Justia U.S. 4th Circuit Court of Appeals Opinion Summaries

The Fourth Circuit affirmed the district court's decision affirming the bankruptcy court's ruling denying the bankruptcy trustee's objection to exemptions claimed by debtors. In this case, the district court concluded that the applicable bankruptcy statute authorized debtors to utilize Louisiana's state law statutory scheme to exempt personal property in West Virginia from debtors' bankruptcy estate. The court agreed with the well-reasoned analysis of the district court that the bankruptcy court correctly adopted the state-specific interpretation of 11 U.S.C. 522(b)(3)(A). The court explained that the district court's adoption of the state-specific approach was consistent with the rulings of at least two sister appellate courts that have addressed the issue. View "Sheehan v. Ash" on Justia Law

At issue was whether a bankruptcy court may strip off valueless liens on a Chapter 13 debtor's principal residence when no proof of claims have been filed. The district court affirmed the bankruptcy court's refusal to strip the liens. The Fourth Circuit reversed and held that the liens may be stripped regardless of whether proof of claims has been filed. In this case, the liens at issue were entirely without value making the creditor the holder of an unsecured claim under section 1322(b). View "Burkhart v. Grigsby" on Justia Law

At issue was whether a bankruptcy court may strip off valueless liens on a Chapter 13 debtor's principal residence when no proof of claims have been filed. The district court affirmed the bankruptcy court's refusal to strip the liens. The Fourth Circuit reversed and held that the liens may be stripped regardless of whether proof of claims has been filed. In this case, the liens at issue were entirely without value making the creditor the holder of an unsecured claim under section 1322(b). View "Burkhart v. Grigsby" on Justia Law

The Fourth Circuit affirmed the bankruptcy court's denial of the receiver's motion to dismiss creditor's bankruptcy petition for cause under 11 U.S.C. 707(a). The court held that the bankruptcy court did not abuse its discretion in denying the motion to dismiss where creditor's decision to file for bankruptcy did not arise to the level of bad faith. The court noted that the standard of review was of paramount importance here where the court did not ask whether it necessarily would have reached the same result as the bankruptcy court, but did note the bankruptcy court's greater familiarity with creditor's case and the fact that the bankruptcy court gave good and sound reasons for ruling as it did. View "Janvey v. Romero" on Justia Law

The Fourth Circuit reversed the district court's dismissal of BLC's appeal of the bankruptcy court's confirmed reorganization plan for debtor. The court held that BLC's appeal was not equitably moot. On the merits, the court held that the bankruptcy court did not err in calculating the indubitable equivalent of BLC's claim or in calculating the amount of post-petition interest due to BLC. Therefore, the court affirmed the bankruptcy court's judgment. View "Bate Land Company LP v. Bate Land & Timber LLC" on Justia Law

This appeal arose out of two separate Chapter 13 bankruptcy proceedings that followed a similar pattern. On appeal, LVNV argued that the bankruptcy court's Chapter 13 plan confirmation orders barred the objections to LVNV's claims because those objections were filed after entry of the Confirmation Orders. The court held that debtors' objections to LVNV's proofs of claim as an unsecured creditor were not barred by the doctrine of res judicata; when the bankruptcy court confirmed debtors' Chapter 13 plans, it only considered treatment of unsecured creditors as a single class; there was no adjudication of the claim of any individual unsecured creditor as part of plan confirmation; determining the validity of individual unsecured claims was a distinctly separate process under section 502 both in procedure and timing; and thus an essential element of application of res judicata was simply absent from the Chapter 13 plan confirmation as to unsecured creditors like LVNV. Because res judicata did not apply in the bankruptcy court's later determination of contested unsecured claims under section 502, the court affirmed the judgment of the bankruptcy court. View "LVNV Funding, LLC v. Harling" on Justia Law

In 2003, a group of doctors filed a nationwide class action against Blue Cross and Blue Shield Association and its member entities, including Blue Cross NC (Love v. Blue Cross and Blue Shield Ass'n). The doctors alleged that the Blue Cross companies used several underhanded business practices to deny, delay, and reduce payments for medical treatments based solely on considerations of cost. After Blue Cross NC filed suit against debtor and his clinic in 2006, debtor filed for Chapter 11 bankruptcy for himself and on behalf of his clinic. Debtor then removed Blue Cross NC's suit to the bankruptcy court, asserting affirmative defenses and nine counterclaims that were essentially the same as in Love. In 2007, the Love parties entered into a settlement and enjoined the doctors from litigating any released claims. It was undisputed that debtor was a putative member of the Love class and that this injunction applied to his first seven counterclaims. Ten months after the Love court had issued its injunction, Blue Cross NC informed the bankruptcy court of the injunction. In 2009, after a nearly two-year hiatus in the North Carolina bankruptcy proceedings, debtor filed a motion for sanctions against Blue Cross NC. The bankruptcy court granted the motion, finding that Blue Cross NC purposefully avoided informing the court and debtor about the Love settlement and the injunction, causing the lost of counterclaims worth potentially millions, delayed litigation, and attorneys fees and costs. The bankruptcy court dismissed Blue Cross NC's claims with prejudice and ordered it to pay debtor a total of $1.29 million in attorneys' fees and costs. The court concluded that the bankruptcy court did not err in finding that Blue Cross NC acted in bad faith. However, the court explained that the sanctions were excessive and based on a faulty premise: that Blue Cross NC bore the responsibility for debtor's lack of diligence. Accordingly, the court vacated and remanded for further proceedings. View "Blue Cross Blue Shield of North Carolina v. Jemsek Clinic, P.A." on Justia Law

The bankruptcy court denied debtor discharge under the false oath provision of 11 U.S.C. 727(a)(4), after it found that debtor intentionally undervalued his interest in a real estate investment company. The court concluded that the undervaluation of the company constituted a false oath considering the magnitude of the undervaluation debtor's distinguished training and experience. The court further concluded that debtor's misstatement was material, and denial of discharge was appropriate in this case. Accordingly, the court affirmed the judgment. View "Robinson v. Worley" on Justia Law

The Chapter 7 trustee of James Edwards Whitley's estate challenges the district court's affirmance of the bankruptcy court's grant of summary judgment for the Bank on the trustee’s claim that certain deposits and wire transfers to Whitley’s personal checking account at the Bank are avoidable as fraudulent transfers. The court found that the transactions at issue do not constitute transfers within the meaning of the Bankruptcy Code. The court explained that when a debtor deposits or receives a wire transfer of funds into his own unrestricted checking account in the regular course of business, he has not transferred those funds to the bank that operates the account. When the debtor is still free to access those funds at will, the requisite “disposing of” or “parting with” property has not occurred; there has not been a “transfer” within the meaning of 11 U.S.C. 101(54). Accordingly, the court affirmed the judgment. View "Ivey v. First Citizens Bank & Trust Co." on Justia Law

Debtor filed a voluntary Chapter 13 petition that included a mortgage claim held by PNC and secured by a deed of trust on debtor's primary residence. The anti-modification clause in 11 U.S.C. 1322(b)(2) of the Bankruptcy Code protects a mortgagee from having its claim in a Chapter 13 bankruptcy proceeding modified, if the mortgage is secured “only by a security interest in real property that is the debtor’s principal residence.” The court held that reference in the Deed of Trust to escrow funds, insurance proceeds, or miscellaneous proceeds constitute incidental property, rather than additional collateral, which entitles debtor to anti-modification protection under section 1322(b)(2). In this case, the Deed of Trust on debtor's residence is secured only by real property that is also his principal residence. Escrow funds, insurance proceeds, and miscellaneous proceeds do not constitute additional collateral. The court affirmed the judgment. View "Birmingham v. PNC Bank, N.A." on Justia Law