Recent Developments (The Year in Review)

 

 

Under the "mechanical" approach urged by the trustee, debtor would have to pay $756/month; under the "forward looking" approach, her income would be only $2700/month, and her disposable income was $144/month. Trustee made effective argument that debtor had alternatives, including moving the six-month time frame pursuant to § 101(10A)(ii). Roberts and Scalia understand, and recognize discretion may exist under some options and not others. Ginsburg and Sotomayor were skeptical. But no one asked a hostile or even very challenging question of debtor's lawyer.

Schwab v. Reilly, 534 F.3d 173 (3d Cir. 2008)(argued Nov. 3, 2009). Debtor entitled to entire value of personal property claimed as exempt when trustee did not object, despite trustee later learning valued exceeded what debtor claimed and exemption cap. Justices Kennedy, Ginsburg and Sotomayor reflected concern about imposing undue burdens on trustees to determine value within 30 days of first meeting of creditors, but Breyer thought it would be determined at first meeting, or first meeting could be continued, and Roberts, Scalia and Alito (and possibly Kennedy) thought debtor's schedules gave trustee adequate notice debtor was claiming entire asset as exempt.

Travelers Indem. v. Bailey, 129 S. Ct. 2195 (June 2009). Whether bankruptcy court had subject matter jurisdiction to enter 1986 injunction against actions against debtor's insurers is not subject to collateral attack, and the court had jurisdiction to enter the "clarifying order" in 2004 because bankruptcy court had jurisdiction to interpret and enforce its own prior orders, citing Local Loan v. Hunt. Bankruptcy court was correct that even "direct actions" alleging insurers' own bad acts were "based upon, arising out of or relating to" the insurer's coverage of debtor, because "In a statute,'[t]he phrase "in relation to" is expansive," although there is a cutoff at some point where the connection "would be thin to the point of absurd."

2. Jurisdiction and Venue

Marshall v. Stern (In re Marshall), 600 F.3d 1037 (9^th Cir. March 19, 2010). A counterclaim is core under § 157(b)(2)(C) only if it is both compulsory and "so closely related to the proof of claim that the resolution of the counterclaim is necessary to resolve the allowance or disallowance of the claim itself." But see In re Gorilla Companies LLC, 2010 WL 1994412 (Bankr. D. Ariz. May 6, 2010)(the Marshall category of compulsory counterclaims that are not core may be extremely narrow).

W.R. Grace & Co. v. Chakarian, 591 F.3d 164 (3d. Cir. Dec. 31, 2009). Reaffirms Pacor test for "related to" jurisdiction over third party injunction, and finds effect on estate lacking if effect on the estate would occur only as a result of another lawsuit. Debtor sought to expand injunction against actions filed against debtor and its affiliates to include an action filed against State of Montana, which would have created potential liability of debtors to State of Montana in a subsequent indemnity action if Montana lost.

 

©2010 Randolph J. Haines