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Bankruptcy Bulletin: Discharge Revoked for Fraud, Failing to Disclose Assets and Business Interests, Concealing and Transferring and Failing to Report Property of the Estate

By Christopher Harayda posted 17 hours ago
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Discharge Revoked for Fraud, Failing to Disclose Assets and Business Interests, Concealing and Transferring and Failing to Report Property of the Estate BANKRUPTCY BULLETIN Contributing Authors: Amanda Schlitz and Connor Meinke   In In re Bebeau , 2022 WL 17661134 (Bankr. D. Minn. Dec. 12, 2022) the court revoked the chapter 7 debtor’s discharge at the request of the U.S. Trustee for fraud, false statements and material omissions, and concealing and transferring property of the estate with fraudulent intent. Jason Bebeau, the debtor, had interests in multiple business entities that were involved in construction and property development. ...
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“Prosecutorial Misconduct” – A Supplementary Comment

By William Wernz posted 3 days ago
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My article, Do Minnesota Prosecutors “Get Away” with Misconduct?, was published in Minnesota Lawyer and posted as a blog on this site on December 1, 2021 . My article commented on several articles discussing prosecutorial misconduct. Another article on the subject was recently published.  Barry S. Edwards and Stacy L. Bettison, Getting Serious About Prosecutorial Misconduct:  What Can – And Should be Done, Bench & B. of Minn., March 2023, at 25. (hereinafter “ Getting Serious” ).  Both this blog and my 2021 article address subjects discussed in the article by Mr. Edwards and Ms. Bettison.   Getting Serious is primarily about prosecutorial ...
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Bankruptcy Court Authorized Rejection of Franchise Agreements

By David Tanabe posted 5 days ago
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BANKRUPTCY BULLETIN In In re EllDan Corp. , 2023 WL 175195 (Bankr. D. Minn. Jan. 12, 2023), the bankruptcy court granted the debtor’s motion to reject its franchise agreements pursuant to 11 U.S.C. § 365.  The debtor maintained it exercised sound business judgment for the benefit of the estate in the determination that the costs of royalty fees due to the franchisor outweighed the benefits received under the franchise agreements. The counterparty franchisor objected to the rejection. The bankruptcy court held that the debtor’s rejection decision was not manifestly unreasonable or made in bad faith. Thus, the court approved the debtor’s rejection of the ...
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No Third-Party Stay Where Indemnification Not Certain

By Alexander Beeby posted 11 days ago
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Bankruptcy Bulletin Contributing Editor: Alexander J. Beeby , Sapientia Law Group, PLLC In Jama v. Wright County , No. 22-CV-438 (PJS/JFD), 2023 WL 2238803 (D. Minn. Feb. 27, 2023), Magistrate Judge Docherty declined to extend the automatic stay to a debtor’s employee. In doing so, he weighed in on (1) who has authority to determine the extent of an automatic stay, (2) whether the stay extends to a third party potentially indemnified by a debtor, and (3) the distinction between an automatic bankruptcy stay and a court’s discretionary stay. The plaintiff sued multiple defendants over injuries sustained while incarcerated. One of the defendants ...
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2023 ABA TechShow: From AI to PDF

By Mary Warner posted 17 days ago
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Last week I attended the 2023 ABA TechShow at the Hyatt Regency Hotel in downtown Chicago. ABA TechShow is one of the two biggest legal tech shows in the U.S. (the other being ClioCon). It’s a conference that those following legal tech don’t want to miss, and for good reason. With many sessions to choose from over the course of this four-day event, it’s a great way to learn about the newest developments in the field, earn CLEs, and get tips on ways to get the most out of technology that has become old-hat. The Expo of legal tech vendors also gives attendees a chance to review the latest products and services available to law firms.   Jennifer Carter ...
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Words to Retire in 2023

By Thomas James posted 19 days ago
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My annual list of words and phrases that are too annoying, overused or misused to keep around: Words to Retire in 2023, by Tom James on Medium.com
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Chapter 13 Debtor Lacked Standing to Pursue Personal Injury Claims for His Own Benefit

By David Tanabe posted 22 days ago
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BANKRUPTCY BULLETIN Contributing author: David M. Tanabe ,  Winthrop & Weinstine, P.A. In Hughes v. Wisconsin Central Limited , 2023 WL 1477835 (D. Minn. Feb. 2, 2023), the district court held that the chapter 13 debtor lacked standing to pursue personal injury claims solely for his own benefit.  In May 2012, the debtor filed a petition for chapter 13 relief. The debtor/plaintiff allegedly was injured on the job in railroad accidents in 2016 and 2017. He failed to disclose the personal injury claims before his chapter 13 bankruptcy discharge was granted in February 2018.  In October 2019, the plaintiff filed the pending ...
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District Court Held Section 303(i) of the Bankruptcy Code Preempted Tort Claims for Wrongful Commencement of Involuntary Bankruptcy

By David Tanabe posted 24 days ago
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BANKRUPTCY BULLETIN Contributing Author: David M. Tanabe ,  Winthrop & Weinstine, P.A. In Stursberg v. Morrison Sund , 2023 WL 23830 (D. Minn. Jan. 3, 2023), the district court granted the defendants’ motions to dismiss because the amended complaint was not authorized, and 11 U.S.C. § 303(i) preempted the plaintiff’s state common-law tort claims for wrongful commencement of an involuntary bankruptcy case.  The defendant law firm represented the plaintiff in another action but withdrew based on unpaid legal fees. Thereafter, the defendant law firm filed an involuntary chapter 7 bankruptcy petition against the plaintiff. The bankruptcy ...
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Former Minnesota Bankruptcy Attorney Sentenced to Prison for Bankruptcy Fraud

By David Tanabe posted 02-12-2023
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Bankruptcy Bulletin Contributing Editor: Alexander J. Beeby , Sapientia Law Group, PLLC According to a press release issued by the U.S. Attorney’s Office, U.S. District Court Judge Tostrud sentenced a former Minnesota bankruptcy attorney on December 9, 2022, to eighteen months in federal prison for bankruptcy fraud as part of a plea agreement (for purposes of this article, I will refer to the now-disbarred attorney as the “attorney”). See United States v. Anderson , No. 21-CR-153 (D. Minn.). According to the plea agreement, the attorney admitted to assisting a client in committing bankruptcy fraud to avoid paying creditors. The client also plead ...
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Eighth Circuit Holds Creditor Cannot Hide Behind Inaccurate Proof of Claim to Evade Service

By David Tanabe posted 02-06-2023
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Bankruptcy Bulletin Contributing Editor: Laura Goforth , Dorsey & Whitney LLP In PIRS Capital, LLC, v. Williams , 2022 WL 17492186 (8th Cir. 2022), the Eighth Circuit Court of Appeals applied Federal Rule of Bankruptcy Procedure 7004 to hold the bankruptcy trustee properly effected service of an adversary complaint. The appellant filed a proof of claim in a bankruptcy case, and about two years later, the bankruptcy trustee filed an adversary complaint naming the appellant as defendant. The bankruptcy trustee served the complaint to the appellant to the attention of the individual who signed the appellant’s proof of claim as “managing partner” ...
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Bankruptcy Court Dismissed Section 523(a)(2)(A) Claim Alleging Statement Relating to Debtor’s Financial Condition

By David Tanabe posted 02-03-2023
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BANKRUPTCY BULLETIN Contributing Editor: Patrick Patino , Patino King LLC   In In re Rankin (Liberty Bail Bond Agency v. Rankin) , No. AP 22-04038, 2022 WL 17742293 (Bankr. D. Minn. Dec. 16, 2022), the bankruptcy court granted debtor/defendant’s motion to dismiss the claim for a debt to be nondischargeable under 11 U.S.C. § 523(a)(2)(A). In its complaint, the plaintiff alleged that it relied upon debtor’s knowingly false statement she could repay a bail bond in monthly installments of $150. For the present motion to dismiss, the bankruptcy court determined the plaintiff only sought relief under § 523(a)(2)(A), which makes clear it only applies ...
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Debtor Barred From Refiling For 180 Days From Order

By David Tanabe posted 01-29-2023
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BANKRUPTCY BULLETIN Contributing Editor: Sam Calvert, Attorney at Law In In re Atkinson , 2022 WL 17722840 (Bankr. D. Minn. Dec. 15, 2022), the bankruptcy court held the debtor was ineligible for relief for a 180-day period after the voluntary dismissal of an earlier case that followed a motion for relief from stay. The debtor filed a petition for bankruptcy relief under Chapter 13 (the “Prior Case”). In July 2022, the bankruptcy court granted a mortgage creditor’s motion for relief from the automatic stay in the Prior Case. Thereafter, the debtor filed an application to voluntarily dismiss the Prior Case, which was granted on October 18, 2022. A mortgage ...
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A Duty to Disclose What’s Already Known?

By William Wernz posted 01-19-2023
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This blog post first appeared as a column in MINNESOTA LAWYER on January 17, 2023. Under the Rules of Professional Conduct lawyers have duties to disclose certain matters (conflicts, adverse interests, etc.) and duties not to disclose confidential information.  How should we understand these duties when certain facts are already known to the relevant persons? Suppose that Sue R., an unrepresented person, says to you, “I know you’re a lawyer and you represent Simon.  If Simon doesn’t pay me a lot of money by tomorrow, I’ll sue and cause a media firestorm.”  Before you say, “How much are you demanding?” you recall that Rule 4.3(b) provides, “a lawyer shall ...
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BAP Affirmed Denial of Request for Appointment of New Counsel, Objections to Proofs of Claims, and Motion for Writ of Mandamus

By David Tanabe posted 01-18-2023
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BANKRUPTCY BULLETIN Contributing Author: David M. Tanabe ,  Winthrop & Weinstine, P.A. In In re Reichel , 645 B.R. 620 (B.A.P. 8th Cir. 2022), the Eighth Circuit BAP affirmed the denial of the debtor’s requests for appointment of counsel, writ of mandamus, summary judgment, and recusal. The debtor filed a petition for Chapter 7 relief and signed a stipulation that waived his bankruptcy discharge. In 2016, a jury in a criminal case determined that the debtor engaged in wire fraud and bankruptcy fraud by illegally transferring funds from investors and employees to himself, and the court sentenced the debtor to prison. In 2017, the Chapter 7 trustee ...
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Bankruptcy Court Held Fee Agreement Providing Attorney’s Lien on Exempt Personal Property to Secure Post-Petition Payments Was False and Misleading

By Christopher Harayda posted 12-19-2022
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BANKRUPTCY BULLETIN Contributing Author: James C. Brand , Fredrikson & Byron, P.A. In In re Turner , Case No. 22-41570 KLT (Bankr. D. Minn., Dec. 2, 2022), Judge Tanabe issued another decision taking aim at consumer debtor attorneys’ efforts to provide post-petition payment plans to debtors.  The fee agreement at issue stated that the debtor’s attorney would take an attorney’s lien under Minnesota Statutes § 481.13 against some of the debtor’s personal property to secure payment of the $1,647 flat fee.  Because the attorney believed the flat fee was secured by a lien on the personal property, which would survive a bankruptcy discharge, the attorney ...
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District Court Dismisses Appeal of Orders for Failure to Object to Underlying Motions, Statutory Mootness, and Lack of Jurisdiction

By David Tanabe posted 12-13-2022
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BANKRUPTCY BULLETIN Contributing Author: Eleanor J. Vincent , Stoel Rives LLP In Green v. Nosek , No. 22-CV-972, 2022 WL 16857106 (Nov. 10, 2022), the U.S. District Court for the District of Minnesota dismissed an appeal of orders granting motions to sell real property and of orders denying a motion for reinstatement of the debtor as the possessor of those properties and for a related evidentiary hearing. The debtor owned 15 residential rental properties. The debtor filed a chapter 11 bankruptcy petition in July 2021, and a subchapter V trustee was appointed. After the United States Trustee moved to remove the debtor from possession of the properties ...
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District Court Addresses Scope of Adverse Inference Sanctions, Expert Testimony, and Bifurcation

By Karl Johnson posted 11-06-2022
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BANKRUPTCY BULLETIN Contributing Editor: Jeff Merritt , Dorsey & Whitney LLP      In  Kelley v. BMO Harris Bank N.A. , No. 19-CV-1756 (D. Minn. Sept. 29, 2022), the district court addressed the scope of adverse inference spoliation sanctions that were previously imposed; motions to exclude expert testimony; and a motion to bifurcate punitive damages from liability and compensatory damages.    The plaintiff, the chapter 11 trustee for the bankruptcy proceeding concerning Petters Company, Inc. (“PCI”) and the defendant, BMO Harris Bank N.A. (“BMO Harris”), each filed motions for clarification on the scope of the adverse inference. Both parties ...
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Eighth Circuit Affirmed Dismissal of Complaint by Creditor in Petters Ponzi Scheme

By David Tanabe posted 10-31-2022
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BANKRUPTCY BULLETIN David M. Tanabe ,  Winthrop & Weinstine, P.A.   In Ritchie Special Credit Investments, Ltd. v. JPMorgan Chase & Co. , 48 F.4th 896 (8th Cir. Sept. 13, 2022), the Eighth Circuit affirmed the dismissal of the complaint based on lack of standing and failure to state a plausible claim against a creditor and consulting firm in the Petters Ponzi scheme. Plaintiff Ritchie Special Credit Investments, Ltd. (“Ritchie”) made investments that were lost in the Petters Ponzi scheme. The trustees in the Petters bankruptcy reached a settlement for Defendant JP Morgan Chase & Co. (“JP Morgan”) to repay some of what it collected during ...
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“Date of Transfer” When Preference Action Targets Property Held In Custodia Legis

By Karl Johnson posted 10-30-2022
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BANKRUPTCY BULLETIN Laura Goforth , Dorsey & Whitney LLP In Ahlgren v. Miller (In re Holbert) , 643 B.R. 332 (Bankr. D. Minn. 2022), the bankruptcy court held that for purposes of a preference action, a transfer occurs on the date funds are deposited with a court and not, as the trustee argued, on the date the court distributes the funds to the preference defendant.  Because this was outside the 90-day preference window, the complaint was dismissed. Years before seeking bankruptcy protection, the debtor entered into an agreement to own certain real property jointly with the preference defendant.   Seven years later, the defendant commenced a ...
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Bankruptcy Court Denies Debtor's Motion for Contempt

By Karl Johnson posted 10-17-2022
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BANKRUPTCY BULLETIN Natasha Wells, Dorsey & Whitney LLP   In In re Paczkowski , Case No. 19-40365 (Bankr. D. Minn. Oct. 6, 2022), the U.S. Bankruptcy Court for the District of Minnesota (the “ Court ”) denied a chapter 7 debtor’s motion for contempt against certain creditors because the creditors’ actions did not violate the Court’s order. Previously, the Court issued an order granting the creditors’ motion for relief from the automatic stay to pursue and liquidate certain Minnesota Uniform Voidable Transactions Act (“ MUVTA ”) claims against the debtor in state court, but not to collect on any resulting judgment without the Court’s permission. Subsequently, ...
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