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

In 2009, Debtor had received an IRS Notice of Deficiency for tax year 2004, claiming additional taxes of $143,445.00, plus penalties of $28,689.00. Debtor filed a voluntary Chapter 7 petition in 2011. In 2011, Debtor received a Notice of Deficiency for tax years 2007 and 2008 claiming that $138,907.00 in additional taxes for 2007, plus penalties of $27,781.40, and an additional $109,648.00 in taxes for 2008, plus penalties of $21,929.60. Debtor challenged the notices. The Tax Court dismissed with respect to the notices for 2007-2008 because of the automatic stay. Post-petition, the Debtor received a $86,512.32 tax refund, based on his 2005 tax return. The Trustee claimed the refund, but Debtor returned the check to the IRS. The Trustee sought turnover of the refund; Debtor objected. The IRS tendered a check for $32,555.15 to Debtor, relating to 2005 taxes, which was received by the Trustee. Debtor sought a determination of tax liability pursuant to 11 U.S.C. 505(a)(1) and turnover of funds if the IRS’s claim was disallowed. The bankruptcy court held that the IRS’s claim of $226,142.85, pertaining to 2004 taxes, was nondischargeable and that the tax refund check for $86,512.32, which erroneously issued to the Debtor, was not property of the estate. The Sixth Circuit Bankruptcy Appellate Panel reversed as to priority and nondischargeability, because the lower court did not address the limitations period. View "In re: Winter" on Justia Law

Debtors owed delinquent real estate taxes to Summit County, Ohio, which sells outstanding tax obligations to investors as tax lien certificates. An investor purchasing such a certificate obtains a lien against the property and the right to pursue the taxpayer for the unpaid taxes, O.R.C. 5721.30-43. Plymouth filed a certificate showing its purchase of the Debtors’ tax obligation for $4,083.73 with a negotiated interest rate of 0.25%, “offered, sold, and delivered on November 3, 2010.” On October 3, 2011, Plymouth filed a second certificate, with a price of $2,045.44 and a negotiated interest rate of 18.00%. On April 17, 2012, Summit County filed a tax lien foreclosure complaint against the Debtors pursuant to pursuant to Plymouth's request for foreclosure. In May, 2012, the Debtors filed a chapter 13 plan and petition, proposing to pay interest on the tax certificates at the interest rates listed on the certificates. Plymouth filed a proof of claim based on both certificates in the amount of $10,521.46, including $2,120.00 in fees and the principal balance of $7,781.19 plus 18% interest from June 1, 2012 on both certificates. The Bankruptcy Court held that under Ohio law the appropriate interest rate for Plymouth’s tax claim was 0.25%. The Bankruptcy Appellate Panel affirmed. View "In re: Bowers" on Justia Law

The bankruptcy court held that a district court judgment entered against the Debtor was nondischargeable under 11 U.S.C. 523(a)(6). The Sixth Circuit Bankruptcy Appellate Panel affirmed, holding that the bankruptcy court properly gave the district court’s findings preclusive effect as to whether the judgment was the result of the Debtor’s willful and malicious injury. View "In re: Barlow" on Justia Law

In 2004, Lampe won a $25,000 judgment against Kash. Kash could not pay his debts and sought bankruptcy protection in 2012. When he submitted a list of creditors, under Bankruptcy Rule 1007(a) Kash omitted Lampe’s residential address, listing her in care of the law firm that represented her eight years earlier. The firm stopped working for Lampe in 2004, and the notice never reached Lampe, who did not participate in the bankruptcy case, which discharged the judgment debt. After the discharge, Lampe returned to the district court, seeking to revive her judgment. The district court rejected her claim. The Sixth Circuit reversed. A debt is a creditor’s property, and the Due Process Clause entitles her to service of notice “reasonably calculated” to reach her before she is deprived of that property. Notification to a former attorney provides little assurance that the notice will reach the creditor. Lawyers have “no general continuing obligation” to pass information along to people they no longer represent. Nothing in the record suggested that the search for Lampe’s address would have imposed an unreasonable burden on Kash; without further investigation, any belief that the firm still worked for Lampe in 2012 was unreasonable. View "Lampe v. Kash" on Justia Law

Beginning in 2004, 1st Source Bank entered into secured transactions with the debtors for the sale or lease of tractors and trailers. The agreements granted 1st Source a security interest in the tractors and/or trailers, accounts, and in proceeds from that collateral. 1st Source filed financing statements that identified the collateral as including the specified tractors/and or trailers, and “all proceeds thereof, including rental and/or lease receipts.” The financing statements did not refer to “accounts,” “accounts receivable,” or any similar language. Later, defendant banks also entered into secured transactions with the debtors and filed financing statements that specifically referred to a security interest in “all accounts receivable now outstanding or hereafter arising.” In 2009, the debtors defaulted. 1st Source undertook repossession of the collateral securing the agreements and attempted to claim a perfected security interest and first priority in debtors’ accounts, arguing that the term “and all proceeds thereof” included accounts receivable. The district court granted defendants summary judgment, finding that 1st Source’s financing statements were not sufficient to put defendants on notice that 1st Source claimed a security interest in accounts receivable, and holding, as a matter of Tennessee law, that “proceeds,” as used in a company’s financing statement, does not include its accounts receivable. The Sixth Circuit affirmed. View "1st Source Bank v. Wilson Bank & Trust" on Justia Law

In 2009, Tyler had accumulated $1,041 of debt on his Chase credit card. DHC, assignee of the debt, filed suit in Kentucky, seeking collection of the debt, plus 21% interest, and attorney’s fees. The complaint had not been served when Tyler filed for Chapter 7 bankruptcy, three months after the suit was filed. Tyler did not list this suit as debt or his potential Fair Debt Collection Practices Act counterclaims as assets on the bankruptcy schedules. Tyler did list a debt owed on a Chase credit card, of “Unknown” amount. Chase did not participate and Tyler was granted a discharge. Eight days later, DHC served process on Tyler. DHC filed a voluntary Notice of Dismissal without prejudice after it learned of Tyler’s bankruptcy, but Tyler filed a purported federal class action, alleging violations of the FDCPA and Kentucky’s usury laws. The district court dismissed, finding that Tyler “elected to forego filing compulsory counterclaims” and that Tyler’s claims were “rooted in the allegations in DHC’s state court complaint” and thus part of the bankruptcy estate. The Sixth Circuit affirmed. While the claim was not barred under res judicata principles, the claim was based on a pre-petition violation and, thus, property of the bankruptcy estate.View "Tyler v. DH Capital Mgmt., Inc." on Justia Law

Debtor was married to Plaintiff’s son, John. Plaintiff and John had an extensive model train collection. After John died, Plaintiff sued, seeking $25,000 for Debtor’s alleged conversion of the collection. Debtor was appointed administratrix of John’s probate estate. After completion of an inventory, Plaintiff and Debtor, individually and as administratrix, entered into a settlement resolving the state court litigation and matters in Probate Court, identifying parts of the collection as belonging to Plaintiff and requiring Debtor to surrender possession of those parts. The remainder of the collection was to be sold at auction and the proceeds were to be split. The court subsequently entered multiple orders directing Debtor to turn over certain trains and accessories to Plaintiff and imposed penalty of $100.00 per day. Finally, the court entered judgment in the amount of $32,186.90 plus interest based on Debtor’s “willful contempt.” Debtor then filed a bankruptcy petition and Plaintiff sought to except from discharge the entire debt owed to him pursuant to 11 U.S.C. 523(a)(2)(A) and (a)(7). The bankruptcy court held that the entire amount ($32,186), not just $9,386.90, was nondischargeable under 523(a)(2)(A). The bankruptcy appellate panel affirmed. View "In re: Nicodemus" on Justia Law

After the Underhills received their discharge under a voluntary Chapter 7 petition in May 2010, Golf Chic, an LLC in which Beth Underhill was the sole member, filed a claim for tortious interference against several entities in October 2010. The lawsuit was settled and $80,000 was awarded to the LLC, but the settlement check was made payable to Beth Underhill and her attorney, rather than to the LLC. Huntington Bank successfully moved to reopen the case so that the settlement proceeds could be administered as an asset of the bankruptcy estate. The Bankruptcy Appellate Panel affirmed. The settlement proceeds received after the discharge were sufficiently rooted in the debtors’ pre-bankruptcy past to be property of the estate, 11 U.S.C. 541(a)(1) and the claims were not abandoned by the trustee when the bankruptcy case was closed. The claim was known to Beth Underhill and affected the value of her membership interest. Placing a value of zero on the membership interest with that knowledge constituted failure to disclose the asset and warrants reopening and a determination by the bankruptcy court of the value of the interest in the LLC. View "In re: Underhill" on Justia Law

Aleris supplied aluminum to Behr under a requirements contract until a labor dispute forced Aleris to close its Quebec factory in 2008. After learning of the closure, Behr took delivery of aluminum worth $2.6 million from Aleris without paying for it and scrambled to obtain aluminum from other suppliers, which Behr says increased its costs by $1.5 million. Behr filed suit in Michigan state court. That suit was stayed in 2009 when Aleris’s parent company filed for bankruptcy in the U.S. Aleris filed for bankruptcy in Canada. Aleris sued Behr in federal court seeking recovery of $2.6 million for the aluminum delivery. Behr asserted numerous defenses and counterclaims including a setoff for its increased costs after the factory closure. The district court abstained from adjudication of Behr’s counterclaim, characterizing it as “part and parcel of the stayed state-court proceedings,” then granted summary judgment to Aleris in the amount of $1.1 million and closed the case. Behr satisfied the judgment. The state court declined to lift the stay. The Sixth Circuit reversed, stating that the decision gave Behr full value for its untested counterclaim and has the impact of depriving the Canadian estate of monies to which it might be entitled. View "RSM Richter, Inc. v. Behr America, Inc." on Justia Law

Greektown, the owner of a Detroit casino, and affiliates filed for Chapter 11 bankruptcy. The bankruptcy court confirmed a reorganization plan and named a trustee. Before the plan became effective, the bankruptcy court authorized unsecured creditors to file a fraudulent transfer action under 11 U.S.C. 544 and 550 and the Michigan Uniform Fraudulent Transfer Act, alleging that Greektown incurred $185 million dollars of debt and simultaneously transferred approximately $177 million to several transferees, including the Tribe. The complaint alleged that the Tribe directly received $6 million and that $145 million transferred to others indirectly benefitted the Tribe because the Michigan Gaming Control Board had required the Tribe to pay this amount to those others if Greektown failed to do so. The Trustee and the Tribe later agreed to a settlement, under which the Tribe would pay $2.75 million and relinquish approximately $2.58 million in claims it had filed, conditioned upon the bankruptcy court’s entering a bar on further claims “arising out of or reasonably flowing from” either the fraudulent transfer proceeding or the allegedly fraudulent transfers themselves. The district court approved the settlement and entered the bar order over objections. Finding the order overly broad, the Sixth Circuit remanded for the court to consider whether the outcome of the actions covered by the bar order would affect the bankruptcy estate. View "Papas v. Buchwald Capital Advisors, LLC" on Justia Law