Forum Shopping

The following is a summary of a Minnesota bankruptcy case or a case relevant to Minnesota bankruptcy law.

Minnesota Bankruptcy Case:

Stabler v. Beyers (In re Stabler), 418 B.R. 764 (B.A.P. 8th Cir. (So. Dak.) 11/30/09) (Venters, J.).

Case Summary:

Abstention is Proper Where Party is Forum-Shopping

The Eighth Circuit BAP affirms the South Dakota bankruptcy court’s dismissal of debtors’ adversary proceeding against a lender based on collateral estoppel and permissive abstention, where the debtors had first sued the lender in state court. The debtors had pre-petition, partially-secured debt with the lender and, after their discharge, rewrote their existing loan and entered into other loans with the lender. When they defaulted and the lender attempted to collect, the debtors commenced an action in state court alleging that the debt had been discharged in bankruptcy and that the lender had committed fraud by leading the debtors to believe that the debts had not been discharged. Nineteen months later, on the eve of the lender’s motion for summary judgment in state court (subsequently granted in part), the debtors asked the bankruptcy court to enjoin the lenders from proceeding further. The bankruptcy court granted the lender’s motion to dismiss. On appeal, the BAP affirms, finding that the court had the discretion to abstain. It noted the twelve factors a court should consider and, in this case, focused on the fact that the debtors appeared to have been forum shopping. They began the litigation in state court, allowed it to go on there for 19 months, and only came to bankruptcy court when it appeared that the state court would rule against them.

Credit: The preceding was a summary of a case relevant to Minnesota bankruptcy law. The case summary was prepared by the U.S. Bankruptcy Court through Judge Robert J. Kressel & attorney Faye Knowles.