Opinions1. In a single consolidated request for relief, H Informatics LLC filed an application for allowance of administrative expenses under 11 U.S.C. §503(b)(1)(A) and debtor Greenpoint Tactical Income Fund, n/k/a Alluvium Fund LLC ("Fund") moved for approval under Federal Rule of Bankruptcy Procedure 9019 of the Fund's compromise of H Informatics' administrative expense claim. The United States trustee and the U.S. Securities and Exchange Commission objected. The court denied the motion to compromise, determining that the existing record did not afford an adequate basis from which the court could determine whether the compromise bore a reasonable relationship to the amount that H Informatics could be allowed under 11 U.S.C. §503(b)(1)(A). With respect to H Informatics' application for allowance of administrative expenses, the court noted that if H Informatics was required to have its employment approved under 11 U.S.C. §327, then it would not be permitted to apply for compensation under 11 U.S.C. §503(b)(1)(A). The court concluded that an evidentiary hearing was required to determine whether H Informatics was a "professional person", thus required to have its employment approved under 11 U.S.C. §327. The court further reasoned that even if H Informatics is not a professional person under §327, the existing record did not allow the court to determine the "actual, necessary costs and expenses of preserving the estate", necessitating an evidentiary hearing to determine the extent to which the court should allow H Informatics' administrative expense claim under 11 U.S.C. §503(b)(1)(A). 2. The court denied H Informatics' motion in limine and for summary judgment based on its denial of the motion to compromise. Behm v. McGill (In re McGill), Adv. Proc. No. 22-02073 (October 2023) -- Chief Judge G.M. Halfenger Plaintiffs sued the debtor-defendant seeking a declaration that the debt owed to them by the debtor-defendant is not dischargeable pursuant to 11 U.S.C. section 523(a)(2)(A) or (B). After a trial on the merits, the court concluded that the plaintiffs failed to meet their burden to prove that the debt owed to them was not dischargeable under section 523(a)(2)(A) or (B). The court also noted that while the complaint referred to section 727(a)(2)(A), (a)(3), (a)(4)(A) and (a)(5), and further requested an order denying the debtor-defendant’s discharge, none of the complaint’s allegations or the evidence at trial supported a claim for the denial of discharge. Cornerstone Pavers, LLC v. Zenith Tech, Inc. (In re Cornerstone Pavers, LLC), Adv. Proc. No. 21-02044 (September 2023) -- Chief Judge G.M. Halfenger After denying the plaintiff's motion to compel the defendant to produce communications withheld during discovery as privileged and rejecting a separate and largely unrelated rationale for production of privileged communications introduced by the third-party defendant after the motion to compel was fully briefed, the court ordered the plaintiff and the third-party defendant to explain why they and their attorneys should not be required to pay the defendant's expenses reasonably incurred in opposing their requests to compel production, pursuant to Federal Rule of Civil Procedure 37(a)(5)(B). Based on the record and the parties' responses, the court concluded that the plaintiff was substantially justified in bringing its motion to compel but that the third-party defendant's distinct rationale for an order compelling production lacked a reasonable basis in fact and law such that the third-party defendant (or its attorney), but not the plaintiff, must pay the expenses reasonably incurred by the defendant in responding to the third-party defendant's additional rationale for an order compelling production. Ruck v. McGill, 22-02074 (September 2023) -- Chief Judge G.M. Halfenger Plaintiff sued the debtor-defendant seeking an award of damages for violation of Wisconsin Statutes section 779.02(5) and a declaration that the award is not dischargeable pursuant to 11 U.S.C. section 523(a)(4). After trial plaintiff argued that debtor-defendant also owed her attorney’s fees pursuant to Wisconsin Statutes section 895.446. The court ruled that debtor-defendant owes plaintiff a debt pursuant to Wisconsin Statutes section 779.02(5) that is not dischargeable under 11 U.S.C. section 523(a)(4), but the plaintiff did not prove a right to relief under Wisconsin Statute section 895.446. Cornerstone Pavers, LLC v. Zenith Tech, Inc. (In re Cornerstone Pavers, LLC), Adv. Proc. No. 21-02044-gmh (September 2023) -- Chief Judge G.M. Halfenger Plaintiff Cornerstone Pavers, LLC and defendant Zenith Tech, Inc. assert claims and counterclaims for breach of a subcontract between them related to a highway-construction project, and Zenith seeks to recover on a surety bond allegedly issued by third-party defendant West Bend Mutual Insurance Company to insure the performance of the subcontract. Cornerstone and West Bend both moved for summary judgment against Zenith arguing that they are entitled to judgment as a matter of law based on Zenith's purported failure to satisfy certain notice requirements in the subcontract and bond before it terminated the subcontract and replaced Cornerstone with another subcontractor. The court denied both motions because the record does not establish, beyond all genuine disputes of material fact, that Zenith cannot prevail at trial. Jackson Family Dentistry, LLC v. Major Dental Partners, LLC (In re Charmoli), Adv. Proc. No. 22-02136 (August 2023) -- Chief Judge G.M. Halfenger The defendants moved for remand and abstention with respect to the claims and counterclaims pending in this adversary proceeding, which were originally asserted in state court and removed to this court under 28 U.S.C. §1452(a) after one of the plaintiffs commenced the underlying chapter 11 case with his spouse. Two of the defendants also moved in the main case for a stay of their related adversary proceeding under 11 U.S.C. §523(a)(2) & (6), for a determination as to the dischargeability of debts allegedly owed to them by the debtor-plaintiff, and for relief from the stay under 11 U.S.C. §362(a), to allow them to continue the state-court litigation after remand. The court denied the defendants' motions because all of the removed claims and counterclaims are "core proceedings" under 28 U.S.C. §157(b)(2), thus not "related to" proceedings subject to mandatory abstention under 28 U.S.C. §1334(c)(2), and the relevant factors do not weigh in favor of permissive abstention under §1334(c)(1) or remand under §1452(b), so there is no good reason to stay the defendants' dischargeability proceeding, nor is there cause to grant the defendants relief from the §362(a) stay. Charmoli v. Aspen American Insurance Company, Adv. Proc. No. 22-02130 (June 2023) -- Chief Judge G.M. Halfenger Defendant issued professional liability policies to plaintiff, and plaintiff filed this adversary proceeding seeking a declaration that defendant was required to defend and indemnify him from malpractice claims asserted by his former patients. After the court denied defendant’s motion to dismiss the complaint, ruling that the complaint’s factual allegations and facts of which the court could take judicial notice did not establish that defendant’s rescission was timely under Wis. Stat. section 631.11 as a matter of law, defendant filed a motion for leave to appeal to the district court. The defendant then filed a motion requesting that the bankruptcy court stay the adversary proceeding pending the district court’s action on its appeal motion. The bankruptcy court denied the motion for a stay pending appeal, concluding that defendant was not likely to succeed on the merits of the motion for leave to appeal or the appeal itself, and further concluding that defendant had not demonstrated irreparable harm. Charmoli v. Aspen American Insurance Company, Adv. Proc. No. 22-02130 (April 2023) -- Chief Judge G.M. Halfenger The plaintiff-debtor seeks declaratory relief with respect to insurance coverage under several policies issued by the defendant. The defendant moved to dismiss the plaintiff's claims, arguing that there are no disputes of material fact with respect to whether it validly rescinded the policies at issue. The court denied the defendant’s motion because Wisconsin Statutes section 631.11, as applicable here, requires an insurer to "notif[y] the insured . . . of its intention to . . . rescind [a] policy" no later than 60 days after it "acquires knowledge of sufficient facts to constitute grounds for rescission of the policy" and the allegations in the operative complaint allow for the plausible inference to be drawn that the defendant acquired such knowledge more than 60 days before it gave the plaintiff notice of its intention to rescind the policies at issue. In re Java Berry, Case No. 22-22162 (March 2023) -- Chief Judge G.M. Halfenger The debtor's mother, who passed away prepetition, borrowed money and promised to repay it on a non-recourse basis from the sale of her home after her death, a transaction commonly known as a "reverse mortgage." The debtor's mother's probate estate has not been administrated. The debtor, who lived in the home for many years with his mother and continues to reside there, filed a chapter 13 bankruptcy petition and a plan proposing to pay the mortgage creditor an amount equal to the home's value. The mortgage creditor, which timely filed a proof of claim alleging it to be secured in full, objected to confirmation, arguing that the debtor did not have an interest in the property that could be provided for in his chapter 13 plan and that the legal owner of the property could not be determined until his mother's probate estate was administered. The court partially overruled the objection, reserving for an evidentiary hearing the mortgage creditor's contention that the plan understates the property's value. The court concluded that the debtor's plan could, consistent with the plan confirmation requirements of §1325, provide for the creditor's claim against the bankruptcy estate by affording the creditor the value of the property, which is all that the creditor could recover under nonbankruptcy law. Charmoli v. Aspen American Insurance Company, Adv. Proc. No. 22-02130 (March 2023) -- Chief Judge G.M. Halfenger The defendant filed a motion asking the district court to withdraw the reference of this proceeding from the bankruptcy court. The bankruptcy court entered a report and recommendation explaining that, in the interests of judicial economy and fidelity to Congress's division of labor between the district courts and bankruptcy courts with respect to bankruptcy proceedings, the defendant’s motion should be denied as premature and the reference should remain in place through the pre-trial stage or the motion should be granted only to the extent that the reference is withdrawn for the purpose of conducting a trial. |