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Reversal shows that not all bankruptcies go to heaven

Charlotte Bankruptcy Lawyer Bryan W. Stone of Arnold & Smith, PLLC answers the question “What is a bankruptcy discharge ?”

 

Where do bankruptcies go when they are… done? Not to heaven, as one Deerfield Beach, Florida-based company found out Tuesday.

Court of Appeals Charlotte Bankruptcy Lawyer North Carolina Chapter 11 AttorneyIn a unanimous decision, the 11th Circuit Court of Appeals reversed a four-year old bankruptcy because, it said, a bankruptcy trustee provided false testimony in a deposition and lower court judges who knew about it applied the wrong standard in their decisions.

Global Energies was formed to convert waste into energy. The fledgling company was still in the research-and-development phase when the relationships between its three partners—Joseph Wortley, Richard Tarrant and James Juranitch—began to sour.

Global filed an involuntary Chapter 11 bankruptcy petition at the end of 2010. Bankruptcy attorney Chad Pugatch was appointed bankruptcy trustee in the case.  Pugatch oversaw the sale of Global’s assets to Tarrant and one of his companies, in exchange for Tarrant paying off Global’s creditor claims.

Wortley fought the bankruptcy, arguing that his partners were conspiring to seize control of the company and that Tarrant and Juranitch filed the bankruptcy petition in bad faith. According to the 11th Circuit, Wortley requested emails between Tarrant and Juranitch that proved they conspired to file the bankruptcy petition in bad faith. The emails directly contradicted their sworn deposition testimony and, the appeals court added, “Pugatch, a sworn officer of the court, actively obstructed Wortley’s efforts to obtain evidence of the plan to file for involuntary bankruptcy.”

The appeals court also observed that Pugatch failed to speak up when Tarrant testified falsely that he had no conversations with Juranitch about filing an involuntary bankruptcy petition. That was a violation of Florida Bar rules, the court wrote.

Worltey had lost at trial before United States Bankruptcy Judge Raymond Ray. His appeal was denied by United States District Judge Kathleen Williams in 2013. The 11th Circuit, however, wrote that Judge Ray applied the wrong standard, abused [his] discretion and “committed clear errors of judgment.” The court remanded the case to Ray, ordering him to vacate the order approving the sale of Global’s assets to Tarrant and his business.

The court also ordered Judge Ray to hold any hearings necessary to ensure that Tarrant and his company, Juranitch and Pugatch “do not profit from their misconduct and abuse of the bankruptcy process.” The court also ordered Judge Ray to vacate sanctions he had imposed against Wortley and to compensate him for any damages he incurred, attorney fees and costs.

Pugatch said he planned to file a motion for rehearing. He said he wasn’t sure how the undoing of a bankruptcy finalized years ago could be accomplished.

If you find yourself needing the services of a Charlotte, North Carolina bankruptcy attorney, please call the skilled lawyers at Arnold & Smith, PLLC find additional resources here. As professionals who are experienced at handling all kinds of bankruptcy matters, our attorneys will provide you with the best advice for your particular situation.

 

 

About the Author

Bryan 1Bryan Stone is a Partner with Arnold & Smith, PLLC, where he focuses his practice on all aspects of bankruptcy, including: Chapter 7, Chapter 11, Chapter 13, home loan modifications and landlord-tenant issues.

A native of Macon, Georgia, Mr. Stone attended the University of Georgia, where he earned a BBA in Banking and Finance, and Wake Forest University School of Law, where he obtained his law degree.

Following law school, Mr. Stone relocated to Charlotte, where he currently serves as Chair of “Bravo!” – a young professionals organization associated with Opera Carolina – and founded the University of Georgia Alumni Association of Charlotte.

In his spare time, Mr. Stone enjoys perfecting his barbeque skills for the annual “Q-City BBQ Championship” and playing softball in the Mecklenburg County Bar softball league.

 

 

Sources:

http://www.dailybusinessreview.com/home/id=1202667122155/11th-Circuit-Says-This-Prominent-Attorney-And-Judge-Acted-Improperly-Reverses-Bankruptcy-Sale-?mcode=1395164393862&curindex=3&slreturn=20140720093105

 

 

Image Credit:

http://upload.wikimedia.org/wikipedia/commons/8/84/US-CourtOfAppeals-11thCircuit-Seal.png

 

 

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