The U.S. Court of Appeals for the Ninth Circuit recently reversed a trial court’s order granting summary judgment in favor of the buyer at a homeowners association’s non-judicial foreclosure sale that was conducted in violation of the automatic stay in the borrower’s bankruptcy, and against a mortgagee whose interest in the foreclosed property would have been extinguished.

In so ruling, the Ninth Circuit held that a first deed of trust lienholder may set aside a completed super-priority lien foreclosure sale if the sale violates the bankruptcy automatic stay.

The last year and a half was a time to be remembered in bankruptcy law. It started with an eye on increasing the ability of small businesses to utilize the Chapter 11 process in a more efficient and less expensive way, which led to a record number of commercial filings, a reduction in consumer filings, and a test of the bankruptcy system. What will the second half of 2021 look like?

The U.S. Court of Appeals for the Sixth Circuit recently held that 11 U.S.C. § 1307(b) requires a bankruptcy court to dismiss a Chapter 13 bankruptcy petition upon a debtor’s request, even if the debtor filed his or her petition in bad faith.

A copy of the opinion in In re Ronald Smith is available at: Link to Opinion.

"`Staggering' legal fees in Boy Scouts Bankruptcy Case." So read the title of an article in The New York Times on May 11, 2021. According to the reporter, a "lawyer negotiating a resolution to the multi-billion dollar bankruptcy filed by the Boy Scouts of America billed $267,435 in a single month. Another charged $1,725 for each hour of work. New lawyers fresh out of law school have been billing at an hourly rate of more than $600." The bankruptcy judge presiding over the case has called the fee totals "staggering," said the reporter.

The Third Circuit recently held, in a case from the Energy Future Holdings bankruptcy, that a losing stalking horse bidder can provide sufficient value to the debtor’s estate to receive an administrative claim for a break-up fee and expenses. In re Energy Future Holdings Corp., 990 F.3d 728, 748 (3rd Cir. 2021). This represents an expansive view of potential administrative claims related to those costs, providing bidders significant potential protections for their bids.

“[B]ankruptcy inevitably creates harsh results for some players,” explained the U.S. Court of Appeals for the Third Circuit on May 21, 2021, when it denied a film producer’s claim for contractual cure payments. In re Weinstein Company Holdings, LLC, 2021 WL 2023058, *9 (3d Cir. May 21, 2021).

The debtors' legal malpractice claim was "not property of their bankruptcy estate," held a split Ninth Circuit on June 30, 2020. In re Glaser, 816 Fed. Appx. 103, 104 (9th Cir. June 30, 2020) (2-1). But the U.S. District Court for the District of Minnesota one week later affirmed a bankruptcy court judgment that "the [debtor's] estate was the proper owner" of such a claim. In re Bruess, 2020 WL3642324, 1 (D. Minn. July 6, 2020).

A secured lender's "mere retention of property [after a pre-bankruptcy repossession] does not violate" the automatic stay provision [362(a) (3)] of the Bankruptcy Code, held a unanimous U.S. Supreme Court on Jan. 14, 2021. City of Chicago v. Fulton, 2021 WL 125106, 4 ( Jan. 14, 2021). Reversing the Seventh Circuit's affirmance of a bankruptcy court judgment holding a secured lender in contempt for violating the automatic stay, the Court resolved "a split" in the Circuits. Id. at 2. The Second, Eighth and Ninth Circuits had agreed with the Seventh Circuit.

The U.S. Court of Appeals for the Fifth Circuit recently affirmed a trial court’s denial of a consumer’s Chapter 13 bankruptcy plan that proposed a “partial surrender” of a cross-collateralized loan.

In so ruling, the Fifth Circuit held that the text of 11 U.S.C. § 1325(a)(5) allows debtors to select a different option “with respect to each allowed secured claim,” but it does not allow a debtor to select different options for different collateral securing the same claim.

Brazos Electric Power Cooperative recently filed for Chapter 11 relief in the U.S. Bankruptcy Court for the Southern District of Texas, weeks after the February ice storm severely disrupted Texas’s electricity supply and prices. Brazos filed for bankruptcy in part to shield its member cooperatives and consumers from liability for invoices totaling over $2.1 billion from the Electric Reliability Council of Texas.