Defendant CPLG TX Properties, LLC (as seller) and Hitendra Bhakta (as buyer) executed purchase agreements for the sale of three hotels and Mr. Bhakta wired a $300,000 deposit for each hotel to an escrow agent. The sales did not close. Plaintiffs, which are single purpose LLCs that Mr. Bhakta formed to buy the hotels, brought an adversary proceeding seeking return of the deposits. Each plaintiff is a debtor in a separate chapter 11 bankruptcy case. 

Defendants moved to dismiss the complaint including for lack of standing and jurisdiction, arguing that that Plaintiffs are not valid assignees of Mr. Bhakta’s rights under the Purchase Agreements. The Court ruled: 1) errors in the assignment documents might not be fatal to effective assignments, 2) the attack on jurisdiction was a factual not facial attack warranting discovery on jurisdictional facts, and 3) parties by contract can agree that an invalid attempted assignment is void, not voidable, meaning that a defective assignment cannot be made valid by ratification.   

The Court deferred ruling on the jurisdiction/standing issue pending completion of discovery and an opportunity for an evidentiary hearing.

Creditor filed a motion seeking an order for declaratory or injunctive relief directing Debtor to remove his name from a list of persons associated with the Archdiocese who have been credibly accused of child sexual abuse. The list was publicly disseminated in September 2017, more than one year prepetition. The motion thus asserts a prepetition claim. Recognizing a conflict in the case law on the issue whether a creditor may sue the debtor in bankruptcy court on a prepetition claim without seeking relief from the automatic stay, the Court examines the rationales underlying the majority view—i.e. that creditors may file such proceedings without violating the automatic stay, and the minority view—that the language of 11 U.S.C. Section 362(a)(1) plainly stays proceedings against the debtor in bankruptcy court on prepetition claims. The Court concludes that the minority view is correct.  The motion, which violates the automatic stay, and is otherwise procedurally improper, is denied. Creditor may pursue the relief requested in the motion only if stay relief is granted, after which he may file an adversary proceeding or remove a pending state court action to this Court. 

Plaintiff, the chapter 7 trustee, filed an adversary proceeding seeking, in part, to avoid an attorney charging lien on surplus funds generated by a prepetition foreclosure sale of residential property owned by Debtor. Ruling on Plaintiff’s motion for summary judgment, the Court held that the undisputed facts show that the Defendant, who represented Debtor in its prepetition attempt to claim the surplus funds, did not have a valid attorney charging lien because (1) the fund at issue was generated by the foreclosure sale, not by Defendant’s skill and effort; and (2) Defendant did not satisfy the notice requirement. Judgment is entered in favor of Plaintiff on the lien avoidance claim. The balance of Plaintiff’s motion for summary judgment will be addressed in a separate opinion.

In these jointly administered subchapter V cases, after the bankruptcy cases had been pending for more than 8 months, Debtors moved to continue the final hearing confirmation hearing and to permit them to amend their proposed reorganization plans after the Court resolved Debtors’ objections to a claim filed by one of its major creditors. The Subchapter V Trustee objected to continuation of the final confirmation hearings, arguing that subchapter V cases are intended to proceed to resolution quickly, that Debtor would not be able to confirm a plan, and that administrative expenses, already approximately $250,000, were continuing to accrue. The Court granted the motion to continue the confirmation hearing taking into account the need for rapid progress toward plan confirmation, including prejudice to creditors from delay; the risk of nonpayment of administrative claims; the likelihood that a plan will be confirmed and whether delaying the confirmation hearing will increase the prospect of confirmation; whether the debtor has proceeded diligently; special challenges presented by the COVID-19 pandemic; the debtor’s progress in reaching agreements with its creditors; and the complexities of the case.