OpinionsCreditor BMO Bank N.A. moved for derivative standing to prosecute claims the bankruptcy estate allegedly has against the individual chapter 11 debtor's sons and others for wrongful transfers. The court denied the motion because it failed to allege the bases for the requested relief with particularity, as required by Fed. R. Bankr. P. 9013. The court concluded that the motion did not adequately allege any of the following requirements for derivative standing, that (1) the debtor in possession refuses a demand to pursue the action and the refusal is unjustified; (2) the claim to be pursued in the action is colorable; and (3) the third party seeks and obtains permission from the court to pursue the claim. The court denied the motion without prejudice but ordered that any future derivative standing motion must be accompanied by (a) a proposed complaint pleading all claims for which derivative standing is requested and (b) proof that the movant presented the proposed complaint to the debtor in possession, demanded that the debtor prosecute the proposed claims, and the debtor refused that demand. In re Wisconsin & Milwaukee Hotel LLC, No. 24-21743, Dkt. 803 (Bankr. E.D. Wis. Dec. 5, 2025) (December 2025) -- Chief Judge G.M. Halfenger Two creditors (Lenders) moved under §362(d)(2) for relief from the §362(a) stay to allow them to enforce their liens on the chapter 11 debtor’s principal asset, a hotel. Lenders’ motion turned on whether the hotel is “necessary to a successful reorganization”, as used in §362(d)(2)(B). Lenders contended that the reasonable time in which to confirm a plan had passed (thus not making the hotel essential to an effective reorganization) and the debtor’s proposed plan of reorganization is fatally flawed, principally, because it violates the absolute priority rule as codified in §1129(b). The court’s opinion, entered after several days of evidentiary hearings and subsequent briefing, rejects these contentions, principally reasoning that the Lenders failed to show that the debtor’s proposed plan is so flawed that it cannot confirm a plan in a reasonable time. In doing so, the opinion addresses the follow topics: (1) issues relating to the auctioning of the debtor’s proposed sale of equity interests in the reorganized debtor; (2) the participation of the existing owner in that process as the proposed stalking horse bidder; (3) the meaning of “property” in §1129(b)(2)(B)(ii)’s prohibition on existing owners receiving or retaining property on account of their existing ownership interests; (4) potential limitations on the sale process, including whether the process can provide that the reorganized debtor will pay the stalking horse a breakup fee and whether a creditor with a security interest in real estate owned by the debtor may credit bid for the equity interests of the reorganized debtor; (5) whether the plan treats a secured creditor whose claim is paid in full unfairly or inequitably within the meaning §1129(b) based on the possibility that existing owners may be paid a dividend from excess sale proceeds after all unsecured claims are fully paid but before completion of all plan payments to the secured creditor; and (6) whether the debtor has failed to show that the need for new value is necessary. Additionally, the opinion addresses the court’s finding of an appropriate cramdown rate for purposes of §1129(b)(2), and, in so doing, discusses the extent to which the plurality opinion in Till v. SCS Credit Corp., 541 U.S. 465 (2004), has precedential force, governs cramdown determinations in cases under chapter 11, and requires the use of the prime rate as the base rate when using the formula approach to determine an appropriate cramdown rate. The opinion explains the court’s evidentiary finding on the appropriate cramdown rate, which it made using the five-year Treasury note rate (employed by the plan and lenders in the applicable industry) as the base rate and adding risk adjustments proven by the Lenders. Swanson v. Cannella (In re Window Select LLC), Adv. No. 25-02021 (October 2025) -- Chief Judge G.M. Halfenger The liquidating trustee under the confirmed plan in the underlying chapter 11 case brought this adversary proceeding against the debtor's former principal and a revocable trust to avoid several prepetition transfers of funds from the debtor, to facilitate its former principal's purchase of residential real property from the trust, and recover the amounts transferred. The trust moved for partial summary judgment seeking a determination that, for purposes of liability and recovery under 11 U.S.C. §550(a), it was not the "initial transferee" (and is therefore not strictly liable for the return) of more than $700 thousand transferred from the debtor to Fidelity Title, Inc., which held the funds until disbursing them to the trust when the sale closed, primarily arguing that the debtor's former principal was the "initial transferee" because, while Fidelity Title held the funds, he had dominion over the funds, i.e., full control of the funds for his personal use. The court denied the trust's motion because Fidelity Title held the funds subject to its agreement to disburse the funds only if specified conditions were satisfied, in accordance with the closing statement, to the trust and others, so the debtor's former principal never had the requisite dominion over the funds. In re KLE Equipment Leasing, LLC, Case No. 25-22922 (August 2025) -- Chief Judge G.M. Halfenger Kirk Ecklund, four LLCs of which he is the only member, and one corporation that he wholly owns all filed petitions for relief under chapter 11 of the Bankruptcy Code. The debtors sought joint administration of their estates, which the court granted, and approval under 11 U.S.C. §327 of each debtor's employment of Kerkman & Dunn to represent and assist them in carrying out their trustee duties as debtors in possession under 11 U.S.C. §1107. The United States trustee objected that the debtors have conflicting interests, specifically with respect to potentially avoidable pre- and post-petition preferential transfers by Ecklund to his sons and a company they own, and that each of the debtors is part of at least one debtor-creditor relationship with another debtor, such that shared representation is impermissible. The court overruled the UST's objection and approved the debtors' employment of Kerkman & Dunn, finding and concluding that Kerkman & Dunn is disinterested and does not hold or represent any interests adverse to any of the bankruptcy estates, as §327(a)'s generally requires for an estate's employment of a professional; the proposed employment does not currently involve any actual conflicts of interest, as §327(c) requires for disqualification due to counsel's representation of a creditor; and the bankruptcy estates and their creditors are most likely best served, at least for the moment, by common representation, which minimizes administrative and transaction costs. In re Huiras, Case No. 23-24283 (July 2025) -- Chief Judge G.M. Halfenger The chapter 13 debtor's former spouse moved for dismissal of the case under 11 U.S.C. §1307(c)(11) based on the court's finding at an evidentiary hearing that the debtor is not current on post-petition child-support payments. The debtor raised many objections to dismissal of the case, including constitutional challenges to the validity and enforceability of the state-court divorce judgment requiring to make the child-support payments at issue, the state statute authorizing the state court's order, and the Bankruptcy Code provisions providing for dismissal of a chapter 13 case and barring confirmation of a chapter 13 plan based on the debtor's failure to make post-petition payments under a domestic support obligation. The court rejected the debtor's defenses to dismissal of the case because the state court's judgment is not void on its face but is, at most, voidable, meaning that this court must give it its full force and effect unless it is set aside; whether a state court could set aside that judgment in whole or in relevant part, this court lacks the jurisdiction to do that; and the challenged Code provisions are constitutional, having been enacted by Congress with a rational justification, well within congressional power under the Constitution to enact bankruptcy laws. The court afforded the debtor 30 days to cure his post-petition default in child-support payments and file proof that he has done so. In re Liukonen, Case No. 24-26139, and Johnson v. Liukonen, Adv. Proc. No. 25-2028 (June 2025) -- Chief Judge G.M. Halfenger Stephanie Johnson filed a prepetition civil action against the debtor in the Eastern District of Wisconsin. On the eve of a jury trial of her claims, the debtor filed a chapter 13 petition, which stayed Johnson's case by operation 11 U.S.C. §362(a). Moving to the bankruptcy court, Johnson filed an adversary proceeding in which she repleaded her district court claims and requested that the bankruptcy court to declare that any damages award she obtained on her claims for willful or malicious personal injuries are not dischargeable under 11 U.S.C. §1328(a)(4). Johnson also moved for relief from the automatic stay to pursue that award in the district court and requested that the district court withdraw the reference of the adversary proceeding (and, possibly, the bankruptcy case). The debtor objected to all of this. The debtor principally argued that Johnson's claims were dischargeable because §1328(a)(4) only excepts from discharge pre-bankruptcy damages awards for personal injuries, which, the debtor argued, Johnson cannot demonstrate. Consequently, the debtor further argued, the court should dismiss the adversary proceeding and deny relief from the stay. The court ruled to the contrary, reasoning that if Johnson obtained a damages award that otherwise satisfied §1328(a)(4)'s discharge-exception criteria before the debtor became eligible for discharge by completing payments under his debt-adjustment plan, the debtor would owe Johnson a debt that would not be discharged under §1328. The court thus modified the §362(a) stay to allow continuation of the district court case and stayed the adversary proceeding. The court also recommended that the district court deny Johnson's motion to withdraw the reference because the modification of the automatic stay is sufficient to grant her full relief without disrupting the efficient administration of the debtor's chapter 13 case. In re Xiong, Case No. 24-25435 (May 2025) -- Chief Judge G.M. Halfenger The chapter 7 debtors claimed an exemption in real property under Wisconsin's homestead exemption, Wis. Stat. §815.20. Judgment creditors Long Lee, Miana Lee, Unlimited Wealth, LLC, David Blong, and Mee Lee (the Lee Parties) objected to the exemption, arguing that the debtors obtained the property with converted funds and thus were not entitled to claim the exemption under Wisconsin law. The Lee Parties further argued that the court should disallow the exemption as a matter of law because the issue had already been determined in state-court proceedings. The court concluded that the state-court proceedings did not preclude the debtors from asserting the homestead exemption in their bankruptcy proceeding, and if the Lee Parties seek to argue that the debtors are not entitled to claim the exemption under Wisconsin law, they must adjudicate that issue anew in the bankruptcy proceeding. In re Landis, Case No. 23-25448 (March 2025) -- Chief Judge G.M. Halfenger Kathleen Hink filed a proof of claim asserting that the chapter 7 debtor, the former husband of Hink's daughter, owes her nearly $107 thousand, primarily because when the debtor and Hink's daughter were married and living together, Hink paid for new siding for their home and to construct an addition (a "mother-in-law suite"), where she lived. The debtor, who waived his discharge, objected to the portion of the claim related to the addition. Hink moved for summary judgment on the claim objection, arguing that issue preclusion or judicial estoppel, or both, bar the debtor from disputing the validity and amount of her claim in this case because the state court in the divorce case between the debtor and Hink's daughter ruled, and the final judgment in that case established, that they owe her marital debts totaling a bit more than $200 thousand for the siding and the addition and that the debtor is responsible for one half of the amount owed (a bit more than $100 thousand, the amount of the relevant portions of her claim). The court denied Hink's motion for summary judgment to the extent that the motion is based on issue preclusion, concluding that issue preclusion under Wisconsin law does not apply because most or all of the issues raised by the debtor's claim objection were not actually litigated in the divorce case and even if some of them were, it would be fundamentally unfair to apply issue preclusion under the circumstances, including that the relevant proceedings in the divorce case will likely differ substantially from those in this case and that the debtor was not incentivized to fully litigate the relevant issues in the divorce case due to the nature of the relevant proceedings in that case. The court also denied Hink's motion for summary judgment to the extent that the motion is based on judicial estoppel because Hink sought the application of that doctrine only with respect to the siding-related portion of her claim and the debtor has not objected to that portion of her claim. Brief v. Willcut, Adv. Proc. No. 24-02051 (March 2025) -- Chief Judge G.M. Halfenger The United States trustee filed an adversary proceeding seeking to revoke the debtor's chapter 7 discharge pursuant to 11 U.S.C. §727(d)(1). The defendant moved for summary judgment, and the court denied the motion, concluding that there were genuine issues of material fact that required a trial. Horton v. O'Keefe, Adv. Proc. No. 23-02072 (March 2025) -- Chief Judge G.M. Halfenger The plaintiff alleged that as a result of a physical confrontation in which the debtor-defendant punched the plaintiff three times in the head, the debtor owed him a debt for willful and malicious injuries, excepted from discharge pursuant to 11 U.S.C. §523(a)(6). After a trial, the court found that plaintiff failed to prove the necessary elements of injury (defined by precedent as a violation of a legal right) and malice (defined by precedent as acting with a conscious disregard of duties or without just cause or excuse) because the debtor acted in self-defense. |