Justia Civil Procedure Opinion Summaries

Dells Hospitality borrowed $12,600,000 to purchase the Lake Delton Hilton Garden Inn. Dells’ owner and president, Sobsczak-Slomczewski, agreed to indemnify the lender against all losses.. Dells defaulted. The lender filed a foreclosure action. Sobsczak‐Slomczewski directed the hotel’s independent management company to transfer $677,000 to a corporate entity he owned. After a foreclosure sale, the lender amended the complaint to add claims for theft and conversion. The district court found that Sobsczak-Slomczewski had converted and embezzled the $677,000. Sobsczak‐Slomczewski then petitioned for bankruptcy. The lender filed an adversary proceeding seeking to have the $677,000 debt found non‐dischargeable. The bankruptcy court granted the lender summary judgment, citing 11 U.S.C. 523(a)(4) and (a)(6). The district court dismissed Sobsczak‐Slomczewski’s appeal, filed 15 days after the bankruptcy court order, holding that Rule 8002(a)’s 14‐day deadline was jurisdictional. Rejecting Sobsczak‐Slomczewski’s assertion that he did not receive notice until the day of the deadline, the court explained that there are no equitable exceptions to a mandatory jurisdictional rule. The Seventh Circuit affirmed after considering recent Supreme Court pronouncements The court joined other circuits in holding that the 14‐day deadline to file a notice of appeal is rooted in the jurisdiction statute, 28 U.S.C. 158, which expressly includes a timeliness condition. Sobsczak‐Slomczewski did not timely seek additional time from the bankruptcy court. View "In re: Sobczak-Slomczewski" on Justia Law

Morrison Informatics, Inc. (the “Company”) filed a petition for Chapter 7 Bankruptcy relief in September 2009. In May 2011, the Company and two shareholders, who also were officers of the corporation, commenced a civil action in the court of common pleas against Members 1st Federal Credit Union, Mark Zampelli, and Scott Douglass. In the ensuing complaint, the Company and the Shareholders asserted that, beginning sometime after January 2005 and continuing into 2009, the Company’s finance manager, Zampelli, had colluded with a Credit Union relationships officer, Douglass, to embezzle Company funds. The complaint advanced claims against the Credit Union, Zampelli, and Douglass variously sounding in fraud, conversion, civil conspiracy, and negligence. The question this case presented for the Supreme Court's review concerned whether a federal bankruptcy trustee could be substituted as a plaintiff in a civil action previously commenced by the debtor in bankruptcy in a Pennsylvania state court, although the statutory limitations period expired prior to the attempted substitution. "Although we recognize that the interests of a debtor and a trustee may diverge in some respects, we find it most important that trustees’ interests are derivative, and accordingly, they generally cannot assert any greater rights as against defendants than debtors could have in the first instance." The Supreme Court departed from the Superior Court’s focus on the continued “existence” of the Company after the initiation of insolvency proceedings, and the Court rejected a strict rule foreclosing a relation-back approach to substitution of a bankruptcy trustee for a debtor. Instead, the Court held that relation back in favor of a federal bankruptcy trustee was appropriate, at least where the trustee has acted in a reasonably diligent fashion to secure his or her substitution, and there is no demonstrable prejudice to defendants. View "Morrison Info. v. Members 1st FCU" on Justia Law

Plaintiffs filed a health care liability suit against defendants in federal court under the court’s bankruptcy jurisdiction. Section 74.351 of the Texas Civil Practice and Remedies Code requires plaintiffs in health care liability cases to serve an expert report within 120 days after the filing of a defendant’s original answer. Following limited discovery, defendants moved to dismiss because plaintiffs had failed to serve an expert report in accordance with section 74.351’s requirements. The district court ultimately dismissed the case with prejudice. The court held that section 74.351 answers the same question as Federal Rules of Civil Procedure 26 and 37, and these Rules represent a valid exercise of Congress’ rulemaking authority. Accordingly, a federal court entertaining state law claims may not apply section 74.351. The court reversed and remanded for further proceedings. View "Passmore v. Baylor Health Care" on Justia Law

In 2005, Crossroads Investors, L.P. borrowed $9 million subject to a promissory note. The note was secured by a deed of trust recorded against an apartment building Crossroads owned in Woodland. Defendant Federal National Mortgage Association (Fannie Mae) was the beneficiary of the deed. The note imposed on Crossroads a prepayment premium should Crossroads pay the unpaid principal before the note’s maturity date or should Crossroads default and Fannie Mae accelerate the loan. Crossroads defaulted on the note in late 2010. Fannie Mae served Crossroads with a notice of default, and accelerated the loan. In February 2011, Fannie Mae initiated nonjudicial foreclosure proceedings. In April 2011, Crossroads entered into a contract to sell the property to Ezralow Company, LLC (Ezralow) for $10.95 million. A few weeks later, Crossroads and Ezralow proposed to Fannie Mae that Ezralow would assume Crossroads’ obligations and pay off the loan on Fannie Mae’s agreeing to waive the prepayment premium. Fannie Mae refused to waive the prepayment premium and rejected the proposal. By June, Fannie Mae recorded a notice of trustee’s sale against the property, stating the total unpaid amount of Crossroad’s obligations was estimated at more than $10.5 million. The day before the property was scheduled to be sold, Crossroads filed for Chapter 11 bankruptcy protection to protect its interest in the property. In its petition, Crossroads asserted it owed Fannie Mae $8.7 million. Fannie Mae sold the property after it was granted relief from the bankruptcy stay. Crossroads then sued Fannie Mae for wrongful foreclosure, breach of contract, fraud, and other tort and contract actions. Fannie Mae filed an anti-SLAPP motion, contending the actions on which Crossroads based its complaint were Fannie Mae’s statements in its papers filed in the bankruptcy proceeding. The trial court disagreed and denied the motion. This appeal challenged the trial court’s denial of Fannie Mae's special motion to strike the complaint under the anti-SLAPP statute. After review, the Court of Appeal affirmed the trial court’s order. "The principal thrust of Crossroads’ action was to recover for violations of state nonjudicial foreclosure law, not for any exercise of speech or petition rights by Fannie Mae. Even if protected activity was not merely incidental to the unprotected activity, Crossroads established a prima facie case showing it was likely to succeed on its causes of action." View "Crossroads Investors v. Federal National Mortgage Assn." on Justia Law

In entertaining defendants' Fed. R. Civ. P. 50(b) motion for judgment as a matter of law after a jury trial, the district court applied the filing deadline found in the Federal Civil Rules and thus found the motion timely. The court disagreed and held that when trying a case arising under title 11 of the United States Code, a district court (just like a bankruptcy court) must apply the filing deadline found in the Federal Rules of Bankruptcy Procedure when addressing a Rule 50(b) motion. The court vacated the district court's order granting defendants relief and remanded with instructions to reinstate the jury's award because, under the Federal Bankruptcy Rules, defendants' Rule 50(b) post-trial motion was untimely. Fed. R. Bankr. P. 9015 requires that such motions be filed no later than 14 days after entry of judgment. In this case, defendants filed their renewed motion 28 days after the entry of judgment. View "Rosenberg v. DVI Receivables XIV, LLC" on Justia Law

PHA filed suit against Wells Fargo, alleging that Wells Fargo falsely represented that it would forbear collection of the principal balance of a line of credit, ultimately causing PHA to default and enter bankruptcy. PHA subsequently filed suit in Virginia state court, which Wells Fargo removed to federal court. Along with repeating the claims made in the bankruptcy adversary complaint, PHA alleged new theories of lender liability. The district court dismissed the suit. The court rejected PHA's contention that the district court erroneously gave res judicata effect to various sale orders issued during PHA’s Chapter 11 bankruptcy, concluding that the elements of res judicata are satisfied. Accordingly, the court affirmed the judgment. View "Providence Hall Assoc. v. Wells Fargo Bank, N.A." on Justia Law

Debtor, a construction business, filed a voluntary Chapter 11 bankruptcy petition, which was converted to chapter 7. A The Bank holds a valid, first-priority security interest in all of the Debtor’s assets, including accounts receivable. The Trustee discovered that checks payable to the Debtor had been negotiated and deposited into the personal account of Hartford, the father of Debtor’s principal, totalling $36,389.89. Before initiating adversary litigation, the Trustee engaged in settlement talks with Hartford, who agreed to pay $36,389.89 to the estate and release the estate from all claims involving the transfers. While the Trustee was pursuing settlement., the Bank obtained an order modifying the automatic stay to allow it to exercise its state law remedies with respect to collateral, then filed suit to recover from Hartford the value of the checks. A state court entered judgment in favor of the Bank. The next day, the Trustee successfully moved for approval of the Hartford settlement. The Bank objected. The bankruptcy court rejected the Bank’s argument that the order granting relief from the automatic stay allowed it to pursue the fraudulent transfer action in state court. The district court affirmed. The Seventh Circuit dismissed for lack of jurisdiction, finding that the bankruptcy court entered no final judgment or appealable order. View "Schaumburg Bank & Trust Co. v. Alsterda" on Justia Law

Twenty-one months after plaintiff filed an employment discrimination case against US Steel, she filed a Chapter 7 bankruptcy petition. When U.S. Steel learned of the bankruptcy case - that plaintiff's Chapter 7 petition had not disclosed the employment-discrimination claims she was pursuing and that the Chapter 7 Trustee was treating the bankruptcy as a “no asset” case and had filed a Report of No Distribution with the bankruptcy court - it moved the district court alternatively to dismiss the case or for summary judgment. The district court concluded that the doctrine of judicial estoppel as formulated in Burnes v. Pemco Aeroplex, Inc., and Robinson v. Tyson Foods, Inc., controlled its decision. The court concluded that New Hampshire v. Maine did not govern the district court's application of judicial estoppel in this case. Therefore, the court rejected plaintiff's argument that the district court erred in failing to give the New Hampshire factors appropriate weight and concluded that the district court did not abuse its discretion in barring her claims on the basis of judicial estoppel. Further, the court concluded that the district court did not err in applying Eleventh Circuit precedent, namely Burnes and Robinson, where the bankruptcy court in those cases accepted the debtor's failure to disclose as property of the bankruptcy estate claims the debtor was litigating in federal district court. Accordingly, the court affirmed the judgment. View "Slater v. US Steel Corp." on Justia Law

Plaintiff filed suit against defendants, alleging employment discrimination and retaliation in violation of federal laws. The district court granted summary judgment in favor of defendants. The court agreed with the district court that plaintiff's failure to disclose her claims in her Chapter 13 bankruptcy proceedings judicially estopped her from pursuing them. Accordingly, the court affirmed the judgment. View "Van Horn v. Martin" on Justia Law

Debtor-Appellant Nathan Welch appealed a district court’s order denying his motion for judgment on the pleadings and determining that a default judgment was nondischargeable in bankruptcy. This case arose from the failure of the Talisman project, a high-end real estate development project in Wasatch County, Utah. Appellee Robert Tripodi was one of these investors, eventually putting $1 million into Talisman. To secure Tripodi’s investment, Welch issued three promissory notes to Capital Concepts, which in turn, assigned the notes to Tripodi. Welch ultimately defaulted on the notes. In January 2009, Tripodi filed a complaint against Mr. Welch in federal district court, alleging violations of state and federal securities laws. For seven months, Welch did not respond. In March 2010, Tripodi filed a motion for entry of default. The court granted the motion for entry of default and issued an order to show cause as to why a default judgment should not be entered. Receiving no response, the district court entered an order granting the entry of default judgment against Welch. Welch filed a voluntary petition for Chapter 7 bankruptcy in August 2011. Nearly two years later, Tripodi sought relief from the automatic stay. In his defense, Welch opposed Tripodi's proof of damages and costs, and attempted to have the default judgment set aside. The district court denied Welch's request to set aside the judgment, ruling the judgment was nondischargable. Finding no reversible error on the district court's judgment, the Tenth Circuit affirmed. View "Tripodi v. Welch" on Justia Law