Slovak v. Loveridge (In re Eurogas)
A creditor’s factual allegations in bankruptcy court must be taken as true on appeal to establish ‘prudential standing.’
- Rochelle Quick Take
View Rochelle Summary- Case Type:
- Business
- Case Status:
- Reversed and Remanded
- Citation:
- 17-4197 (10th Circuit, Jan 04,2019) Not Published
- Tag(s):
- Ruling:
- When deciding whether to allow or disallow a trustee to abandon an asset, a bankruptcy court must (1) identify the legal definition of the terms “burdensome” and “inconsequential,” (2) make findings of fact about the contested asset, (3) determine whether its findings of fact satisfy the legal test for whether an asset is “burdensome” or “inconsequential,” and, (4) if it concludes that the property is burdensome or inconsequential, determine if the trustee abused its discretion by choosing to abandon the asset.
- Procedural context:
- Over the objection of the Slovak Republic, the bankruptcy court approved a settlement agreement entered into by the ch. 7 trustee and her motion to abandon property of the estate. The 10th Circuit BAP held that the Slovak Republic lacked prudential standing and dismissed the appeal although alternatively it held that the Slovak Republic failed on the merits because the bankruptcy court did not abuse its discretion by authorizing the trustee to abandon the property or by approving the settlement agreement. The 10th Circuit assumed without finding that the Slovak Republic had prudential standing and agreed with the bankruptcy court that the Trustee properly exercised its authority to abandon the talc claims under section 554(a) because the property was burdensome to the estate. It vacated the BAP’s dismissal and remanded the case to the BAP directing it to affirm the bankruptcy court’s decision. Legal determinations were reviewed de novo, questions of fact were reviewed for clear error, and the bankruptcy court’s decision to approve abandonment was reviewed for abuse of discretion.
- Facts:
- An involuntary bankruptcy was filed against the debtor (“Eurogas I”) by a creditor with a $113 million judgment against it. The creditor filed a claim in Eurogas I’s bankruptcy case, which claim was acquired by Texas Euro Gas (“TEG”). Eurogas I’s bankruptcy case was closed. After the order for relief in Eurogas I’s bankruptcy case, a successor to Eurogas I was formed with the same name and officers (“Eurogas II”). Many years later, Eurogas I’s bankruptcy case was reopened because of undisclosed interests in talc deposits in the Slovak Republic (the “Talc Claims”). It was alleged that the Talc Claims were property of the bankruptcy estate of Eurogas I being unlawfully held by Eurogas II. The ownership of the Talc Claims was the subject of an arbitration proceeding before the International Centre for Settlement of Investment Disputes in France. The trustee entered into a settlement agreement with Eurogas II pursuant to which it would pay the estate $250,000, the trustee would abandon the Talc Claims and TEG would withdraw the $113 million claim. The Slovak Republic offered to purchase the Talc Claims on a quitclaim basis for $250,000.
- Judge(s):
- Bacharach, Ebel, Moritz (Ebel) (Bacharach concurring)
