On September 12, 2024, the United States Court of Appeals for the Eighth Circuit reversed a trial court decision that had rejected a bank’s assertion of the in pari delicto defense to aiding and abetting claims brought by the bankruptcy trustee for a debtor that had allegedly perpetrated a Ponzi scheme. Kelley v. BMO Harris Bank Nat’l Ass’n, 2024 WL 4158179 (8th Cir. Sept. 12, 2024).

Whether it's gone completely flat or simply reached its maturity, one thing is abundantly clear: The Minneapolis-St. Paul craft beer industry took a turn for the worst in this past year. Multiple, well-known establishments called it quits, including the Eastlake Craft Brewery and Clutch Brewing. Others, like Fair State Brewing Cooperative, recently filed for bankruptcy to reset their financial liabilities and attempt to survive in the new marketplace. Multiple others teeter on the precipice of financial disaster.

Chart Comparing Exemptions

The specific bankruptcy and nonbankruptcy (Minnesota law and nonbankruptcy federal law) exemptions vary in scope and dollar amount. The following table summarizes and compares the two sets of exemptions. The statutory language of the exemption has been paraphrased in this chart. The actual statutory language as well as case law must be reviewed when analyzing a debtor’s claim for a particular exemption.

Revised August 2024

The United States District Court for the District of Minnesota recently rejected a creditor’s argument that when a Chapter 11 case is converted to one under Chapter 7 and the estate is administratively insolvent 11 U.S.C. § 726(b) requires disgorgement of amounts approved and paid to Chapter 11 administrative claimants.

EIGHTH CIRCUIT BANKRUPTCY MONITOR

The legalization of marijuana and the Bankruptcy Code continue to proceed on a crash course. A majority of states have legalized marijuana for medical use, and a growing number have legalized recreational use as well. As a result, the industry is rapidly expanding – national sales in legal markets have increased 34 percent in 2018 to $10.8 billion.

In certain states, including Minnesota, a resident may file a bankruptcy case and elect to protect certain assets under the Bankruptcy Code. The Bankruptcy Code provides that these exemption amounts are automatically adjusted for inflation every three years. In short, the adjustments are based on changes to the Consumer Price Index for All Urban Consumers published by the Department of Labor, rounded to the nearest $25.

“… Ponzi scheme payments to satisfy legitimate antecedent debts to defendant banks could not be avoided” by a bankruptcy trustee “absent transaction-specific proof of actual intent to defraud or the statutory elements of constructive fraud – transfer by an insolvent debtor who did not receive reasonably equivalent value in exchange,” held the U.S. Court of Appeals for the Eighth Circuit on Nov. 20, 2018. Stoebner v. Opportunity Finance LLC, 2018 WL 6055636 at *4 (8th Cir. Nov. 20, 2018), citing Finn v. Alliance Bank, 860 N.W. 2d 638, 653-56 (Minn. 2015).

On November 8, a federal jury for the U.S. District Court for the District of Minnesota awarded the ResCap Liquidating Trust, the post-bankruptcy successor-in-interest to Residential Funding Company, LLC (RFC), a $27.8 million verdict in an indemnity case against a correspondent lender.

In a recent decision, the Minnesota Court of Appeals affirmed a receiver’s power to pursue a creditor’s “veil piercing” claims against insiders of the company in receivership and blocked the creditor from pursuing those same claims after the receivership ended. Aaron Carlson Corp. v. Cohen, No. A18-0100 (Minn. Ct. App., October 1, 2018).