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The U.S. District Court for the Northern District of California recently issued two blistering opinions on appeals by the Internal Revenue Service (IRS) California Franchise Tax Board (FTB) (collectively, Tax Agencies) from a bankruptcy court’s Chapter 11 plan confirmation order and a tax determination order. In the first decision, the court held the appeals were neither constitutionally nor equitably moot. In re Levandowski, 2023 WL 2503305 (N.D. Cal. Mar. 14, 2023), (Levandowski I). In the second opinion, the court reversed and remanded the bankruptcy court’s order erroneously determining the debtor’s tax liability (Tax Order) and the bankruptcy court’s separate confirmation order on feasibility grounds “due to legal error [in] the Tax Order.” In re Levandowski, 2023 WL 2495763 (N.D. Cal. Mar. 14, 2023) (Levandowski II). The court also remanded to the bankruptcy court for a reconsideration of its “setoff rights” finding in the confirmation order’s discharge provision.
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Appellate Courts Skeptical About Bankruptcy Court Sanctions
By Michael L. Cook
Recent appellate decisions reflect a distaste for appeals from bankruptcy court sanction orders. A split Fourth Circuit even refused to hear such an appeal. Other courts tend to limit sanctions or, alternatively, accept a bankruptcy judge’s findings under a stringent “abuse of discretion” standard.
Supreme Court’s Rejection of Purdue Pharma Settlement Redefines Releases In Chapter 11
By Angelo Castaldi
The U.S. Supreme Court has issued its most anticipated bankruptcy decision in recent memory. In a 5-4 decision entered June 27, the Supreme Court struck down the nonconsensual third-party releases. Writing for the Court, Justice Neil Gorsuch ruled that nothing in the Bankruptcy Code authorized the nonconsensual release or discharge of claims of opioid victims against the Sacklers, who were not debtors themselves.
Ninth Circuit: Debt In Asset Case Is Nondischargeable If Debtor Fails to Properly Schedule the Debt
By Lawrence J. Kotler and Geoffrey A. Heaton
In a recent published decision, the U.S. Court of Appeals for the Ninth Circuit addressed a previously unresolved question in that circuit: whether a debtor’s failure to properly schedule a debt in an “asset case” renders the debt nondischargeable.
Is the Rule Preventing Bankruptcy Judges from Appointing Special Masters Outdated?
By Mark B. Conlan and Noel L. Hillman
Rule 9031 of the Federal Rules of Bankruptcy Procedure prevents all bankruptcy judges, and, if broadly interpreted, any federal judge hearing bankruptcy cases and proceedings, from appointing special masters. The rule has not been amended since its adoption in 1983. It is outdated and should be repealed or amended to accord with the reality of today’s complex Chapter 11 cases.