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

Debtor appealed from the bankruptcy court's grant of summary judgment to creditor, holding a debt in the amount of $400,000, nondischargeable pursuant to section 523(a)(2)(A) of Title 11 of the United States Code (Bankruptcy Code). The court held that summary judgment was improper because there existed fact issues regarding whether (1) the financing arrangement should be treated as if it was between the debtor and creditor, or between Imports Plus, Inc. and the creditor; and (2) whether the debtor obtained the majority of funds from the creditor at the time of the alleged misrepresentation.

The Chapter 7 trustee appealed from the decision of the Bankruptcy Appellate Panel (BAP) reversing the bankruptcy court's judgment that the proceeds of personal property sold with a homestead were not proceeds of the homestead. The court held that the BAP committed two errors: first, the BAP required only "sufficient indicia" of an intent to convert non-exempt personal property into exempt homestead property where, as a matter of law, there must not only be an intent to convert non-exempt assets, but also an actual conversion; and second, in reversing the bankruptcy court, the BAP said "we find" an intent by debtor to convert non-exempt property into exempt property where findings of fact were the sole province of the bankruptcy court. The court reversed and remanded for further proceedings.

Debtor appealed from the Order of the Bankruptcy Court appointing a trustee in its involuntary Chapter 11 case. The court held that since the record supported a finding of cause under 11 U.S.C. 1104(a)(1), and that the appointment of a trustee was in the interest of creditors and the estate under section 1104(a)(2), the appointment of the trustee was mandatory. Therefore, the Bankruptcy Court's order was affirmed.

This case involved a fallout of a $3.65 billion Ponzi scheme perpetrated by Minnesota businessman Thomas J. Petters. Appellants, investment funds (collectively, Ritchie), incurred substantial losses as a result of participating in Petters' investment scheme. Ritchie subsequently sued two officers of Petters' companies, alleging that they assisted Petters in getting Ritchie to loan over $100 million to Petters' company. Ritchie's five-count complaint alleged violations of the Racketeer Influenced and Corrupt Organizations Act (RICO), 18 U.S.C. 1962(a), (c)-(d), common law fraud, and tortious inference with the contract. The court held that the district court erred in concluding that Ritchie's action was barred by a Receivership Order. The court also rejected arguments challenging the sufficiency of Ritchie's pleadings in the common law fraud count and did not to address other arguments related to abstention, lack of causation, and absolute privilege. Accordingly, the court reversed the judgment of the district court and remanded for further proceedings.

Defendant was convicted for the theft or embezzlement of funds from his employee's IRA accounts in violation of 18 U.S.C. 664. On appeal, defendant argued that his conviction should be reversed because, at trial, the district court barred him from presenting evidence to the jury that he eventually repaid all of the embezzled funds. The court held that because the intent to permanently deprive was neither a required element of, nor a defense to, the conversion or stealing that section 664 criminalized, the district court did not abuse its discretion when it excluded evidence of defendant's eventual repayment of his employees' funds in a bankruptcy proceeding as irrelevant.

This case concerned the bankruptcy estate of Qualia Clinical Service, Inc. The estate's Chapter 7 Trustee sought to avoid as a preferential transfer a security interest recorded by one of Qualia's creditors shortly before the bankruptcy petition. The bankruptcy court and the Bankruptcy Appellate Panel (BAP) held the security interest voidable. The court held that the bankruptcy court and the BAP properly applied 11 U.S.C. 547(c)(5)(A) to conclude that the preferential transfer in this case, though it concerned an interest in accounts receivable, improved Inova Capital Funding, LLC's position as against Qualia's other creditors and so was not exempt from avoidance under that subsection. The court found Inova's remaining arguments unpersuasive.

Debtor appealed from the bankruptcy court's order confirming his modified Chapter 13 plan over his objection. At issue was whether the bankruptcy court could confirm the debtor's plan which provided for the avoidance of two junior liens on the debtor's principal residence. The court held that 11 U.S.C. 1322(b)(2) did not bar a Chapter 13 debtor from stripping off a wholly unsecured lien on his principal residence. The court also held that the strip off of a wholly unsecured lien on a debtor's principal residence was effective upon completion of the debtor's obligations under this plan and it was not contingent on his receipt of a Chapter 13 discharge. Accordingly, the court reversed the decision of the bankruptcy court and remanded for further proceedings where the debtor must amend his plan to provide for proper treatment of the junior lienholders' claims as unsecured nonpriority claims.

Appellant appealed the bankruptcy court's approval of a multi-million dollar, global settlement in one of the largest Ponzi scheme bankruptcies in American history. The settlement had been substantially consummated and the appeal had been rendered largely moot. The court held that the bankruptcy court did not abuse its discretion in approving the settlement where the record upon which the bankruptcy court based its approval of the settlement was sufficient and where the settlement satisfied the Flight Transportation/Drexel factors. Accordingly, the order of the bankruptcy court approving the settlement was affirmed.

The Educational Credit Management Corporation (ECMC) appealed from the judgment of the bankruptcy court, later affirmed by the Bankruptcy Appellate Panel (BAP), which discharged the student loan debt of debtor under the "undue hardship" provision of 11 U.S.C. 523(a)(8). The court held that it was not clear error to consider debtor's financial condition from the date of discharge to the date debtor sought undue hardship relief. The court also held that there was no clear error in not calculating debtor's husband's part time income where debtor and her husband stipulated their adjusted gross income in 2007. Even when the payroll deductions were excluded, the expenses of the debtor and her dependents outstripped her available resources. Therefore, the court held that, in light of the overall circumstances, excepting debtor's student loan debt from discharge would impose an undue hardship on her.

The trustee of Cheryl Reagan's bankruptcy estate, and Latta Bachelor, the personal representative of Ronald Reagan's probate estate, appealed from an order of the district court affirming the judgment of the bankrutpcy court in this interpleader and declaratory judgment action filed by Regions Bank. The court held that although Cheryl, acting as executrix, retained control over the assets in Ronald's estate, and she may have improperly exercised that control in her capacity as executrix, her conduct in that capacity did not invalidate the spendthrift provisions. Because the spendthrift provision was enforceable under Arkansas law, Cheryl's interest in the net income from Trust C was subject to a "restriction on... transfer" under "applicable nonbankruptcy law," the section 541(c)(2) of the Bankruptcy Code's exception applied, and Cheryl's interest in the distributions of net income from Trust C was not a part of her bankruptcy estate. Appellants have failed to establish the requisite inducement and detrimental reliance to successfully assert that Cheryl should be estopped from claiming the benefit of the spendthrift trust.