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Eighth Circuit Bankruptcy Monitor

Eighth Circuit Weighs in on North Dakota Law in O&G Case

EIGHTH CIRCUIT BANKRUPTCY MONITOR

In Slawson Exploration Co., Inc. v. Nine Point Energy, LLC (In re Triangle USA Petroleum Corp.), the Eighth Circuit (Judges Shepherd, Smith, Melloy) held that under North Dakota law, an O&G promote obligation does not run with the land, was not an equitable servitude, and was not a real property interest akin to an overriding royalty.  Slawson and the Debtor’s predecessor, TPC, were O&G production companies who teamed up to lease, develop and drill land in North Dakota.  Under the terms of their agreement (the “EDA”), either party that acquired an O&G leasehold in a specified area of North Dakota was required to offer the other an undivided interest at cost in the proportion specified in the EDA: 70% for Slawson and 30% for TPC.  TPC also agreed to pay “an additional 10% of its share of the drilling, completing, and equipping costs for each well in which TPC elect[ed] to participate” – the “Promote Obligation.”

Eighth Circuit Bankruptcy Monitor: Objection to IRS Proof of Claim

Objection to IRS Proof of Claim, Filed Before Amendment to Rule 3007 Went Into Effect, Was Properly Mailed Only to IRS

In Nicolaus v. USA (In re Nicolaus), the Eighth Circuit (Judges Stras, Benton and Gras) held that a debtor’s objection to a proof of claim filed by the IRS may properly be served by mail to the IRS, rather than by service on the Attorney General and the local United States Attorney.  The Eighth Circuit’s holding is contrary to that of other courts, including the First Circuit BAP.

Eighth Circuit BAP Addresses What Is Property of the Estate When There Are Multiple Bankruptcies

Eighth Circuit Bankruptcy Monitor

In Boisaubin v. Blackwell (In re Boisaubin), the Eighth Circuit BAP (Judges Sanberg, Nail, Saladino) affirmed the Bankruptcy Court’s (Judge Rendlen) orders approving a compromise and denying motions to file documents under seal.  In so doing, the Court addressed whether an asset that was estate property in a prior case by the debtor, but which was never scheduled, becomes estate property in a later case by the same debtor once the first case is reopened and the asset abandoned. The Court answered that the asset becomes part of the second bankruptcy estate even though the asset itself was not the property of the debtor at the time the second case was filed.

Eighth Circuit Affirms Environmental Claims Against Peabody Barred By Confirmed Plan

EIGHTH CIRCUIT BANKRUPTCY MONITOR

In County of San Mateo, California v. Peabody Energy Corp. (In re Peabody Energy Corp.), the Eighth Circuit (Judges Arnold, Gruender and Shepherd) agreed that the Bankruptcy Court (Judge Schermer) did not abuse its discretion when it held that litigation against Peabody by various California municipalities was barred by the terms of Peabody’s confirmed chapter 11 plan of reorganization.  In so doing, the Court placed particular weight on the presumed intent of the plan drafters in defining exceptions from discharge – a rule of interpretation that may prove significant.

LLC Members Equitably Estopped From Claiming Ownership of LLC Property

Eighth Circuit Bankruptcy Monitor

In Richards v. Rabo Agrifinance, LLC (In re Kip and Andrea Richards Family Farm & Ranch, LLC), the Eighth Circuit BAP (Judges Schermer, Shodeen and Sandberg) affirmed the bankruptcy court’s determination that members of a debtor LLC were equitably estopped from claiming ownership of LLC property.

Court May Exercise “Related To” Jurisdiction Over Adversary Complaint By A Creditor Against a Third Party

Eighth Circuit Bankruptcy Monitor

Court May Exercise “Related To” Jurisdiction Over Adversary Complaint by a Creditor Against a Third Party; Orders Transfer of Action to State Court Although Action Originally Filed in Federal Court

In Bushman Custom Farming, LLC v. Stillmunkes (In re Stillmunkes), Bankr. N.D. Iowa, 19-01011, d/e 16, April 30, 2020, Judge Thad Collins found the Court had “related to” subject matter jurisdiction under 28 U.S.C. § 157(b)(3) to entertain a non-core adversary proceeding between a creditor and a third party. The Court elected to abstain and ordered the action transferred to an Iowa state court.

Chapter 12 Debtor May Require Turnover of Withheld Pre-Petition Taxes Despite Section 553(a)

EIGHTH CIRCUIT BANKRUPTCY MONITOR

Judge Thad Collins of Bankr. N.D. Iowa held, as a matter of first impression, that “§ 1232(a) allows family farmers who have capital gains tax debt under Chapter 12 process to require taxing entities to issue a refund of withheld income taxes to the bankruptcy estate.”

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