Justia Civil Procedure Opinion Summaries

Plaintifff Pattyann Larsen filed employment discrimination and other claims against her former employer shortly after her debts had been discharged by the federal bankruptcy court, but she had failed to list those claims as assets in her bankruptcy case. The trial court granted defendant’s motion for summary judgment, concluding that the bankruptcy trustee—not plaintiff— was the real party in interest. The court then denied plaintiff’s motion to substitute the bankruptcy trustee as plaintiff and dismissed the case based on its conclusion that plaintiff’s attempt to pursue this action in her own name was not an “honest and understandable mistake.” The Court of Appeals affirmed, concluding that the trial court had not abused its discretion in denying substitution. THe Oregon Supreme Court reversed: under ORCP 26 A, a motion to substitute the real party in interest as the plaintiff, if granted, would require plaintiff to amend the complaint under ORCP 23 A. “We have interpreted the standard specified in that rule—leave to amend ‘shall be freely given when justice so requires’—to mean that leave to amend should be granted absent any unfair prejudice to the nonmoving party. The text, context, and legislative history of ORCP 26 A confirm that the standards governing leave to amend the pleadings under ORCP 23 A also apply in deciding whether to allow substitution of the real party in interest under ORCP 26 A.” Defendant did not contend that it would be unfairly prejudiced if the bankruptcy trustee were to be substituted as the plaintiff in this case. The Supreme Court concluded that, because the trial court applied the wrong legal standard, it abused its discretion in denying substitution and dismissing this case. View "Larsen v. Selmet, Inc." on Justia Law

This litigation stems from the bankruptcy of Imperial Petroleum Recovery Corporation (“IPRC”). IPRC once marketed microwave separation technology (“MST”) machines, which purported to recover usable oil from various emulsions. The Carmichael parties held security interests in IPRC’s assets—including its MST units. The Carmichaels filed an involuntary Chapter 7 liquidation proceeding against IPRC. After various proceedings, the amended judgment cut the actual damages owed to the Carmichaels to $4,000, cut the fee and cost award to around $92,000, and made no provision for post-judgment interest. All told, the sum due to the Carmichael parties declined roughly 96%, from over $2.3 million to approximately $96,000. The Carmichaels appealed to the district court. The district court affirmed.   The Fifth Circuit affirmed in part, vacated in part, and remanded. The court wrote that the bankruptcy court’s factual findings related to the assigned assets were not clearly erroneous. The court wrote that the district court’s damages award nevertheless rested on clearly erroneous factual findings. The court explained that the Carmichaels are entitled to post-judgment interest pursuant to 28 U.S.C. Section 1961. Finally, the court disposed of the Carmichaels’ contention that the bankruptcy court’s judgment did not provide adequate declaratory relief. The court wrote that applying a preponderance standard and viewing the record holistically, it is persuaded that the Carmichaels’ damages for reassembly exceed $4,000. But the court wrote that it does not attempt to specify the Carmichaels’ reassembly damages here. Instead, the court remanded so that the bankruptcy court may consider the Carmichaels’ asserted damages under the correct standard of proof. View "Carmichael v. Balke" on Justia Law

Plaintiffs Matthew and Melanie Nelson (collectively Nelsons) married in 2020. The following year, defendant Puget Sound Collections Inc. (PSC), a debt collection agency, garnished Matthew’s wages in an attempt to satisfy a 2014 default judgment against him and his former wife, stemming from her medical expenses. The Nelsons argued RCW 26.16.200 required any eligible debt be reduced to judgment within the three years before and the three years after the marriage. In their view, the marital bankruptcy statute barred PSC from garnishing Matthew’s wages because the 2014 judgment was entered too soon and not “within three years” of their 2020 marriage. In contrast, PSC argued “within three years of the marriage” simply meant “not later in time than three years after the marriage.” Under this interpretation, PSC lawfully garnished Matthew’s wages because it reduced the debt to judgment not later than three years after the Nelsons’ marriage. The federal appellate court certified questions of Washington law in this case about the so-called marital bankruptcy statute, RCW 26.16.200. The Washington Supreme Court found that while the Nelsons’ interpretation might hold “some logical appeal, and their situation is certainly sympathetic, only PSC’s interpretation of RCW 26.16.200 effectuates the purpose of the statute to provide limited debt collection relief to diligent creditors.” The Court answered the first and second certified questions based on the statute’s plain language and held that “within” in this context means “not later in time than” three years of the marriage. “This interpretation permits wage garnishment where, as here, the creditor had reduced the debt to judgment more than three years before the marriage.” As to the additional certified question, which asked whether Washington law placed any limitation on the amount of wages subject to garnishment, the Nelsons correctly conceded this issue. The Supreme Court held that where other statutory requirements are met, RCW 26.16.200 permitted a creditor to garnish the entirety of the debtor spouse’s wages. View "Nelson v. P.S.C., Inc." on Justia Law

Creditor Clifton Capital Group, LLC Clifton was chair of an official committee of unsecured creditors appointed by the Office of the United States Trustee to monitor the activities of debtor East Coast Foods, Inc., manager of Roscoe’s House of Chicken & Waffles. The bankruptcy court appointed Bradley D. Sharp as Chapter 11 trustee. Clifton objected to Sharp’s fee application, but the bankruptcy court awarded the statutory maximum fee. Clifton appealed. The district court concluded that Clifton had standing to appeal. On remand, the bankruptcy court again awarded the statutory maximum. Clifton again appealed, and the bankruptcy court affirmed. Clifton challenged the district court’s order affirming the bankruptcy court’s enhanced fee award of over $1 million dollars to the trustee in a funded bankruptcy.   The Ninth Circuit reversed the district court’s order affirming the bankruptcy court’s enhanced fee award. The panel wrote that the Ninth Circuit historically bypassed the Article III inquiry in the bankruptcy context, instead analyzing whether a party is a “person aggrieved” as a principle of prudential standing. The court, however, has returned emphasis to Article III standing following Susan B. Anthony List v. Driehaus, 573 U.S. 149 (2014), in which the Supreme Court questioned prudential standing. The panel held that Clifton lacked Article III standing to appeal the fee award because it failed to show that the enhanced fee award would diminish its payment under the bankruptcy plan, and thus it failed to establish an “injury in fact.” The panel concluded that Clifton did not show that the fee award impaired the likelihood or delayed the timing of its payment. View "IN RE: CLIFTON CAPITAL GROUP, LLC, ET AL V. BRADLEY SHARP" on Justia Law

Appellant, an attorney, represented debtor in proceedings before the United States Bankruptcy Court. After Appellant failed to comply with a series of discovery orders, the bankruptcy court imposed sanctions of $55,000 for 55 days of non-compliance and $36,600 in attorneys' fees. The orders were affirmed by the district court. Appellant appealed, arguing that, first, the bankruptcy court lacked inherent authority to issue civil contempt sanctions, and second, as a matter of due process, he was not provided with sufficient notice of the basis for the sanctions imposed against him.   The Second Circuit affirmed. The court concluded that the civil contempt sanctions imposed against Appellant were within the scope of the bankruptcy court's discretion and that he had ample notice of the basis and reasons for the imposition of sanctions. The court explained that it appears that Appellant could not have been sanctioned under any express authority; the bankruptcy court was right to consider its inherent contempt authority. Nor was the bankruptcy court's exercise of its inherent contempt authority contrary to any provision of the Bankruptcy Code, including Section 105(a). Further, the court reasoned that the bankruptcy court found all the necessary elements -- that is, a finding of bad faith and satisfaction of the King factors -- to order contempt sanctions in the circumstances here, where Appellant was acting as an advocate. View "In re: Larisa Ivanovna Markus" on Justia Law

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