12 B 43452
Chapter 13 Trustee objected to confirmation on the grounds that by continuing to make voluntary 401(k) contributions, the Debtor was not applying all projected disposable income to make payments to unsecured creditors in violation of section 1325(b)(1)(B). In this order, the court first reviewed the split in case law over the interpretation of section 541(b)(7). This subsection states that certain contributions to retirement accounts "shall not constitute disposable income, as defined in section 1325(b)(2)." The court determined that the majority viewpoint was correct and section 541(b)(7) is not limited to prepetition contributions. Postpetition voluntary retirement contributions are excluded from the calculation of projected disposable income. In dicta the court noted that even if the Debtor had not been making voluntary 401(k) contributions during the six months prior to filing her case, any future contributions would still be excluded from projected disposable income. Objection overruled.
Judge Pamela S. Hollis - Opinions / Outlines
Judge Pamela S. Hollis
October 22, 2013
12 B 43452
March 13, 2013
08 B 31707, 11 A 02415
Debtors/Plaintiffs filed for relief under Chapter 13 and confirmed their plan. They fell behind on plan payments, attempted to catch up, then voluntarily dismissed their case. The Chapter 13 Trustee was left holding a sum of money at dismissal. Debtors filed an adversary proceeding seeking turnover of the funds. The Chapter 13 Trustee argued that she must distribute the funds to creditors. Debtors filed a motion for judgment on the pleadings, since no facts were in dispute. HELD: The funds must be returned to the Debtors. 11 U.S.C. 1326(a)(2), which instructs trustees to distribute certain payments to creditors in accordance with the plan, applies only to preconfirmation payments. Postconfirmation, trustees must make payments under the plan pursuant to 1326(c). At dismissal, however, 349(b)(3) revests property of the estate in the entity in which such property was vested immediately before the commencement of the case, which in the case of funds paid into the plan, held by the Chapter 13 Trustee and not yet distributed, is the Debtors.
09 B 26595, 09 A 01045
Debtor/Defendant had a successful remodeling and construction business. He and Plaintiff, a salaried and less-successful tool and die designer, became close friends. When Plaintiff sold his home and found himself with some extra cash, they agreed to invest in new construction. Defendant chose the location, acted as the general contractor and arranged for construction financing. Plaintiff put up the money and his name alone was on the title and loan. The house was completed just in time for the real estate market to crash. The bank foreclosed and got a deficiency judgment against Plaintiff, who asked Defendant where all the money had gone. Defendant could only account for about three-quarters of the funds. Plaintiff sought a finding that Defendant's debt was nondischargeable under 523(a)(2) and (a)(4). Following a multi-day trial, the parties briefed the issues and Plaintiff dropped the 523(a)(2) count. HELD: The parties had a fiduciary relationship because of the difference in knowledge and power which gave Defendant a position of ascendancy over Plaintiff. The debt was caused by Defendant's defalcation while acting in a fiduciary capacity, and is nondischargeable pursuant to 523(a)(4)
October 11, 2012
Private equity fund Sun Capital purchased a 100+ year old family-owned retailer, financed the purchase through an LBO, ended up as the secured lender, and put the company in Chapter 11 less than 18 months later. After Sun obtained a covenant not to be sued, Debtor filed suit against its former shareholders, three siblings. Debtor sought avoidance of the sale and recovery of sale proceeds, alleging that the LBO was a fraudulent conveyance that rendered the Debtor insolvent or undercapitalized. After several days of trial and review of two expert valuation reports as well as thousands of pages of deposition testimony and other exhibits, the court entered judgment for the Defendants. The court declined to collapse the LBO, which would have been enough to end the lawsuit. The court then analyzed the expert reports, determining that it was not the sale that left the company insolvent or undercapitalized.
September 29, 2011
Lakewood entered into an agreement to outsource its box fan manufacturing to Chicago American Manufacturing (CAM). The agreement included remedies for CAM if Lakewood failed to purchase the forecasted amounts of box fans within a certain time period. After an involuntary petition was filed against Lakewood, the Trustee rejected the agreement and brought suit against CAM to enjoin further manufacturing as well as selling any of the unpurchased box fans. The court first determined that the agreement was ambiguous, then interpreted the ambiguous provisions using parol evidence, and concluded (among other findings) that CAM's remedies included a license to manufacture and sell box fans using Lakewood's patents and trademarks. Rejection of the agreement did not terminate that license, and all box fans that CAM manufactured and sold were covered by the license granted in the agreement. Judgment for the defendant on all counts.
Defendant brought a motion for summary judgment on Plaintiffs' adversary complaint which sought to except certain debts from discharge under 11 U.S.C. §§ 523(a)(2)(A), (a)(2)(B), & (a)(6). Defendant sought a determination that Plaintiffs' complaint was barred by res judicata because of a prior action brought in state court. The court ruled that Plaintiffs were judicially estopped from denying a final judgment had been entered in the state court as Plaintiffs had engaged in supplementary proceedings, treating the judgment as final. Summary judgment was granted in favor of Defendant on Counts I and II. Defendant did not succeed on Count III because Plaintiffs did receive a judgment which could support a willful and malicious injury.
June 8, 2011
Creditor objected to approval of disclosure statement where plan contemplated using rents from apartment complex after the automatic stay had been lifted with respect to the apartment complex and creditor had asserted its right to take possession of the apartment complex and the rents. Creditor’s objection was sustained on the basis that the rents were no longer property of the estate.
March 3, 2011
Defendant brought motion to dismiss complaint alleging turnover and breach of fiduciary claims. Defendant’s motion was granted on both counts. Plaintiff failed to allege a basis upon which certain funds were property of the estate, necessitating dismissal of turnover claim. Plaintiff’s breach of fiduciary claim was barred by the statute of limitations as it was not brought within five years of the date the claim arose and the continuing violation doctrine did not apply.
February 24, 2011
10 B 04352
Debtor filed a motion pursuant to 11 U.S.C. § 362(k) against secured creditor who refused to accept Chapter 13 plan payments for certain pawned property provided for in the confirmed plan. Debtor sought creditor’s compliance with the plan or, alternatively, damages. Secured creditor responded with a motion to amend the debtor’s Chapter 13 plan pursuant to 11 U.S.C. § 1329, 11 U.S.C. § 362(d), and Federal Rule of Bankruptcy 9024 (incorporating Federal Rule of Civil Procedure 60), stating that the plan had been confirmed in error because the debtor no longer had an interest in certain pawned property because of a failure to comply with 11 U.S.C. § 541(b)(8). The creditor’s motion was denied for lack of standing, res judicata, and because exceptional circumstances did not exist. As there was no reason for the court to believe the creditor was not bound by the terms of the Plan, the debtor’s motion was granted.
February 24, 2011
Debtor filed a motion pursuant to 11 U.S.C. § 362(k) against secured creditor who refused to accept Chapter 13 plan payments for certain pawned property provided for in the confirmed plan. Debtor sought creditor’s compliance with the plan or, alternatively, damages. Secured creditor responded with a motion to amend the debtor’s Chapter 13 plan pursuant to 11 U.S.C. § 1329, 11 U.S.C. § 362(d), and Federal Rule of Bankruptcy 9024 (incorporating Federal Rule of Civil Procedure 60), stating that the plan had been confirmed in error because the debtor no longer had an interest in certain pawned property because of a failure to comply with 11 U.S.C. § 541(b)(8). The creditor’s motion was denied as the creditor did not have standing under § 1329 and its argument under § 362(d) was barred by res judicata since creditor failed to allege that it had not been provided with notice of the bankruptcy or the plan. The creditor’s Rule 60 arguments were similarly denied as these circumstances were not so exceptional as to warrant relief from judgment post-confirmation.