Justia Civil Procedure Opinion Summaries

Plaintiffs, unsuccessful bidders in a bankruptcy proceeding, appealed the district court's dismissal of their suit alleging claims for breach of fiduciary duty, tortious interference, and common law fraud against the law firm K&L Gates, LLP and two of its former partners. Plaintiffs alleged that defendants used their prior representation of plaintiffs to undermine plaintiffs' attempt to acquire assets in a bankruptcy sale.  The district court granted defendants' motion to dismiss based on res judicata. The court agreed with plaintiffs that they could not have brought their claims during the bankruptcy proceedings, and that this present action would not disturb the orders of the bankruptcy court. The court explained that the circumstances in this case did not demand that plaintiffs raise their claim in the bankruptcy proceeding, and noted that the relevant issues were not litigated through an adversary proceeding or otherwise. Accordingly, the court reversed and vacated, remanding for further proceedings. View "Brown Media Corp. v. K&L Gates, LLP" on Justia Law

Plaintiffs-appellants David and Lee Ann Lankford unwittingly invested in a Ponzi scheme operated by Vaughan Company Realtors (VCR), wherein investors paid money to VCR in return for interest-bearing promissory notes. After the Ponzi scheme collapsed, VCR filed for bankruptcy under Chapter 11 of the Bankruptcy Code. Unlike many others, the Lankfords actually profited from their investment. So the court-appointed trustee of VCR’s bankruptcy estate, Judith Wagner, brought an adversary proceeding against them in the United States Bankruptcy Court for the District of New Mexico. Through this and related “clawback” proceedings, the trustee sought to avoid, or undo, pre-bankruptcy fraudulent transfers and thus recoup fictitious profits from investors with net gains for the benefit of all of VCR’s creditors. The Lankfords filed this lawsuit against the bankruptcy trustee and her counsel without first applying for and receiving permission under "Barton v. Barbour," (104 U.S. 126 (1881)), and its progeny (the “Barton doctrine”). The district court concluded that "Barton" barred the suit and dismissed for lack of subject matter jurisdiction. Finding no reversible error, the Tenth Circuit Court of Appeals affirmed. View "Lankford v. Wagner" on Justia Law

Mains executed a mortgage on his home with WAMU in 2006 and made timely payments for about two years. WAMU failed in 2008; the FDIC became its receiver. Chase purchased Mains’s mortgage. Mains fell behind on his payments. He requested loan modifications from Chase three times and discontinued making payments in March 2009. Chase sent Mains a default and acceleration notice in June. In April 2010, Citibank (Chase’s successor) filed for foreclosure in Clark County, Indiana. That court granted Citibank summary judgment in 2013. Mains unsuccessfully appealed, contending that Citibank had committed fraud because it was not the real party in interest but instructed its employees fraudulently to sign documents. In 2015, Mains filed a “rambling, 90‐page” federal court complaint, alleging that he had discovered new evidence that he could not have presented to the state court—undisclosed consent judgments, parties in interest, and evidence of robo‐signing. He claimed to have rescinded his mortgage. He alleged state law claims and violations of: the Real Estate Settlement Procedures Act, 12 U.S.C. 2601; the Truth in Lending Act, 15 U.S.C. 1631; the Fair Debt Collection Practices Act, 15 U.S.C. 1692; and the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. 1961. The district court found that a decision for Mains would effectively nullify the state‐court judgment and dismissed for lack of subject matter jurisdiction under the Rooker‐Feldman doctrine. The Seventh Circuit agreed, but modified so that the dismissal was without prejudice. View "Mains v. Citibank, N.A." on Justia Law

Netzer, a debtor in bankruptcy, asked the court to discharge a $9,200 debt to Wisconsin’s Office of Lawyer Regulation, imposed as costs in a disciplinary proceeding. The bankruptcy court concluded that the debt is a “fine, penalty, or forfeiture” under 11 U.S.C. 2 and not dischargeable. Netzer had 14 days to appeal, but 41 days later he asked the district judge to excuse his tardiness, contending that until a few days earlier he had not known of the bankruptcy court’s decision. The district court dismissed the appeal as untimely, reasoning that the 14-day period is jurisdictional and that there cannot be equitable exceptions to jurisdictional rules. The Seventh Circuit affirmed, stating that whether or not a given rule is “jurisdictional” it is still a rule and must be enforced. Courts lack an “equitable” power to contradict the bankruptcy statutes and rules. Litigants need only check the court’s electronic docket once a month in order to protect their interests. View "Netzer v. Office of Lawyer Regulation" on Justia Law

Cox, the trustee in the Central Illinois Energy Cooperative bankruptcy, appealed a bankruptcy court ruling after it was affirmed by the district court. In the meantime, the parties mediated a settlement and the bankruptcy court stated that it would approve that settlement, subject to the disposition of any objection filed by a creditor or Cox. Cox then moved for dismissal of the appeal. The Seventh Circuit denied the motion. When, as in this case, an appeal is from the district court’s affirmance of a bankruptcy court order, a remand to the bankruptcy court for approval of settlement requires coordination between three courts. Rules 12.1 and 57 both authorize relief only after the district court has said that it is inclined to grant a motion barred by the pending appeal. Although the parties obtained an indicative ruling from the bankruptcy court, there is no record that they sought or obtained an indicative ruling from the district court. The proper procedure is to obtain an indicative ruling from both courts that will need to act. View "Cox v. Nostaw, Inc." on Justia Law

The United States District Court for the Western District of Washington certified two questions to the Washington Supreme Court about the application of RCW 49.52.050, the wage rebate act (WRA), in circumstances of chapter 7 bankruptcy: (1) whether an officer, vice principal, or agent of an employer liable for a deprivation of wages under RCW 49.52.050 when his or her employment with the employer (and his or her ability to control the payment decision) was terminated before the wages became due and owing; and (2) whether an officer, vice principal, or agent's participation in the decision to file the Chapter 7 bankruptcy petition that effectively terminated his or her employment and ability to control payment decisions alter the analysis. The Washington Supreme Court answered both questions in the affirmative: (1) officers, vice principals, or agents may be held personally liable under the WRA, even if the payday date for those wages came after the employer filed for chapter 7 bankruptcy; and (2) an officer's participation in the decision to file the chapter 7 bankruptcy petition tends to show a willful withholding of wages-the second element required by the WRA. View "Allen v. Dameron" on Justia Law

In 2010, Trentadue’s ex‐wife sought to modify placement and child support, related to one of their six children. A three-year legal dispute over custody, placement, health insurance, and child support followed, involving substantial motion practice, requests for contempt findings, engagement of experts, and evidentiary hearings. The Wisconsin state court overseeing the litigation determined that Trentadue’s conduct resulted in excessive trial time to resolve the case and awarded Trentadue’s ex‐wife $25,000 in attorney’s fees for “overtrial,” to be paid to attorney Gay. Trentadue never paid Gay. Instead, he filed a chapter 13 bankruptcy petition. Gay countered by filing a $25,000 claim for the unpaid overtrial award and classified it as a nondischargeable, domestic support obligation entitled to priority. Trentadue objected that the obligation was imposed as a punishment, not a domestic support obligation. The bankruptcy court overruled his objection. The district court and Seventh Circuit affirmed, noting the restorative nature of the award. which “furthers two objectives, providing compensation to the overtrial victim for fees unnecessarily incurred and deterring unnecessary use of judicial resources.” The court also noted that Trentadue’s finances are “not so bleak,” including monthly income of six to seven thousand dollars. View "Trentadue v. Gay" on Justia Law

The creditors of a Chapter 7 bankruptcy debtor filed an adversary complaint, arguing that assets held by the debtor’s wife and business (defendants) rightfully belonged to the estate under 11 U.S.C. 542(a). The bankruptcy court recommended, and the district court granted, judgment on the pleadings, saying that the defendants were alter egos of the debtor and the corporate veils should be pierced and the assets “brought into the Debtor’s bankruptcy estate.” Three weeks later, the defendants, having failed to timely appeal the bankruptcy court’s turnover order, appealed the district court’s order remanding the case to the bankruptcy court to implement the district court’s ruling requiring that the defendants’ assets be turned over to the debtor’s estate. The defendants cited 28 U.S.C. 157(c)(1), arguing that the turnover claim was not a “core proceeding,” so only the district court could enter a final order resolving the claim. The Seventh Circuit dismissed their appeal. Core proceedings involve bankruptcy law; non‐core proceedings are proceedings that relate to a bankruptcy but arise under some other body of law. The turnover of the defendants’ assets to the debtor’s estate and their liquidation for the benefit of the defendants is a core proceeding; the limitations on the bankruptcy court’s authority are irrelevant. View "Gemini Int'l, Inc. v. BCL-Burr Ridge, LLC" on Justia Law

In these consolidated appeals, debtor filed numerous, frivolous challenges to the settlement and the district court entered a pre-filing injunction barring him from filing any new civil actions in the district court without court permission. At issue is whether the injunction encompasses appeals to the district court from bankruptcy court. The court concluded that, as written, the injunction does not cover those appeals with sufficient clarity, and that the district court thus erred in striking these three appeals for violating the pre-filing injunction. Nonetheless, the court affirmed the district court's dismissal of two of the three appeals (adversary proceeding numbers 14-10024 and 14-10043) for failure to state a claim, and remanded for the district court to resolve the third appeal (number 14-10014). View "US ex rel. Yelverton v. Federal Ins. Co." on Justia Law

This appeal as of right arose from defendants' alleged breach of a settlement agreement executed by defendants and one of the plaintiffs in this action, Globe Motor Company (Globe), to resolve prior litigation between the parties. Shortly after defendants sent two checks totaling $75,000 to plaintiffs to settle the earlier action, a Trustee appointed to represent the estate of an insolvent Minnesota entity brought an adversary proceeding against plaintiffs. The Trustee demanded that plaintiffs disgorge the settlement funds, on the ground that those funds had belonged to the bankrupt entity, not to defendants, and that the transactions were therefore voidable under provisions of the United States Bankruptcy Code, 11 U.S.C.A. 544 and 548. Plaintiffs paid $22,500 to resolve the bankruptcy Trustee's claim. Plaintiffs filed this action against defendants, seeking to recover the money that they paid to settle the bankruptcy proceeding as well as attorneys' fees and costs. The motion judge entered summary judgment for plaintiffs on their breach of contract claim. An Appellate Division panel affirmed that determination, with one judge dissenting. After its review, the New Jersey Supreme Court held that the motion judge improperly granted summary judgment in plaintiffs' favor. The Court concluded that the record did not establish plaintiffs' right to judgment as a matter of law. The case was remanded for further proceedings. View "GlobeMotor Company v. Igdalev" on Justia Law