In re Blasingame

Trustee and Creditor filed an adversary complaint against Debtors and NonDebtor Defendants, including BIT, seeking a declaration that Debtors were not entitled to a discharge, and to recover assets from the Non-Debtors. Creditor and Trustee later entered into an agreement; Creditor purchased the bankruptcy estate’s claims, except Trustee’s objection to discharge, for $100,000 and a reduction to Creditor’s proof of claim. The court authorized the sale and dismissed the purchased claims for lack of subject matter jurisdiction because Trustee no longer owned and lacked standing to assert them but did not dismiss the 2009 Complaint. Creditor then filed the dismissed claims in the Western District of Tennessee, alleging that the BIT was an alter ego of Debtors, such that its assets should be made available to satisfy claims. The district court dismissed the claims because Tennessee law does not recognize reverse-veil-piercing outside of parent-subsidiary corporate relationships. In 2017, Creditor filed a new bankruptcy court complaint, invoking derivative standing and seeking a declaration that the BIT is a self-settled trust so that its assets are not excluded from bankruptcy estate by 11 U.S.C. 541(c)(2). The Sixth Circuit Bankruptcy Appellate Panel affirmed dismissal. The bankruptcy court did not abuse its discretion in interpreting the Sale Order to include the claims asserted in the 2017 Complaint or in concluding that Creditor could not pursue the claims asserted in the 2017 Complaint derivatively on Trustee’s behalf. View "In re Blasingame" on Justia Law