Today’s cautionary tale from the Fifth Circuit Court of Appeals should remind lawyers of the most important lesson in the law: Words have meaning.
That means that if you’re going to file a lien on property in a bankruptcy proceeding, your affidavit better include the right language.
Easy enough, right?
Reversal of Confirmation of Chapter 13 Plan
In In re: Kizzee-Jordan, No. 09-20777, the court reversed the bankruptcy court's order confirming a Chapter 13 plan, holding that a third-party lender who pays a debtor's ad valorem taxes and receives a transfer of the local taxing authority's tax lien under Texas law holds a tax claim protected from modification by 11 U.S.C. section 511 of the Bankruptcy Code.
Bankruptcy Court Erred in Denying "Superpriority" Claim
In In re: SCOPAC, No. 09-40307, creditors' appeal from the district court's dismissal of their appeal for lack of subject matter jurisdiction, where that appeal alleged that the bankruptcy court erred in denying their "superpriority" administrative claim on the bankruptcy estate, the court vacated where the bankruptcy court undervalued the noteholders' priority administrative section 507(b) claim by $29.7 million, and the court erred in not crediting their interest with timber sales proceeds that were received during the bankruptcy, on which they had a lien and priority interest arising from the court's many cash collateral orders.
In In re: Kleibrink, No. 07-11190, a debtor's appeal from a district court's affirmance of a bankruptcy court's ruling that a creditor held an enforceable security interest in a property of his, despite his having received a discharge in an earlier bankruptcy proceeding, the court affirmed the order where the notice given to the creditor did not satisfy the due process standard for notice set forth in Mullane.
In Reed v. City of Arlington, No. 08-11098, a Chapter 7 bankruptcy case in which debtors omitted a pending $1 million-plus judgment from their sworn statements and bankruptcy filings, the discharge of the debtor's debts is reversed where, to protect the integrity of judicial processes, judicial estoppel barred the trustee from collecting the judgment.
In re: Northlake Dev. L.L.C., No. 09-60743, a creditor's appeal from the district court's affirmance of the bankruptcy court's decision that certain deeds the creditor held were legal nullities, the court certified the following questions to the Supreme Court of Mississippi: When a minority member of a Mississippi limited liability company prepares and executes, on behalf of the LLC, a deed to substantially all of the LLC's real estate, in favor of another LLC of which the same individual is the sole owner, without authority to do so under the first LLC's operating agreement, is the transfer of real property pursuant to the deed: (i) voidable, such that it is subject to the intervening rights of a subsequent bonafide purchaser for value and without notice, or (ii) void ab initio, i.e., a legal nullity?
Onoh v. Northwest Airlines, Inc., No. 09-10971, involved a state-law breach-of-contract and intentional-infliction-of-emotional-distress action against an airline. The court of appeals affirmed the dismissal of the complaint on the grounds that plaintiff's conversation with an airline agent, in which the agent allegedly stated that "the U.S. State Department would not permit [her] to travel . . . .", was sufficiently related to defendant's provision of "services" under the Airline Deregulation Act to trigger preemption.
Saenz v. Harlingen Med. Ctr., L.P., No. 09-40887, concerned a Family and Medical Leave Act (FMLA) action based on plaintiff's alleged termination due to her epilepsy. The court reversed summary judgment for defendant, holding that the district court erred when it held plaintiff to defendant's heightened in-house procedure, and further, plaintiff provided the minimum required notice under FMLA's default requirements.
Spotts v. US, No. 09-41039, involved an action by present and former inmates of the Federal Correctional Complex, United States Penitentiary, in Beaumont, Texas, in connection with the decision made by the Regional Director of the South Central Region of the Federal Bureau of Prisons, not to evacuate the Penitentiary in the aftermath of Hurricane Rita. The court affirmed the dismissal of the action on the grounds that 1) plaintiffs did not plead, and never argued to the district court, that the Eighth Amendment precluded the application of the discretionary function exception to the Federal Tort Claims Act; 2) plaintiffs' contention that the Safe Drinking Water Act imposed nondiscretionary duties that were contravened by the decision not to evacuate lacked merit; and 3) defendants' decision was the type of policy decision protected by the discretionary function exception and therefore meets the second prong of the Berkovitz test.
In re: Mirant Corp., No. 09-10451, involved a fraudulent transfer adversary proceeding initiated by some of a debtor's affiliates in connection with a bankruptcy petition. The court affirmed the denial of defendant's motion to compel arbitration on the grounds that 1) defendant moved to compel arbitration only after the district court had partially denied its third motion to dismiss, despite being fully aware of its right to compel arbitration from the outset; and 2) the eighteen-month delay between the filing of defendant's original answer and its motion to compel arbitration wasted judicial resources and disadvantaged plaintiff.
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In re: Texas Pig Stands, Inc., No. 09-50544, involved a bankruptcy trustee's appeal from the district court's reversal of the bankruptcy court's order refusing to hold the trustee liable for a tax deficiency incurred in running the debtor's business. The court of appeals affirmed the district court's order, holding that the trustee exceeded his authority, violated the Plan, and committed willful misconduct, and therefore the Trust Agreement did not limit his liability.
As the court wrote: "Vincent J. Liuzza, Jr. served as the bankruptcy trustee for Texas Pig
Stands, a venerable San Antonio, Texas, restaurant company. In an attempt to keep the restaurants afloat after a plan of reorganization had been confirmed, Liuzza failed to remit state sales taxes to the Texas Comptroller. The issue posed in this appeal is whether Liuzza may be held personally liable for the deficiency. TEX. TAX. CODE ANN. § 111.016(b) (Vernon 2007). The bankruptcy court found that Liuzza could not be held liable absent a showing of "gross negligence." The district court disagreed. We affirm the district court's judgment imposing liability."
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In re: Wilborn, No. 09-20415, involved an interlocutory appeal from the bankruptcy court's certification of a class action in an adversary proceeding. The Fifth Circuit vacated the order, on the ground that a bankruptcy judge may certify a class of debtors under appropriate circumstances but that the proposed class in this case did not satisfy the requirements of Federal Rule of Civil Procedure 23 and Federal Bankruptcy Rule of Procedure 7023.
In US v. Velasquez-Torres, No. 09-40646, the court of appeals affirmed defendant's sentence for illegal reentry by a deported alien, holding that, having admitted the fact of his deportation as stated in the presentence report, defendant could not argue that the district court improperly relied on that deportation.
Balentine v. Thaler, No. 09-70026, involved a capital habeas petitioner's appeal from the denial of his motion to set aside the judgment that a year earlier had denied him habeas relief. The court of appeals vacated, on the grounds that 1) petitioner's application stated a Sixth Amendment ineffective assistance of counsel claim, and the Fed. R. Crim. P. 60(b) motion did not present a new habeas claim barred by the Antiterrorism and Effective Death Penalty Act; 2) the Texas Court of Criminal Appeals' ruling was not clearly based on an adequate state ground independent of the merits; and 3) the equities for Rule 60(b)(6) relief were compelling when the failure to investigate and present available mitigation evidence had already been found in the Section 2254 proceedings to be a substantial issue.
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Castro v. US, No. 07-40416, concerned an action under the Federal Tort Claims Act (FTCA) alleging that the government's negligence caused the wrongful deportation of plaintiff's son. The court of appeals affirmed the dismissal of the action on the ground that the government was protected from suit by 28 U.S.C. section 2680(a), the discretionary function exception of the FTCA.
In re: Velocita Worldwide Logistics Inc., No. 09-10416, involved an appeal from the district court's judgment affirming the bankruptcy court and declining to imply a right of contribution among defendants who agreed to be jointly and individually liable for a payment as part of the settlement agreement for a state tort action. The court of appeals affirmed, on the ground that the obligations in the instant settlement agreement were not analogous to the obligations in surety and guaranty agreements, the contractual arrangements in which Texas courts had allowed contribution claims against co-obligors.
In re: Moore, No. 09-10604, concerned a creditor's appeal of the district court's affirmance of the bankruptcy court's approval of a settlement of estate claims over creditor's objection and despite its offer to purchase the claims for higher value. The court of appeals reversed, holding that the claims at issue could be sold as well as compromised, and the bankruptcy court's failure to consider the effect of such a sale was an abuse of discretion.
Amazing Spaces, Inc. v. Metro Mini Storage, No. 09-20702, involved an action alleging infringement of a star design that plaintiff claimed as a service mark. The court of appeals affirmed summary judgment for defendant, on the grounds that 1) the record evidence was replete with similar or identical five-pointed stars, both raised and set in circles, and used in similar manners, such that--notwithstanding the residual evidence of the presumption of validity--no reasonable jury could find that the star symbol was even a mere refinement of this commonly adopted and well-known form of ornamentation; and 2) plaintiff failed to raise a fact issue regarding the existence of secondary meaning with respect to the symbol. However, the court reversed in part, on the ground that plaintiff had not yet had the opportunity to introduce evidence relating to its trade dress claims.
La Union Del Pueblo Entero v. Fed. Emergency Mgmt. Agency, No. 09-40948, concerned the Federal Emergency Management Agency's (FEMA) appeal from the district court's preliminary injunction requiring FEMA to publish standards that complied with 42 U.S.C. section 5174(j). The court of appeals vacated the injunction, holding that plaintiffs merely complained that the regulations lacked specificity, not that FEMA wholly abdicated its responsibility to promulgate regulations, or promulgated regulations that directly contravened the statutory language.
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