Justia U.S. 10th Circuit Court of Appeals Opinion Summaries

This appeal arose out of a Chapter 7 bankruptcy petition filed by Jeffrey Lavenhar. Jeffrey’s ex-wife, Laurie Lavenhar, filed a proof of claim in Jeffrey’s bankruptcy proceeding for $347,400, claiming this amount was owed to her as a domestic support obligation, and it was entitled to priority under 11 U.S.C. 507(a)(1). First American Title Insurance Company, one of Jeffrey's creditors, filed an objection to Laurie’s proof of claim, asserting that the entirety of the domestic support obligation underlying Laurie’s proof of claim was obtained as a result of collusion between Jeffrey and Laurie in state-court divorce proceedings. First American also sought relief from the automatic stay so it could seek a state-court declaration that the judgment upon which Laurie’s claim was based was obtained by fraud on the court. In an order designed to prevent the state-court proceedings from intruding on the prerogatives of the Chapter 7 Trustee, the bankruptcy court granted First American’s motion to lift the stay. The district court affirmed that order on appeal. Laurie appealed, arguing the bankruptcy court erred in granting First American’s motion to lift the stay. According to Laurie, First American lacked standing to litigate the validity of any component of the state-court judgment because the power to control property of the bankruptcy estate belonged solely to the Trustee. After review, the Tenth Circuit found no reversible error in the bankruptcy court's judgment, and affirmed the narrowly tailored order lifting the stay. View "Lavenhar v. First American Title Insurance" on Justia Law

Appellant FB Acquisition Property I, LLC appealed a district court order affirming the confirmation of a Chapter 11 plan for Appellees and Debtors Larry and Susan Gentry. The Gentrys were the sole shareholders, officers, and directors of Ball Four Inc., a sports complex in Adams County, Colorado. In 2010, Ball Four filed a voluntary Chapter 11 petition, and a year later, the Gentrys filed this Chapter 11 proceeding. This appeal involved aspects of both bankruptcies. In 2005, Ball Four received a $1.9 million loan from FirsTier Bank to expand its sporting facilities and pay off a previous loan. After four years of struggling with construction defects, underfunding of the project, and an economic downturn, Ball Four stopped making interest payments to FirsTier. Ball Four proposed a plan of reorganization that provided the bank’s allowed claim would be repaid in full, plus interest, and that FirsTier would retain its lien on Ball Four’s property until the claim was paid. Before Ball Four’s Chapter 11 plan was approved in 2011, the Colorado Division of Banking closed FirsTier and the Federal Deposit Insurance Corporation (FDIC) was appointed as receiver. Later, the FDIC conveyed all rights under the original promissory note to 2011-SIP 1 CRE/CADC Venture, LLC (SIP). Neither FirsTier, FDIC, nor SIP objected to the Ball Four Plan, and it was confirmed in August 2011, and Ball Four’s case was closed in 2013. In October 2010, a month after Ball Four filed for bankruptcy, FirsTier sued the Gentrys in Colorado state court to collect on the guaranties. In November 2011, the Gentrys filed this Chapter 11 case. The Gentrys filed the necessary disclosures and an amended plan. The amended plan provided that the Gentrys’ liability on the 2005 loan would be satisfied by Ball Four under its confirmed plan. Despite SIP’s objections, the bankruptcy court confirmed the Gentry Plan in 2013. Because the bankruptcy court's feasibility finding of the Gentrys' plan was based on a permissible view of the evidence, the Tenth Circuit concluded the bankruptcy court’s finding of feasibility was not clearly erroneous. However, the Court found the district court erred with regard to limiting the Gentrys' liability as guarantors to the amount Ball Four owed. In light of the Tenth Circuit's ruling, the matter was remanded back to the bankruptcy court in the event the guaranty issue impacted the plan feasibility assessment. View "In re: Gentry" on Justia Law

Mark Lazzo served as legal counsel for Schupbach Investments, L.L.C. in its Chapter 11 bankruptcy case. After confirming a liquidation plan for the debtor, the bankruptcy court entered a final fee order approving certain disputed fee applications Lazzo filed. Creditor Rose Hill Bank and Carl B. Davis, the trustee of the Schupbach Investments Liquidation Trust, appealed the final fee order to the Bankruptcy Appellate Panel (BAP). The BAP reversed those portions of the bankruptcy court’s order that: (1) confirmed post facto approval of Lazzo’s employment, and allowed fees incurred prior to approval of his employment; and (2) allowed postconfirmation fees. The Debtor, Lazzo, and his law firm, Mark J. Lazzo, P.A. appealed the BAP’s decision. Finding no reversible error, the Tenth Circuit affirmed. View "Davis v. Schupbach Investments" on Justia Law

Plaintiff Jeffrey Weinman was the Chapter 7 Trustee for Adam Aircraft Industries (“AAI”). Defendant Joseph Walker was an officer of AAI and served as its president and as a member of its Board of Directors. Throughout his employment, Walker had neither a written employment contract nor a severance agreement with AAI. In February 2007, the Board decided it wanted to replace Walker as both president and as a board member. Since AAI did not want Walker’s termination to disrupt its ongoing negotiations for debt financing, AAI suggested that Walker could voluntarily “resign” in lieu of termination and could also continue to support the company publicly. Subsequently, Walker agreed, and the parties executed a Memorandum of Understanding (“MOU”) outlining the terms of Walker’s separation, and they also embodied these terms in two Separation Agreements and Releases. About a year after terminating Walker, AAI declared bankruptcy. It then sued in bankruptcy court to avoid further transfers to Walker, to recover some transfers previously made to Walker, and to disallow Walker’s claim on AAI’s bankruptcy. The bankruptcy court denied AAI’s claims. The Bankruptcy Appellate Panel (“BAP”) affirmed this ruling in its entirety. AAI appealed part of the ruling, arguing that its obligations and transfers to Walker were avoidable under the Code on two alternative bases. Finding no reversible error, the Tenth Circuit affirmed the BAP's decision. View "Weinman v. Walker" on Justia Law

C.W. Mining Company was forced into bankruptcy after creditors filed a petition for involuntary bankruptcy on January 8, 2008. Several months before the petition was filed, C.W. Mining had entered into its first contract with SMC Electrical Products, Inc., an agreement to purchase equipment with a view toward greatly increasing coal production. One payment for the equipment was a $200,000 wire transfer from C.W. Mining on October 16, 2007. Because this transfer was less than 90 days before the petition was filed, the bankruptcy trustee sought to recoup the $200,000 for the bankruptcy estate by initiating an adversary proceeding to avoid the transfer under 11 U.S.C. 547(b). Granting SMC summary judgment, the bankruptcy court rejected the Trustee’s claim on the ground that the debt was incurred and the payment made in the ordinary course of business. The bankruptcy appellate panel affirmed. Finding no reversible error, the Tenth Circuit affirmed too. View "Rushton v. SMC Electrical Products" on Justia Law

Plaintiffs in this case alleged their former bankruptcy trustee breached professional duties due them because of conflicting obligations the trustee owed the bankruptcy estate. Plaintiffs sought recovery under state law. However, plaintiffs filed suit in federal court against the trustee alleging diversity jurisdiction and the right to have the case resolved in an Article III court. The trustee maintained the case should have been heard in an Article I bankruptcy court because the alleged-breached professional duties arose from the bankruptcy proceedings. The district court concluded the case should have been heard in the Article I court, and certified its decision for immediate appeal. The Tenth Circuit concluded that an Article III court had jurisdiction, and reversed the district court's order. View "Loveridge v. Hall" on Justia Law

Michael and Rebecca Gordon filed a voluntary petition for bankruptcy. In their petition, they sought to treat $2,051 in a savings account as an exempt asset under the Colorado exemption for “[p]roperty . . . held in or payable from any pension or retirement plan or deferred compensation plan.” The Trustee objected on the ground that the exemption did not apply to funds once paid out from a retirement plan. The bankruptcy court sustained the Trustee’s objection and denied the Gordons’ motion for reconsideration. The United States District Court for the District of Colorado affirmed, and finding no reversible error, the Tenth Circuit also affirmed. View "In re: Gordon" on Justia Law

Appellants William Karl Jenkins and M. Earlene Jenkins (collectively, Mr. Jenkins) appealed an order of the Bankruptcy Appellate Panel (BAP) that affirmed the bankruptcy court’s dismissal of their claim for the payment of certain secured promissory notes. Alternate Fuels, Inc. (AFI) was a Kansas corporation that formerly engaged in surface coal mining operations. On December 9, 1992, AFI filed a petition under Chapter 11 of the Bankruptcy Code in the District of Kansas. AFI briefly continued its coal mining operations under the terms of a confirmed plan of reorganization. At that time, John Warmack acquired 100% of the stock of AFI and assumed control. Mr. Warmack then formed Cimarron Energy Co., LLC to handle the mining operations for which AFI still held permits. Mr. Warmack owned 99% of Cimarron. Twenty-four certificates of deposit, valued at approximately $1.4 million, were pledged to secure multiple reclamation bonds. Then, Cimarron recommenced mining operations. AFI’s equipment was released to AFI’s secured creditors, who ultimately foreclosed and sold the equipment back to Cimarron. Mr. Jenkins entered into an agreement to purchase Mr. Warmack’s interest in AFI. Mr. Jenkins did not intend to resume mining operations or otherwise operate AFI. Instead, Mr. Jenkins believed that, through his political connections, he could fulfill AFI’s remaining reclamation obligations and obtain the proceeds of the release of the 24 certificates of deposit and the sale of Cimarron’s mining equipment. Mr. Jenkins testified that he knew AFI had no prospect of repaying two promissory noted from its own funds; his only prospects for future payment were the certificates of deposit. The bankruptcy court found that Mr. Jenkins’ claims were not allowed claims because the transfers alleged to be consideration for the notes should have been recharacterized as equity contributions. In the alternative, the court found that Mr. Jenkins failed to sustain his burden of proof as to the validity and amount of his claim, or that Mr. Jenkins putatively secured claim should have been subordinated to the status of an unsecured claim. The Tenth Circuit reversed, finding that Mr. Jenkins' transfers did not meet the criteria for either recharacterization or equitable subordination, and he satisfied his burden of proof as to the validity and amount of his claim. View "Redmond v. Jenkins" on Justia Law

Western Insurance Company was insolvent and was being liquidated in Utah state court pursuant to the Utah Insurer Receivership Act. As a part of that liquidation, the Liquidator brought an ancillary proceeding against several of Western's "affiliates" to recover funds Western had transferred to them. The Defendants removed the ancillary proceeding to federal district court pursuant to the court’s diversity jurisdiction. The Liquidator responded by seeking a remand, which the district court granted. Defendants appealed, but concluding that it lacked appellate jurisdiction the Tenth Circuit dismissed the appeal. View "Western Insurance v. A & H Insurance" on Justia Law

Chapter 7 bankruptcy trustee Carl Davis appealed a decision by the U.S. Bankruptcy Court for the District of Kansas which was affirmed by the U.S. Bankruptcy Appellate Panel of the Tenth Circuit (BAP). Davis sought to avoid, as a fraudulent conveyance, debtor Tung Nguyen’s transfer to his sister of his interest in a piece of real property. Both the Bankruptcy Court and the BAP concluded that Nguyen possessed only bare legal title to the property and that such an interest is not one that may be avoided under the Bankruptcy Code. Finding no reversible error, the Tenth Circuit affirmed. View "Davis v. Pham" on Justia Law