Case Updates

The Bankruptcy Appellate Panel for the Ninth Circuit recently ruled that a chapter 13 debtor is not required to use post-confirmation proceeds from prepetition assets to pay creditors when the property revests in the debtor after confirmation. Black v. Leavitt (In re Black), 609 B.R. 518, 2019 WL 7344909 (BAP 9th Cir. 2019). Read more

A California bankruptcy court has held that a contractual provision authorizing lender to recover default interest at the rate of 4% above the ordinary contract rate was not an unenforceable penalty under California or bankruptcy law. The court also ruled that the default rate was enforceable as a liquidated damages clause. [In re 3MB, LLC, Case No. 18-14663-B-11, 2019 WL 6701420 (Bankr. E.D. Cal. Dec. 5, 2019).] Read more

The Fifth Circuit Court of Appeals rejects lower court ruling that a bankruptcy trustee could avoid prepetition transfers and recover their values under 11 U.S.C. section 550(a), when the immediate transferee had returned the funds in question to the debtor prepetition, as such recovery would violate the prohibition against double recovery in Section 550(d). Matter of DeBerry, ___ F.3d ___, 2019 WL 7046904 (5th Cir. 2019). Read more

The Texas Supreme Court, on a certified question from the Fifth Circuit Court of Appeals, determined that a recipient of a fraudulent transfer who was on inquiry notice of the transferor’s fraud must diligently investigate suspicions to prove good faith as part of the good faith and value defense in the Texas Uniform Fraudulent Transfers Act, irrespective of whether the investigation would reveal fraudulent conduct. Janvey v. GMAG, L.L.C., 2019 WL 6972237 (Tex. Sup. Ct. 2019). Read more

The Ninth Circuit Court of Appeals recently determined that the statute-of-limitations disclosure in a debt collector’s letter did not mislead or deceive the “least sophisticated debtor” and therefore was not a violation of the Fair Debt Collection Practices Act. Stimpson v. Midland Credit Management, Inc., 2019 WL 6885508 (9th Cir. Dec. 18, 2019). Read more

A California bankruptcy court has held that Chapter 7 debtor-taxpayers are liable for taxes owed to the Franchise Tax Board where the transaction by which the debtors formed and operated their Subchapter S corporation was determined to be a “sham” with no economic substance separate from providing tax benefits to the debtors. Read more

In In re Davis, (unpublished), No. 19-1116, 2019 WL 2931668, 2019 Bankr. LEXIS 3466 (9th Cir. BAP Nov. 5, 2019) the U.S. Bankruptcy Appellate Panel of the Ninth Circuit ruled that generic language in a contract may be sufficient to permit a bankruptcy court to award attorneys fees to the debtor for successful defense of a Section 523(a)(2) action. Read more

In Norio, Inc. v. Thomas H. Casey, Chapter 7 Trustee, 2019 WL 6331564 (9th Cir. BAP 2019), the Bankruptcy Appellate Panel for the Ninth Circuit held in an unpublished opinion that a lender’s claim was unsecured because the Debtor-borrower had no direct ownership interest in the property (membership interests in a limited liability company and a limited partnership, collectively the “Membership Interests”) she purported to pledge as collateral for the related loan. Read more

The Fifth Circuit Court of Appeals reversed a district court order affirming denial of a motion to compel arbitration of an adversary proceeding for violations of the Truth in Lending Act. A strong dissent argued that the district court and bankruptcy court properly denied the motion. Tower Loan of Mississippi, LLC v. Willis (Matter of Willis), 2019 WL 6767095 (5th Cir. 2019). Read more

A doctor with San Jose Neurospine (SJN) performed a lumbar microdiscectomy surgery on a patient insured by Aetna after the patient was taken to the emergency room with excruciating back pain. SJN submitted claims to Aetna for reimbursement for the medical services provided, but incorrectly cited non-emergency CPT (Current Procedural Terminology) codes. Aetna provided reimbursement for “non-emergency surgery.” SJN sent Aetna an appeal letter explaining its initial coding error, but Aetna declined to pay for the emergency services. SJN sued, alleging Aetna violated Health and Safety Code section 1371.4. Aetna moved for summary judgment, arguing that SJN was not entitled to reimbursement for emergency services because its initial bills contained non-emergency codes. SJN responded that its second bill mentioned “ER” and therefore requested reimbursement for emergency services, and filed evidence of the emergency services. The trial court granted Aetna’s motion, reasoning that: “If the doctor doesn’t submit the correct coding on a health insurance claim, he doesn’t get paid for it.” SJN appealed. Read more