Scharrer v. Schron (In re Fundamental Long Term Care, Inc.)

Case Type:
Case Status:
16-16462 (11th Circuit, Oct 19,2017) Published
Bankruptcy court had authority under the All Writs Act and Anti-Injunction Act to enjoin plaintiffs from reviving suits in state court based on the same "nucleus of facts" as the dismissed claim. Although broad, the breadth of the injunction was justified in this case. Also dismissal of claims against defendant related to improper transfer of assets was appropriate: claims were implausible, even taking the plaintiff's allegations as true, because they failed to allege defendant acted individually or was liable derivatively, and plaintiffs failed to correct deficiencies in their pleadings.
Procedural context:
Bankruptcy court (M.D. Fla.) dismissed claims filed by appellant-plaintiffs - the estates of decease nursing home patients - against the appellee-defendant, a real estate investor, and issue a permanent injunction. Appellants appealed both orders, which the district court (M.D. Fla.) affirmed. The appellants appealed to the 11th Circuit.
Estates of several deceased nursing home patients brought a series of wrongful death suits against a network of nursing homes. In order to evade enforcement of the judgments and other liabilities, the defendants orchestrated a so-called "bust out" scheme under which they transferred the useful assets of the nursing home business to a newly formed operating entity, which left the core judgment debtor a judgment-proof shell entity. After learning that the judgment debtor had been stripped of its assets, the plaintiffs commenced involuntary chapter 7 proceedings and initiated actions to avoid the asset transfers as fraudulent transfers. The appellee - a real estate investor named Schron - was one of the defendants. The bankruptcy court dismissed Schron from the suit concluding that his alleged connection to the transaction was speculative. (The suits against the other defendants proceeded and were ultimately settled.)
Jordan and Carnes (Circuit Judges) and Vinson (District Judge)

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