Justia Civil Procedure Opinion Summaries

This appeal arose when plaintiffs filed suit against defendants, alleging that defendants violated various Louisiana securities laws, among other state law claims. On appeal, defendants challenged the district court's order of remand on the basis that the district court lacked the discretion to abstain from hearing the case. The court concluded that the district court could not permissively abstain and equitably remand under 28 U.S.C. 1334(c)(1) and 1452(b) without considering the Chapter 15 bankruptcies at issue. Accordingly, the court reversed the district court’s decision to remand the case to state court and remanded to the district court for consideration under its bankruptcy jurisdiction. View "Firefighters' Retirement Sys, v. Citco Group" on Justia Law

Sharif tried to discharge a debt to Wellness in his Chapter 7 bankruptcy. Wellness argued that a trust Sharif claimed to administer was actually Sharif’s alter ego, and that its assets were part of his bankruptcy estate. The Bankruptcy Court entered default judgment against Sharif. While appeal was pending, but before briefing concluded, the Supreme Court held (Stern v. Marshall) that Article III forbids bankruptcy courts to enter final judgment on claims that seek only to “augment” the bankruptcy estate and would otherwise “exis[t] without regard to any bankruptcy proceeding.” The district court denied Sharif permission to file a supplemental brief and affirmed. The Seventh Circuit determined that Sharif’s “Stern” objection could not be waived and reversed, holding that the Bankruptcy Court lacked constitutional authority to enter judgment on the alter ego claim. The Supreme Court reversed. Article III permits bankruptcy judges to adjudicate Stern claims with the parties’ knowing and voluntary consent. The right to adjudication before an Article III court is “personal” and “subject to waiver,” unless Article III’s structural interests as “an inseparable element of the constitutional system of checks and balances” are implicated; parties “cannot by consent cure the constitutional difficulty.” Allowing bankruptcy courts to decide Stern claims by consent does not usurp the constitutional prerogatives of Article III courts. Bankruptcy judges are appointed and may be removed by Article III judges, hear matters solely on a district court’s reference, and possess no free-floating authority to decide claims traditionally heard by Article III courts. Consent to adjudication by a bankruptcy court need not be express, but must be knowing and voluntary. The Seventh Circuit should decide on remand whether Sharif’s actions evinced the requisite knowing and voluntary consent and whether Sharif forfeited his Stern argument. View "Wellness Int’l Network, Ltd. v. Sharif" on Justia Law

After Pajian filed for bankruptcy, Lisle Savings Bank, a creditor, filed a proof of claim ($330,472.19) in the bankruptcy court, but missed the bankruptcy court’s filing deadline (set under FED. R. BANKR. P. 3002(c)) by several months. The Bank argued that Rule 3002(c) applies only to unsecured creditors; as a secured creditor, it asserted, it was entitled to file a proof of claim at any time until plan confirmation. The bankruptcy court agreed with the Bank. The Seventh Circuit reversed, holding that a secured creditor must file its proof of claim by the 90-day deadline specified by Rule 3002(c). View "Pijian v. Lisle Savings Bank" on Justia Law

Diamond filed a chapter 7 bankruptcy petition. February 28, 2012 was the deadline for complaints to determine the dischargeability of certain debts under 11 U.S.C. 523(c). On February 15, Goldstein requested a 60-day “extension of proceedings” and “withholding of the entry of the discharge order,” claiming that he was a creditor but did not receive proper notice. The bankruptcy court found the request to be for “abatement of the case.” Finding no cause for relief, it denied the motion and the request to withhold discharge. The case closed. A year later Goldstein filed a dischargeability complaint in a different jurisdiction, not citing a statute, but captioned “Fraud and Defalcation.” The court transferred the matter to the original court. After a remand, that court entered an order to show cause why the complaint should not be dismissed. Goldstein responded. The court took no action on its show cause order, but scheduled a trial. Diamond filed an answer, requesting dismissal. Goldstein responded; the court dismissed, determining that the debt was not excepted from discharge. The Eighth Circuit affirmed. Goldstein had adequate time to protect his rights. He used that time to file a proof of claim and move for extension. He cannot , long after the fact, claim to have been hindered by his lack of knowledge of the case. View "Goldstein v. Diamond" on Justia Law

After filing for Chapter 13 bankruptcy, Bullard submitted a proposed repayment plan. Bullard’s mortgage lender objected to the plan’s treatment of its claim. The Bankruptcy Court sustained the Bank’s objection and declined to confirm the plan. Bullard appealed to the First Circuit Bankruptcy Appellate Panel, which concluded that denial of confirmation was not a final, appealable order, 28 U.S.C.158(a)(1), but heard the appeal under a provision permitting interlocutory appeals “with leave of the court,” and agreed that Bullard’s proposed plan was not allowed. The First Circuit dismissed for lack of jurisdiction, finding that the order denying confirmation was not final so long as Bullard remained free to propose another plan. A unanimous Supreme Court affirmed. The relevant proceeding is the entire process of attempting to arrive at an approved plan that would allow the bankruptcy case to move forward. Only plan confirmation, or case dismissal, alters the status quo and fixes the parties’ rights and obligations; denial of confirmation with leave to amend changes little. Additional considerations—that the statute defining core bankruptcy proceedings lists “confirmations of plans,” but omits any reference to denials; that immediate appeals from denials would result in delays and inefficiencies; and that inability to immediately appeal a denial encourages the debtor to work with creditors and the trustee to develop a confirmable plan—bolster this conclusion. View "Bullard v. Blue Hills Bank" on Justia Law

Chivalry contracted with Rehtmeyer to develop and manufacture a board game. Chivalry paid Rehtmeyer over $128,000, but the relationship deteriorated. Rehtmeyer never produced the game. Chivalry sued for breach of contract and won a judgment of $168,331.59, plus $621.25 in costs in Illinois state court. Rehtmeyer never paid. Chivalry issued a citation to discover assets. At the citation examination, Rehtmeyer testified that she had no ownership interest in any real estate; securities, stocks, bonds or similar assets; office or electronic equipment; nor a personal checking or savings account. Because Rehtmeryer had not produced required documents, Chivalry continued the citation and filed a motion to compel production, which was granted. She did not comply. The state court twice more ordered her to produce all the documents required by the citation. Months later, Chivalry sought a rule to show cause. The day before the scheduled hearing, Rehtmeyer filed a Chapter 7 bankruptcy petition. Chivalry appeared to object to the discharge of the debt owed to it, claiming that Rehtmeyer had concealed her assets and income during the citation proceedings. The bankruptcy court denied Chivalry’s objection. The district court affirmed. The Seventh Circuit reversed, finding that Rehtmeyer concealed assets with the requisite intent. View "Jacobs v. Marcus-Rehtmeyer" on Justia Law

Debtor filed a voluntary chapter 11 petition. Debtor had a program under which independent contractor drivers could lease and acquire ownership of trucks. Trucks were financed or leased from creditors, including Daimler. At the time of filing, Daimler was the lessor of 14 trucks and held security interests in 99 others and in driver lease payments and other proceeds generated by the use of such trucks. Daimler sought sequestration to prevent unauthorized use of that money. The parties submitted an agreed order, providing that Daimler would sell 21 trucks and credit the net proceeds. Debtor would retain 80 trucks subject to Daimler’s security interest and would make adequate protection payments. The order was silent about Daimler’s security interest in proceeds from the use of the trucks. The bankruptcy court confirmed a plan. The debtor appealed with respect to application of excess adequate protection payments, claiming it overpaid for erosion in the value of the trucks and argued that the court erred when it supplemented the secured portion of Daimler’s claim with an award of $51,909.40 as proceeds from the use of Daimler’s trucks. The Eighth Circuit dismissed for lack of jurisdiction. The orders were interlocutory. The debtor now possesses no trucks; no meaningful relief could be granted. Debtor did not propose a plan that was denied, so it is not an aggrieved party, and does not have standing. View "O&S Trucking, Inc. v. Mercedes Benz Fin. Servs., USA" on Justia Law

McCready's husband sold his business, Billy Bags, to Whorf before he died. Whorf failed to make payments. McCready sued and obtained a judgment of $134,927.36 that provided, "McCready is awarded an equitable lien on the assets and profits of [Billy Bags]." Whorf filed a Chapter 7 bankruptcy petition, showing an average net monthly income of $10,487.72 from Billy Bags. Whorf named McCready as a creditor. Personal liability on Whorf's debts was discharged in bankruptcy. The lien, however, remained on the assets and profits of Billy Bags. McCready sued for money had and received, claiming that Whorf had been receiving $10,487.72 per month profit from Billy Bags; that McCready has a lien against those profits; and that profits received from the filing of the bankruptcy petition to the time of trial were monies belonging to McCready. The complaint sought $134,927.36. The court ruled in favor of for Whorf, stating: "[McCready's] remedy, if any, was to seek to enforce the judgment that created the lien through the use of laws applicable to the enforcement of judgments.” The court of appeal reversed. A separate action on a judgment is expressly authorized by Code of Civil Procedure section 683.050. View "McCready v. Whorf" on Justia Law

Debtors filed a petition for relief under chapter 11 in 1999. Debtors proposed several plans of reorganization, but none were confirmed. On the Trustee's motion, the bankruptcy court dismissed Debtors' case in 2004. Debtors did not appeal and the case was closed on the bankruptcy clerk's docket in 2005. In 2014, Debtors moved to reopen their case "to pursue Confirmation of their current Plan[.]" The Trustee and Agrifinance objected, and, without first holding a hearing, the bankruptcy court entered a text order denying Debtors' motion. The Eighth Circuit affirmed. There is no requirement in 11 U.S.C. 350 that the court provide a hearing on a motion to reopen and nothing would have been gained by holding a hearing. View "Bowman v. Casamatta" on Justia Law

Five individuals (collectively, “Plaintiffs”) each filed a petition for individual bankruptcy under Chapter 13 in the Bankruptcy Court for the District of Maryland. LVNV Funding, LLC and its affiliated companies (collectively, “Defendants”) filed a proof of unsecured claim based on defaulted debts it had acquired against each plaintiff. Each Chapter 13 plan was approved. Defendants’ claims were allowed, and they received payments from the Chapter 13 trustees on these claims. Plaintiffs subsequently filed this putative class action lawsuit in the District of Maryland alleging that Defendants violated the federal Fair Debt Collection Practices Act (FDCPA) and various Maryland laws by filing proofs of claim without a Maryland debt collection license. The district court dismissed the action, concluding (1) the state common law claims were barred by res judicata, and (2) the federal and state statutory claims failed to state a claim. The Fourth Circuit affirmed but on res judicata grounds, holding (1) Plaintiffs’ claims were based on the same cause of action as Defendants’ claims in the confirmed bankruptcy plans and were thus barred by res judicata; and (2) Plaintiffs’ statutory claims were subject to the normal principles of res judicata and were thus precluded by the confirmation of the Chapter 13 plans. View "Covert v. LVNV Funding, LLC" on Justia Law