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

The purchaser of viatical settlements paid approximately $507,000 for life settlements with the debtor and received $9,000,000 in death benefits when he died shortly thereafter. The bankruptcy trustee filed an adversary proceeding to recover the market value of the life settlements. The court held that debtor's interests in the term life insurance policies, including the secondary market value of the policies and resulting life settlements, constitute a recoverable “interest of the debtor in property” pursuant to 11 U.S.C. 548(a)(1). In this case, debtor had a legal and equitable interest in the property at issue within the meaning of section 541(a), the property was not excluded from the estate under section 541(b), and the property was not the subject of a proper exemption in this case. The court further concluded that the district court properly held that the trustee's avoidance action was not time-barred because debtor's fraudulent concealment equitably tolled the statute of limitations from commencing. Finally, the district court correctly concluded that the bankruptcy court should have granted the trustee leave to amend her avoidance action. View "Gladstone v. U.S. Bancorp" on Justia Law

Debtor filed a motion in the bankruptcy court seeking to recover from AmeriCredit all of the attorney’s fees she incurred in opposing AmeriCredit’s objection to confirmation of her Chapter 13 plan. The court noted that a claim secured by property worth less than the amount of the claim is “bifurcated” into two claims: a secured claim equal to the value of the property and an unsecured claim for the balance. The hanging paragraph creates a special rule for auto lenders by prohibiting bifurcation of claims that are secured by a “purchase money security interest” in a motor vehicle recently acquired for the debtor’s personal use. The bankruptcy court ruled that the purchase money security interest protected by the hanging paragraph does not include amounts attributable to the negative equity from a trade-in vehicle. The bankruptcy court denied debtor’s motion for attorney’s fees on the ground that she did not prevail “on the contract” because her success in the litigation with AmeriCredit turned on a question of federal bankruptcy law. The district court affirmed. California Civil Code 1717 makes reciprocal an otherwise unilateral contractual obligation to pay attorney’s fees. The court held that the hanging-paragraph litigation was an “action on a contract” in which debtor prevailed. The court concluded that, as the “party prevailing on the contract,” debtor is entitled to recover reasonable attorney’s fees under section 1717. Accordingly, the court reversed and remanded. View "Penrod v. AmeriCredit Fin. Serv." on Justia Law

Debtors are "Chapter 20 debtors" who filed for Chapter 7 and then Chapter 13 relief. The court concluded that the bankruptcy court properly voided HSBC’s lien under section 506(d) of the Bankruptcy Code, confirmed debtors' Chapter 13 plan offering permanent voidance of HSBC’s lien upon successful plan completion, and found no due process violation or bad faith purpose in filing the Chapter 13 petition. Therefore, the court affirmed the bankruptcy court’s lien-voidance order, plan confirmation order, and plan implementation order. In regards to debtors' cross-appeal for attorneys' fees, the court concluded that the district court lacked jurisdiction to determine whether debtors were entitled to attorneys’ fees because this issue was not addressed, in the first instance, by the bankruptcy court. Therefore, the court vacated the district court's denial o fees and instructed the district court to remand to the bankruptcy court for a determination of debtors' entitlement to attorneys’ fees in the first instance. View "HSBC Bank v. Blendheim" on Justia Law

Plaintiff appealed the bankruptcy court's order approving a settlement agreement in the Chapter 11 bankruptcy of debtor. At issue was whether a beneficiary of a trust who disagrees with the way the trust was administered by former trustees is a “party in interest” with standing to object to the bankruptcy court’s approval of a settlement agreement between a debtor, creditor entities held by the trust, and the former trustees. The court held that the trust beneficiary does not have party-in-interest standing under 8 U.S.C. 1109(a) to object to the settlement, at least where his interests are adequately represented by a party-in-interest trustee. Accordingly, the court affirmed the district court's dismissal for lack of standing. View "Hughes v. Tower Park Props." on Justia Law

Sahagun filed a class action suit against Landmark, alleging that Landmark had failed to pay a variety of wages required by California law. The district court affirmed the bankruptcy court’s ruling that Sahagun was entitled to the prevailing wage for time spent fabricating components for public works contracts. The district court held, however, that the bankruptcy court applied an incorrect legal standard for assessing whether Landmark was required to pay prevailing wages for the time class members spent traveling to and from public worksites. The district court thus remanded for “additional fact finding.” Both parties appealed. The court weighed four factors to assess jurisdiction, concluding that the risk of piecemeal litigation in this instance is significant; judicial efficiency would not be enhanced by exercising jurisidiction; systemic interest in preserving the bankruptcy court's role as the finder of fact tips in favor of declining jurisdiction; and delaying review would not cause irreparable harm to either party. The court held that the district court's order was not a final order and, therefore, the court lacked jurisdiction over the appeal. Accordingly, the court dismissed the appeal for lack of jurisdiction. View "Sahagun v. Landmark Fence Co." on Justia Law

After Gregory Bos and his spouse filed a joint petition for Chapter 7 bankruptcy, the Board filed a complaint against Bos and his spouse contesting the dischargeability of a $504,282.59 debt. An arbitrator had awarded the Board the $504,282.59 against Bos, individually and as doing business as BEI, and BEI to recover the outstanding amounts owed to trust funds governed by the Employee Retirement Income Security Act (ERISA), 29 U.S.C. 1001 et seq. The bankruptcy court entered judgment, concluding that Bos had committed defalcation while acting as a fiduciary of the Funds and that the $504,282.59 debt to the Funds was therefore nondischargeable. The district court affirmed. At issue on appeal was whether an employer’s contractual requirement to contribute to an employee benefits trust fund makes it a fiduciary of unpaid contributions. The court joined the Sixth and Tenth Circuits, holding that Bos was not a fiduciary under section 523(a)(4). Consistent with the court's general rule that unpaid contributions to employee benefit funds are not plan assets, Bos did not engage in defalcation for purposes of section 523(a)(4). Therefore, the court reversed the district court's judgment because Bos did not act as a fiduciary under 11 U.S.C. 523(a)(4), and because the bankruptcy court and district court expressly found that Bos’s debt did not fall under any of the other nondischargeability exceptions put forth by the Board. The court remanded to the bankruptcy court with instructions to discharge the debt. View "Bos v. Board of Trustees" on Justia Law

Appian was created by the Enea brothers, who were its only shareholders and officers. Appian managed real estate development projects, including Monticello, of which Appian was a General Partner, and Monterrosa, of which Appian was the Managing Member. Double Bogey invested approximately $4 million in Monticello as its Limited Partner, and $1 million in Monterrosa as a non-managing member. Double Bogey never recovered any of its investment in Monterrosa and did not receive profits from either investment. After Appian failed to provide an accounting of its investments, Double Bogey filed suit. The Eneas and Appian separately filed for Chapter 7 bankruptcy. Double Bogey brought an adversary proceeding, claiming that: Appian was Double Bogey’s fiduciary with respect to the investments; Appian was liable for lost principal and profits; the liabilities were created by Appian’s “defalcation;” and the Eneas were also liable for such non-dischargeable debt either because of their own defalcation or as alter egos of Appian. Liabilities created by a fiduciary’s defalcation are not dischargeable in bankruptcy under Bankruptcy Code Section 523(a)(4). The bankruptcy court rejected the claims. The Ninth Circuit affirmed, agreeing that merely finding the Eneas were alter egos of Appian under California law was insufficient to hold that they were Double Bogey's “fiduciaries” under Section 523(a)(4). View "Double Bogey LP v. Enea" on Justia Law

ASARCO appealed the district court's grant of summary judgment for CNA in ASARCO's suit for contribution under section 113(f)(3)(B) of the Comprehensive Environmental Response,Compensation, and Liability Act (CERCLA), 42 U.S.C. 9613(f)(3)(B). The district court dismissed the complaint. The court held that a judicially approved settlement agreement between private parties to a CERCLA cost-recovery suit starts the clock on the three-year statute of limitations in section 113(g)(3)(B), and that a later bankruptcy settlement that fixes the costs of such a cost recovery settlement agreement does not revive a contribution claim that has otherwise expired. The court's holding that a later bankruptcy settlement with the government cannot revive an otherwise expired contribution claim ensures that a party does not receive a benefit that it had not paid for in the bankruptcy settlement. In this case, the court concluded that ASARCO's time to file contribution claims pursuant to the Wickland Agreement has expired, and that the Wickland Agreement covered all response costs at the Selby Site and the 2008 bankruptcy settlement merely fixed costs. Accordingly, the court affirmed the judgment. View "ASARCO v. Celanese Chem. Co." on Justia Law

Lender challenged the district court's denial of Lender's appeal from the bankruptcy court's order confirming a Chapter 11 plan of reorganization based on equitable mootness grounds. At issue was whether a lender that made colorable objections to a plan of reorganization in bankruptcy court and then diligently sought a stay in order to litigate those objections may obtain review of its objections on appeal even though the plan has been implemented. The court held that the lender’s objections are not equitably moot and should be considered on appeal because it would be possible to devise an equitable remedy to at least partially address the lender’s objections without unfairly impacting third parties or entirely unraveling the plan. Accordingly, the court reversed and remanded for further proceedings. View "JPMCC 2007-C1 Grasslawn Lodging v. Transwest Resort Properties" on Justia Law

The chapter 7 trustee paid the 2005 federal income taxes of a bankruptcy estate without first providing notice to a creditor of the estate, requesting a hearing to determine the appropriate amount of those taxes, or obtaining an order of the bankruptcy court authorizing the payment of those taxes. At issue was whether section 503 of the Bankruptcy Code, 11 U.S.C. 503(b), requires a chapter 7 trustee to provide notice to creditors, and obtain a hearing, before paying taxes incurred by the estate. The court held that the plain language of section 503 requires that notice and a hearing be provided before the payment of taxes as administrative expenses, and that this requirement does not impose inconsistent obligations on trustees under other provisions of the Bankruptcy Code or the Internal Revenue Code. Accordingly, the court remanded with directions for the bankruptcy court to determine the amount of 2005 federal income taxes due from the estate and to conduct other appropriate proceedings. View "Dreyfuss v. Cory" on Justia Law