U.S. Tenth Circuit - The FindLaw 10th Circuit Court of Appeals Opinion Summaries Blog

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Marijuana-related businesses who go belly up shouldn't expect any relief from federal bankruptcy courts, a bankruptcy appellate panel in the Tenth Circuit announced late August. Marijuana businesses, even if they're allowed by state laws in Colorado, are still viewed as illegal in the federal government's eyes and can't get relief from the federal bankruptcy system, the panel ruled.

The marijuana industry has boomed in Colorado since the state legalized recreational weed in 2013. Recreational marijuana sales reached $700 million during the first full year of legalization. But should those budding businesses stumble, they'll be barred from bankruptcy court as a result of federal laws criminalizing marijuana.

Social Security Can Be Excluded from Disposable Income Calculation

While bankruptcy rates continue to decline, there are still plenty of people filing for bankruptcy. And many of those seeking bankruptcy protection are senior citizens.

Seniors filing for bankruptcy raise a unique question: Should Social Security Income be included in the petitioner's disposable income calculation? According to the Tenth Circuit Court of Appeals, it doesn't have to be.

Are Ponzi Scheme Proceeds Dischargeable in Bankruptcy?

Let’s say your client made a little money as an investor in (what turned out to be) a Ponzi scheme. The scheme was revealed, and a court ordered your client — though she was never prosecuted in the scheme — to pay back her share of ill-gotten gains.

The she declared bankruptcy.

How would the Tenth Circuit Court of Appeals treat her share of the take? Would it be nondischargeable debt?

In re: C.W. Mining Co., No. 10-4028

Appeal from Bankruptcy Court Contempt Order

In In re: C.W. Mining Co., No. 10-4028, creditors' appeal from an order of the Bankruptcy Appellate Panel affirming a contempt order of the bankruptcy court, the court affirmed where 1) given a facially plausible motion, creditors were not denied due process because they were afforded adequate notice and a meaningful opportunity to be heard; and 2) creditors' argument that Local Rule 9013-1(c) is unconstitutional was not previously raised; and 3) the bankruptcy court did not exceed its authority by voiding the actions taken by creditors in violation of the automatic stay.

In re: Dittmar, No. 09-3230, involved bankruptcy trustees' appeal from the judgment of the bankruptcy appellate panel holding that debtors' stock appreciation rights (SARs) were not part of debtors' bankruptcy estates under 11 U.S.C. section 541.  The court reversed where 1) while the value of the SARs before any payment event occurred may have been de minimis, that did not mean that debtors did not have a property interest in the SARs; and 2) the SARs created by the collective bargaining agreement at issue were more akin to contingent pre-petition property rights than mere expectancies based on discretionary bonuses.

Colorado Certificate of Title Act Did Not Supersede Colorado UCC

In re: Roser, No. 09-1341, involved a creditor's appeal from the bankruptcy court's order holding that the trustee in a Chapter 7 proceeding could avoid a creditor's lien.  The court of appeals reversed on the ground that the Colorado Certificate of Title Act (CCTA) did not supersede Colorado UCC section 4-9-317(e) because the provision did not govern the manner or timing of the perfection of liens, and governed only the priority of a lien and was not inconsistent with the CCTA.

As the court wrote:  "On May 19, 2007, Sovereign Bank gave Robert James Roser a secured loan to purchase a motor vehicle, and he took possession of the vehicle that day. Nineteen days later, on June 7, the Bank filed its lien in compliance with the Colorado Certificate of Title Act (CCTA), Colo.Rev.Stat. § 42-6-121 (2007). Because the Colorado Uniform Commercial Code (Colorado UCC), which closely tracks the Uniform Commercial Code (UCC), gives priority over other security interests to a purchase-money security interest that is filed within 20 days of the purchaser's taking delivery of the collateral, see Colo.Rev.Stat. § 4-9-317(e) (2007), the Bank felt secure."

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In re: Graves, No. 08-1462, involved an appeal from the bankruptcy appellate panel's holding that the Bankruptcy Code's turnover provision, 11 U.S.C. section 542, did not empower a trustee to demand turnover from a debtor in this case.  The court of appeals affirmed with modification, on the ground that debtors' interest in a 2006 tax refund, irrevocably applied pre-petition to 2007 taxes, was not subject to turnover under 11 U.S.C. section 542(a).

In US v. McGinty, No. 09-6246, a prosecution for misapplication of bank funds, the court of appeals reversed the district court's award of forfeiture at sentencing, on the ground that the government was entitled to a money judgment against defendant for the money he obtained from his criminal activity.

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In re: Trout, No. 09-1332, concerned a bankruptcy trustee's appeal from a decision of the bankruptcy appellate panel affirming the bankruptcy court's determination that, having successfully avoided a preferential vehicle lien under 11 U.S.C. section 547, the trustee was not entitled to a money judgment equal to the value of the avoided liens under section 550(a).  The court of appeals affirmed, on the ground that the bankruptcy estate had been sufficiently returned to its pre-transfer status by avoiding the preferential lien at issue and stepping into the lien priority of the avoided creditor under 11 U.S.C. section 551.

Narotzky v. Natrona Cty. Mem. Hosp. Bd. of Trustees, No. 09-8053, involved an action by doctors against their former hospital employer, stating a procedural due process claim based on a theory of constructive discharge and a claim based on the warrantless search of plaintiffs' lockers.  The court of appeals affirmed summary judgment for defendant, on the ground that no constructive discharge occurred and that the search was reasonable, given the context and circumstances.

Thomas v. Parker, No. 09-6203, concerned an action challenging various conditions of plaintiff's confinement at the James Crabtree Correctional Center (JCCC), a prison in the Oklahoma Department of Corrections (ODOC).  The Tenth Circuit affirmed the dismissal of the action, on the grounds that 1) the district court did not err in concluding that plaintiff failed to exhaust his administrative remedies when he did not properly complete all three required written steps; 2) plaintiff's allegations were insufficient to establish fraud on the court because, at most, they showed the nondisclosure of evidence or the alteration of evidence by a party, with no showing of attorney involvement; and 3) it is difficult to see how there could be actionable fraud on the court if the district court had before it the correct documents when it made its final decision.

In US v. Hasan, No. 08-5137, the court of appeals affirmed defendant's perjury convictions in part, on the ground that, although the prosecutor could have done more to clarify, the district court would not have clearly or obviously erred in concluding that a reasonable jury could find that the questions were not the cause of defendant's inconsistent answers.  However, the court vacated in part on the ground that the district court needed to determine in the first instance whether defendant spoke primarily a language other than the English language under the proper legal standard.

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Dismissal of Bankruptcy Appeal Affirmed

In In re: Latture, No. 09-6016, court of appeals affirmed the bankruptcy appellate panel's (BAP) order dismissing debtor's appeal as untimely, holding that 1) debtor's failure to timely file an appeal in compliance with Rule 8002(a) deprived the BAP of jurisdiction to hear his appeal; 2) by its own terms Fed. R. App. P. 6 did not govern an appeal taken from bankruptcy court to a bankruptcy appellate panel; and 3) even assuming debtor did not receive the court's judgment, the BAP could not extend the time to file a notice of appeal.

As the court wrote:  "Plaintiff-Appellee Tracy Emann obtained a judgment against Defendant-Appellant Rodger Latture. Latture subsequently filed for bankruptcy. The bankruptcy court granted Emann's motion for summary judgment, finding Emann's claim non-dischargeable. The bankruptcy court entered summary judgment for Emann on November 14, 2008. Latture did not file his notice of appeal with the Bankruptcy Appellate Panel of the Tenth Circuit (B.A.P.) until November 25, 2008--eleven days after the bankruptcy court entered its judgment--making it one day out of time according to Fed. R. Bankr. P. 8002(a) and 9006(a).1 Relying on In re Herwit, 970 F.2d 709, 710 (10th Cir. 1992), the B.A.P. concluded Latture's failure to file a timely notice of appeal was a jurisdictional defect which bars appellate review and, accordingly, dismissed Latture's appeal."

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In re: Paige, No. 08-4104

In an appeal from the bankruptcy court's decision confirming appellees' joint bankruptcy reorganization plan and denying appellants' competing plan, dismissal of the appeal as moot is reversed where: 1) the competing plan could theoretically be confirmed without requiring disgorgement of payments made to third-party creditors; and 2) reversal of the existing plan would not require the undoing of complex transactions.

Read In re: Paige, No. 08-4104

Appellate Information

Filed November 3, 2009


Opinion by Judge Ebel


For Appellants:

Adam S. Affleck, Michael N. Zundel, James A. Boevers, Andrew B. Clawson, and Erin M. Stone, Prince, Yeates & Geldzahler, P.C., Salt Lake City, UT

For Appellees:

Peter W. Billings and Garry E. Jubber, of Fabian & Clendenin, P.C., Salt Lake City, UT