New Cases - Week of August 23, 2004

August 27, 2004
Case	Court	Holding

In re IT Group, Inc. (DBN Subscription Required)	Bankr. DE	There is no heightened pleading requirement in preference actions (disagreeing with In re Valley Media, Inc., 288 B.R. 189 (Bankr. De. 2003))
In re CellNet Data Systems, Inc. (DBN Subscription Required)	Bankr. DE	When a bankruptcy court orders assumption of an executory contract, it necessarily finds that no uncured defaults exist. The nonbankrupt counterparty bears the burden of bring any uncured defaults to the Court's attention prior to assumption. Failure to do so is res judicata as to later claims for such defaults.
In re Precept Business Services, Inc. (DBN Subscription Required)	Bankr. N.D. TX	A defendant/creditor's failure to object to and/or appeal another creditor's assignment to a bankruptcy trustee of the creditor's claim against the defendant as part of a settlement bars the defendant creditor from challenging the assignment. Although an order for relief extends the limitations period for claims owned by a debtor, it does not do so for claims assigned to a debtor by a third party. However, fraudulent concealment rules may extend the period. The Court need not determine the applicability of the in pari delicto defense (and whether it applies against a trustee) unless it first finds that facts exist that warrant application of the defense. The law firm/defendant sued by the bankruptcy trustee for breach of fiduciary duty, malpractice, civil conspiracy, negligent misrepresentation and aiding and abetting fraud was not entitled to summary judgment in its favor on any of those claims.

August 26, 2004
Case	Court	Holding

In re Garcia (DBN Subscription Required)	9th Cir. BAP	Under the doctrine of merger, all defenses that a debtor could have raised to a nondischargeability claim were barred upon entry of a default judgment, and the creditor was not required to refile a new dischargeability action when the debtor filed a second bankruptcy.
In re Croston (DBN Subscription Required)	9th Cir. BAP	§ 706(a)'s anti-waiver language precludes barring debtors from exercising their one-time right to convert for reasons other than, as stated in § 706, a prior disqualifying conversion or ineligibility for relief under the particular chapter. Doubts about success in the converted case should be resolved post-conversion. The court can redress dishonest exploitation of the right to convert through its statutory powers to convert the case back to chapter 7 and to award chapter 7 administrative expenses that must be paid under a plan.

August 25, 2004
Case	Court	Holding

In re Borden Chemicals and Plastics Operating Limited (DBN Subscription Required)	Bankr. DE	Where most of the documents and witnesses pertinent to a debtor's objection to a State tax claim were located in or near Louisiana, and the claim arose under State law, the bankruptcy court transferred venue for the claim objection proceeding to Louisiana.
In re U.S. Wood Products, Inc. (DBN Subscription Required)	Bankr. DE	Where an interim trustee is appointed within two years after the order for relief, and the interim trustee files an avoidance action within one year after his interim apointment, but more than one year after his permanent appointment, the action is timely for limitations purposes.
In re WW Warehouse, Inc. (DBN Subscription Required)	Bankr. DE	Claims arising from gift certificates sold prepetition by a retail merchant debtor are entitled to priority as "deposits" under 11 USC 507(a)(6).
In re Mushroom Transportation Company, Inc. (DBN Subscription Required)	3rd Cir.	In a cause of action for embezzlement of estate funds by the attorney for a debtor in possession, the Court should apply the local State statute of limitations. Where a debtor in possession's attorney uses his fiduciary relationship to cause the debtor to relax its vigilance over the attorney's use of estate assets, there is a fact issue about when the debtor should have reasonably discovered defalcation by the attorney.

August 24, 2004
Case	Court	Holding

In re Andreyev
(DBN Subscription Required)

9th Cir. BAP

The bankruptcy court erred in approving a settlement that the debtor had neither agreed to nor performed.

Settlement of a nondischarability action represents a reaffirmation agreement which cannot be approved absent an afirmative finding by the Court that the settlement is in the best interests of the debtor.