Lowe v. Ransier

Case Type:
Case Status:
Nos. 15-8053/8055; File No. 18b0003p.06 (6th Circuit, Mar 13,2018) Published
Sixth Circuit Bankruptcy Appellate Panel (BAP) affirmed Bankruptcy Court's decision that found indirect equity owner of Debtor in contempt for pursuing claims in his own name in state court under the Ohio Corrupt Practices Act (OCPA) which claims were property of the Debtor's estate. BAP also affirmed decision of Bankruptcy Court to award fees and expenses of $91,068.00 against indirect equity owner in favor of Chapter 7 Trustee who brought contempt charges against indirect equity owner for his pursuit of the OCPA claims in state court.
Procedural context:
Individual owned limited liability company which owned the membership interest in company which had various business relationships with natural gas company. After litigation with natural gas company, financial problems forced counter-party to file Chapter 7. While bankruptcy was pending, the individual brought OCPA claims in state court against natural gas company. Chapter 7 Trustee settled with natural gas company and then prosecuted individual for contempt under Section 362(a)(3) as claims under OCPA belonged to the Debtor's estate. Chapter 7 trustee also sought recovery of his fees and expenses. Bankruptcy Court found the individual in contempt and then awarded fees and costs under Section 105 (a) to the Trustee amounting to 95% of his request.
Individual claimed that the claims he was asserting under OCPA were his claims and not those of the Debtor. BAP held that an equity owner of a corporation cannot pursue his individual claim under OCPA to recover based on damage to the value of his interest in the corporate entity. BAP found Ohio Legislature limited those claims to the corporate entity. BAP also determined that the claims asserted against the natural gas company were estate property. Since the claims were estate property, the filing of the state court suit by the individual was a violation of the automatic stay and punishable as contempt. The Bankruptcy Court correctly held a hearing under Section 105 (a) to determine the fees and expenses and properly awareded 95% of what the Trustee requested. This was proper according to the BAP.
BAP Judges Delk, Harrison and Opperman (Chief- wrote opinion)

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