Duff v. Central Sleep Diagnostics, LLC

Dist. Ct. did not err in denying creditor-law firm’s objection to distribution of assets of receivership, even though creditor argued that its lien on estate property (i.e., settlement proceeds of medical-malpractice claim) that arose out of its claim to legal fees owed to it by debtors entitled it to be paid in full directly from settlement proceeds, rather than sharing same with other creditors. Record showed that Dist. Ct. had previously entered stay order that prevented all creditors from proceeding against debtors, and that although creditor had received limited lifting of said order in order to obtain judgment against debtors based on amount of fees owed to it, creditor obtained lien on settlement proceeds in violation of said stay order. As such, Dist. Ct. could properly ignore instant lien and make pro rata distribution of receivership assets. Ct. also imposed Rule 38 sanctions against creditor for filing frivolous appeal.