Articles Posted in US Court of Appeals for the Ninth Circuit

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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

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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

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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

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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

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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

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Wilson filed her voluntary Chapter 7 bankruptcy petition in December 2013, electing to take the federal exemptions and listing the “wildcard” exemption. Wilson’s condominium was valued at $250,000 and was subject to a $246,440 mortgage. Wilson listed her exemption as $3,560, the equity in her home as of the petition date. The value of the property increased. In July 2016, Wilson amended her Schedule C, claiming “100% of fair market value, up to any applicable statutory limit,” stating the value of the property at $412,500, and listing Washington’s homestead exemption as the basis for the amended exemption. The bankruptcy court held that an amendment to update the value of an exemption in light of post-petition changes in value was not permitted. The district court and the Ninth Circuit affirmed. Declining to decide whether the definition of the value of exemptions in 11 U.S.C. 522(a)(2) applies to state law exemptions as well as to federal ones, the court concluded that under section 541(a)(1) the debtor’s interests in property transfer to the bankruptcy estate as of the commencement of the bankruptcy action. Following this transfer, any appreciation enures to the bankruptcy estate. The debtor’s exemption was limited to her equity in the property as of the date of her bankruptcy petition. View "Wilson v. Rigby" on Justia Law

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The Ninth Circuit certified the following question of bankruptcy law to the Supreme Court of California: Does the form of title presumption set forth in section 662 of the California Evidence Code overcome the community property presumption set forth in section 760 of the California Family Code in Chapter 7 bankruptcy cases where: (1) the debtor husband and non-debtor wife acquire property from a third party as joint tenants; (2) the deed to that property conveys the property at issue to the debtor husband and non-debtor wife as joint tenants; and (3) the interests of the debtor and non-debtor spouse are aligned against the trustee of the bankruptcy estate? View "Brace v. Speier" on Justia Law

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The period in which a creditor may execute on a lien constitutes the continuation of the original action that resulted in the judgment and is thus tolled during the automatic stay. The Ninth Circuit affirmed the bankruptcy appellate panel's decision reversing the bankruptcy court's grant of summary judgment for the trustee in an adversary proceeding brought by a judgment creditor. Before debtor filed for bankruptcy, creditor obtained an Order of Appearance and Examination (ORAP) lien encumbering debtor's personal property under California law. In this case, the creditor was unable to execute on her lien and she failed to renew it under state law. View "Daff v. Good" on Justia Law

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The Ninth Circuit affirmed the district court's decision affirming the bankruptcy court's summary judgment denying discharge of two individual Chapter 11 debtors' debt arising from a state-court judgment for fraud and misrepresentation. The panel held that the Chapter 11 plan provided for the liquidation of all or substantially all of the property of the bankruptcy estate under 11 U.S.C. 1141(d)(3)(A); debtors did not engage in business after consummation of the Chapter 11 plan, because they were simply employees in businesses owned or operated by others; and, assuming that section 1141(d)(3) does not require that the debtor engage in a pre-petition business, the statute was not satisfied by mere employment in someone else's business after consummation of a Chapter 11 plan. View "Hyun J. Um v. Spokane Rock I, LLC" on Justia Law

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Sovereign immunity does not preclude an award of emotional distress damages against the United States for willful violation of an automatic stay. The Ninth Circuit reversed the district court's judgment reversing the bankruptcy court's award of damages to debtors for the IRS's violation of the Bankruptcy Code's automatic stay. The panel held that Congress waived sovereign immunity for a "money recovery" under certain bankruptcy provisions, including 11 U.S.C. 362(k), which allows an individual to recover "actual damages" for a willful violation of the automatic stay. The panel remanded with instructions to consider the government's challenges on the merits. View "Hunsaker v. United States" on Justia Law