Part 1 of this blog series examined a bankruptcy court’s subject matter jurisdiction over a debtor’s legal malpractice claims. See, Part 1. Recognizing that bankruptcy courts typically retain related to jurisdiction over legal malpractice claims against a debtor’s pre-petition counsel, this blog now turns to abstention considerations for a legal malpractice strategy.

Keystone Tube Company, LLC and four affiliates, including A.M. Castle & Co. (OTC: CASL), HY-Alloy Steels Company, Keystone Service, Inc. and Total Plastics, Inc., have filed chapter 11 petitions before the United States Bankruptcy Court for the District of Delaware (Lead Case No. 17-11330). The debtors are a specialty metals distribution company.

The U.S. Court of Appeals for the Second Circuit recently affirmed the dismissal of LIBOR-manipulation fraud claims brought by a group of hotel-related entities and their investor against a bank and two of its subsidiaries.

In so ruling, the Second Circuit held that:

(a) the borrower and related entities lacked standing to sue because they failed to list their potential claims in their bankruptcy case and the claims were barred by the doctrine of judicial estoppel; and

(b) the claims of the investor and guarantors were untimely and barred by the law of the case.

The Supreme Court of the United States inMidland v. Johnson reversed the Eleventh Circuit Court of Appeals and held that a debt collector that files a proof of claim for debt that is barred by the applicable statute of limitations does not violate the Fair Debt Collection Practices Act (FDCPA) if the face of the proof of claim makes clear that the statute of limitations has run. The Supreme Court refused to accept the debtor's argument that Midland's proof of claim was "false, deceptive, or misleading" under the FDCPA.

"The Parent Bank entered into this insurance contract with its eyes wide open and its wallet on its mind."

It is very common for bankruptcy court orders to provide that the court retains jurisdiction to enforce such orders. Similarly, chapter 11 confirmation orders routinely provide that the bankruptcy court retains jurisdiction over all orders previously entered in the case. The enforceability of these “retention of jurisdiction” provisions, however, will not rest on the plain language in the order but on the bankruptcy court’s statutory jurisdiction.

On June 13, 2017, Judge Kevin Gross of the Delaware Bankruptcy Court issued an opinion granting in part and denying in part BMW’s motion to dismiss a complaint filed by Emerald Capital Advisors Corp., in its capacity as trustee for FAH Liquidating Trust – established in the Fisker bankruptcy proceedings. A copy of the Opinion is available here.

The Bankruptcy Court for the District of Delaware recently issued a decision that will undoubtedly influence strategies in bankruptcy cases involving plugging and abandonment liabilities. The court’s ruling in Venoco, LLC v. City of Beverly Hills illuminates the Bankruptcy Code’s rehabilitative purposes by explaining that financial harm, without more, is not sufficient to enjoin a debtor’s actions.

What Happened

What happens in a Chapter 13 bankruptcy case when a creditor files a proof of claim involving a debt for which the statute of limitations to collect the debt has run? More specifically, does the filing of such a claim violate the Fair Debt Collection Practices Act (the “Act”)? That’s the issue considered by the U.S. Supreme Court in its recent decision in the case of Midland Funding, LLC v. Johnson. 1

In November, members of our Bankruptcy & Creditors’ Rights group gave a presentation concerning the Midland Funding, LLC v. Johnson case then pending before the U.S. Supreme Court. The Supreme Court recently decided the case, holding that a debt collector who files a claim that is “obviously” barred by the statute of limitations has not engaged in false, deceptive, misleading, unconscionable or unfair conduct and thus does not violate the federal Fair Debt Collection Practices Act (FDCPA). Writing the opinion for the majority in favor of the debt collector, Justice Stephen G.