In Re American Cartage, Inc.
656 F.3d 82
1st Cir.2011Background
- bankruptcy case involving American Cartage, a waste-disposal debtor, with FFC holding security interests in equipment and collateral;
- trustee appointed after conversion to Chapter 7;
- Allied and Zoll allegedly harmed debtor's assets and contracts;
- assets including Equipment Collateral and Other Collateral were foreclosed and sold to Todesca, then City Sanitation;
- state court suit by City against Allied and Zoll for torts related to diversion of assets;
- bankruptcy case reopened and trustee sought to pursue and settle disputed claims for $12,000 on behalf of the estate;
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the Allied claims are estate property or secured-proceeds. | City—claims are proceeds of collateral; | Allied—claims are commercial tort claims belonging to the estate, not proceeds; | Claims are commercial tort claims belonging to the estate. |
| Whether the trustee had exclusive standing to pursue the claims. | City—trustee may not sole-pursue; | Trustee has exclusive standing to prosecute estate claims; | Trustee had exclusive standing. |
| Whether City waived abandonment argument under Bankruptcy Rule 8006. | City asserted abandonment argument on appeal; | Rule 8006 waiver applied due to failure to raise issue in statement; | Abandonment argument waived. |
| Whether the bankruptcy court abused its discretion in approving the settlement. | Settlement undervalues claims and ignores likelihood of success; | Settlement within range of reasonableness given Jeffrey factors; | Settlement approved within bankruptcy court discretion. |
| Whether the bankruptcy court properly applied Jeffrey factors and overall standards for settlements. | Factors favored City; | Factors supported trustee; | Court properly applied Jeffrey factors; settlement approved. |
Key Cases Cited
- Shamus Holdings, LLC v. LBM Fin., LLC (In re Shamus Holdings, LLC), 642 F.3d 263 (1st Cir.2011) (source on underlying law and standing in bankruptcy)
- Raleigh v. Ill. Dep't of Rev., 530 U.S. 15 (U.S. 2000) (origin of creditor rights in bankruptcy law)
- In re Kane, 628 F.3d 631 (3d Cir.2010) (trustee standing for estate claims)
- Moses v. Howard Univ. Hosp., 606 F.3d 789 (D.C.Cir.2010) (standing and ownership of claims in bankruptcy context)
- Koch Ref. v. Farmers Union Cent. Exch., Inc., 831 F.2d 1339 (7th Cir.1987) (trustee vs personal claims; general vs personal claims)
- In re Mailman Steam Carpet Cleaning Corp., 212 F.3d 632 (1st Cir.2000) (Jeffrey factors and settlement scrutiny)