Justia Civil Procedure Opinion Summaries

Richardson, apparently a lawyer who has been suspended several times, incurred educational debt in 1988 but did not pay. Indiana University, the creditor, sued in 1998. Richardson filed a bankruptcy petition days before trial but did not tell the court, the University, or its counsel. Nor did he appear for trial. The state judge entered a default judgment, which the law firm tried unsuccessfully to collect. After learning about the bankruptcy, the law firm stopped collection efforts. The bankruptcy ended in 2001, and the firm resumed collection efforts, relying on 11 U.S.C. 523(a)(8), which makes most educational debts nondischargeable. Richardson filed a second bankruptcy in 2002 that lasted until 2007. Again the law firm ceased its efforts until after its end. The post-2007 efforts resulted in Richardson’s claim that the law firm violated the Fair Debt Collection Practices Act, 15 U.S.C. 1692e, 1692f, by trying to enforce a judgment that had been entered in violation of the Bankruptcy Code’s automatic stay. The district court treated the suit as a collateral attack on the state court’s judgment and dismissed for want of jurisdiction, invoking the Rooker-Feldman doctrine. The Seventh Circuit held that the dismissal should be on the merits, noting that the state court judgment was vacated at the request of Indiana University.View "Richardson v. Koch Law Firm, P.C." on Justia Law

Schwab filed a chapter 11 bankruptcy petition in 2010. HLP was appointed as bankruptcy counsel. Schwab’s individual directors/shareholders filed an adversary proceeding against Attorney Oscar and HLP, asserting malpractice arising from an allegedly undisclosed conflict of interest with Bank of America. The bankruptcy court dismissed, holding that the directors lacked standing to bring the claim directly or derivatively and that the claim was barred by res judicata. They did not appeal. One year after the dismissal, the directors sought to reopen the adversary proceeding on the basis of asserted newly discovered evidence of failure to disclose a conflict with Huntington National Bank. The bankruptcy court denied the motion for relief from judgment, reasoning that the directors had not challenged the prior ruling that they lacked standing and that, although other arguments were immaterial in light of lack of standing, the proffered evidence was neither new nor newly discovered. The directors “had knowledge of the specific conflict at least three years earlier than they’ve claimed in their motion for relief.” The Sixth Circuit Bankruptcy Appellate Panel affirmed. Because the directors lacked standing to be a party in the underlying complaint, they lack standing to bring a motion for relief from judgment.View "In re: SII Liquidation Co." on Justia Law

The Plaintiffs sued Payday Financial, Webb, an enrolled member of the Cheyenne River Sioux Tribe, and other entities associated with Webb, alleging violations of civil and criminal statutes related to loans that they had received from the defendants. The businesses maintain several websites that offer small, high-interest loans to customers. The entire transaction is completed online; a potential customer applies for, and agrees to, the loan terms from his computer. The district court dismissed for improper venue, finding that the loan agreements required that all disputes be resolved through arbitration conducted by the Cheyenne River Sioux Tribe on their Reservation in South Dakota. Following a limited remand, the district court concluded that, although the tribal law could be ascertained, the arbitral mechanism detailed in the agreement did not exist. The Seventh Circuit held that the action should not have been dismissed because the arbitral mechanism specified in the agreement is illusory. Rejecting an alternative argument that the loan documents require that any litigation be conducted by a tribal court on the Cheyenne River Sioux Tribe Reservation, the court stated that tribal courts have a unique, limited jurisdiction that does not extend generally to the regulation of nontribal members whose actions do not implicate the sovereignty of the tribe or the regulation of tribal lands. View "Jackson v. Payday Fin., LLC" on Justia Law

KDC had cash flow problems and, in 2004, hired Johnson. Johnson retained the law firm (GPM) of his acquaintance, Tenenbaum. GPM sent KDC an engagement letter that included conflict‐waiver language regarding Johnson and a company affiliated with Johnson. Johnson soon resigned and joined First Products. GPM resigned as KDC’s counsel. KDC filed for Chapter 11 bankruptcy. Its assets were purchased at auction by First Products. No other bids were received; the bankruptcy court approved the sale. The bankruptcy was later converted to a Chapter 7 liquidation proceeding. The bankruptcy trustee hired Sullivan as special counsel. Sullivan had filed a shareholder derivative action before KDC filed for bankruptcy, alleging that directors and officers of KDC had conspired to defraud the company of its intellectual property by driving KDC out of business and purchasing its assets at bargain prices. In 2010, a Wisconsin state judge entered judgment, finding some defendants, including Johnson, had engaged in a civil conspiracy to defraud KDC and steal its assets. In 2012, KDC, through its bankruptcy trustee, brought claims against GPM, alleging involvement in the scheme to defraud KDC orchestrated by Johnson. On summary judgment, the district court determined that the remaining claims were barred by the six‐year Wisconsin statute of limitations because KDC was on notice of GPM’s alleged fraud by 2006, when Sullivan received KDC’s client file. The Seventh Circuit affirmed. View "KDC Foods, Inc. v. Gray, Plant, Mooty, Mooty & Bennett, P.C." on Justia Law

Pinpoint and Atlas filed federal court actions against each other based on a 2009 contract between them. Two months after answering and counterclaiming Pinpoint in the Virginia action, Atlas filed for bankruptcy under Chapter 7 of the Bankruptcy Code. Atlas's filing automatically stayed the Virginia and Puerto Rico actions. At issue was Pinpoint's appeal from the Bankruptcy Appellate Panel's judgment dismissing Pinpoint's challenge to the bankruptcy court's no-stay-relief order. The court rejected the blanket-rule approach and, like the Third Circuit, held that it was possible that in some cases an order denying stay relief may lack finality. Because the order denying stay relief in this case was not final, the court dismissed Pinpoint's appeal for lack of jurisdiction. View "Pinpoint IT Services, LLC v. Atlas IT Export, Corp." on Justia Law

Parmalat, a large Italian food and dairy company, entered bankruptcy in Italy and Bondi was appointed “extraordinary commissioner,” the equivalent of a bankruptcy trustee. In 2004 Bondi instituted, in New York, a proceeding under the since-repealed section 304 of the U.S. Bankruptcy Code to enjoin any action against Parmalat with respect to property involved in the Italian bankruptcy, to consolidate claims against the company. Months later, Bondi filed suit in Illinois, against Thornton, an accounting company, claiming that Thornton contributed to the collapse of Parmalat by conducting fraudulent audits of in violation of Illinois tort law. The case was removed to federal court. The New York district court declined to abstain in light of the Illinois suit and granted Thornton summary judgment, on the ground that the doctrine of in pari delicto barred Parmalat’s claim against the accounting company. The Second Circuit vacated and remanded with instructions to remand to Illinois state court. The Illinois district court declined to remand to state court and upheld the in pari delicto ruling. The Seventh Circuit held that the district court was required to remand to the state court, but noted that the New York litigation remained unresolved. View "Bondi v. Grant Thornton Int'l" on Justia Law

Spaine was a seasonal employee from 2008 until 2011, helping low-income and disabled persons register for housing assistance. Spaine alleges that she was harassed and unfairly disciplined because of her race and that she was told, when her 2011 employment ended, that instead of being reinstated automatically as in the past, she would have to reapply the next year. Spaine interpreted this as termination. She filed suit under 42 U.S.C. 1981 alleging that she was harassed and eventually fired because she is African American. Months after filing that complaint, Spaine filed a petition under Chapter 7 of the bankruptcy code. Spaine was represented by counsel in the discrimination suit, but was without a lawyer in the bankruptcy case. On a schedule of personal property, Spaine was required to list contingent and unliquidated claims of all types. She listed nothing. In the separate financial statement, Spaine was required to list lawsuits to which she was party within the preceding year. She listed two eviction suits, but did not list her discrimination suit. A transcript of the creditors’ meeting shows that Spaine told the bankruptcy trustee about her discrimination lawsuit at the first opportunity after filing her incomplete schedules. Spaine also subsequently filed an affidavit indicating that she told the bankruptcy judge about the suit. The employer alleged that Spaine was trying to conceal the suit. Spaine successfully moved to reopen her bankruptcy. The discrimination suit was dismissed on estoppel grounds. The Seventh Circuit reversed, finding that material facts remained in dispute. View "Spaine v. Kane-Richards" on Justia Law

BIA filed a voluntary chapter 7 bankruptcy petition. The bankruptcy trustee filed a complaint alleging fraudulent conveyance of assets. The bankruptcy court granted the trustee summary judgment. The district court affirmed. While appeal was pending, the Supreme Court held, in Stern v. Marshall, that Article III did not permit a bankruptcy court to enter final judgment on a counterclaim for tortious interference, even though final adjudication of that claim by the bankruptcy court was authorized by statute. The Ninth Circuit affirmed, acknowledging the trustee’s claims as “Stern claims,” i.e., claims designated for final adjudication in the bankruptcy court as a statutory matter, but prohibited from proceeding in that way under Article III, but concluding that defendants had impliedly consented to jurisdiction. The court stated that the bankruptcy court’s judgment could be treated as proposed findings of fact and conclusions of law, subject to de novo review by the district court. A unanimous Supreme Court affirmed. Under 28 U.S.C. 157, federal district courts have original jurisdiction in bankruptcy cases and may refer to bankruptcy judges “core” proceedings and “non-core” proceedings. In core proceedings, a bankruptcy judge “may hear and determine . . . and enter appropriate orders and judgments,” subject to the district court’s traditional appellate review. In non-core proceedings—those that are “otherwise related to a case under title 11,” final judgment must be entered by the district court after de novo review of the bankruptcy judge’s proposed findings of fact and conclusions of law, except that the bankruptcy judge may enter final judgment if the parties consent. Lower courts have described Stern claims as creating a statutory gap, since bankruptcy judges are not explicitly authorized to propose findings of fact and conclusions of law in a core proceeding. However, the gap is closed by the Act’s severability provision; when a court identifies a Stern claim, the bankruptcy court should simply treat that claim as non-core. The fraudulent conveyance claims, which Article III does not permit to be treated as “core” claims are “related to a case under title 11” and fit comfortably within the category of claims governed by section 157(c)(1). View "Exec. Benefits Ins. Agency v. Arkison" on Justia Law

Appellant-property owner filed a Chapter 13 petition for bankruptcy and subsequently filed a third amended reorganization plan proposing to bifurcate Appellee-mortgagee’s claim into secured and unsecured portions. The bankruptcy court denied confirmation of the plan and ordered Appellant to file an amended plan. Appellant appealed and also filed a motion for leave to appeal the bankruptcy court’s interlocutory order. The Bankruptcy Appellate Panel (BAP) granted the motion and affirmed the bankruptcy court’s denial of confirmation. Appellant subsequently filed a notice of appeal and motion for certification of the appeal, which the BAP denied. The First Circuit Court of Appeals issued an order to show cause why the case should not be dismissed for lack of jurisdiction because the BAP’s order affirming the denial of the confirmation did not appear to be a final order. The First Circuit dismissed Appellant’s appeal, holding (1) an intermediate appellate court’s affirmance of a bankruptcy court’s denial of confirmation of a reorganization plan is not a final order if the debtor may still propose an amended plan; and (2) therefore, the Court lacked jurisdiction to hear this appeal. View "Bullard v. Hyde Park Savings Bank" on Justia Law

Mark Fisher and Reece Boudreaux were limited partners of Nighthawk Oilfield Services, Ltd. (“Nighthawk”), which acquired Richey Oilfield Construction, Inc. (“Richey Oil”) from Mike Richey. The business did not go well, and Nighthawk and Richey Oil filed for bankruptcy. Richey sued Fisher and Boudreaux in Wise County where Richey resided, alleging claims for, inter alia, breach of fiduciary duty, common law fraud, statutory fraud and violations of the Texas Security Act. Fisher and Boudreaux responded by moving to transfer venue to Tarrant County or dismiss the suit pursuant to the mandatory venue selection clauses in the acquisition documents. The trial court denied the motions. Fisher and Boudreaux sought mandamus relief from the court of appeals, which denied relief. The Supreme Court conditionally granted relief, holding that the trial court abused its discretion by failing to enforce the venue selection clauses in the acquisition documents. View "In re Fisher" on Justia Law