Articles Posted in US Court of Appeals for the Sixth Circuit

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Debtors filed a Chapter 7 bankruptcy petition. They included their interest in Franklin, Ohio real property with three mortgages. PNC held the first two. The home was “underwater.” The Trustee filed an adversary proceeding to avoid PNC’s alleged first mortgage under 11 U.S.C. 544(a)(1) and 544(a)(3) and Ohio law. The bankruptcy court stayed the proceeding pending resolution of questions of law that had been certified to the Ohio Supreme Court in another matter. The Ohio Supreme Court ultimately responded that O.R.C. 1301.401 applies to all recorded Ohio mortgages and acts to provide constructive notice to the world of a recorded mortgage that was deficiently executed under O.R.C. 5301.01. Although the parties agreed that the mortgage's acknowledgment clause was defective and did not substantially comply with section 5301.01, PNC asserted that section 1301.401 vitiates the Trustee’s power to avoid recorded mortgages based on defects in their execution as either a hypothetical bona fide purchaser under 11 U.S.C. 544(a)(3) or hypothetical judicial lien creditor under 11 U.S.C. 544(a)(1). The bankruptcy court denied a motion to dismiss. The Sixth Circuit Bankruptcy Appellate Panel affirmed, finding the Ohio Supreme Court did not address the Trustee’s avoidance powers as a hypothetical judicial lien creditor, and the Ohio Legislature did not make its amendments retroactive. View "In re Oakes" on Justia Law

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The United States charged Hall with unlawful gambling and money laundering and obtained a preliminary criminal forfeiture order for 18 parcels in Knox County. The County determined that Hall owed substantial delinquent real property taxes, giving it a first lien under Tennessee law. Under 21 U.S.C. 853(n)(2), a party asserting an interest in property that is subject to criminal forfeiture may seek a hearing on his alleged interest within 30 days. Knox County filed an untimely claim. The court amended the preliminary forfeiture order to cover three more Knox County properties. Knox County filed a timely second claim and requested an interlocutory sale and delay of forfeiture. The United States stated that accrued taxes and interest would be paid, regardless of whether the taxing authority filed a claim, but argued that Knox County would have no legal interest in accruing taxes once title passes, citing the Supremacy Clause, and objected to delaying a final forfeiture order. The Sixth Circuit vacated the forfeiture order. Knox County has a legal interest in the property (tax lien), so the district court erred in dismissing its claim for lack of standing but it is not necessarily entitled to a hearing. The court may ascertain the scope of Knox County’s interest on summary judgment but must account for that interest before entering a final forfeiture order. The court did not abuse its discretion in denying Knox County’s motion for an interlocutory sale. View "United States v. Hall" on Justia Law

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Plaintiffs are homeowners in centrally-planned neighborhoods in Thompson’s Station, Tennessee. The developers established and controlled owners’ associations for the neighborhoods but have transferred that control to third-party entities not controlled by either the developers or homeowners. While under the developers’ control, the associations each entered into agreements granting Crystal the right to provide telecommunications services to the neighborhoods for 25 years, with an option for Crystal to unilaterally renew for an additional 25 years. The Agreements make Crystal the exclusive agent for homeowners in procuring services from outside providers. Homeowners must pay the associations a monthly assessment fee, which the associations use to pay Crystal, regardless of whether the homeowner uses Crystal's service, and must pay Crystal $1,500 for the cost of constructing telecommunications infrastructure. Crystal uses service easements within the neighborhoods. Crystal had no prior experience in telecommunications-services and contracts with another provider, DirecTV, and charges homeowners a premium above the rate negotiated with DirecTV. Crystal does not provide services outside of the neighborhoods. The plaintiffs claimed that the Agreements constituted self-dealing, unjust enrichment, unconscionability, unlawful tying, and unlawful exclusivity. The Sixth Circuit reversed dismissal, in part, finding plaintiffs’ allegations plausible on their face with respect to the tying claim, but affirmed dismissal of the exclusivity claim. View "Cates v. Crystal Clear Technologies, LLC" on Justia Law

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The Herrs bought property on Crooked Lake in the Upper Peninsula of Michigan, hoping to use the lake for recreational boating and fishing. Most of Crooked Lake lies in the federally-owned Sylvania Wilderness but some remains under private ownership. Congress gave the Forest Service authority to regulate any use of Crooked Lake and nearby lakes “subject to valid existing rights.” The Forest Service promulgated regulations, prohibiting gas-powered motorboats and limiting electrically powered motorboats to no-wake speeds throughout the wilderness area. After noting “nearly a quarter century of litigation over the recreational uses of Crooked Lake,” the Sixth Circuit concluded that both regulations exceed the Forest Service’s power as applied to private property owners on the lake. Under Michigan law, lakeside property owners may use all of a lake, making the Herrs’ right to use all of the lake in reasonable ways the kind of “valid existing rights” that the Forest Service has no warrant to override. Michigan law permits motorboat use outside the Sylvania Wilderness. The Forest Service long allowed motorboat use on all of the lake after it obtained this regulatory authority and it still does with respect to one property owner. View "Herr v. United States Forest Service" on Justia Law

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After the 2008 financial crisis, many banks foreclosed on many properties used to secure the underlying loans. According to the City of Cincinnati, Wells Fargo adopted a policy of violating local and state property regulations when the cost of compliance outweighed the value that could be recouped through the resale of a foreclosed property. The city claimed the violations created a common law public nuisance that lowered property tax revenues, increased police and fire expenses, and added other administrative costs. The parties resolved claims arising from any individual code violations and associated fines attached to properties named in the complaint. The district court rejected the city’s claim as a matter of law. The Sixth Circuit affirmed. The economic-loss doctrine forecloses the claim for damages for a qualified public nuisance under Ohio law. The doctrine bars tort plaintiffs from recovering purely economic loss that “do[es] not arise from tangible physical injury” to persons or property. Absent allegations of an intentional nuisance or an inherently dangerous context, the city cannot pursue an absolute nuisance claim. The city did not identify specific nuisance properties and offered no evidence that the alleged “policy” of selective non-compliance with health and safety codes will inevitably result in a public nuisance. View "City of Cincinnati v. Deutsche Bank National Trust Co." on Justia Law

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LCS, a nondenominational Christian school in Livingston County, Michigan, sought to relocate after operating for several years in Pinckney, LCS entered into a lease agreement to operate its school on the property of Brighton Nazarene Church in Genoa Charter Township. The Township informed LCS that an amended special-use permit was required. The Church applied for a permit on LSC’s behalf. The Township denied the application, citing traffic concerns, inconsistency with the surrounding area’s single-family residential zoning, the failure of the Planning Commission’s proposed conditional approval to mitigate these problems, and the Church’s history of noncompliance with the zoning ordinance and with conditions on its prior special-use permits. The district court rejected, on summary judgment, LCS’s claim that the denial violated the Religious Land Use and Institutionalized Persons Act, 42 U.S.C. 2000cc. The Sixth Circuit affirmed. When a religious institution has an available alternative outside of a desired jurisdiction, and where the distance from the desired location to the alternative property is reasonably close, the artificial boundaries of a particular jurisdiction become less important. The record here does not indicate that traveling roughly 12 miles to Pinckney would be unduly burdensome to LCS’s students. Nor does the record demonstrate that LCS’s religious beliefs required it to locate within Genoa Township. View "Livingston Christian School v. Genoa Charter Township" on Justia Law