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United States Courts Opinions

United States Courts Opinions (USCOURTS) collection is a collaborative effort between the U.S. Government Publishing Office (GPO) and the Administrative Office of the United States Courts (AOUSC) to provide public access to opinions from selected United States appellate, district, and bankruptcy courts.

The District of Nebraska offers a database of opinions for the years 1997 to current, listed by year and judge. For a more detailed search, enter the keyword or case number in the search box above.

Wesley Howard Hitchcock v. American Mortg. Co. (In re Hitchcock), Ch. 12, BK22-40480-BSK, A22-4021-BSK (Sept. 20, 2023) 09/28/2023
Judge Brian S. Kruse

In a matter of first impression in this district, the bankruptcy court considered how to harmonize a federal agency’s Touhy regulations with the Federal Rules of Civil Procedure where documents are sought from an opposing litigant and not subpoenaed or requested from the federal agency.

The plaintiffs moved to compel the production of FDIC examination reports from a bank. The FDIC raised the bank examination privilege and agency regulations governing the disclosure of documents otherwise exempt from public disclosure requirements (known as Touhy regulations). The Touhy regulations are based on sovereign immunity to protect the government from being forced to comply with a subpoena.

The court examined the tension between a party’s right under Rule 34/Rule 7034 to request the production of relevant documents in the responding party’s possession, custody, or control, and the sovereign immunity of government agencies. Under the circumstances of this case, the court held that sovereign immunity is not implicated by the discovery request, because the plaintiffs were seeking the records from a bank, not from the FDIC. The court permitted the plaintiffs to request the records from the bank without making a Touhy request to the FDIC. Separately, the court would consider the claimed bank examination privilege after an in camera review of the records.

Gordon & Shirley Hitchcock v. American Mortg. Co. (In re Wesley Howard Hitchcock), Ch. 12, BK22-40480-BSK, A22-4023-BSK (Sept. 20, 2023) 09/28/2023
Judge Brian S. Kruse

In a matter of first impression in this district, the bankruptcy court considered how to harmonize a federal agency’s Touhy regulations with the Federal Rules of Civil Procedure where documents are sought from an opposing litigant and not subpoenaed or requested from the federal agency.

The plaintiffs moved to compel the production of FDIC examination reports from a bank. The FDIC raised the bank examination privilege and agency regulations governing the disclosure of documents otherwise exempt from public disclosure requirements (known as Touhy regulations). The Touhy regulations are based on sovereign immunity to protect the government from being forced to comply with a subpoena.

The court examined the tension between a party’s right under Rule 34/Rule 7034 to request the production of relevant documents in the responding party’s possession, custody, or control, and the sovereign immunity of government agencies. Under the circumstances of this case, the court held that sovereign immunity is not implicated by the discovery request, because the plaintiffs were seeking the records from a bank, not from the FDIC. The court permitted the plaintiffs to request the records from the bank without making a Touhy request to the FDIC. Separately, the court would consider the claimed bank examination privilege after an in camera review of the records.

Green Acres MHP, LLC v. George Dunlop, Jr. (In re Green Acres MHP, LLC), Ch. 11 Sub. V, BK22-80635-TLS, A23-8003-TLS (Aug. 28, 2023) 08/28/2023
Judge Thomas L. Saladino

The court granted the Subchapter V debtor’s unopposed motion for summary judgment in this adversary proceeding seeking the court’s permission to use the plan confirmation process to restructure the manner in which the debtor provides water to and receives payment from the residents of its housing development.

The debtor has for years furnished water to the lots in the subdivision in a manner that does not allow for service to individual lots to be turned off. The water is provided under an arrangement that originally envisioned the formation of a homeowners’ association to approve assessments on each lot to pay for water service and enforce non-payment by filing a lien against the property. However, the original set of covenants has expired and the homeowners’ association was never formed. None of the subsequent covenants and easements are enforceable to give the debtor the ability to assess and collect payment for the water it provides. Most of the residents are years in arrears on water payments; this delinquency caused the debtor to file its bankruptcy petition.

In its plan, the debtor proposed a payment and assessment scheme. Because the proposal would affect the rights of parties not under the bankruptcy court’s jurisdiction, the debtor filed this adversary proceeding and served all of the lot owners. Most did not respond and are in default. None resisted this amended motion for summary judgment, so the court granted it. The debtor may proceed with developing a plan to establish a payment structure to compensate it for maintaining a water utility and providing water to residents, and to establish procedures for shutting off the water for non-payment.

Thomas Supanchick, Ch. 7, BK23-40594-TLS (Aug. 24, 2023) 08/24/2023
Judge Thomas L. Saladino

Debtor's motion to avoid a judicial lien under § 522(f)(1)(A) was denied without prejudice for failure to meet the burden of proof.

Herman Edward Smith & Piper Jean Leeds, Ch. 13, BK22-80836-BSK (May 16, 2023) 05/16/2023
Judge Brian S. Kruse

The bankruptcy court denied without prejudice the debtors’ objection to certain proofs of claim for medical services.

The objections initially were based on the Nebraska statute of limitations for contracts not in writing. Although the creditor did not resist the objection, the court set the matter for hearing so the debtors could prove that the four-year statute of limitations for oral contracts, rather than the five-year statute of limitations for written contracts, applied.

At the hearing, the debtors asserted for the first time that the claims should be denied under Rule 3001(c)(1) and disallowed under Rule 3001(c)(2)(D) because no copy of the writing on which the claims were based was filed with the proofs of claim. The court declined to disallow the claim because the debtors failed to comply with Local Rule 3007-1(B) by not providing the claimant with notice of the specific grounds for this objection.

The court also explained that a properly filed proof of claim is prima facie evidence of the validity and amount of the claim pursuant to Rule 3001(f) unless the debtors can establish otherwise. Here, the claimant attached the summarized details of the debt with each proof of claim and included a notice that full documentation would not be attached to the claim due to medical privacy laws, but additional information could be requested from the claimant if necessary. The debtors did not request additional information. The court ruled that the debtors did not meet their burden of showing that the proofs of claim lacked sufficient information to be allowed.

Moreover, the debtors did not establish that the four-year statute of limitations applied. The court observed that medical providers typically require patients to sign documentation prior to treatment, so the statute of limitations for oral contracts is unlikely to apply. The debtors bear the burden of proof for an affirmative defense such as the statute of limitations, and by merely relying on a purported lack of documentation attached to the proof of claim they fail to meet that burden. The court noted that the summaries attached to the proofs of claim contain dates of payments on the account, which the debtors could challenge as inaccurate as one way of supporting their objection.

However, objections must be grounded in a good-faith factual and legal basis. While the debtors offered no evidence to support their objection, the court did not foreclose the possibility that they could do so in a subsequent filing, but warned that any future objections should be supportable in both fact and law.

Kenneth Joseph Woodard v. Navient Solutions, LLC (In re Woodard), Ch. 13, BK08-81442, A21-8023-TLS (Mar. 8, 2023) 03/08/2023
Judge Thomas L. Saladino

The court approved the formation of a circuit-wide class action to challenge alleged violations of the § 524(a) discharge injunction in connection with the collection of student loan debt. The court found that it has the authority to enforce discharge orders other than ones it entered because such orders operate by the statutory authority of § 524(a)(2) and the court’s power under § 105(a), and are not individualized, hand-crafted orders that require interpretation.

The court also found that the purported waiver (contained in the promissory note) by the debtor of the right to bring a class action arose only in the context of arbitration proceedings. The court here had denied the defendant’s motion to compel arbitration, so the waiver provision was inapplicable.

The court then discussed the necessary elements of a class action under Federal Rule of Civil Procedure 23 (Fed. R. Bankr. P. 7023), and found that the plaintiff had established each element of Rule 23(a) – numerosity, commonality, typicality, and adequacy of class representation. The court further found the plaintiff had satisfied the requirements of Rule 23(b)(3) because “the questions of law or fact common to class members predominate over any questions affecting only individual members, and that a class action is superior to other available methods for fairly and efficiently adjudicating the controversy.” While the matter of calculating restitution and damages will require individual findings for each class member, that by itself is an inadequate reason to deny certification when liability can be determined for the whole class.

Because the plaintiff established under the elements of Rule 23 that a class action should be approved in this litigation as an efficient and equitable method of resolving the issue of whether the defendant violated the discharge injunction and, if so, what remedies are responsive to that violation, the motion for class certification will be granted by the terms of an order to be submitted.

Philip Kelly, Chap. 7 Trustee v. Valda McDonald (In re Marissa Lynn Dedrick), Ch. 7, BK22-40277-TLS, A22-4014-TLS (Feb. 23, 2023) 02/23/2023
Judge Thomas L. Saladino

The Chapter 7 trustee filed this adversary proceeding to recover a preferential payment the debtor allegedly made for past-due rent. The defendant denied that the payment had been made and asserted that her signature on the payment receipt was forged. At trial, the only question before the court was whether the trustee had met his burden of proving the existence of the payment by a preponderance of the evidence.

The court decried the assault on the integrity of the legal system evident from the contradictory testimony by the witnesses, but found the trustee had met this burden, on the basis of evidence that the debtor and the defendant did have an expectation that rent would be paid for the living quarters, the debtor withdrew a similar amount of money from her bank account on the same day the payment was allegedly made, and the debtor consistently disclosed this payment throughout her bankruptcy case. There was no evidence to support the defendant’s assertion that her signature on the written receipt was a forgery.

Judgment was entered setting aside the transfer and directing the defendant to pay that amount to the trustee.

Sheri J. Palmer Revocable Trust v. Jason Michael Stephens (In re Stephens), Ch. 7, BK21-40869-TLS, A21-4023-TLS (Dec. 12, 2022) 12/12/2022
Judge Thomas L. Saladino

After a trial on the plaintiff’s complaint to except a debt from discharge under § 523(a)(2)(A), the court ruled for the defendant. The plaintiff loaned $500,000 to the debtor to purchase a controlling interest in a bank. For various reasons, the debtor bought only a minority interest, and the transaction took longer than the plaintiff expected. When the debtor filed a Chapter 7 case, the plaintiff filed this adversary proceeding to have the debt declared non-dischargeable.

None of the evidence presented proved that the debtor deliberately and intentionally made a knowingly false representation to the plaintiff for the purpose of deceiving her at the time she made the loan to him. His intent at the time he obtained the funds was key, and at that time, the evidence indicates he did intend to use the money to buy a bank. This lack of fraudulent intent renders the debt dischargeable.

United States v. Donald Duane Klein & Norma Jean Klein (In re Klein), Ch. 12, BK22-40804-BSK, A22-4020-BSK (Dec. 7, 2022) 12/07/2022
Judge Brian S. Kruse

The bankruptcy court granted a preliminary injunction to the SBA to enjoin the debtors from spending the balance of a loan allegedly obtained by fraud.

The debtors obtained a $500,000 Covid hardship loan from the SBA by representing in their application that they were engaged in the business of farming, operating under a confirmed Chapter 12 plan, and would use the loan proceeds as working capital. None of those representations appear to be true. The debtors did not confirm a plan in their previous Chapter 12 case, they do not own any land or equipment and are about to surrender the few head of livestock they have, their only source of income is Social Security, and they have used the loan proceeds for attorney fees, litigation expenses, and personal living expenses.

The court granted the government’s motion to enjoin the debtors from spending the balance of the loan proceeds/cash collateral. The court found that all of the Dataphase factors had been met: the SBA would suffer irreparable harm if the loan proceeds were spent; SBA would suffer greater harm if an injunction wasn’t entered than the debtors would if their access to the funds was limited; the SBA is likely to succeed on its § 523(a)(2)(A) claim to except the debt from discharge; and public policy favors ensuring that the loan process is not abused and public funds are properly utilized.

Eletech, Inc., v. Jonathan Jones (In re Jones), Ch. 7, BK21-80876-TLS, A21-8024-TLS (Dec. 7, 2022) 12/07/2022
Judge Thomas L. Saladino

The bankruptcy court granted summary judgment to a creditor holding a judgment debt and excepted the debt from discharge. The state-court judgment was entitled to preclusive effect on the matter of dischargeability, as the elements of § 523(a)(2)(A), (a)(4), and (a)(6) were established by the state-court record. The debtor did not identify any genuine issues of material fact that would preclude summary judgment.

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