Current Month (October 2026)
The following pieces are part of a series of summaries of the leading cases related to bankruptcy decided in the last year and a half.
Judicial Estoppel: Keathley v. Buddy Ayers Construction, Inc., 146 S. Ct. 1532 (2026)
By Miriam Mykho, Seton Hall University School of Law
The doctrine of judicial estoppel prevents inconsistent judgments by stopping litigants from changing their stated position on a particular claim in different cases. In bankruptcy cases, a debtor must disclose all assets, including possible claims and causes of action. Some courts, like the U.S. Court of Appeals for the Fifth Circuit, presume that a claim does not exist if it was not disclosed in the bankruptcy case. Consequently, if a debtor then files a claim that was not previously disclosed in the bankruptcy case, then the debtor’s position on the claim is inconsistent with the position taken in the bankruptcy case.
Circuit courts are split on whether to use rules or standards to determine if a bankruptcy omission is a mistake. The Fifth and Tenth Circuits use a two-step rule, while other courts of appeals use a case-by-case approach instead. To resolve this issue, the Supreme Court granted certiorari in Keathley v. Buddy Ayers Construction, Inc. 146 S. Ct. 1532 (2026).
Thomas Keathley filed for Chapter 13 bankruptcy in 2019, with a five-year repayment plan confirmed in April of 2020. In 2021, Keathley was involved in a car accident. The driver of the vehicle was employed by Buddy Ayers Construction, Inc. (“BAC”), and Keathley sued the company. Keathley informed his bankruptcy attorney of this new claim, but neither he nor his attorney informed the bankruptcy court of the personal injury case. In the district court, BAC moved for summary judgment on the grounds of judicial estoppel. Keathley then filed an amended schedule disclosing the claim. Keathley explained that he had made a mistake and that he thought he had done all that he needed after he informed his bankruptcy attorney of the suit. The district court disagreed and granted summary judgment in favor of BAC. On appeal, the Fifth Circuit affirmed the district court’s decision.
Both the district court and the Fifth Circuit followed Fifth Circuit precedent in analyzing whether a nondisclosure in a bankruptcy case was a mistake. In the Fifth Circuit, an omission in the disclosure of claims is a mistake if the debtor did not have any potential motive to hide the claim or if the debtor did not have any knowledge of the underlying claim. Keathley, 146 S. Ct. at 1536. Keathley failed both elements. Since Keathley could have received a payout from the personal injury claim, he had a potential motive to hide that claim from the bankruptcy court. Likewise, as the person involved in the car crash, Keathley knew the facts of the personal injury claim. The district court and the Fifth Circuit consequently found no mistake.
The Supreme Court reversed, holding that the Fifth Circuit’s approach was simultaneously overly broad and overly rigid. The Court assumed, for this case, that judicial estoppel did apply in the bankruptcy context and that a mistake would be an exception to the application of judicial estoppel.
Judicial estoppel is an equitable doctrine, and, since equity depends on flexibility, judicial estoppel decisions must be made on a case-by-case basis. Id. at 1539. To do so, a court should look at the totality of the circumstances. Id. On one hand, the Supreme Court found the Fifth Circuit rule too rigid as it did not permit a court to look at any other evidence that may show the debtor made a mistake. Id. at 1539–40. This goes against the flexibility needed for a doctrine of equity. On the other hand, the approach was too broad because it was almost entirely unlikely that a debtor would not meet either of the two elements. Id. at 1540. First, it is highly unlikely that a debtor will not know the underlying facts of a claim he is directly involved in. Second, it is almost impossible that there will not be a hypothetical motive.
Concurring, Justice Thomas, joined by Justice Gorsuch, expressed concern regarding the foundation of the doctrine of judicial estoppel. The only time the Court enforced the doctrine was in an original jurisdiction case, New Hampshire v. Maine, 532 U.S. 742 (2001). Keathley, 146 S. Ct. at 1542–43. Furthermore, the judicial estoppel issue in New Hampshire was based on litigation between the same two parties. Id. at 1543. New Hampshire did not have much effect on lower courts because it was not representative of judicial estoppel issues in other cases.
Justice Thomas observed that judicial estoppel only recently became commonplace in the courts of appeals and was applied broadly by lower courts because there is no clarity as to the foundation of the doctrine. This broad application can have negative downstream effects. The Fifth Circuit approach, for instance, widened judicial estoppel. With such an application, Justice Thomas argued that a defendant like BAC could avoid liability regardless of the nature of its conduct because the plaintiff did not mention the cause of action in a bankruptcy case. Id. at 1541.
In a separate concurrence, Justice Sotomayor reiterated the importance of looking at the totality of the circumstances in judicial estoppel. She questioned whether judicial estoppel should apply in a pending bankruptcy case. Id. at 1543. Justice Sotomayor reasoned that the Fifth Circuit’s application of judicial estoppel negatively affected creditors because the creditors could benefit from additional debtor resources in a repayment plan. Id. at 1544. This approach also created a windfall for potential tortfeasors because they would not have to litigate a claim for which they could be liable. Id.
Pension Plans: In re Yellow Corp., 152 F.4th 491 (3d Cir. 2025)
By Miriam Mykho, Seton Hall University School of Law
In 1974, Congress enacted the Employee Retirement Income Security Act (“ERISA”) to help protect pension plans and ensure employees would not lose their retirement benefits. To assist, Congress established the Pension Benefit Guaranty Corporation (“PBGC”). The PBGC insures single-employer and multiemployer pension plans. However, if an employer withdraws from a multiemployer pension plan (“MEPP”), the remaining employers would be responsible for making up the difference. This would increase employer burden, leading to a “death-spiral” where the remaining employers in the MEPP successively withdraw from the plan. In re Yellow Corp., 152 F.4th 491, 503 (3d Cir. 2025). To resolve this issue, Congress enacted the Multiemployer Pension Plan Amendments Act (“MPPAA”), imposing early withdrawal liability on employers so that remaining employers would not be responsible for the shortfall. Under the MPPAA, a withdrawing employer is responsible for its share of a plan’s unfunded vested benefits, which is the difference between the vested plan benefits (the amount the plan must pay) and the plan’s assets.
During the COVID-19 pandemic, Congress passed the American Rescue Plan Act (“ARPA”). ARPA appropriated funds to MEPPs. The PBGC provided two regulations, the Phase-In Regulation and the No-Receivables Regulation. Under the Phase-In Regulation, MEPPs must phase ARPA funds into the plan asset calculations, rewarding employers who withdraw later by decreasing their liability. Under the No-Receivables Regulation, MEPPs cannot recognize the special financial assistance awards as assets until the award is paid to the plan, increasing liability for employers that withdraw before the special assistance award payment.
Yellow Corporation (“Yellow”), a trucking company, filed for bankruptcy in 2023 after a labor dispute with the Teamsters union. Yellow challenged, as part of the bankruptcy case, the $6.5 billion it owed in withdrawal liability to eleven MEPPS by arguing that the PBGC regulations were not valid.
The bankruptcy court held (1) that the PBGC could promulgate the Phase-In and No-Receivables Regulations, (2) that these regulations were not arbitrary, and (3) that Yellow could be held to the contracted withdrawal payments with the union. The bankruptcy court certified an order for direct appeal.
The U.S. Court of Appeals for the Third Circuit reviewed de novo, as courts must independently review statutes granting authority to agencies because statutory ambiguity is not an implicit grant of agency authority. Loper Bright Enters. v. Raimondo, 603 U.S. 369, 395, 404 (2024). Yellow argued that ARPA did not grant the PBGC the regulatory authority to change the statutory formula for withdrawal-liability calculations. In In re Yellow Corp., the Third Circuit disagreed, noting that ARPA provides special financial assistant to help recipient plans make “benefit payments and pay plan expenses.” 152 F.4th at 501 (quoting 29 U.S.C. § 1432(l)). The Third Circuit also noted that ARPA explicitly grants PBGC the authority to set conditions regarding plan asset allocation. Id. at 502 (citing 29 U.S.C. § 1432(m)(1)). If these funds were included as assets in withdrawal-liability calculations, ARPA would effectively subsidize employer liability. The Third Circuit reasoned that Congress left it to the PBGC to resolve this issue and that the PBGC issued the Phase-In and No-Receivables Regulations as a result. Furthermore, since later-created specific statutes overrule earlier-created broader statutes, FDA v. Brown & Williamson Tobacco Corp., 529 U.S. 120, 143 (2000), the Third Circuit found that the MPPAA generally guided withdrawal-liability calculations, while ARPA was more specific. Accordingly, the Third Circuit held that both regulations are valid exercises of the PBGC’s authority.
The Third Circuit also disagreed with Yellow’s argument that the regulations were “arbitrary or capricious,” holding that Yellow did not “show that the PBGC’s decision making was so outside the ‘zone of reasonableness,’ . . . that it flunks [the] ‘deferential’ review of agency policymaking.” In re Yellow, 152 F.4th at 502, 504 (quoting FCC v. Prometheus Radio Project, 592 U.S. 414, 423 (2021) (quoting Loper Bright, 603 U.S. at 392)). Agency action is “arbitrary or capricious if it is not reasonable and reasonably explained.” Id. at 502 (quoting Ohio v. EPA, 603 U.S. 279, 292 (2024) (citation modified)). If an agency can provide “a satisfactory explanation for its action including a rational connection between the facts found and the choice made,” id. at 502–03 (quoting Motor Vehicles Mfrs. Ass’n of the U.S., Inc. v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43 (1983)), then the court can “ensure [] that the agency has acted within a zone of reasonableness.” Id. at 503 (quoting Prometheus Radio Project, 592 U.S. at 423). Yellow did not dispute the PBGC’s comprehensive review or objectives in enacting the regulations but argued that the agency’s worry about the employer-wide withdrawal issue was misplaced. Simultaneously, Yellow conceded that the regulations would discourage such employer action. The Third Circuit ruled that the “‘appropriate deference’ [was to] ‘agency decisionmaking,’ not to Yellow’s efforts to convince [the Third Circuit] [that Yellow] would have gone about the rulemaking another way.” In re Yellow, 152 F.4th at 503 (quoting FDA v. Wages & White Lion Invs., 604 U.S. 542, 145 S. Ct. 898, 917 (2025)). The Third Circuit was “convinced that the administrative record reflect[ed] ‘reasonable’ rulemaking” and held that the PBGC regulations were valid. In re Yellow, 152 F.4th at 503 (quoting Ohio, 603 U.S. at 292).
Yellow also argued that the regulations applied to employers, not the plans themselves. However, Yellow was obligated to pay withdrawal liability before ARPA was passed, and the regulations merely preserved this liability by preventing ARPA funds from being used to reduce employer withdrawal liability. As such, the Third Circuit held that the regulations applied to plans and not employers.
Additionally, the Third Circuit found issue with Yellow’s attempted application of the major questions doctrine. Under the major questions doctrine, “an agency cannot take action that results in a ‘transformative expansion’ of its authority . . . without express permission from Congress.” In re Yellow, 152 F.4th at 504 (quoting West Virginia v. EPA, 597 U.S. 697, 716, 724 (2022)). However, the Third Circuit highlighted that “Congress created the PBGC to set regulations on withdrawal liability . . . and charged [the agency] with the task to ‘impose, by regulation[,] . . . reasonable conditions’ related to ‘withdrawal liability’ on any ‘eligible [MEPP] that receives special financial assistance.’” In re Yellow, 152 F.4th at 504–05 (quoting 29 U.S.C. § 1432(m)(1)).
Yellow’s final argument challenged its withdrawal liability with regard to two Teamster union pension plans. When reentering the union pension plans, Yellow bargained for a 25 percent contribution rate in return for a withdrawal liability calculated at 100 percent of the contribution rate. Yellow argued that relevant statutory authority asserts that the withdrawal liability should be calculated using the employer’s actual contributions, which in Yellow’s case was 25 percent of the normal requirement. In re Yellow, 152 F.4th at 505. Under 29 U.S.C. § 1391, “alternative calculation methods are permissible only . . . [with] PBGC approval.” Id. Yellow asserted that the method used in calculating its liability was not approved by the PBGC. However, the bankruptcy court reasoned, and the Third Circuit agreed, that the MPPAA set a floor for withdrawal liability, not a ceiling, and “‘[did] not forbid employers from agreeing to pay extra money to a pension trust.’” In re Yellow, 152 F.4th at 506 (quoting In re Yellow Corp., No. 23-11069, 2024 WL 4925124, at *17 (Bankr. D. Del. Nov. 5, 2024)). Furthermore, the Third Circuit reasoned that the MPPAA’s goal is to protect pension plan solvency.
While there did appear to be a statutory conflict and a lack of PBGC approval, the Third Circuit noted that approval is only needed when a completely different calculation method is used. When approving a different calculation method, the PBGC determines if that different method would “significantly increase the risk of loss to plan participants.” Id. at 506 (quoting 29 U.S.C. § 1391(c)(5)(A)). When an agreement mandates higher withdrawal liability, there is no such risk of loss. Id. (citing PBGC Supp. Br. at 5 (citing PBGC, Opinion Letter 89-8 (Oct. 19, 1989), 1989 WL 224526). Consequently, “employers may waive [the] limitations on their withdrawal liability . . . without [PBGC] approval. . . .” Id. (quoting PBGC, Opinion Letter 89-8)). Finally, the Third Circuit highlighted that Yellow consented to the higher withdrawal liability in return for a lower contribution rate. The Third Circuit did not find any reason to not hold Yellow to its agreement and affirmed the bankruptcy court.
Exemptions: Langston, Jr. v. Dallas Commodity Co. (In re Langston), 159 F.4th 346 (5th Cir. 2025)
By Miriam Mykho, Seton Hall University School of Law
When a debtor files for bankruptcy, their assets become part of the bankruptcy estate. 11 U.S.C. § 541. However, a debtor can claim certain property to be exempt from the estate. 11 U.S.C. § 522. Creditors are then able to object to the exemption under Bankruptcy Rule 4003(b)(1). Rule 4003(b)(1) states that the party objecting to a debtor’s claim of property exemption must file that objection within thirty days of the conclusion of the 11 U.S.C. § 341 meeting (“341 meeting”). Section 341 provides for a meeting of the creditors that allows the creditors to examine the debtor’s financial statements; 341 meetings can be concluded or reconvened. Under the 2011 amendment to Bankruptcy Rule 2003(e), if the 341 meeting is reconvened, a trustee must file a statement showing adjournment and stating when the meeting will reconvene.
Joseph F. Langston filed for Chapter 7 bankruptcy in 2019 after Dallas Commodity obtained a $1.5 million verdict against him and the Langston Family Limited Partnership. Langston claimed that his two individual retirement accounts (“IRAs”) were exempt from the bankruptcy estate.
Langston’s 341 meeting was reconvened multiple times to allow Langston to provide needed documentation. At the last 341 meeting, held on May 26, 2021, Langston, his attorney, the Chapter 7 trustee, and counsel for Dallas Commodity agreed that the Chapter 7 trustee would schedule a continued date for the 341 meeting. Neither Langston nor his counsel objected to continuing the meeting. However, instead of filing a statement pursuant to Rule 2003(e), the trustee filed an “interim report” stating the parties’ intention to schedule a final 341 meeting.
On March 9, 2022, the trustee in Langston’s case made a docket entry stating that the meeting of the creditors was held and concluded on May 26, 2021. A month later, on April 8, 2022, Dallas Commodity filed an objection to Langston’s claim of the IRAs exemption. Langston objected, asserting that Dallas Commodity’s objection was untimely. The bankruptcy court ruled in Dallas Commodity’s favor.
The district court affirmed under the Fifth Circuit’s decision in In re Peres, 530 F.3d 375 (5th Cir. 2008). In Peres, the Fifth Circuit adopted a case-by-case analysis for the 2008 version of Rule 2003(e), which did not require a statement showing adjournment. On appeal to the Fifth Circuit in Langston, Jr. v. Dallas Commodity Co. (In re Langston), Langston argued that the 2011 version of Rule 2003(e) overruled Peres and created a bright-line rule requiring a written notice for adjourned 341 meetings. 159 F.4th 346, 353 (5th Cir. 2025).
While the Fifth Circuit disagreed with the district court’s reasoning, it affirmed the district court’s decision. The Fifth Circuit held that (1) the 2011 amendment did not create a bright-line rule; (2) the 341 meeting concluded on May 26, 2021, not March 9, 2022; (3) Peres did not apply in this case; and (4) Langston had waived his right to challenge the timeliness of Dallas Commodity’s objection when he agreed to continue the meeting.
The Fifth Circuit relied on In re Jenkins, 784 F.3d 230 (4th Cir. 2015), the only circuit-level case to examine amended Rule 2003(e). There, the U.S. Court of Appeals for the Fourth Circuit held that the amended rule did create any penalties or consequences for failure to comply with the written notice requirement. In re Jenkins, 784 F.3d at 238. The Fourth Circuit decided against a bright-line approach because it would create a penalty where none had been initially set.
The Fifth Circuit also relied on Jenkins in deciding when the 341 meeting concluded. The Fifth Circuit highlighted “that there is ‘a significant difference in holding that a creditors’ meeting concluded on the final date the trustee convened[]’ . . . and holding ‘that the meeting concluded at some point after that date, when no meeting was scheduled and no creditors were convened.’” In re Langston, 159 F.4th at 353 (quoting In re Jenkins, 784 F.3d at 237). In Peres, the Fifth Circuit noted that deeming a 341 meeting not concluded until the trustee declares so would effectively allow a trustee to continue a 341 meeting indefinitely. However, the reasonableness standard set forth in Peres did not apply because Peres could only apply if there had been a continued 341 meeting. Since there was no meeting after May 26, 2021, the district court erred in deciding that the 341 meeting concluded on March 9, 2022.
Dallas Commodity issued an objection more than thirty days after the 341 meeting concluded. However, the Fifth Circuit still ruled against Langston’s timeliness argument because it decided that Langston had waived the Rule 4003(b)(1) defense. The Fifth Circuit held that Bankruptcy Rule 4003(b)(1) is a claims-processing rule that also affords debtors affirmative defenses to objections filed outside of the thirty-day time limit set in the rule. However, this rule is also subject to equitable defenses, including waiver, the intentional relinquishment of a known right that can occur through intentional conduct inconsistent with the claiming of that right. Here, Langston did not object to the improper continuation of the 341 meeting. He also used the time to amend his schedules and negotiate an agreed order. The Fifth Circuit found that Langston benefited from the time provided by the extension. This action was inconsistent with the claiming of the right granted to debtors in Rule 4003(b)(1). Since Langston had waived the applicable defense of Rule 4003(b)(1), Dallas Commodity’s objection was admissible.
Property of the Estate: Lil’ Joe Records, Inc. v. Ross, 177 F.4th 1170 (11th Cir. 2026)
By Miriam Mykho, Seton Hall University School of Law
The Copyright Act, codified in Title 17, grants authors of artistic works a copyright that they are then able to transfer. Upon transferring, 17 U.S.C. § 203 creates an inalienable termination interest that allows authors of copyrighted works to terminate the grant of that copyright. To do so, the author or their successors must timely serve a signed, written notice on the copyright grantee or their successors. When a work has multiple authors, a majority of the authors must sign the termination notice for it to become effective. In a recent decision, Lil’ Joe Records, Inc. v. Ross, the U.S. Court of Appeals for the Eleventh Circuit held that termination interests can become part of a bankruptcy estate. 177 F.4th 1170 (11th Cir. 2026).
The rap group 2 Live Crew recorded five albums between 1986 and 1989. The group’s four members, Luther Campbell, Mark Ross, Christopher Wong Won, and David Hobbs, entered into an agreement with Luke Records, a recording company owned by Campbell, giving the company the sound recording copyrights in the master recordings of the songs. In 1995, Luke Records filed for bankruptcy and sold all the sound recording copyrights from the agreement with 2 Live Crew to Lil’ Joe Records. In 2000, Ross filed for Chapter 7 bankruptcy in Alabama. Lil’ Joe Recs., Inc. v. Ross, 752 F. Supp. 3d 1287, 1293 (S.D. Fla. 2024), rev’d and remanded, 177 F.4th 1170 (11th Cir. 2026). His termination interests were not scheduled, administered, or mentioned in the bankruptcy case.
In 2020, twenty years after Ross’s bankruptcy case was resolved, Campbell, Ross, and Wong Won’s heirs (“Defendants”) served a timely termination notice on Lil’ Joe Records, exercising their termination rights in adherence with 17 U.S.C. § 203. Together, the three formed a majority that could negate the copyright grant to Lil’ Joe Records. As a result, Lil’ Joe Records sued the Defendants in the U.S. District Court for the Southern District of Florida. Lil’ Joe Recs., 752 F. Supp. 3d at 1293. Since debtors cannot access property while it is part of the bankruptcy estate, Lil’ Joe Records claimed that the termination notice was ineffective because Ross could not exercise his termination rights after they had been transferred into the Chapter 7 estate.
Campbell, Ross, and Wong Won’s heirs counterclaimed for a declaration that Ross could and did terminate the transfer of the termination interests into the bankruptcy estate. They argued that Ross could exercise the termination notice. Both sides moved for summary judgment. While the district court denied both motions, it decided that 17 U.S.C. § 203 and 11 U.S.C. § 541 meant that the termination interests were not part of the bankruptcy estate. After trial, the district court decided, based on the jury’s findings, that the termination notice was effective. On appeal, the Eleventh Circuit reversed, determining that the termination was ineffective since Ross could not exercise his termination interests because they were still part of the bankruptcy estate.
The court began by deciding whether the termination interests were part of the bankruptcy estate. First, Ross’s termination rights existed at the time of the Chapter 7 filing. Termination interests are created when authors transfer their copyrights, so Ross’s termination rights came into existence when the agreement with Luke Records was created. Second, termination interests are property under the Bankruptcy Code. According to 11 U.S.C. § 541(a)(1), “all legal or equitable interests of the debtor in property” that exist as of the creation of the bankruptcy estate become part of the estate. 11 U.S.C. § 541(a)(1). Contingent rights are also within the scope of the estate. In re Alvarez, 224 F.3d 1273, 1279 (11th Cir. 2000) (citing Segal v. Rochelle, 382 U.S. 375, 379 (1966)). The court expressed that a property interest is “all or part of a legal or equitable claim to or right in property.” Interest, Black’s Law Dictionary (12th ed. 2024). Termination interests are legal rights in property because they are contingent rights to regain copyrights, a form of intellectual property. Dowling v. United States, 473 U.S. 207, 216 (1985).
In response to the argument that the termination interests had been transferred into the bankruptcy estate, the Defendants argued that termination interests are inalienable and could not be transferred into a bankruptcy estate. The Eleventh Circuit confirmed this interpretation of § 203. However, the Eleventh Circuit added that in a bankruptcy case, bankruptcy law controls. When specific and general law conflict, the specific law is usually “treated as an exception to the general rule.” Savage Servs. Corp. v. United States, 25 F.4th 925, 946 (11th Cir. 2022). Assuming the Copyright Act was general law, the Eleventh Circuit decided that § 541 would function as a specific exception in regard to the termination interests. Section 541 adds property interests to the estate regardless of whether “any provision in . . . applicable nonbankruptcy law” says otherwise. 11 U.S.C. § 541.
After confirming that the termination interests were part of the bankruptcy estate, the Eleventh Circuit held that Ross could not exercise his termination rights because a debtor has no control over property while it is part of the estate. In a Chapter 7 case, property that is not scheduled, administered, or formally abandoned remains property of the estate, even after the discharge, unless the court orders otherwise. 11 U.S.C. § 541(a)(1); id. § 554(c), (d). The termination interests were never mentioned or identified in the Chapter 7 case, meaning that they had not been scheduled, administered, or formally abandoned and were still a part of the bankruptcy estate, unavailable when Ross attempted to exercise them.
Since Ross could not use his termination rights, only two of the four 2 Live Crew members actually exercised their termination rights. This was insufficient for a majority as required by § 203 and did not amount to an effective termination notice. Accordingly, the Eleventh Circuit reversed the district court’s decision and held that the transfer to Lil’ Joe Records had not been terminated.
Discharge Issues: Rigon v. EuropaKids Preschool, LLC (In re Rigon), No. 21-BK-11641, 2026 WL 993795 (B.A.P. 9th Cir. Apr. 13, 2026)
By Miriam Mykho, Seton Hall University School of Law
One of the benefits of filing for bankruptcy is the discharge. The discharge releases the debtor from certain debts, depending on the type of bankruptcy petition filed. Chapter 7 bankruptcy offers a discharge for a more limited range of debts than Chapter 13 bankruptcy. A debtor can also file for Chapter 7 bankruptcy and then convert to Chapter 13, availing themselves of a broader range of dischargeable debts. A debtor can also file for Chapter 13 bankruptcy after receiving a discharge in a Chapter 7 case. Such conversions and successive filings mean that a debtor can receive discharges in different bankruptcy cases, and that the lack of discharge availability in one case does not mean that a discharge will not be available in a future case. As such, the Bankruptcy Appellate Panel (“B.A.P.”) for the Ninth Circuit recently held in Rigon v. EuropaKids Preschool, LLC (In re Rigon) that the denial of a discharge in a Chapter 7 case does not moot the issue of whether the debt was dischargeable. No. 21-BK-11641, 2026 WL 993795 (B.A.P. 9th Cir. Apr. 13, 2026).
Christine Kwon, a licensed real estate broker, formed Rock PI, LLC (“Rock PI”) to purchase, renovate, rent, and sell real property. In 2019, Kwon solicited a $50,000 investment (“Loan”) from EuropaKids that she claimed would be used to renovate a property in Seattle. EuropaKids invested and Kwon personally guaranteed the Loan. When Rock PI had not made the required payments on July 19, 2020, the Loan maturity date, EuropaKids sent a notice of default.
Christine Kwon and her husband Olivier Rigon (“Debtors”) filed for Chapter 7 bankruptcy in 2021. The petition contained multiple deficiencies that the Debtors failed to resolve, and the United States Trustee (“UST”) filed an 11 U.S.C. § 727 action to deny the Debtors discharge due to misconduct.
Simultaneously, EuropaKids filed a complaint seeking to exempt the Loan from the discharge due to fraud pursuant to 11 U.S.C. § 523(a)(2)(A) (“Nondischargeability Proceeding”). The Debtors admitted to the Loan in their response but generally denied the facts of EuropaKids’ complaint. The parties then agreed to stay the Nondischargeability Proceeding until the § 727 action was resolved. The parties decided that if the UST was successful and the discharge was denied, the question of whether the Loan should be exempt from the discharge would be meaningless because there would be no discharge from which to exempt the Loan.
Kwon’s discharge was denied after the trial for the § 727 action. EuropaKids then filed a motion to lift the stay on the Nondischargeability Proceeding, seeking determination and judgment as to the amount of the debt. EuropaKids argued that while the discharge denial mooted the exemption question, it did not moot the question of the amount of liability. EuropaKids sought entry of judgment. The Debtors objected, reasoning that the entire Nondischargeability Proceeding would be moot because none of the debts would be discharged. The Debtors also argued that the bankruptcy court had no jurisdiction over the issue because the Nondischargeability Proceeding would not have any effect on the estate. The Debtors argued that bankruptcy courts are courts of limited jurisdiction and cannot decide on issues that do not affect the bankruptcy estate.
EuropaKids disagreed, arguing (1) that the Debtors had not objected to the jurisdiction in their answer, (2) that the Debtors had consented to jurisdiction due to a local bankruptcy rule, (3) that the claim was not moot, and (4) that it would be unfair to restart litigation in state court. The bankruptcy court granted EuropaKids’ motion to lift the stay. EuropaKids filed for summary judgment, asserting that it was entitled to summary judgment as a matter of law and because the material facts were undisputed: (1) the Debtors solicited a $50,000 loan to develop a property, even though they did not intend to do so; (2) EuropaKids loaned the Debtors $50,000 in reliance on the false representations; (3) the Loan was personally guaranteed by Kwon; (4) the Debtors did not repay the Loan; and (5) EuropaKids suffered $60,694.52 in damages as of the bankruptcy filing date.
In their response, the Debtors did not dispute any of the asserted facts but argued that the bankruptcy court did not have jurisdiction. The Debtors asserted that EuropaKids had not mentioned the breach of contract issue before and had only mentioned nondischargeability. Since the nondischargeability issue was not going to be prosecuted, the bankruptcy court had no jurisdiction over the unpled contract claim because the claim was no longer related to the bankruptcy case. EuropaKids moved to strike the Debtors’ untimely response and argued that there was jurisdiction “to enter a money judgment on a disputed state law claim in the course of determining the dischargeability of that debt under § 523.” In re Rigon, 2026 WL 993795, at *3. After hearings, the bankruptcy court granted EuropaKids summary judgment.
On appeal, the B.A.P. held that denial of a discharge does not moot the issue of whether the debt was dischargeable because of res judicata and the possibility of a Chapter 13 discharge. Res judicata precludes a party from bringing a claim if that claim may have been litigated in a previous case. Since Chapter 13 provides a broader availability for discharge and because the bankruptcy court did not comment on the availability of a Chapter 13 discharge in its decision, there was a possibility of a discharge for the Loan in the future. As such, both the amount and the dischargeability were still controversies because they could affect future litigation. Furthermore, because the claim could have been litigated, EuropaKids would have been barred from litigating the dischargeability claim in future proceedings under res judicata. Therefore, the dischargeability issue was not moot as litigation of the claim could influence future proceedings.
The B.A.P. also held that the bankruptcy court had jurisdiction over the dischargeability claim and exercised proper discretion in retaining jurisdiction. 28 U.S.C. § 157(b)(1) grants bankruptcy courts the ability to hear and determine all cases under the Bankruptcy Code, as well as all core proceedings arising under the Bankruptcy Code or arising in a case under the Bankruptcy Code. Core proceedings are claims that arise under the Bankruptcy Code because they depend on a substantive provision of bankruptcy law, meaning that a cause of action is created or determined by the Bankruptcy Code. A proceeding is related to a bankruptcy case if its outcome would alter a debtor’s rights and impact the administration of the bankruptcy estate. The B.A.P. decided that determinations as to dischargeability are core proceedings. Moreover, the bankruptcy court had exclusive jurisdiction over these issues because the cause of action was created by § 523, regardless of whether EuropaKids decided to litigate the whole claim or only part of it. The bankruptcy court had jurisdiction because jurisdiction was decided at the time the party filed the claim.
In addition to having jurisdiction at the time the claim was filed, the bankruptcy court had the discretion to retain jurisdiction, despite the fact that claims for money damages do not “arise under” the Bankruptcy Code. In re Rigon, 2026 WL 993795, at *7. In the U.S. Court of Appeals for the Ninth Circuit, bankruptcy courts are able to retain jurisdiction over an adversary proceeding after a discharge. The B.A.P. reasoned that an adversary proceeding continuing after a discharge is comparable to an adversary proceeding continuing after a dismissal, and that the same factors of (1) judicial economy, (2) convenience, (3) fairness, and (4) comity should be considered when deciding whether to keep jurisdiction. Id. at *8–9.
While the bankruptcy court did not analyze these factors, there was a sufficient record for the B.A.P. to consider them. On the question of judicial economy and convenience, essentially the time and effort spent on a case by the court and the parties, starting over in a new forum would require additional expense and inconvenience. In regard to fairness, the Debtors chose the forum and EuropaKids asserted its rights as creditor, even agreeing to delay a decision on dischargeability based on a stipulation. Forcing EuropaKids to delay adjudication even more would be unfair.
Finally, the B.A.P. decided that comity did not weigh against retaining jurisdiction as the breach of contract issue was not complex and was within the bankruptcy court’s expertise. The B.A.P. decided that there was no abuse of discretion when the bankruptcy court kept jurisdiction, and since jurisdiction was proper, the bankruptcy court could liquidate the debt.
The B.A.P. also affirmed the bankruptcy court’s grant of summary judgment to EuropaKids. Under Federal Rule of Civil Procedure 56(a), incorporated into bankruptcy under Bankruptcy Rule 7056, summary judgment should be granted when there is (1) no genuine dispute as to any material fact and (2) the movant is entitled to judgment as a matter of law. A material fact is a fact that could affect the outcome of the case under applicable law, and a genuine factual issue occurs when there is sufficient evidence for a reasonable fact finder to find in favor of the nonmoving party. The moving party bears the initial burden of proving that there is an absence of genuine issues of material fact by presenting sufficient uncontroverted facts. The burden then shifts to the nonmoving party to provide specific evidence to establish that there is a specific and genuine issue of material fact. When deciding, the court must draw all reasonable inferences in favor of the nonmoving party; and if the nonmovant does not provide specific facts showing a genuine issue, the court must grant summary judgment.
While the B.A.P. agreed with the Debtors that EuropaKids did not establish that the Loan was established by fraud, false pretenses, or false representation, it also said that the Debtors misconstrued the judgment. The bankruptcy court did not make a specific § 523(a)(2)(A) determination; it only determined the amount of damages that EuropaKids suffered.
The bankruptcy court granted summary judgment because the Debtors did not argue that there were any genuine issues of material fact. After EuropaKids provided sufficient uncontroverted facts, evidence in the form of documents related to the Loan, the burden moved to the Debtors to show that there was a specific and genuine issue of material fact. The Debtors did not dispute the facts and, instead, focused on the question of jurisdiction. Since the Debtors did not show that there was a genuine issue of material fact, the bankruptcy court did not err in granting summary judgment.
Separately, EuropaKids sought sanctions against the Debtors for a frivolous appeal. Incorporated into bankruptcy under Bankruptcy Rule 8020(a), Federal Rule of Appellate Procedure 38 states that an appeal is frivolous if the results are obvious or arguments of error are wholly without merit. EuropaKids’ argument that the appeal was sanctionable because the Debtors’ position was contrary to well-settled Ninth Circuit authority was without support because the bankruptcy court did not find any Ninth Circuit cases on the issue. The B.A.P. stated that an argument is not wholly without merit just because the appeals court decides that the arguments are novel or unpersuasive. The motion for sanctions was denied.
Sanctions: ProScript Pharmacy v. Alexander (In re Alexander), 677 B.R. 32 (S.D.N.Y. 2026)
By Miriam Mykho, Seton Hall University School of Law
One of the benefits of filing a bankruptcy petition is the automatic stay, which is available as of the petition filing day. 11 U.S.C. § 362(a). When the stay is in effect, creditors cannot collect on claims. If a creditor violates the stay, the debtor is able recover damages. 11 U.S.C. § 362(k)(1). In this case, ProScript Pharmacy v. Alexander (In re Alexander), the debtor (“Debtor”) filed for Chapter 7 bankruptcy; and a creditor, ProScript, sent an invoice for a claim around a week later. 677 B.R. 32 (S.D.N.Y. 2026). The Debtor’s counsel sent a letter updating ProScript of the bankruptcy case, but ProScript sent another notice of collection. In response, the Debtor filed a motion for contempt. ProScript did not appear at the hearing, and the motion was granted, setting a twenty-day period to pay the sanctions.
After ProScript failed to pay the sanctions ordered, the Debtor filed a second motion for contempt, seeking actual and punitive damages against ProScript for failure to abide by the first contempt order. ProScript paid the sanctions from the first order and responded to the second contempt motion. ProScript argued that the first order was a money judgment per Federal Rule of Civil Procedure 69 and that the Debtor had to seek a writ of execution to enforce the order, instead of merely filing a second contempt motion. Additionally, ProScript argued that the first order was defective because the bankruptcy court had neither properly analyzed the attorney fees nor made the necessary findings for punitive damages. On March 18, 2025, after holding a hearing, the bankruptcy court granted enforcement of the first contempt order and the request for attorney fees in the second contempt motion but denied the Debtor’s request for punitive damages.
On March 28, 2025, Proscript filed a notice of appeal. This appeal was stricken from the docket because it had an incorrect name, according to the clerk of the court’s local naming practice. ProScript filed an identical notice of appeal, with a corrected name, on April 6. This notice of appeal was docketed. ProScript then filed a statement of issues on April 17, 2025.
On appeal, ProScript argued that the bankruptcy court should not have granted the second contempt motion for three reasons: (1) the first contempt order was defective, and there is no basis for contempt when a party does not abide by a defective order; (2) the second contempt order was defective because the bankruptcy court did not accurately analyze the attorney fees; and (3) the second contempt order was defective because the first contempt order should have been enforced through a writ of execution.
In response, the Debtor raised five points: (1) ProScript’s appeal was untimely, (2) the district court should not consider the appeal because ProScript did not appeal the first contempt order, (3) the first contempt order was not defective, (4) the bankruptcy court correctly determined that the first order was not a money judgment, and (5) the bankruptcy court correctly found ProScript to be in contempt of the first order. After review, the district court concluded that ProScript’s appeal was timely and affirmed the bankruptcy court’s decision.
The district court first analyzed the timeliness of the appeal under Federal Rules of Bankruptcy 8002 and 8009. Rule 8002(a) requires that a notice of appeal be filed within fourteen days after a judgment. The second contempt order was issued on March 18, 2025, and the Debtor argued that the notice of appeal was untimely because it was filed on April 6. The court disagreed, holding that ProScript timely filed the appeal on March 28.
In its analysis, the district court referenced Contino v. United States, 535 F.3d 124 (2d Cir. 2008). In re Alexander, 677 B.R. at 41. In Contino, an appeal was stricken from the docket for failure to comply with local rules. Id. The district court noted that the U.S. Court of Appeals for the Second Circuit in Contino, relying on Federal Rule of Civil Procedure 5(d)(4), held that the appeal was filed on the attempted filing date because there was no evidence that the failure to comply with the local rules was willful and because if the local rule would be enforced, the petitioner would lose the right to appeal. Id. (citing Contino, 535 F.3d at 127). Stating that Contino would apply in the bankruptcy context due to Federal Rules of Bankruptcy Procedure 8011(a)(3) and 5005(a)(1), the district court held that ProScript’s appeal was timely filed on the attempted filing date of March 28 because there was no evidence that the naming error was willful and because if the local rule was enforced, ProScript would lose its right to appeal.
The district court also disagreed with the Debtor’s argument that the appeal should be dismissed for failure to timely file a statement of issues pursuant to Federal Rule of Bankruptcy Procedure 8009. Rule 8009(a) states that the statement of issues must be filed fourteen days after the notice of appeal has become effective under Rule 8002. As per the Second Circuit, an untimely filing can only be allowed if there is excusable neglect. Excusable neglect is evaluated based on “the danger of prejudice to the [non-moving party], the length of the delay and its potential impact on judicial proceedings, the reason for the delay, . . . and whether the movant acted in good faith.” Id. at 42 (quoting Pioneer Inv. Servs. Co. v. Brunswick Assocs. Ltd. P’ship, 507 U.S. 380, 394–95 (1993)). The district court followed Second Circuit precedent in prioritizing the reason for delay and whether the delay was in reasonable control of the movant. Id. (citing In re Enron Corp., 419 F.3d 115, 122 (2d Cir. 2005); In re Residential Cap., LLC., No. 12-BK-12020, 2014 WL 1363368, at *2 (Bankr. S.D.N.Y. Apr. 7, 2014)). The district court reasoned that the appeal was properly docketed on April 6 and that it was the proper docketing that made the appeal effective; therefore, the April 17 filing of the statement of issues was timely under Rule 8009. Even if the April 17 filing was not timely, the court found excusable neglect. The Debtor did not show that the six-day delay prejudiced her or delayed the appeal in any way. Furthermore, it was reasonable for ProScript to assume that it did not have to file the statement of issues until after the appeal filing error was corrected. Since the deadline for filing was not entirely clear, there was excusable neglect, and the district court decided that the appeal should not be dismissed for failure to timely file the statement.
The district court then moved to discuss the merits of the appeal. First, it analyzed whether the first contempt order was a money judgment that should have been enforced through a writ of execution. The district court found that the bankruptcy court had correctly analyzed relevant case law and decided that the first contempt order was not a money judgment and that it could be enforced through a new contempt motion. The district court pointed out that Federal Rule of Civil Procedure 69(a)(1), incorporated into bankruptcy through Federal Rule of Bankruptcy Procedure 7069, states that a “money judgment is enforced by a writ of execution, unless the court directs otherwise.” Id. at 44 (quoting Fed. R. Civ. P. 69(a)(1)). Several courts have held that sanctions for misconduct would not be ordinary money judgment and can be enforced through the bankruptcy court’s contempt power. Id. at 45 (citing, for example, Cleveland Hair Clinic, Inc. v.Puig, 106 F.3d 165, 166 (7th Cir. 1997)).
Continuing its analysis, the district court expressed that the bankruptcy court had correctly found In re Hernandez, No. 13-SC-1301, 2014 WL 1345940 (B.A.P. 9th Cir. Apr. 4, 2014), to be instructive. In In re Hernandez, the B.A.P. affirmed a bankruptcy court’s entry of an order requiring a creditor to pay attorney fees for willful violation of the automatic stay; the B.A.P. reasoned that the order awarded damages for the creditor’s inappropriate conduct and could not “be characterized as anything other than a sanction.” Id. (quoting In re Hernandez, 2014 WL 1345940, at *7). Similarly, the district court in In re Alexander reasoned that the sanctions for misconduct in this case were not money damages and could be enforced through contempt proceedings.
The district court further held that the bankruptcy court did not abuse its discretion in finding Proscript in contempt. While ProScript did eventually pay the sanctions, after the second contempt motion had been filed, it did not do so within the time limit set by the first contempt order and made no effort to comply with the order within the time limit. The bankruptcy court awarded sanctions compensating the Debtor for losses arising from noncompliance, an action in concert with the holdings of many other courts.
Furthermore, the district court rejected ProScript’s argument that the first order was defective. ProScript could not “challenge” the bankruptcy “court’s order by violating it.” Id. at 48 (quoting United States v. Cutler, 58 F.3d 825, 832 (2d Cir. 1995)). A party should obey an order until that order is modified or reversed. While a party can in some cases overturn contempt judgment by showing that the underlying order was invalid, the party must first properly challenge that order. Since ProScript neither appealed the first order nor moved for reconsideration, the district court reasoned that ProScript could not appeal the second order on the grounds that the first order was invalid.
The district court also affirmed the bankruptcy court’s finding of attorney fees after ProScript argued that the bankruptcy court did not properly scrutinize the award. A bankruptcy court may award a reasonable amount of attorney fees. Here, the bankruptcy court’s decision was comparable to other courts’ analyses in similar cases. Consequently, the bankruptcy court did not abuse its discretion in analyzing the hourly rate or the time spent on the second motion.
