Apps v. Morrison (In re Superior Homes & Investments, LLC)

Summarized by Lynn Hinson , Dean Mead Egerton Bloodworth Capouano & Bozarth PA
12 years 8 months ago

Citation:

11th U.S. Circuit Court of Appeals Case Number 12-15451 (will not be published)

Tag(s):

Ruling:

The 11th Circuit Court of Appeals AFFIRMED the United States District Court for the Middle District of Florida approving a compromise that enjoined the appellant creditors from proceeding with further state court litigation against the Debtor and non-debtors. The 11th Circuit held that the Bankruptcy Court had "related to" subject matter jurisdiction over the state-court cases based on 28 U.S.C. section 1334(b).

Procedural context:

On appeal from the United States District Court for the Middle District of Florida, which had AFFIRMED the decision of United States Bankruptcy Court for the Middle District of Florida.

Facts:

On February 20, 2009, numerous creditors filed a Chapter 11 involuntary bankruptcy petition against Superior Homes & Investments, LLC. There were over 650 claims asserted against the Debtor, 400 of which concerned unreturned deposits paid to the Debtor totaling $33,000,000.00. The Bankruptcy Trustee determined that the Debtor had made numerous transfers to its principals and affiliated entities. Accordingly, the Trustee filed suit to recover the transfers, asserting that the transfers were fraudulent. Based on the non-Debtor Defendants cooperation, the Trustee determined that they had approximately $1,000,000.00 in cash and assets available to satisfy a judgment against them. However, the Trustee was concerned that the assets would be exhausted in defending against state-court cases that had been filed by 56 creditors of the Estate. The Trustee agreed to a compromise that would result in the non-Debtor Defendants paying $800,000.00 to the Estate in exchange for the entry of an order barring further litigation against both the Debtor (which had no assets) and the non-Debtor Defendants. Many of the creditors objected to the Bankruptcy Court order which approved the compromise based, in part, on the argument that the creditors would receive only two cents for each dollar of their deposit. The Bankruptcy Court overruled the objections and approved the compromise, noting that the non-Debtor Defendants were paying approximately 80% of their remaining assets to the Estate. The objecting creditors appealed the Bankruptcy Court order to the United States District Court. The District Court affirmed the order of the Bankruptcy Court, and the creditors then appealed the decision of the District Court to the 11th U.S. Circuit Court of Appeals.

Judge(s):

11th Circuit Court Judges Marcus, Wilson and Kravitch.

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