Justia U.S. 9th Circuit Court of Appeals Opinion Summaries

David Freeman and his cohort of investors, including William Del Biaggio, III, purchased the Nashville Predators, a National Hockey League (NHL) team in Nashville, Tennessee. As a result of the sale, the Predators became wholly owned and operated by Nashville Hockey Club Limited Partnership, LLC, which is in turn wholly owned by Predators Holdings, LLC (Holdings). Several months after the sale, Freeman learned that Del Biaggio never had the funds to support his guarantees and that the $25 million Del Biaggio already invested was in fact money he had embezzled from his clients. Del Biaggio filed for Chapter 11 bankruptcy which gave rise to the current proceeding. Freeman filed a general unsecured claim against Del Biaggio’s bankruptcy estate seeking damages of an undetermined amount arising from his fraud in the Holdings transaction. In response, the Liquidating Trust Committee of the Del Biaggio Liquidating Trust, the entity charged with prosecuting claims objections in Del Biaggio’s bankruptcy, filed a counterclaim against Freeman and sought summary judgment. The bankruptcy court granted the Committee’s motion for summary judgment, finding Freeman’s claim was subject to mandatory subordination under 11 U.S.C. 510(b). The court concluded that Freeman's claim is a damages claim, and the district court did not err in applying section 510(b) to his claim against Del Biaggio because his claim is one "arising from the purchase or sale" of Holdings. Furthermore, Freeman's claim is not limited to corporate debtors. The court rejected Freeman's remaining claims and affirmed the judgment. View "Liquidating Trust Comm. v. Freeman" on Justia Law

Debtor is the mother of a minor who was held in juvenile detention in Orange County for more than a year. At issue is whether a mother’s debt to Orange County arising from her son’s involuntary juvenile detention is a “domestic support obligation” (DSO) and thus excepted from discharge in bankruptcy. The court concluded that it is not. Debtor's debt is not in the nature of domestic support simply because it represents in part the costs of her son’s basic needs. Where the principal purpose of the County’s custody over debtor’s son is public safety, not the son’s domestic well-being or welfare, the debt does not qualify as a DSO. Accordingly, the court reversed the bankruptcy appellate panel's decision. View "Rivera v. Orange Cnty. Prob. Dept." on Justia Law

Creditor appealed the Bankruptcy Appellate Panel's (BAP) decision determining that the exception to discharge found in 11 U.S.C. 727(a)(2) did not apply to debtor. The court held that section 727(a)(2), which prevents the bankruptcy court from granting a debtor a discharge if the debtor improperly transferred property “within one year before the date of the filing of the petition” in bankruptcy, is not subject to equitable tolling. In this case, because the transfer of the Lake Harbor property took place more than one year before debtor filed his Chapter 7 bankruptcy petition and section 727(a)(2) is not subject to equitable tolling, debtor was not precluded from discharge of his debts under section 727(a)(2). Accordingly, the court concluded that the bankruptcy court properly granted summary judgment to debtor on this issue. View "DeNoce v. Neff" on Justia Law

Castaic, debtors, challenged the district court's dismissal of this bankruptcy appeal as moot under 11 U.S.C. 363(m). During the pendency of the appeal, the bankruptcy court dismissed the underlying bankruptcy cases as well. Castaic did not appeal those dismissals, and after 14 days, they became final. Therefore, the court concluded that there is no longer any case or controversy, and the court has no power to grant Castaic any effective relief. The court dismissed the appeal as moot under Article III. View "In the matter of Castaic Partners II, LLC" on Justia Law

Marilyn Scheer, an attorney with a suspended California law license, contends that the district court erred when it held that her debt to a former client was nondischargeable under 11 U.S.C. 523(a)(7). In this case, there were no costs or fees assessed for disciplinary reasons. Rather, the debt at issue was effectively the amount that Scheer improperly received from a client, but did not pay back. At its core, the $5775 at issue is not a fine or penalty, but compensation for actual loss. The court concluded that the the debt to her client does not fall within the section 523(a)(7) nondischargeability exception. Accordingly, the court reversed and remanded. View "Scheer v. State Bar of CA" on Justia Law

Sunnyslope, as the debtor of a chapter 11 bankruptcy plan, exercised the cram down option pursuant to section 506(a) of the Bankruptcy Code and elected to retain the property at issue. Sunnyslope argued that the value of First Southern’s secured interest should be calculated with the affordable housing restrictions remaining in place. The bankruptcy court and the district court both agreed. First Southern appeals. The court denied Sunnyslope’s motion to dismiss the appeals as equitably moot. The court concluded that valuing First Southern’s secured interest as if the affordable housing restrictions related to subordinated positions still applied was not appropriate under section 506(a). All of the restrictive covenants and other provisions that Sunnyslope seeks to invoke to limit the project to affordable housing and to the reduced rental income that would be collected as a result are derived from positions that were junior and expressly subordinated to First Southern's interest. As a result, the plan of reorganization confirmed by the bankruptcy court and affirmed by the district court must be set aside, because it was based on an improper valuation of First Southern's interest. Accordingly, the court reversed and remanded for further proceedings. View "First Southern Nat'l Bank v. Sunnyslope Housing" on Justia Law

Debtor appealed the bankruptcy appellate panel's (BAP) denial of his petition for a writ of mandamus. The court overruled In re Salter and held that the BAP is not a court established by Act of Congress under subsection (a) of the All Writs Act, 28 U.S.C. 1651(a), so it does not have jurisdiction to entertain a mandamus petition. Accordingly, the court vacated the decision of the BAP and remanded with instructions to dismiss the petition for lack of jurisdiction. View "Ozenne v. Chase Manhattan Bank" on Justia Law

Lakeridge has one member, MBP. MBP is managed by a board of five members, one of whom is Kathie Bartlett. Bartlett shares a close business and personal relationship with Dr. Robert Rabkin. Lakeridge filed for bankruptcy and US Bank held a fully secured claim worth about $10 million and MBP held an unsecured claim worth $2.76 million. After MBP's board decided to sell its unsecured claim, Rabkin purchased the claim for $5000. US Bank subsequently moved to designate Rabkin's claim and disallow it for plan voting purposes. The bankruptcy court held Rabkin was not a non-statutory insider and that Rabkin did not purchase MBP's claim in bad faith. However, the bankruptcy court designated Rabkin’s claim and disallowed it for plan voting, because it determined Rabkin had become a statutory insider by acquiring a claim from MBP. Lakeridge and Rabkin both appealed, and US Bank cross-appealed. The BAP reversed the finding that Rabkin had become a statutory insider as a matter of law by acquiring MBP’s claim and affirmed the findings that Rabkin was not a non-statutory insider and that the claim assignment was not made in bad faith. The BAP held that insider status cannot be assigned and must be determined for each individual “on a case-by-case basis, after the consideration of various factors.” Finally, the BAP held Rabkin could vote to accept the Lakeridge plan under 11 U.S.C. 1129(a)(10), because he was an impaired creditor who was not an insider. The court affirmed the BAP's decision. View "US Bank v. The Village at Lakeridge, LLC" on Justia Law

Debtors filed a joint voluntary individual chapter 11 petition and debtors' operative plan of reorganization placed their largest unsecured creditor, California Bank, into its own class of unsecured creditors and proposed to pay it $5,000 on its claim of nearly $2,000,000. California Bank objected because its claim was thus “impaired under the plan.” The court overruled In re Friedman and joined its sister circuits in adopting the "narrow view", holding that the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA), 11 U.S.C. 541(a)(, (a)(1), 1115(a), 1129(b)(2)(B)(ii), amendments merely have the effect of allowing individual Chapter 11 debtors to retain property and earnings acquired after the commencement of the case that would otherwise be excluded under section 541(a)(6) & (7). The court further concluded that, under this view, an individual debtor may not cram down a plan that would permit the debtor to retain prepetition property that is not excluded from the estate by section 541, but may cram down a plan that permits the debtor to retain only postpetition property. Accordingly, the court affirmed the bankruptcy court's order. View "Zachary v. California Bank & Trust" on Justia Law

Eden Place appealed the BAP's decision affirming the bankruptcy court’s determination that Eden Place violated the automatic stay provisions of the Bankruptcy Code by evicting debtor from a residential property. After considering the court's applicable precedent, SS Farms, LLC v. Sharp, and the clear language of the statute, the court held that the bankruptcy court’s order that Eden Place violated the automatic stay was final and appealable. On the merits, the court concluded that the unlawful detainer judgment and writ of possession entered pursuant to California Code Civil Procedure 415.46 bestowed legal title and all rights of possession upon Eden Place. Accordingly, the court concluded that the bankruptcy court erred when it ruled that Eden Place violated the automatic stay provisions of the Bankruptcy Code and reversed the bankruptcy court order. In this case, debtor had no legal or equitable interest remaining in the property after issuance of the unlawful detainer judgment and writ of possession in state court. View "Eden Place v. Perl" on Justia Law