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

After the State Bar of California suspended one of its members for misconduct, it conditioned her reinstatement of the payment of court-ordered discovery sanctions and costs associated with its disciplinary proceedings. The suspended attorney sought to discharge the payment in bankruptcy.The Ninth Circuit held that, while a debtor may not discharge the costs of the State Bar's attorney disciplinary proceedings imposed under California Business and Professions Code 6086.10, the discovery sanctions under California Procedure Code 2023.030 were dischargeable. Under the plain text of 11 U.S.C. 523(a)(7), they were not payable to and for the benefit of a governmental unit and were compensation for actual pecuniary losses. Finally, the panel rejected the attorney's claim that the State Bar violated 11 U.S.C. 525(a) by failing to reinstate her law license because of her nonpayment of dischargeable debts. Accordingly, the panel affirmed in part and reversed in part. View "Albert-Sheridan v. State Bar of California" on Justia Law

A bankruptcy court may not void a lien under 11 U.S.C. 506(d) when a claim relating to the lien is disallowed because the creditor who filed the proof of claim did not prove that it was the person entitled to enforce the debt the lien secures.The Ninth Circuit affirmed the bankruptcy appellate panel's opinion reversing the bankruptcy court's summary judgment for the Chapter 13 debtor in the debtor's adversary proceeding seeking a declaration that a lien securing a disallowed claim was void. Because debtor conceded that if the panel affirmed the BAP on this issue, then the order reversing the fee award should also be affirmed. Therefore, the panel affirmed the BAP's decision to reverse the fee award. View "Lane v. The Bank of New York Mellon" on Justia Law

The Ninth Circuit affirmed the district court's judgment affirming the bankruptcy court's order granting a Chapter 7 trustee's motion to exercise management rights over Dillon and authorizing the trustee's assumption of the operating agreement with Dillon. Dillon is a limited liability company created to hold title to foreclosed property securing investments by private investors in Point Center Financial, and appellants are the former principal of Point Center Financial, the debtor, and members of Dillon.The panel held that the Harkey parties have standing to pursue this appeal; the bankruptcy court had subject matter jurisdiction to confirm the vote establishing the trustee as manager of Dillon and to hear the assumption motion; the bankruptcy court properly authorized the trustee to exercise management rights over Dillon after the majority of Dillon's members voted for the trustee to manage Dillon; the bankruptcy court properly extended its own deadline for assumption of the operating agreement pursuant to Fed. R. Bankr. P. 9006(b)(1)(2); and the panel need not reach the question of equitable mootness because it affirmed the district court on other grounds. View "In re: Point Center Financial, Inc." on Justia Law

After debtor made unauthorized and fraudulent transfers of funds during the Chapter 13 proceeding, the bankruptcy court converted the proceedings to Chapter 7 in response, and then debtor argued that the transferred funds were no longer in the estate.The Ninth Circuit affirmed the Bankruptcy Court and the Bankruptcy Appellate Panel's determination that the transferred funds should remain property of the Chapter 7 estate, which would mean that the Chapter 7 trustee had authority to recover them. The panel held that debtor transferred the funds with the fraudulent purpose of avoiding payments to creditors and those funds remained within his constructive possession or control. Therefore, the funds should be considered property of the converted estate under 11 U.S.C. 348(f)(1)(A). View "Brown v. Barclay" on Justia Law

The Ninth Circuit dismissed Ocwen's appeal of the Bankruptcy Appellate Panel's (BAP) decision affirming the bankruptcy court's contempt orders, holding that the panel lacked appellate jurisdiction. The panel held that the BAP's decision remanding the matter to the bankruptcy court was not final and appealable. The panel considered the need to avoid piecemeal litigation, judicial efficiency, the systemic interest in preserving the bankruptcy court's role as the finder of fact, and whether delaying review would cause any party irreparable harm, and ultimately concluded that all factors compelled dismissal of Ocwen's appeal.However, the panel held that it had jurisdiction over debtors' appeal and affirmed the BAP's conclusion that they were not entitled to attorney's fees for their appeal to the BAP. Therefore, the panel rejected debtors' claims that they were entitled to attorney's fees under Federal Rule of Appellate Procedure 38, the attorney's fee provision in the deed of trust with Ocwen, and section 105(a) of the Bankruptcy Code. View "Ocwen Loan Servicing, LLC v. Marino" on Justia Law

A claim is subject to a bona fide dispute as to amount within the meaning of 11 U.S.C. 303(b)(1) even if a portion of that claim is undisputed. The Ninth Circuit affirmed the bankruptcy and district court's decisions holding that the MDOR lacked standing to file the involuntary Chapter 7 bankruptcy petition against debtor. Section 303(b)(1) states that petitioning creditor's claims must not be contingent or the subject of a bona fide dispute as to liability or amount. In this case, the MDOR's claim for the 2004 tax year was subject to a bona fide dispute as to amount notwithstanding debtor's concession that the deduction challenged in Audit Issue 4 was improper. However, because all other petitioning creditors have withdrawn from the proceedings, the panel remanded to the bankruptcy court to determine whether this case should be dismissed under section 303(j)(3). View "State of Montana Department of Revenue v. Blixseth" on Justia Law

A party moving for substantive consolidation must give notice of the motion to creditors of a putative consolidated non-debtor. The Ninth Circuit affirmed the bankruptcy appellate panel's (BAP) decision affirming the bankruptcy court's denial of a Chapter 7 trustee's motion to substantively consolidate debtor's estate with the estates of various non-debtors. The panel held that there was no notice given in this case and the panel rejected the trustee's argument that he provided notice to the same extent as was provided in In re Bonham. Furthermore, the BAP did not err by concluding that the trustee failed to adequately research and serve non-debtors' creditors. View "Leslie v. Mihranian" on Justia Law

The Ninth Circuit reversed the district court's judgment affirming the bankruptcy court's judgment in favor of the chapter 7 trustee. The trustee claimed that the tax refunds should be considered part of the bankruptcy estate and the bankruptcy court agreed. However, the panel held that the trustee failed to exhaust the administrative claims process as required by the Financial Institutions Reform, Recovery, and Enforcement Act of 1989. Therefore, the panel held that the bankruptcy court did not have subject matter jurisdiction over the dispute because of the failure to exhaust. View "Waldron v. FDIC" on Justia Law

The Ninth Circuit affirmed the district court's decision affirming the bankruptcy court's order confirming a second amended Chapter 11 plan of five real estate holding companies. The panel held that 11 U.S.C. 1129(a)(3) directs bankruptcy courts to police the means of a reorganization plan's proposal, not its substantive provisions. Therefore, the panel affirmed confirmation of the Amended Plan over the trustee's objection that the lease violated federal drug law because one of the debtors leased property to a company that used the property to grow marijuana. View "Garvin v. Cook Investments NW" on Justia Law

A 50% shareholder of an involuntary debtor may not seek damages under 11 U.S.C. 303(i). The Ninth Circuit affirmed the district court's decision affirming the bankruptcy court's denial of a request for statutory damages made by a 50% shareholder, holding that it did not have standing under section 301(i) because it was not the debtor. In this case, relevant House and Senate Reports suggest that only the debtor has standing to seek section 303(i) damages; appellate courts in this circuit have twice considered whether a non-debtor can seek damages under section 303(i), and twice those courts have decided it cannot; and reading section 303(i) to permit only the debtor to seek damages is consistent with its purpose and the policy interests underlying it. View "Vibe Micro, Inc. v. SIG Capital, LLC" on Justia Law