstain under the Burford doctrine. The court reversed the bankruptcy court's denial of ERCOT’s motion to abstain and its denial of ERCOT’s motion to dismiss the trustee’s complaint. The court also vacated the bankruptcy court’s order dismissing the takings claim with prejudice. The court remanded the case with instructions to dismiss certain counts and stay others pending the resolution of related state proceedings. View "Electric Reliability Council of Texas v. Phillips" on Justia Law