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“Singular” Cases on Nondischarge and Dischargeability

March 27, 2017


Liar businessman with crossed fingers at back .

Two recent cases analyzed the misrepresentations of a debtor regarding a single asset and held a written misrepresented value of a single scheduled estate asset would result in nondischargeability under Section 727, and that a verbal misrepresentation of a pre-petition asset to a creditor did not result in an exception to discharge under Section 523.

In Worley v. Robinson,[1]/ the Fourth Circuit affirmed nondischarge where a financially sophisticated debtor’s Schedules substantially undervalued his estate’s only substantial asset.  In Appling v. Lamar, Archer Cofrin LLP,[2]/ the Eleventh Circuit reversed a district decision and held that a false oral statements to a creditor regarding one pre-petition asset would not render the associated debt nondishargeable because they were statements of “financial

For Whom the Bell Tolls: Obligations and Risks of Third-party Witnesses under Rule 2004 Examinations.

November 27, 2016


Two recent Bankruptcy Court cases both remind and illustrate the power and risks presented by discovery of facts and documents under Bankruptcy Rule 2004, showing that it can compel third parties to provide information to support later litigation against them or cause them to lose their 5th Amendment right against self-incrimination.

  • In re Great Lakes Comnet, Inc.[1]/ (a copy of the case is here: great-lakes-comnet-inc), the Bankruptcy Court for the Western District of Michigan held that the Committee of Unsecured Creditors was entitled to conduct a Rule 2004 examination of a third-party company while explicitly recognizing that the intent of the examination was to prepare for and inform the committee regarding later litigation against the third-party.
  • In re Mavashev[2]/ (a copy of the case is here: in-re-mavashev), the Bankruptcy Court for the Eastern District of New York held that a third-party witness would not

Stern Amendments to Bankruptcy Rules

September 19, 2016


Stern Amendments to Bankruptcy Rules

September 19, 2016

Authored by: James Maloney

While it has taken five years of committee and court efforts, the “Stern Amendments” to the Federal Rules of Bankruptcy Procedure will become effective December 1, 2016.  These amendments will streamline litigant and court procedures in resolving subject matter jurisdiction matters as between district courts and bankruptcy courts.

The Bankruptcy Cave has followed many procedural issues since Stern v. Marshall.[1]/ Stern held certain claims designated by statute for final adjudication in bankruptcy court, are nonetheless required by the Constitution to proceed in an Article III district court (Stern post). Various Stern progeny has explored the role of parties’ consent to final adjudication in the bankruptcy court, the ability of the bankruptcy court to make findings of fact and conclusions of law for final determination by the district court, emerging local rule accommodations of jurisdictional uncertainty, and a special practitioner’s peril where a trial in district court is

Losing Both Ways: Debtor Diligence in the Identification of Claims

August 3, 2016


Two recent cases serve as reminders the devil is truly in the details. As to the front-end risks associated with an early § 363(f) sale, in In re Motors Liquidation Company[1](the “GM” case) we have seen a $10 billion reminder that identification and actual notice to persons with claims against the Debtor is an indispensable element to the “free and clear” result intended by such a sale.  On the back-end risks of a confirmed Chapter 11 Plan, In re AmCad Holdings, LLC[2]teaches that failing to specifically identify claims of the Debtor against others for retained jurisdiction under the Plan can defeat the intended jurisdiction of the Bankruptcy Court to adjudicate those omitted claims.

GM involves the ongoing troubles from the 2009 insolvency of the General Motors Corporation, the United States’ largest car manufacturer.  As opposed to the usual reorganization procedures of 11 U.S.C. §§ 1121?1129, which

Failure to Observe Bankruptcy Rule Deadline in An Adversary Proceeding Tried in District Court Costs Defendants Opportunity to Appeal $6,000,000 Verdict.

May 17, 2016


A recent case from the 11th Circuit illustrates the procedural perils of litigation arising from a bankruptcy case but ultimately tried in the district court.  In Rosenberg v. DVI Receivables XIV, LLC,[1] the defendants lost their appeal not on the merits, but based upon the difference between civil rules and bankruptcy rules regarding what are timely post-trial motions.

BC has previously addressed procedural issues between bankruptcy courts and district courts arising from the Supreme Court’s ruling in Stern v. Marshall.[2]   As we have written when Stern was first decided, Stern held certain claims designated by statute for final adjudication in bankruptcy court, are nonetheless required by the Constitution to proceed in an Article III district court.  Relevant Stern progeny has explored the role of parties’ consent to bankruptcy court proceedings, the ability of the bankruptcy court to make findings of fact and conclusions of

The Stern Files: Evolving Jurisdiction by Consent, Wellness International Network Ltd. v. Sharif.

August 3, 2015


Directional text on stone

In a previous post this blog addressed the Supreme Court’s 2011 ruling in Stern v. Marshall.[1] In Stern, the Court held that Article III of the Constitution limited bankruptcy courts from entering final orders on certain state law counterclaims despite such claims being designated as “core” proceedings by statute (now known as Stern Claims).

The Supreme Court left questions of great interest unanswered in Stern, but two emerged quickly: 1) can a bankruptcy court treat a “core” Stern Claim by the same procedures as “non-core” (disputes not significantly related to a bankruptcy case) under 28 U.S.C. Section 157, and thereby carry the dispute through proposed findings of fact and conclusions of law to forward to the district court; and 2) can a bankruptcy court enter a

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