Category Archives: opinion

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River East Plaza, LLC v. LNV Corp.

Justia.com Opinion Summary: The debtor’s single asset is a commercial building. The lender promptly started foreclosure proceedings in state court, prevailed, and a foreclosure sale of the property was scheduled, but was stayed when the debtor filed for bankruptcy, 11 U.S.C. 362(a)(4). The lender became a participant in the bankruptcy The bankruptcy court rejected the debtor’s plan to exchange the mortgage for an “indubitable equivalent,” lifted the stay, and dismissed the bankruptcy. The Seventh Circuit affirmed, noting that the lender has waited years to enforce its lien and that the court was not required to further stretch the wait. The lien on Treasury bonds proposed by the debtor would not be equivalent to the lender retaining its lien on the building. 

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Reedsburg Util. Comm’n v. Grede Foundries (7th Cir.)

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Justia.com Opinion Summary:

Wisconsin smelting plant owed more than $1.3 million in delinquent utility charges to the local municipal utility when it filed for Chapter 11. Months later, despite the Automatic Stay, a utility company implemented a process pursuant to Wisconsin Statutes and Local Ordinances 66.0809 and 66.0627 by which the plant’s unpaid utility bills became a lien against the Debtor‘s property. Both the Bankruptcy and District Courts found that none of the exceptions to the Automatic Stay applied to make their actions. They were, in fact, a violation of the Stay.  The 7th Circuit Court of Appeals affirmed, holding that no exception to the Stay applied and the offending utility company creditor did not obtain a pre-petition security interest in the plant’s property by providing services or by giving notice in the form of billing. Finally, the 7th Circuit agreed with the District Court that the utility bills produced did not amount to a “tax or special assessment” that would have exempted them from the operation of the Stay.

Click here to download this Opinion in PDF format


Stern v. Marshall (US S.Ct.)

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Stern, Executor for Est. of Marshall v. Marshall, Executrix for Est. of MarshallSupreme Court of United States   Decided June 23
Click here to view and download the opinion in .pdf format.
The Question: Whether a bankruptcy court judge hadauthority under 28 U. S. C. §157 and Article III of the US Constitution to enter final judgment on a counterclaim filed by Vickie Lynn Marshall a/k/a Anna Nicole Smith (whose Estate is Petitioner) against Pierce Marshall (whose Estate is Respondent) in her bankruptcy proceedings.
The Upshot: As set forth in §157(a) Congress divided bankruptcy proceedings into 3 categories:
  1. Cases under Title 11;
  2. Cases arising in a Title 11 case; and
  3. Cases related to a case under Title 11.
With respect to the first 2 categories, “core proceedings arising under title 11, or arising in a case under title 11,” District courts refer proceedings to bankruptcy judges, who intern are empowered to enter a final judgment. §§157(a), (b). Pierce argued that the bankruptcy court lacked jurisdiction to resolve Vickie’s counterclaim because his own initial defamation claim against her was a “personal injury tort” – that is, the kind of thing that the bankruptcy court lacked jurisdiction to hear under §157(b) because it did not arise under title 11 or arise in a title 11 case.
The Decision: A majority of the Supreme Court agreed with Pierce and rejected the claim made by the estate of Anna Nicole that the bankruptcy court legitimately exercised jurisdiction over the counterclaim as an adjunct of the District Court or Court of Appeals. Instead the Court held that the 1984 Bankruptcy Act and §§157(c) and 1334(c) required that some matters be sent to the State or District courts for resolution, and nothing about this situation changed that basic division of labor.

In re Outboard Marine (ND IL ED)(J. Squires)

In re Outboard Marine Corporation, et al., 00-037405
Issued: June 23, 2011
Judge: John H. Squires

Click here to view and download the opinion in .pdf format.

The UpshotWhen sanctions are requested upon a party’s motion pursuant to Bankruptcy Rule 9011(c)(A), two requirements must be met: the motion must be made separate and apart from other motions or requests and “[must] describe the specific conduct alleged to violate subdivision (b)[,]” and “the motion may not be presented to the court unless, within twenty-one days of service, the non-movant has not withdrawn or corrected the challenged behavior.” The Trustee argues that the Statement of Interest filed by Counsel on behalf of NAEIR warrants sanctions under Rule 9011 because theStipulation released any right NAEIR had to assert a claim against the proceeds of the ACE GL Policies and, as such, the Statement of Interest is not reasonably based in law or fact. Next, the Trustee seeks sanctions against Counsel pursuant to 28 U.S.C. § 1927, which provides as follows: Any attorney or other person admitted to conduct cases in any court of the United States or any Territory thereof who so multiplies the proceedings in any case unreasonably and vexatiously may be required by the court to satisfy personally the excess costs, expenses, and attorneys’ fees reasonably incurred because of such conduct.

In re Netzel, 08-046723 (ND IL ED) (J. Doyle)

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Issued: January 20, 2011 by Judge Doyle

Case #: 09 B 46723, 10 A 01292

The Issue: Whether an individual creditor has  standing under  § 523(a)(4) to bring a direct action against directors of an insolvent corporation for breach of fiduciary duty.

The Story: Debtor owned a plumbing company.  Plaintiff claimed that Debtor breached his fiduciary duty to creditors after the plumbing company became insolvent due to the diversion of company funds to pay for the Debtor’s personal debts.  Creditor claimed that the debt was non-dischargeable in bankruptcy under Rule 523(a)(4).  The court held that the individual creditor lacked standing.   Also a good walk thru on Illinois law about “Special Circumstances Fiduciary Duty.”

Click here to view and download the opinion in .pdf format.

In re Jones, 10-04352 (ND IL ED)(J. Hollis)

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In re Willie and Peggy Jones, 10-004352

Ruling issued Feb. 24, 2011

By the Hon. Pamela S. Hollis

The Issue: A creditor moves to Amend the Plan and for Relief from Plan pursuant to 11 U.S.C. § 1329, relief from staypursuant to 11 U.S.C. § 362(d), and relief from the Confirmation Order, pursuant to Federal Ruleof Civil Procedure 60(b).

The Opinion: In this case the creditor was a pawn shop and the debtor had a loan from the creditor secured by jewelry.  The debtor listed the pawn shop as a creditor and the plan allowed for repayment of the loan.  The pawn shop received notice its status as a creditor and of the plan; however, the pawn shop never appeared in court nor objected to the plan.  Only after the plan was confirmed and it had received the first payment, did it file this motion.  The court dismissed all counts of the motion.  The 1329 claim was dismissed because the pawn shop “is a secured creditor and only a debtor, the Trustee, or the holder of an unsecured claim can seek modification.”  The court does a thorough job of analyzing the FRCP 60(b) and 11 USC 362(d) claims.

Click here to view and download the Opinion as to the Motion to Amend
Click here to view and download the Opinion as to the Motion for Damages

Harris v. Gander Partners (ND IL)

Harris N.A. v. Gander Partners LLC ,(N.D.Ill.)

Issue: When an LLC is in Chapter 11 reorganization, can a creditor collect directly from the principals of the company instead?

Answer: Apparently not in the Northern District of Illinois

Upshot: Here, the Court upheld an injunction entered by the Bankruptcy Court after determining that

  • The participation of these principles was essential to the company’s reorganization
  • If these principles were distracted by this lawsuit the reorganization would likely fail
  • Many other creditors would be harmed financially if this reorganization failed; and
  • The creditor seeking to collect only faced only a temporary stay, anyway.

In the immortal words of Spockcirca Star Trek IIthe needs of the many outweigh the needs of the few.