Justia Civil Procedure Opinion Summaries

The Trustee for the bankrupt debtor, Simply Essentials, LLC, filed a Motion to Compromise under Federal Rule of Bankruptcy Procedure 9019(b) and a Motion to Sell Property Free and Clear of Liens under 11 U.S.C. Section 363(f). Pitman Farms, the owner of Simply Essentials, who is also a creditor in this action, objected. Pitman Farms argued that the sale included Chapter 5 avoidance actions and that such actions are not part of the bankruptcy estate under 11 U.S.C. Section 541(a). The bankruptcy court granted the motion, finding Chapter 5 avoidance actions are part of the bankruptcy estate. Pitman Farms filed a motion to appeal the decision. The Bankruptcy Court certified Pitman Farms’ motion to appeal, and the Eighth Circuit granted permission to appeal.   The Eighth Circuit affirmed. The court agreed with the bankruptcy court’s conclusion that Chapter 5 avoidance actions are the property of the estate and affirmed the order approving the Trustee’s motion to sell the property of the estate. The court explained that to the extent that Pitman Farms argues the property is created in a third period of time, a time that is equivalent to the moment the bankruptcy proceeding commences, we disagree. Finding such a period of time existed “would frustrate the bankruptcy policy of a broad inclusion of property in the estate[.]” View "Pitman Farms v. ARKK Food Company, LLC" on Justia Law

Plaintiff appealed the district court’s grant of summary judgment to PHH Mortgage Corporation on numerous federal and state law claims. The two primary issues on appeals are whether the Bankruptcy Code preempts state law causes of action for a creditor’s improper collection efforts related to debt that has been discharged in bankruptcy. Second, are there genuine disputes of material fact with respect to Guthrie’s federal and state claims?   The Fourth Circuit affirmed in part, vacated in part, and remanded. The court held that the Bankruptcy Code does not preempt Plaintiff’s state law claims arising from alleged improper collection attempts of a discharged debt.  The court also held that Plaintiff has established a genuine dispute of material fact with respect to his NCDCA and FCRA claims. However, he has failed to establish a genuine dispute of material fact with respect to his TCPA claim. View "Mark Guthrie v. PHH Mortgage Corporation" on Justia Law

Appellant, former Chief Financial Officer of Convergence Ethanol, Inc., and former employee of Convergence and its subsidiary California MEMS USA, Inc., challenged his liability for the unpaid payroll taxes of California MEMS. The bankruptcy court denied both sides’ motions for summary judgment on the issue of whether Appellant was a “responsible person” regarding the payroll taxes under 26 U.S.C. Section 6672. Rather than proceed to trial, Appellant agreed to a stipulated judgment allowing the Internal Revenue Service’s claim, but he made clear on the record that his consent was subject to his stated intention to appeal that judgment on the grounds that his motion for summary judgment should have been granted.   The Ninth Circuit affirmed the district court’s order affirming the bankruptcy court’s judgment in favor of the United States. The panel concluded that the bankruptcy court’s judgment was sufficiently “final” under Section 158(d)(1) because it fully disposed of the claims raised by Appellant’s adversary complaint. The panel held that jurisdiction was not precluded by the holding of Ortiz v. Jordan, 562 U.S. 180 (2011), and Dupree v. Younger, 598 U.S. 729 (2023), that, on appeal from a final judgment after a trial on the merits, an appellate court may not review a pretrial order denying summary judgment if that denial was based on the presence of a disputed issue of material fact. The panel held that the bankruptcy court correctly concluded that Appellant failed to show that, viewing the summary judgment record in the light most favorable to the IRS, a rational trier of fact could not reasonably find in the IRS’s favor. View "IN RE: RICHARD YORK, ET AL V. USA" on Justia Law

Inmarsat Global Limited and related entities(collectively, “Inmarsat”) operate a satellite network providing communications services to remote locations, including ships at sea. Inmarsat sells the services at retail to end-users and at wholesale to distributors. Speedcast International Limited was a leading Inmarsat distributor, purchasing Inmarsat’s services and providing them to its own customers. Speedcast is the debtor in the bankruptcy. Several contracts governed the business relationship among the parties. Their last contract terminated all of the creditors’ claims against the debtor except for narrowly defined “Permitted Claims.” The creditors sought a reversal of the district and bankruptcy court’s conclusion that a particular claim was not a permitted one.   The Fifth Circuit affirmed, holding that the Termination Agreement’s definitions of Released Claims and Permitted Claims are unambiguous. Consequently, the court wrote that it need not consider any extrinsic evidence. The court found Inmarsat’s pricing argument unpersuasive. The Shortfall Amount is not a payment for services delivered by Inmarsat to Speedcast. The SAA provides that the Shortfall Amount is part of the performance that Speedcast promised “[i]n exchange for” Inmarsat agreeing to grant a 30% discount. The Shortfall Amount, in turn, is not levied on the services that Inmarsat delivered to Speedcast; it is levied due to the customers Speedcast failed to provide. View "Inmarsat Global v. SpeedCast Intl" on Justia Law

Farmer William Topp raises crops and livestock in Monroe County, Iowa. After several rough years, he filed for Chapter 12 bankruptcy—intended for “family farmers.” Farm Credit Services of America had financed part of Topp’s farm operation and filed a $595,000 claim as a secured creditor. The claim arose from five loans of various durations, with interest rates ranging from 3.5% to 7.6%. Together, the loans were secured by $1.45 million of Topp’s real estate. This bankruptcy appeal arises from a dispute between the farmer and his creditor over their proposed repayment plan. The two could not agree on the appropriate discount rate that should apply to the farmer’s deferred payments so as to satisfy the creditor’s present claim. The bankruptcy court sided with the farmer.   The Eighth Circuit affirmed. The court explained that the bankruptcy court studied the Till/Doud relationship and the prevalence of postTill decisions using the prime rate. The court considered the length of the proposed maturity period, the fact that Farm Credit’s claim was substantially over-secured, and the overall risk of nonpayment. In the end, the court approved a 4% rate—the treasury rate plus 2% for risk. By focusing on the starting rate rather than the ultimate rate, Farm Credit has failed to show that the bankruptcy court clearly erred in its determination that a 4% rate was sufficient to ensure full payment on “the value, as of the effective date of the plan,” of the secured claim. View "Farm Credit Services of America v. William Topp" on Justia Law

Debtors, husband and wife filed for Chapter 13 bankruptcy. They listed their home among their assets with a value of $500,000, a mortgage with an outstanding balance of $375,077, and a homestead exemption of $124,923. The bankruptcy court confirmed a Chapter 13 plan, but after roughly twenty months, which included a temporary job loss and deferral of mortgage payments due to the pandemic, the husband contracted Parkinson’s Disease, and the couple could no longer make their required payments. Debtors exercised their right to convert to Chapter 7. In the interim, their home had risen in value by an estimated $200,000. The Chapter 7 trustee (“Trustee”) filed a motion to sell Debtors home to recover the value for creditors.   The Ninth Circuit affirmed the district court’s order which affirmed the bankruptcy court’s order, the panel held that post-petition, pre-conversion increases in the equity of an asset belonging to the bankruptcy estate rather than to debtors who, in good faith, convert their Chapter 13 reorganization petition into a Chapter 7 liquidation. The panel held that the plain language of Section 348(f)(1)(A), coupled with the Ninth Circuit’s previous interpretation of 11 U.S.C. Section 541(a), compelled the conclusion that any appreciation in the property value and corresponding increase in equity belonged to the estate upon conversion. The panel looked to the definition of “property of the estate” in Section 541(a), which addresses the contents of the bankruptcy estate upon filing under either Chapter 7 or Chapter 13, and the court’s prior opinions holding that the broad scope of Section 541(a) means that post-petition appreciation inures to the bankruptcy estate, not the debtor. View "IN RE: JOHN CASTLEMAN, SR., ET AL V. DENNIS BURMAN" on Justia Law

Petitioners moved to quash trial subpoenas issued by the United States Bankruptcy Court for the Central District of California, requiring them to testify via contemporaneous video transmission from their home in the U.S. Virgin Islands. The bankruptcy court denied their motions, and the Petitioners sought mandamus relief from this court. Petitioners argued that Federal Rule of Civil Procedure 45(c)(1) prohibits the bankruptcy court from compelling them to testify, even remotely, where they reside out of state over 100 miles from the location of the trial.   The Ninth Circuit granted the petition. The panel held that the bankruptcy court erred in refusing to quash the trial subpoenas because, under the plain meaning of the text of the Rules, the geographic limitations of Rule 45(c) apply even when a witness is permitted to testify by contemporaneous video transmission. The panel concluded that Rule 45(c) governs the court’s power to require a witness to testify at trial and focuses on the location of the proceeding, while Rule 43(a) governs the mechanics of how trial testimony is presented. Weighing the Bauman factors to determine whether issuance of a writ of mandamus was appropriate, the panel concluded that the third factor, clear error, weighed in favor of granting mandamus relief. The panel concluded that the fifth Bauman factor also weighed in favor because the petition presented an important issue of first impression. The panel held that the third and fifth Bauman factors were sufficient on their own to warrant granting mandamus relief in this case. View "IN RE: JOHN KIRKLAND, ET AL V. USBC, LOS ANGELES" on Justia Law

Bouchard Transportation Company and its affiliates (collectively “Bouchard”)—debtors in bankruptcy—prepared to sell some of their assets at an auction. Fearing the auction would go poorly, Bouchard solicited a “stalking horse bidder” to start the auction and set a floor price. In exchange, Bouchard agreed to pay the stalking horse bidder a $3.3 million break-up fee and to reimburse expenses up to $1.5 million. The question is whether those payments were a permissible use of estate funds. As the bankruptcy and district courts found, the stalking horse payments were lawful under both applicable provisions of the Bankruptcy Code—they provided an actual benefit to the estate and were issued in the reasonable exercise of business judgment.
The Fifth Circuit affirmed the district court’s judgment affirming the bankruptcy court’s order that Bouchard pay Hartree a break-up fee and a capped expense reimbursement. The court explained that Bouchard’s payment to the stalking horse bidder is justified under either the stringent administrative-expense standard or the more relaxed business judgment rule. The court further wrote that there is “no basis to conclude that the board did not thoroughly review the presentation and make a well-reasoned, careful decision to designate Hartree as the stalking-horse bidder.” In signing the Hartree purchase agreement, Bouchard acted well within the bounds of reasonable business judgment. Section 363(b) does not require more. View "Official Committee v. Hartree" on Justia Law

Gary and Jeanette Merritt own four residential properties in Marysville, Washington. Between 2005 and 2007, the Merritts opened five home equity lines of credit (HELOCs), executing five five promissory notes (notes or HELOC agreements) in favor of USAA Federal Savings Bank. The Merritts secured these loans by executing deeds of trust on the properties with USAA as the beneficiary. In November 2012, the Merritts filed for Chapter 7 bankruptcy. The Merritts stopped making their monthly payments on the USAA loans prior to the November 2012 bankruptcy filing. USAA never accelerated any of the loans or acted to foreclose on the properties. In 2020, the Merritts filed four quiet title complaints seeking to remove USAA’s liens on each of the properties. Relying on Edmundson v. Bank of America, NA, 378 P.3d 272 (2016), the Merritts argued that the six-year statute of limitations to enforce the deeds of trust expired six years after February 12, 2013, the day before their bankruptcy discharge. In October 2020, the Merritts moved for summary judgment in each case. In November 2020, the trial court denied each of these motions. In February 2021, USAA moved for summary judgment in each case. USAA argued that the plaintiffs were not entitled to quiet title because the statute of limitations to foreclose on the deeds of trust would not begin to run until the maturity date of each loan, the earliest of which will occur in 2025. The Court of Appeals affirmed the trial court, holding that the the six-year statute of limitations had not begun to run on enforcement of the deeds of trust since none of the loans had yet matured. The issue this case presented for the Washington Supreme Court's review was whether a bankruptcy discharge triggered the statute of limitations to enforce a deed of trust. The Court affirmed the Court of Appeals and the trial court and hold that bankruptcy discharge did not trigger the statute of limitations to enforce a deed of trust. View "Merritt v. USAA Federal Savings Bank" on Justia Law

The property at issue in this case was a residential home that was purchased in 2007 by Shawn and Stephanie Kurtz. The house was located in a subdivision, which required property owners to pay homeowners association (HOA) assessments to petitioner Copper Creek (Marysville) Homeowners Association. If the assessments were not paid, then Copper Creek was entitled to foreclose on its lien. However, Copper Creek’s lien was “subordinate to any security interest perfected by a first deed of trust or mortgage granted in good faith and for fair value upon such Lot.” The Kurtzes stopped paying their HOA assessments and the home loan in varying times in 2010. The Kurtzes (in the process of divorcing) individually filed for bankruptcy. Neither returned to the house, nor did they make any further payments toward their home loan or their HOA assessments. However, there was no attempt to foreclose on the deed of trust. As a result, the house sat vacant for years and fell into disrepair. The Kurtzes remained the property owners of record and HOA assessments continued to accrue in their names. In 2018, Copper Creek recorded a notice of claim of lien for unpaid HOA assessments, fees, costs, and interest. In January 2019, Copper Creek filed a complaint against the Kurtzes seeking foreclosure on the lien and a custodial receiver for the property. The issue this case presented concerned the statute of limitations to foreclose on a deed of trust securing an installment loan after the borrower receives an order of discharge in bankruptcy. As detailed in Merritt v. USAA Federal Savings Bank, No. 100728-1 (Wash. July 20, 2023), the Washington Supreme Court held that a new foreclosure action on the deed of trust accrues with each missed installment payment, even after the borrower’s personal liability is discharged. Actions on written contracts are subject to a six-year statute of limitations. Therefore, the nonjudicial foreclosure action on the deed of trust in this case was timely commenced as to all unpaid installments within the preceding six years, regardless of the borrowers’ bankruptcy discharge orders. In addition, the Court held the trial court properly exercised its discretion to award fees as an equitable sanction for respondents’ litigation misconduct. View "Copper Creek (Marysville) Homeowners Ass'n v. Kurtz" on Justia Law