Justia U.S. 6th Circuit Court of Appeals Opinion Summaries

Martin filed a chapter 7 bankruptcy petition on January 28. On April 9, the Pecks sought relief from stay to continue state court litigation against Martin. On April 29, the Pecks filed an adversary proceeding seeking nondischargeability of a debt stemming from the same litigation. The court indicated that it would grant relief from stay, noting that the state court discovery process was further along; additional parties are involved in that case; and the Pecks had requested a jury trial. On July 7, the bankruptcy court granted relief from the stay, holding the adversary proceeding in abeyance. On July 17, Martin timely filed notice of appeal. On July 22, Martin sought a stay pending appeal in the bankruptcy court. The Pecks filed opposition. On October 5, Martin filed his appellate brief. The Pecks filed their brief on November 5. Martin filed his reply brief on November 23, requesting oral argument. On November 19, before obtaining a ruling from the bankruptcy court and before completion of briefing, Martin moved, in the Bankruptcy Appellate Panel, for stay pending appeal. On November 30, the Pecks filed a response and the bankruptcy court denied a stay. On December 11, Martin filed an “Emergency” second motion for stay pending appeal. The Panel declined oral argument and affirmed relief from the automatic stay. View "In re: Daniel Martin, Sr." on Justia Law

MERV, an LLC formed to purchase and operate an antique mall, encountered difficulties paying its mortgage loan and entered into a forbearance agreement with the Bank. MERV later defaulted and filed a Chapter 11 Bankruptcy Petition. Although a plan of reorganization was confirmed, MERV again defaulted. The Bank foreclosed its mortgage on the property. Before the bankruptcy case closed, MERV retained special counsel and filed an adversary proceeding against some of its founders and the Bank. The claims against the Bank alleged breach of contract, “facilitation of fraud and theft”, and equitable subordination of the Bank’s claim. MERV sought punitive damages. The bankruptcy court granted summary judgment, agreeing with the Bank that MERV had executed a release of all of the claims as part of the forbearance agreement. The Sixth Circuit Bankruptcy Appellate Panel affirmed, finding that the Bank offered prima facie evidence of a complete affirmative defense to the complaint by showing that MERV executed a Release of all claims. MERV did not demonstrate a genuine issue of material fact as to the validity of that Release. MERV did not file a motion or a Rule 56(d) affidavit or declaration with the bankruptcy court requesting more time for discovery. View "In re: MERV Props., LLC" on Justia Law

A Chapter 7 petition was filed against Connolly in 2001. Shapiro, then the bankruptcy trustee, initiated an adversary proceeding. In 2007, the bankruptcy court concluded that Shapiro and his attorney had breached their discovery obligations due to gross negligence and dismissed Shapiro’s claims with prejudice. Connolly’s unsecured creditors, including Coface, successfully sought to remove Shapiro as trustee. French, Shapiro’s successor, then commenced an adversary proceeding against Shapiro, his law firm, and his professional-liability insurer. The parties reached a court-approved settlement. The bankruptcy court recognized that at least some of the work that Coface paid its attorneys to do substantially benefitted the bankruptcy estate and the unsecured creditors, and contributed greatly to a significant increase in funds that unsecured creditors would receive. Coface sought reimbursement of $164,336.28 in attorney fees and costs under 11 U.S.C. 503(b). The bankruptcy court denied Colface’s motion. The district court agreed. The Sixth Circuit reversed, holding that administrative expenses are allowable in these circumstances under section 503(b) in a Chapter 7 case. Denying creditors reimbursement of administrative expenses in such circumstances would disincentivize participation in the bankruptcy process and would impugn the fundamental notion of bankruptcy as equitable relief View "Coface Argentina v. McDermott" on Justia Law

The Debtors’ chapter 13 plan provided for cure of any defaults and maintenance of regular monthly mortgage payments on real property, pursuant to 11 U.S.C. 1322(b)(5). The Bank failed to file a proof of claim and did not receive any disbursements for the mortgage debts. After their chapter 13 discharge, the Debtors sought a determination that the Bank’s liens had been discharged. The bankruptcy court determined that the liens had passed through the bankruptcy, but that the amount of debt secured by each should be reduced by the amount that the Bank would have been paid if it had filed proofs of claim. The Sixth Circuit Bankruptcy Appellate Panel reversed the reduction of the debt amount. Although a secured creditor is not required to file a proof of claim to preserve its lien, its failure to do so affects its right to payment under a chapter 13 plan. The Debtors or the Trustee could have filed a proof of claim on the Bank’s behalf, so that the Debtors would not have exited bankruptcy in default on the debt. Excess cash of more than $9,000 was returned to the Debtors after the plan was consummated. If the decision to reduce the debt were affirmed, the Debtors would gain a windfall. View "In re: Matteson" on Justia Law

Henry filed a Chapter 13 Bankruptcy Petition, without counsel. The Trustee objected to confirmation of his plan, arguing that the repayment period exceeded five years and was too speculative; there was no evidence Henry would be able to meet the required payments. Henry agreed to have his original plan denied and was allowed to remedy errors by filing an amended plan by January 22, 2015. Henry maintains that an amended plan was mailed to the Bankruptcy Court on January 22, 2015. The Court never received an amended plan, nor did the Trustee. The Trustee submitted an order for dismissal, which was entered on February 4. Henry received the order on February 9, and immediately went to the Bankruptcy Court and filed amended schedules and an appeal. The Bankruptcy Appellate Panel for the Sixth Circuit affirmed. The Trustee was extremely thorough in explaining what was expected and what to file; Henry was receiving communications from the Bankruptcy Court through traditional mail. If there was any doubt that the documents would arrive through the mail, he should have made arrangements to present the documents physically to the Court. Filing requirements and deadlines are necessary to an orderly bankruptcy process. View "In re: Henry" on Justia Law

Debtor filed a voluntary chapter 7 bankruptcy petition and listed Dennison, Ohio as the mailing address on the petition, but listed Debtor’s residence as 2035 First Street, Dock 9, Sandusky, Ohio. This location is the dock slip where Debtor kept his boat. Debtor listed the boat on Schedule B as “residential boat 46 foot 1988 SeaRayBoat.” On schedule C, Debtor claimed the boat exempt pursuant to Ohio’s homestead exemption. In July 2012, Debtor’s 38-year marriage ended. As part of the dissolution, Debtor transferred real property to his ex-wife, including their former marital home. Debtor asserts that after the dissolution of his marriage3 he moved into his boat and began using it as his full-time residence. The mailing address on the petition is Debtor’s former marital home, now belonging to and occupied by his ex-wife. The Trustee timely filed an objection and sought turnover of the boat. The bankruptcy court held that “the Chapter 7 Trustee has met his burden of proving by a preponderance of the evidence that the Sea Ray boat was not Debtor’s residence at the time of filing. The Sixth Circuit Bankruptcy Appellate Panel agreed that the Ohio homestead exemption cannot be claimed on the vessel and ordered turnover of the boat. View "In re: Aubiel" on Justia Law

Utica’s subsidiary, Republic, hired Sheppard’s law firm to pursue a subrogation action. Settlement proceeds totaling $145,000.00 were entrusted to the law firm; Sheppard was the managing partner. Republic was entitled to $130,740.03; that award was not distributed. Republic retained the Lewis, law firm to recover the money. The parties reached a settlement agreement; $60,000.00, was due in November 2013 and $70,740.03, was to be paid in December 2013. Payments were to be made to the Utica Atlanta regional office, which had originally worked with Sheppard and handles claims relating to member companies, including Republic. Sheppard’s portion, $30,000.00, was not received. In February 2014, Sheppard filed Chapter 7 bankruptcy. UTICA is listed as a creditor,with the address of its New York home office. The Bankruptcy Court mailed notice to all creditors of the May 30, 2014 date by which creditors had to file a complaint or challenge the dischargeability of certain debts. No notice was sent to Lewis or Republic. On May 21, 2014 Lewis sued Sheppard in Tennessee State Court, unaware of the pending bankruptcy. Lewis received notice of the bankruptcy on May 28, and, on May 29, filed a timely motion to extend the deadline. The Bankruptcy Appellate Panel reversed denial of the motion, finding sufficient “cause” to justify extension under Fed. R. Bankr. P. 4004 and 4007(c). View "In re: Sheppard" on Justia Law

The debtors owned a house in Michigan; in 2007, it was foreclosed and sold at a sheriff’s sale. In 2008, they filed for chapter 13 bankruptcy, but did not disclose any interest in the house or any related cause of action. The redemption period for the house expired after the bankruptcy petition date. The case was converted to a chapter 7 proceeding. The debtors received a discharge. The bankruptcy case closed in February 2009. In March, the debtors filed suit in state court, alleging that the foreclosure was defective, but never sought to reopen their bankruptcy case to amend their schedules. Learning about the case, the trustee claimed that the cause of action was bankruptcy estate property. The bankruptcy court reopened in 2013. The debtors filed an amended schedule that disclosed the claim, stating a value of $3 million. Each debtor claimed a “wildcard” exemption of $5,300.00, 11 U.S.C. 522(d)(5). The bankruptcy court approved settlement of the case and denied the trustee’s objection to the exemptions. The district court affirmed. The Sixth Circuit affirmed, citing the Supreme Court’s 2014 decision that a bankruptcy court may not use equitable powers to deny an exemption as a sanction for debtor misconduct, and noting that the trustee’s objection to timeliness was waived. View "Ellmann v. Baker" on Justia Law

In 1988 Sutherland received breast implants in North Carolina. She filed suit in North Carolina five years later, after learning that the silicone in her implants could be causing a variety of serious medical problems. The Silicone’s manufacturer, Dow Corning, filed for bankruptcy in Michigan, and Sutherland’s suit was transferred there. In 2012, 24 years after Sutherland received the implants, the district court concluded that Sutherland’s claim was barred by Michigan’s statute of limitations and granted summary judgment to the defendant. The Sixth Circuit reversed, reasoning that the district court should have applied North Carolina’s law instead of Michigan’s, and should have concluded that there was a genuine factual issue as to whether Sutherland’s claim was timely-filed under North Carolina law. View "Sutherland v. DCC Litig. Facility, Inc." on Justia Law

Claimants filed a $2,142,000 non-priority unsecured proof of claim in jointly administered Chapter 11 bankruptcy cases. That claim was disallowed by the bankruptcy court; the district court and the Sixth Circuit affirmed. As a result of the multitude of filings, strategies employed and positions taken over a six year period, the bankruptcy court sanctioned the attorney, Grossman, the sum of $207,004 pursuant to 28 U.S.C. 1927 and the court’s inherent authority under 11 U.S.C. 105, representing the attorney fees expended by counsel for the Official Committee of Unsecured Creditors and, post-confirmation, the Liquidation Trustee and his counsel, directly or indirectly related to the claim litigation. Grossman appealed the sanction and an order denying a motion which sought the recusal of the bankruptcy judge pursuant to 28 U.S.C. 455. In a separate appeal, Grossman challenged the retention of special counsel to collect the judgment against him and an order requiring him to submit to a debtor’s examination and provide written discovery. Consolidating the appeals, the Sixth Circuit Bankruptcy Appellate Panel affirmed. Grossman vexatiously pursued arguments and filed documents throughout the litigation that were frivolous; his claims about the judge were misstatements. View "In re: Royal Manor Mgmt., Inc." on Justia Law