Environmentally Contaminated Property

In In re St. Lawrence Corp., 239 B.R. 720 (Bankr. D. N.J. 1999), the court addressed issues relating to a proposed abandonment of environmentally contaminated property. The court held that once the chapter 7 trustee satisfied the initial burden of proving prima facie a case for abandonment of real property as burdensome or of inconsequential value, the burden shifted to the state's Department of Environmental Protection (as the party opposing the abandonment) to show that the abandonment would aggravate a risk of imminent and identifiable harm from contamination on the property. Once the property is abandoned, it reverts to any party with a possessory interest. If that party is the chapter 7 debtor, then possession would be subject to any clean-up obligations imposed by the state's environmental laws.

Jurisdiction over Automatic Stay

In Halas v. Playtek, 239 B.R. 784 (Bankr. N.D. Ill. 1999), the court held that a request for sanctions for an alleged violation of the automatic stay pursuant to 11 U.S.C. §362(h) is within the exclusive jurisdiction of the bankruptcy court. Therefore, a state court did not have jurisdiction over such alleged violations and such relief could not have been sought in that forum. As a result, res judicata did not bar the debtor's motion for sanctions in the bankruptcy court.

Trust Fund Taxes

In In re Macagnone, 240 B.R. 444 (Bankr. M.D. Fla. 1999), the court held that once it determines that the debtor was a "responsible person" within the meaning of the trust fund provision of the Internal Revenue Code, the debtor has the burden of proving lack of willfulness in failing to pay the trust fund taxes. Further, the bankruptcy court had jurisdiction under §505 to determine whether the liability was correctly assessed against the debtor pursuant to IRC §6672.

Trustee's Compensation

In In re Miniscribe Corp., 241 B.R. 729 (Bankr. D. Colo. 1999), the chapter 7 trustee filed a final application for allowance of compensation, and the U.S. Trustee and others objected. The trustee sought a fee of in excess of $3 million. During his administration of the estate, the trustee disbursed more than $100 million through his accounts. Of this, approximately $84 million represented proceeds from the settlement of an action relating to an alleged fraud perpetrated by the debtor. The balance of the distributions principally came from preference and fraudulent transfer claims. The trustee paid in full certain compromised claims, the trade claims and all of the costs of administration of both the unsuccessful chapter 11 case and the chapter 7 case. Even if the trustee's requested fee was paid in full, he would return more than $9.7 million to debenture holders. In a lengthy opinion evaluating the trustee's efforts not only under Johnson v. Georgia Highway Express Inc., 488 F.2d 714 (5th Cir. 1974), but also under applicable Tenth Circuit precedent and giving full consideration to the "common fund" analysis, the court found that the reasonable fee to the trustee for his services would be equal to or greater than that permitted by 11 U.S.C. §326. Thus, the court awarded the trustee the full amount of the request of in excess of $3 million, together with the reimbursement of his out-of-pocket expenses of in excess of $40,000.

The Earmarking Doctrine

The earmarking doctrine was held not to apply as a defense to preference actions in the following three cases, all of which provide an extensive and exhaustive discussion of the earmarking doctrine: In re Crystal Medical Products Inc., 240 B.R. 290 (Bankr. N.D. Ill. 1999); In re Davis, 240 B.R. 372 (Bankr. W.D. Mo. 1999); and In re Libby Intern. Inc., 240 B.R. 375 (Bankr. W.D. Mo. 1999).

Miscellaneous

• In re Pudgie's Development of NY Inc., 239 B.R. 688 (Bankr. S.D.N.Y. 1999) (landlord for non-residential real property lease is entitled to rent during the post-petition pre-rejection period regardless of solvency of the bankruptcy estate and is not subject to disgorgement if the estate becomes insolvent, but unpaid rent is not entitled to a super-priority administrative status);
• In re Amgam Associates, 239 B.R. 737 (Bankr. S.D. Miss. 1999) (while craft or vessel that floats is not necessarily "a vessel" subject to a maritime lien, a floating casino built on top of a barge and then towed to an indefinite mooring qualified as a "vessel," which could be made subject to a maritime lien);
• Seiko Epson Corp. v. Nu-kote Intern. Inc., 190 F.3d 1360 (5th Cir. 1999) (appeal by non-debtor co-defendant is not stayed even if co-defendants are in a similar legal or factual nexus with the debtor);
• In re Skinner, 240 B.R. 225 (Bankr. W.D. Va. 1999) (Subsequent to the amendments to 11 U.S.C. §330, the bankruptcy court cannot award compensation from the estate to the attorney for a chapter 7 debtor);
• In re Vierkant, 240 B.R. 317 (8th Cir. BAP 1999) (a post-petition default judgment does not collaterally estop debtor in adversary seeking to deny dischargeability of obligation that was the subject of default judgment that was void ab initio);
• In re Whiteside, 238 B.R. 468 (Bankr. W.D. Mo. 1999) (petitioning creditors in a voluntary case have the burden of establishing a prima facie case that their claims are not subject to a bona fide dispute, and once that is established, the burden shifts to the debtor to present evidence that a bona fide dispute does exist);
• In re Williams, 238 B.R. 909 (Bankr. M.D. Ga. 1999) (bankruptcy court had "related to" jurisdiction over state law conversion claim asserted by one secured creditor against another for allegedly accepting proceeds from the sale of the first creditor's collateral); and
• In re Beever, 239 B.R. 13 (Bankr. E.D.N.Y. 1999) (as a corporate officer and director has a fiduciary duty to the corporation as well as to stockholders, conversion of the corporation's profits by 50 percent to the shareholder/debtor was a violation of the fiduciary duty to the other 50 percent of shareholders).

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