Opinions

 

The summaries on this website are summaries of the opinions issued by the judges of the Bankruptcy Court for the Western District of Virginia from October 2004 to date. The opinions may be searched by year, judge, category and chapter. For a more detailed search, enter a keyword in the search box above. This opinion bank, however, is not an exhaustive list of opinions issued by the judges of the Western District. These summaries are not intended to replace other research methods, but may be used as a starting point for your research. These summaries do not contain information as to whether an opinion has been published, appealed or the disposition of any such appeal, or otherwise overruled or affected by subsequent case law or statute. These summaries have been prepared for the convenience of the researcher and in no way constitute an interpretation by the Court of the opinion summarized. Please rely on the opinion not the summary. Please contact Judge Connelly's chambers or Judge Black's chambers regarding any questions or errors.

Fitzgerald v. Delafield, et al. (In re Williams) (Case No. 15-71767, A.P. No. 16-07024) 5/14/2018

The defendants filed a motion for a limited stay of enforcement of a bankruptcy court order that revoked the privilege of Upright Law and certain other parties from filing or conducting cases in the Western District of Virginia for five years. The Court held that the defendants did not meet the burden under Rule 8007 to establish grounds for entry of a stay pending appeal as they did not demonstrate that they will likely prevail on the merits of the appeal, that they will suffer irreparable injury if the stay is denied, that other parties will not be substantially harmed by the stay and that the public interest will be served by granting the stay.  The Court denied the motion, but ordered that the temporary stay would remain in effect through a certain date, after which it shall be dissolved.

Farthing v. Fraley (In re Fraley), Case No. 17-70067; A.P. No. 17-07027 3/28/18

The Chapter 7 Trustee sought order avoiding voluntary transfer of land from one debtor to his daughter in which a life estate was reserved for the debtors (one of whom was a stranger to the title) under 11 U.S.C. § 544(b) and Virginia Code § 55-81. As the female debtor did not own an interest in the property prior to the reservation, the reservation of the life estate only survived as to the male debtor.  The Court then valued his single life estate in the property and added that to the value of his other personal property and found that the total asset value after the transfer was greater than his total liabilities. Thus, the male debtor was not insolvent at the time of, or made insolvent by, the transfer and the conveyance may not be avoided.

In re Hoole (17-50262) 03/21/2018

The chapter 7 trustee asked the Court to determine the estate's interest in a joint tenancy.  The trustee asserted that the estate's interest was a one-half interest, while the debtor argued that the estate's interest was nominal at most.  The Court found that the estate's interest was in the nature of a joint tenant with an undivided interest in the entire property with the right of survivorship.

In re Townside Construction, Inc., Case No. 16-70629 (03/14/2018)

The Chapter 7 Trustee, the Bank creditor and the foreclosure trustee under certain deeds of trust filed a motion to approve a compromise and settlement whereby the Bank would pay a certain sum to the Trustee, after which the Trustee would convey certain real property  to the Bank and execute a general release of the Bank and foreclosure trustee releasing all claims against them, known and unknown, and accruing from the beginning of time through the date of the entry of the order approving the settlement. The Debtors objected to the motion asserting that certain causes of action were not property of the estates and that the Debtors were entitled to bring litigation against these parties without the Trustee's involvement.   As the scope of the definition of estate property under 11 U.S.C. § 541 is both comprehensive and far-reaching, the Court found that the causes of action alleged by the Debtors in these pending separate lawsuits were "sufficiently rooted" in the Debtors' pre-bankruptcy pasts with the Bank to fall within the  Segal v. Rochelle test, and that the alleged causes of action sufficiently flowed from the Debtors' prepetition assets such as to fall within the scope of Section 541.  The Court did not decide whether the settlement should be approved, reserving the issue until after the Trustee fulfills his statutory duties.

Dulles Electric & Supply Corp. v. Shaffer (In re Shaffer) Case No. 13-51380; A.P. No. 17-05018 02/27/2018

Plaintiff reopened the bankruptcy cases of defendants and filed separate complaints against each defendant seeking a declaratory judgment on the dischargeability of particular debts for postpetition extensions of credit based on a guaranty signed prepetition.  The Court concluded that the chapter 7 discharge orders did not discharge liability under the guaranty for the postpetition extensions of credit.

Robbins v. Delafield, et al. (In re Williams)(Case No. 15-71767, A.P. No. 16-07024) 2/12/2018

The United States Trustee filed adversary proceedings against certain parties involved in a multi-jurisdictional law practice seeking disgorgement of attorney's fees, cancellation of fee agreements between the debtors and their attorneys, an injunction against the parties enjoining them from violating 11 U.S.C. §  526, and the imposition of civil penalties and sanctions against the parties.  While the Court expressed concern about the way the multi-jurisdictional law firm conducted its business and the lack of proper oversight of its employees, the Court found the Rule 2016(b) statements were not actionable on the grounds the local partners were not sharing compensation with members of the same law firm.   However, the Court found the law firm was an active participant in promoting and participating in an improper scheme called a "New Car Custody Program" to have consumers' vehicles towed out of state to facilitate the payment of the law firm's attorney's fees and filing fees by the towing company.  The Court ordered disgorgement of attorney's fees received under 11 U.S.C. § 329, with the funds to be paid to the debtor's estates.   Further, under its inherent authority pursuant to 11 U.S.C. § 105(a), the Court sanctioned the "local partner" attorneys by revoking their privileges to conduct and file cases in the Western District of Virginia for one year and eighteen months, respectively, and also monetarily sanctioned them $5,000.00 each. The Court also separately fined the law firm and certain of its members and affiliated persons the sum of $250,000 and revoked the law firm's privilege to conduct and file cases in this District for five years. The managing partner was fined $50,000 personally.  The Court further ordered the towing defendant in default to, among other things, disgorge all funds received from residents of this district in connection with the vehicle recovery program.

In re Rollison (17-61097) 01/19/2018

The Court considered whether to reopen a closed chapter 7 no-asset bankruptcy case to allow the debtor to amend his schedules to add two creditors, whom the debtor had not scheduled or noticed during his case.  The Court noted that the Bankruptcy Code, in particular sections 523 and 727, addresses the effect of the entry of a discharge order on unscheduled debts.  The Court found that the debtor had not met his burden to prove compelling circumstances to reopen for the purpose of scheduling debts he did not previously disclose on his bankruptcy filings.  Because reopening to amend the schedules would not alter the effect of sections 523 and 727, the Court determined that reopening would be futile and a waste of judicial resources.  The Court denied the motion to reopen. 

Ayers v. U.S. Dep't of Defense (In re Ayers); Case No. 17-70928; A.P. No. 17-07035 1/8/2018

The Debtor filed an adversary proceeding against the U.S. Department of Defense and the U.S. Department of the Treasury seeking a declaration that her debt to the Department of Defense under the ROTC/SOAR program is dischargeable under 11 U.S.C. § 727 or alternatively that any such debt excepted from discharge under 11 U.S.C. § 523(a)(8) constitutes an undue hardship on the Debtor and should be discharged.  The Debtor also asserted that the Defendants’ actions were arbitrary and capricious and that no reason exists for disparate treatment of the Debtor and sought declaratory judgment that the Defendants’ decision to recoup certain expenses because of her disenrollment from the Air Force based solely on her sexual preference is in violation of 5 U.S.C. §706(2) and her right to due process and equal protection under the Fifth Amendment of the Constitution.  In response, the Defendants filed a motion to dismiss pursuant to Rule 12(b)(1) and 12(b)(6) of the Federal Rules of Civil Procedure. The Court granted the Defendants’ Motion to Dismiss in part and denied it in part, denied the Debtor’s Motion to Amend the Complaint as futile, but allowed the Debtor to amend her complaint as to whether the debt can be discharged as an undue hardship under the Brunner v. N.Y. State Higher Educ. Servcs. Corp. test.

Hurt v. HUD (In re Hurt), Case No. 17-70281, A.P. No. 17-07020, 12/27/2017

 The Debtors filed an adversary proceeding pursuant to 11 U.S.C. §§ 542(a) and 547(b) seeking to recover a federal tax refund the United States Department of the Treasury setoff prepetition within 90 days of their petition date in partial satisfaction of a foreclosure deficiency that the Debtors owed to HUD. HUD contends that the setoff is not recoverable under either section, nor is it recoverable under 11 U.S.C. § 553, the provision of the Bankruptcy Code governing setoffs.  The Court held that the validity of the setoff had not been called into question by any allegation of the Complaint and a cause of action to recover it is not available under Section 547(b).  The Court also held that Section 553(b)(1) does not bar the creation of an insufficiency during the 90 day prepetition period, but permits the trustee to recover the setoff amount only if the insufficiency is less at the time of set off than when it arose.  In the instant case, there was no reduction in the insufficiency, therefore section 553(b) does not allow recovery by the trustee.  As HUD did not improve its position within 90 days preceding the filing of the petition, the Court granted HUD’s motion for summary judgment and dismissed the adversary proceeding.

Robbins v. Delafield, Upright Law et al. (In re Williams), Case No. 15-71767, A.P. No. 16-07024 12/8/2017

Prior to trial, the Court granted the Defendants’ motion to file confidential exhibits under seal temporarily.  Upon conclusion of the trial, the parties were directed to submit a brief to justify the continued sealing of exhibits and an explanation as to why alternatives to sealing would not provide sufficient protections.  The Defendants’ motion for continued sealing of exhibits is now before the Court. While the presumption is that all documents filed in a bankruptcy case are accessible to the public; under 11 U.S.C. § 107(b), the Court may protect an entity with respect to a trade secret or confidential research, development or commercial information and defamatory or scandalous material.  The Court held that the seal would be maintained pending its decision on the merits of this case on scripts and training materials for employees, partner handbooks, tax returns and financial information, but not on partner newsletters that contain publicly available information.  The Defendants also requested that they be allowed to withdraw from the public record any proposed trial exhibits previously filed under seal that were not admitted into evidence.  The Court kept those documents under seal upon final resolution of the case, will not consider the documents in its ruling on the merits and will permit the Defendants to withdraw the documents upon final resolution of the case. 

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