- Case Type:
- Case Status:
- Affirmed in part and Reversed in part
- No. 20-6002 (8th Circuit, Sep 16,2020) Published
- BAP for 8th Cir. affirmed in part and reversed in part ruling of bankruptcy court (D. ND - Fargo) disallowing claim due to lack of standing, untimeliness, and laches. Notwithstanding long period of time, no distributions had occurred, and recovery of significant assets for estate justified untimeliness. 11 USC 726(a)(2)(C) expressly authorized and determined priority of distribution on tardily filed claims. State did not have parens patriae standing to assert claims on behalf of unnamed charities. However, it did have standing for creditor claim acquired by assignment.
- Procedural context:
- Trustee and creditor objected to State's claim as tardily filed. Bankruptcy court (D. ND - Fargo) sustained objection. State appealed to BAP for 8th Cir.
- Chapter 11 debtor operated pari-mutuel betting business in North Dakota. It filed its Chapter 11 petition on February 3, 2004. "Bala" was sole shareholder and creditor. Case was converted to Chapter 7 months later. Ten years into the case, the District Court ruled that North Dakota was not authorized to collect taxes under state law on account of wagering. As a result, State owed the Debtor’s bankruptcy estate millions of dollars for taxes improperly collected. The parties eventually settled; the State paid the estate over $15 million. Other creditors then asserted new claims for a piece of the large cash infusion. The Bankruptcy Court sustained the objections to these claims (other than one of Bala's claims) after a multiple-day trial. The State filed a new proof of claim over a month after the Bankruptcy Court issued its ruling on the other claims. Its Claim was made “as Representative for the benefit of eligible nonprofit organizations” under the doctrine of parens patriae. The only charity listed by name, however, was Team Makers. State obtained an assignment of the claim from Team Makers. Bala and chapter 7 trustee objected to the Claim on the grounds that the State lacked standing, Claim lacked merit, and Claim was untimely. After an evidentiary hearing on the claim objection, the Bankruptcy Court denied the State’s Claim for lack of standing and laches. It focused on the State’s failure to establish 1) that a substantial segment of the population was injured, and 2) that Claim belonged to anyone other than Team Makers, and if there were indeed any other identifiable charities that were involved, that they were incapable of bringing an action on their own. The Bankruptcy Court also held that while the State may have standing to represent Team Makers by virtue of the Consent Agreement, the Team Makers Claim was barred by laches.
- Nail, Shodeen, Dow
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