St. Johns Case Blog

By: Yana Knutson

St. John’s Law Student

American Bankruptcy Institute Law Review Staff

 

The question of whether a debtor can obtain an exemption under 11 U.S.C. § 1146(a) from having to pay stamp or similar tax in a pre-confirmation asset transfer was decisively answered in the negative by the United States Supreme Court last year.[1] However, whether the exemption applies to a pre-confirmation sale that closed post-confirmation remains an issue with which courts must continue to struggle. 

By: Tracy Keeton

St. John’s Law Student

American Bankruptcy Institute Law Review Staff

 

In the case of Tate v. Bolen (In re Tate),[1] the Fifth Circuit held that for the purposes of calculating monthly income deductions under the “means test,”[2] a chapter 7 debtor may deduct a transportation ownership expense for a vehicle that is not encumbered by any debt or lease. In January 2007, the Tates sought to file for Chapter 7 bankruptcy. After filing, they were subject to the “means test” added to the Code by the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005. The purpose of the means test is to determine whether debtors have sufficient disposable income to repay a portion of their debt to creditors, which was at least $166.67 a month (or at least $10,000 over 5 years) at the time of the Tates’ bankruptcy filing, and if so, a chapter 7 proceeding is presumptively abusive.[3] 

 

By: Richard C. Solow

St. John’s Law Student

American Bankruptcy Institute Law Review Staff

 

Determining exactly which parties have the right to request relief from the automatic stay in bankruptcy has long been a challenging and contentious issue for the courts. Recently, in In re Jacobson,[1] the Bankruptcy Court for the Western District of Washington held that a “servicing agent” was not a “real party in interest” for the purpose of filing a section 362(d) motion, which when granted entitles a party to relief from an automatic stay. Substantiated evidence proving standing in bankruptcy court is necessary to allow parties to bring such motions. In denying UBS AG's (“UBS”) motion, the court upheld important notions of prudential standing, which require, even within the context of a federal bankruptcy forum, strict adherence and awareness of pertinent state requirements.[2]

By: Daniel J. Carollo

St. John’s Law Student

 

Recently, the United States Bankruptcy Court for the Southern District of Texas in In re Energy Partner’s Ltd.[1] held that employment agreements for professionals and other agents in a bankruptcy re-organization under 11 U.S.C. § 328 are subject to a heightened reasonableness standard because once a fee is approved by the court it will not be subject to review absent unforeseeable circumstances.[2] Energy Partners Ltd., an offshore oil and gas exploration company, and its affiliates filed a petition for relief under chapter 11 in May of 2009.[3] Two creditors committees appointed by the United States Trustee filed applications under section 328 requesting court approval to employ investment banking firms to provide two separate valuation reports on the bankrupt debtor corporation.[4] Each investment banking firm had requested a non-refundable fee of $500,000, plus various other administrative fees.[5] The court rejected the applications to employ the investment banks because the court determined that neither firm would provide a material benefit to the estate.[6]

 

By: John P. Esposito

St. John’s Law Student

American Bankruptcy Institute Law Review Staff

 

Recently, in a case of first impression, the Sixth Circuit was presented with the opportunity to address the interaction of the “mootness” provision of section 363(m)[1] and the power of a trustee under section 363(h) to sell “both the estate’s interest . . . and the interest of any co-owner in [estate] property.”[2] In In re Nashville Senior Living, LLC,[3] the Sixth Circuit held that a non-debtor co-owners’ failure to obtain a stay of the bankruptcy court’s order approving the sale of both the debtors’ interest and the interests of the co-owners in jointly-owned property rendered an appeal to undo the sale as moot.[4] The court rejected, as “an aberration in well-settled bankruptcy jurisprudence,”[5] the contrary reasoning of the Ninth Circuit in Clear Channel Outdoor, Inc. v. Knupfer (In re PW, LLC)[6], which held that mootness could not apply to the “free and clear” aspect of a sale authorized under section 363(f). In essence, the Sixth Circuit interpreted section 363’s mootness provision expansively to cover sales under subsection (h),[7] despite the fact that 363(m) explicitly applies only to sales under sections 363(b)[8] or (c).[9]

By: Marissa Gross

St. John’s Law Student

American Bankruptcy Institute Law Review Staff

 

Recently, in Midwest Holding # 7, LLC v. Anderson (In re Tanner Family, LLC),[1] the Eleventh Circuit held that a debt on a lease agreement is incurred at the time of signing and not when the rental payments become due. Under section 547(b) of the Code, a bankruptcy trustee can avoid “any transfer of an interest of the debtor in property” provided the transfer meets five elements.[2] Since one of those elements requires that the payment sought to be avoided must be “for or on account of an antecedent debt owed by the debtor before such transfer was made,” determining when a debt is incurred is essential to the analysis.[3]

 

By: Reshma Shah

St. John’s Law Student

American Bankruptcy Institute Law Review Staff

 

In In re Century City Doctors Hospital, LLC (“Century City”), the Bankruptcy Court for the Central District of California held that the chapter 7 trustee who assumed control of the debtor’s business operations solely to liquidate assets was not required to abide by the Worker Adjustment and Retraining Notification (“WARN”) Act.[1] In Century City, a hospital with over one hundred employees, filed for chapter 7 relief and, within two hours of the hospital’s filing, the trustee assigned to wind down the hospital’s operations conducted a mass lay off of employees.[2] After the admitted patients had been transferred into appropriate health care facilities,[3] the remaining staff was also terminated.[4] None of the hospital’s employees received notice prior to being laid off.

 

By: Jenny J. Huang

St. John’s Law Student

American Bankruptcy Institute Law Review Staff

 

In bankruptcy, “one of the most controversial and frequently litigated of the avoidance powers” is the debtor or trustee’s ability to recover preferential transfers under 11 U.S.C. § 547(b).[1] The twin purposes of section 547(b) are to “prevent[] individual creditors from dismembering the assets of the debtor in a manner that negatively impacts other creditors, and [to allow] all creditors to obtain a more equitable distribution of the assets of the debtor.”[2] Recently, in Parks v. FIA Card Services (In re Marshall), the Tenth Circuit addressed how courts should adhere to these twin purposes in a landscape where nearly instantaneous electronic transfers pose a new problem for the court’s analysis.[3] 

 

By: Lauren Kiss

St. John’s Law Student

American Bankruptcy Institute Law Review Staff

 

Federal and state authority sometimes conflict with each other. This was illustrated in Stanley v. Trinchard (In re Hale), in which the Fifth Circuit held that 11 U.S.C. § 108(a), which grants a bankruptcy trustee a time extension to commence suit on behalf of the debtor, superseded Louisiana’s peremption period for legal malpractice claims.[1] In April 2002, Hale’s bankruptcy trustee filed suit in federal court in Louisiana against Trinchard, alleging that Trinchard had committed malpractice in its mishandling of the settlement negotiations. Trinchard argued the claim was time barred under Louisiana law.[2]  In 1991, Gerald Burge (“Burge”) filed a civil rights action against the St. Tammany Parish Sheriff, the former Sheriff’s Deputy Hale (“Hale”), and their insurer, Northwestern National Insurance Company of Milwaukee, Wisconsin (“NNIC”).  In May 1995, NNIC appointed Trinchard, Trinchard, & Trinchard LLC (“Trinchard”) to represent the sheriff and Hale.  In November 2000, a settlement was reached between Trinchard, NNIC’s counsel, and Burge’s counsel, which fully released NNIC from liability, but only partially released the sheriff and Hale from liability. In January 2001, Hale consented to the settlement.  In May 2001, judgment was entered against the sheriff and Hale in the amount of $4,075,000 on Burge’s remaining claims. In October 2001, Burge brought suit against Hale to collect the entire judgment in Mississippi and Hale was forced into bankruptcy on October 15, 2001.