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

The Trustee for debtor TRM appealed the dismissal of his adversary action against real estate development companies, alleging that TRM and the development companies engaged in a scheme to sell properties at inflated prices in recently developed subdivisions in North Carolina and South Carolina. The court held that the development companies were potentially independently liable to TRM's purchasers because it participated in TRM's sales and marketing efforts. But, because TRM was not entitled to statutory contribution, the Trustee's action failed as a matter of law. Accordingly, the court affirmed the district court's judgment. View "Total Realty Mgmt. LLC v. R. A. North Development, Inc." on Justia Law

The Trustee filed this action against former directors and officers of Bancshares. The directors also all formerly served as the officers and directors of the Bank, a wholly owned subsidiary of Bancshares. The court held that the Trustee could pursue her claims only as to the directors' alleged improper subordination of Bancshares' LLC interest. Therefore, the court reversed and remanded the district court's judgment as to that claim, but affirmed its judgment in all other respects. Accordingly, the court held that the district court did not err in granting the directors' motion to dismiss except as to the claim for subordination of the LLC interest of Bancshares. View "Beach First National Bancshare v. Anderson" on Justia Law

In this direct appeal from the United States Bankruptcy Court for the Eastern District of North Carolina, the Fourth Circuit addressed a question of first impression in the circuit courts of appeal: in light of the 2005 amendments to the Bankruptcy Code, codified in Bankruptcy Abuse Prevention and Consumer Protection Act ("BAPCPA"), how is the "household" size of a debtor seeking bankruptcy relief to be calculated under Chapter 13. Petitioner Tanya Johnson filed a voluntary petition for Chapter 13; upon receiving notice of Petitioners motion for confirmation of the plan, Petitioner's ex-husband objected because he felt the plan overstated Petitioner's household size and monthly expenses. As a result, the ex-husband maintained that Petitioner's disposable monthly income was insufficient to make payments to two unsecured loans for which he and Petitioner were jointly liable. In examining the parties' dispute, the bankruptcy court observed that the Code does not define "household," there was no binding precedent on point, and that other bankruptcy courts followed three different approaches to define that term. Finding no error in the bankruptcy court's method of calculating the Petitioner's household size based on how many individuals operate as an "economic unit" with the Petitioner, the Fourth Circuit affirmed the bankruptcy court's order denying the Petitioner's motion for confirmation with leave to amend the Debtor's "disposable income calculation and plan to reflect the household size [of five]." View "Johnson v. Zimmer" on Justia Law

In this direct appeal from the Bankruptcy Court, the court addressed whether, in light of the 2005 amendments to the Bankruptcy Code, 11 U.S.C. 101 et seq., codified by the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA), Pub. L. No. 109-8, 119 Stat. 23, the absolute priority rule continued to apply to individual debtors in possession proceeding under Chapter 11. The court answered in the affirmative. The court concluded that the absolute priority rule as it applied to individual debtors in Chapter 11 had not been abrogated by BAPCPA and affirmed the bankruptcy court's order denying plan confirmation. View "In Re: Ganess Maharaj" on Justia Law

Plaintiff, the Chapter 7 trustee for the bankruptcy estate of BioniCare Medical Technologies, contested determinations of the Medicare Appeals Council (MAC) refusing to provide coverage for the BIO-1000, a device to treat osteoarthritis of the knee. Plaintiff alleged that the Secretary improperly used the adjudicative process to create a policy of denying coverage for the BIO-1000, that the MAC's decisions were not supported by substantial evidence, and that the MAC's decisions were arbitrary and capricious on account of a variety of procedural errors. The court rejected those contentions and affirmed the judgment of the district court. View "Almy v. Sebelius" on Justia Law

The bankruptcy trustee in the Chapter 13 bankruptcy estate of the debtor appealed a district court order affirming a bankruptcy court ruling that in calculating projected disposable income, the debtor could deduct the monthly payments that she would not in fact be required to make. The court concluded that the bankruptcy court erred in ruling that the determination of the debtor's projected disposable income could not take into account the debtor's intention to surrender her ATV vehicles. Accordingly, the judgment was reversed and remanded. View "Morris v. Quigley" on Justia Law

In this bankruptcy case, SunTrust filed a proof of claim for repayment of a loan that it claimed was secured by a deed of trust on two contiguous parcels of debtor's real property in Orange County, North Carolina (Tract I and Tract II). The Trustee commenced this action under 11 U.S.C. 544(a)(3) to avoid the lien on Tract I because the deed of trust, while recorded on the official recordation index of Orange County as to Tract II, was not so recorded as to Tract I. SunTrust contended that even though the recordation was deficient, the Trustee was imputed with constructive knowledge of the lien on Tract I. The bankruptcy court rejected SunTrust's arguments and ordered its lien on Tract I avoided under section 544(a)(3), and the district court affirmed. Because the Trustee's status vis-a-vis the title of Tract I was, under section 544(a)(3), that of a bona fide purchaser under North Carolina law, the Trustee was only imputed with the notice that would be imputed to a bona fide purchaser of Tract I under North Carolina law. And North Carolina law allowed a purchaser to rely exclusively on the official recordation index of the county to discover liens, regardless of what other independent knowledge that purchaser might have. Therefore, the court affirmed the judgment. View "McCormick v. Northen" on Justia Law

Plaintiffs appealed a district court order dismissing several of their claims in a suit regarding conduct that occurred during bankruptcy proceedings. Plaintiffs were former officers of EBW Laser, a company that entered bankruptcy in 2005. After the case was converted to Chapter 7, the court appointed attorney Charles Ivey as trustee and Ivey subsequently retained his firm (IMGT) to serve as his counsel and to prosecute an adversary proceeding he had filed against plaintiffs. On appeal, plaintiffs argued that the district court erred in dismissing their claims against the IMGT defendants under the Barton doctrine. The Supreme Court established in Barton that before another court could obtain subject-matter jurisdiction over a suit filed against a receiver for acts committed in his official capacity, plaintiff must obtain leave of the court that appointed the receiver. The court held that the district court properly dismissed plaintiffs' claims and properly applied the Barton doctrine. Therefore, the court affirmed the district court's order. View "McDaniel, Jr. v. Blust" on Justia Law

Named Claimants filed "class proofs of claims" in these consolidated bankruptcy cases in which Circuit City and related entities are the debtors. Named Claimants alleged that they, together with unnamed claimants, were owed almost $150 million in unpaid overtime wages. The court affirmed the decisions of the bankruptcy court with a different procedural approach for allowing claimants to file class proofs of claim and to present Rule 9014 motions. With respect to the bankruptcy court's ruling that in the circumstances of this case, the bankruptcy process would provide a process superior to the class action process for resolving the claims of former employees, the court concluded that the court's ruling fell within its discretion. With respect to these Named Claimants' challenge to notice, the court concluded that the notice to them was not constitutionally deficient - a conclusion with which they agreed - and that, with respect to unnamed claimants, the Named Claimants lacked standing to challenge the notice. View "Gentry v. Circuit City Stores, Inc." on Justia Law

Following a state court judgment of over six million dollars entered against NHF in Texas, NHF filed a voluntary petition in the U.S. Bankruptcy Court, seeking to reorganize under Chapter 11 of the Bankruptcy Code. At issue was were the circumstances under which a bankruptcy court could approve nondebtor release, injunction, and exculpation provisions as part of a final plan of reorganization under Chapter 11. The court held that equitable relief provisions of the type approved in this case were permissible in certain circumstances. A bankruptcy court must, however, find facts sufficient to support its legal conclusion that a particular debtor's circumstances entitled it to such relief. Because the bankruptcy court in this case failed to make such findings, the district court erred in affirming the bankruptcy court's confirmation order. Accordingly, the court vacated the judgment of the district court and remanded for further proceedings. View "Behrmann, et al. v. Nat'l Heritage Foundation, et al." on Justia Law