Justia U.S. 1st Circuit Court of Appeals Opinion Summaries

In 2004, Laura Sheedy refinanced property she owned. For the transaction, Sheedy executed a promissory note and mortgage in favor of Washington Mutual Bank (WAMU). The mortgage was eventually assigned to Deutsche Bank National Trust Company. JPMorgan Chase National Association (Chase) serviced the loan. Deutsche Bank subsequently commenced foreclosure proceedings. Thereafter, in 2010, Sheedy filed for protection under Chapter 13 of the Bankruptcy Code. As part of her plan, Sheedy raised a series of allegations of lender liability. In 2011, Sheedy filed this adversary proceeding to have the bankruptcy court resolve her lender liability claims, adding that Deutsche Bank and Chase (together, the Secured Creditors) were liable for fraud deceit, and misrepresentation on the basis that WAMU provided her with inaccurate or false information concerning the terms of the note and the mortgage. The bankruptcy court granted summary judgment in favor of the Secured Creditors. The district court affirmed. The First Circuit affirmed, holding that all of Sheedy’s claims were either time-barred or without merit. View "Sheedy v. Deutsche Bank Nat’l Trust Co." on Justia Law

Creditor extended to Debtor a line of credit, and Debtor granted Creditor, pursuant to an agreement, a security interest in payments due to Debtor under an insurance policy. The agreement provided that Maine law governed all rights under the agreement. Insurer subsequently issued a commercial property insurance policy to Debtor. After a freight train owned by Debtor derailed, Creditor filed a claim under the policy, which Insurer denied. Debtor then filed for Chapter 11 bankruptcy. Creditor instituted an adversary proceeding seeking a declaration regarding the priority of its asserted security interest in any payments due under the policy. Insurer subsequently settled with Debtor and the trustee requiring Insurer to pay $3,800,000 to Debtor in satisfaction of all claims under the policy. Creditor objected to approval of the proposed settlement, arguing that the agreement granted it a first-priority security interest in the settlement. The bankruptcy court concluded that Debtor was entitled to the settlement proceeds free and clear of Creditor’s asserted interest because Creditor had failed to perfect its interest under Maine law. The bankruptcy appellate panel affirmed. The First Circuit affirmed, holding that the courts below did not err in concluding that Debtor was entitled to the proposed settlement payment free and clear of Creditor’s asserted security interest. View "Wheeling & Lake Erie Ry. v. Keach" on Justia Law

In this Chapter 7 bankruptcy proceeding, Appellants filed a complaint in a Puerto Rico superior court against the Trustee in bankruptcy and other defendants. The Trustee removed the state case to the bankruptcy court. Thereafter, Appellants filed a motion for a jury trial and a motion requesting remand to state court. The bankruptcy denied both motions. Appellants appealed. The district court dismissed the appeal on the grounds that the bankruptcy court’s orders were not final. The First Circuit dismissed Appellants’ subsequent appeal, holding that it lacked jurisdiction over the district court’s dismissal of Appellants’ appeal of the bankruptcy court orders because the bankruptcy court’s orders were not final. View "Sitka Enters., Inc. v. Segarra Miranda" on Justia Law

Puerto Rico may not authorize its municipalities, including public utilities, to seek federal bankruptcy relief under Chapter 9 of the U.S. Bankruptcy Code. In 2014, the Commonwealth attempted to allow its utilities, which were at risk of becoming insolvent, to restructure their debt by enacting its own municipal bankruptcy law, the Puerto Rico Public Corporation Debt Enforcement and Recovery Act (Recovery Act). Plaintiffs, investors who collectively held nearly two billion dollars of bonds issued by one of the distressed utilities, brought suit to challenge the Recovery Act’s validity and to enjoin its implementation. The district court entered judgment in favor of Plaintiffs and permanently enjoined the Recovery Act on the ground that it was preempted under 11 U.S.C. 903(1), which ensures the uniformity of federal bankruptcy laws by prohibiting state municipal debt restructuring laws that bind creditors without their consent. The First Circuit affirmed, holding that section 903(1) preempts the Recovery Act, as the statute does not read that Puerto Rico is outside the reach of its prohibitions and the Recovery Act would frustrate the precise purpose underlying the enactment of section 903(1). View "Franklin California Tax-Free v. Commonwealth of Puerto Rico" on Justia Law

Sauer Incorporated alleged that Carrie Lawson incurred a debt by knowingly receiving a fraudulent conveyance from her father that was designed to prevent Sauer from collecting a judgment against him. After Lawson filed for chapter 13 bankruptcy Sauer initiated this adversary proceeding objecting to the discharge of this debt under 11 U.S.C. 523(a)(2)(A) as being for money “obtained by…actual fraud.” The bankruptcy court dismissed Sauer’s adversary proceeding, determining that because Sauer could not allege that Lawson had made a misrepresentation, Sauer could not establish that section 523(a)(2)(A) barred discharge of Lawson’s debt. The First Circuit vacated the bankruptcy court’s grant of Lawson’s motion to dismiss, holding that a debt that is not dischargeable in Chapter 13 bankruptcy as a debt for money or property “obtained by…actual fraud” extends beyond debts incurred through fraudulent misrepresentations to also include debts incurred as a result of knowingly accepting a fraudulent conveyance that the transferee knew was intended to hinder the transferor’s creditors. View "Sauer Inc. v. Lawson" on Justia Law

Debtor filed a voluntary petition for Chapter 13 bankruptcy. The bankruptcy court appointed a Trustee and confirmed Debtor’s Chapter 13 plan, which contained a tax return production requirement. When the Trustee received neither a copy of Debtor’s tax return under the tax return production requirement nor a request for an extension, the Trustee filed a motion alerting the bankruptcy court to Debtor’s failure to comply with the tax return production requirement. When Debtor belatedly furnished Trustee with a copy the extension request, the bankruptcy court imposed a $100 sanction on Debtor. The district court upheld the sanction. the First Circuit rejected Debtor’s challenge to the sanction, holding that the district court did not err in upholding it. View "Charbono v. Sumski" on Justia Law

The four debtors involved in these bankruptcy appeals all failed to timely file their Massachusetts income tax returns and failed to pay their taxes. Each debtor eventually filed his late tax returns but still failed to pay the taxes that were due. Each debtor eventually filed for Chapter 7 bankruptcy and sought a ruling that their obligation to pay the unpaid taxes was dischargeable. The Massachusetts Department of Revenue argued that unpaid taxes for which no return was timely filed by the Commonwealth’s statutory deadline fit within an exception to discharge under 11 U.S.C. 532(a)(1)(B)(i). The bankruptcy courts split three to one in favor of the debtors. In the two cases appealed to the Bankruptcy Appellate Panel (BAP), the BAP sided with the debtors. In the two cases appealed to the district court, the court granted summary judgment to the Department. The First Circuit affirmed the district court’s judgment in favor of the Department and reversed the BAP’s grant of judgment for the debtors, holding that a Massachusetts state income tax return filed after the date by which Massachusetts requires such returns to be filed does not constitute a “return” under 11 U.S.C. 523(a) such that unpaid taxes due under the return can be discharged in bankruptcy. View "Fahey v. Mass. Dep’t of Revenue" on Justia Law

T&N Limited (T&N), an asbestos manufacturer, chose to address the liability it faced after the deadly qualities of asbestos were discovered through a Chapter 11 bankruptcy reorganization plan (the Plan). Then Plan transferred to a Trust certain of T&N’s assets and rights, with which the Trust was to pay asbestos claims brought by persons who could have sued T&N but for T&N's bankruptcy. The Plan provided that T&N’s asbestos liability would continue after plan confirmation and that the Trust would bring asbestos suits against T&N as the agent of the actual claimants. In this lawsuit, the Trust brought an asbestos claim that had accrued a decade earlier. The district court dismissed the Trust’s suit on statute of limitations grounds, thus rejecting the Trust’s argument that it was allowed to bring asbestos claims that had not become stale prior to T&N’s filing for bankruptcy protection whenever it wished to do so. The First Circuit affirmed, holding that the Trust’s argument failed because the Plan unambiguously terminated the automatic stay and contained no provision that provided for any further tolling of the limitations period beyond that granted by the Bankruptcy Code. View "Barraford v. T&N Ltd." on Justia Law

Appellant sued Appellees in Massachusetts state court, asserting claims for, inter alia, embezzlement and fraud. Appellees subsequently filed for bankruptcy, and the state court stayed Appellant’s action. The bankruptcy court granted Appellees a discharge. Appellant challenged two orders issued by the bankruptcy court after it granted the discharge. The district court affirmed the bankruptcy court’s order on Appellant’s “motion to affirm,” which requested the bankruptcy court to rule that the discharge it granted Appellees had no effect on Appellant’s right to pursue his claims against Appellees against them in state court, and affirmed the bankruptcy court’s denial of Appellant’s motion for reconsideration of the order denying his motion to affirm. The First Circuit affirmed, holding that the bankruptcy court did not err in its rulings in its order on Appellant’s motion to affirm or in denying Appellant’s motion for reconsideration.View "Moushigian v. Marderosian" on Justia Law

Pinpoint and Atlas filed federal court actions against each other based on a 2009 contract between them. Two months after answering and counterclaiming Pinpoint in the Virginia action, Atlas filed for bankruptcy under Chapter 7 of the Bankruptcy Code. Atlas's filing automatically stayed the Virginia and Puerto Rico actions. At issue was Pinpoint's appeal from the Bankruptcy Appellate Panel's judgment dismissing Pinpoint's challenge to the bankruptcy court's no-stay-relief order. The court rejected the blanket-rule approach and, like the Third Circuit, held that it was possible that in some cases an order denying stay relief may lack finality. Because the order denying stay relief in this case was not final, the court dismissed Pinpoint's appeal for lack of jurisdiction.View "Pinpoint IT Services, LLC v. Atlas IT Export, Corp." on Justia Law