Justia U.S. 8th Circuit Court of Appeals Opinion Summaries

Debtors filed a petition for relief under chapter 11 in 1999. Debtors proposed several plans of reorganization, but none were confirmed. On the Trustee's motion, the bankruptcy court dismissed Debtors' case in 2004. Debtors did not appeal and the case was closed on the bankruptcy clerk's docket in 2005. In 2014, Debtors moved to reopen their case "to pursue Confirmation of their current Plan[.]" The Trustee and Agrifinance objected, and, without first holding a hearing, the bankruptcy court entered a text order denying Debtors' motion. The Eighth Circuit affirmed. There is no requirement in 11 U.S.C. 350 that the court provide a hearing on a motion to reopen and nothing would have been gained by holding a hearing. View "Bowman v. Casamatta" on Justia Law

Petters purported to purchase and resell electronics. His operations were a Ponzi scheme. In 2005, Petters purchased Polaroid and become Chairman of Polaroid’s board of directors. Polaroid continued to engage in legitimate business. Petters took several million dollars from Polaroid. In 2007-2008, Petters’s companies, including Polaroid, experienced major financial difficulty. Ritchie made short term loans of more than $150 million, with annual interest rates of 80 to 362.1%. Polaroid was not a signatory, although some proceeds were used to repay a Polaroid debt. When the loans were past due, Ritchie demanded collateral. Petters executed a Trademark Security Agreement (TSA) giving Ritchie liens on Polaroid trademarks. Polaroid’s CEO objected to the TSA as impeding Polaroid’s ability to raise needed capital. The TSA did allow Polaroid to grant first-priority trademark liens to secure $75 million in working capital. After the FBI raid, which resulted in Petters’s convictions for mail fraud, wire fraud, and money laundering, and sentence of 50 years in prison, Ritchie accelerated all of the loans. Polaroid filed for bankruptcy and challenged the TSA as an actual fraudulent transfer under federal and Minnesota bankruptcy law, citing the “Ponzi scheme presumption.” The bankruptcy court presumed Petters executed the liens with fraudulent intent, found Ritchie had not received them in good faith and for value, and granted summary judgment. The district court upheld the admission of expert testimony and application of the Ponzi scheme presumption. The Eighth Circuit affirmed. View "Ritchie Capital Mgmt., LLC v. Stoebner" on Justia Law

Collection Associates garnished a total of $858.98 in wages Brandon earned during six pay periods. Brandon’s employer sent the first four garnishments, $562.78, to the state court that issued the garnishment order. That court delivered the payments to Collection Associates, under Neb. Rev. Stat. 25-1056(2). Brandon and his wife filed a bankruptcy petition and notified the state court they had done so. When the state court received the final two garnishments, totaling $296.20, instead of delivering those funds to Collection Associates, it returned the money to Brandon’s employer, which refunded the money to Brandon. The debtors then sought to avoid and recover the funds garnished during the preference period. The bankruptcy court found the preference action barred by the defense for consumer debtor payments under $600. The Bankruptcy Appellate Panel affirmed. The Eighth Circuit agreed that the defense applies because the Pierces sought to avoid the transfer of less than $600. View "Pierce v. Collection Assocs., Inc." on Justia Law

As part of a redevelopment project partially financed by Sioux City, Iowa, Civic borrowed from Northwest Bank to build a movie theater complex. Main Street leased the space in 2004. Main Street did not fully pay its rent and Civic did not fully make its loan payments. After mediation, Civic and Main Street agreed on an amended lease that substantially lowered the rent. Eventually, Civic filed for Chapter 11 bankruptcy, arguing that the court should subordinate the interests of Northwest and the city because they had defrauded Civic into accepting the amended lease. The bankruptcy court issued orders deciding that the amended lease applied. Civic appealed the lease orders; the Bankruptcy Appellate Panel ruled that Civic’s appeal was improperly interlocutory and dismissed for lack of jurisdiction. Civic filed a second plan, which restated the fraud argument. The bankruptcy court denied confirmation and rejected the fraud argument, but did not dismiss the bankruptcy petition. Civic appealed the new order and, again, the three earlier orders. The BAP again dismissed. Civic appealed all four orders. The Eighth Circuit dismissed for lack of jurisdiction; a determination of the BAP is not final unless the underlying order of the bankruptcy court is final. View "Civic Partners Sioux City, LLC v. Main Street Theaters, Inc." on Justia Law

In 2001, N.D. Laws 53-06.2-10.1 was amended to authorize “account wagering,” a form of parimutuel wagering in which an individual deposits money in an account and, through a licensed simulcast service provider authorized to operate a simulcast parimutuel wagering system, uses the balance to pay for parimutuel wagers. The legislature did not make corresponding changes to section 53-06.2-11 or otherwise alter the statutory takeout formulas to authorize a tax on account wagering until 2007. Racing Services (RSI), formerly a state-licensed horse racing simulcast service provider, filed bankruptcy. PW Enterprises, its largest non-governmental creditor filed suit on behalf of all creditors to recover money the state collected from RSI as taxes on parimutuel account wagering. The district court held that the money must be returned to the bankruptcy estate because North Dakota law did not authorize the state to collect taxes on account wagering before 2007. The Eighth Circuit affirmed. Though some members of the legislature may have understood account wagering would be taxed similarly to existing forms of parimutuel wagering, that belief does not make the statute as written ambiguous or require a court to strain to infer a legislative intent that is entirely absent from the statutory language. View "PW Enters., Inc. v. North Dakota" on Justia Law

Miller purchased an annuity from Minnesota Life Insurance, with a lump-sum “Purchase Payment” of $267,319.48, consisting of funds from his individual retirement account. Minnesota Life agreed to make an annual “Income Payment” of $40,497.95 to Miller for the next eight years. Miller later filed for Chapter 7 bankruptcy and claimed that the annuity was exempt under 11 U.S.C. 522(b)(3)(C), as “retirement funds to the extent that those funds are in a fund or account that is exempt from taxation under section . . . 408 . . . of the Internal Revenue Code.” Section 408 provides that an individual retirement account and an individual retirement annuity are exempt from taxation as qualified retirement plans, 26 U.S.C. 408(a), (b), (e)(1). The Eighth Circuit affirmed. The exemption generally applies even if the debtor transferred the retirement funds to the qualified retirement plan from another qualified retirement plan. There is no dispute that the funds used to purchase Miller’s annuity were retirement funds that came from Miller’s individual retirement account, which was a qualified individual retirement account. The court rejected the trustee’s argument that Miller’s annuity is not a qualified individual retirement annuity. View "Running v. Miller" on Justia Law

Stephens, an attorney, is controlling principal of Southwest Medical, the Debtor, and has an interest in Southeast, the debtor in a separate bankruptcy. The Chapter 7 Trustee filed an adversary proceeding against Southeast and Stephens based on assets that were transferred post-petition by the Debtor to Southeast, and sought imposition of a constructive trust. By joint stipulation, Stephens was dismissed from the Adversary Proceeding. In 2013, following a trial, the Bankruptcy Court denied Stephens’ Motion to Intervene in the Adversary Proceeding; entered an order that allowed the Trustee an unsecured claim against Southeast ($1,190,000); and denied a constructive trust against Southeast’s assets. While Stephens’ appeal was pending, and on the last day of the one-year limitation period under FRCP 60(b), Stephens moved for Relief from Judgment or Order, alleging that the Trustee’s attorney had colluded with Southeast’s attorneys, amounting to a “fraud on the court.” The court denied Stephens’ Rule 60 Motion because, he was not a party in the Adversary Proceeding; held that Stephens’ allegations of fraud on the court violated Rule 9011(b)(2) and (b)(3); and ordered Stephens to pay $19,188.42 in attorney fees plus $1,659.10 as a sanction under Rule 9011(c)(2). The Eighth Circuit affirmed. View "Williams v. Stephens" on Justia Law

In 2007, Calandrillo purchased a boat manufactured by a Genmar subsidiary. Calandrillo claimed the boat was defective. In 2009, Calandrillo agreed to convey title to the boat to Genmar in exchange for payment of a lien plus $65,000. The bank received $140,000 and issued a lien waiver. Calandrillo conveyed title to Genmar, which sent Calandrillo a check for $65,000. Genmar filed for bankruptcy. The trustee sought recovery of $65,000 as a preferential transfer. The $140,000 payment was outside the 90-day preference period, 11 U.S.C. 547(b). Calandrillo argued that the payment was a contemporaneous new value exchange, exempt from avoidance. The Bankruptcy Appellate Panel affirmed the bankruptcy court’s conclusion that Calandrillo presented no evidence permitting a reasonable fact-finder to find that the parties intended a contemporaneous exchange for new value. The Eighth Circuit affirmed. Calandrillo’s conveyance of the boat was completed on March 4, when he sent executed title documents. He received payment of the $65,000 settlement balance on March 23. The settlement provided that the $65,000 payment would be made no sooner than 15 days after Genmar received the lien waiver and title documents, reflecting a short-term loan of $65,000 to Genmar. Repayment of a loan within 90 days of bankruptcy is an avoidable preference. View "Ries v. Calandrillo" on Justia Law

Debtors and Starion entered into loan transactions. The promissory notes and mortgages provided that the Debtors were liable for Starion’s attorney fees and costs of collections. The Debtors also executed personal guarantees. Defaults resulted in a 2012 Workout Agreement between Starion and the Debtors, who consented to entry of judgments against them to secure their personal guarantees. Based upon properly filed confessions of judgment, executed under the Agreement, a North Dakota state court entered judgments against Debtors for $2,078,034.26 and $1,000,000.00, plus interest. Debtors filed a voluntary chapter 11 petition. The Debtors’ Second Amended Plan of Reorganization stated: Debtors agree to pay Starion’s allowable attorney’s fees and costs associated with both Debtors’ bankruptcy proceedings including but not limited to reasonable attorneys’ fees, consulting, appraisal, filing fees, late fees … as provided in the Plan. The Plan was confirmed. Later the Debtors refused to pay requested appraisal and engineering costs and attorneys’ fees. Starion requested that the bankruptcy court compel payment of $125,014.64 based upon the Plan and 11 U.S.C. 506(b). The bankruptcy court ruled in favor of the Debtors. The Eighth Circuit Bankruptcy Appellate Panel reversed, noting that the obligation has appeared throughout the long documented history of the relationship. View "Starion Fin. v. McCormick" on Justia Law

GE Capital appealed the bankruptcy court's denial of its motion for allowance of an administrative expense claim for unpaid lease obligations against debtor. The court concluded that the written record supports GE Capital's request that its motion be considered under 11 U.S.C. 365. The court also concluded that, by declining to consider GE Capital's motion under section 365(d)(5), the bankruptcy court shifted the burden of proof from the objecting party to the claimant, which is erroneous as a matter of law. Accordingly, the court reversed and remanded for further proceedings. View "GE Capital Commercial, Inc. v. Sylva Corp., Inc." on Justia Law