The United States Court of Appeals for the Tenth Circuit recently shut down litigation filed by plaintiffs who had represented to a Bankruptcy Court that their claims were worth far less than they were attempting to recover in a lawsuit filed in federal district court. Queen v. TA Operating, LLC, --- F.3d ----, 2013 WL 4419322, (10th Cir. Aug. 20, 2013).
The U.S. Court of Appeals for the Tenth Circuit―in Rajala v. Gardner, 709 F.3d 1031 (10th Cir. 2013)―has joined the Second Circuit and departed from the Fifth Circuit by holding that an allegedly fraudulently transferred asset is not property of the estate until recovered pursuant to section 550 of the Bankruptcy Code and therefore is not covered by the automatic stay. According to the court, its decision “gives Congress’s chosen language its ordinary meaning, and abides by a rule against surplusage.”
Dill Oil Company, LLC v. Stephens, No. 11-6309 (10th Cir., Jan. 15, 2013)
CASE SNAPSHOT
The Court of Appeals for the Tenth Circuit, in a case of first impression before the court, joined the Fourth Circuit in holding that the absolute priority rule remains applicable in individual chapter 11 cases.
FACTUAL BACKGROUND
On May 13, 2013, the Supreme Court declined to review the ruling of the United States Court of Appeals for the Tenth Circuit1 that had held that a security interest may extend to the “proceeds” of the future transfer of a license holder’s interest in its Federal Communications Commission (“FCC”) broadcast license and that, under applicable state law, the security interest attached upon execution of the security agreement, despite the fact that the parties did not contemplate a transfer of the license at that time.
In re Tracy Broadcasting Corporation, No. 11-1453 (10th Cir., Oct. 16, 2012)
CASE SNAPSHOT
On August 20th, the U.S. Court of Appeals for the Tenth Circuit reversed a trial court's ruling finding that judgments against Ponzi scheme "net gainers" were non-dischargeable in bankruptcy. The debtors were early investors in what turned out to be a Ponzi scheme and received more money than they invested. When the Ponzi scheme was uncovered, the state State of Oklahoma sued the debtors for unjust enrichment but not for any securities violations. After the State obtained a judgment on the unjust enrichment claim, the debtors declared bankruptcy.
Generally, retirement plan benefits are excluded from a bankruptcy estate. However, if the retirement plan is not covered by Title I of the Employee Retirement Income Security Act of 1974 (ERISA), a separate exemption from the bankruptcy estate must be found. Some retirement plans are not covered by Title I of ERISA because they do not cover employees, which, for this purpose, excludes the sole owner of a business and the owner’s spouse. These types of plans are commonly referred to as “Keogh” plans.
2012 is shaping up as a year of bankruptcy first impressions for the Ninth Circuit. The court of appeals sailed into uncharted bankruptcy waters twice already this year in the same chapter 11 case. On January 24, the court ruled in In re Thorpe Insulation Co., 2012 WL 178998 (9th Cir. Jan. 24, 2012) ("Thorpe I"), that an appeal by certain nonsettling asbestos insurers of an order confirming a chapter 11 plan was not equitably moot because, among other things, the plan had not been "substantially consummated" under the court's novel construction of that statutory term.
TW Telecom Holdings Inc. v. Carolina Internet Ltd., Case No. 11-1068 (10th Cir. Nov. 15, 2011)
CASE SNAPSHOT
The Tenth Circuit Court of Appeals reversed its longstanding position, and held that section 362(a) of the Bankruptcy Code does automatically stay the debtor’s appeal of an action commenced against the debtor prior to the bankruptcy filing, regardless of whether the debtor is the appellant or the appellee. This decision aligns the Tenth Circuit with at least nine other circuits.
FACTUAL BACKGROUND
On February 1st, the Tenth Circuit held that Deutsche Bank failed to establish it was a "party of interest" entitled to relief from a bankruptcy petition's automatic stay. After Deutsche Bank's foreclosure of the Millers' home was stayed by the latter's bankruptcy petition, the bank obtained relief from the stay. On appeal, the Tenth Circuit reversed and remanded. The bank failed to provide the original note to the bankruptcy court and did not provide the original or a copy to the bankruptcy appellate panel.