On appeal, the Fourth Circuit Court of Appeals (J. Hanes, Heytens, and Benjamin) affirmed the rulings of the Bankruptcy Court and the District Court for the Middle District of North Carolina sustaining the Chapter 7 Trustee’s objection to the Debtor’s claimed exemptions. The Debtor owed a tax debt to the Internal Revenue Service (“IRS”) and the Fourth Circuit panel considered the lower courts’ ruling that the Debtor’s interest in entireties property was not “exempt from process under applicable bankruptcy law.” 11 U.S.C. § 522(b)(3)(B). The Fourth Circuit utilized the same standard of review as the District Court, i.e. it reviewed the Bankruptcy Court’s legal conclusions de novo and its findings of fact for clear error. 
     Writing for the majority, District Judge Elizabeth Hanes (sitting by designation) affirmed the lower courts’ ruling that, while North Carolina law exempts entireties property from the claims of non-joint creditors, such property is not exempt from federal law and specifically the U.S. Tax Code. She also seconded the lower courts’ finding under United States v. Craft, 535 U.S. 274 (2002) that, “because a federal lien can attach to one spouse’s interest in entireties property, even when the tax debt is not jointly owed, the property is not ‘exempt from process’ under federal nonbankruptcy law if the IRS has the right to obtain such a lien.”
     Judge Hanes specifically refuted the Debtor’s two primary arguments. Citing to the Fourth Circuit’s decision in Sumy v. Schlossberg, 777 F.2d 921, 928 n.1 (4th Cir. 1985), Judge Hanes rejected the Debtor’s argument that the IRS must obtain a perfected tax lien on the Debtor’s real property in order to find the Debtor’s interest was not exempt from process under § 522(b)(3)(B), noting that “the absence of a judgment or lien has no bearing on the hypothetical issue of whether the debtor’s interest would be exempt from process[.]” Judge Hanes was similarly unpersuaded by the Debtor’s second argument, that Craft requires the IRS to perfect a lien against the Debtor’s property before he filed for bankruptcy. Judge Hanes found that “[n]othing in Craft limits its holdings to instances where the IRS has perfected a tax lien against the property,” and “to rule otherwise would create perverse incentives by allowing a debtor to shield his entireties property from federal tax obligations as long as the debtor files for bankruptcy before the IRS issues a demand for the taxes or a Notice of Federal Tax Lien.” For those reasons, Judge Hanes affirmed the lower courts, holding “that property owned as a tenancy by the entirety may not be exempted from an individual debtor’s bankruptcy estate under 11 U.S.C. § 522(b)(3)(B) to the extent of the debtor’s tax debt to the IRS.”
 

     Memorandum Opinion and Order Granting in Part and Denying in Part the Defendant’s Motion for Partial Summary Judgment and Denying the Plaintiff’s Motion for Partial Summary Judgment. The Court considered cross-motions for summary judgment on three claims: breach of contract, breach of the implied covenant of good faith and fair dealing, and unfair or deceptive acts or practices. All three claims in this matter arose from the Defendant’s alleged conduct as required under the Management Service Agreement (the “MSA”) between the two parties.
     In addressing the breach of contract claim, the Court first considered the scope of duties and performance standard under the MSA. Based on the language of the MSA, the Court found that the Defendant must perform the responsibilities listed in Section 3 of the MSA in a manner “consistent with the standards of the healthcare industry for an independent management company contracting on an arm’s length basis to provide comprehensive management services….” Despite being defined within the MSA, the Court determined that, due to its ambiguity and reference to technical benchmarks, the meaning of the performance standard required further factual development at trial.
     Next, the Court addressed the Defendant’s assertion that Randolph Health waived the Defendant’s obligations. The Court found that, because the Randolph CEOs and COOs were the Defendant’s employees and subagents under the MSA, their acts or communications, standing alone, failed to satisfy the requisite intent by Randolph Health to waive the Defendant’s duties. The Court was unable to determine whether Randolph Health, through its Board of Directors, knowingly and intentionally waived potential breaches or the Defendant’s ongoing obligations when it continued to pay the Defendant’s management fees and other expenses without sending a notice of default.
     The Defendant also sought judgment as a matter of law on nine of twelve specifically alleged breaches of the MSA. After review of the evidence, the Court found in favor of the Defendant for two of the nine alleged breaches – pertaining to Sections 3(a) and (e) – but was unable to determine the remaining seven alleged breaches – pertaining to Sections 3(b), (c), (g), (h), (i), (k), (n) – as the Court found that the Plaintiff produced sufficient evidence to create genuine issues of material fact.
     The Court next evaluated the alleged breach of the implied covenant of good faith and fair dealing.  Depending on the ultimate determination of disputed material facts at trial, the Court determined it was possible to find that the Defendant’s conduct breached the implied covenant by wrongfully recruiting vulnerable physicians it knew Randolph Health expressed interest in, thereby undercutting Randolph Health’s attempts to implement the recruitment plan and obtain benefits owed under the MSA. However, at summary judgment, the Court was unable to make credibility determinations regarding the Defendant’s intentions in recruiting physicians and denied both summary judgment motions with respect to the breach of the implied covenant claim.
     The Court then assessed whether the Defendant violated the North Carolina Unfair and Deceptive Act or Practice statute (the “UDP”). Although North Carolina permits a plaintiff to assert a breach of contract claim and a UDP claim, the “plaintiff must allege substantial aggravating circumstances.” In re Charlotte Com. Grp., Inc., No. 01-52684C-11W, 2003 WL 1790882, at *3 (M.D.N.C. Mar. 13, 2003). The Court found that, despite the Plaintiff’s claims that the Defendant was misleading or secretive, its conduct was too bound up with its rights and duties under the MSA and was not attended by sufficiently egregious or aggravating circumstances to warrant a finding that such conduct was unfair or deceptive under the UDP.
     Although not raised by the Defendant, the Court also observed that the Plaintiff’s claim was likely barred by the learned profession exemption. The UDP prohibits “[u]nfair methods of competition in or affecting commerce, and unfair or deceptive acts or practices in or affecting commerce.” N.C. Gen. Stat.§ 75-1.1(a). Although “commerce” under the UDP “includes all business activities,” it “does not include professional services rendered by a member of a learned profession.” N.C. Gen. Stat.§ 75-1.1(b). The Court first found that, as an operating hospital, the Defendant qualified as a “medical professional” for purposes of the learned profession exemption. The Court further found that the Defendant’s physician recruitment efforts and its allegedly anticompetitive conduct related to the provision of medical services in Randolph County and fell squarely within the learned profession exemption. As such, the Court granted the Defendant’s motion for summary judgment as to the Plaintiff’s UDP claim.

Order Granting Trustee's Motion to Modify Plan to Require Turnover of Funds and to Increase Liquidation Requirement. Where Debtor's plan did not contemplate a sale of real property and provided that the real property would remain property of the estate, and Debtor's interest in the real property represented a substantial portion of the liquidation requirement in the Plan, trustee's motion to modify the plan after Debtor's post-confirmation sale of the real property at an appreciated value in order  to increase the liquidation requirement and require turnover of proceeds over and above Debtor's statutory exemption was proper under 11 U.S.C. § 1329(b)(1).

     Order Overruling Trustee's Objection to Exemption. The Chapter 7 Trustee objected to the Debtor’s claimed exemption in her interest in her former husband’s 401(k) retirement account. In concluding her prepetition divorce, the state court had entered a consent equitable distribution order (the “Consent Order”) that provided for the Debtor to receive a distributive award of $22,677.31 to be paid from her ex-spouse’s 401(k) account through a Qualified Domestic Relations Order (QDRO). The Debtor asserted that the interest was fully exempt under N.C. Gen. Stat. § 1C-1601(a)(9) and 11 U.S.C. § 522(b)(3). The Trustee, however, argued that the Debtor’s exemption claim failed for several reasons: (1) the Debtor did not own the distributive award or the retirement plan that was to be the source of the payment; (2) any potential ownership interest that the state court may have awarded to the Debtor would be ineffective without a QDRO; and (3) even if the Debtor had an effective ownership interest in the $22,677.31, the funds were nevertheless property of the estate and could not be exempted under 11 U.S.C. § 522(b)(3) or N.C. Gen. Stat. § 1C-1601(a)(9) because they were not “retirement funds.” See Clark v. Rameker, 573 U.S. 122, 127 (2014).
      The Court first found that the Consent Order vested the Debtor’s interest in the sum of $22,677.31 located in the ex-spouse’s 401(k) account. Generally, upon separation, each spouse is limited to a claim to an equitable distribution of marital and divisible property. A final order resolving an equitable distribution proceeding, however, fixes the parties’ rights and transforms the more general right to equitable distribution into concrete interests in specific property. Here, the Court found that the language and context of the Consent Order, which closely connected the distributive award to the division and distribution of the parties’ retirement accounts, established the Debtor’s specific, vested property interest in the amount of $22,677.31 in the ex-spouse’s 401(k) account.
      The Court next determined that the absence of a QDRO did not impact the Debtor’s $22,677.31 interest in the 401(k) account because that interest already vested in the Consent Order. North Carolina courts and federal courts applying North Carolina law have recognized that a QDRO is unnecessary to establish a spouse’s right to retirement benefits where the underlying equitable distribution order or divorce decree has already done so. Those courts adhere to the general rule in modern practice that a DRO or QDRO is not a substantive order at all but is instead a procedural device for implementing the terms of the underlying equitable distribution order. Here, the parties to the divorce envisioned a second order – a QDRO – that, if approved by the plan administrator as such, would implement the Debtor’s rights established and recognized under the Consent Order. As such, the Court found the absence of an executed QDRO did not impact the Debtor’s $22,677.31 interest in the 401(k) retirement account.
      The Court then considered whether Debtor’s interest was part of her bankruptcy estate and, if so, whether it was exempt under either or both North Carolina law and the Bankruptcy Code. The Court observed that the sum awarded to the Debtor from her ex-spouse’s 401(k) plan had not yet been distributed and thus remained held in trust by an ERISA plan. As such, the Debtor’s interest in the undistributed funds of an ERISA-qualified plan was not property of her bankruptcy estate. See Patterson v. Shumate, 504 U.S. 753 (1992); Nelson v. Ramette (In re Nelson), 322 F.3d 541 (8th Cir. 2003). Because the Debtor’s interest was excluded from the bankruptcy estate altogether, the Court did not need to consider whether it was exemptible from the estate under federal or state law. For those reasons, the Court overruled the Trustee’s objection, finding that the Debtor had an ownership interest in the sum of $22,677.31 within her ex-spouse’s 401(k) retirement account that was excluded from her bankruptcy estate and not subject to the Court’s jurisdiction.