Judge Jacqueline P. Cox - Opinions / Outlines

Judge Jacqueline P. Cox

07 B 21123, 08 A 00180

This is an amended opinion; the original opinion was signed on March 17, 2010. This case involved a preference action under 11 U.S.C. sec. 547 to recover three payments made to the Defendants during the pre-petition preference period. The court found that the Debtor met its burden under 11 U.S.C. sec. 547 and proved by a preponderance of the evidence that the payments at issue were in fact preferential. The Defendants set forth twelve affirmative defenses, most notably the ordinary course of business defense. The court determined that the Defendants failed to meet their burden with regard to any of the affirmative defenses. The court found that the Defendants' ordinary course of business defense failed because the fraud that the Debtor's officers engaged in pre-petition and during the preference period could not serve as an exception to preference liability because ordinary businesses do not defraud their customers and lenders.

07 B 03856

This is an amended order; the original order was issued on April 1, 2010. The court found that two creditors willfully violated the automatic stay by pursuing a District Court action against several Debtors despite the creditors' knowledge of the ongoing bankruptcy case. The creditors had an opportunity to pursue their grievances in the bankruptcy court but decided to withdraw their proof of claim. At a hearing the creditors argued that the District Court action was based upon facts that were personal and peculiar to the creditors and that the District Court complaint was based upon facts that arose after the bankruptcy petition was filed. The court found that the creditors' claims were not personal and peculiar because they were similar to the other homeowners' claims against the Debtors. The court also determined that the entire District Court complaint was based upon events that occurred prior to the filing of the bankruptcy petition. The creditors' attorney was ordered to show cause why he has not violated Federal Rule of Bankruptcy Procedure 9011(b) by signing a pleading that might not be based upon legally and factually sound representations.

09 B 27094

The court granted the Trustee’s motion for a preliminary injunction staying various lawsuits pending against former directors and officers of the Debtor. The court found that the Trustee was entitled to a preliminary injunction because the pending lawsuits would likely deplete the Debtor’s entire directors and officers insurance policy, leaving nothing for the bankruptcy estate should the Trustee decide to pursue similar claims against former officers and directors. The Trustee also made a successful showing that the creditors' claims were not unique and personal, and that the creditors’ claims overlapped and were based in the same facts and circumstances as the Trustee’s potential claims against former directors and officers of the Debtor.

09 B 27094

The court denied a motion to dismiss the bankruptcy case due to the initial petition being filed by a non-lawyer on behalf of the corporation based upon laches and Federal Rule of Bankruptcy Procedure 1009 after the movants waited three months to file the motion once the preference period had passed.

In re: Tekena USA, LLC
November 19, 2009

09 B 16969

The court dismissed this Chapter 11 case finding that it was not filed in good faith due to the Debtor's involvement in efforts that amounted to abuse of the judicial system.

09 B 20825

In this matter, a judgment creditor moved to dismiss the debtor’s chapter 11 case under 11 U.S.C. § 1112(b) arguing that the bankruptcy was really a two-party dispute between the debtor and the creditor. The Court granted the motion, after determining that the debtor could not propose a confirmable plan since the creditor held over two-thirds of the total amount of claims and would not vote for any plan that would impair his claim.

08 B 28225, 09 A 00413

In this case, the chapter 7 trustee sought to enjoin a lawsuit brought by a group of investors who invested in the Debtors against a third non-debtor party accounting firm. The investors filed suit in Minnesota state court for negligent misrepresentation and professional negligence regarding the accounting firm’s financial reports concerning the Debtors’ financial position. The investors theory is that the accounting firm, with proper due diligence, would have uncovered an alleged Ponzi scheme. The Court agreed with the Trustee’s argument that the suit against the accounting firm was property belonging to the bankruptcy estate that only the Trustee could pursue and stayed the investors’ lawsuit.

In re Lunkes
July 2, 2009

09 B 00583

In this matter, the debtor claimed his interest in a trust was exempt from inclusion in his bankruptcy estate under 11 U.S.C. § 541(c)(2) because the trust was a spendthrift trust. The chapter 7 trustee objected, arguing that the trust was not a spendthrift trust. The Court agreed with the chapter 7 trustee and sustained the objection.

In re Howard
June 16, 2009

08 B 32998

The issue in this case was whether the hanging paragraph of 11 U.S.C. § 1325 applied to so-called “negative equity” in connection with the purchase of a motor vehicle that is subject to that provision. In this case, the debtor purchased a motor vehicle within 910 days of filing his bankruptcy petition for $29,798.00. Along with a $4,500.00 down payment, the debtor traded in his old car valued at $14,450.00. However, the debtor still owed $22,498.68 on the trade-in, leaving a difference of $8,048.68. This difference is referred to as “negative equity” in motor vehicle financing. The debtor entered into a financing agreement with Americredit Financial Services, Inc. (Americredit) to purchase the motor vehicle and for payment of the negative equity to pay off the debt owed on his trade-in. After the debtor filed his bankruptcy petition, Americredit filed its proof of secured claim for $34,698.07. However, the debtor’s proposed plan listed a secured claim for Americredit of $13,250.00, the motor vehicle’s current value. Americredit objected to the debtor’s plan, arguing that the debtor may not bifurcate the motor vehicle debt under the hanging paragraph of § 1325. The debtor argued that it may bifurcate the debt, stating that the negative equity component of the financing is not included under the hanging paragraph of § 1325. The Court held that the entire claim was a subject to the hanging paragraph of § 1325. The court certified the matter under 28 U.S.C. § 158 for direct appeal to the Circuit. The Seventh Circuit affirmed the ruling on March 1, 2010. See In re Howard, 597 F. 3d 852.

09 B 05868, 09 A 00384, 09 A 00385

In this matter, the Debtor and two non-debtor parties (“Respondents”) were held jointly and severally liable for attorney’s fees awarded by the U.S. District Court for the Northern District of Texas after initiating a lawsuit and failing to conduct any discovery in the case. Ultimately, summary judgment was entered against them. The judgment creditors then commenced collection proceedings to satisfy the award in both a Texas state court and in the Texas U.S. District Court. The Debtor’s bankruptcy followed. The other two respondent parties each filed adversary proceedings before this Court in an attempt to remove the collection actions from the state and federal courts in Texas to this Court. The Court agreed with the judgment creditors that there was no basis to remove the Texas proceedings and dismissed both adversary proceedings.

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