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 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

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The Ninth Circuit affirmed the district court's decision affirming the bankruptcy court's dismissal of a Chapter 11 petition filed by the former board members of Sino. The panel held that the bankruptcy court properly dismissed the action because plaintiffs lacked corporate authority under Nevada law when they filed the petition where a receiver appointed by the Nevada state court already had removed them from the corporation's board of directors. Therefore, plaintiffs were not authorized to file the petition on behalf of the corporation. View "Sino Clean Energy, Inc. v. Seiden" on Justia Law

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In this consolidated bankruptcy appeal, two law firms challenged the bankruptcy court's order approving a settlement for an involuntary Chapter 11 bankruptcy. The Ninth Circuit affirmed the district court's dismissal of the appeals, holding that the firms forfeited their objection to the settlement agreement because neither firm explicitly objected to the settlement or entered an appearance. Furthermore, the evidence on the record regarding the bankruptcy court and trustee's understanding that the firms were implicitly objecting was not clear enough to overcome such failures. The panel assumed without deciding that the law firms' challenge should be reviewed for plain error, rather than dismissed without reaching the merits, and found that the bankruptcy court did not err in approving the settlement agreement. View "Reid and Hellyer, APC v. Laski" on Justia Law

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The Ninth Circuit reversed the district court's decision affirming the bankruptcy court's summary judgment in favor of a condominium association. The panel held that condominium association assessments that become due after a debtor has filed for bankruptcy under Chapter 13 were dischargeable under 11 U.S.C. 1328(a). In this case, debtor's personal obligation to pay the assessments was not the result of a separate, post-petition transaction but was created when she took title to the condominium unit. Therefore, the debt for the assessments arose pre-petition and was dischargeable under section 1328(a), unless the Bankruptcy Code provided an exception to discharge. The panel held that the personal debt arising from the assessments was not excepted from discharge under section 1328(a). Finally, the Takings Clause was not implicated and equitable arguments did not override the express provisions of the Bankruptcy Code. View "Goudelock v. Sixty-01 Association of Apartment Owners" on Justia Law

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Under 11 U.S.C. 1126(e), a bankruptcy court may not designate claims for bad faith simply because (1) a creditor offers to purchase only a subset of available claims in order to block a plan of reorganization, and/or (2) blocking the plan will adversely impact the remaining creditors. At a minimum, there must be some evidence that a creditor is seeking "to secure some untoward advantage over other creditors for some ulterior motive." In this case, the Ninth Circuit reversed the district court's order affirming the bankruptcy court and vacated the bankruptcy court's order granting a chapter 11 debtor's motion to designate claims for bad faith and preclude the claims from being voted against a plan of reorganization. The panel held that the bankruptcy court erred when it refused to analyze whether Pacific Western acted under an "ulterior motive," beyond its "mere enlightened self interest" in protecting its secured claim. The panel remanded for further proceedings. View "Pacific Western Bank v. Fagerdala USA" on Justia Law

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An appellant's failure to attend and object at a bankruptcy court hearing has no bearing on the question of whether that appellant has standing to appeal a bankruptcy court order. The Ninth Circuit reversed the district court's dismissal of an appeal from the bankruptcy court's order authorizing a Chapter 7 trustee to assume the operating agreement of an LLC whose interests were implicated in the bankruptcy proceedings. The district court dismissed the appeal on the ground that appellants lacked standing to challenge the bankruptcy court order. The panel held that appellants' attendance and objection were not prerequisites for satisfying the "person aggrieved" requirement for prudential standing. Therefore, the panel remanded to the district court. View "In re Point Center Financial, Inc." on Justia Law

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The trustee's adversary complaint contesting the basis for debtor's exemptions qualified as an objection to those exemptions under Federal Rules of Bankruptcy Procedure 4003. The Ninth Circuit affirmed a bankruptcy court's turnover order denying debtor's claimed exemptions. In this case, before filing a petition in bankruptcy, debtor transferred his interests in two properties into a tenancy-by-the-entirety estate, and subsequently claimed an exemption for those interests under 11 U.S.C. 522(b)(3). The panel rejected debtor's argument that the trustee had failed to make a timely objection to his claimed exemptions, and therefore the exemptions were valid notwithstanding the avoidance of the transfer. View "Lee v. Field" on Justia Law

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The Ninth Circuit affirmed the Bankruptcy Appellate Panel's opinion reversing the bankruptcy court's order entering contempt sanctions against creditors for knowingly violating the discharge injunction in the Chapter 7 case. The panel held that creditors did not knowingly violate the discharge injunction because they had a subjective good faith belief that the discharge injunction did not apply to their state-court claim for post-petition attorneys' fees. The panel explained that creditors' subjective good faith belief, even if unreasonable, insulated them from a finding of contempt. View "In re Taggert" on Justia Law

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Gilman filed a voluntary Chapter 7 bankruptcy petition. Phillips was a creditor. Gilman identified properties in Van Nuys and Northridge, describing the Northridge property as “in escrow” and claiming a household exemption for the Van Nuys property, and stating “Debtor has Cancer and has not been able to work.” He did not list any contracts relating to the sale of the Van Nuys property. Gilman would later admit that escrow was open on that property when he filed for bankruptcy. Phillips filed an adversary proceeding, alleging fraud, and objected to Gilman’s homestead exemption. Gilman did not oppose the objection and did not appear at the hearing. The bankruptcy court sustained Phillips’ objections. Gilman filed an amended Schedule C, claiming a reduced exemption and obtained Rule 60(b) relief, based on his counsel’s mistaken failure to oppose Phillips’ objections. The bankruptcy court held that escrow did not eliminate Gilman’s right to a homestead exemption. The Ninth Circuit held that it had jurisdiction to review the district court’s order affirming the grant of the homestead exemption; that the bankruptcy court did not abuse its discretion in granting Rule 60(b) relief from judgment on the ground of excusable neglect; and that the bankruptcy court erred in concluding that the debtor established his claim to a homestead exemption under California law without determining whether the debtor intended to continue to reside in the property. View "Phillips v. Gilman" on Justia Law