Fifth Circuit Finds No Clear and Convincing Evidence of Bad Faith and Undoes Bankruptcy Court Sanction Against Cadle Company

Fifth Circuit Finds No Clear and Convincing Evidence of Bad Faith and Undoes Bankruptcy Court Sanction Against Cadle Company

 The Fifth Circuit has reversed a Bankruptcy Court's decision to impose death penalty sanctions against a creditor where the lower court found that "the very temple of justice has been defiled." The Bankruptcy Court had found that the actions of an attorney who was the Cadle Company's long-time lawyer and was representing the Trustee as special counsel could be imputed to Cadle. The Fifth Circuit, on the other hand, found that the attorney was not acting as Cadle's attorney and that the Bankruptcy Court had acted without clear and convincing evidence of bad faith. No. 13-10325, The Cadle Company v. Moore (5th Cir. 1/9/14). The Fifth Circuit opinion can be found here [an enhanced version of this opinion is available to subscribers], while my prior post can be found here.

While the Bankruptcy Court was outraged at the apparent duplicity by the Cadle Company and its attorney, the Fifth Circuit was mildly concerned with the attorney's non-disclosures but did not attribute them to Cadle. While the Bankruptcy Court drafted a 52-page opinion which set forth its findings in detail, the Fifth Circuit devoted just 6 1/2 pages to its discussion of the merits. The Fifth Circuit dismissed the Bankruptcy Court's extensive findings as nothing more than imputed bad faith and suspicion.

The two opinions are a bit like the parable of the blind men and the elephant. They are both describing aspects of the same thing but they ultimately don't agree on what they are describing. Because I have already written extensively about the Bankruptcy Court's findings, I will not repeat them here. However, I will do some compare and contrast analysis later on.

The Facts from the Fifth Circuit Opinion

The Fifth Circuit's recitation of the facts is quoted in its entirety:

Cadle, an Ohio corporation, is the largest creditor of Moore’s bankruptcy estate. Prior to Moore’s filing for bankruptcy, Cadle sued Moore, Brunswick Homes, LLC (“Brunswick”), Moore’s spouse, and JHM Properties (collectively, “defendants”) in Texas state court. Under state-law theories of fraudulent conveyance, constructive trust, and reverse veil piercing, Cadle alleged that Moore had used Brunswick and the other entities to shield assets and avoid payment of debts. The law firm of Bell Nunnally & Martin LLP (“BNM”) represented Cadle in this suit.

Moore subsequently filed for bankruptcy. Cadle then removed its action to the bankruptcy court, where Cadle and Brunswick each filed proofs of claim. Cadle allowed the estate’s trustee to assert the company’s claims; the trustee was substituted as plaintiff in the adversary proceeding (“avoidance action”) and engaged Cadle’s counsel at BNM to serve as special counsel. Accordingly, Attorney Bruce Akerly (“Akerly”) of BNM filed a special employment application indicating that BNM would represent the trustee on a contingency basis and that BNM owed fiduciary duties to only the trustee, not Cadle. Yet soon thereafter, in November 2006, BNM sent Cadle a letter confirming that Cadle would pay BNM’s fees for its representation of the trustee, which fees would be reimbursed by BNM in the event of a positive outcome.

Also at this time, BNM began representing Cadle in a separate, ultimately successful action to deny Moore’s discharge (“discharge action”). See 11 U.S.C. § 727. Toward the end of the discharge action, BNM filed a motion to withdraw as special counsel to the trustee in the avoidance action. BNM’s stated reason was that Cadle had refused to pay certain expenses—namely, fees for retaining an expert forensic accountant. As the bankruptcy court later noted, BNM’s claim that Cadle had a duty to cover expenses in the avoidance action was inconsistent with both the special employment application, which stated that BNM would work only on a contingent-fee basis, and the (yet undisclosed) November 2006 letter, which obligated Cadle to pay only BNM’s fees, not expenses. At the hearing on BNM’s motion to withdraw, a BNM attorney explained that “Cadle instructed [BNM] that they didn’t want [BNM] to do anything that would benefit the trustee from a cost and expense standpoint.” The bankruptcy court denied BNM’s motion to withdraw, noting the absence of any agreement obligating Cadle to pay either BNM’s fees or litigation expenses, and expressing suspicion that Cadle cared more about success in the discharge action than in the avoidance action.

A half-year later, the trustee announced a settlement agreement in the avoidance action. Under the agreement, the defendants would collectively pay the trustee $37,500. Subsequently, Cadle, through a new attorney, objected to the settlement and offered to buy back its claims for $50,000. At a hearing on the settlement motion, a Cadle employee testified about Cadle’s $60,000 fee payments to BNM for its representing the trustee. The trustee later testified that he was “shocked” at learning about the fees and promptly requested Akerly to disclose the arrangement. Akerly never did so, and the issue was not explored further at the time.

The bankruptcy court approved the settlement, and the district court affirmed. On appeal, BNM represented the trustee, and the new, non-BNM attorneys represented Cadle. Akerly departed BNM, and in his stead, a first-year BNM associate presented oral argument on behalf of the trustee before the panel. The panel reversed the district court’s judgment and remanded, holding that the bankruptcy court erred by refusing to consider as an available option the sale of the claims to Cadle for an amount greater than the settlement offer. Mims, 608 F.3d at 266. On remand, the bankruptcy court permitted an auction, and Cadle acquired the claims for $41,500.

At the sale order hearing following the auction, the bankruptcy court’s suspicions about conflicts of interest resurfaced. Akerly, purportedly on behalf of the trustee, sought a continuance in the adversary proceeding’s trial date. The trustee had not instructed Akerly to seek a continuance, which appeared to benefit Cadle, who wanted more time to prepare for trial as the new plaintiff. The bankruptcy court approved the sale but ordered a short continuance and requested that Cadle address the apparent conflict of interest. At a hearing later that month, a Cadle employee testified that the company had continued to pay BNM’s fees for approximately one year after becoming adverse to the trustee on the settlement issue. The employee explained that, in December 2008, a Cadle manager had discovered the payments and informed BNM that they would stop, and that the last payments were made in February 2009.

Thereafter, Moore and Brunswick filed a motion to dismiss on grounds of abuse of judicial process. They alleged, in addition to the improper fee payments, that BNM might have taken a “dive” during oral arguments on the previous appeal by having the first-year associate present oral argument. After a three-day evidentiary hearing, the bankruptcy court dismissed the adversary proceeding based on its inherent power to sanction a party for abuse of judicial process. The district court affirmed, and Cadle now appeals.

Fifth Circuit Opinion, pp. 2-5.

Preliminary Issues

Having had its claims dismissed with prejudice, the Cadle Company wanted to find a way to attack Judge Jernigan's authority. It asserted that the Court lacked authority to enter a final judgment under Stern v. Marshall and that the Bankruptcy Court should have abstained. The Court had little trouble dismissing the abstention argument, finding that the Cadle Company had not made a request for abstention, much less a timely one. However, its ruling on Stern v. Marshall was curious. This case originated as a suit to pierce the corporate veil and avoid fraudulent conveyances under state law. The Trustee was able to step into the shoes of the creditor under the "strong arm" powers of 11 U.S.C. Sec. 544. The conventional wisdom is that fraudulent conveyance suits are "suits at law" which cannot be assigned to a bankruptcy court for final determination, a conclusion that should be affirmed by the Supreme Court next month.

Nevertheless, the Fifth Circuit ruled that:

Cadle contends that under Stern, the bankruptcy court lacked constitutional authority to enter final judgment because the avoidance action originated from and is based entirely upon state law and is thus wholly independent of the bankruptcy proceeding. We disagree. The bankruptcy court had authority to enter final judgment because Cadle’s state-law claims “would necessarily be resolved in the claims allowance process.” Id. at 2618. In Stern, the trustee asserted counterclaims to augment the estate apart from the bankruptcy proceeding. Here, Cadle is a creditor who has filed a proof of claim for debts owed by the debtor, and resolving the state-law claims is necessary to adjudicating its proof of claim. Such claims by creditors against debtors are the very reason the claims allowance process exists. Cf. In re Frazin, 732 F.3d at 320–24 (concluding that two of three counterclaims would necessarily be resolved in bankruptcy court’s award of attorney’s fees and were therefore within court’s constitutional authority under Stern).

Contrary to Cadle’s submission, the state-law basis of the claims is not dispositive. Here, while Cadle’s claims rest on state-law theories and were originally brought in state court, after Moore’s filing for bankruptcy, the Bankruptcy Code governed the avoidance action. See, e.g., 11 U.S.C. §§ 544 (strong-arm powers), 548 (fraudulent transfers by debtor). Accordingly, the bankruptcy court had constitutional authority to enter final judgment in this adversary proceeding.

Fifth Circuit Opinion at pp. 5-6. This opinion, while likely mistaken, can be fruitfully cited by those wishing to take a very narrow reading of Stern. The Court takes two concepts, the claims allowance process and whether a claim is governed by the Code, to find that Stern does not apply. While the first conclusion is arguably irrelevant to the issue being decided, the second is either wrong or signals a bold new direction in Stern jurisprudence. Here is why.

First, the Court is absolutely right that the Bankruptcy Court's ability to decide matters incident to the claims allowance process remains intact. However, the fact that Cadle had filed a claim was irrelevant to this issue. Cadle bought a cause of action from the estate. The claim was not lodged against Cadle. Instead, it was one brought by Cadle and then by the trustee and then by Cadle again after it purchased the claim. It was not necessary to resolve the fraudulent conveyance and veil piercing claims in order to decide Cadle's claims. As a result, the fact that Cadle filed a proof of claim is irrelevant unless the Court found that Cadle consented to the Bankruptcy Court's authority by filing a proof of claim. However, the Supreme Court expressly rejected the argument that filing a claim constituted consent to determination of unrelated causes of action in Stern v. Marshall.

Second, the reasoning of the Supreme Court in Granfinanciera and Stern had to do with the division of power between the courts of equity and law in England in 1789. The Supreme Court expressly distinguished between claims which augment the estate and those which are necessarily decided in the claims process. In doing so, it implicitly rejected the notion that bankruptcy constituted a public right because it involved a federal statutory scheme. However, in this case, the Fifth Circuit appears to have held that anytime a trustee pursues claims governed by the Bankruptcy Court that Stern does not apply. This is a huge leap and is contrary to the spirit and logic of the recent Fifth Circuit decisions invalidating consent in Stern cases.

I wish I had more time to spend on this issue, but I want to get to the meat of the decision.

Bad Attorneys Don't Make Bad Faith

Bankruptcy Courts have three main bases for awarding sanctions: 1)  Rule 9011 which punishes frivolous filings; 2)  28 U.S.C. Sec. 1927 which assesses liability for "vexatiously and unreasonably" multiplying the proceedings in any case; and 3) the Court's "inherent power" to impose sanctions for bad faith or willful abuse of the judicial process under Chambers v. NASCO, Inc., 501 U.S. 32, 55 (1991) [enhanced version]. Of these powers, the inherent power to sanction has the highest standard to meet. The trial court must find clear and convincing evidence of bad faith or willful abuse. If that threshold is met, the sanction awarded is reviewed for abuse of discretion.

The Fifth Circuit found that the Bankruptcy Court's findings were insufficient.

We hold that because the bankruptcy court failed to find by clear and convincing evidence that Cadle acted in bad faith, it erred in invoking its inherent sanction power. (citation omitted). Akerly and BNM’s potential misconduct notwithstanding, the record does not establish that Cadle deliberately abused the judicial process—either before or after it became adverse to the trustee.

Fifth Circuit Opinion, p. 9.

The Fifth Circuit took each of the Bankruptcy Court's findings and rejected it. The Court dismissed BNM's failure to disclose its relationship with Cadle in its employment application.

Yet BNM’s nondisclosure and inconsistency, while justifying scrutiny, are not alone clear and convincing evidence of Cadle’s bad faith or willful misconduct. Cadle account officer Jeanne Isler specifically testified that she had no knowledge of any separate fee agreement between BNM and the trustee. Moreover, at this stage in the proceeding, the interests of Cadle and the trustee had not yet become adverse, so Cadle’s fee payments were not yet problematic. . . . Even under Moore and Brunswick’s premise that Cadle had an affirmative duty to disclose the trustee’s attorney’s potential conflict of interest, the record bears out no clear and convincing evidence of any bad-faith violation of this duty. To the contrary, Cadle representatives candidly testified about fee payments to BNM at hearings in 2007 and 2008. In fact, during the sale order hearing, the bankruptcy court even recalled its earlier knowledge of the fee arrangement.

Fifth Circuit Opinion, p. 10.

Next the Court rejected the Bankruptcy Court's finding that BNM's attempt to withdraw as counsel for the trustee was dictated by the Cadle Company.

The bankruptcy court next took issue with BNM’s 2007 attempt to withdraw as counsel to the trustee in the avoidance action. Suggesting that a conflict between Cadle and the trustee had materialized even at this early stage, the court cited a BNM attorney’s testimony that “Cadle instructed [BNM] that they didn’t want [BNM] to do anything that would benefit the trustee from a cost and expense standpoint . . . .” The bankruptcy court noted its suspicion that Cadle, like many large creditors, cared only about the discharge action and not the trustee’s success in the avoidance action.

Again, the bankruptcy court’s mere suspicions do not add up to clear and convincing evidence of Cadle’s bad faith. Cadle’s “instructing” BNM not to incur certain litigation expenses suggests disagreement between Cadle and BNM regarding litigation strategy and expense allocation in the avoidance action, but does not constitute clear and convincing evidence of Cadle’s bad faith. At this time, Cadle and the trustee were aligned in their objective of recovering assets for the estate. In fact, Cadle continued to pay BNM’s fees in connection with motions and trial preparation; the company refused only to pay for an expert forensic accountant.

Fifth Circuit Opinion, pp. 10-11.

The Fifth Circuit also disposed of findings that Cadle had used BNM to advance its agenda at the expense of the Trustee.

The bankruptcy court further suggests that bad faith can be deduced from evidence of the benefits reaped by Cadle after it became directly adverse to the trustee. The court suggests that the company sabotaged BNM’s representation of the trustee and purposefully obtained privileged information revealing the trustee’s litigation strategy. But both allegations find insufficient support in the record. As to the first claim that Cadle influenced BNM’s representation of the trustee, the court relies only on the facts that Akerly left BNM, that the firm had no definite plans for identifying his replacement, and “a decision was made” to allow a first-year associate to present arguments. None of these facts indicates that Cadle “willful[ly]” tainted the judicial process. (citation omitted). Neither does the bankruptcy court substantiate its suggestions that Cadle purposefully obtained privileged information appearing on BNM’s bills for its work for the trustee. Finally, the bankruptcy court’s narrative is factually inconsistent. Cadle indeed continued to pay BNM’s fees after Cadle became adverse to the trustee on the settlement issue, but far from obtaining any benefit, Cadle actually lost in the bankruptcy court and then again in the district court. Cadle ultimately prevailed on the previous appeal before us, but Cadle’s payments to BNM had stopped well before the appeal was filed; no clear and convincing evidence links the victory to Cadle’s fee payments or influence.

Fifth Circuit Opinion, pp. 11-12.

Finally, the Fifth Circuit rejected the notion that BNM's conduct should be imputed to the Cadle Company.

(T)he bankruptcy court imputes BNM’s alleged misconduct to Cadle. The court’s theory is that because the company is a “sophisticated party that regularly hires lawyers to monetize assets,” Cadle was accountable for “its” lawyers, who represented the trustee. Thus, the nondisclosures and conflicts of interest are “attributable” not only to BNM, but also to Cadle.

The bankruptcy court’s approach controverts well-established rules of agency law. An agent’s acts and mental states are imputed to his principal when the agent acts on behalf of the principal.(citation omitted). Here, at all relevant times in the avoidance action, BNM was the agent of the trustee, not of Cadle. In both BNM’s employment application and its November 2006 letter to Cadle, the law firm explained to Cadle that the trustee was its sole client in the avoidance action.

No clear and convincing evidence shows that Cadle had somehow appropriated BNM as its own agent. BNM’s attempt to withdraw from representing the trustee in the avoidance action, in fact, manifested the tension between its fiduciary duty to the trustee and its reliance on Cadle’s payment of litigation expenses. And the fact that BNM received fees from Cadle, unbeknownst to the trustee, did not destroy this agency relationship and transform BNM into the agent of Cadle. Rather, under agency principles, an agent must account to his principal for any gains beyond the agent’s agreed-upon compensation. Thus, BNM should have relinquished any fees received from Cadle, but the agency relationship between BNM and the trustee—established when BNM became the trustee’s special counsel—remained intact. Cf. 11 U.S.C. § 328(c) (enabling court to require disgorgement of fees arising from conflict of interest).

After Cadle and the trustee became adverse on the settlement issue, there is even less basis for construing BNM as Cadle’s agent. BNM continued to represent the trustee in directly opposing Cadle and was successful in these efforts until our decision on the last appeal. Thus, because BNM was not acting as Cadle’s agent before or after the settlement dispute arose, we cannot impute the firm’s acts or mental states to Cadle.

Fifth Circuit Opinion, pp. 12-13.

Having soundly rejected the Bankruptcy Court's findings, the Fifth Circuit nevertheless expressed its sympathy, writing:

We are not unsympathetic to the bankruptcy court’s concerns about the “unpleasant odor” of this adversary proceeding. The record suggests that BNM made several miscommunications about fee arrangements. And after Cadle became adverse to the trustee, it should have recognized immediately the conflict of interest and ceased all fee payments to BNM. Cadle’s management of the avoidance action was inept, at best. But even at its worst, the evidence is not enough to sustain an inherent power dismissal. This appeal turns on whether clear and convincing evidence demonstrates that Cadle, not the BNM attorneys, willfully abused the judicial process. Neither imputed bad faith nor suspicion alone justifies the invocation of the inherent power. In sum, all of the bankruptcy court’s theories fall short of the stringent standard of clear and convincing evidence of bad faith.

Fifth Circuit Opinion, p. 14.

What Does It Mean?

This opinion, if followed, will give great comfort to respondents caught in the grasp of the Court's inherent sanctioning power. Rather than giving deference to the Bankruptcy Court's fact finding, the Fifth Circuit was either dismissive of or outright hostile to the Bankruptcy Court's findings. The activist nature of the Fifth Circuit's opinion can be shown in two ways. First is to compare this ruling to another inherent power to sanction ruling from the Fifth Circuit which involved not a creditor's lawyer but a debtor's lawyer. The second is to look at how the Fifth Circuit demolished the Bankruptcy Court's factual findings without ever finding them clearly erroneous.

In Sommers v. Barry (In re Cochener), No. 08-20048 (5th Cir. 2008)(unpublished) [enhanced version], which can be found here, the Fifth Circuit considered sanctions awarded against a debtor's lawyer who 1) argued that dismissal of a chapter 7 case was in the best interest of creditors; 2) decided not to attend a first meeting of creditors; 3) instructed the debtor not to produce documents to the trustee; and 4) misrepresented the look-back period for fraudulent transfers in a letter to the trustee. The Bankruptcy Court awarded sanctions under its inherent authority years after the fact while the District Court reversed.

In reinstating the Bankruptcy Court award, the Fifth Circuit concluded that affirmance was required so long as it could "ascertain plausible record evidence to support the bankruptcy court's findings that Barry acted in bad faith" and "(b)ecause the bankruptcy court's findings of bad faith conduct are not clearly erroneous, its determination of Barry's liability for sanctions under Section 105 was legally appropriate."    Cochener, at 2, 3. In contrast, the words "clearly erroneous" do not appear anywhere in the The Cadle Company v. Moore. Rather than looking to see whether there was "plausible record evidence," the Court went through a two-step process, looking first to see whether there was clear and convincing evidence of bad faith or willful abuse and only then applying an abuse of discretion standard. It may be unfair to compare Cochener and Moore because Cochener is an unpublished per curiam opinion. However, there is more than a little reason to conclude that the Court applied a deferential standard of review when a debtor's lawyer was on the receiving end of sanctions and a heightened standard of review when the case involved a creditor.

 It is also telling (at least to me) that the Fifth Circuit appears to have gone out of its way to disregard the Bankruptcy Court's factual findings. Here are a few examples:

The Fifth Circuit said:  "Cadle account officer Jeanne Isler specifically testified that she had no knowledge of any separate fee agreement between BNM and the trustee." Fifth Circuit Opinion, p. 10.

On the other hand, the Bankruptcy Court found:

Jeanne Isler confirmed in testimony on September 27, 2011, that she recalled seeing this letter when it was sent to Creditor-Cadle and, indeed, she read it, and Creditor-Cadle agreed to pay BNM’s fees incurred in representing the Chapter 7 Trustee in the Veil-Piercing Action.


But Jeanne Isler of the Creditor-Cadle testified that there, in fact, was no special agreement that the Creditor-Cadle would pay expenses for the estate in connection with the Veil-Piercing Action, but she testified that the Creditor-Cadle also never refused to pay expenses generally—it just refused to pay a forensic accountant in connection with the Veil-Piercing Action.

Bankruptcy Court Opinion, pp. 16-17 and 24. So it is accurate that Ms. Isler testified that she didn't know about any separate arrangement to pay the law firm. However, she also testified that she had seen the letter which contained the agreement. Rather than supporting Cadle's position, this testimony seems to show the creditor dissembling which would support a finding of bad faith.

 The Fifth Circuit wrote:

Even under Moore and Brunswick’s premise that Cadle had an affirmative duty to disclose the trustee’s attorney’s potential conflict of interest, the record bears out no clear and convincing evidence of any bad-faith violation of this duty. To the contrary, Cadle representatives candidly testified about fee payments to BNM at hearings in 2007 and 2008. In fact, during the sale order hearing, the bankruptcy court even recalled its earlier knowledge of the fee arrangement.

Fifth Circuit Opinion, p. 10. First, I question the statement that Cadle's representatives testified candidly about the arrangements. According to the Bankruptcy Court's findings:

Specifically, at the April 15, 2008 hearing on the Settlement Motion, the Creditor-Cadle’s representative, Jeanne Isler, testified that there was actually no written agreement with the Chapter 7 Trustee for the Creditor-Cadle to pay the hard costs of prosecuting the claims in the Veil-Piercing Action, but that the Creditor-Cadle had paid bills, which Attorney BA then characterized in questioning as “some bills,” totaling $50,000 to $60,000 towards the litigation. Jeanne Isler (and Attorney BA) did not clearly indicate at the April 15, 2008 hearing that Attorney BA and BNM were receiving fee payments from the Creditor-Cadle for the representation of the Chapter 7 Trustee. And, certainly, there was no mention of the November 6, 2006 letter—even in the context of specific questioning about what had Creditor-Cadle agreed to.

Bankruptcy Court Opinion, p. 26. Thus, the Bankruptcy Court expressly found that Cadle had not testified candidly about the arrangements, a finding seemingly dismissed by the appellate court. Obviously, the Bankruptcy Court knew some aspects about the secret arrangement between Cadle and BNM because that is what prompted the motion to withdraw. What is critical here is that the Bankruptcy Court did not know the complete facts. It is almost as though the Court of Appeals is faulting the Bankruptcy Judge for failing to dig deeper to unearth the rest of the story.

The Fifth Circuit also discounted the Bankruptcy Court's finding that Cadle had acted in bad faith in causing BNM to attempt to withdraw from representing the Trustee. The court wrote:

Again, the bankruptcy court’s mere suspicions do not add up to clear and convincing evidence of Cadle’s bad faith. Cadle’s “instructing” BNM not to incur certain litigation expenses suggests disagreement between Cadle and BNM regarding litigation strategy and expense allocation in the avoidance action, but does not constitute clear and convincing evidence of Cadle’s bad faith.

Fifth Circuit Opinion p. 11. This seems self-serving to me. Cadle had an undisclosed agreement with its attorneys who were representing the trustee. Cadle breached that agreement. As a result, the trustee's lawyers attempted to withdraw. While the court characterized this as a "disagreement between Cadle and BNM regarding litigation strategy," the larger question remains:  why was Cadle directing the litigation strategy pursued by the Trustee's lawyers?   The very point relied upon by the Fifth Circuit seems to support the Bankruptcy Court's conclusion rather than undermine it.

Finally, the Fifth Circuit discounted the finding that BNM had acted as Cadle's agent due to the fact that BNM's engagement agreement with the Trustee said that the Trustee was BNM's sole client in the avoidance action. The ultimate question in the case is whether BNM was serving Cadle at the expense of the Trustee. As a result, a statement in an engagement agreement standing alone should not have resolved the issue. Further, it was undisputed that BNM had represented Cadle in the bankruptcy case before, during and after its representation of the Trustee. Most importantly, while Cadle and the Trustee were adverse, BNM was sending Cadle its unredacted invoices for work on behalf of the Trustee and also billed Cadle for a lengthy conversation about how Cadle should react to the Trustee. See Bankruptcy Court opinion, p. 41. As a result, the factual finding that BNM was Cadle's agent should have been given more deference.

Final Thoughts

This case is probably a one-off decision that will probably be limited to its facts. The Fifth Circuit obviously felt that the Bankruptcy Court went too far in punishing Cadle for its lawyer's actions. While they had to reach to get there (in my opinion), I don't think this signals a trend in appellate hostility toward Bankruptcy Court fact finding. I also don't think the opinion shows any favoritism towards the Cadle Company since the Fifth Circuit has demonstrated that it is willing to rule against Cadle on a regular basis. Nevertheless, I do think the Court dropped the ball on this one and owes Judge Jernigan an apology.

 Read more at A Texas Bankruptcy Lawyer's Blog

For more information about LexisNexis products and solutions, please connect with us through our corporate site.