Ballard Spahr LLP v Official Committee of Equity Security Holders

Summarized by Bradley Pearce , Pearce Law PLLC
3 weeks 1 day ago

Case Type:

Business

Case Status:

Affirmed

Citation:

25-2134 (7th Circuit, Feb 27,2026) Published

Tag(s):

Ruling:

A claim against a debtor's bankruptcy estate that is based on an alleged oral promise by the debtor or its authorized officer to pay the debt of another must be supported by evidence sufficient to show that such promise was actually made. The claimant cannot rely on its understanding or belief, but must present some evidence of when the alleged promise was made and who made the promise.

Procedural context:

The bankruptcy court disallowed the claim of Ballard Spahr LLP after the Official Committee of Equity Security Holders in the Greenpoint Tactical Income Fund LLC ("GTIF") bankruptcy case objected to Ballard's claim. The bankruptcy court disallowed Ballard's claim because Ballard failed to identify any genuine issue of material fact regarding whether Ballard had an enforceable claim against GTIF. Ballard appealed to the district court, which affirmed the bankruptcy court. Ballard then appealed to the United States Court of Appeals for the Seventh Circuit.

Facts:

Ballard Spahr LLP ("Ballard") was engaged to represent Michael Hull and Bluepoint Investment Counsel LLC ("Bluepoint") in federal securities law investigations relating to the solicitation of investments in Greenpoint Tactical Income Fund LLC ("GTIF"). Hull controlled one of the two limited liability companies that served as GTIF's managing members, and Bluepoint, which was unrelated to GTIF. Hull again engaged Ballard to represent him as GTIF's investors prepared to commence arbitration proceedings against GTIF and its leadership. Both engagements were reduced to written agreements. Neither agreement stated that GTIF was responsible for paying Ballard's fees and expenses. While Ballard invoiced Hull, Ballard's work in the arbitration proceeding benefited GTIF and the other respondents. Regardless, GTIF paid several of Ballard's invoices, leaving an unpaid debt of $236,717. GTIF subsequently filed a Chapter 11 petition. Ballard filed a proof of claim for $236,717 in GTIF's bankruptcy case. The Official Committee of Equity Security Holders in the GTIF case (the "Equity Committee") objected to Ballard's proof of claim. Ballard then amended its claim to $230,000 (which was the amount GTIF had scheduled for Ballard), and the Equity Committee moved for summary judgment on its objection. In response, Ballard argued that its claim should be allowed because: (1) Ballard alleged that one of GTIF's managing members had made an oral promise—outside of the statute of frauds—that GTIF would pay Ballard's legal fees and expenses; (2) Ballard alleged that, even if the statute of frauds made the oral promise unenforceable, the claim should be allowed under the doctrine of promissory estoppel; and (3) Ballard had a right of indemnification against GTIF under both Wisconsin statutory law and GTIF's operating agreement, which imposed similar obligations on GTIF. In opposing the Equity Committee's summary judgment motion, Ballard failed to show who, on behalf of GTIF, made the oral promise that GTIF assumed primary responsibility for Hull's debt to Ballard. Ballard relied on (1) the declaration of the partner in charge of the Hull representation, which stated that "GTIF, through its managing members [sic], orally agreed with Ballard to pay the fees and expenses of Ballard" (cleaned up), (2) GTIF's payment of ten of Ballard's invoices to Hull, and (3) GTIF scheduling Ballard as an unsecured creditor owed $230,000. The Ballard partner who made the declaration failed to state who made the promise or when the promise was made. The bankruptcy court found that the Ballard partner's conclusory statement did not create a triable issue of fact. The bankruptcy court also found that GTIF's payment of certain invoices and scheduling of a debt to Ballard failed to establish that GTIF's alleged oral promise to pay Ballard was a primary, rather than a collateral, promise. Thus, Ballard failed to show that a triable issue of a material fact existed on Ballard's principal theory. Ballard's promissory estoppel argument also failed because Ballard failed to establish an evidentiary dispute regarding whether the alleged oral promise was sufficient to make GTIF reasonably believe that the alleged promise would induce action or forbearance of a substantial character by Ballard. Ballard's final argument—indemnification—failed because the indemnification clause in GTIF's operating agreement made GTIF liable only to its managing members and other members. Ballard was neither.

Judge(s):

ST. EVE, KIRSCH, and JACKSON-AKIWUMI, Circuit Judges

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