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

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

U.C.C. 9-319(a), which grants a consignee "rights and title to the goods," also grants the consignee an interest in the proceeds of those goods that were generated prior to bankruptcy. The Ninth Circuit affirmed the bankruptcy appellate panel's decision affirming the bankruptcy court's grant of summary judgment for the bankruptcy trustee who brought an adversary proceeding seeking avoidance of transfers.Under settled bankruptcy law, if a consignee files for bankruptcy, any consigned "goods" in its possession become property of the bankruptcy estate unless the seller has previously provided public notice of its interest in the goods (normally by filing a document known as a "financing statement") and thereby "perfected" its interest. The panel held that this rule also extended to the proceeds from goods sold that are held by the consignee on the date it files for bankruptcy. View "IPC (USA), Inc. v. Ellis" on Justia Law

The Ninth Circuit reversed the district court's denial of debtors' motion under 11 U.S.C. 362(k) for attorneys' fees incurred on appeal in successfully challenging the bankruptcy court's award of attorneys' fees to debtors for a willful violation of an automatic stay. The panel held that section 362(k) also authorizes attorneys' fees and costs to the debtor incurred on appeal in successfully challenging an initial award made pursuant to section 362(k).The panel also held that the district court abused its discretion by denying the motion on the alternative ground that debtors failed to comply with a local rule. In this case, the memorandum of points and authorities filed with the district court sufficiently clarified the attorneys' fees and costs. The panel remanded for further proceedings. View "Easley v. Collection Service of Nevada" on Justia Law

The Ninth Circuit dismissed objector's appeal of the bankruptcy court's order denying his objection to confirmation of a Chapter 9 petition, by the City of Stockton, as equitably moot. In this case, objector filed an inverse condemnation claim against the City in state court and the plan classified the claim as a general unsecured claim.The panel held that objector did not seek a stay of confirmation at any stage; the plan has been substantially consummated; the relief of undoing plan confirmation would bear unduly on innocent third parties; and the bankruptcy court could not fashion relief without undoing the confirmed plan. On the merits, the panel held that the Takings Clause exempted objector's unsecured claim from reorganization. In reality, objector's purported property interest was a claim for monetary relief. View "Cobb v. City of Stockton" on Justia Law