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

As one of the largest developers in Cincinnati, Erpenbeck defrauded buyers and banks out of nearly $34 million. Erpenbeck pled guilty to bank-fraud in 2003, received a 300-month sentence, and was ordered to forfeit proceeds: $33,935,878.02, 18 U.S.C. 982(a). The FBI later learned that Erpenbeck had given a friend more than $250,000 in cash. The friend put the cash in a cooler and buried it on a golf course. Agents unearthed the cooler. The government sought forfeiture of the cash and posted online notice in 2009. Three months later, the trustee of Erpenbeck’s bankruptcy estate contacted an Assistant U.S. Attorney, told her the estate had an interest in the cash and asked about the government's plans. The attorney did not mention the forfeiture proceedings. Because no one asserted an interest, the district court entered an order vesting title to the cash in the government, 21 U.S.C. 853(n)(7). The trustee sought to stay the order in November 2010. The district court denied the motion because the trustee did not file a timely petition. The Sixth Circuit vacated. Even though the trustee’s interest in the cash was "far from a mystery," the government did not take even the "modest step" of sending a certified letter. View "United States v. Erpenbeck" on Justia Law

In the 1990s debtors owned a business that failed and incurred liabilities from unpaid taxes. They had a monthly payment obligation to the IRS. Husband obtained employment; 2003 to 2009, his yearly gross income was between $53,000 and $59,000. In addition, he receives $1,300 per month from a settlement annuity. Wife was employed as a bookkeeper until 1999. In 2000, she pled guilty to felony embezzlement of funds from her former employer and was sentenced to probation and required to pay restitution of $800 per month. Before her indictment wife obtained employment as a bookkeeper for plaintiff, began embezzling, and deposited stolen funds to Debtors’ joint bank accounts. By 2006, she had embezzled $283,391.88 from plaintiff and forged credit card purchases of $2,821.43. In 2007, she embezzled $328,516.10. In 2008, she embezzled $11,230.21. She stole goods valued at $127,156 from her employer. Debtors spent accordingly. The Bankruptcy Court entered an order excepting debt owed to plaintiff from discharge under 11 U.S.C. 523(a)(6), finding that husband conspired with wife to convert embezzled funds and other property. The Sixth Circuit affirmed, holding that Debtors’ conduct constituted willful and malicious injury to plaintiff. View "In re: Cottingham" on Justia Law

Stokes owned 1Point, which managed employee-benefits plans and 401(k) retirement plans as a third-party administrator (TPA). Most were governed by the Employee Retirement Income Security Act, 29 U.S.C. 1002. TPAs generally provide record-keeping and assist in transferring money, but do not handle money or securities. Stokes directed clients to send funds to accounts he had opened in 1Point’s name. Cafeteria plan clients deposited $45 million and 401(k) clients deposited $5.7 million in accounts at Regions. Because the accounts bore 1Point’s name, Stokes was able to transfer money. Between 2002 and 2006, Stokes stole large sums. Regions failed to comply with the Bank Secrecy Act, 31 U.S.C. 3513, requirements to report large currency transactions, file suspicious-activity reports, verify identities for accounts, and maintain automated computer monitoring. In 2004, the U.S. Financial Crimes Enforcement Network assessed a $10 million fine against Regions. In 2006, Stokes and 1Point filed for bankruptcy. The Trustee filed suit against Regions in bankruptcy court on behalf of victimized plans for which he assumed fiduciary status. The suit was consolidated with plaintiffs’ suit. The district court withdrew the Trustee’s case from bankruptcy court, dismissed ERISA claims, and found that ERISA preempted state law claims. The Sixth Circuit affirmed. View "McLemore v. Regions Bank" on Justia Law

In 2007, Debtor purchased a manufactured home, borrowing the funds from Creditor and granting a security interest. Creditor filed an application for first title and a title lien statement in Whitley County, Kentucky. The seller of the manufactured home is located in Whitley County. Debtor resided at the time in Laurel County, Kentucky. Later, the Kentucky Transportation Cabinet issued a Certificate of Title for the Manufactured Home showing the lien as being filed in Whitley County. In 2010, Debtor filed his voluntary Chapter 7 bankruptcy petition. The Chapter 7 Trustee initiated an adversary proceeding. The Bankruptcy Court avoided the lien, 11 U.S.C. 544. The Sixth Circuit affirmed. The statute requires that title lien statements be filed in the county of the debtor’s residence even if the initial application for certificate of title or registration is filed in another county under KRS 186A.120(2)(a). View "In re: Pierce" on Justia Law

The Debtor filed a voluntary petition for relief under Chapter 7, listing no student loan debts. Notice of filing was sent to listed creditors. Weeks later, Debtor filed an amended Schedule F which listing a creditor holding a student loan in the amount of $76,654.86. One week later, the bankruptcy court issued a general Chapter 7 discharge. No adversary proceedings were commenced during the case and no determination of undue hardship was requested or made. About six months later, the Chapter 7 Trustee filed a no asset report, and the bankruptcy court entered a final decree and closed the case. Seven years later, the Debtor sought to pursue sanctions and damages against the holder of her student loans for an alleged violation of the discharge injunction. The bankruptcy court denied a motion to reopen. The Sixth Circuit. Student loans are not discharged in bankruptcy absent determination of undue hardship in an adversary proceeding, 11 U.S.C. 523(a)(8).

In Chapter 11 bankruptcy, the airline extracted concessions that resulted in an approximate 40 percent wage cut for pilots in return for an $888 million claim in bankruptcy to be disbursed as stock shares. The union first suggested that a pilot's share should reflect time that the pilot worked during the 85-month concessionary period, but ultimately adopted a cutoff date for determining which pilots would receive full shares. The cutoff assumed that any pilot employed on the effective date of the Restructuring Agreement would remain employed through its termination four years later. Any pilot who left before the date would receive a share based the number of months that the pilot worked during the concessionary period. All participants in the Early Retirement Program retired after the cutoff date. Plaintiffs, retirees who reached mandatory retirement age and left before the cutoff, received shares at least $100,000 less than expected. The union rejected appeals. The district court granted summary judgment to the union. The Sixth Circuit affirmed, rejecting claims that the union breached its duty of fair representation, Railway Labor Act, 45 U.S.C. 15, and discriminated based on age, Age Discrimination in Employment Act, 29 U.S.C. 623(c)(1), and Mich. Comp. Laws 37.2204(a).

Plaintiff's bank, Firstar, erroneously dishonored her check for her April 2002 monthly mortgage payment to Aames. Firstar issued an "official check" to Aames on April 8, 2002 but also failed to honor that check. Aames notified plaintiff of default on April 20 and assessed a late fee. Firstar ultimately honored her personal check as well as one of two official checks, resulting in two mortgage payments received for the month of April. Plaintiff did not submit a payment for May. Aames sent notice that it had assigned the mortgage to Ocwen, which began dunning plaintiff and her husband, who is not a co-borrower, for the May payment, despite proof of the double payment. No assignment was recorded. Ocwen made endless collection calls, despite cease and desist requests and registry on the federal “Do Not Call” directory; threatened foreclosure; assessed late fees; and reported derogatory information to the credit reporting agencies. Plaintiffs alleged violation of the Fair Debt Collection Practices Act, 15 U.S.C. 1692. The district court dismissed, concluding that neither defendant was covered under the Act as neither was a debt collector. The Sixth Circuit reversed, stating that defendants cannot "have it both ways."

In 2009, Debtor filed a chapter 13 petition that was dismissed for failure to file a plan or schedules. Two months later, she filed a pro se chapter 7 petition which was dismissed for failure to produce proper documentation. She soon filed another pro se petition, under chapter 11. Debtor is the owner of 10 parcels of real estate from which she earns $5,340.00 per month in rental income, although she asserts that most of the properties are currently vacant. One of her creditors asserted, and the court agreed, that she was using bankruptcy stays to prevent foreclosure and live rent free. In dismissing the petition the court ordered that: "Debtor, or anyone in contractual privity with the Debtor or anyone having or purporting to have a possessory interest in the real property located at… is permanently barred from ever listing said Property or the debt owed to Creditor in a future bankruptcy petition," 11 U.S.C. 105; 362(d)(4). The Sixth Circuit affirmed dismissal with prejudice for 180 days and the order granting in rem relief against the specific property, insofar as it applies to Debtor and anyone in contractual privity with the Debtor.

Reyes alleges that her home was foreclosed upon and that she and her children were forced to live in a motel. She agreed to pay debtor $22,000 for a mobile home and gave debtor $15,000 in cash. The closing never took place and Reyes claims that debtor was not the owner of the trailer at the time of the sale. Reyes filed suit and, just before trial, debtor filed a voluntary Chapter 7 petition. Reyes filed a complaint (11 U.S.C. 523(a)(2)(A)and (a)(6)), arguing that the debt was not dischargeable. The bankruptcy court found that the complaint met the heightened pleading standard for fraud. Debtor's attorney withdrew. After several continuances, Reyes sought voluntary dismissal without prejudice. The court dismissed with prejudice without explanation. The Sixth Circuit reversed.

In 2006 debtors sublet land from lessees on a 30-year recorded lease and purchased a three-story cottage on the land by bill of sale. The lease refers to removal of the structure upon termination of the lease and requires approval by the lessor of any liens or mortgages. The landowner consented to a mortgage on the cottage and leasehold. Two years later, debtors filed a voluntary Chapter 7 petition and listed the cottage as real property, with a secured claim of $235,000. The Trustee sought to avoid security interests held by the bank and landowner, arguing that the cottage was a chattel so that a lien could only be perfected by filing a financing statement with the Ohio Secretary of State. The bankruptcy court ruled that the mortgage was valid, concluding that the cottage was a fixture. The Sixth Circuit affirmed. To avoid the security interest (11 U.S.C. 544) the trustee had to show that the cottage was chattel. The cottage is highly integrated with the land and unlikely to be moved or dismantled; there was no proof that the parties intended that it be chattel. Security interests in both the cottage and leasehold were properly secured.