Garrett v. Coventry II DDR/Trademark Montgomery Farm, LP (Matter of White-Robinson), No. 14-10525 (5th Cir. 2/6/15). This case involved a bankruptcy court which sanctioned a law firm and then imposed a contempt order against them when they did not pay the sanction. The District Court and the Fifth Circuit both affirmed the contempt order. Attorney Garrett represented Nina White-Robinson in her bankruptcy. She represented the Debtor in a suit against DDR. The Bankruptcy Court ordered that Garrett and her firm pay sanctions totaling $25,000 for discovery abuse and for filing a frivolous motion for contempt. Garrett appealed the sanctions orders and lost. Garrett did not obtain a stay pending appeal nor did she pay the sanctions. As a result, DDR brought a motion for contempt against Garrett and her firm. The Bankruptcy Court ordered Garrett to pay an additional $6,454.50 in expenses to DDR and ordered that they pay an additional $100.00 per day for each additional day that they did not pay the sanctions. (There is an irony here in that the attorneys started the ball rolling with a motion for contempt only to have one granted against themselves.).
The Fifth Circuit found that the Bankruptcy Court had authority to issue the civil contempt order. It found that it was a core proceeding for the Bankruptcy Court to enforce its own orders and that the pending appeal did not deprive the court of jurisdiction. The Fifth Circuit also rejected the argument that the Contempt Order improperly allowed imprisonment for failure to pay a debt. However, the Contempt Order did not provide for imprisonment. Rather, it just increased the amount of money she owed. The Fifth Circuit also rejected the argument that the contempt order was an abuse of discretion.
The first moral here is that when appealing an order for payment of money, you should always request a stay pending appeal. The second one is that if you don't get a stay pending appeal, you should be prepared to get your checkbook out. Bankruptcy Courts don't like it when their orders are ignored.
Superior MRI Services, Inc. v. Alliance Healthcare Services, Inc., No. 14-60087 (5th Cir. 2/18/15). This case involves rights supposedly acquired from a debtor that filed bankruptcy. We start with P & L Incorporated. It filed chapter 7 bankruptcy on January 19, 2012. In its statement of financial affairs, it referenced an assignment of MRI service agreements to Superior MRI Services. However, Superior was not incorporated with the State of Mississippi until November 28, 2011. Superior then sued Alliance Healthcare Services for allegedly interfering with the MRI service agreements it acquired from the Debtor. Each of the incidents happened prior to Superior's incorporation. Alliance moved to dismiss for lack of prudential standing. It provided public records showing that Superior was not incorporated at the time of the alleged assignment. Furthermore, Superior was not able to provide evidence of the alleged assignment other than the statement in P & L's statement of financial affairs. The District Court dismissed the complaint. The District Court rejected the argument that P & L and Superior had merged and that Superior had ratified the assignment after it was incorporated. The Fifth Circuit affirmed.
The principal bankruptcy interest here is what doesn't appear in the record. Apparently Alliance also argued that any cause of action belonged to the bankruptcy trustee since the alleged wrongs occurred prior to bankruptcy. Superior sought leave to join the trustee as a party but the court dismissed the case before that could happen. There is certainly a hint here that P & L sought to transfer assets to a third party on the eve of bankruptcy to keep them out of the estate. If that was the case, the plan failed due to the fact that the assignee didn't exist at the time and no evidence of the assignments was ever produced. Assuming that there ever was a valid cause of action, it should have been pursued by the bankruptcy trustee. However, we don't know what the chapter 7 trustee thought about the case or whether he ever knew it existed. If this were a Sherlock Holmes mystery, it would be the case of the trustee who didn't bark.
Baker v. Baker (In re Baker), No. 14-10569 (5th Cir. 2/20/15)(unpublished). This is the case of Joe, Joan and John and the missing mineral interest. Joe and Joan were married. When they got divorced, Joan was supposed to convey all of her interest in a property known as Poppies to Joe. However, when she signed the deed, it contained an exclusion for her mineral interest in the property. At some point Joe sued Joan in state court to compel her to convey the mineral interest to him. Joe filed chapter 12. Under his plan, he sold all of the estate's interest in Poppies to John. The sale order provided for John to receive all of the estate's interest, both mineral and surface to the Poppies property. John received a title commitment showing a reservation for the mineral interests and accepted a deed with this reservation as well. Eight months later, he filed a motion to compel, seeking to force the bankruptcy estate to convey the mineral interest to him. Finding that the estate had already conveyed all of the interest that it had, the Bankruptcy Court denied the motion. On appeal, John contended that the Bankruptcy Court exceeded its jurisdiction by determining the extent of the estate's interest. Apparently John was afraid that the Bankruptcy Court's order could be interpreted to foreclose Joe's suit against Joan to get the mineral interests back. The Fifth Circuit said that yes, the Bankruptcy Court had authority to interpret its own orders and that no, the Bankruptcy Court did not rule upon the state law issue between Joe and Joan.