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Judge Jack B. Schmetterer

Judge Jacqueline P. Cox

In re Enyedi, et al.
July 12, 2007

06 B 08771

Debtors filed a chapter 7 bankruptcy case and obtained a discharge. The chapter 7 trustee filed a No Asset Report and the case was closed. Approximately 7 months later, the debtors’ case was re-opened for the purpose of disclosing 2 pre-petition causes of actions that were omitted from their bankruptcy schedules. The chapter 7 trustee previously assigned to the case was re-appointed as trustee. After the case was re-opened, the defendants involved in the one matter pending in state court (the other matter is a workers compensation claim) obtained an order dismissing the law suit with prejudice because the debtors failed to properly list it in the bankruptcy case. The chapter 7 trustee moved for an order of contempt against the defendants for violating the automatic stay. The court held that (1) the unscheduled lawsuit was never abandoned by the trustee and is still property of the estate protected by the automatic stay; (2) the trustee, not the debtors, hold the exclusive right to pursue the cause of action in state court; (3) the defendants violated the automatic stay and the state court order of dismissal is void ab initio; and (4) neither an order of contempt nor an award of damages were warranted based on the circumstances of the case.

07 B 03856

Chapter 11 debtors filed application to employ law firm as special litigation counsel to represent them in pending state-court litigation involving derivative claims and counterclaims the debtors’ principals filed against each other on behalf of certain debtors. The court overruled the objection from one of the debtors’ principal members and prior manager and held that the law firm’s employment was in the best interest of the estate and that the interests of the debtors’ controlling principals, who are defendants in the state court litigation, are not adverse to the estates’ interests. The court also noted that special counsel risked total denial of any requested compensation award if it failed to timely disclose the development of an adverse interest while representing the debtors.

Judge A. Benjamin Goldgar

07 B 01134

Judge Carol A. Doyle