April 2010 6th Circuit Bankruptcy Case Summaries

The Bankruptcy Court dismissed a Creditor's Complaint attempting to revoke confirmation of a Chapter 11 plan. The Creditor alleged that copies of certain emails demonstrated that the Confirmation Order was procured by fraud. The Appellate Panel noted that under 11 U.S.C. Section 1144 a Confirmation Order may only be revoked for fraud in circumstances involving a materially false representation (or omission) that a Bankruptcy Court relies on in entering the Confirmation Order. However, the record demonstrated that the Bankruptcy Court had previously considered the emails and the fraud issue prior to the confirmation hearing. As such, the Creditor failed to establish fraud upon which the Bankruptcy Court relied as is required to revoke a Confirmation Order.

The Creditor and Debtor entered into a settlement agreement regarding the Creditor's specific claim. Subsequently, the Bankruptcy Court confirmed the Debtor's proposed Chapter 11 Plan. The Creditor then attempted to revoke confirmation of the Chapter 11 Plan in alleging that confirmation was procured by fraud. In examining whether the Creditor had standing to attempt revocation of the Confirmation Order, the Appellate Panel explained that an individual only has standing to appeal an order that diminishes the individual's property, increases the individual's burdens, or impairs the individual's rights. As a consequence of the settlement agreement, the Appellate Panel determined that the Creditor did not have standing to attempt revocation of the Confirmation Order.

After a Chapter 13 Trustee declined to pursue avoidance of a lien on a manufactured home, the Bankruptcy Court determined that the Debtor had standing to pursue avoidance of the lien as a preference under 11 U.S.C. Section 547. The Appellate Panel determined that Bankruptcy Courts may properly exercise equitable powers in granting "derivative standing" to Chapter 13 Debtors that want to bring an action to avoid a lien, if the Trustee declines to pursue the claim.

The Committee of Unsecured Creditors sought review of the Bankruptcy Court's denial of the Committee's application to retain a particular lawfirm as its counsel. The Appellate Panel noted that under 28 U.S.C. Section 158, jurisdiction to consider appeals arises only from: 1) final orders; or 2) interlocutory orders with leave of court. After determining that an order denying an application to appoint counsel is not a final order, the Appellate Panel considered whether to grant leave for an interlocutory appeal under Bankruptcy Rule 8003. The Appellate Panel found that the interlocutory order did not involve a controlling question of law as to which there is substantial ground for difference of opinion, and, therefore, the appeal was dismissed.