584 B.R. 820
Bankr. W.D. Tex.2017Background
- Debtors (the Quigleys) listed two entities (Clubquig II and LRTCL, LLC) and the "Gumbo's" trademark(s) as inactive/worthless in their Chapter 7 schedules and statement of financial affairs.
- At bankruptcy, LRTCL was disclosed as owning one Gumbo's mark; Clubquig II (owner of the second mark and the party that had granted a license to the Pages) was listed as inactive and its license to the Pages was not disclosed in the bankruptcy filings.
- The Pages had purchased a Gumbo's restaurant from the Quigleys shortly before bankruptcy and held a license from Clubquig II allowing use of the mark (royalty set at 0%).
- After bankruptcy closed, the Pages were sued in state court by Clubquig II for allegedly exceeding the license (opening a second Gumbo's).
- The Pages moved to reopen the bankruptcy to revoke abandonment and force estate administration of the trademark, alleging the Quigleys concealed the mark’s value and the license to mislead the Chapter 7 Trustee.
- The Chapter 7 Trustee knew of the restaurants/marks, elected not to administer the mark during the case, and did not seek to reopen when told of the state suit; the Court found no evidence the Trustee was misled.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the bankruptcy should be reopened to revoke abandonment and allow the Trustee to administer the Gumbo's trademark(s) | The Pages: Debtors hid or undervalued the mark and failed to disclose a license, so the Trustee was misled and would have administered the asset if fully informed | Debtors/Trustee: The relevant facts were disclosed at the 341 meeting; the Trustee reasonably declined to pursue the asset and left it abandoned; reopening is unnecessary | Denied — the mark was effectively abandoned at closing; no showing the Trustee was misled and no basis to revoke abandonment |
| Whether nondisclosure of the Pages' license amounted to concealment warranting reopening | Pages: Failure to disclose the license (and the 2-mark structure) evidences a shell game to hide value | Quigley: License was held by a non-debtor entity (Clubquig II) and carried 0% royalties; not required to be listed by the debtors and was not shown to have misled the Trustee | Denied — nondisclosure did not amount to misleading the Trustee; Trustee’s business judgment not second-guessed |
Key Cases Cited
- Dorsey v. U.S. Dep't of Educ., 870 F.3d 359 (5th Cir. 2017) (§350(b) gives bankruptcy court broad discretion to reopen closed cases)
- Citizens Bank & Tr. Co. v. Case (In re Case), 937 F.2d 1014 (5th Cir. 1991) (reopening authority and standards)
- Kane v. National Union Fire Ins. Co. (In re Kane), 535 F.3d 380 (5th Cir. 2008) (noting low threshold to reopen but grounds needed)
- Vasquez v. Adair (In re Adair), 253 B.R. 85 (9th Cir. BAP 2000) (once scheduled property is abandoned, reopening to vacate abandonment is not warranted absent misleading)
- Russell v. Tadlock (In re Tadlock), 338 B.R. 436 (10th Cir. BAP 2006) (emphasizing need for finality and that abandonment generally precludes reopening)