District court reversed a bankruptcy court decision that denied an unsecured creditor's motion to reopen a chapter 7 case to administer unadministered assets. The district court first ruled that debtor's assertion that creditor was barred from making its current claim by its failure to directly appeal the abandonment was without merit, since creditor had not been properly notified of the abandonment, as required by 11 U.S.C. § 554(a) and Bankruptcy Rule 6007. In addition, the fraudulent conveyance claim could not be deemed abandoned under § 554(c), as it had not been "scheduled" by debtor. The district court then concluded that the bankruptcy court had abused its discretion by denying the motion to reopen because trustee's failure to comply with the requirements for abandonment of the claim at issue left an asset unadministered.

Defendant lenders moved to dismiss chapter 11 trustee's complaint against them, which sought to avoid alleged preferential payments under 11 U.S.C. § 547(b) and fraudulent transfers under 11 U.S.C. § 548(a)(2). The court denied the motion after finding that, for the most part, trustee had alleged sufficient facts in support of his claims under §547, 548, and 11 U.S.C. § 550 to avoid dismissal. In so ruling, the court considered the Tenth Circuit's recent decision in Lowrey v. Mfrs. Hanover Leasing Corp. (In re Robinson Bros. Drilling, Inc.), 892 F.2d 850 (10th Cir. 1989).

Plaintiff corporation filed a state court action against bank, alleging that it had negligently issued a credit card to debtor, who was neither an officer nor a director of plaintiff, and had improperly collateralized the credit card debt using plaintiff's funds. Bank responded and counterclaimed against plaintiff for failure to pay card balances, and filed a third-party complaint against debtor. Debtor filed a chapter 7 petition, and bank removed the state court action and amended its complaint against debtor to allege non-dischargeability under 11 U.S.C. § 523(a)(2)(A). Plaintiff moved to remand the original action back to state court or, if the court would not remand, to abstain pursuant to 28 U.S.C. § 1334(c)(2). The bankruptcy court submitted its decision as a report and recommendation to the district court on the requested relief. The court first determined whether the case had been properly removed, and concluded that neither the initial state court action nor the third party action was a "core" proceeding, but that both claims sought to establish liability for debtor's pledge of plaintiff's property, and the matters in their entirety were therefore "related to" the bankruptcy and were subject to removal. The court also determined that plaintiff's claims against bank were "intertwined" with bank's claims against debtor, and, therefore, could not realistically be severed. Finally, although the court questioned applicability of § 1334(c)(2) to the remand issue, it determined that abstention was not required by that provision. The court recommended that plaintiff's motion be denied.

The sole issue on appeal was whether the two year limitations period set forth in 11 U.S.C. § 546(a)(1) begins to run from the date of the trustee's actual permanent appointment at the first meeting of creditors, or from an earlier date if the creditors' meeting is held later than the 20 to 40-day time period dictated by Bankruptcy Rule 2003(a). Based on the facts, the statutory language, and the policies behind the Bankruptcy Code, the district court concluded that the limitations period does not begin to run until the trustee is actually appointed, despite the rule requirement that the creditors' meeting be held within 40 days of the order for relief. Therefore, the trustee's adversary actions had been timely filed, and the bankruptcy court's orders were affirmed.