McKinstry v. Richard Holmes Enterprises, LLC (In re Black Diamond Mining Company, LLC)

(E.D. Ky. Aug. 18, 2016)

The district court grants the motion to unseal the record. The record had been sealed following a motion that asserted the documents contained confidential settlement information. However, the court made clear that if someone requested that the record be unsealed, the moving party would have the heavy burden of showing why particular documents should remain sealed. The movant failed to meet that burden here, with respect to the record as a whole. The court orders that the record be unsealed with the limited exception of specific portions that contain the settlement amount.

Judge: Thapar

Attorneys for Appellants: Foley & Lardner, LLP, David B. Goroff, Geoffrey S. Goodman; Dinsmore & Shoal LLP, David James Treacy; Hoover Hull Turner LLP, Michael R. Limrick, Patrick A. Ziepolt, Wayne C. Turner

Attorneys for Appellees: The Getty Law Group, PLLC, C. Thomas Ezzell, Richard A. Getty; Ware Jackson Lee O’Neill Smith & Barrow, LLP, Paul Smith, Timothy F. Lee

2016-08-18 – in re black diamond mining company

Author: Matt Lindblom

McKinstry v. Richard Holmes Enterprises, LLC (In re Black Diamond Mining Company, LLC)

(E.D. Ky. June 16, 2016)

The district court affirms the bankruptcy court’s order dismissing the reopened bankruptcy case. The creditor consented to the unsecured creditors trusts’ settlement of a claim, which was followed by a distribution to creditors and closure of the case. The creditor then moved to reopen the case, and the bankruptcy court granted the motion on condition that the creditor deposit its distribution amount in escrow. The creditor failed to do so, and the case was then dismissed. The bankruptcy court did not err in placing a condition on reopening the case. Because the creditor waited to challenge the settlement and bring claims against the trusts’ attorneys after distribution, there were no fund to indemnify the trust. Thus, the requirement to deposit funds in escrow was appropriate. Opinion below.

Judge: Thapar

Attorneys for Creditor: The Getty Law Group, PLLC, C. Thomas Ezzell, Richard A. Getty, Ware Jackson Lee O’Neill Smith & Barrow, LLP, Paul Smith, Timothy F. Lee

Attorneys for Trust and Its Attorneys: Foley & Lardner, LLP, David B. Goroff, Geoffrey S. Goodman, Dinsmore & Shoal LLP, David James Treacy, Hoover Hull Turner LLP, Michael R. Limrick, Patrick A. Ziepolt, Wayne C. Turner

2016-06-16 – in re black diamond mining company

Spradlin v. Beads and Steeds Inns, LLC (In re Howland)

(E.D. Ky. June 7, 2016)

The district court affirms the bankruptcy court’s orders holding the trustee failed to state a claim for substantive consolidation and could not proceed on a reverse veil piercing theory under Kentucky law. The trustee alleged the defendant was the recipient of a fraudulent transfer from the debtors, but the transfer was actually made to the defendant by a Kentucky LLC separate from the debtors. Because Kentucky courts have not recognized reverse veil piercing, the district court declines to apply it to disregard the separate existence of the debtors and the LLC. The court also agrees with the bankruptcy court that the trustee failed to allege facts sufficient to apply substantive consolidation. Opinion below.

Judge: Caldwell

Attorney for Defendant: Stoll Keenon Ogden PLLC, Adam M. Back

Attorneys for Trustee: Bingham Greenebaum Doll LLP, James R. Irving, Richard Boydston

2016-06-07 – in re howland

Author: Matt Lindblom

McKinstry v. Richard Holmes Enterprises, LLC (In re Black Diamond Mining Company, LLC)

(E.D. Ky. Feb. 5, 2016)

The district court denies the motion for stay pending the appeal of the bankruptcy court’s order. The bankruptcy court had ordered that the party moving to reopen the bankruptcy case deposit funds into escrow as a condition to reopening the case. The court held that the party must show at a minimum serious questions going to the merits to obtain such a stay, but the party failed to do so. Opinion below.

2016-02-05 – in re black diamond mining

Author: Matt Lindblom

First National Bank of Manchester v. Elza

(E.D. Ky. Aug. 21, 2015)

The district court affirms the bankruptcy court’s order avoiding the mortgage foreclosure deficiency judgment liens on the debtor’s residence. The creditor had obtained a deficiency judgment following foreclosure of its mortgage lien and filed a judgment lien for the deficiency, which encumbered the debtors’ residence. The debtors moved to avoid the lien under 11 U.S.C. § 522(f) and the bankruptcy court granted the motion. The creditor appealed, arguing that § 522(f)(2)(C), which provides that judgments arising out of mortgage foreclosures are not avoidable, applied to the deficiency judgment lien. The court recognizes the split in authority on the issue, but ultimately concludes that § 522(f)(2)(C) merely provides that judgments in foreclosure actions (i.e. sale orders enforcing the mortgage lien) cannot be avoided such that the mortgage lien is avoided. The section does not apply to deficiency judgment liens. Opinion below.

2015-08-21 – first national bank v elza

Author: Matt Lindblom

Samaritan Alliance, LLC v. Kentucky Cabinet for Health and Family Services (In re Samaritan Alliance, LLC)

(Bankr. E.D. Ky. Aug. 18, 2014)

The bankruptcy court finds that the Cabinet did not commit fraud on the court when it contended it had overpaid the debtor hospital for Medicaid reimbursements. The debtor alleged the Cabinet had emails reflecting it understood it had actually underpaid the hospital at the time it was alleging the overpayment in court. The court held that this did not constitute fraud on the court such that a five-year old judgment should be overturned. Nevertheless, the bankruptcy court recommends that the district court enter judgment in favor of the debtor hospital for the now undisputed amount of the underpayment from the cabinet. Opinion below.

2014-08-18 – in re samaritan alliance

McKinstry v. Genser (In re Black Diamond Mining Company, LLC)

(E.D. Ky. Aug. 6, 2014)

The district court holds the bankruptcy court incorrectly used the federal “lodestar” method to determine whether attorney fees were reasonable for purposes of a fee-shifting provision of a settlement agreement between the trustee of the unsecured creditors trust and the former restructuring specialists. The trustee argued the Philadephia-based billing rates were unreasonable, and should have been adjusted to be in line with the Kentucky market. The court holds the bankruptcy court should have used Kentucky state law when determining the reasonableness of the fee, as state law controls the interpretation of contracts. The court nevertheless adopts the bankruptcy court’s proposed findings of fact and conclusions of law, because the result was the same under either analysis. The fees were reasonable under the circumstances, even though the rates were higher than those in the local market. Opinion below.

2014-08-06 – in re black diamond mining company