Law Commons^™

Trustee’S Broad Duty To Disclose Information To Interested Parties Under Section 704(A)(7) Of The Bankruptcy Code, Joel Cardoz

Bankruptcy Research Library

(Excerpt)

A trustee has a duty to disclose information to interested parties upon request. Section 1109(b) of title 11 of the United States Code (the “Bankruptcy Code”) includes creditors in the definition of interested parties. Trustees must obtain a court order to be excused from their duty to disclose.

A trustee’s duty of disclosure is “broad and extensive.” Courts are reluctant to excuse the trustee from their duty of disclosure unless the trustee points to a compelling “countervailing fiduciary duty … whose performance is more important than avoiding the harm resulting from withholding the information in question.”

First, this article …

The Effect Of Rejection Of A Copyright License On A Non-Debtor Licensee, Thomas Meininger

Bankruptcy Research Library

(Excerpt)

In general, a trustee may assume, reject, or assign an executory contract of the debtor under title 11 of the United States Code (the “Bankruptcy Code”). Courts have generally held that intellectual property license agreements are executory contracts. If the license is an exclusive copyright license, it is a transfer of ownership under title 17 of the United States Code (the “Copyright Act”). Thus, some courts treat a copyright license as transfer of ownership, not an executory contract.

This article explores the rights and obligations of a non-debtor licensee when a debtor-licensor rejects a copyright license under the Bankruptcy …

Generalized Creditors And Particularized Creditors: Against A Unified Theory Of Standing In Bankruptcy, David G. Carlson, Jeanne L. Schroeder

Articles

Courts have struggled toward a unified theory to explain when the trustee has exclusive jurisdiction to sue a third party for harms done to a bankrupt debtor, and when creditors have exclusive jurisdiction to sue the third party. Courts have proclaimed that when every creditor can sue the third party, then none of them can, and the right belongs solely to the trustee. Creditor rights are “generalized.” If only a proper subset of creditors can sue the third party, then the trustee is not able to subrogate to the subset. Such creditors are “particularized.” This paper proclaims the test a …

The Settlement Trap, Lindsey Simon

Scholarly Works

Mass tort victims often wait years for resolution of their personal injury claims, but many who successfully navigate this arduous process will not receive a single dollar of their settlement award. According to applicable bankruptcy and state law, settlement payments may be an asset of the estate that the trustee, exercising its significant authority, administers and distributes to creditors instead of a claimant who had filed for bankruptcy. This distribution power maximizes repayment, a critical counterbalance to the robust protections and benefits that debtors receive in bankruptcy.

Setting aside the perceived unfairness of taking desperately needed money from tort victims, …

The In Pari Delicto Defense May Bar Trustees That Bring Claims Which Are Property Of The Estate Under 11 U.S.C. § 541(A), Carmine Broccole

Bankruptcy Research Library

(Excerpt)

The in pari delicto doctrine states that “[i]n a case of equal or mutual fault … the position of the [defending] party … is the better one.” This doctrine is guided by the premise that it is not within the purview of the court to resolve disputes among wrongdoers, and that denial of judicial relief in these instances effectively deters illegal activity. Within the bankruptcy context, “every Circuit to have considered the question has held that in pari delicto can be asserted against a trustee bringing a claim on behalf of a debtor in bankruptcy.”

Under Section 541(a)(1) of …

Under A Confirmed Chapter 11 Plan A Liquidating Trustee May Have Sole Authority To Review And Object To Claims, Ryan C. Beil

Bankruptcy Research Library

(Excerpt)

A liquidating trust is one that is organized for the primary purpose of liquidating and distributing the assets transferred to it. When a plan under chapter 11 of title 11 of the United States Code (the “Bankruptcy Code”) is confirmed and establishes a liquidating trust, the trust is treated as a distinct entity. The liquidating trust terminates the debtor in possession’s status and conveys the estate’s rights and assets to a “liquidating trustee.” The confirmed plan does not simply substitute the trustee for the debtor-in-possession, but rather it creates a separate and distinct trust, holding certain property of the …

In Re Minter-Higgins, Deanna Scorzelli

Bankruptcy Research Library

(Excerpt)

A Chapter 7 trustee cannot recover from the debtor, through a turnover motion, postpetition transfers that were made out of the debtor’s bank account that resulted from pre-petition checks and debit expenditures that were not transferred by the bank to the payees until after the debtor filed for bankruptcy. The § 362(b)(11) exception from the automatic stay insulates a consumer debtor from the trustee’s attempt to require her to “turnover” these amounts.

A Chapter 7 Trustee’S Qualified Right Of Immunity May Be No Shield For Intentional, Negligent, Or Grossly Negligent Conduct: Analyzing And Applying The Three-Way Circuit Split, Nataniel E. Arabov

Bankruptcy Research Library

(Excerpt)

Quasi-judicial immunity is best understood as a blessing and a curse. A bankruptcy trustee is appointed to act as trustee through an order of the bankruptcy court. In Antoine v. Byers & Anderson, the Supreme Court provided a two-part test to analyze how far judicial immunity extends to persons who perform quasi-judicial functions in connection with their appointment. This test explains whether a judicial appointee is absolutely immune from personal liability to the estate or others. Under the test, a court (1) must decide whether the functions of the individual were historically adjudicative in nature, and (2) must …

Exercising Dominion And Control; An Initial Transferee’S Liability For Avoidable Transfers, Shelley Fredericks

Bankruptcy Research Library

(Excerpt)

Under section 550(a)(1) of the Bankruptcy Code, a bankruptcy trustee may collect the full amount of an avoidable transfer from the initial transferee of a fraudulent or avoidable transfer. Specifically, it provides that, “[e]xcept as otherwise provided in this section, to the extent that a transfer is avoided…the trustee may recover, for the benefit of the estate, the property transferred or…the value of such property, from the initial transferee of such transfer or the entity for whose benefit such transfer was made.” This section of the Bankruptcy Code gives power to bankruptcy trustees seeking to collect improperly transferred funds, …

The Insolvency Effect On Attorney-Client Privilege, Anna Piszczatowski

Bankruptcy Research Library

(Excerpt)

“The attorney-client privilege is the oldest of the privileges for confidential communications known to the common law.” This privilege has been held as sacred and essential to encourage complete and candid communication between attorneys and their clients. In fact, if the attorney’s “professional mission” is to be carried out appropriately to the fullest extent, then the attorney must be able to acquire all the information necessary to represent his client. Therefore, the privilege allows unfettered communication, for the benefit of both parties.

By carving more exceptions to the privilege, as bankruptcy courts, and even the Supreme Court, have in …

Whether Section 327 Professional Persons’ Legal Fees Are The Cost Of Doing Business In A Chapter 11 Bankruptcy, Christopher Atlee F. Arcitio

Bankruptcy Research Library

(Excerpt)

When a debtor attempts to reorganize under chapter 11 of title 11 of the United States Code (the “Bankruptcy Code”), the debtor typically remains “in possession” and retains all the rights of the trustee, including the right to administer the bankruptcy estate “as a fiduciary for the estate’s creditors” in a chapter 11 bankruptcy case.

Importantly, a debtor-in-possession and a trustee are empowered to employ third parties to carry out their duties. Section 327 of the Bankruptcy Code deems these individuals “professional persons.” A professional person may be compensated upon submission of a fee application to the court. The …

Conflict In The Bankruptcy Code: Ramification Of A Trustee’S 363(F) Right To Sell Property “Free And Clear” On The Lessee’S 365(H) Right To Retain Property, Aaron Leaf

Bankruptcy Research Library

(Excerpt)

Section 363(f) of title 11 of the United States Code (the “Bankruptcy Code”) allows a trustee to sell property “free and clear of any interest in such property” that a third party might have if certain conditions are met. Section 365(h) of the Bankruptcy Code allows the lessee of a rejected lease to either retain the property with all rights appurtenant to the estate, or treat such lease as terminated and sue for damages. Courts are split on if these sections of the Bankruptcy Code are compatible. The majority of courts have found these sections are not compatible, and …

Turnover Actions And The “Floating Check” Controversy, David R. Hague

Faculty Articles

When a debtor files for Chapter 7 bankruptcy, a Chapter 7 trustee is appointed and is charged with collecting and reducing to money the property of the bankruptcy estate. One of the most basic collection methods a trustee possesses is its turnover power under § 542(a) of the Bankruptcy Code. Pursuant to § 542(a), an entity in possession, custody, or control, during the bankruptcy case, of property that the trustee may use, sell, or lease, must deliver to the trustee, and account for, such property or the value of such property.

An interesting issue has arisen that is placing debtors …

Trustees Beware: Reviewing The Circuit Split On Bankruptcy Trustee Personal Liability, Barry Z. Bazian

Bankruptcy Research Library

(Excerpt)

Imagine that you have been appointed to serve as a trustee in a bankruptcy case. As the “representative of the estate,” one of your responsibilities is to properly manage the estate’s assets. You decide to invest the estate’s funds in several risky penny stocks, relying on minimal research you performed online. Unfortunately, these investments quickly decrease in value, substantially diminishing the value of the estate. Now, of course, the debtor and his creditors are angry and want to sue you for mismanaging the estate’s funds. Can you be held personally liable? In other words, will you have to pay …

Lien Preservation Does Not Give Trustee Right To Collect All Debt, Elizabeth Filardi

Bankruptcy Research Library

(Excerpt)

In Morris v. St. John National Bank, 516 F.3d 1207 (10th Cir. 2008), the Tenth Circuit addressed the issue of whether a bankruptcy trustee who successfully avoids a lien and preserves the in rem security interest for the bankruptcy estate under the powers granted to him by the Bankruptcy Code automatically assumes all the rights the original lienholder may have against the debtor. The Court, affirming the decisions of the bankruptcy court and bankruptcy appellate panel, concluded the trustee did not automatically assume all the rights the original lienholder may have against the debtor. Id. at 1212. …

Allowing Trustee Removal For Cause, Sua Sponte, After Notice And A Hearing, Jonathan Grasso

Bankruptcy Research Library

(Excerpt)

The issue of whether a bankruptcy judge can sua sponte remove a trustee has rarely been addressed; however, two courts have recently considered the issue. The Bankruptcy Appellate Panel in Morgan v. Goldman (In re Morgan), 375 B.R. 838 (B.A.P. 8th Cir. 2007) and the U.S. Court of Appeals for the Eleventh Circuit in Walden v. Walker (In re Walker), 515 F.3d 1204 (11th Cir. 2008) both concluded that a bankruptcy judge has the ability to remove a trustee “for cause,” sua sponte, after “notice and a hearing.”

Morgan was the first case to ever deal …

Trustee's Ability To Waive Individual Debtor’S Attorney-Client Privilege, Rebecca Leaf

Bankruptcy Research Library

(Excerpt)

Courts disagree about whether a trustee may waive an individual debtor's attorney-client privilege. Although the Supreme Court has addressed the issue in the case of corporate debtors, it has not done so in the case of individual debtors. Thus, lower courts have adopted three approaches to cases involving individual debtors: allowing the trustee to always waive privilege, never allowing the trustee to waive privilege, and a balancing approach.

This memo explores the importance of the attorney-client privilege, its relevant statutory bases, Supreme Court precedent, and the three approaches mentioned above. This memo also considers the advantages and disadvantages of …

On Proof Of Preferential Effect, Rafael I. Pardo

Scholarship@WashULaw

This Article presents a comprehensive analysis of the manner in which the trustee of a debtor's estate may satisfy his burden of proof to demonstrate the preferential effect of a prebankruptcy transfer from a debtor to a creditor. The proposed framework, if adhered to by courts, will create a uniformity that gives preference law its proper reach and thereby reinforces its primary goal: equal treatment of similarly situated creditors (the equality principle). After examining the historical developments that have made a trustee's evidentiary burden administratively less complex, the Article discusses the Ninth Circuit's decision in Batlan v. TransAmerica Commercial Finance …

Section 365 In The Consumer Context: Something Old, Something New, Something Borrowed, Something Blue, Michael G. Hillinger, Ingrid Michelsen Hillinger

Faculty Publications

The § 365 consumer debtor case law has a further complication. Much of it arises in the context of the last great bankruptcy frontier, Chapter 13. Until recently, Chapter 11 has occupied the minds and hearts of courts and attorneys. Not any more. And, as attorneys and courts take a closer, harder look at Chapter 13, it is no longer possible to describe it as a “streamlined creditors-can’t-vote Chapter 11”. Chapter 13 is unique, presenting its very own quandaries, not the least of which is how its provisions and § 365 interact. We live in interesting times.

Chapters 11 And 13 Of The Bankruptcy Code--Observations On Using Case Authority From One Of The Chapters In Proceedings Under The Other, David G. Epstein

Law Faculty Publications

This Article will focus on the relationship between Chapter 11 and Chapter 13 of the Bankruptcy Code. A number of issues are similar or identical in Chapter 11 and Chapter 13. Furthermore, much of the language of Chapter 13 mirrors that of Chapter 11. This Article explores whether courts should apply case law and concepts of one chapter when similar issues arise in proceedings under the other chapter. Parts II and III of this Article address basic similarities and differences between Chapters 11 and 13. Parts IV, V, and VI examine three issues governed by statutory language common to both …