A&G Goldman P'ship V. Picard (In Re Bernard L. Madoff Inv. Secs. LLC

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A&G Goldman P’ship v. Picard (In re Bernard L. Madoff Inv. Secs. LLC)

United States Court of Appeals for the Second Circuit June 27, 2018, Decided No. 17-512-bk

Reporter 2018 U.S. App. LEXIS 17574 *; 2018 WL 3159228 propping-up, disguised, quotation, collapse IN RE: BERNARD L.MADOFF INVESTMENT SECURITIES LLC, Debtor.A & G GOLDMAN PARTNERSHIP, PAMELA GOLDMAN, Appellants, v. Case Summary IRVING H. PICARD, Trustee for the Liquidation of Bernard L. Madoff Investment Securities LLC and Overview Bernard L. Madoff, CAPITAL GROWTH COMPANY, DECISIONS INCORPORATED, FAVORITE FUNDS, JA HOLDINGS: [1]-A suit alleging that an investor in a PRIMARY LIMITED PARTNERSHIP, JA SPECIAL Ponzi scheme and associated entities were liable for LIMITED PARTNERSHIP, JAB PARTNERSHIP, JEMW securities fraud as controlling persons under 15 PARTNERSHIP, JF PARTNERSHIP, JFM U.S.C.S. § 78t(a) was barred by an injunction entered in INVESTMENT COMPANIES, JLN PARTNERSHIP, connection with a Securities Investor Protection Act JMP LIMITED PARTNERSHIP, JEFFRY M. PICOWER trustee's settlement of a fraudulent transfer claim. The SPECIAL CO., JEFFRY M. PICOWER P.C., THE facts alleged did not give rise to a colorable claim that PICOWER FOUNDATION, THE PICOWER INSTITUTE the investor controlled the entity through which the FOR MEDICAL RESEARCH, THE TRUST F/B/O Ponzi scheme was perpetrated, so the substance of the GABRIELLE H. PICOWER, BARBARA PICOWER, allegations amounted to only a derivative fraudulent individually and as Executor of the Estate of Jeffry M. transfer claim. Picower, and as Trustee for the Picower Foundation and for The trust f/b/o Gabrielle H. Picower, Appellees. Outcome Judgment affirmed. Notice: PLEASE REFER TO FEDERAL RULES OF APPELLATE PROCEDURE RULE 32.1 GOVERNING THE CITATION TO UNPUBLISHED OPINIONS. LexisNexis® Headnotes

Prior History: [*1] Appeal from a January 25, 2017, judgment of the United States District Court for the Southern District of New York (Woods, J.).

Bankruptcy Law > Procedural Matters > Judicial A & G Goldman Partnership v. Capital Growth Co. (In re Review > Bankruptcy Appeals Procedures Bernard L. Madoff Inv. Sec. LLC), 565 B.R. 510, 2017 U.S. Dist. LEXIS 10394 (S.D.N.Y., Jan. 24, 2017) Bankruptcy Law > ... > Judicial Review > Standards of Review > Clear Error Review

Core Terms Bankruptcy Law > ... > Judicial Review > Standards of Review > De Novo Standard of Review Parties, allegations, fraudulent transfer, derivative, injunction, trading, securities, investors, withdrawals, HN1[ ] Judicial Review, Bankruptcy Appeals customers, bankruptcy court, complaints, fraudulent, Procedures Trustee's, liquidation, fictitious, funds, harms, counterparty, investments, purported, policies, district In an appeal from a district court's review of a court, securities law, dissemination, transactions, bankruptcy court decision, the court of appeals reviews Page 2 of 8 2018 U.S. App. LEXIS 17574, *1 the bankruptcy court decision independently, accepting Transfers > Intent its factual findings unless clearly erroneous but reviewing its conclusions of law de novo. Bankruptcy Law > ... > Avoidance > Fraudulent Transfers > Value

HN4[ ] Fraudulent Transfers, Elements Bankruptcy Law > ... > Examiners, Officers & Trustees > Duties & Functions > Capacities & Roles Property is fraudulently transferred if the debtor made such transfer with actual intent to hinder, delay, or Bankruptcy Law > Claims > Types of defraud any entity to which the debtor was or became, Claims > Definitions on or after the date that such transfer was made, indebted, 11 U.S.C.S. § 548(a)(1)(A), or received less HN2[ ] Duties & Functions, Capacities & Roles than a reasonably equivalent value in exchange for such transfer and one of a number of other requirements is In the bankruptcy context, derivative claims are ones met, § 548(a)(1)(B). that arise from harm done to the estate and that seek relief against third parties that pushed the debtor into bankruptcy. In assessing whether a claim is derivative, a court inquires into the factual origins of the injury and, Securities Law > Civil Liability more importantly, into the nature of the legal claims Considerations > Secondary Liability > Controlling asserted. The way a claim is labeled is not conclusive, Persons since plaintiffs often try, but are not permitted, to plead around a bankruptcy. By contrast, when creditors have HN5[ ] Secondary Liability, Controlling Persons a claim for injury that is particularized as to them, they are exclusively entitled to pursue that claim, and the A claim under § 20(a) of the Securities Exchange Act of bankruptcy trustee is precluded from doing so. Whereas 1934, 15 U.S.C.S. § 78t(a), is a securities fraud claim a derivative injury is based upon a secondary effect that is particularized to the injured party or parties. from harm done to the debtor, an injury is said to be particularized when it can be directly traced to the third party's conduct. Securities Law > ... > Secondary Liability > Controlling Persons > Definition of Control

Bankruptcy Law > ... > Avoidance > Fraudulent Securities Law > ... > Secondary Transfers > Elements Liability > Controlling Persons > Elements of Proof

HN3[ ] Fraudulent Transfers, Elements HN6[ ] Controlling Persons, Definition of Control

Fraudulent transfer is a claim commonly arising in The elements of a claim under § 20(a) of the Securities bankruptcy proceedings. A bankruptcy trustee may Exchange Act of 1934, 15 U.S.C.S. § 78t(a), are (1) a recover from the initial transferee, for the benefit of the primary violation of the securities laws by the controlled estate, property fraudulently transferred within the person, (2) control of the primary violator by the meaning of 11 U.S.C.S. § 548. 11 U.S.C.S. § 550(a). defendant, and (3) that the defendant was, in some Fraudulent transfer is perhaps the paradigmatic meaningful sense, a culpable participant in the example of a claim that is "general" to all creditors in controlled person's fraud. Securities and Exchange bankruptcy; thus, it is usually brought by the trustee, for Commission regulations define "control" as the the benefit of all creditors and seeks to recover property possession, direct or indirect, of the power to direct or of the estate. cause the direction of the management and policies of a person, whether through the ownership of voting securities, by contract, or otherwise. 17 C.F.R. § 230.405. Bankruptcy Law > ... > Avoidance > Fraudulent Transfers > Elements

Bankruptcy Law > ... > Avoidance > Fraudulent Securities Law > Civil Liability Page 3 of 8 2018 U.S. App. LEXIS 17574, *1

Considerations > Secondary Liability > Controlling Parties and Irving H. Picard, the Trustee in the SIPA Persons liquidation—filed adversary proceedings in the SIPA liquidation to enjoin the Florida action, contending that it HN7[ ] Secondary Liability, Controlling Persons violated a permanent injunction and the automatic stay issued in the SIPA liquidation. Id. The bankruptcy court A claim under § 20(a) of the Securities Exchange Act of in the Southern District of New York agreed and 1934, 15 U.S.C.S. § 78t(a), seeks to hold the control enjoined the Florida action, id., which the district court person jointly and severally liable for the primary affirmed, A & G Goldman P'ship v. Capital Growth Co. violation of the securities laws by the controlled person, (In re BLMIS), 565 B.R. 510, 526-27 (S.D.N.Y. 2017). so long as the control person is a culpable participant in This appeal followed. We assume the parties' familiarity the fraud. with the underlying facts, the record of the prior proceedings, and issues on appeal, and repeat them Counsel: FOR APPELLANTS: JOSEPH G. GALARDI, here only as necessary to explain our decision to affirm. (James W. Beasley, Jr., on the brief), Beasley Kramer & Galardi, P.A., West Palm Beach, FL; Joshua J. Angel, The Madoff Ponzi scheme has been described in detail Herrick Feinstein LLP, New York, NY. elsewhere. See Sec. Inv'r Prot. Corp. v. BLMIS (In re BLMIS), 424 B.R. 122, 126-32 (Bankr. S.D.N.Y. 2010). FOR APPELLEE TRUSTEE: DEBORAH H. RENNER As is relevant here, Madoff claimed he was investing (Thomas D. Warren, David J. Sheehan, Ferve E. BLMIS's customers' funds in stocks and then hedging Ozturk, Samuel M. Light, on the brief), Baker & with option trades. In re BLMIS, 654 F.3d 229, 231 (2d Hostetler LLP, New York, NY. Cir. 2011). In reality, Madoff never invested any of the FOR APPELLEES THE PICOWER PARTIES: GARY funds. Id. Instead, BLMIS generated fictitious [*3] STEIN (Marcy Harris, William D. Zabel, Michael Kwon, account statements reflecting trades that were never Jennifer M. Opheim, on the brief), Schulte Roth & Zabel actually completed and profits that were never actually LLP, New York, NY. generated. Id. at 231-32. Because BLMIS was not actually generating profit, it paid customers who Judges: PRESENT: PIERRE N. LEVAL, GERARD E. withdrew funds with the proceeds of other customers' LYNCH, CHRISTOPHER F. DRONEY, Circuit Judges. investments. Id. at 232. Eventually, BLMIS was unable to meet its customers' demands for withdrawals, and the Opinion scheme collapsed. Id.

On May 12, 2009, the Trustee filed an adversary proceeding in the SIPA liquidation against the Picower SUMMARY ORDER Parties seeking to recover $6.7 billion in withdrawals Picower made from BLMIS and bringing claims for UPON DUE CONSIDERATION, IT IS HEREBY fraudulent transfer, avoidable preferences, and turnover ORDERED, ADJUDGED, AND DECREED that the under both the Bankruptcy Code and New York law. judgment of the district court is AFFIRMED. The Trustee alleged that Picower benefited from BLMIS's Ponzi scheme and either knew or should have This appeal arises from the Securities Investor known that BLMIS's trading activity was fictitious and Protection Act ("SIPA") liquidation of Bernard L. Madoff that BLMIS was perpetrating a fraud. To support its Investment Securities LLC ("BLMIS"), the entity through contention that Picower either knew or should have which Bernard Madoff perpetrated his infamous Ponzi known about the fraud, the Trustee's complaint cited scheme. Appellants A & G Goldman Partnership and Picower's close relationship with Madoff and knowledge Pamela Goldman filed a complaint (the "complaint") in of BLMIS's operations, Picower's direction of the activity the United States District Court for [*2] the Southern in his own accounts with BLMIS and knowledge that his District of Florida (the "Florida action"), bringing a accounts reflected backdated trading, and [*4] the securities fraud claim under § 20(a) of the Securities implausibly high rates of return Picower received on his Exchange Act of 1934 against the late Jeffry Picower's purported investments. estate and several entities associated with Picower (together, the "Picower Parties"). See Picard v. A & G The Trustee and the Picower Parties reached a Goldman P'ship, 546 B.R. 284, 288 (Bankr. S.D.N.Y. settlement, which the bankruptcy court approved in an 2016) ("Bankruptcy Op."). Appellees—the Picower order dated January 13, 2011. The Picower Parties Page 4 of 8 2018 U.S. App. LEXIS 17574, *4 agreed to forfeit over $7.2 billion to the government for fraudulent trading records and fraudulent trading results, distribution to Madoff's victims, $5 billion of which would which effected returns in [his] accounts based upon be returned directly to the BLMIS estate. The transactions which in fact never took place." J. App. bankruptcy court also issued a permanent injunction 339-40. He would then "transfer proceeds from these (the "injunction"), which provided in relevant part: purported transactions to his own account and then to [A]ny BLMIS customer or creditor of the BLMIS third party bank accounts which he controlled." J. App. estate who filed or could have filed a claim in the 340. liquidation, anyone acting on their behalf or in concert or participation with them, or anyone whose These allegations pertained to Picower's activity in his claim in any way arises from or is related to BLMIS own accounts at BLMIS. For example, the draft or the Madoff Ponzi scheme, is hereby permanently complaints highlighted Picower's withdrawal of $6 billion enjoined from asserting any claim against the from one of his BLMIS accounts, falsely labeled a Picower BLMIS Accounts or the Picower Releasees margin loan, when that account "had no trading activity that is duplicative or derivative of the claims brought or cash or related assets to support such borrowing." J. by the Trustee, or which could have been brought App. 341. by the Trustee against the Picower BLMIS Accounts or the Picower Releasees . . . . The bankruptcy court found, and the district court J. App. at 212. agreed, that the draft complaints did not allege securities claims under § 20(a); rather, aside from Appellants, former BLMIS customers and now creditors general, conclusory allegations that Picower controlled of the BLMIS estate, filed the complaint in the Florida BLMIS, they "plead[ed] nothing more than that the action [*5] on August 28, 2014. That complaint is Picower [Parties] [*7] fraudulently withdrew money from Appellants' third attempt to hold the Picower Parties BLMIS" and were thus "deceptively labeled fraudulent liable under § 20(a), and it is the third time that the conveyance claims." A & G Goldman P'ship v. Picard, bankruptcy court has enjoined Appellants from No. 12-cv-6109, 2013 U.S. Dist. LEXIS 143956, 2013 proceeding under the injunction. This case is the first WL 5511027, at *7, *10 (S.D.N.Y. Sept. 30, 2013) opportunity we have had to rule on the issue with ("Goldman I"). As such, the Goldman I claims were respect to these particular appellants. derivative of the Trustee's fraudulent transfer claims against the Picower Parties and were thus barred by the Appellants' first action against the Picower Parties injunction. See 2013 U.S. Dist. LEXIS 143956, [WL] at (initiated by a motion to the bankruptcy court seeking a *9-10. Appellants did not appeal from the district court's determination that nearly identical draft class action ruling. complaints, one by each of the Appellants, against the Picower Parties would not run afoul of the injunction) Appellants then brought a second action against the alleged that BLMIS's Ponzi scheme constituted Picower Parties under a complaint making many of the securities fraud in violation of § 10(b) of the Exchange same allegations as the draft complaints in Goldman I, Act and Rule 10b-5 promulgated thereunder. Appellants and further alleging that Picower knew and intended that sought to hold the Picower Parties jointly and severally the fictitious trading in his own accounts would result in liable under § 20(a) of the Exchange Act for BLMIS's BLMIS disseminating other fictitious information to other underlying securities fraud because Picower allegedly investors. The bankruptcy court held that the new controlled BLMIS. allegations did not render Appellants' claim any less derivative of the Trustee's fraudulent transfer claims In an attempt to demonstrate Picower's control of than were the allegations in the Goldman I draft BLMIS, the draft complaints alleged as follows: Picower complaints. See Picard v. Marshall (In re BLMIS), 511 invested with BLMIS since at least the 1980s, lived near B.R. 375, 393-94 (Bankr. S.D.N.Y. 2014) ("Goldman II"). Madoff in Florida, and was closely associated with him Appellants initially appealed from the bankruptcy court's both in business and socially for decades. Picower "was decision in Goldman II, but withdrew the appeal and able to control BLMIS and use BLMIS [*6] as 'a filed the Florida action instead. See Fox v. Picard (In re personal piggy bank' by withdrawing funds for various BLMIS), 531 B.R. 345, 350 n.3 (S.D.N.Y. 2015). entities he controlled," including "funds . . . belong[ing] to other BLMIS customers . . . ." J. App. 339-40. He The complaint in the Florida action—the operative became a control person "from at least December complaint for purposes of this appeal—makes [*8] 1995," when he began "direct[ing] BLMIS to prepare many of the same allegations as the draft complaints at Page 5 of 8 2018 U.S. App. LEXIS 17574, *8 issue in Goldman I and the complaint in Goldman II, and The central question in this appeal is whether the further alleges two categories of conduct by Picower complaint in the Florida [*10] action violated the unrelated to his own BLMIS accounts. injunction because, despite labeling their claim as a § 20(a) claim for control person liability, Appellants First, Appellants claimed that Picower made what instead brought a disguised fraudulent transfer claim purported to be two loans to BLMIS totaling more than that is derivative of the Trustee's fraudulent transfer $200 million to help the Madoff Ponzi scheme avoid claims. discovery and collapse (the "propping-up allegations"). The first purported loan, in 1992, involved Picower HN2[ ] In the bankruptcy context, "derivative claims" transferring $76 million in securities to BLMIS without are "ones that arise from harm done to the estate and consideration. BLMIS held those securities in a general that seek relief against third parties that pushed the account and used them to secure a bank loan that it debtor into bankruptcy." Marshall v. Picard (In re then used to repay investors after one of BLMIS's feeder BLMIS), 740 F.3d 81, 89 (2d Cir. 2014) ("Marshall") funds failed. The second purported loan, in April 2006, (internal quotation marks and brackets omitted). "In involved Picower depositing $125 million with BLMIS at assessing whether a claim is derivative, we inquire into when BLMIS was again short on cash to repay its the factual origins of the injury and, more importantly, investors. BLMIS repaid Picower in September 2006. into the nature of the legal claims asserted." Id. The way Both transactions were completed without formal loan a claim is labeled is "not conclusive, since plaintiffs often documents and were not disclosed to the Financial try, but are not permitted, to plead around a Institution Regulatory Authority ("FINRA"). The bankruptcy." In re Tronox Inc., 855 F.3d 84, 100 (2d Cir. complaint alleged that these purported loans gave 2017). By contrast, "when creditors have a claim for Picower control over BLMIS because his ability to injury that is particularized as to them, they are withdraw or refuse the loans would have resulted in exclusively entitled to pursue that claim, and the BLMIS's [*9] collapse and the discovery of the Ponzi bankruptcy trustee is precluded from doing so." Id. at 99 scheme. (internal quotation marks and alterations omitted). "Whereas a derivative injury is based upon a secondary Second, Appellants claimed Picower allowed BLMIS to effect from harm done to the debtor, an injury is said to list him in its fabricated books and records as a be particularized when it can be directly traced to counterparty for a large volume of fictitious options the [*11] third party's conduct." Id. at 100 (internal trading (the "counterparty allegations"). Picower agreed quotation marks and brackets omitted). that he would not disclose the fictitious nature of the trading and that he would warn Madoff if regulators or HN3[ ] Fraudulent transfer is a claim commonly arising others questioned him about the transactions. The in bankruptcy proceedings. A bankruptcy trustee "may complaint further alleged that this lent credibility to recover [from the initial transferee], for the benefit of the Madoff's and BLMIS's fraudulent representations that estate," property fraudulently transferred within the they were engaged in a high volume of options trading.

Finally, Appellants allege that Picower knew that the foregoing activity would result in BLMIS's preparation and filing of false financial reports with FINRA, and that Trustee's claims. In Marshall v. Picard (In re BLMIS), a case such reports would reach BLMIS customers. involving the same exact injunction at issue here and a similar procedural posture, we noted that "[t]he standard of review for HN1[ ] "In an appeal from a district court's review of a the grant of a permanent injunction, including an antisuit bankruptcy court decision, we review the bankruptcy injunction, is abuse of discretion." 740 F.3d 81, 87 (2d Cir. court decision independently, accepting its factual 2014) (quoting Paramedics Electromedicina Comercial, Ltda. v. GE Med. Sys. Info. Techs., Inc., 369 F.3d 645, 651 (2d Cir. findings unless clearly erroneous but reviewing its 2004)) (alteration in original). More recently, in In re Tronox conclusions of law de novo." Ball v. A.O. Smith Corp., Inc., we articulated the distinction that, although the lower 451 F.3d 66, 69 (2d Cir. 2006) (internal quotation marks court's interpretation of the scope of the injunction was 1 omitted). "entitled to deference[,]" the purely legal question of whether the claims at issue were derivative of the trustee's claims was subject to de novo review. 855 F.3d 84, 99 & n.20 (2d Cir. 1 There is an apparent tension in our case law regarding the 2017). We need not resolve this apparent tension, however, standard of review for the bankruptcy court's determination because we would affirm the bankruptcy court under the more that the claim at issue in the complaint is derivative of the demanding de novo review. Page 6 of 8 2018 U.S. App. LEXIS 17574, *11 meaning of 11 U.S.C. § 548.2 11 U.S.C. § 550(a). whether, despite the label Appellants attach to it, the Fraudulent transfer is "perhaps the paradigmatic claim asserted is actually a disguised fraudulent transfer example of a claim that is 'general' to all creditors" in claim that is derivative of the Trustee's fraudulent bankruptcy; thus, it is "usually brought by the trustee, for transfer claim. See Tronox, 855 F.3d at 100. the benefit of all creditors" and "seek[s] to recover property of the estate." Marshall, 740 F.3d at 91 Appellants claim that the Picower Parties are liable (quoting Highland Capital Mgmt. LP v. Chesapeake under § 20(a) because BLMIS was the primary violator Energy Corp. (In re Seven Seas Petroleum, Inc.), 522 of the securities laws, Picower was a control person of F.3d 575, 589 n.9 (5th Cir. 2008)). BLMIS, and Picower was a direct participant in BLMIS's fraud. The facts [*13] as alleged, however, do not give By contrast, HN5[ ] a claim under § 20(a) is a rise to a colorable claim that Picower controlled BLMIS. securities fraud claim that is particularized to the injured The substance of the allegations, therefore, still party or parties. Section 20(a) provides: amounts only to a derivative, fraudulent transfer claim. Every person who, directly or indirectly, controls Appellants do not allege that Picower had the "power to any person liable under any provision of this direct or cause the direction of the management and chapter or of any rule or regulation thereunder shall policies of a person . . . through the ownership of voting also be liable jointly and severally with and to the securities [or] by contract." 17 C.F.R. § 230.405. Thus, same extent as such controlled person to any they must establish that Picower had such power by person to whom such controlled person is liable . . . other means. See id. They have failed to do so. , unless the controlling person acted in good faith and did not directly or indirectly induce the act or Excepting the propping-up and counterparty allegations, acts constituting the violation or cause of action. the gravamen of the present complaint, like that of the previous complaints, is that Picower effected a number 15 U.S.C. § 78t(a). HN6[ ] The elements of a § 20(a) of withdrawals constituting fraudulent transfers from claim are "(1) a primary violation [*12] [of the securities BLMIS to himself, causing BLMIS to falsify its records to laws] by the controlled person, (2) control of the primary hide these transfers from other investors. As we held in violator by the defendant, and (3) that the defendant Marshall, such allegations "plead nothing more than that was, in some meaningful sense, a culpable participant the Picower [Parties] fraudulently withdrew money from in the controlled person's fraud." ATSI Commc'ns, Inc. v. BLMIS." Marshall, 740 F.3d at 92 (quoting Goldman I, Shaar Fund, Ltd., 493 F.3d 87, 108 (2d Cir. 2007). SEC 2013 U.S. Dist. LEXIS 143956, 2013 WL 5511027, at regulations define "control" as "the possession, direct or *7). Indeed, Picower's alleged actions with respect to his indirect, of the power to direct or cause the direction of own withdrawals merely injured the estate by removing the management and policies of a person, whether assets that could have been used to repay other through the ownership of voting securities, by contract, creditors and investors in the SIPA liquidation. Id. at 92- or otherwise." 17 C.F.R. § 230.405; accord Sec. & Exch. 93. Thus, any resulting injury [*14] to Appellants from Comm'n v. First Jersey Sec., Inc., 101 F.3d 1450, 1472- Picower's removal of assets would be "inseparable 73 (2d Cir. 1996). from, and predicated upon, [the] legal injury to the In determining whether the complaint in the present estate." Id. at 92. Moreover, these allegations case is barred by the injunction, we agree with the demonstrate no control over the "management and parties that the appropriate inquiry is not whether the policies" of BLMIS. 17 C.F.R. § 230.405. Rather, they complaint would survive a motion to dismiss pursuant to show Picower purportedly caused BLMIS to transfer Rule 12(b)(6). However, the substance of the money to the Picower Parties and then generate fake allegations is relevant insofar as it helps us to determine records reflecting fake trading activity. But in Madoff's Ponzi scheme, any investor who withdrew money necessarily caused BLMIS to transfer money to the investor and then generate fake records. Thus, these 2 HN4[ ] Property is fraudulently transferred if the debtor allegations do not meet the "control" requirement of § "made such transfer . . . with actual intent to hinder, delay, or 20(a). defraud any entity to which the debtor was or became, on or after the date that such transfer was made . . . , indebted[,]" 11 Nor do the propping-up or counterparty allegations U.S.C. § 548(a)(1)(A), or "received less than a reasonably demonstrate that Picower controlled BLMIS within the equivalent value in exchange for such transfer" and one of a meaning of § 20(a), under either of the two theories number of other requirements is met, id. § 548(a)(1)(B). Page 7 of 8 2018 U.S. App. LEXIS 17574, *14

Appellants advance. scheme; Appellants allege no facts suggesting that Picower directed or originated that practice. First, the complaint asserts that Picower's contributions to the Ponzi scheme allowed the scheme to continue, Ultimately, the "control" allegations in the complaint and that, had he chosen not to assist BLMIS, the amount to nothing more than an attempt to "plead scheme would have collapsed earlier than it did. But around" the injunction. Marshall, 740 F.3d at 96. Appellants make only conclusory allegations that Because the complaint does [*16] not assert a Picower ever leveraged his allegedly important role in colorable § 20(a) claim, and identifies no other legal the scheme to direct the "management and policies" of theory under which Picower's alleged conduct directly BLMIS, 17 C.F.R. § 230.405, and it is not reasonable to injured Appellants, rather than the BLMIS estate, the infer that Picower [*15] had that kind of influence "nature of the legal claim[]" that remains is, once again, merely because he could have caused BLMIS to that of a fraudulent transfer claim.4 Tronox, 855 F.3d at 3 collapse earlier than it did. 100 (internal quotation marks omitted). That claim is clearly derivative of the Trustee's settled fraudulent Second, Appellants contend that the propping-up and transfer claim against Picower and is barred by the counterparty allegations demonstrate Picower's "ability injunction. See Marshall, 740 F.3d at 92. to direct the creation and dissemination of false and misleading trading and financial documentation" Appellants rely heavily on our decision in Picard v. because he knew his participation would result in false JPMorgan Chase & Co. (In re BLMIS), another case information being incorporated into BLMIS's financial from the BLMIS liquidation proceedings, to argue that disclosures. J. App. 462 ¶ 94. But these allegations their § 20(a) claim belongs to the investors, not the demonstrate only Picower's understanding that his Trustee, and thus is not derivative. 721 F.3d 54 (2d Cir. participation would result in the dissemination of false 2013). Appellants point to similarities between the information, not that he actually directed that the allegations in the operative complaint about Picower's dissemination of false information occur or otherwise conduct and the allegations in JPMorgan to argue that had "control of the primary violator" of the securities Picower's actions harmed creditors directly, rather than laws. ATSI Commc'ns, Inc., 493 F.3d at 108. The the BLMIS estate. That reliance is misplaced. creation and dissemination of such false information was a basic and continuing feature of Madoff's Ponzi JPMorgan did not involve § 20(a) claims. In that case, the Trustee sought to hold several financial institutions responsible for assisting Madoff when they knew or 3 This distinguishes the present case from the cases that Appellants cite for the proposition that a lender may acquire control under § 20(a). In Mecca v. Gibraltar Corp. of America, 4 We reject Appellants' contention that they have pleaded a the court held that a reasonable jury could find that the lender, bona fide § 20(a) claim, rather than a fraudulent transfer claim, Gibraltar, controlled the primary securities law violator, merely because the complaint alleges the Picower Parties Contreras, based on multiple examples of Gibraltar using its took actions beyond "directing fictitious trades in, and leverage over Contreras to influence his actions. 746 F. Supp. withdrawing proceeds from, their own BLMIS accounts." 338, 342 (S.D.N.Y. 1990). For example, after Gibraltar Appellants' Br. at 27 (quoting Goldman I, 2013 U.S. Dist. threatened to report Contreras's misconduct to law LEXIS 143956, 2013 WL 5511027, at *6). The language from enforcement, Contreras allowed Gibraltar to place several Goldman I quoted in Appellants' brief indicates only the district people in supervisory roles in Contreras's business, and court's reasoning as to why the particular complaints before agreed to terms on certain transactions at Gibraltar's behest the court were disguised fraudulent transfer claims. Goldman despite his belief that it would hurt relations with his most I, 2013 U.S. Dist. LEXIS 143956, 2013 WL 5511027, at *6-8. important customer. Id. Likewise, the lenders in In re Falstaff Goldman I—which is not binding on this Court—did not, as Brewing Corp. Antitrust Litigation evinced control by requiring Appellants assert, set forth a comprehensive test for the primary violator to "(1) replace acting officers and determining the difference between a bona fide § 20(a) claim directors; (2) implement certain policies; (3) revise its debt and a disguised fraudulent transfer claim, or hold that a § structure; (4) obtain an equity investor; (5) give additional 20(a) claim is bona fide so long as it alleges any conduct at all security; and (6) obtain approval before acquiring or selling that goes beyond the fraudulent withdrawal of funds and the capital assets." 441 F. Supp. 62, 65 (E.D. Mo. 1977). The necessary steps to effect or document such withdrawals. complaint in this case lacks similar examples of Picower Thus, adding the propping-up and counterparty allegations, actually using whatever influence he may have obtained by which do not demonstrate Picower's control, does not allegedly assisting in the Ponzi scheme to direct the transform Appellant's disguised fraudulent transfer claim into a management and policies of BLMIS. control person claim under § 20(a). Page 8 of 8 2018 U.S. App. LEXIS 17574, *16 should have known he was running a Ponzi scheme. We have considered Appellants' remaining arguments See id. at 57-58. The Trustee brought claims for and conclude [*19] that they are without merit. common [*17] law unjust enrichment, breach of Accordingly, we AFFIRM the judgment of the district fiduciary duty, aiding and abetting fraud, and court.5 negligence. See id. at 58. We held that such claims sought to recover money owed directly to creditors, not to the estate, and thus they belonged to the injured End of Document creditors, not to the Trustee. See id. at 67. In doing so, we determined that the defendants' alleged actions had not harmed all of BLMIS's customers in the same way; rather, the Trustee's claims sought to vindicate harms to "thousands of customers" caused by "financial institutions [by] their handling of individual investments made on various dates in varying amounts." Id. at 71.

An important difference between JPMorgan and the present case is that the only theory of liability Appellants have pursued against the Picower Parties is control person liability. The claims in JPMorgan sought to hold financial institutions liable directly for the harms their own actions caused to the investors. See JPMorgan, 721 F.3d at 57-58. By contrast, Appellants' claim seeks to hold the Picower Parties responsible for the harms BLMIS's fraud caused. HN7[ ] A § 20(a) claim seeks to hold the control person jointly and severally liable for the "primary violation" of the securities laws by the controlled person, so long as the control [*18] person is a "culpable participant" in the fraud. ATSI Commc'ns, Inc., 493 F.3d at 108. Here, BLMIS, not the Picower Parties, is alleged to have violated the securities laws— specifically § 10(b) of the Exchange Act and Rule 10b- 5—and thus the harm alleged is that BLMIS defrauded Appellants as investors. Under a § 20(a) theory of liability, the legal significance of Picower's alleged actions facilitating the Ponzi scheme is not that Picower's own actions directly harmed Appellants, but instead that they demonstrated Picower's control and culpable participation in BLMIS's fraud, such that the Picower Parties can legally be held jointly and severally liable for the harms BLMIS caused. Thus, any similarities between the financial institutions' alleged conduct and resulting harm in JPMorgan and Picower's alleged conduct and resulting harm here are irrelevant to the question of whether Appellants' claim is direct or derivative.

The only harm alleged in the operative complaint that Appellants have legally attributed to the Picower Parties is, as in the preceding complaints, for fraudulent withdrawal of assets from the estate. That is a derivative claim, which is barred by the injunction.

* * * Matter of Goodrich Petroleum Corporation, --- F.3d ---- (2018) 65 Bankr.Ct.Dec. 225

interest based on debtor's nonpayment of promissory note executed in connection with settlement. 2018 WL 3149141 United States Court of Appeals, Fifth Circuit. Affirmed. In the MATTER OF: GOODRICH PETROLEUM CORPORATION; Goodrich Petroleum Company, L.L.C., Debtors Appeal from the United States District Court for the Fallon Family, L.P., Appellant Southern District of Texas, Kenneth M. Hoyt, U.S. v. District Judge Goodrich Petroleum Corporation; Goodrich Attorneys and Law Firms Petroleum Company, L.L.C., Appellees. Roger Joseph Naus, John Stephen Hodge, Seth Michael No. 17-20278 Moyers, Wiener, Weiss & Madison, A.P.C., Shreveport, | LA, for Appellant. June 27, 2018 | Frank Converse Brame, Brame Law Firm, P.C., Dallas, REVISED June 29, 2018 TX, Bradley Roland Foxman, Vinson & Elkins, L.L.P., Dallas, TX, John Tucker Kalmbach, Esq., Cook, Synopsis Yancey, King & Galloway, A.P.L.C., Shreveport, LA, for Background: Non-debtor party to prepetition settlement Appellees. agreement with Chapter 11 debtor filed emergency motion seeking to compel assumption or rejection of settlement Before DAVIS, JONES , and HIGGINSON , Circuit agreement. In alternative, movant sought to dissolve Judges. settlement agreement based on debtor's nonpayment of promissory note and sought to strip estate of mineral Opinion lease that it had ratified in connection with settlement. The United States Bankruptcy Court for the Southern W. EUGENE DAVIS, Circuit Judge: District of Texas denied motion and found that debtor- *1 In 2014, appellant Fallon Family, L.P. (the “Fallon in-possession's strong-arm powers protected it from any Family”), as part of a settlement agreement with challenge to its leasehold interest, and movant appealed. appellees Goodrich Petroleum Corporation and Goodrich The District Court, Kenneth M. Hoyt, J., 2017 WL Petroleum Company, L.L.C. (collectively, “Goodrich”), 1178002, affirmed. Appeal was taken. executed a ratification of a previously disputed mineral lease in favor of Goodrich. In March 2016, Goodrich filed a Chapter 11 bankruptcy proceeding. Although Holdings: The Court of Appeals, W. Eugene Davis, the settlement agreement required Goodrich to make Circuit Judge, held that: substantial cash payments over time to the Fallon Family, the recorded ratification of the lease did not [1] Chapter 11 debtor-in-possession, in its strong-arm reflect this fact but only indicated that good and capacity with all of the rights of hypothetical bona fide sufficient consideration had been paid for the ratification. purchaser of debtor's real property as of commencement The Fallon Family argued that because the bankrupt of bankruptcy case, had to be regarded as “third person,” Goodrich failed to make payments under the promissory for purposes of Louisiana “public records” doctrine, and note made part of the settlement agreement, the Fallon Family had the right to dissolve the settlement agreement [2] debtor's strong-arm powers as hypothetical bona on grounds of non-payment, thus divesting Goodrich of fide purchaser of debtor's real property prevented party its interest in the lease. We agree with the bankruptcy which had entered into prepetition settlement with court that when Goodrich filed for bankruptcy, the debtor for ratification of debtor's mineral lease from debtor-in-possession became vested under 11 U.S.C. dissolving settlement and stripping estate of this leasehold § 544(a) with all the rights and powers of a bona fide purchaser of the real property rights of Goodrich,

© 2018 Thomson Reuters. No claim to original U.S. Government Works. 1 Matter of Goodrich Petroleum Corporation, --- F.3d ---- (2018) 65 Bankr.Ct.Dec. 225 including the ratified lease. The lease as ratified may not Fallon Family and the Promissory Note duly delivered. be dissolved for nonpayment of the obligations in the The Amendment and Ratification of Oil, Gas and Mineral settlement agreement because the public record reflects Lease (the “Lease Ratification”) was recorded in the that consideration had been fully paid, and a third party conveyance records of both Caddo and DeSoto parishes, was not placed on notice of the remaining payments. We with an effective date of October 15, 2014. The recorded therefore AFFIRM. Lease Ratification, in relevant part, reads:

*2 NOW, THEREFORE, for the promises and covenants exchanged I. below, and other good and valuable consideration exchanged by the On September 8, 1954, the Fallon Family’s predecessor- Parties on or near this date, the in-interest, Silas F. Talbert, executed a mineral rights receipt and sufficiency of which is lease (the “Lease”) covering a 487–acre tract of land in hereby acknowledged, the Parties Caddo and DeSoto Parishes, Louisiana (the “Property”). agree [to the listed promises and The Lease provided for a five-year primary term and a covenants]. secondary term to continue “as long thereafter as oil, gas or other mineral is produced” on the Property. The Lease was properly recorded in the conveyance records of both The stipulated promises and covenants in the Lease parishes. Ratification are: (1) that except as to land released by prior agreement, the Lease is “hereby affirmed and ratified in On February 28, 2012, the Fallon Family petitioned its entirety, and remains in full force and effect;” (2) that the 42nd Judicial District Court in DeSoto Parish to the Lease “never ceased to be in full force and effect;” (3) terminate the Lease and to assess damages and attorney’s that the Lease is severed by unit for maintenance; and (4) fees against Goodrich and other parties. Specifically, that an additional royalty clause is added to the Lease. the Fallon Family alleged that Goodrich had ceased continuous operations on three units of the Property, in On October 15, 2015, Goodrich paid the first $100,000 violation of the terms of the Lease. On October 2, 2014, installment on the Promissory Note; when the second the Fallon Family recorded two Notices of Pendency of installment came due on April 15, 2016, Goodrich failed Action (collectively, the “Lis Pendens”) in the conveyance to make the payment, leaving a $900,000 outstanding records of Caddo and DeSoto Parishes, which attached balance on the Promissory Note. On the same day, it the Lease and evidenced the Fallon Family’s suit to filed voluntary chapter 11 bankruptcy proceedings in the Southern District of Texas bankruptcy court. terminate the Lease. 1 On October 6, 2014, the eve of trial, the Fallon Family agreed with Goodrich and the During the course of bankruptcy proceedings, the Fallon other defendants to resolve all controversies relating to the Family filed an emergency motion seeking to compel Lease. assumption or rejection of the Settlement Agreement as an 11 U.S.C. § 365 executory contract. Had the Fallon The settlement was confirmed in a written agreement Family succeeded in this argument, Goodrich would (the “Settlement Agreement”) between the Fallon have been obligated either to perform fully the terms of Family, Goodrich, and other defendants. The Settlement the Settlement Agreement and thus pay the remainder Agreement spelled out the terms of the parties’ October of the debt or to reject the Settlement Agreement and 15, 2014 compromise. In the Settlement Agreement, thus relinquish any interest in the Lease Ratification. the Fallon Family agreed to ratify the Lease and to Alternatively, the Fallon Family sought to dissolve release its claims against Goodrich in consideration the Settlement Agreement in its entirety, putting both for Goodrich’s paying $650,000 within ten business parties back in their pre-Settlement Agreement positions days of the Settlement Agreement and executing a and thereby stripping Goodrich of its interest in the promissory note (the “Promissory Note”) in the amount Lease. Goodrich, in opposition, argued that 11 U.S.C. of $1,000,000. The Promissory Note was to be paid in § 544(a) allowed it to rely, as a bona fide purchaser, $100,000 biannual installments, with the first installment on representations in the recorded Lease Ratification due on October 15, 2015. The $650,000 was wired to the

© 2018 Thomson Reuters. No claim to original U.S. Government Works. 2 Matter of Goodrich Petroleum Corporation, --- F.3d ---- (2018) 65 Bankr.Ct.Dec. 225 that full consideration had been paid thereby preventing dissolution. Because Goodrich, as debtor-in-possession, “occupies the shoes of a trustee in every way” under the Bankruptcy On July 26, 2016, following the receipt of Goodrich’s Code, 5 Goodrich’s abilities as debtor-in-possession are objection and a motion hearing, the bankruptcy court defined by 11 U.S.C. § 544(a). 6 The relevant text of 11 denied the Fallon Family’s motion, finding that, though U.S.C. § 544(a) reads as follows: the Promissory Note was integrated into the Settlement Agreement: (1) the Settlement Agreement was not an (a) The trustee shall have, as of the commencement of executory contract under 11 U.S.C. § 365 that Goodrich the case, and without regard to any knowledge of the could be compelled to assume or reject; and (2) the trustee or of any creditor, the rights and powers of, or Fallon Family’s dissolution rights were not effective as to may avoid any transfer of property of the debtor or any Goodrich pursuant to 11 U.S.C. § 544. 2 On appeal, the obligation incurred by the debtor that is voidable by— district court affirmed. ... The Fallon Family timely lodged this appeal. (3) a bona fide purchaser of real property, other than fixtures, from the debtor, against whom applicable law permits such transfer to be perfected, that obtains II. the status of a bona fide purchaser and has perfected such transfer at the time of the commencement of the [1] We exercise jurisdiction pursuant to 28 U.S.C. § 158(d) case, whether or not such a purchaser exists. 7 (1). “We review the decision of a district court, sitting as an appellate court, by applying the same standards of review [2] [3] [4] Section 544(a) does not merely bestow upon a to the bankruptcy court’s findings of fact and conclusions debtor-in-possession the ability to avoid either the transfer 3 of law as applied by the district court.” Thus, we review of a debtor’s property or its obligations; instead, a debtor- the bankruptcy court’s findings of fact for clear error and in-possession is endowed with “the rights and powers” of, 4 its legal conclusions de novo. inter alia, a “bona fide purchaser of real property.” 8 In other words, the Bankruptcy Code creates a legal fiction affording a debtor-in-possession the abilities it would III. have as a bona fide purchaser of the debtor’s interests in immovable property 9 at the time the bankruptcy is Central to this case is the interplay between 11 U.S.C. filed. 10 § 544(a), commonly referred to as the “strong arm” provision of the Bankruptcy Code, and the Louisiana Public Records Doctrine, Louisiana Civil Code article 3338. As a threshold matter, the Fallon Family argues that IV. 11 U.S.C. § 544(a) only permits a debtor-in-possession (1) to avoid the transfer of property of the debtor; or (2) [5] [6] “While the Bankruptcy Code creates the status to avoid the obligations incurred by the debtor. In other of a hypothetical bona fide purchaser, state law defines words, the Fallon Family argues that these are the only that status.” 11 The Fallon Family argues that debtors-in- strong-arm abilities Goodrich has to keep the bankruptcy possession and bona fide purchasers are not third persons estate intact. “under Louisiana’s law of registry with respect to the ratification of a mineral lease pursuant to a settlement *3 These powers, the Fallon Family argues, are agreement,” and thus that Goodrich remains responsible irrelevant in determining whether the Fallon Family can for its obligations under the unrecorded terms of the dissolve the Settlement Agreement because dissolution Settlement Agreement. We agree with Goodrich that this is a separate Louisiana statutory right. We agree with argument is foreclosed by our decision in In re Zedda, Goodrich that the Fallon Family’s reading of 11 U.S.C. § which concluded that 11 U.S.C. § 544(a)(3) bona fide 544(a) is much too narrow.

© 2018 Thomson Reuters. No claim to original U.S. Government Works. 3 Matter of Goodrich Petroleum Corporation, --- F.3d ---- (2018) 65 Bankr.Ct.Dec. 225 purchasers are third persons under the Louisiana Public by the Trustee’s correct assertion that he occupies the Records Doctrine. 12 position of a third party who is entitled to rely on the public records.” 20 As noted above, Goodrich exercises *4 The Louisiana Public Records Doctrine requires the identical powers and duties as a trustee. 21 In re certain types of instruments affecting immovables to be Zedda, then, stands for the proposition that Goodrich, as filed in the public records in order to be effective against a debtor-in-possession, is considered a third person acting third persons. 13 It states: as a bona fide purchaser for the purposes of the Louisiana Public Records Doctrine. 22 The rights and obligations established or created by the following written instruments are without effect as to *5 The Fallon Family attempts to avoid the result a third person unless the instrument is registered by reached in In re Zedda, contending that Article 128 of recording it in the appropriate mortgage or conveyance the Louisiana Mineral Code dictates that Goodrich, as records pursuant to the provisions of this Title: an assignee of a mineral lease, “is fully and directly (1) An instrument that transfers an immovable or responsible for the performance of Goodrich’s prepetition establishes a real right in or over an immovable. obligations under the Settlement Agreement.”

(2) The lease of an immovable. Article 128 provides:

(3) An option or right of first refusal, or a contract to To the extent of the interest buy, sell, or lease an immovable or to establish a real acquired, an assignee or sublessee right in or over an immovable. acquires the rights and powers of the lessee and becomes responsible (4) An instrument that modifies, terminates, or directly to the original lessor transfers the rights created or evidenced by the for performance of the lessee’s instruments described in Subparagraphs (1) through obligations. 23 (3) of this Article. 14 Article 128, on its face, defines the obligations of a Louisiana Civil Code article 3343 defines a third person sublessee or an assignee; because Goodrich is neither, as one “who is not a party to or personally bound by an Article 128 does not apply here. 24 It is true that 15 instrument.” The article clarifies that, “[a] person who Goodrich, prior to initiating bankruptcy proceedings, by contract assumes an obligation or is bound by contract was burdened by the responsibilities described in the to recognize a right is not a third person with respect to Settlement Agreement. However, in donning the mantle of the obligation or right or to the instrument creating or bona fide purchaser permitted by § 544(a)(3), Goodrich is establishing it.” 16 a hypothetical purchaser of the Lease Ratification subject to the obligations detailed therein. 25 In In re Zedda, a panel of this Court considered the intersection of the Louisiana Public Records Doctrine [7] The Fallon Family also argues that Louisiana Civil with 11 U.S.C. § 544(a) where the trustee of a bankruptcy Code article 3343 precludes third-person status for estate claimed that certain property was part of, and Goodrich. This argument fails as well. As described above, could be administered by, the estate. 17 In its analysis, Article 3343 merely clarifies that third persons are not the Court found that, “[f]or purposes of Louisiana’s those who, “by contract assume[ ] an obligation or [are] Public Records Doctrine, a creditor or a purchaser is a bound by contract to recognize a right.” 26 Goodrich third person.” 18 Applying that doctrine to § 544(a), the as debtor-in-possession is considered to be a separate Court concluded that it was “clear” that a trustee was “a entity from Goodrich as debtor. And, as a bona fide third person for purposes of the public records when he purchaser of the Lease Ratification, Goodrich has not assume[d] the status of a hypothetical creditor or a bona contractually assumed obligations outside the recorded 27 fide purchaser as of the commencement of the case.” 19 Lease Ratification. This conclusion, the Court continued, was “supported

*6 In addition, both the registry laws and the Louisiana [9] Under longstanding Louisiana legal principles, Mineral Code recognize the existence and rights of a “[n]either fraud, nor want of consideration, nor secret third person who may be held only to the terms of a equities between the parties, who have placed on the public mineral lease—or to the terms of a document modifying records a title valid upon its face, can be urged against it—as they are described in the conveyance record. 28 the bona fide purchaser for value, who has acted on the The Louisiana Public Records Doctrine explicitly directs faith of such recorded title.” 35 A number of Louisiana that the lease of an immovable and any documents state and federal cases analogous to today’s case have altering the interest in it must be recorded to be effective concluded that, where the conveyance record indicates against a third person. 29 Further, Article 18 of the that consideration has been paid in full, a third party is Mineral Code instructs that “[a]ll sales, contracts, and not susceptible to the remedy of dissolution, which would judgments affecting mineral rights are subject to the laws be available between the original contractual parties. 36 In of registry.” 30 And, a mineral lease is one of the “basic” LeBlanc v. Bernard, the plaintiff sued the rehabilitator of an insurance company, seeking the dissolution of a sale mineral rights under Louisiana law. 31 The fact that the of immovable property where the recorded conveyances immovable in this case is a mineral lease ratification, showed the purchase price had been paid but, in fact, it then, does not affect Goodrich’s status as a third person was undisputed that the price had not been paid. 37 The under the Louisiana Public Records Doctrine. 32 Whether Louisiana appellate court reasoned that “[t]he operation dissolution is permissible notwithstanding the lack of of the right of dissolution against a third party becomes notice to a third person is a separate question we discuss inconsistent with the public records doctrine when ... the below. public records reflect that the [purchase] price [for an immovable right] has been paid.” 38 Thus, the court held that “the right of dissolution cannot lie in this case if V. defendant can rely on the public records.” 39 [8] Having determined that Goodrich, as a debtor-in- possession, qualifies as a third person under the Louisiana *7 In In re Leeward Operators, LLC, an analogous Public Records Doctrine, we address the next question case in the bankruptcy context, two oil companies presented: May a party dissolve an agreement when it will assigned a mineral lease to an oil well operator by letter disrupt an interest in immovable property protected by the agreement. 40 The assignment was recorded—without any Louisiana Public Records Doctrine? mention of the letter agreement—in the parish conveyance records. 41 The operator failed to make the payment The Fallon Family argues that under Louisiana Civil provided for in the agreement and subsequently filed Code article 3339, “a termination of rights that depends on for bankruptcy under Chapter 11. 42 During bankruptcy the occurrence of a condition [such as breach of contract] proceedings, the bankruptcy trustee sought to have the need not be recorded to affect third parties,” and thus creditors’ privileges ranked, and the oil companies sought that the right of dissolution obtains even when recorded dissolution of the agreement assigning the lease and documents do not indicate that an immovable interest requiring consideration. 43 The bankruptcy court refused may be affected. 33 In support, the Fallon Family points to dissolve the agreement, finding that, “if the public to Article 3081 of the Louisiana Civil Code, which governs record shows that the purchase price was paid, the dissolution of a compromise, to argue that the right to seller’s dissolution rights are not effective against third dissolution is effective against third persons regardless 44 of recordation because the right to dissolve a contract parties.” “arises by operation of law.” 34 Goodrich responds that, The Fallon Family here faces obstacles similar to those because the recorded Lease Ratification represents that faced by the plaintiffs in LeBlanc and In re Leeward. full consideration has been paid, the Fallon Family cannot Goodrich, as debtor, has not paid the Promissory dissolve the Settlement Agreement in order to divest Note; however, Goodrich, as debtor-in-possession, and Goodrich of its interest in the Lease. thus a hypothetical bona fide purchaser of the Lease Ratification, may avoid the result of dissolution because

© 2018 Thomson Reuters. No claim to original U.S. Government Works. 5 Matter of Goodrich Petroleum Corporation, --- F.3d ---- (2018) 65 Bankr.Ct.Dec. 225 the public record indicates that consideration has been Parties on or near this date, the fully paid. 45 The Fallon Family has not cited a single receipt and sufficiency of which is authority where dissolution has been allowed where hereby acknowledged, the Parties the defendant is a bona fide purchaser and the public agree [to the listed promises and record shows that the purchase price has been fully covenants]. 46 paid. Following long-standing Louisiana law, then, we The recorded assignment in In re Leeward, as the Lease conclude that because the Lease Ratification shows the Ratification here, specifically acknowledges “the receipt ... purchase price has been paid, the Fallon Family cannot and sufficiency” of the “valuable consideration” detailed 47 dissolve the Settlement Agreement. by the documents. 50 The “promises and covenants” in the Lease Ratification here were “exchanged below,” by *8 The Fallon Family protests that it is ambiguous here Goodrich and the Fallon Family “on or near” October whether the purchase price was, indeed, paid. It argues 15, 2014, the effective date of the Lease Ratification. that the record here militates in favor of a different result Thus, a third person would understand that exchange than that reached for example, in In re Leeward, because was complete on the day the Lease Ratification was the language in the recorded assignment there showed that effective. Also, the Lease Ratification specified that the consideration had been paid “cash in hand,” whereas here Lease had never ceased, so all outstanding encumbrances the Lease Ratification recites that promises and covenants upon the interest would appear to a third party to have have been exchanged. This is not so. been resolved. 51 Additionally, the Lease Ratification makes no reference whatever either to the Settlement As explained above, the bankruptcy court in In re Leeward Agreement or to the Note. The Fallon Family’s claim concluded that the creditor oil companies could not that consideration is insufficient is inconsistent with the dissolve, to the trustee’s detriment, a letter agreement recorded instrument and therefore impermissible under outlining the consideration to be paid for the recorded Louisiana Civil Code article 3342, which prohibits a party assignment of mineral leases when the public record to a recorded instrument from later contradicting the showed that the purchase price had been paid. 48 The instrument to the prejudice of a third person. 52 Because language in that recorded assignment read: the language in the Lease Ratification represents to a third NOW, THEREFORE, in person that consideration had been fully paid, Goodrich consideration of the sum of One is shielded from the effects of dissolution. 53 Hundred Dollars ($100), cash in hand paid, and of other good and valuable consideration, the receipt, VI. adequacy and sufficiency of which are hereby acknowledged, PRIME *9 [10] [11] The Fallon Family offers two final OIL COMPANY, L.L.C., ... does arguments regarding the nature of the Settlement hereby convey, assign, sell, set- Agreement with which we summarily dispense. First, over and deliver unto LEEWARD though the argument is not well developed in briefing, OPERATORS, L.L.C., ... 87.50% of the Fallon Family argues that, because the Promissory the right, title and interest of [Prime] Note and Lease Ratification are fully integrated into the in and to [the] Leases ... 49 Settlement Agreement, Goodrich may not use 11 U.S.C. § 544(a)(3) to treat the Lease Ratification as a bona fide Contrary to the Fallon Family’s argument, this language third-party purchaser. Whether the Settlement Agreement strongly resembles that in its Lease Ratification, which is integrated is not relevant to the dispute here. 54 We reads, in part: find no authority, nor has the Fallon Family cited NOW, THEREFORE, for the any, suggesting that integration of the Promissory Note promises and covenants exchanged and Lease Ratification into the unrecorded Settlement below, and other good and valuable Agreement would put a hypothetical bona fide purchaser consideration exchanged by the

© 2018 Thomson Reuters. No claim to original U.S. Government Works. 6 Matter of Goodrich Petroleum Corporation, --- F.3d ---- (2018) 65 Bankr.Ct.Dec. 225 on notice of the terms of the Settlement Agreement. It the full amount of their claims; however, this is a feature, would not. not a flaw, of the design of the bankruptcy system.

The Fallon Family also argues that the Settlement Agreement cannot be “parsed into its components, so that VII. Goodrich may retain the benefits and reject the burdens.” However, in the bankruptcy context, obligations agreed For the reasons above, we AFFIRM the judgment of the to in pre-petition non-executory contracts are often never bankruptcy court. met in full. The purpose of the Bankruptcy Plan is to meet these commitments as fully as possible while All Citations still granting Goodrich an opportunity to rebuild its business. 55 Unfortunately, creditors often do not receive --- F.3d ----, 2018 WL 3149141, 65 Bankr.Ct.Dec. 225

Footnotes 1 A notice of lis pendens alerts a third party to a suit “affecting the title to, or asserting a mortgage or privilege on, immovable property.” LA. CODE CIV. PRO. ANN. art. 3751. Under Louisiana law, it must be recorded. Id. 2 The 11 U.S.C. § 365 executory contract issue was not urged on appeal, and we do not address it here. 3 In re Entringer Bakeries, Inc., 548 F.3d 344, 348 (5th Cir. 2008) (quotation marks omitted). 4 In re Gerhardt, 348 F.3d 89, 91 (5th Cir. 2003). 5 In re Hughes, 704 F.2d 820, 822 (5th Cir. 1983) (citing 11 U.S.C. § 1107(a) ). The debtor, though left in possession by the judge, does not operate the business as it did before the filing of the petition, unfettered and without restraint. Rather, a debtor in possession holds its powers in trust for the benefit of creditors. Id. (alterations and quotation marks omitted). 6 See generally 11 U.S.C. § 544(a). 7 Id. In advancing its argument, the Fallon Family briefly mentions 11 U.S.C. § 544(a)(1), which endows a trustee with the powers of a judicial lien creditor, but neither Goodrich nor the Fallon Family urge any argument regarding the import of judicial lien creditor status. 8 See id. § 544(a)(3) (emphasis added). “Statutory construction ... begins with the plain language of the statute.” In re Dale, 582 F.3d 568, 573 (5th Cir. 2009). 9 In civil law systems things are divided into movables and immovables. This division was known in Roman law and other ancient legal systems and has been adopted in modern civil codes. In common law jurisdictions, property is divided into personal property and real property, but these terms may be taken as roughly equivalent to the civilian notions of movables and immovables. A. N. YIANNOPOULOS, 2 LA. CIV. L. TREATISE, PROPERTY § 7:1 (5th ed. 2017) (footnotes omitted). 10 11 U.S.C. § 544(a)(3). 11 In re Hamilton, 125 F.3d 292, 298 (5th Cir. 1997). 12 See 103 F.3d 1195, 1201–02 (5th Cir. 1997). 13 The contours of the doctrine have not been fully defined, but its general outlines are settled. The three basic tenets of the doctrine are: an acquirer of immovable property is bound by recorded instruments affecting the property; any personal knowledge that the acquirer may have outside the records is immaterial; and a bona fide purchaser for value is entitled to rely on the absence from the public records of instruments that must be recorded. A. N. YIANNOPOULOS, 4 LA. CIV. L. TREATISE, PREDIAL SERVITUDES § 6:22 (4th ed. 2017). 14 LA. CIV. CODE ANN. art. 3338. 15 Id. art. 3343. 16 Id. 17 103 F.3d at 1200. The Louisiana provision the Court addressed there has changed slightly in form since the In re Zedda decision but has not changed in substance. Compare LA. REV. STAT. ANN. § 9:2721 (1996), with LA. CIV. CODE ANN. art. 3338. 18 In re Zedda, 103 F.3d at 1202. 19 Id.

20 Id. (emphasis added). 21 See In re Hughes, 704 F.2d at 822. 22 See In re Zedda, 103 F.3d at 1202. 23 LA. REV. STAT. ANN. § 31:128. 24 See id. Consequently, the case submitted by the Fallon Family in oral argument, Singer v. Continental Illinois Energy Development Corp., has no relevance to the facts here. See 786 F.2d 647 (5th Cir. 1986). Our facts would parallel those in Singer, if, before filing for bankruptcy, Goodrich had assigned its interest in the Lease Ratification to another party and then, after Goodrich’s filing, the Fallon Family had attempted to enforce the terms of the Settlement Agreement against that third party, which would have none of the 11 U.S.C. § 544(a)(3) protections and would not be a bona fide purchaser. See generally id. As those circumstances vary significantly from today’s case, the Fallon Family’s reliance on Singer is misplaced. See id. 25 See 11 U.S.C. § 544(a)(3). Of note, Goodrich does not contest that the Fallon Family has a viable claim against the bankruptcy estate for the consideration outlined in the Settlement Agreement and, more specifically, the $900,000 debt outstanding on the Promissory Note. However, Goodrich considers this to be separate, unsecured debt. 26 LA. CIV. CODE ANN. art. 3343 (emphasis added). 27 See id. The cases the Fallon Family cites in its briefing are readily distinguishable. See Sonnier v. Conner, 998 So.2d 344, 359 (La. Ct. App. 2008) (citing LA CIV. CODE ANN. art. 961 and LA. CIV. CODE ANN. art. 3343) (standing for the proposition that heirs that have accepted succession are not innocent third persons as to the debts of an estate under Louisiana Civil Code article 3343 and the applicable law of succession); J & R Enters.–Shreveport, L.L.C. v. Sarr, 989 So.2d 235, 241 (La. Ct. App. 2008) (standing for the straightforward precept of Louisiana Civil Code article 3343: that a party who assumes a lease is not a third person). The Fallon Family finally argues that because Louisiana law permits the use of memoranda and notices of lease, not all obligations between the parties need to be recorded in the public records. See LA. REV. STAT. ANN. § 9:2742. Unlike notices or memoranda of lease, however, the Lease Ratification does not purport to be an incomplete statement of the parties’ status. 28 See LA CIV. CODE ANN. art. 3338; LA. REV. STAT. ANN. § 31:18. 29 LA. CIV. CODE ANN. art. 3338. 30 LA. REV. STAT. ANN. § 31:18 (emphasis added). 31 Id. § 31:16. 32 See LA CIV. CODE ANN. art. 3338; LA. REV. STAT. ANN. § 31:18. 33 See LA. CIV. CODE ANN. art. 3339. 34 See id. art. 3081. 35 Schwing Lumber & Shingle Co. v. Ark. Nat. Gas Co., 166 La. 201, 116 So. 851, 852 (1928) (quoting Cole v. Richmond, 156 La. 262, 100 So. 418, 423 (1924) ); see also DIAN TOOLEY–KNOBLETT & DAVID GRUNING, 24 LA. CIV. TREATISE, SALES § 15:12 (2017). 36 See e.g., LeBlanc v. Bernard, 554 So.2d 1378, 1381 (La. Ct. App. 1989); cf. City Bank & Tr. Co. v. Caneco Constr., Inc., 341 So.2d 1331, 1333 (La. Ct. App. 1976) (“[T]he record showed an authentic act of sale reciting that the full amount of the purchase price was paid in cash. Under these circumstances, the trial court did not err in excluding parol evidence varying the recital that the full amount of the purchase price was paid in cash ....”). 37 LeBlanc, 554 So.2d at 1379–81. A rehabilitator under the Louisiana Insurance Code acts as the trustee to a Louisiana bankruptcy estate. See generally LA. REV. STAT. ANN. § 22:2008. 38 LeBlanc, 554 So.2d at 1381. 39 Id. 40 No. 09-50260, 2012 WL 1073173, at *1 (Bankr. W.D. La. Mar. 29, 2012). 41 See id. at *1, *4. 42 Id. at *1. 43 Id. at *1–2. 44 Id. at *3 (citing YIANNOPOULOS, 2 LA. CIV. L. TREATISE, PROPERTY § 233; LeBlanc, 554 So.2d at 1381). 45 See id.; LeBlanc, 554 So.2d at 1381. In fact, the Public Record doctrine might protect Goodrich from being stripped of the Lease Ratification even were the record silent as to the purchase price being paid. See In re D’Anna, 548 B.R. 155, 167–68 (E.D. La. 2016) (“Third persons are not allowed to rely on what is contained in the public records but can instead rely on the absence from the public record of those interests that are required to be recorded.” (internal quotation marks and alterations omitted) ). However, Louisiana law generally appears to require positive affirmation that the purchase

price was paid in the records where parties seek to maintain an interest in immovable property. See YIANNOPOULOS, supra note 9, PROPERTY § 9:33. 46 The Fallon Family argues that Robertson v. Buoni, a Louisiana Supreme Court case, stands for the proposition that the right to dissolve an agreement is not dependent on the existence of a recorded security device. See 504 So.2d 860 (La. 1987). However, in that case, unlike today’s case, there was no third party present. See id. at 863 (Lemmon, J., concurring). The concurrence noted that “[w]hen a sale of immovable property has been recorded, the seller’s right to dissolution, as against a subsequent purchaser, may depend on whether the recorded original sale indicates that the price has or has not been paid.” Id. The court in LeBlanc applied the concurrence’s reasoning, and it has been influential in persuasive secondary sources. See LeBlanc, 554 So.2d at 1380–81 (citing Robertson, 504 So.2d at 863 (Lemmon, J., concurring) ); TOOLEY–KNOBLETT, supra note 35, § 15:12 (citing Robertson, 504 So.2d at 863 (Lemmon, J., concurring) ). 47 Indeed, the Louisiana Supreme Court, in 1928, applied this principle in the land exchange context, prohibiting the dissolution of a contract when the immovable property concerned had passed into the hands of a third party, and the recorded document showed that the parties had acknowledged the exchange to be complete. Schwing Lumber & Shingle Co., 116 So. at 851–52. 48 In re Leeward, 2012 WL 1073173, at *3 (citing YIANNOPOULOS, 2 LA. CIV. L. TREATISE, PROPERTY § 233; LeBlanc, 554 So.2d at 1381). 49 Id. at *4. 50 See id. 51 The bankruptcy court sums up the effect of the language as follows: If a hypothetical third party had examined the property records, the third party would have seen the Lis Pendens referencing the 1954 Lease, then a Lease Ratification which specifically indicated that all claims regarding the 1954 Lease were released and waived. The Lease Ratification indicated further that consideration—analogous to the purchase price in Leeward—had been given and acknowledged as sufficient. The Fallon Family exercising their right to dissolve the Settlement Agreement based on a failure of consideration would contradict the recorded instrument acknowledging receipt and sufficiency of consideration. This is not allowable under Louisiana law. 52 See LA. CIV. CODE. ANN. art. 3342. 53 See, e.g., In re Leeward, 2012 WL 1073173, at *4. 54 See Condrey v. SunTrust Bank of Ga., 429 F.3d 556, 564 (5th Cir. 2005)(explaining that the purpose of an integration clause is to ‘‘negate[ ] the legal introduction of parol evidence,’’ preventing parties from varying a written contract by introducing prior oral agreements). 55 See Stellwagen v. Clum, 245 U.S. 605, 617, 38 S.Ct. 215, 62 L.Ed. 507 (1918) (“The federal system of bankruptcy is designed not only to distribute the property of the debtor ... fairly and equally among his creditors, but as a main purpose of the act, intends to aid the unfortunate debtor by giving him a fresh start in life ....”).

Appellant Dawna Valentine has filed numerous lawsuits since 2011, seeking to avoid foreclosure on and eviction 2018 WL 3005839 from property located on Amberjack Drive in Texas Only the Westlaw citation is currently available. City, Texas. She has also initiated several bankruptcy This case was not selected for proceedings. As the district court explained, the instant publication in West's Federal Reporter. appeal arises from “the interplay between Valentine’s See Fed. Rule of Appellate Procedure 32.1 appeal of [a] state court Judgement for Possession and generally governing citation of judicial decisions Valentine’s latest bankruptcy proceeding.” issued on or after Jan. 1, 2007. See also U.S.Ct. of App. 5th Cir. Rules 28.7 and 47.5. On January 13, 2017, United States Bankruptcy Judge United States Court of Appeals, Fifth Circuit. Marvin Isgur granted a motion by JP Morgan Chase In the MATTER OF: Dawna asking that a bankruptcy stay be lifted. That same day, Meryl VALENTINE, Debtor Valentine filed a notice of appeal in district court. A week later, Valentine filed an amended notice of appeal. The Dawna Valentine, Appellant two notices were filed under different docket numbers. v. JP Morgan Chase Bank National Association, On March 23, 2017, the district court entered a Notice of Successor by Merger to Chase Home Finance, Deficiency, stating that Valentine had not paid the filing L.L.C., its Successors and Assigns, Appellee fee nor arranged to pay for the transcript designated from the bankruptcy court. The Notice of Deficiency warned No. 17-40710 Valentine that if she did not cure these deficiencies within | fourteen days, “the district court may dismiss the appeal Summary Calendar without further notice.” | Filed June 14, 2018 On April 3, 2017, Valentine sent a letter to the district Appeals from the United States District Court for the court clerk’s office requesting that the two cases be Southern District of Texas, USDC No. 3:17-CV-13 consolidated. In that same letter, Valentine indicated that she “[did] not have funds to pay for the appeal” Attorneys and Law Firms and that she “filed proper documentation to be granted an IFP status.” She also claimed she did not have the Dawna Valentine, Pro Se funds to pay for the transcript. That same day, she Marcie Lynn Schout, Esq., William Lance Lewis, Esq., filed a “Judicial Notice” stating, inter alia, that “[i]t[’]s Quilling, Selander, Lownds, Winslett & Moser, P.C., obvious Appellant does not have funds to pay the fee Dallas, TX, for Appellee for the appeal” and claiming that “Appellant submitted all relevant documents ... for an IFP status and this IFP Before HIGGINBOTHAM , JONES, and SMITH , status shall be honored by the district court.” She attached Circuit Judges. a notarized affidavit stating her annual income and the amount of money in her checking and savings accounts. Opinion In the following months, Valentine continued to file * PER CURIAM: motions without curing the deficiency. The district court denied the motions regarding her IFP status *1 This appeal results from the district court’s dismissal “without prejudice to re-urging after completion of of a bankruptcy appeal for want of prosecution. Finding the attached [Application to Proceed in District Court no abuse of discretion, we AFFIRM. Without Prepaying Fees or Costs] form.” The court’s order included an attached copy of the form, yet the record shows that Valentine never submitted the attached I. form despite submitting additional motions, requests

for “Judicial Notice,” and affidavits that the court had already treated as deficient. Under Federal Rule of Civil Procedure 41(b), a district court may dismiss a claim for failure of prosecution. 2 On June 21, the district court issued a “Memorandum While Rule 41(b) refers to a defendant’s motion for Opinion and Order” and an “Order to Cure Deficiencies.” dismissal, the Supreme Court has recognized the “inherent The district court “decline[d] to consolidate these cases power” of district courts to dismiss sua sponte in order until certain procedural problems in both cases are to “manage [its] own affairs so as to achieve the orderly addressed.” The court then noted that Valentine had not and expeditious disposition of cases.” 3 We review such paid the filing fees in either case, nor had she paid for the dismissals for an abuse of discretion. 4 designated transcripts, despite the fact that the court had instructed Valentine to file the appropriate paperwork. Where, as here, the district court order does not specify Thus, the court ordered that the motion to consolidate whether a dismissal is with or without prejudice, “this in both cases was denied without prejudice to reurging, [c]ourt has treated a dismissal for failure to prosecute and instructed that if Valentine did not cure the listed 5 deficiencies by July 7, 2017, both cases would be dismissed as ... a dismissal with prejudice.” We affirm such for want of prosecution. dismissals only when “(1) there is a clear record of delay or contumacious conduct by the plaintiff, and (2) the district *2 Once again, instead of filing the requested form, court has expressly determined that lesser sanctions would Valentine filed a response to the court’s order where she not prompt diligent prosecution, or the record shows reiterated many of her complaints about the handling that the district court employed lesser sanctions that 6 of her case. She also claimed that she had already filed proved to be futile.” Typically, this involves “at least the required documentation in January and February one of three aggravating factors.... includ[ing] (1) delay 2017, and thus the court was “requesting Appellant to resulting from intentional conduct, (2) delay caused by the do something already done” by requiring her to complete plaintiff personally, and (3) delay causing prejudice to the an IFP form. That same day, Valentine filed a new defendant.’ ” 7 “Motion for Leave to Proceed Without Payment” and attached another affidavit containing essentially the same Applying these standards to this case, we find that the information as her previous affidavits. That same day, district court acted within its discretion in dismissing Valentine filed her first Notice of Appeal to this Court. Valentine’s case. 8 The district court repeatedly notified Valentine that she needed to either pay the required filing On July 11, 2017, the district court dismissed the case for fees or submit the appropriate form to proceed in forma want of prosecution and denied all pending motions as pauperis, beginning with the Notice of Deficiency entered moot. on March 23. Valentine continually ignored the court’s urging, instead filing a variety of motions and judicial notices that did not cure the deficiencies. Given the court’s II. repeated warnings, the record demonstrates that lesser sanctions were and would continue to be futile. Valentine’s brief does not address the district court’s dismissal for failure to prosecute. She therefore waives *3 Thus, we AFFIRM the district court’s dismissal. appeal of this claim. 1 Even if her argument were not waived, however, our review of the record indicates that the district court did not abuse its discretion in dismissing All Citations the case. --- Fed.Appx. ----, 2018 WL 3005839

Footnotes * Pursuant to 5th Cir. R. 47.5, the court has determined that this opinion should not be published and is not precedent except under the limited circumstances set forth in 5th Cir. R. 47.5.4.

1 See Hickerson v. Christian, 283 F. App’x 251, 253 (5th Cir. 2008) (per curiam) (unpublished); see also Yohey v. Collins, 985 F.2d 222, 225 (5th Cir. 1993) (noting that issues not briefed are abandoned). 2 See Link v. Wabash R. Co., 370 U.S. 626, 629, 82 S.Ct. 1386, 8 L.Ed.2d 734 (1962) (citing FED. R. CIV. P. 41(b) ). 3 Link, 370 U.S. at 631, 82 S.Ct. 1386. See also Boudwin v. Graystone Ins. Co. Ltd., 756 F.2d 399, 400 (5th Cir. 1985) (noting that “[t]his authority flows from the court’s inherent power to control its docket and prevent undue delays in the disposition of pending cases”). 4 Boudwin, 756 F.2d at 400. 5 In re Wood, 199 F. App’x 328, 331 (5th Cir. 2006) (per curiam) (unpublished); see also Boudwin, 756 F.2d at 400 n.1. 6 In re Wood, 199 F. App’x at 332 (citing Berry v. CIGNA/RSI-CIGNA, 975 F.2d 1188, 1191 (5th Cir. 1992) ). 7 Boudwin, 756 F.2d at 401 (internal quotation marks omitted). 8 Cf. In re Hall, 354 F. App’x 842, 843 (5th Cir. 2009) (per curiam) (unpublished) (finding “no error in the dismissal of the [appellant’s] appeal from the bankruptcy court on account of his failure to pay the filing fees”).

Opinion 893 F.3d 308 United States Court of Appeals, Fifth Circuit. DON R. WILLETT, Circuit Judge:

In the MATTER OF: TECHNICOOL In bankruptcy litigation, the mishmash of multiple parties SYSTEMS, INCORPORATED, Debtor, and multiple claims can render things labyrinthine, to Robert Furlough, Appellant, say the least. To dissuade umpteen appeals raising v. umpteen issues, courts impose a stringent-yet-prudent standing requirement: Only those directly, adversely, and Trustee Lowell T. Cage, Appellee. financially impacted by a bankruptcy order may appeal it. No. 17-20603 | This appeal is from a bankruptcy court order approving a FILED June 20, 2018 trustee’s application to employ special counsel. Appellant Robert Furlough, owner of the Debtor, Technicool Synopsis Systems, objects to Trustee Lowell Cage’s application to Background: Debtor filed for Chapter 7 bankruptcy. employ Stacy & Baker, P.C. (SBPC), alleging that SBPC Trustee applied to employ special counsel, and debtor's holds an interest “adverse to the estate” under 11 U.S.C. owner objected. The United States Bankruptcy Court for § 327(a). Both the bankruptcy court and the district court the Southern District of Texas approved the application, held that Furlough lacked standing to object. We agree. concluding owner lacked standing to object, and the Furlough’s indirect interest in the order fails to meet the United States District Court for the Southern District of strict requirements for bankruptcy standing. Because the Texas affirmed. Owner appealed. order does not reach his wallet, he cannot reach this court.

We AFFIRM. Holdings: The Court of Appeals, Don R. Willett, Circuit Judge, held that: I [1] owner lacked standing under “persona aggrieved” test, and National Oilwell Varco (NOV) purchased roughly 300 industrial-strength air conditioners from manufacturer [2] owner lacked standing to object as a creditor. Technicool Systems for use on specialty oil-and-gas rigs *310 around the world. The total cost to NOV exceeded $3 million. The units were marketed as “desert-proof.” Affirmed. They weren’t. After multiple units failed in the field, NOV, represented by SBPC, sued Technicool in Texas state court for fraud, breach of warranty, and negligent *309 Appeal from the United States District Court for misrepresentation. the Southern District of Texas

Attorneys and Law Firms Shortly thereafter, Technicool filed for Chapter 7 bankruptcy and the resulting automatic stay froze NOV’s Annie E. Catmull, Sara M. Keith, Sanders Willyard, state court lawsuit. NOV filed a Motion for Relief from L.L.P., Houston, TX, for Appellant. the Stay to join Technicool’s owner, Robert Furlough, to its state suit. After an evidentiary hearing, the bankruptcy Timothy L. Wentworth, Cage, Hill & Niehaus, L.L.P., court modified the automatic stay; it allowed NOV to add Houston, TX, for Appellee. Furlough but prohibited NOV from alleging “any cause of action for damages suffered directly or indirectly by the Before SMITH, WIENER, and WILLETT, Circuit Estate, or that otherwise are Estate property.” Judges.

In addition to its state court suit against Technicool and appeal each and every order would clog up the system and Furlough, NOV filed a $3 million proof of claim in the bog down the courts. Given the specter of such sclerotic bankruptcy case, representing 93 percent of the total litigation, standing to appeal a *311 bankruptcy court claims filed by Technicool creditors. SBPC represented order is, of necessity, quite limited. NOV in this suit too. Both the bankruptcy court and the district court After discovery revealed that Furlough had formed concluded that Furlough lacked standing to contest the other companies closely related to Technicool, the Trustee’s application to employ SBPC. We agree. Trustee sought to consolidate the businesses and pierce the corporate veil. To that end, the Trustee filed an application to employ SBPC as special counsel under 11 A U.S.C. § 327(a). Furlough objected to this application, arguing that SBPC was not a disinterested person as [5] [6] [7] [8] The narrow inquiry for bankruptcy required by § 327(a) and that SBPC’s representation of standing—known as the “person aggrieved” test—is NOV was a disqualifying “interest adverse to the estate.” “more exacting” than the test for Article III standing. 4 Rather than showing the customary “fairly traceable” The bankruptcy court held a hearing on Furlough’s 5 objection. The Trustee presented an engagement letter, causal connection, a bankruptcy appellant must instead signed by SBPC, in which NOV agreed to transfer to the show that he was “directly and adversely affected 6 bankruptcy estate any funds it recovered from Furlough pecuniarily by the order of the bankruptcy court.” In in the state court proceedings up to the total amount essence, bankruptcy standing requires “a higher causal of creditor claims on file. At the close of the hearing, nexus between act and injury.” 7 This restriction narrows the court held that Furlough lacked standing to object the playing field, ensuring that only those with a direct, because he was not a creditor and did not have a stake in financial stake in a given order can appeal it. Thus in the estate. It then approved the Trustee’s application to bankruptcy litigation, as in life, “the more money we come employ SBPC. across, the more problems we see.” 8

The district court affirmed on standing, and Furlough Furlough cannot show that he was “directly and adversely timely appealed. affected pecuniarily by the order of the bankruptcy court.” 9 Furlough’s primary contention is that, but for NOV’s proof of claim, Technicool’s assets would exceed II its debt, and he would be entitled to any estate surplus. Because SBPC represents both NOV and the Trustee, [1] [2] [3] Because this appeal arises from a district Furlough argues, it might fail to disclose any problems court order affirming the final judgment of a bankruptcy with NOV’s claim, robbing him of the possibility of court, we apply the same standard of review as did recovering a surplus. the district court. That is, we review the bankruptcy court’s factual findings for clear error, and we review This speculative prospect of harm is far from a direct, legal conclusions and mixed questions of fact and law de adverse, pecuniary hit. Furlough must clear a higher 1 novo. Standing is a question of law that we review de standing hurdle: The order must burden his pocket before novo. 2 he burdens a docket. SBPC was appointed to assist the Trustee in consolidating claims and piercing the corporate [4] Bankruptcy courts are not Article III creatures bound veil. That appointment does not directly affect whether by traditional standing requirements. 3 But that does not the bankruptcy court approves or denies NOV’s claim mean disgruntled litigants may appeal every bankruptcy against the estate, and thus it does not directly affect court order willy-nilly. Quite the contrary. Bankruptcy Furlough’s pecuniary interests. Furlough’s argument is cases often involve numerous parties with conflicting and essentially that if NOV’s claim (somehow) ceased to overlapping interests. Allowing each and every party to exist or dramatically decreased, the estate’s assets would exceed its debt, and he would benefit financially. This

© 2018 Thomson Reuters. No claim to original U.S. Government Works. 2 Matter of Technicool Systems, Incorporated, 893 F.3d 308 (2018) 65 Bankr.Ct.Dec. 215 might be true—however unlikely—but it would not be a [10] Furlough asserts he has standing because he is now direct result of this appeal. That Furlough feels grieved a creditor. But this argument proves too little, too late. by SBPC’s appointment does not make him a “person Now matters not. Standing is “determined as of the 12 aggrieved” for purposes of bankruptcy standing. commencement of the suit.” And Furlough was not a creditor at the time the Trustee sought to employ SBPC or at the time the bankruptcy court held a hearing on his objection. He purchased a proof of claim while his appeal B was pending before the district court. Timing matters, [9] Furlough claims another basis for standing. The though, and Furlough cannot belatedly claim creditor Bankruptcy Code states that creditors have standing to status and establish standing retroactively. oppose an application *312 to employ special counsel if an actual conflicts exists. Under § 327(c), “a person is not disqualified for employment ... solely because of III such person’s employment by or representation of a creditor, unless there is objection by another creditor or Furlough is neither a “person aggrieved” under the the United States trustee, in which case the court shall exacting test for bankruptcy standing nor a creditor under disapprove such employment if there is an actual conflict 11 U.S.C. § 327(c). of interest.” 10 The Bankruptcy Code defines “creditor” as an entity that has: (1) “a claim against the debtor AFFIRMED. that arose at the time of or before the order for relief concerning the debtor”; (2) one of several specific types of All Citations claims against the estate; or (3) a community claim. 11 893 F.3d 308, 65 Bankr.Ct.Dec. 215

Footnotes 1 See In re Mercer, 246 F.3d 391, 402 (5th Cir. 2001) (en banc) (citing Randall & Blake, Inc. v. Evans (Matter of Canion), 196 F.3d 579, 584 (5th Cir. 1999) ). 2 See Fortune Nat. Res. Corp. v. U.S. Dep’t of Interior, 806 F.3d 363, 366 (5th Cir. 2015) (citing Joffroin v. Tufaro, 606 F.3d 235, 238 (5th Cir. 2010) ). 3 See Rohm & Hass Tex., Inc. v. Ortiz Bros. Insulation, 32 F.3d 205, 210 n.18 (5th Cir. 1994) (explaining that “Article III is inapplicable to bankruptcy courts”). 4 Matter of Delta Produce, L.P., 845 F.3d 609, 619 (5th Cir. 2016) (quoting In Re Coho Energy, Inc., 395 F.3d 198, 203 (5th Cir. 2004) ); see also Coho Energy, 395 F.3d at 202 (explaining that the “person aggrieved” test originated in 11 U.S.C. § 67(c) (1976) and noting that, although Congress did not include the provision “when the [Bankruptcy] code was revamped in 1978[,] ... courts subsequently have found that this test continues to govern standing”). 5 See Lujan v. Defenders of Wildlife, 504 U.S. 555, 560–61, 112 S.Ct. 2130, 119 L.Ed.2d 351 (1992) (laying out the “three elements” that make up the “irreducible constitutional minimum” of standing: an injury in fact, a fairly traceable causal connection between the injury and the complained-of conduct, and a likelihood of redressability). 6 Fortune Nat. Res., 806 F.3d at 366 (quoting Coho Energy, 395 F.3d at 203). 7 Id. 8 NOTORIOUS B.I.G., Mo Money Mo Problems, on LIFE AFTER DEATH (Bad Boy/Arista 1997). 9 Fortune Nat. Res., 806 F.3d at 366 (quoting Coho Energy, 395 F.3d at 203). 10 11 U.S.C. § 327(c) (emphasis added). 11 Id. at § 101(10). 12 Kitty Hawk Aircargo, Inc. v. Chao, 418 F.3d 453, 458 (5th Cir. 2005) (quoting Lujan, 504 U.S. at 570 n.5, 112 S.Ct. 2130).

debtor to sign consent directive, but about how it should issue. 585 B.R. 587 United States Bankruptcy Appellate Panel of the Ninth Circuit. Reversed and remanded.

IN RE: Michael R. MASTRO, Debtor. James F. Rigby, Jr., Chapter 7 Trustee, Appellant, *589 Appeal from the United States Bankruptcy Court v. for the Western District of Washington, Bk. No. 2:09–bk– Michael R. Mastro, Appellee. 16841–MLB, Honorable Marc L. Barreca, Bankruptcy Judge, Presiding BAP No. WW–17–1226–TaSKu | Attorneys and Law Firms Bk. No. 2:09–bk–16841–MLB | Rick Rein of Horwood Marcus & Berk Chartered argued Argued and Submitted March 22, 2018 for appellant James F. Rigby, Jr.; | C. James Frush of Corr Cronin Michelson Baumgardner Filed June 5, 2018 Fogg & Moore argued for appellee Michael R. Mastro. Synopsis Before: TAYLOR , SPRAKER, and KURTZ, Background: After involuntary Chapter 7 debtor and his Bankruptcy Judges. wife fled the country in order to avoid turning over potentially significant assets to trustee, trustee sought an order requiring debtor to execute consent directive, OPINION which trustee could then send to international banks and financial entities in attempt to identify undisclosed TAYLOR, Bankruptcy Judge: debtor accounts. The United States Bankruptcy Court for the Western District of Washington, No. 2:09-bk-16841- INTRODUCTION MLB, Marc L. Barreca, J., declined, on theory that he was without authority to issue such an order, and trustee Extraordinary cases may require unusual measures; and appealed. this case certainly qualifies *590 as extraordinary. Chief among the atypical events is debtor Michael Mastro's flight from the United States to avoid turning potentially significant assets over to chapter 7 1 trustee James F. Holdings: The Bankruptcy Appellate Panel, Taylor, J., Rigby, Jr. Debtor and his wife are now resident in France, held that: and extradition efforts in a related criminal proceeding have failed. [1] requiring debtor to execute consent directive would not violate debtor's Fifth Amendment rights against self- As a result of this extraordinary lack of cooperation, the incrimination; Trustee seeks unusual assistance in his attempt to identify and collect assets of the estate: He requests an order [2] bankruptcy court may exercise its authority to compelling Mastro to sign a consent directive, a rara avis issue “necessary or appropriate” orders, processes, or in the bankruptcy world. He intends to send the executed judgments and the mechanism of Rule 2004 in order to document to international banks and financial entities in compel debtor to sign a consent directive in furtherance an attempt to identify undisclosed Mastro accounts. of debtor's obligation to provide recorded information to trustee and in furtherance of trustee's duty to investigate Mastro opposed issuance of the consent directive with debtor's affairs; and vehemence, and his opposition was successful. The bankruptcy court, while sympathetic to the Trustee's [3] on remand, bankruptcy court would have discretion not only about whether an order should issue requiring

© 2018 Thomson Reuters. No claim to original U.S. Government Works. 1 In re Mastro, 585 B.R. 587 (2018) 65 Bankr.Ct.Dec. 207, 2018 Daily Journal D.A.R. 5451 dilemma, declined to compel execution of the document The bankruptcy court had jurisdiction under 28 U.S.C. because, it reasoned, it lacked any authority to do so. §§ 1334 and 157(b)(2)(A). We have jurisdiction under 28 U.S.C. § 158. The Trustee appealed, and he now asks us to rule that a bankruptcy court may issue a consent directive. As we agree that the bankruptcy court had discretion to do so, ISSUES we REVERSE and REMAND. Did the bankruptcy court abuse its discretion in denying the Trustee's request for an order compelling a consent directive and the Trustee's reconsideration motion? FACTS 2

[1] The parties provide little background information about this 2009 involuntary bankruptcy case. As STANDARDS OF REVIEW already noted, however, Mastro was not a cooperative involuntary debtor; he and his wife fled to France with [2] [3] [4] We review the bankruptcy court's legal estate assets. Their legal troubles include pending criminal conclusions de novo. Los Angeles Cnty. Treasurer & Tax charges. See generally Mastro v. Rigby, 764 F.3d 1090, Collector v. Mainline Equip., Inc. (In re Mainline Equip., 1092 (9th Cir. 2014) (“[A] French Court of Appeal has Inc.), 539 B.R. 165, 167 (9th Cir. BAP 2015). We otherwise denied U.S. requests to extradite Linda and Michael.”). review for an abuse of discretion a bankruptcy court's: The Trustee appears confident that estate assets outside (1) Rule 2004 decision, In re Dinubilo, 177 B.R. 932, 939 his control exist. (E.D. Cal. 1993); Motor Coach Indus., Inc. v. Drewes (In re Rosenberg), 303 B.R. 172, 175 (8th Cir. BAP 2004); and In May 2017 (and nearly 4,000 docket entries after case (2) denial of a motion for reconsideration, Weiner v. Perry, initiation), the Trustee moved for an order under Rule Settles & Lawson, Inc. (In re Weiner), 161 F.3d 1216, 1217 2004 and § 521(a)(3) and (4) allowing the “issuance for (9th Cir. 1998). execution by the Debtor, Michael R. Mastro, of a Consent Directive.” 3 [5] A bankruptcy court abuses its discretion if it applies the wrong legal standard, misapplies the correct legal The bankruptcy court denied the request. It expressed standard, or makes factual findings that are illogical, concern that the consent directive was a form of injunctive implausible, or without support in inferences that may be relief and concluded: “I still have to follow the law. I only drawn from the facts in the record. See TrafficSchool.com, have the authority, under Rule 2004, to do what Rule 2004 Inc. v. Edriver Inc., 653 F.3d 820, 832 (9th Cir. 2011) blesses. I don't see that it blesses consent directives, even if (citing United States v. Hinkson, 585 F.3d 1247, 1262 (9th it does bless, as it does, issuance of subpoenas under [Civil] Cir. 2009) (en banc) ). Rule 45.” In considering whether the bankruptcy court applied or *591 The bankruptcy court entered a separate order rested its conclusion on an erroneous legal standard, we denying the motion. That same day, the Trustee moved review legal conclusions de novo. See Pom Wonderful for reconsideration; treating it as a Rule 9023 motion, the LLC v. Hubbard, 775 F.3d 1118, 1123 (9th Cir. 2014). bankruptcy court denied the motion.

The Trustee timely appealed. Because a Rule 2004 DISCUSSION examination decision may be interlocutory, we granted leave to appeal under 28 U.S.C. § 158(a)(3). The Trustee advanced several theories supporting his request that the bankruptcy court compel Mastro to sign the consent directive. He initially invoked Rule 2004 in connection with Mastro's duties under § 521(a)(3) JURISDICTION and (4); then he argued that Civil Rule 45, as applied by Rule 2004(c), authorizes consent directives; next, he

© 2018 Thomson Reuters. No claim to original U.S. Government Works. 2 In re Mastro, 585 B.R. 587 (2018) 65 Bankr.Ct.Dec. 207, 2018 Daily Journal D.A.R. 5451 argued that Civil Rule 26, as applied to Rule 2004 by Other circuits followed suit. United States v. Davis, 767 Rule 9014, authorizes consent directives; and last, in his F.2d 1025, 1040 (2d Cir. 1985); United States v. Cid– reconsideration motion, he directly invoked § 105. Molina, 767 F.2d 1131, 1133 (5th Cir. 1985). 4 But opinions were not unanimous: The First Circuit, over On appeal, the Trustee abandoned his Civil Rule 45 a dissent by then-Judge Breyer, held that compelling a argument; we do not consider it further. signature on a consent directive would be testimonial. In re Grand Jury Proceedings (Ranauro), 814 F.2d 791, 795–96 (1st Cir. 1987). See also United States v. Pedro, A. Consent directives are investigatory tools. 662 F.Supp. 47 (W.D. Ky. 1987), vacated, 889 F.2d A consent directive is not necessarily or even often 1089 (6th Cir. 1989); Senate Select Comm. on Secret consensual: reported decisions involve cases where a court Military Assistance to Iran v. Secord, 664 F.Supp. 562, compels a person to sign the document. The signatory 565 (D.D.C.), vacated, 933 F.Supp. 1 (D.D.C. 1987); identifies neither the contemplated recipients nor accounts United States v. Cook, 678 F.Supp. 1292 (N.D. Ohio in the consent directive. Instead, the document generally 1987); In re Grand Jury Investigation (Doe), 599 F.Supp. directs any bank or other financial institution that receives 746 (S.D. Tex. 1984). the consent directive to disclose any accounts held by the signatory. As a result, the signatory does not admit As a result, issues related to the constitutionality of a the existence of any account at any particular financial consent directive worked their way up to the Supreme institution. Court, which concluded in Doe v. United States that a consent directive was not testimonial in nature and, thus, *592 1. The Supreme Court found a consent directive did not violate the signer's Fifth Amendment privilege. 487 permissible in Doe v. United States, 487 U.S. 201, 108 U.S. 201, 214–19, 108 S.Ct. 2341, 101 L.Ed.2d 184 (1988). S.Ct. 2341, 101 L.Ed.2d 184 (1988). Only Justice Stevens dissented. Id. at 219, 108 S.Ct. 2341 Consent directives began to receive judicial scrutiny in (Stevens, J., dissenting). reported decisions in the early 1980s. United States v. Ghidoni involved Lawrence Ghidoni's indictment for 2. Doe controls our evaluation of Mastro's tax evasion and the government's issuance of a records constitutionality argument. subpoena to the Florida branch of the Bank of Nova [6] Mastro does not question the Trustee's proposed Scotia. 732 F.2d 814, 816 (11th Cir. 1984). Bank officials, form of consent directive. Instead, he asserts that recent concerned about bank employees' exposure to criminal developments in the act-of-production doctrine undercut liability under Cayman Islands Law, suggested that Doe's holding and make Justice Stevens's dissent the better Ghidoni sign a consent directive. Id. The district court view. then ordered him to sign one, Ghidoni refused to do so, and the district court found him in contempt. Id. But vague allusion to developments in the law and a half-hearted, paragraph-long discussion do not rise to The Eleventh Circuit affirmed. Id. It held, over a dissent, the level of a cognizable argument justifying deviation that compelling Ghidoni to sign the consent directive did *593 from Supreme Court authority. We appreciate that not violate his Fifth Amendment privilege against self- Mastro wants to preserve his constitutionality argument incrimination because the directive was not testimonial for appeal. But we are bound by Doe, and Mastro in nature. Id. at 819. In resolving the question, the cites no case that even suggests that Doe is no longer Eleventh Circuit highlighted that the directive spoke in good law. Cf. In re Various Grand Jury Subpoenas, the hypothetical. E.g., id. at 818 (“Rather, the directive 248 F.Supp.3d 525, 527–29 (S.D.N.Y. 2017) (concluding states that if the accounts exist ....”) (emphasis in original); that the “Consent Directive Does Not Violate the Fifth id. (“Rather, the directive merely permits the bank to Amendment” and citing Doe, 487 U.S. at 215, 108 disclose information relating to any accounts with respect S.Ct. 2341). Accordingly, because Doe holds that consent to which the bank records indicate Ghidoni's authority to directives are not testimonial, we reject Mastro's argument draw (i.e., any accounts with respect to which the bank that an order compelling execution of a consent directive thinks Ghidoni has authority).”) (emphasis in original).

© 2018 Thomson Reuters. No claim to original U.S. Government Works. 3 In re Mastro, 585 B.R. 587 (2018) 65 Bankr.Ct.Dec. 207, 2018 Daily Journal D.A.R. 5451 would violate his Fifth Amendment privilege against self- Trade Commission, the Consumer Financial Protection incrimination. Bureau, the *594 Securities and Exchange Commission, and the Internal Revenue Service use them. Each of these agencies is vested by statute with investigatory powers, 3. Courts in non-bankruptcy cases rely on various including the ability to issue subpoenas and compel sources of authority to issue consent directives. testimony of witnesses. 7 And each can rely on such In Doe, the Fifth Circuit held that the All Writs Act powers in requesting and obtaining a consent directive. (28 U.S.C. § 1651) allowed the district court to issue the consent directive. 487 U.S. at 205 n.3, 108 S.Ct. 2341. The Internal Revenue Service's use of a consent directive Because the petitioner did not challenge that conclusion was discussed and limited in United States v. Kao, 81 F.3d on appeal, the Supreme Court did not address it. Id. 114, 115–16 (9th Cir. 1996). The Ninth Circuit held that the IRS could not compel signature of a consent directive After Doe, reported decisions began to define the under 26 U.S.C. § 7602 because so doing could allow the authority for issuance of consent directives with more IRS to obtain records from domestic financial institutions precision. Some courts relied on the All Writs Act, but without notifying the Kaos, thus circumventing 26 U.S.C. many were reluctant to rely on it exclusively because the § 7609, which establishes special procedures that the All Writs Act is not an independent source of jurisdiction: IRS must use to summon a domestic, third-party record to invoke it, the court must have some other jurisdictional keeper. Id. at 116–17. Notwithstanding this decision, basis. E.g. , In re Grand Jury Proceedings, Yanagihara the IRS continues to request consent directives where Grand Jury, 709 F.Supp. 192, 194 (C.D. Cal. 1989) (“The it seeks information from financial institutions outside court agrees that jurisdiction may not rest on the All the United States. E.g., United States v. Norwood, 420 Writs Act alone.”). See United States v. Denedo, 556 F.3d 888 (8th Cir. 2005); United States v. Brayshaw, U.S. 904, 913, 129 S.Ct. 2213, 173 L.Ed.2d 1235 (2009) No. 2:14-MC-00088-MCE-KJN, 2016 WL 7048033, 2016 (“[T]he All Writs Act and the extraordinary relief the U.S. Dist. LEXIS 171003 (E.D. Cal. Oct. 20, 2016); statute authorizes are not a source of subject-matter United States v. Plath, No. 0:03–cv–60439–KAM, 2003 jurisdiction.”); Doe v. INS, 120 F.3d 200, 204–05 (9th Cir. WL 23138778, 2003–2 U.S. Tax Cas. (CCH) P50,729 (S.D. 1997). Fla. Oct. 29, 2003). 8 In the context of criminal proceedings, the recalcitrant witness statute, 28 U.S.C. § 1826, which governs grand *595 In the ordinary civil context, courts have also jury witnesses, emerged as the primary jurisdictional authorized consent directives based on their “broad discretion” to supervise discovery. See Bank of Crete v. hook. 5 Both the Ninth and Second Circuits held that the Koskotas, No. 88-CIV-8412-KMW, 1989 WL 46587, at recalcitrant witness statute vested the district court with *1, 1989 U.S. Dist. LEXIS 4289, at *2–*3 (S.D.N.Y. authority to compel and enforce a consent directive. In re Apr. 21, 1989) (“I hold that the issuance of an order Grand Jury Proceedings (Shams), 873 F.2d 238 (9th Cir. compelling defendant to sign a consent form is within 6 1989); In re Doe, 860 F.2d 40, 49 (2d Cir. 1988). As a the court's broad discretion to supervise discovery and result, both circuits declined to consider if the All Writs issue appropriate orders, provided that the form of the Act, in isolation, was sufficient. Shams, 873 F.2d at 239 consent does not abrogate defendants' Fifth Amendment n.1; In re Doe, 860 F.2d at 49. or due process rights.”); see also SEC v. Coll. Bound, Inc., 155 F.R.D. 1, 2 (D.D.C. 1994) (“District courts have The Second Circuit additionally held that the district broad discretion in supervising discovery. An order to court's inherent supervisory power over a grand jury compel defendants to sign a consent form is a permissible provided the district court with the power to enforce a method of obtaining that discoverable information in a consent directive. In re Doe, 860 F.2d at 49. civil context, provided that the form of the consent does not abrogate defendants' Fifth Amendment or due process Reported cases discuss the appropriateness of consent rights.”). And at least one court required signature of a directives outside situations involving a grand jury consent directive in concert with the granting of a motion less frequently, but government agencies such as the to compel under Civil Rule 37. See Hansel 'N Gretel Commodity Futures Trading Commission, the Federal Brand, Inc. v. Savitsky, No. 1:94-cv-04027-CSH-HBP,

1997 U.S. Dist. LEXIS 17615, at *1–*2, 1997 WL 698179, at *1 (S.D.N.Y. Nov. 10, 1997). The Bank of Crete and 2. Section 105 and Rule 2004 provide broad authority to Hansel 'N Gretel Brand, Inc. cases are noteworthy because a bankruptcy court and allow it to enter orders carrying they do not involve a government agency. out Code-imposed obligations. The Code and Rules provide powers and tools that allow a trustee to meet her responsibilities to investigate a debtor's B. Bankruptcy courts may compel a debtor to sign a financial affairs and to collect and liquidate a debtor's consent directive on the request of a chapter 7 trustee. estate. [7] When we consider the obligations and enforcement mechanisms created by the Code and the investigatory Section 105. Section 105(a) vests bankruptcy courts with tools available to the Trustee, we conclude that the broad residual power: “The court may issue any order, bankruptcy court had discretion to authorize and enforce process, or judgment that is necessary or appropriate to a consent directive at the request of the Trustee. carry out the provisions of this title.” 11 U.S.C. § 105(a). And bankruptcy courts have “broad authority” under § 105(a) “to take any action that is necessary or appropriate 1. The Code imposes statutory investigatory duties on to prevent an abuse of process ....” Marrama v. Citizens trustees and statutory disclosure obligations on debtors. Bank of Mass., 549 U.S. 365, 375, 127 S.Ct. 1105, 166 [8] A chapter 7 trustee is under a statutory duty to, L.Ed.2d 956 (2007) (internal quotation marks omitted). among other things, collect “the property of the estate” Section 105(a) thus “confers authority to ‘carry out’ the and “investigate the financial affairs of the debtor ....” provisions of the Code ....” Law v. Siegel, 571 U.S. 415, 11 U.S.C. § 704(a)(1)&(4). Property of the estate includes 134 S.Ct. 1188, 1194, 188 L.Ed.2d 146 (2014). a debtor's foreign bank accounts. See Hong Kong & Shanghai Banking Corp. v. Simon (In re Simon), 153 F.3d We long ago held that § 105(a) encompassed the powers 991, 996 (9th Cir. 1998). of the All Writs Act in bankruptcy proceedings. Ad Hoc Protective Comm. for 10½% Debenture Holders v. Itel A chapter 7 debtor also has various, Code-imposed duties. Corp. (In re Itel Corp.), 17 B.R. 942, 945 (9th Cir. BAP 11 U.S.C. § 521(a). A debtor must “surrender to the trustee 1982). Indeed, both § 105(a) and the All Writs Act serve all property of the estate and any recorded information, similar purposes. 10 including books, documents, records, and papers, relating to property of the estate ....” 11 U.S.C. § 521(a)(4). That [9] Although we recognize the breadth of § 105, we includes bank accounts, even foreign accounts. And in the conclude, by analogy to those cases rejecting use of the § 521(a)(4) context, a debtor's disclosure obligations are All Writs Act as the sole basis for issuance of a consent heightened: she must surrender information to the trustee directive, that it cannot justify issuance of a consent even if she has not been granted immunity under § 344. directive in isolation. Despite its broad language, § 105(a) 9 Id. In addition, a debtor has a duty to cooperate with is not a “roving commission to do equity.” Saxman v. the chapter 7 trustee “as necessary to enable the trustee to Educ. Credit Mgmt. Corp. (In re Saxman), 325 F.3d 1168, perform the trustee's duties under this title ....” 11 U.S.C. 1175 (9th Cir. 2003) (internal quotation marks omitted). § 521(a)(3). It cannot be used to take “action that the Code prohibits.” Law, 134 S.Ct. at 1194. *596 Thus, the Trustee's investigatory powers resemble those of the governmental agencies that utilize consent But § 105 does not operate in isolation when a trustee directives. Like those agencies, the Trustee has a statutory requests a consent directive; instead, it operates in concert authorization to require production of documents in with the Code's investigatory and disclosure requirements. the furtherance of an investigatory duty also created by A consent directive order under § 105 would enable statute. the trustee's § 704 investigation of the debtor's financial affairs; and it is consistent with a debtor's § 521 obligation And a debtor's duty to provide information and to to cooperate with this investigation. cooperate in this investigation is at least as clear as that of a party subject to regulation by a governmental agency.

In short, bankruptcy courts may use § 105(a) to issue a the ability to summon persons and to obtain production consent directive and carry out the provisions of §§ 704 of documents and data. Based on this authority, even and 521. without a tool such as a Rule 2004 examination, the agencies use consent directives to conduct statutorily [10] Rule 2004. Rule 2004 is the basic discovery device required investigation. 14 in bankruptcy cases. In re Subpoena Duces Tecum, 461 B.R. 823, 829 (Bankr. C.D. Cal. 2011). 11 It allows A chapter 7 trustee, similarly, is statutorily tasked broad examination relating to “the acts, conduct, or with investigating financial affairs and collecting estate property or to the liabilities and financial *597 condition property, and Rule 2004 allows a trustee to compel the of the debtor, or to any matter which may affect the production of documents. Thus, a trustee uses a consent administration of the debtor's estate, or to the debtor's directive in the same manner as the agencies discussed right to a discharge.” Fed. R. Bankr. P. 2004(b); see also above. id. (discussing scope of examination in chapter 11, 12, and 13 cases). Our conclusion is similarly supported when we consider that debtors' disclosure obligations are analogous to the [11] [12] As the Rule's text makes clear, the scope of a obligations of witnesses under subpoena. As we noted Rule 2004 examination is “unfettered and broad”; the rule *598 above, the Code requires a debtor to surrender essentially permits a “fishing expedition.” In re Subpoena to a trustee “any recorded information, including books, Duces Tecum, 461 B.R. at 829 (quoting and citing In re documents, records, and papers, relating to property GHR Energy Corp., 33 B.R. 451, 453–54 (Bankr. D. Mass of the estate ....” 11 U.S.C. § 521(a)(4). This statutory 1983) ). And the examination may “extend to third parties text mirrors language that the Ninth Circuit has already who have had dealings with the debtor.” In re Fin. Corp. used to justify a consent directive when it held that the of Am., 119 B.R. 728, 733 (Bankr. C.D. Cal. 1990). recalcitrant witness statute, 28 U.S.C. § 1826, authorizes a district court to hold a grand jury witness who refuses to [13] We acknowledge that Rule 2004 is not without limits. sign a consent directive in contempt. Shams, 873 F.2d at It should not be used “to abuse or harass ....” In re Enron 239. That section, in turn, refers to a witness who “refuses Corp., 281 B.R. 836, 840 (Bankr. S.D.N.Y. 2002); cf. Fed. without just cause shown to comply with an order of the R. Bankr. P. 9011(b)(1). Nor should it “stray into matters court to testify or provide other information, including which are not relevant to the basic inquiry.” In re Mittco, any book, paper, document, record, recording or other Inc., 44 B.R. 35, 36 (Bankr. E.D. Wis. 1984). 12 Thus, we material ....” 28 U.S.C. § 1826(a). Refusing to sign a stop short of a determination that Rule 2004, in isolation, consent directive, then, must be contemptuous because would justify issuance of a consent directive to anyone it is refusal to “provide other information,” as plainly required by statute. other than a chapter 7 trustee. 13 But where, as here, it enables the financial affairs investigation required by the The statutory texts are similar. Both statutes' illustrative, Code, it is firmly tethered to the Trustee's § 704 statutory “including” list refer to “books,” “documents,” “records,” duties. Thus, issuance of a consent directive in connection and “papers.” The recalcitrant witness statute goes a little with a Rule 2004 examination request is entirely consistent further and references “recording” and “other material” in with the broad inquiry into a debtor's financial affairs its illustrative list. And we acknowledge a slight wording authorized by the Code. difference between the two: § 521(a)(4) refers to “recorded information” while 28 U.S.C. § 1826(a) refers to “other 3. Case law allowing use of consent directives in other information.” But the account information sought by a contexts supports our determination that they are consent directive falls under each term; it is both recorded appropriate in a bankruptcy context. information and other information. Thus, to the extent 28 Our view that the statutory rights and duties created U.S.C. § 1826(a) authorizes the use of a consent directive, by the Code provide a basis for issuance of a consent so would § 521(a)(4). directive is bolstered by our review of regulatory agencies' use of consent directives. Various statutes provide these Rule 2004 serves as an additional bridge between §§ 521 agencies with investigatory obligations and authority and and 704, as it provides trustees a mechanism to require

© 2018 Thomson Reuters. No claim to original U.S. Government Works. 6 In re Mastro, 585 B.R. 587 (2018) 65 Bankr.Ct.Dec. 207, 2018 Daily Journal D.A.R. 5451 debtors to produce. And, again, to the extent Rule 2004 and 940 n.12 (comparing procedures); Simon v. FIA is not sufficiently broad, § 105 would allow issuance of a Card Servs., N.A., 732 F.3d 259, 268 n.6 (3d Cir. 2013) consent directive to require a debtor to fulfill a statutory (“Rule 2004 examinations ... are subject to few of the duty. Section 105(a) is not being used as an independent procedural safeguards normally applicable to discovery basis for the consent directive; it is, rather, being used in under the Federal Rules of Civil Procedure.” (internal quotation marks omitted) ). So in some circumstances it concert with §§ 521 and 704. 15 may be appropriate for the bankruptcy court to “borrow” procedural protections from the Civil Rules and apply Accordingly, we hold that a bankruptcy court may use them to Rule 2004 examinations. In re Valley Forge Plaza § 105(a) and Rule 2004 to compel a debtor to sign a Assocs., 109 B.R. 669, 675 (Bankr. E.D. Pa. 1990). consent directive in furtherance of the debtor's § 521(a)(4) obligation to provide recorded information to the trustee We do not have the bankruptcy court's familiarity with and in furtherance of a trustee's § 704 duties to investigate the case. It may yet, exercising its discretion, appropriately 16 a debtor's affairs. deny the consent directive request. We conclude here only that it wrongly ruled that it lacked any discretion.

4. On remand, the bankruptcy court may exercise discretion. C. The bankruptcy court erred when it denied the Trustee's The bankruptcy court decided that it lacked the authority reconsideration motion. to issue a consent directive. The Trustee asks us to reverse [16] [17] Based on the above, we also conclude that that decision and to order Mastro to execute the consent the bankruptcy court erred in denying the Trustee's directive. But our conclusion *599 that the bankruptcy reconsideration motion. 17 court could compel Mastro to sign a consent directive does not mean that a consent directive should issue under the present facts. We leave that decision in the first instance to the bankruptcy court's discretion. CONCLUSION

The bankruptcy court denied the Trustee's motion because [14] The bankruptcy court's discretion is at least two- it thought that it lacked the authority to compel a fold: (1) should the Rule 2004 consent directive order debtor to sign a consent directive. This was legal error; issue?; and (2) how should it issue? The underlying bankruptcy courts have that power. This conclusion, bankruptcy case has a decidedly international bent; the however, does not mean that the bankruptcy court must consent directive involves international institutions, so compel Mastro to do so. Accordingly, we REVERSE consideration of international comity may be involved in the bankruptcy court's order and REMAND for further answering the first question. See, e.g., Shams, 873 F.2d at proceedings consistent with this opinion. 239–40 (considering Swiss law); Marsoner, 40 F.3d at 964 (considering Austrian law). All Citations [15] The second question matters because a Rule 2004 examination “does not offer the procedural safeguards 585 B.R. 587, 65 Bankr.Ct.Dec. 207, 2018 Daily Journal available under the Federal Rules of Civil Procedure ....” D.A.R. 5451 In re Dinubilo, 177 B.R. at 939. See id. at 939–40

Footnotes 1 Unless otherwise indicated, all chapter and section references are to the Bankruptcy Code, 11 U.S.C. §§ 101–1532. All “Rule” references are to the Federal Rules of Bankruptcy Procedure. All “Civil Rule” references are to the Federal Rules of Civil Procedure. 2 We exercise our discretion to take judicial notice of documents electronically filed in the underlying bankruptcy case. See Atwood v. Chase Manhattan Mortg. Co. (In re Atwood), 293 B.R. 227, 233 n.9 (9th Cir. BAP 2003). 3 The Trustee's proposed consent directive reads in part:

I, Michael R. Mastro, a United States citizen, do hereby direct any bank, trust company, financial services company, brokerage entity, and other financial institution or branch thereof, and its officers, employees and agents (“Financial Institution”), located outside the territorial United States, at which I may have or may have had a bank or brokerage account of any kind however described upon which I am or was authorized to draw (“Accounts”), to disclose all information and deliver copies of all documents of every interest in the Financial Institution's possession or control which relate to the Accounts, together with a certificate attesting to the authenticity of any and all such documents, to any agent or attorney of James F. Rigby, Jr., Trustee of the bankruptcy estate of Michael R. Mastro, who presents a copy of this Consent Directive. 4 See also Two Grand Jury Contemnors v. United States (In re Grand Jury Subpoena), 826 F.2d 1166, 1171 (2d Cir. 1987); United States v. A Grand Jury Witness (In re N.D.N.Y Grand Jury Subpoena # 86–0351–S), 811 F.2d 114 (2d Cir. 1987) (disapproving use of consent directive that did not expressly say it was executed under court order); United States v. Lehder–Rivas, 827 F.2d 682 (11th Cir. 1987). 5 See In re Grand Jury Proceedings, 709 F.Supp. at 194 (“Exercise of this court's jurisdiction is nonetheless permissible under 28 U.S.C. § 1826 (1982). Through this statute, Congress authorized courts to compel a recalcitrant witness to testify in front of a grand jury and to provide necessary documents. The order in this case is intended to produce just that result.” (footnote omitted) ). 6 Marsoner v. United States (In re Grand Jury Proceedings), 40 F.3d 959, 966 (9th Cir. 1994) (“Marsoner's challenges to the district court's order compelling him to sign the directive do not constitute just cause for his refusal to do so. See 28 U.S.C. § 1826(a). Accordingly, the district court did not abuse its discretion by holding Marsoner in contempt.”). 7 The Commodity Futures Trading Commission and the Federal Trade Commission request and receive restraining orders that also direct individuals to sign a “Consent to Release of Financial Records” forms; the Consumer Financial Protection Bureau has done so as well. E.g., Fed. Trade Comm'n v. Bunzai Media Grp., Inc., No. CV 15–4527–GW(PLAx), 2015 WL 5305243, 2015 U.S. Dist. LEXIS 123139 (C.D. Cal. Sept. 9, 2015); Consumer Fin. Prot. Bureau v. Morgan Drexen, Inc., No. SACV 13–01267–JLS (JEMx), 2015 WL 12745793, 2015 U.S. Dist. LEXIS 186915 (C.D. Cal. Apr. 30, 2015); U.S. Commodity Futures Trading Comm'n v. Capital Blu Mgmt., LLC, No. 6:09-CV-508-ORL-28DAB, 2010 WL 11508133, 2010 U.S. Dist. LEXIS 149233 (M.D. Fla. Apr. 20, 2010). The Commodity Futures Trading Commission likely bases its use of consent directives on 7 U.S.C. § 9, which provides that it may: “subpoena witnesses, compel their attendance, take evidence, and require the production of any books, papers, correspondence, memoranda, or other records that the Commission deems relevant or material to the inquiry[ ]”; and require the “attendance of witnesses and the production of any such records ....” 7 U.S.C. § 9(5)&(6). Similarly, the Federal Trade Commission likely grounds its use of consent directives in 15 U.S.C. § 49, which provides it with the power “to require by subpoena the attendance and testimony of witnesses and the production of all such documentary evidence relating to any matter under investigation.” 15 U.S.C. § 49. And the Internal Revenue Service relies on 26 U.S.C. § 7602 for using consent directives directed at foreign financial institutions. That section allows the IRS to summon persons and have them produce “such books, papers, records, or other data ... as may be relevant or material ....” 26 U.S.C. § 7602(a)(2). Other agencies where case law identifies use of consent directives have similar statutorily-based investigative powers. The Consumer Financial Protection Bureau may “issue subpoenas for the ... production of relevant papers, books, documents, or other material ....” 12 U.S.C. § 5562(b)(1). The Securities and Exchange Commission may “subpena witnesses ... and require the production of any books, papers, correspondence, memoranda, or other records which the Commission deems relevant or material to the inquiry.” 15 U.S.C. § 78u(b). 8 The IRS's Internal Revenue Manual provides some guidance on its use of consent directives. IRM 5.21.2.4 (2018) (“A consent directive, also known as a disclosure directive, is a document signed by the taxpayer that authorizes a third party to release to a U.S. court information regarding that taxpayer that is held by a foreign bank or a third party custodian.”). The manual also explains how the IRS uses judicial process to compel a taxpayer to sign one. IRM 25.5.4.5.9 (2015) (“A summons cannot be used to directly compel a taxpayer to sign a consent directive. However, if a summons for the foreign records is served on the taxpayer while in the United States, a federal district court can enforce the summons by directly ordering the taxpayer to produce the documents in his or her custody or control. Moreover, the Service can seek an order under IRC 7402(b) compelling a taxpayer to sign a consent directive authorizing the foreign institution to produce its records.”). 9 Section 344, in turn, provides that “[i]mmunity for persons required to submit to examination ... or to provide information in a case under this title may be granted under part V of title 18.” 11 U.S.C. § 344.

10 Consider the relevant texts: Section 105(a) allows the bankruptcy court to “issue any order, process, or judgment that is necessary or appropriate to carry out the provisions of this title.” 11 U.S.C. § 105(a). The All Writs Act permits “all courts established by Act of Congress” to “issue all writs necessary or appropriate in aid of their respective jurisdictions and agreeable to the usages and principles of law.” 28 U.S.C. § 1651(a). 11 Indeed, the “sweeping general examination” of debtors is “traceable to the first bankruptcy statute enacted by the English Parliament more than 450 years ago.” In re Symington, 209 B.R. 678, 683 (Bankr. D. Md. 1997). Bankruptcy examinations thus predate modern federal civil procedure. Id. at 684. 12 E.g., In re Wilcher, 56 B.R. 428, 434 (Bankr. N.D. Ill. 1985) (“It is clear that Rule 2004 may not be used as a device to launch into a wholesale investigation of a non-debtor's private business affairs.”); In re Fin. Corp. of Am., 119 B.R. at 733 (“Matters having no relationship to the debtor's affairs, or the administration of the bankruptcy estate are not proper subjects of a Rule 2004 examination.”). 13 Or other trustee vested with similar responsibilities by the Code. 14 We acknowledge the limitations the Ninth Circuit placed on the IRS in Kao. But the Code does not contain any restriction analogous to 26 U.S.C. § 7609 or applicable to discovery in relation to foreign bank accounts. 15 As a result, the Ninth Circuit's decision to not decide whether the All Writs Act independently authorizes a consent directive does not worry us. The Code affirmatively requires disclosure of the information the Trustee seeks by way of consent directive; so using § 105(a) to compel a debtor to sign a consent directive for a trustee would not be an untethered use of the section. 16 Having concluded that a bankruptcy court has the discretion to issue a consent directive, we briefly reject the Trustee's Civil Rule 26 theory. He seeks to import civil discovery processes to Rule 2004 by arguing that a Rule 2004 motion is a Rule 9014 contested matter. A Rule 2004 motion is only sometimes—and not always—a contested matter, and a contested matter is not required before a bankruptcy court authorizes a Rule 2004 examination. In re Subpoena Duces Tecum, 461 B.R. at 831. As a result, when the Trustee filed his motion, he did not necessarily have Civil Rule 26 at his disposal; it thus did not support issuance of the consent directive when the motion was filed. And in any event, the contest in an opposed Rule 2004 examination involves the right to the examination itself, not the particular tool used for examination. 17 Whether an order denying a Rule 2004 examination is a final order is unclear. Lynch v. Malloy (In re Lynch), 544 B.R. 444, 448 (10th Cir. BAP 2016) (“Appellate courts have reached different conclusions on whether an order for a Rule 2004 examination is a discrete dispute that sufficiently concludes a ‘proceeding.’ ”) (gathering cases). So a case-by-case analysis is warranted. Cf. id. at 449. Here, at the hearing, the bankruptcy court suggested the order was interlocutory: it invited the Trustee to submit additional authority and indicated that it might reconsider the ruling. The Trustee submitted additional authority with his reconsideration motion; the bankruptcy court, however, interpreted and denied the motion as a Civil Rule 59(e) motion. But courts “have inherent power to modify their interlocutory orders before entering a final judgment.” Balla v. Idaho State Bd. of Corr., 869 F.2d 461, 465 (9th Cir. 1989). So, to the extent the order was interlocutory, the bankruptcy court erred when it applied Civil Rule 59(e). Cf. Balla, 869 F.2d at 466 (“Rule 59(e) clearly contemplates entry of judgment as a predicate to any motion.” (internal quotation marks omitted) ).

PRESENT: Dennis Jacobs, Denny Chin, Raymond J. 2018 WL 2973103 Lohier, Jr., Circuit Judges. Only the Westlaw citation is currently available. This case was not selected for publication in West's Federal Reporter. SUMMARY ORDER RULINGS BY SUMMARY ORDER DO NOT HAVE Mark S. Wallach, as Chapter 7 Trustee of PRECEDENTIAL EFFECT. CITATION TO A NanoDynamics, Inc., appeals from the judgment of the SUMMARY ORDER FILED ON OR AFTER JANUARY United States District Court for the Western District of 1, 2007, IS PERMITTED AND IS GOVERNED BY New York, which affirmed an order of the Bankruptcy FEDERAL RULE OF APPELLATE PROCEDURE Court dismissing Wallach’s claim for $700,000 plus 32.1 AND THIS COURT'S LOCAL RULE 32.1.1. interest on the balance of a pre-petition stock subscription WHEN CITING A SUMMARY ORDER IN A agreement. We assume the parties’ familiarity with the DOCUMENT FILED WITH THIS COURT, A PARTY underlying facts, the procedural history, and the issues MUST CITE EITHER THE FEDERAL APPENDIX presented for review. OR AN ELECTRONIC DATABASE (WITH THE NOTATION "SUMMARY ORDER"). A PARTY CITING David and Jennifer Smith (the “Smiths”) executed a A SUMMARY ORDER MUST SERVE A COPY OF IT stock subscription agreement (the “Agreement”) with ON ANY PARTY NOT REPRESENTED BY COUNSEL. NanoDynamics, Inc. (“Debtor”) to purchase 2.5 million United States Court of Appeals, Second Circuit. shares of stock at $1 per share. Under the Agreement, IN RE: NANODYNAMICS, INC., Debtor. the Smiths would complete payment in stages by March 31, 2009, and Debtor would issue the number of shares Mark S. Wallach, 169 Delaware Avenue, corresponding to the money paid within five business days Buffalo, NY, 14202, Chapter 7 Trustee of of each receipt of funds. The Smiths failed to complete NanoDynamics, Inc., Plaintiff-Appellant, payment by March 31, 2009, but did pay a total of $1.8 v. million in various amounts between March 9, 2009, and David Smith,2403 Ridgepointe Drive, Jonesboro, June 8, 2009. All but one of these payments occurred after AR, 72404, Jennifer Smith, 2403 Ridgepointe Drive, the March 31, 2009 deadline. Rather than terminating the Jonesboro, AR, 72404, Defendants-Appellees. Agreement or suing for breach, the Debtor continued to issue shares of stock within five business days of each 17-2410-bk payment. | June 13, 2018 On July 27, 2009, when the Debtor filed a voluntary Appeal from a judgment of the United States District petition under Chapter 7 of Title 11 of the Bankruptcy Court for the Western District of New York (Vilardo, J.). Code, a balance of $700,000 remained untendered on the Agreement, and the petition listed the Agreement as an UPON DUE CONSIDERATION, IT IS HEREBY executory contract. Wallach filed an amended complaint ORDERED, ADJUDGED AND DECREED that the on February 28, 2011 alleging that the Smiths were in judgment of the district court be AFFIRMED. breach of the Agreement as of the contractual deadline (April 1, 2009), and were liable for the remaining balance Attorneys and Law Firms plus interest under New York Business Corporation Law (“BCL”) § 628(a) and Section 542 of the Bankruptcy Code. FOR APPELLANT: Robert J. Feldman, Gross Shuman The Smiths denied liability and asserted a number of P.C., Buffalo, N.Y. counterclaims and affirmative defenses. The Bankruptcy FOR APPELLEES: Christopher P. Schueller, Esq. Court’s final opinion and order dismissed the claims for (Kathleen A. Murphy, Esq., on the brief), Buchanan breach of contract and BCL § 628 on the ground that Ingersoll & Rooney PC, Pittsburgh, PA. 11 U.S.C. § 365(c)(2) expressly prohibits a trustee from assuming and collecting upon a contract for the issuance of stock. The district court affirmed, concluding that

“[b]ecause § 365(c)(2) decides the case, th[e] Court need history of the BRA that Section 365(c)(2) was specifically not consider whether the Agreement was invalid due to the designed to defeat “a pre-petition agreement obligating debtor’s violation of the federal securities laws.” Wallach the non-debtor to advance new cash or credit in exchange v. Smith, 15-CV-1080(LJV), 2017 WL 2957829, at *6 for the debtor’s” stock). Congress enacted the BRA in part (W.D.N.Y. July 11, 2017). as a response to industry concerns about the enforcement of unjust contracts such as the very Agreement sought to On review of the District Court’s July 2017 decision be assumed here. See In re Ardent, Inc., 275 B.R. 122, affirming the December 2015 order of the Bankruptcy 125-26 (Bankr. D.D.C. 2001); H.R. Rep. No. 95-595, at Court, see In re Nanodynamics, Inc., No. 09-13438 K, 348 (1977); Bankruptcy Reform Act of 1978: Hearings 2015 WL 8602618 (W.D.N.Y. Bankr. Dec. 11, 2015), on S. 2266 Before the Subcommittee on Improvements in we accept the bankruptcy court’s factual findings unless Judicial Machinery of The Judiciary, 95th Cong. 521, 858 clearly erroneous and review its conclusions of law de (1977). Wallach (a trustee) therefore cannot sue for money novo. Bell v. Bell ( In re Bell ), 225 F.3d 203, 209 (2d Cir. damages on the unpaid portion of an executory contract 2000). for the sale of stock under the common law rule or the BCL. Wallach claims entitlement to the remaining balance of $700,000 plus interest as a matter of contract law, Wallach argues in the alternative that the proscription notwithstanding that performance on the contract by of Section 365(c)(2) does not apply to this case because Debtor is no longer possible. He relies on the common law the Agreement is non-executory, and the Bankruptcy rule that a “trustee in bankruptcy had authority to bring Code only prevents the assumption of an executory and maintain [an] action upon the stock subscription,” contract. See 11 U.S.C. § 365(c)(2). There are multiple tests even if “the corporation is bankrupt and a stock certificate for determining whether an agreement is an “executory cannot be issued,” Allen v. Ryan, 219 A.D. 634, 635-36, contract” within the meaning of Section 365(c). The so- 221 N.Y.S. 77 (4th Dep’t 1927); see In re Hannevig, called Countryman Test defines an executory contract 10 F.2d 941, 945 (2d Cir. 1925); and explains that this as “a contract under which the obligation of both the rule was codified in the New York Business Corporation bankrupt and the other party to the contract are so Law, which provides that a “subscriber for shares of far unperformed that the failure of either to complete a corporation shall be under no obligation to the performance would constitute a material breach excusing corporation for payment for such shares other than the the performance of the other.” In re Ellipsat, Inc., obligation to pay the unpaid portion of his subscription....” 480 B.R. 1, 6 (Bankr. D.D.C. 2012) (internal citations BCL § 628 (emphasis added); see Chrysler Corp. v. omitted); see also In re Spectrum Inf. Techs., Inc., Fedders Corp., 73 A.D.2d 504, 507, 422 N.Y.S.2d 876 190 B.R. 741, 746-47 (Bankr. E.D.N.Y. 1996). The (1st Dep’t 1979) (Section 628 “put[ ] into statutory form Second Circuit has also employed a less demanding the common-law recognition of the fact that liability for inquiry characterized as the “some performance due” unpaid subscriptions is contractual and, therefore, should test, which defines an executory contract as one “on run in favor of the corporation.”); Lewis v. Dansker, 68 which performance remains due to some extent on both F.R.D. 184, 192 (S.D.N.Y. 1974). sides.” Eastern Air Lines, Inc. v. Ins. Co. of Penn. (In re Ionosphere Clubs, Inc.), 85 F.3d 992, 998-99 (2d Cir. *2 This authority is unavailing. Section 365 of 1996) (quoting NLRB v. Bildisco & Bildisco, 465 U.S. 513, Bankruptcy Code, codified in the 1978 Bankruptcy 522 n.6, 104 S.Ct. 1188, 79 L.Ed.2d 482 (1984) ). Courts Reform Act (“BRA”), provides in plain terms that examine the executory status of a contract as of the date a “trustee may not assume or assign any executory the bankruptcy petition was filed. In re Ellipsat, Inc., 480 contract ... if such contract is a contract ... to issue a B.R. at 7 (citing In re Exide Techns., 607 F.3d 957, 962 (3d security of the debtor.” 11 U.S.C. § 365(c)(2). Section Cir. 2010) ). 365 would thus specifically supersede any rule that would otherwise permit a trustee in bankruptcy to assume We need not resolve the question of which test applies an executory contract for the sale of stock. See In re because the Agreement is an executory contract under Teligent, Inc., 268 B.R. 723, 737 (Bankr. S.D.N.Y. 2001) either test. Cf. In re Teligent, 268 B.R. at 732. (concluding after a comprehensive review of the legislative It is undisputed that neither side tendered complete

performance on the Agreement; $700,000 remained unpaid and 700,000 shares unissued when the Debtor *3 Whether or not the Debtor could have proven a filed under Chapter 11. Default on an obligation to make breach on April 1, 2009 and proceeded to terminate or substantial monetary payments in exchange for shares is a rescind the Agreement, it did not do so. It elected instead material breach that renders a contract executory. See id. to forbear any action against the Smiths and accept partial at 731 (“the buyer’s breach of its payment obligation [is] performance of $1.8 million over the course of three material, making the contract executory on that side”); see separate transactions. And the Debtor duly performed on also In re Bluman, 125 B.R. 359, 362 (Bankr. E.D.N.Y. its obligations under the Agreement by issuing its stock 1991); In re Ardent, 275 B.R. at 124. within five days of each allotted payment. In sum, the conduct of the Debtor in the months intervening between Wallach points out that since the Smiths materially April 1, 2009 and the declaration of bankruptcy on July breached the contract as of April 1, 2009, the Debtor 27, 2009 shows that it considered the contract very much was relieved of its obligations and had the option to executory, and it listed the Agreement as an “executory rescind, and argues that this breach makes the contract contract” on its initial bankruptcy filing on July 27, 2009. non-executory. But a material breach by one party does App’x at 73, 127. Section 365(c)(2) precludes the trustee not necessarily transform an executory contract into from assuming the Agreement and enforcing it against the a non-executory one. “If the injured party chooses to Smiths, so the claims arising under the Agreement were go on” after an alleged breach, “he loses his right to properly dismissed. terminate the contract because of the default.” Apex Pool Equip. Corp. v. Lee, 419 F.2d 556, 562 (2d Cir. Accordingly, and finding no merit in Wallach’s other 1969). Under these circumstances, the animate contract arguments, we hereby AFFIRM the judgment of the remains executory. See id.; see, e.g., In re RLR Celestial district court. Homes, Inc., 108 B.R. 36, 45 (Bankr. S.D.N.Y. 1989) (“[A] contract is not deemed terminated and no longer All Citations executory simply because the debtor has defaulted or breached the contract before the commencement of a --- Fed.Appx. ----, 2018 WL 2973103 bankruptcy case.” (internal citations omitted) ).

Appeal from the United States Bankruptcy Court for 2018 WL 3197481 the Central District of California, Honorable Sandra R. United States Bankruptcy Appellate Klein, Bankruptcy Judge, Presiding Panel of the Ninth Circuit. Attorneys and Law Firms IN RE: Yavaughnie Renee WILKINS, Debtor. Yavaughnie Renee Wilkins, Appellant, Andrew M. Wyatt of Wyatt Law argued for appellant v. Yavaughnie Renee Wilkins; William J. Wall argued for John J. Menchaca, Chapter 7 Trustee; Schreiber appellee Schreiber Family Trust. Family Trust dated March 22, 1989, Appellees. Before: KURTZ, LAFFERTY , and SPRAKER, Bankruptcy Judges. BAP Nos. CC–17–1335–KuLS, CC–17–1337– KuLS, CC–17–1346–KuLS (Related Appeals) | OPINION Bk. No. 2:16–bk–12328–SK | KURTZ, Bankruptcy Judge: Argued and Submitted on May 24, 2018 at Pasadena, California I. PROCEDURAL HISTORY | Filed—June 28, 2018 *1 In these related appeals, chapter 7 1 debtor Ms. Yavaughnie Wilkins appeals from the bankruptcy court's Synopsis (1) Order Granting Trustee's Motion For Conversion To Background: Following conversion of case from Chapter Chapter 7 (Conversion Order) and from the portion of the 13 to Chapter 7, debtor appealed from orders of Order Denying Ms. Wilkins' Motion for Reconsideration the United States Bankruptcy Court for the Central related to the Conversion Order (BAP No. CC–17–1335); District of California, Sandra R. Klein, J., which granted (2) Order Granting Trustee's Motion to Sell Real Estate trustee's motion for conversion to Chapter 7, granted (Sale Order) and from the portion of the Order Denying trustee's motion to sell real estate, denied debtor's motion Ms. Wilkins' Motion For Reconsideration related to Sale for reconsideration, and granted turnover and writ of Order (BAP No. CC–17–1337); and (3) Order Granting possession. Turnover Order and Writ of Possession (BAP No. CC– 17–1346).

Holdings: The Bankruptcy Appellate Panel (BAP), Frank Ms. Wilkins filed a single notice of appeal which was L. Kurtz, J., held that: untimely filed as to all of the above-referenced orders. The BAP Clerk's office issued a notice of deficiency requesting [1] 14-day deadline for filing appeal from bankruptcy the parties to explain why these appeals should not be court's decision is a jurisdictional requirement, not a dismissed. Ms. Wilkins' counsel responded by requesting mandatory claim-processing rule subject to waiver or an extension of time to appeal under Rule 8002(d)(1)(B), forfeiture, and claiming excusable neglect. Appellee, John J. Menchaca, the chapter 7 trustee, maintained that the standards for [2] debtor's request for extension of time to file notice of excusable neglect were not met and therefore the appeals appeal was too late. should be dismissed. Appellee, Schreiber Family Trust (SFT), 2 responded similarly and also contended that counsel's request for an extension of time to appeal was Appeals dismissed. untimely under Rule 8002(d)(1)(B). Therefore, the Panel was required to dismiss the appeals for lack of jurisdiction. SFT subsequently filed a motion to dismiss these appeals on these same grounds.

In light of the Supreme Court's decision in Hamer v. (A) The district court may extend the time to file a notice Neighborhood Housing Services of Chicago, ––– U.S. of appeal if: ––––, 138 S.Ct. 13, 199 L.Ed.2d 249 (2017), the Panel (i) a party so moves no later than 30 days after the time sua sponte requested further briefing on whether the 14– prescribed by this Rule 4(a) expires; and day time deadline for filing an appeal from a bankruptcy court's decision was jurisdictional, thereby requiring (ii) regardless of whether its motion is filed before or dismissal of these appeals, or whether the time deadline during the 30 days after the time prescribed by this Rule was a mandatory claim-processing rule subject to waiver 4(a) expires, that party shows excusable neglect or good or forfeiture. cause.

Having reviewed the briefs from Ms. Wilkins and SFT (B) A motion filed before the expiration of the time and considered the oral arguments of counsel, we conclude prescribed in Rule 4(a)(1) or (3) may be ex parte unless that the 14–day time deadline in Rule 8002(a) remains a the court requires otherwise. If the motion is filed after mandatory and jurisdictional requirement in this court as the expiration of the prescribed time, notice must be the Ninth Circuit has held for decades. Accordingly, we given to the other parties in accordance with local rules. dismiss these three appeals for lack of jurisdiction. (C) No extension under this Rule 4(a)(5) may exceed 30 days after the prescribed time or 14 days after the date when the order granting the motion is entered, II. JURISDICTION whichever is later.

[1] [2] [3] We have jurisdiction to determine our own In a unanimous decision, the Hamer court held that jurisdiction and consider the issue de novo. Gugliuzza v. FRAP(4)(a)(5)(C), which limits the length of any Fed. Trade Comm'n (In re Gugliuzza), 852 F.3d 884, 889 extension, was a mandatory claim-processing rule because (9th Cir. 2017). The Panel's first consideration on appeal the time limit arises from a rule, in contrast to a non- is our jurisdiction. Id. waivable and non-forfeitable jurisdictional requirement arising from a statute. The court emphasized:

III. DISCUSSION Only Congress may determine a lower federal court's subject- A. Time Deadline For Appeal: The Jurisdictional/Claim– matter jurisdiction. Accordingly, a Processing Rule Dichotomy provision governing the time to *2 In Hamer, the Supreme Court considered whether the appeal in a civil action qualifies as maximum time a court may extend an appeal deadline jurisdictional only if Congress sets in FRAP(4)(a)(5)(C), in a case in which the appellant the time. A time limit not prescribed received timely notice of the judgment or order appealed by Congress ranks as a mandatory from, was a jurisdictional requirement or a mandatory claim-processing rule, serving to claim-processing rule that was subject to waiver or promote the orderly progress of forfeiture. litigation by requiring that the parties take certain procedural steps Section 2107 of title 28 and FRAP (4)(a)(1) state that in at certain specified times. a civil case, the notice of appeal must be filed within 30 days after entry of the judgment or order appealed from. 138 S.Ct. at 17 (citations and internal quotation marks FRAP(4)(a)(5) addresses the time deadlines for extending omitted). the 30–day period by motion: [4] The court further noted that the distinction between a (5) Motion for Extension of Time. jurisdictional rule and a claim-processing rule is “critical” because “[f]ailure to comply with a jurisdictional time prescription ... deprives a court of adjudicatory authority

© 2018 Thomson Reuters. No claim to original U.S. Government Works. 2 In re Wilkins, --- B.R. ---- (2018) 65 Bankr.Ct.Dec. 239 over the case, necessitating dismissal—a ‘drastic’ result.” Court reminds us that “ ‘most [statutory] time bars are Id. However, “[m]andatory claim-processing rules are less nonjurisdictional.’ ” Hamer, 138 S.Ct. at 20 n.9 (alteration stern. If properly invoked, mandatory claim-processing in original) (quoting United States v. Kwai Fun Wong, rules must be enforced, but they may be waived or 575 U.S. ––––, ––––, 135 S.Ct. 1625, 1632, 191 L.Ed.2d forfeited.” Id. at 17–18 (citing Manrique v. United States, 533 (2015) ). 581 U.S. ––––, ––––, 137 S.Ct. 1266, 1271–1272, 197 L.Ed.2d 599 (2017) ). The Hamer court reserved the issue [9] In Henderson v. Shinseki, the Supreme Court also whether mandatory claim-processing rules may be subject observed that the statute/rule distinction is not quite to equitable exceptions. Id. at 18 n.3 (citing Kontrick v. that simple to apply because Congress is free to attach Ryan, 540 U.S. 443, 457, 124 S.Ct. 906, 157 L.Ed.2d 867 the conditions that go with the jurisdictional label to a (2004) ). deadline that the Court would normally consider a claim- processing rule. 562 U.S. 428, 435, 131 S.Ct. 1197, 179 [5] Hamer follows a line of Supreme Court cases which L.Ed.2d 159 (2011) (citing Bowles v. Russell, 551 U.S. have considered anew the historical use of the term 205, 209–210, 127 S.Ct. 2360, 168 L.Ed.2d 96 (2007) ). “jurisdictional” in connection with time deadlines set The Court stated that in determining whether Congress forth in statutes versus procedural rules. The Supreme intended a particular provision to be jurisdictional, Court's precedent, including Hamer, shapes a rule of “[c]ontext, including this Court's interpretation of similar decision that is both clear and easy to apply: “If a provisions in many years past, is relevant. When a long time prescription governing the transfer of adjudicatory line of this Court's decisions left undisturbed by Congress authority from one Article III court to another appears in has treated a similar requirement as jurisdictional, we will a statute, the limitation is jurisdictional; otherwise the time presume that Congress intended to follow that course.” specification fits within the claim-processing category.” Henderson, 562 U.S. at 436, 131 S.Ct. 1197 (citations and Hamer, 138 S.Ct. at 20 (citations omitted); cf. Kontrick, internal quotation marks omitted); see also Sebelius, 568 540 U.S. 443, 124 S.Ct. 906 (finding Rule 4004 which sets U.S. at 153–154, 133 S.Ct. 817 (quoting Reed Elsevier, the time within which an objection to a debtor's discharge Inc. v. Muchnick, 559 U.S. 154, 168, 130 S.Ct. 1237, 176 must be filed, is not a jurisdictional requirement despite L.Ed.2d 18 (2010), for the same proposition). its “inflexible,” “unalterable” nature); Eberhart v. United States, 546 U.S. 12, 126 S.Ct. 403, 163 L.Ed.2d 14 (2005) (holding that the time limit and extension requirements set B. Analysis forth in Federal Rules of Criminal Procedure 33 and 45 [10] Mindful of these guidelines and the Supreme Court's are claim-processing rules and nonjurisdictional). caution against reckless use of the term “jurisdictional,” we turn to 28 U.S.C. § 158, which governs bankruptcy *3 [6] [7] [8] In cases not involving the timebound appeals. In that statute, Congress gave jurisdiction to the transfer of adjudicatory authority from one Article III district court in subsection (a), and this Panel in subsection court to another, the Supreme Court has applied the clear- (b), to hear appeals from bankruptcy court decisions. statement rule: “A rule is jurisdictional ‘[i]f the Legislature Embedded within these jurisdictional grants at subsection clearly states that a threshold limitation on a statute's (c)(2), the statute provides: scope shall count as jurisdictional.’ ” Hamer, 138 S.Ct. An appeal under subsections (a) at 20 n.9 (citing Gonzalez v. Thaler, 565 U.S. 134, 141, and (b) of this section shall be 132 S.Ct. 641, 181 L.Ed.2d 619 (2012) (quoting Arbaugh taken in the same manner as appeals v. Y & H Corp., 546 U.S. 500, 515, 126 S.Ct. 1235, 163 in civil proceedings generally are L.Ed.2d 1097 (2006) ). Accordingly, we must examine taken to the courts of appeals whether there is any clear indication that Congress wanted from the district courts and in the the 14–day time deadline to file a notice of appeal in Rule time provided by Rule 8002 of the 8002(a) to be jurisdictional. Although Congress's intent Bankruptcy Rules. must be clear, it need not be explicit. Hamer, 138 S.Ct. at 20 n.9 (citing Sebelius v. Auburn Regional Med. Ctr., 568 U.S. 145, 153, 133 S.Ct. 817, 184 L.Ed.2d 627 (2013). Rule 8002(a), in turn, says that the notice of appeal must When applying the clear statement rule, the Supreme be filed within 14 days after entry of the judgment, order, or decree being appealed.

of district courts in this area. Id. at 1363 (citing Pfister v. [11] “To determine whether Congress has made the N. Ill. Fin. Corp., 317 U.S. 144, 152–53, 63 S.Ct. 133, 87 necessary clear statement, we examine the text, context, L.Ed. 146 (1942) ). “Dissatisfied with the lack of finality and relevant historical treatment of the provision at that accompanied the discretionary power to entertain issue.” Duggan v. Comm'r of Internal Revenue, 879 F.3d late petitions, Congress amended [Section 39(c) ] in 1029, 1032 (9th Cir. 2018) (citing Musacchio v. United 1960 for the specific purpose of legislatively overruling States, ––– U.S. ––––, 136 S.Ct. 709, 717, 193 L.Ed.2d Pfister.” Ibid. (citing [Shannon v. Benefiel (In re 639 (2016) ). Here, examination of these factors shows Benefiel) ], 500 F.2d 1219, 1220–21 (9th Cir. 1974) ). that the 14–day time deadline in Rule 8002(a) which is Subsequent decisions by our court of appeals therefore incorporated into 28 U.S.C. § 158(c)(2) is a jurisdictional “strictly construed and compulsorily applied” the 10– requirement. day limitation “to negate the discretion afforded the reviewing court” under Pfister, holding that untimely [12] First, the historical treatment of the taking of notice of appeal from the bankruptcy court deprived the an appeal indicates that the 14–day time limit is reviewing district court of jurisdiction. Id. at 1363–64. jurisdictional. The Supreme Court has always said without exception that procedural conditions for In 1973, Federal Rule of Bankruptcy Procedure 802 appealing a case from one Article III court to another are superseded Section 39(c). Id. at 1364; [ Headlee v. jurisdictional. “When an appeal is ‘not taken within the Ferrous Fin. Servs. (In re Butler's Tire & Battery Co., time prescribed by law,’ the ‘Court of Appeals [is] without Inc.) ], 592 F.2d 1028, 1030 (9th Cir. 1979). Although jurisdiction.’ ” Gonzalez, 565 U.S. at 159, 132 S.Ct. 641 [Rule] 802 carried forward the 10–day time limit from (Scalia, J., dissenting) (citing George v. Victor Talking Section 39(c), it otherwise paralleled [FRAP] 4(a). 3 Machine Co., 293 U.S. 377, 379, 55 S.Ct. 229, 79 L.Ed. Butler's Tire & Battery, 592 F.2d at 1031. Our court 439 (1934); United States v. Robinson, 361 U.S. 220, 229– of appeals thus declined in Butler's Tire & Battery to 230, 80 S.Ct. 282, 4 L.Ed.2d 259 (1960) ). rely on decisions construing Section 39(c), including [In re] Best Distribution, in construing [Rule] 802. Id. at *4 For decades, the Ninth Circuit has consistently 1030–31. Nonetheless, after applying [Rule] 802 with construed the time deadline in Rule 8002(a) for appeals the guidance of case law concerning FRAP 4(a) and from a non-Article III court in accordance with this its predecessor, Federal Rule of Civil Procedure 73(a), precedent. The district court in In re Melcher, No. 3:16- our court of appeals again concluded that untimely cv-05982-WHA, 2017 WL 1175590, at *2–3 (N.D. Cal. notice of appeal from the bankruptcy court deprived Mar. 29, 2017), briefly summarized the history of the the district court of jurisdiction. Id. at 1034. This Ninth Circuit's application of the time deadline in Rule conclusion comported with well-established precedent 8002(a): holding that FRAP 4(a)'s time period for filing a notice of appeal is also “mandatory and jurisdictional.” See, As our court of appeals explained in [Gough v. Wells e.g., Pettibone v. Cupp, 666 F.2d 333, 334 (9th Cir. Fargo Bank (In re Best Distribution Co.) ], 576 1981) (citing Browder v. Dir., Dept. of Corr. of Ill., F.2d 1360 (9th Cir. 1978), prior to 1938, petitions 434 U.S. 257, 264, 98 S.Ct. 556, 54 L.Ed.2d 521 (1978), for review from bankruptcy orders had to be filed superseded in part by statute on other grounds as within a “reasonable time” unless local rules provided recognized in Ukawabutu v. Morton, 997 F.Supp. 605, a specific period. In 1938, however, Section 39(c) of the 608 (D.N.J. 1998) ). Bankruptcy Act set forth a 10–day time limit for the filing of such petitions “to provide a uniform degree of Although Butler's Tire & Battery recognized the limited finality to orders of bankruptcy judges.” Id. at 1362. In scope of past decisions construing Section 39(c), the interpreting the 10–day time limit, “the circuits divided underlying principle of those decisions—that untimely on whether the limitation merely restricted the right to filing of a notice of appeal from the bankruptcy court file petitions for review, or whether it also restricted is jurisdictional—remained instructive to subsequent the district courts' discretionary power to entertain decisions applying [Rule] 802 and its successors. For late petitions.” Id. at 1362–63. In 1942, the Supreme example, [Ramsey v. Ramsey (In re Ramsey) ], 612 F.2d Court held that Congress had expressed no intention, by 1220 (9th Cir. 1980), which cited Butler's Tire & Battery enacting Section 39(c), to limit the traditional discretion for the principle that “untimely notice deprives the

district court of jurisdiction to review the bankruptcy [13] [14] We are bound to follow the Ninth Circuit's court's order or judgment,” also cited Butler's Tire & strict construction and compulsory application of the Battery, [In re] Best Distribution, and other decisions time limit for filing notices of bankruptcy appeals under dealing with Section 39(c) for the proposition that Rule 8002(a) unless and until its rulings are overruled our court of appeals “has strictly construed and by statute, the Ninth Circuit sitting en banc, or by the compulsorily applied the ten-day requirement.” Id. at Supreme Court. See United States v. Gonzalez–Zotelo, 1222. And [Greene v. United States (In re Souza) ], 556 F.3d 736, 740–41 (9th Cir. 2009) (“The district court, 795 F.2d 855 (9th Cir. 1986)—applying FRBP 8002, the like this panel, was bound to follow the reasoning of [prior “virtually identical” successor to FRBP 802—in turn Ninth Circuit precedent] unless it had been effectively cited Ramsey for the principle that “untimely filing of overruled or was clearly irreconcilable with a case from the notice of appeal is jurisdictional.” Id. at 857. In both the relevant court of last resort.”). Further, the Supreme Ramsey and Souza, our court of appeals concluded that Court has noted that “[c]onsiderations of stare decisis untimely notice of appeal from the bankruptcy court have special force in the area of statutory interpretation, deprived the district court of jurisdiction. for here, ..., the legislative power is implicated, and Congress remains free to alter what we have done.” Hilton *5 In [Anderson v. Mouradick (In re Mouradick) ], v. S. Carolina Pub. Rys. Comm'n, 502 U.S. 197, 202, our court of appeals cited both Ramsey and Souza, 112 S.Ct. 560, 116 L.Ed.2d 560 (1991). Congress has had among other decisions, for the same core principle decades to change the Ninth Circuit's treatment of the that “[t]he provisions of Bankruptcy Rule 8002 are time deadline in 28 U.S.C. § 158(c)(2) and Rule 8002(a) as jurisdictional; the untimely filing of a notice of appeal jurisdictional and has not done so. 4 deprives the appellate court of jurisdiction to review the bankruptcy court's order.” 13 F.3d [326, 327 (9th *6 In the end, there is nothing in Hamer that gives us Cir. 1994) ]. But Mouradick also noted that “[s]upport a reason to reexamine the Ninth Circuit's longstanding for this admittedly harsh result is found in the cases construction of the time deadline in Rule 8002(a). The interpreting [FRAP 4(a) ], the analog to [Rule 8002],” Hamer decision did not refer to 28 U.S.C. § 158(c)(2) and reiterated that the provisions of the former are or Rule 8002(a). At issue in Hamer was FRAP 4(a)(5) “mandatory and jurisdictional.” Id. at 328. In short, (C), which involved the district court's extension of the whether by carrying forward the approach of strict deadline to file a notice of appeal beyond the extension construction and compulsory application from the days of limitation set forth in the rule. In contrast, 28 U.S.C. § Section 39(c) or by analogy to FRAP 4(a), our court of 158(c)(2) involves the timing of the filing of a notice of appeals has consistently held that the time limit for filing a appeal traditionally viewed as an event of jurisdictional notice of appeal from the bankruptcy court is mandatory significance. See Griggs v. Provident Consumer Discount and jurisdictional. Co., 459 U.S. 56, 58, 103 S.Ct. 400, 74 L.Ed.2d 225 This strict construction, which had persevered through (1982) (“The filing of a notice of appeal is an event of the evolution from Section 39(c) to [Rule] 802 to [Rule] jurisdictional significance—it confers jurisdiction on the 8002, also survived a 2009 amendment to [Rule] 8002 court of appeals and divests the district court of its control that changed the 10–day period to a 14–day period. over those aspects of the case involved in the appeal.”). See Advisory Committee Notes to [Rule] 8002. Thus, Context thus confirms that the 14–day time deadline in 2016, our court of appeals in Ozenne [v. Chase imposes a jurisdictional limit. Manhattan Bank (In re Ozenne) ] cited Mouradick for the proposition that the “mandatory and jurisdictional” Moreover, here, unlike Hamer, there is a statutory basis deadline to file an appeal “also applies to federal for applying the 14–day time deadline in Rule 8002(a) to bankruptcy appeals.” 841 F.3d [810, 814 (9th Cir. appeals from a bankruptcy court's decision to this Panel. 2016) ]. The statutory language in 28 U.S.C. § 158(c)(2) directs us towards a jurisdictional conclusion in a couple of ways. In re Melcher, No. 3:16-cv-05982-WHA, 2017 WL 1175590, at *2–3 (N.D. Cal. Mar. 29, 2017) (emphasis [15] First, a fair interpretation of 28 U.S.C. § 158(c) added). (2)'s language “in the time provided by Rule 8002(a)” is that Rule 8002(a) implements a congressionally mandated

“built-in time constraint” even though there is no specified cases cited were issued before 2017, they apply the cases time period in the statute. In Kontrick, the Supreme and rules of interpretation used in Hamer. Court placed significant emphasis on the fact that certain statutory provisions governing bankruptcy courts contain *7 [16] Second, 28 U.S.C. § 158(c)(2) plainly states that built-in time constraints, while others do not. 540 U.S. appeals to the district court and this Panel “shall be at 453, 124 S.Ct. 906. As an example of a statute with a taken in the same manner as appeals in civil proceedings built-in time contraint, the Supreme Court cited 28 U.S.C. generally are taken to the courts of appeals from the § 157(c)(1) which addresses de novo district court review district courts.” The time for taking an appeal in a civil of bankruptcy court findings and conclusions in noncore case to the court of appeal from the district court has long proceedings. That provision confines review to “matters been understood to be jurisdictional. See Henderson, 562 to which any party has timely and specifically objected.” U.S. at 438–39, 131 S.Ct. 1197; see also In re Jackson, 585 540 U.S. at 453, 124 S.Ct. 906. Although the statute did B.R. at –––– – ––––, 2018 WL 2172693, at *6–7. Therefore, not spell out what was a timely objection, the Supreme a natural reading of this language is consistent with the Court found this “timeliness condition” was the sort of jurisdictional conclusion embraced by the Ninth Circuit. “built-in time constraint” that was jurisdictional. Id. [17] [18] Finally, although public policy considerations Like 28 U.S.C. § 157(c)(1), 28 U.S.C. § 158(c)(2) does do not hold much weight in statutory construction not specify a time limit for appealing to the district court endeavors, public policy guides us toward a result which or this Panel. Yet it does contain a timeliness condition is consistent with what the statutory construction of 28 by the language “in the time provided by Rule 8002(a).” U.S.C. § 158(c)(2) dictates. A strict construction of the This is the sort of “built-in time constraint” that makes 14–day time deadline for appeals from a bankruptcy the time deadline contained in the rule jurisdictional. See court is consistent with the broader policies underlying Smith v. Gartley (In re Berman–Smith), 737 F.3d 997, the Bankruptcy Code. Time deadlines in bankruptcy are 1003 (5th Cir. 2013) (28 U.S.C. § 158 “expressly requires abundant and require all parties in interest to move swiftly that the notice of appeal be filed under the time limit so that estates can be administered and distributions can provided in Rule 8002, [and] we conclude that the time be made within a reasonable time. A strict time deadline limit is jurisdictional”); In re Caterbone, 640 F.3d 108, for filing an appeal from a bankruptcy court's decision 112 (3d Cir. 2011) (“[E]ven though it is a bankruptcy rule advances the interests of the parties by wrapping up the that specifies the time within which an appeal must be bankruptcy case in a timely manner and giving finality to filed, the statutory incorporation of that rule renders its the entire process. Accordingly, there is a legitimate policy requirement statutory and, hence, jurisdictional and non- interest embodied in a strict time deadline for appeals from waivable.”); Emann v. Latture (In re Latture), 605 F.3d a bankruptcy court's decision. See generally In re Jackson, 830, 837 (10th Cir. 2010) (“Congress did explicitly include 585 B.R. at –––– – ––––, 2018 WL 2172693, at *7–8 (noting a timeliness condition in 28 U.S.C. § 158(c)(2)—the that the time-value of money and the depreciation of requirement that a notice of appeal be filed within the time assets are benefitted by the quick appeals deadlines and provided by Rule 8002(a)”); see also Hatch Jacobs, LLC the ability to make future financial decisions based on the v. Kingsley Capital, Inc. (In re Kingsley Capital, Inc.), 423 finality of court determinations). B.R. 344, 351 (10th Cir. BAP 2010) (“[A]bsent controlling precedent indicating that the statute must specifically set In sum, applying the bright line rule for transfer the time parameters, this [c]ourt will continue to treat the of adjudicatory authority between Article III courts timely filing of a notice of appeal pursuant to [28 U.S.C.] § articulated by the Supreme Court in Hamer—statutory 158(c)(2) and Rule 8002 to be a jurisdictional requirement deadlines are jurisdictional, non-statutory deadlines are that cannot be waived.”); but see In re Shah, 546 B.R. not—suggests that the 14–day time deadline specified 398 (Bankr. E.D. Wis. 2016) (Congress's reference to Rule in Rule 8002(a) is a mandatory claim-processing rule 8002(a) shows that it implicitly delegated the authority subject to waiver. However, at the end of the day, the to set the appeal deadline in bankruptcy cases to the time deadline is incorporated in 28 U.S.C. § 158(c)(2) by Supreme Court, suggesting that the time deadline is a reference to “in the time provided by Rule 8002” and claim-processing rule). Although many of the foregoing has been consistently construed by the Ninth Circuit as a jurisdictional requirement. We thus conclude that the

14–day time deadline in Rule 8002(a) is a jurisdictional beyond the deadline established by Rule 8002(d)(1). requirement that acts as an immutable constraint on our Appellees promptly objected to appellant's excusable authority to consider and hear appeals. See Bowles, 551 neglect request, the chapter 7 trustee within two days and U.S. at 214, 127 S.Ct. 2360 (noting that a court has no SFT within nine days. Regardless whether the deadline to authority to create equitable exceptions to jurisdictional seek an extension for excusable neglect is a jurisdictional requirements). Although enforcement of the time deadline time bar or a claim-processing rule, Ms. Wilkins failed to leads to a harsh result, we are still obliged to enforce it. comply with the requirements to seek such an extension and SFT promptly objected to her attempt. Therefore, the request for an extension of the deadline to appeal fails. C. Excusable Neglect [19] In her December 4, 2017, response to the Panel's notice regarding the timeliness of this appeal, Ms. Wilkins IV. CONCLUSION sought an extension of time to appeal pursuant to Rule 8002(d)(1)(B). Rule 8002(d)(1) permits the bankruptcy *8 For the reasons discussed above, we DISMISS Ms. court to extend the time to file a notice of appeal upon Wilkins' untimely filed appeals in BAP Nos. CC–17–1335, a motion filed within 21 days after the 14–day appeal CC–17–1337, and CC–17–1346 for lack of jurisdiction. deadline expired (or 35 days after the entry of the order being appealed) if the party shows excusable neglect. All Citations [20] Ms. Wilkins' request was made 42 days after --- B.R. ----, 2018 WL 3197481, 65 Bankr.Ct.Dec. 239 entry of the last orders she is seeking to appeal,

Footnotes 1 Unless otherwise indicated, all chapter and section references are to the Bankruptcy Code, 11 U.S.C. §§ 101–1532, Rule references are to the Federal Rules of Bankruptcy Procedure, and FRAP references are to the Federal Rules of Appellate Procedure. 2 SFT held a promissory note executed by Ms. Wilkins in the original principal sum of $200,000. The note was secured by a deed of trust on Ms. Wilkins' personal residence in San Jose, California. SFT successfully moved to convert Ms. Wilkins' case from chapter 13 to chapter 7. The chapter 7 trustee then sold the property to a third party. 3 The Advisory Committee Note to Rule 8002(a) states that the rule is an “adaptation of Rule 4(a) of the Federal Rules of Appellate Procedure.” This Note is admittedly the product of the Advisory Committee and not Congress and thus would not meet the clear statement requirement. Nonetheless, it helps explain the historical treatment of the time deadline in Rule 8002(a) as a mandatory and jurisdictional requirement in this Circuit. The 30–day time limit for taking an appeal contained in 28 U.S.C. § 2107 and FRAP 4(a) has always been held to be mandatory and jurisdictional. Browder v. Dir., Dep't of Corrs. of Ill., 434 U.S. 257, 264, 98 S.Ct. 556, 54 L.Ed.2d 521 (1978); U.S. v. Sadler, 480 F.3d 932, 937 (9th Cir. 2007). 4 Our circuit is aligned with the holdings of the other circuits which have also held that the 14–day time limit in 28 U.S.C. § 158(c)(2) and Rule 8002(a) is jurisdictional. In re Jackson, 585 B.R. 410, –––– n.7 (6th Cir. BAP 2018) (citing cases from the 1st, 2nd, 3rd, 4th, 5th, 7th, 10th, and 11th circuits which have found the time deadline in Rule 8002(a) jurisdictional).

Schnitzel, Inc. v. Sorensen (In re Sorensen)

United States Bankruptcy Appellate Panel for the Ninth Circuit May 25, 2018, Argued and submitted at San Francisco, California; June 15, 2018, Filed BAP No. NC-17-1152-FBTa

Reporter 2018 Bankr. LEXIS 1849 *; 65 Bankr. Ct. Dec. 206 In re: SYDNEY EILEEN SORENSEN, Debtor.SCHNITZEL, INC., dba R&J JEWELRY & LexisNexis® Headnotes LOAN, Appellant, v. SYDNEY EILEEN SORENSEN, Appellee.

Prior History: [*1] Appeal from the United States Bankruptcy Court for the Northern District of California. Bk. No. 16-52281. Adv. No. 17-05018. Honorable Bankruptcy Law > ... > Bankruptcy > Estate Stephen J. Johnson, Bankruptcy Judge, Presiding. Property > Contents of Estate

Core Terms Governments > Legislation > Statute of Limitations > Time Limitations jewelry, notice, pawned, pawnbroker, bankruptcy court, Contracts Law > Types of Commercial ten-day, bankrupt estate, state law, expiration, pledged, Transactions > Secured redeem, redemption period, automatic stay, termination, Transactions > Pawnbrokers pledgor, redemption right, loans, right to redeem, automatically, confirmed, vested, property of the estate, HN1[ ] Estate Property, Contents of Estate redemption, pawnshop, provides, void, days, commencement of the case, redeem property, injunction Under 11 U.S.C.S. § 541(b)(8), certain tangible property pledged to pawnbrokers is excluded from property of the Case Summary estate unless the debtor redeems the property within the time allowed under 11 U.S.C.S. § 108(b). Section 108(b) provides that the redemption period is the later of Overview 60 days after the petition is filed or the period set by state law. HOLDINGS: [1]-The bankruptcy court did not err in entering a preliminary injunction barring a pawnbroker from disposing of a chapter 13 debtor's pawned jewelry because her right to redeem the jewelry was property of Bankruptcy Law > ... > Judicial Review > Standards the estate and the pawnbroker's notice to her of loan of Review > De Novo Standard of Review termination and her 10-day right to redeem was invalid since it violated the automatic stay; therefore, the 10- HN2[ ] Standards of Review, De Novo Standard of day redemption period never began to run under Cal. Review Fin. Code § 21201(d), the debtor's redemption right was Where the issues before the United State Bankruptcy never extinguished, the pawnbroker never took title to Appellate Panel are purely questions of law, it reviews the jewelry, and 11 U.S.C.S. § 541(b)(8) did not remove them de novo. the jewelry from the estate.

Outcome Order affirmed. Civil Procedure > Appeals > Standards of Review > De Novo Review Page 2 of 9 2018 Bankr. LEXIS 1849, *1

HN3[ ] Standards of Review, De Novo Review expires.

De novo review is independent and gives no deference to the trial court's conclusion. Business & Corporate Compliance > ... > Default > Foreclosure & Repossession > Redemption Bankruptcy Law > ... > Bankruptcy > Estate Property > Contents of Estate Contracts Law > Types of Commercial Transactions > Secured HN4[ ] Estate Property, Contents of Estate Transactions > Pawnbrokers

Under 11 U.S.C.S. § 541(a), an estate is created at the HN7[ ] Foreclosure & Repossession, Redemption filing of a bankruptcy petition that contains, subject to certain exceptions, all legal or equitable interests of the The right to redeem pawned property under California debtor in property as of the commencement of the case. law does not expire until 10 days after the pawnbroker § 541(a)(1). gives proper notice to the pledgor.

Bankruptcy Law > ... > Bankruptcy > Estate Bankruptcy Law > ... > Automatic Stay > Scope of Property > Contents of Estate Stay > Claims Against Estate Property

Real Property Law > ... > Mortgages & Other Bankruptcy Law > ... > Automatic Stay > Violations Security Instruments > Redemptions > Mortgagor's of Stay > Void & Voidable Actions Right HN8[ ] Scope of Stay, Claims Against Estate Contracts Law > Types of Commercial Property Transactions > Secured Transactions > Pawnbrokers The automatic stay prevents a creditor from taking certain actions against property of the bankruptcy Bankruptcy Law > ... > Bankruptcy > Estate estate. Actions taken in violation of the automatic stay Property > Redemption of Property are void.

HN5[ ] Estate Property, Contents of Estate Bankruptcy Law > ... > Automatic Stay > Violations With respect to determining the contents of the of Stay > Void & Voidable Actions bankruptcy estate, a pre-foreclosure right to redeem is a property right under 11 U.S.C.S. § 541. This includes HN9[ ] Violations of Stay, Void & Voidable Actions rights that a debtor retains in her pawned property. Actions taken in violation of the automatic stay are void.

Contracts Law > Types of Commercial Transactions > Secured Bankruptcy Law > Claims > Types of Transactions > Pawnbrokers Claims > Secured Claims & Liens HN6[ ] Secured Transactions, Pawnbrokers HN10[ ] Types of Claims, Secured Claims & Liens Cal. Fin. Code § 21201 provides that, if a pawned item 11 U.S.C.S. § 102(2) provides that "claim against the is not redeemed before the end of the loan period, the debtor" includes claim against property of the debtor. In pawnbroker must give notice of the loan termination other words, nonrecourse claims are "claims" for and provide a 10-day redemption period. California law bankruptcy purposes. specifies that the pawnbroker only becomes vested with full ownership of the property after the 10-day period Page 3 of 9 2018 Bankr. LEXIS 1849, *1

Bankruptcy Law > ... > Bankruptcy > Estate Judges: Before: FARIS, BRAND, and TAYLOR, Property > Contents of Estate Bankruptcy Judges.

HN11[ ] Estate Property, Contents of Estate Opinion by: FARIS

Properly understood, the Bankruptcy Code takes an Opinion estate's constituent property interests as it finds them. If an asset is by its state-law nature static, then it remains so in the bankruptcy estate. If, by contrast--as is often FARIS, Bankruptcy Judge: the case--state law imbues an estate asset with a sort of internal dynamism, then that characteristic will follow the asset into the estate. But increase will not always be the INTRODUCTION result--sometimes the dynamism will reduce (or even eliminate) an asset's value. Appellant Schnitzel, Inc., dba R&J Jewelry & Loan ("R&J"), appeals from the bankruptcy court's ruling prohibiting R&J from disposing of chapter 131 debtor Bankruptcy Law > ... > Bankruptcy > Estate Sydney Eileen Sorensen's pawned jewelry. R&J argues Property > Redemption of Property that the bankruptcy court erred because the jewelry was excluded from Ms. Sorensen's estate by § Bankruptcy Law > Administrative 541(b)(8), and she could not extend her right to redeem Powers > Automatic Stay > Scope of Stay the property through the bankruptcy process. We AFFIRM. HN12[ ] Estate Property, Redemption of Property

11 U.S.C.S. § 362(a) does not toll redemption periods. FACTUAL BACKGROUND

R&J is a licensed pawnbroker in the state of California. In March 2016, Ms. Sorensen pledged five pieces of Bankruptcy Law > ... > Business & Corporate jewelry as collateral for five pawn loans with R&J. Four Compliance > Bankruptcy > Estate Property months later, she obtained replacement loans that had a termination date of November 18, 2016. Civil Procedure > Preliminary Considerations > Federal & State Prior to the termination date [*2] of the loans, Ms. Interrelationships > Choice of Law Sorensen filed for chapter 13 bankruptcy protection. Her schedules identified R&J as a creditor holding claims HN13[ ] Bankruptcy Law, Estate Property secured by the pawned jewelry. Her proposed chapter 13 plan listed R&J as a secured creditor and sought to With respect to determining the contents of the repay the loans and retain the jewelry. bankruptcy estate, property interests are created and defined by state law. Unless some federal interest On November 18, 2016, R&J issued a notice of loan requires a different result, there is no reason why such termination, providing a ten-day right to redemption interests should be analyzed differently simply because required by state law. Ms. Sorensen did not redeem the an interested party is involved in a bankruptcy jewelry during the ten-day period. proceeding. Undefined considerations of equity provide no basis for adoption of a uniform federal rule displacing Ms. Sorensen filed an amended chapter 13 plan,2 which state property law.

Counsel: Jon Webster, The Law Offices of Jon 1 Unless specified otherwise, all chapter and section Webster, argued on behalf of appellant Schnitzel, Inc., references are to the Bankruptcy Code, 11 U.S.C. §§ 101- dba R&J Jewelry & Loan. 1532, all "Rule" references are to the Federal Rules of David A. Boone, The Law Offices of David A. Boone, Bankruptcy Procedure, and all "Civil Rule" references are to argued on behalf of appellee Sydney Eileen Sorensen. the Federal Rules of Civil Procedure.

2 The chapter 13 trustee raised several objections to the Page 4 of 9 2018 Bankr. LEXIS 1849, *2 again identified R&J as a secured creditor and arguments raised by Ms. Sorensen, the bankruptcy proposed to make $50 monthly payments on each of the court ordered supplemental briefing and continued the five loans. R&J did not oppose plan confirmation. hearing.

Meanwhile, counsel for R&J and Ms. Sorensen On March 31, R&J filed a motion to dismiss the communicated about the status and characterization of adversary complaint ("Motion to Dismiss") under Civil the pawn loans. R&J offered Ms. Sorensen two more Rules 12(b)(1) and (b)(6), made applicable in extensions of her redemption rights; the final deadline bankruptcy by Rule 7012(b), arguing that the bankruptcy was March 3, 2017. court lacked subject matter jurisdiction over the pawned jewelry because it was excluded from the bankruptcy On March 1, Ms. Sorensen filed an adversary estate. It repeated that, under § 541(b)(8), the jewelry proceeding complaint for injunctive and declaratory was not part of the bankruptcy estate: due to Ms. relief against R&J. She requested that the court issue Sorensen's and "the Trustee's failure to redeem the an injunction preventing R&J from disposing of the property in the statutorily prescribed time limit, the jewelry, which she contended was part of the property never entered the bankruptcy estate. If Plaintiff bankruptcy estate and therefore subject to the automatic wished to include the pledged items in the estate, stay. [*3] Plaintiff was required to redeem them pursuant to Section 541(b)(8)(C) and Section 108(b)." It also argued Ms. Sorensen also filed an application for a temporary that Ms. Sorensen failed to state a claim upon which restraining order ("TRO Motion") to prevent R&J from relief could be granted: the "automatic stay does not in disposing of the jewelry. She argued that she satisfied any way affect the statutory redemption period [*5] of the standard for a temporary restraining order ("TRO") Section 108 and Section 541(b)(8)(C). Plaintiff has not because she had "every intention to retain the liens and alleged, and cannot allege, that Debtor-Plaintiff or the make payment on those liens to redeem possession of Trustee attempted to redeem the property within the her jewelry, [and] she had clearly stated her intentions time prescribed by Section 108." to retain the liens and redeem the property in her Chapter 13 Plan . . . ." Following a hearing on the continued TRO Motion and the Motion to Dismiss, the bankruptcy court orally held In opposition to the TRO Motion, R&J argued that Ms. that (1) R&J's notice of loan termination was likely void Sorensen was unlikely to succeed on the merits for violating the automatic stay; and (2) Ms. Sorensen's because the jewelry was excluded from the bankruptcy confirmed chapter 13 plan — including its treatment of estate pursuant to § 541(b)(8). It contended that, under the jewelry - was binding on the parties. It considered § 541(b)(8)(C) and § 108(b), the redemption period the interplay between three factors: state law, relevant to a pawn loan expires on the later of (1) the bankruptcy law, and the confirmed plan. loan termination date under state or local law or (2) sixty days from the date of the bankruptcy filing. Under First, the court noted that California law allows a California law, Ms. Sorensen had four months (until fourmonth loan period that expired on November 18, November 18, 2016) to redeem her jewelry; R&J then 2016. At that time, if R&J properly provided statutory issued the statutorily-required grace notice extending notice and a ten-day redemption period to Ms. the right of redemption until November 28. It contended Sorensen, then, "[p]ursuant to California Finance Code that, because Ms. Sorensen did not redeem her Section 21201, R&J would be vested with all right, title, property within the statutory period, the jewelry was and interest in the jewelry after the expiration of the ten- excluded from the bankruptcy estate [*4] under § day period." 541(b)(8), and the automatic stay never applied to the jewelry. Second, the bankruptcy court considered how Ms. Sorensen's bankruptcy case affected the parties' rights. On March 28, 2017, the bankruptcy court confirmed Ms. It stated that, when she filed her petition, her estate Sorensen's amended plan. Later that same day, the included her option to redeem the jewelry. However, bankruptcy court heard Ms. Sorensen's TRO Motion. In HN1[ ] under § 541(b)(8), certain tangible property light of the earlier plan confirmation and additional pledged to pawnbrokers [*6] is excluded from property of the estate unless the debtor redeems the property original plan, including whether R&J had properly received within the time allowed under § 108(b). That section notice of the plan. The amended plan addressed the trustee's provides that the redemption period is the later of sixty concerns, including notice to R&J. Page 5 of 9 2018 Bankr. LEXIS 1849, *6 days after the petition is filed or the period set by state law. But the bankruptcy court noted that the time period JURISDICTION [*8] under state law had not expired because the ten-day notice that R&J sent violated the automatic stay: The bankruptcy court had jurisdiction pursuant to 28 U.S.C. §§ 1334 and 157(b)(1) and (b)(2)(B). We have Here, R&J never sent a proper notice of loan jurisdiction under 28 U.S.C. § 158. termination. Section 362(a)(6) enjoins any act to collect, [assess], or recover a claim against the debtor that arose before the property of the — the ISSUE commencement of the case. Nothing in 541(b)(8), which is the section that talks about ownership[ ] of Whether the bankruptcy court erred in denying R&J's these assets[,] creates an exception to the Motion to Dismiss and granting Ms. Sorensen a automatic stay. So relief from stay is required preliminary injunction preventing R&J from disposing of before any collection action can begin. And the the jewelry. reference here is 5 Collier on Bankruptcy, at 541 — paragraph 541.24. STANDARD OF REVIEW R&J never moved for relief from stay, which likely would have been granted in view of Section HN2[ ] The issues before the Panel are purely 541(b)(8). And it would have allowed R&J to send questions of law, which we review de novo. Great Lakes the notice required by California law. As everyone Higher Educ. Corp. v. Pardee (In re Pardee), 218 B.R. knows, actions taken in violation of the stay are 916, 919 (9th Cir. BAP 1998), aff'd, 193 F.3d 1083 (9th void. So it is as if R&J never sent the notice and the Cir. 1999) ("We review conclusions of law, including the ten-day redemption period never began. bankruptcy court's interpretation of the Bankruptcy Accordingly, title to [*7] the property was never Code, de novo."). HN3[ ] De novo review is vested in R&J. independent and gives no deference to the trial court's conclusion. Roth v. Educ. Credit Mgmt. Agency (In re Third, the bankruptcy court considered the effect of Ms. Roth), 490 B.R. 908, 915 (9th Cir. BAP 2013). Sorensen's confirmed plan. It stated that the plan controlled the disposition of the jewelry under § 1327(a) and Espinosa v. United Student Aid Funds, Inc., 553 DISCUSSION F.3d 1193 (9th Cir. 2008), aff'd, 559 U.S. 260, 130 S. Ct. 1367, 176 L. Ed. 2d 158 (2010). The court entered an order granting the TRO Motion and denying the Motion A. R&J did not validly terminate Ms. Sorensen's to Dismiss ("Order"). right to redeem the jewelry.

R&J filed a timely notice of appeal from the Order and a The overarching question before the Panel is whether motion for leave to appeal. The BAP motions panel the pawned jewelry is still property of the bankruptcy remanded the case to the bankruptcy court for a estate. This appears to be a question of first impression determination whether the Order granted a TRO, and is in this circuit. We agree with the bankruptcy court's thus interlocutory, or whether the Order granted a reasoning. preliminary injunction and is immediately reviewable on appeal. The bankruptcy court clarified that, despite language indicative of a TRO, the Order constituted a 1. When Ms. Sorensen filed for bankruptcy preliminary injunction. The bankruptcy court also protection, her interest in the jewelry became part of supplemented the reasoning behind the Order, stating the bankruptcy estate. that Ms. Sorensen sought to retain ownership of the jewelry through a confirmed plan that "treated the We must first decide how Ms. Sorensen's bankruptcy Property as collateral for a secured claim held by R&J petition affected the parties' respective interests in the and called for payment of that secured claim over time. jewelry. R&J did not object to any of Plaintiff's Chapter 13 plans. . . . The Court continues to believe the confirmed HN4[ ] Under § 541(a), an estate is created at the Chapter 13 plan controls the Property." filing of a bankruptcy petition that contains, [*9] subject to certain exceptions, "all legal or equitable interests of Page 6 of 9 2018 Bankr. LEXIS 1849, *9 the debtor in property as of the commencement of the under the contract or State law, in a timely case." § 541(a)(1). HN5[ ] "[A] pre-foreclosure right to manner as provided under State law and redeem is a property right under section 541 . . . ." section 108(b)[.] Harsh Inv. Corp. v. Bialac (In re Bialac), 712 F.2d 426, § 541(b)(8). The parties do not dispute that subsections 431 (9th Cir. 1983). This includes rights that a debtor (A) and (B) are satisfied; only (C) is at issue in this retains in her pawned property. See Title Max v. appeal. We thus look to § 108(b) and the relevant state Northington (In re Northington), 876 F.3d 1302, 1309-10 law. (11th Cir. 2017) (agreeing that the debtor "retained property interests in the [pawned property] that became Section 108(b) provides: 'property of the estate' under 11 U.S.C. § 541. In particular, the parties agree that the car, which (b) Except as provided in subsection (a) of this remained in [the debtor's] possession, as well as the section, if applicable nonbankruptcy law, an order associated right to redeem it — which at that time had entered in a nonbankruptcy proceeding, or an not yet expired — entered the estate with the filing of his agreement fixes a period within which the debtor or petition"). an individual protected under [*11] section 1201 or 1301 of this title may file any pleading, demand, In the present case, when Ms. Sorensen filed her notice, or proof of claim or loss, cure a default, or bankruptcy petition, all of her interests in her jewelry at perform any other similar act, and such period has that time became part of her bankruptcy estate. See not expired before the date of the filing of the Cty. of Imperial Treasurer-Tax Collector v. Stadtmueller petition, the trustee may only file, cure, or perform, (In re RW Meridian LLC), 564 B.R. 21, 28 (9th Cir. BAP as the case may be, before the later of - 2017) ("The nature and extent of the debtor's interests (1) the end of such period, including any in property must be determined by nonbankruptcy suspension of such period occurring on or after law."); Cal. Fin. Code. § 21201(a), (f). The bankruptcy the commencement of the case; or court correctly held that her estate included her right to (2) 60 days after the order for relief. redeem her jewelry. § 108(b).

In this case, California law provides the longer period for 2. Under California law, § 541(b)(8) does not redemption of pawned property. HN6[ ] California automatically exclude pawned property from the Financial Code section 21201 provides that, if a pawned bankruptcy estate without notice to the pawnor. item is not redeemed before the end of the loan period, the pawnbroker must give notice of the loan termination R&J argues that the plain language of § 541(b)(8) and provide a ten-day redemption period: automatically exempts the pawned [*10] property from the bankruptcy estate. That subsection provides that: (d) If any pledged article is not redeemed during the (b) Property of the estate does not include-- loan period as provided herein, and the pledgor . . . and pawnbroker do not mutually agree in writing to extend the loan period, the pawnbroker shall (8) subject to subchapter III of chapter 5, any notify the pledgor within one month after interest of the debtor in property where the expiration of the loan period. If the pawnbroker debtor pledged or sold tangible personal fails to notify the pledgor within one month after the property (other than securities or written or expiration of the loan period, the pawnbroker shall printed evidences of indebtedness or title) as not charge interest from the day after the expiration collateral for a loan or advance of money given of the one-month [*12] period. The pawnbroker by a person licensed under law to make such shall notify the pledgor at his or her last known loans or advances, where - mailing or electronic address of the termination of (A) the tangible personal property is in the the loan period, by a means for which verification possession of the pledgee or transferee; of mailing or, at the sole option of the pledgor, (B) the debtor has no obligation to repay electronic transmission of the notification can be the money, redeem the collateral, or buy provided by the pawnbroker, and extending the back the property at a stipulated price; and right of redemption, during posted business (C) neither the debtor nor the trustee have hours, for a period of 10 days from date of exercised any right to redeem provided mailing or electronic transmission of that Page 7 of 9 2018 Bankr. LEXIS 1849, *12

notice. the estate or of property from the estate or to exercise control over property of the estate; Cal. Fin. Code § 21201(d) (emphases added). California . . . law specifies that the pawnbroker only becomes vested with full ownership of the property after the ten-day (5) any act to create, perfect, or enforce period expires: against property of the debtor any lien to [*14] the extent that such lien secures a claim that (f) If any pledged article is not redeemed within the arose before the commencement of the case 10-day notice period, the pawnbroker shall under this title; become vested with all right, title, and interest (6) any act to collect, assess, or recover a of the pledgor, or his or her assigns, to the claim against the debtor that arose before the pledged article, to hold and dispose of as his or commencement of the case under this title[.] her own property. § 362(a)(3), (5), (6).

Cal. Fin. Code § 21201(f) (emphases added); see Cal. R&J's issuance of the ten-day notice was an act "to Fin. Code § 21002(b) ("'Vested property' is property the exercise control over property of the estate[,]"3 to title to which has been transferred from the pledgor to "enforce a lien [that] . . . secures a claim[,]" and "to the pawnbroker pursuant to Section 21201. Vested collect, assess, or recover a claim against the debtor[.]"4 property is not pledged property."). It thus violated § 362(a). HN9[ ] "Actions taken in violation of the automatic stay are void." In re RW In other words, HN7[ ] the right to redeem pawned Meridian LLC, 564 B.R. at 28. Because the ten-day property under California law does not expire until ten notice was void ab initio, R&J did not satisfy the notice days after the pawnbroker gives proper [*13] notice to requirement in California Financial Code section the pledgor. 21201(d). In the present case, Ms. Sorensen filed for bankruptcy Accordingly, the ten-day redemption period never began protection on August 9, 2016. The replacement loans to run under subsection (d), Ms. Sorensen's redemption terminated on November 18, 2016. Pursuant to right was never extinguished, R&J never took title to the California Financial Code section 21201(d), R&J then jewelry under subsection (f), and § 541(b)(8) did not issued the notice of the ten-day right of redemption. Ms. remove the jewelry from the estate. Sorensen did not redeem the jewelry during the ten-day period. This case is distinguishable from cases decided in other jurisdictions with different state statutes. For example, in R&J contends that, because Ms. Sorensen failed to Northington, the Eleventh Circuit held that, under state redeem the jewelry during the ten-day period, the law automatically vesting title in the pawnbroker at the pawned jewelry was excluded from the bankruptcy expiration of the redemption period, the pawned estate under § 541(b)(8)(C). But as we explain in the property "dropped out" of the estate pursuant to § next section, the ten-day notice was void because R&J 541(b)(8). 876 F.3d at 1306. In that [*15] case, the issued it in violation of the automatic stay. debtor failed to redeem prepetition pawned property,

3. The statutory redemption notice was void because R&J failed to seek relief from stay. 3 R&J already had "control" of the jewelry in the sense of physical possession. The notice (if effective) would have given HN8[ ] The automatic stay prevents a creditor from it complete control by permitting it to sell the jewelry and keep taking certain actions against property of the bankruptcy the proceeds. Cal. Fin. Code § 21201(d), (f). Therefore, the estate. In relevant part, § 362 provides: notice violated § 362(a)(3).

(a) Except as provided in subsection (b) of this 4 R&J's loans were nonrecourse, meaning that if the proceeds section, a petition filed under section 301, 302, or of sale of the jewelry were insufficient to repay the loans in 303 of this title . . . operates as a stay, applicable to full, R&J had no recourse against Ms. Sorensen for the all entities, of - deficiency. This is immaterial, because HN10[ ] § 102(2) . . . provides that "'claim against the debtor' includes claim against property of the debtor . . . ." In other words, nonrecouse claims (3) any act to obtain possession of property of are "claims" for bankruptcy purposes. Page 8 of 9 2018 Bankr. LEXIS 1849, *15 and the pawnbroker sought relief from stay and argued result here is different because Georgia's pawnshop law that the property was excluded from the estate pursuant differs from California's. In Georgia, following a statutory to § 541(b)(8). The Eleventh Circuit started with the redemption period, the interest in the pawned property proposition that the debtor's interest in the pawned is automatically vested in the pawnbroker; the property became property of the estate when he filed his pawnbroker does not need to take any action. Ga. Code bankruptcy petition. Id. at 1309. But it stated that "an Ann. § 44-14-403(b)(3) ("Pledged goods not redeemed estate is not necessarily 'frozen in time,' but rather can, within the grace period shall be automatically forfeited to in certain circumstances, expand or contract in the pawnbroker by operation of this Code section, and accordance with the operation of underlying state-law any ownership interest of the pledgor or seller shall property rules." Id. at 1314. The court held that, by automatically be extinguished as regards the pledged operation of state law, the pawned property "dropped item."). In contrast, California Financial Code section out" of the estate: 21201(d) required [*17] R&J to send notice to Ms. Sorensen before it obtained legal title to the jewelry. HN11[ ] Properly understood, the Bankruptcy That notice, as discussed above, was void because it Code takes an estate's constituent property violated the automatic stay.6 interests as it finds them. If an asset is by its state- law nature static, then it remains so in the R&J points out that this analysis treats California bankruptcy estate. If, by contrast — as is often pawnshops differently from pawnshops in other states the case — state law imbues an estate asset that do not require the pawnbroker to give notice of with a sort of internal dynamism, then that termination of the redemption right.7 R&J argues that characteristic will follow the asset into the estate. . . .

But increase will not always be the result — 6 This is not to say that § 362(a), rather that § 108(b), controls sometimes the dynamism will reduce (or even the redemption period. We agree with other courts in our eliminate) an asset's value. Think, for instance, circuit that have held thatHN12[ ] § 362(a) does not toll about a debtor whose bankruptcy estate [*16] redemption periods. See, e.g., In re York, No. 16-01964- includes an option contract. If the debtor fails to FPC13, 2016 Bankr. LEXIS 3795, 2016 WL 6157432, at *3 exercise the option in accordance with state law, (Bankr. E.D. Wash. Oct. 21, 2016) ("This court finds more persuasive courts finding that § 362(a) does not toll the then the right to buy disappears. This case reflects running of the time period for redemption, and that the only the same basic phenomenon. Under Georgia's available extension of time for such periods is the 60 days pawn statute, following his loan's maturity date, provided for in § 108(b). . . ."); In re Mosher, No. 07-60007-13, Wilber had a conditional right to possess the 2007 Bankr. LEXIS 4730, 2007 WL 1487399, at *7 (Bankr. D. Charger as well as a right to redeem it during the Mont. May 17, 2007) ("Debtors' argument that their statutory period. But after the expiration of the redemption period was tolled by the automatic stay is prescribed period, Wilber had no rights in the car, contradicted by the plain language of § 541(b)(8)(C) which possessory or otherwise. Rather, his rights had specifically invokes § 108(b) for determining whether a debtor been "automatically . . . extinguished" and or trustee has exercised any right to redeem in a timely "automatically forfeited to [TitleMax]." manner."); see also In re Northington, 876 F.3d at 1313 (rejecting the notion that "the automatic-stay provision applies Id. at 1314-15 (emphasis added). to toll an as-yet-unexpired state-law redemption period indefinitely, thereby preventing the period from lapsing and (in We agree with the Northington court's analysis,5 but the effect) keeping pawned assets in the estate"). Section 362(a) is still relevant, however, in cases like this one, where a redemption period does not start running until the creditor gives a notice, and the automatic stay prevents the creditor 5 In particular, we agree that pawned property "drops out" of from giving that notice. the estate if the redemption right is not timely exercised. R&J argues that pawned property does not enter the estate at all 7 Pawnshop laws vary widely from state to state. See, e.g., unless and until the debtor or trustee timely exercises the Del. Code Ann. § 2307(b) (prohibiting the pawn of prosthetic redemption right. The Northington court's view is more limbs); Clark County, Nev. Ord. 6.24.150 (stating that it is consistent with the language and structure of § 541(b)(8). That illegal to accept pawned goods from someone known to be a section expressly permits the debtor or the trustee to redeem "habitual drunkard" or "an insane person"). Most state laws the property. If the redemption right were not property of the provide that pawned property "automatically" vests in the estate, the trustee could not exercise it. pawnbroker when the redemption period expires, but a Page 9 of 9 2018 Bankr. LEXIS 1849, *17 this result is unfair and inappropriate. We agree that application of state law in this context produces different CONCLUSION results in different states, but this is neither wrong nor even unusual. HN13[ ] "Property interests are created The bankruptcy court did not err when it denied the and defined by state law. Unless some federal interest Motion to Dismiss and granted the TRO Motion. We requires a different result, there is no reason why such AFFIRM. interests should be analyzed differently simply because an interested party is involved in a bankruptcy proceeding." Butner v. United States, 440 U.S. 48, 55, End of Document 99 S. Ct. 914, 59 L. Ed. 2d 136 (1979). "[U]ndefined considerations of equity provide no basis for adoption of a uniform federal rule" displacing state property law. Id. at 56.

Accordingly, Ms. Sorensen's redemption rights did not terminate because R&J did not obtain relief from the automatic stay before giving the ten-day notice. The bankruptcy court [*18] did not err.

B. We need not decide whether the plan has preclusive effect.

The bankruptcy court alternatively held that R&J was bound by the terms of the confirmed plan, which treated R&J as a secured creditor and provided for redemption of the pawned jewelry. We do not reach this issue on appeal because we are affirming the decision on another, independently sufficient ground.

minority (including California) require the pawnbroker to give notice to the pawnor before the pawnbroker acquires full title to the property or sells the property. Thirteen jurisdictions (California, Kentucky, Massachusetts, New Jersey, New Mexico, New York, Ohio, Oregon, Pennsylvania, South Carolina, Wisconsin, District of Columbia, and Guam) require notice. See, e.g., Ohio Rev. Code Ann. § 4727.11 ("the licensee shall notify the pledgor . . . [that] the pledged property shall be forfeited to the licensee"); Or. Rev. Stat. § 726.400(3)("the pawnbroker may not deem a pledge to be forfeited until: (a) The pawnbroker notifies the pledgor that the pledge is at risk of forfeiture . . ."); Wis. Stat. Ann. § 138.10 ("A pawnbroker shall not sell any pledge unless due notice of such contemplated sale has been forwarded to the pledgor . . . ."). A few other jurisdictions require that the pawnshop give public notice of the upcoming sale. See 19 R.I. Gen. Laws Ann. § 19- 26-10; V.I. Code Ann. tit. 9 § 228. Still others have no pawnshop laws or leave the regulation up to local government. But the majority of jurisdictions do not require further notice or simply do not speak to any further notice requirement prior to the pawnshop acquiring full interest in the pawned property. Our holding here only applies where applicable nonbankruptcy law requires the pawnbroker to give notice in order to terminate the pawnor's rights in the property. Derma Pen, LLC v. 4EverYoung Limited, --- Fed.Appx. ---- (2018)

Stene Marshall, Pro Se 2018 WL 2684268 Only the Westlaw citation is currently available. Nathan D. Alder, Bryson R. Brown, Karra J. Porter, This case was not selected for Christensen & Jensen, Salt Lake City, UT, Freyja publication in West's Federal Reporter. R. Johnson, Linda M. Jones, Clemens Alexander See Fed. Rule of Appellate Procedure 32.1 Landau, Zimmerman Booher, Salt Lake City, UT, for generally governing citation of judicial Counterclaim Defendant-Appellant decisions issued on or after Jan. 1, 2007. See also U.S.Ct. of App. 10th Cir. Rule 32.1. David W. Scofield, Peters Scofield, Sandy, UT, for United States Court of Appeals, Tenth Circuit. Counterclaim Defendants Derma Pen IP Holdings, Medmetics, LLC DERMA PEN, LLC, Plaintiff Nathan D. Alder, Bryson R. Brown, Karra J. Porter, Counterclaim Defendant, Christensen & Jensen, Salt Lake City, UT, Counterclaim v. Defendants Jeremy Jones, Michael J. Morgan, Chad 4EVERYOUNG LIMITED, doing business Milton as DermapenWorld; BioSoft (Aust) Pty Ltd, doing business as DermapenWorld; Before TYMKOVICH, Chief Judge, BRISCOE, and Equipmed International Pty Ltd, doing HARTZ, Circuit Judges. * business as DermapenWorld, Defendants, and ORDER AND JUDGMENT ** Stene Marshall, doing business as DermapenWorld, Defendant-Appellee, Timothy M. Tymkovich, Chief Judge and 4EverYoung Limited; Equipmed International *1 The parties are familiar with the complex procedural Pty Ltd., Counterclaim Plaintiffs, history of this case involving trademark infringement and 1 v. counterclaims for breach of contract. This appeal only Michael E. Anderer, Counterclaim concerns Michael Anderer’s motions to (1) vacate the civil contempt orders previously entered against him, and (2) Defendant-Appellant, release the injunction bond posted by his adversary. The and 2 Jeremy Jones; Michael J. Morgan; Chad district court denied those motions, and we affirm. Milton; Medmetics, LLC, a Delaware limited liability company; Dermagen International LLC; Derma Pen IP Holdings, I. Background John Does 1-25, Counterclaim Defendants. We begin by explaining why the district court enjoined No. 17-4105 Anderer and why it later held him in contempt. | Filed June 5, 2018 A. The suit (D.C. No. 2:13-CV-00729-DN-EJF) (D. Utah) Derma Pen LLC sued 4EverYoung Limited and associated parties for trademark infringement. Attorneys and Law Firms 4EverYoung counterclaimed for breach of contract and sought specific performance. Specifically, 4EverYoung’s Michael Ben Bennett, Orem, UT, Bryson R. Brown, agreement with Derma Pen provided that upon its Christensen & Jensen, Salt Lake City, UT, Douglas termination, 4EverYoung would have the right to R. Short, Holladay, UT, for Plaintiff Counterclaim purchase the Derma Pen trademark and the associated Defendant domain name. After the parties terminated the agreement, however, Derma Pen refused to sell the trademark

© 2018 Thomson Reuters. No claim to original U.S. Government Works. 1 Derma Pen, LLC v. 4EverYoung Limited, --- Fed.Appx. ---- (2018) and domain name to 4EverYoung. 4EverYoung’s counterclaim thus sought to force Derma Pen to sell it those assets. C. The temporary restraining orders and preliminary injunctions Upon learning of these actions, 4EverYoung filed a B. Anderer’s attempts to obtain the assets renewed motion for a preliminary injunction—claiming Michael Anderer is a long-time investor in Derma Pen the transfers would violate Utah’s fraudulent transfer law. and was involved in the agreement between Derma Pen The district court entered a temporary restraining order and 4EverYoung. In 2014, Anderer made Derma Pen a against Derma Pen on December 23, 2014. On January 6 large loan and secured it against all of Derma Pen’s assets (with a written order on January 12), the court granted —including the trademark assets. Up until this point, 4EverYoung a preliminary injunction against Derma Pen. Anderer had been serving as a board member for Derma Both orders prohibited Derma Pen and those “acting in Pen. He resigned because of alleged conflicts between his concert” with it from transferring the trademark assets. roles as a creditor and board member. App. 760, 818, 1412.

*2 Shortly after execution of the 2014 Note—and On January 12, worried by Anderer’s continued steps one business day before trial was to begin in this toward selling the assets, 4EverYoung added Anderer as case—Derma Pen filed for bankruptcy. The district a party to the suit. On January 21, the district court court accordingly placed the litigation on hold. As the granted 4EverYoung’s motion for a temporary restraining bankruptcy proceedings began, the bankruptcy court order preventing Anderer from transferring the assets. granted Anderer permission to loan Derma Pen more The court did so without a hearing because 4EverYoung money through debtor-in-possession financing. Derma claimed Anderer was planning to sell the assets at a public Pen also stipulated to the validity and priority of sale the next day. On February 25, the district court Anderer’s secured interests, and Anderer prepared a bid granted 4EverYoung a preliminary injunction enjoining to sell the trademark assets as a means to pay Derma Pen’s Anderer from transferring the trademark assets “except secured creditors. in connection with a foreclosure based on the Debtor In Possession (DIP) Financing.” App. 1439. These proceedings did not get very far. On December 19, 2014, the bankruptcy court dismissed the bankruptcy petition as a bad faith attempt to stymie the district D. Anderer’s alleged violations of the orders court’s adjudication of 4EverYoung’s claim involving the After the temporary restraining order and preliminary trademark assets. The court also noted Derma Pen’s injunction against Derma Pen, but before the orders liabilities did not exceed its assets. enjoining Anderer personally, Anderer took a series of actions to transfer the trademark assets. This included After the dismissal, Anderer sent Derma Pen notice of filing an application for a Writ of Execution for the Utah default and demanded payment of its outstanding loans. State Court judgment, filing a Notice of Constable Sale, He then asked Derma Pen’s CEO to confess judgment in and expressing his intent to go forward with the sale of the Utah State Court. Derma Pen did so on December 22, assets in open court, among other things. 2014, and the Utah court rendered judgment for Anderer on December 24, 2014. Anderer also took steps to transfer the trademark assets after the court issued a temporary restraining order Meanwhile, Anderer’s counsel, Samuel Saunders, also and preliminary injunction enjoining him personally. asked Derma Pen to assign Anderer the trademark assets On February 26, Anderer held a public sale of the as a partial surrender of a secured asset under Article 9 trademark assets pursuant to his debtor-in-possession of the Utah Commercial Code. Saunders suggested this loan foreclosure. He purchased the trademark assets transfer as an alternative to seizing the trademark assets himself. The same day, he transferred the assets to through execution of Anderer’s state court judgment. Dermagen International LLC, a foreign company in Derma Pen assigned Anderer the trademark and recorded which Anderer holds a minority stake. it with the U.S. Patent Office Electronic Transfer Assignment system on December 22, 2014.

Anderer appeals from the court’s denial of his motion E. The district court holds Anderer in civil contempt to vacate the contempt orders. While Anderer made his *3 4EverYoung moved to hold Anderer in civil contempt motion before final judgment, and so was not acting for violating the orders enjoining Derma Pen—and those pursuant to Rule 60(b), his motion is in essence a “acting in concert”—as well as the orders enjoining motion for reconsideration of those orders in light of Anderer personally. In its written orders on April 15, 2015 changed circumstances. We therefore review for abuse of the district court found Anderer had known about the discretion. See Wright ex rel. Tr. Co. of Kan. v. Abbott orders and willfully violated them. The court thus ordered Labs., Inc., 259 F.3d 1226, 1235 (10th Cir. 2001). Anderer to pay 4EverYoung’s attorneys’ fees and costs in bringing the motion. “Under an abuse of discretion standard, a trial court’s decision will not be disturbed unless the appellate court has a definite and firm conviction that the lower court F. Anderer’s motions made a clear error of judgment or exceeded the bounds Later in 2015, 4EverYoung and the other defendants of permissible choice in the circumstances.” Id. (internal started having trouble retaining their attorneys. One after quotation omitted). “That is to say, we will not alter a another, the defendants’ attorneys moved to withdraw trial court’s decision unless it can be shown that the court’s because of unpaid fees. The district court repeatedly decision was an arbitrary, capricious, whimsical, or granted the defendants time to obtain new counsel, and manifestly unreasonable judgment.” Id. at 1236 (internal warned that it would impose sanctions if the defendants quotation omitted). Anderer maintains the district court did not obtain counsel by the court’s deadline. On August abused its discretion by denying his motion to vacate the 29, 2016—after several months, four sets of withdrawn contempt orders against him. We are not persuaded. attorneys, and a string of broken deadlines—the district court sanctioned 4EverYoung by vacating the preliminary To begin, the mere fact the district court vacated the injunctions it had obtained against Derma Pen and injunctions did not compel it to vacate the contempt Anderer. orders too. Generally, it is true “a claim for civil contempt must fall if the order that was disobeyed is subsequently With the injunctions on which the civil contempt orders reversed by the issuing court or the appellate court, or had been premised now vacated, Anderer moved to vacate if its issuance exceeded the power of the issuing court.” the civil contempt orders too. Reliance Ins. Co. v. Mast Const. Co., 84 F.3d 372, 376 (10th Cir. 1996). This rule makes sense because civil On January 31, 2017, after more of the same from the contempt is not punitive—it is meant only to compensate defendants, the district court entered default judgment the party wronged by the other party’s disobedience of a against 4EverYoung and the other defendants. Anderer court order. See United States v. United Mine Workers of then moved to have the injunction bond 4EverYoung had Am., 330 U.S. 258, 302, 303–04, 67 S.Ct. 677, 91 L.Ed. posted released to him as damages. 884 (1947). It follows that if the disobedient party should never have been enjoined, there is no need to compensate The district court entered final judgment for Derma Pen the party who sought the injunction. and Anderer on May 9. But about a month later, on June 7, the district court denied Anderer’s motions to vacate the *4 This does not mean, however, that a contempt order contempt orders and release the injunction bond. is automatically overturned whenever the violated order terminates. If the violated order terminates for some reason unrelated to the merits—like mootness or simply II. Analysis the passage of time—the contempt order still stands. Reliance Ins. Co., 84 F.3d at 376. Anderer argues the district court should have vacated the contempt orders and released the injunction bond. We The district court here vacated the preliminary injunctions 3 affirm the district court on both issues. as a sanction against 4EverYoung. Because the court never found the injunctions had been incorrectly granted

A. The civil contempt orders

© 2018 Thomson Reuters. No claim to original U.S. Government Works. 3 Derma Pen, LLC v. 4EverYoung Limited, --- Fed.Appx. ---- (2018) on the merits, it had no obligation to vacate the contempt sale exception from the court’s order. We do not dispute orders. this, but neither do we find it relevant. We agree the order expressly allowed Anderer to conduct the foreclosure sale. Nevertheless, Anderer argues the district court should And we also agree Anderer was entitled to purchase have vacated the contempt orders for two reasons: first, the assets at the foreclosure sale, as that constituted because the February 25 injunction did not prohibit his a transfer “in connection with” the foreclosure. But conduct in a sufficiently clear way 4 ; second, because the what Anderer could not do was transfer the asset again district court incorrectly granted the injunctions on the after the foreclosure sale. The injunction’s terms clearly prohibited that transfer. The district court thus held merits. 5 We find merit in neither. Anderer in contempt for his subsequent transfer to Dermagen International—not for holding the foreclosure sale or purchasing the assets himself. 1. Clarity of February 25 preliminary injunction Even so, Anderer claims the transfer to Dermagen did Rule 65(d)(1) requires an injunction to “state its terms not violate the injunction because once he had transferred specifically” and “describe in reasonable detail ... the act the assets to himself at the foreclosure sale, he was free or acts restrained or required.” Fed. R. Civ. P. 65(d)(1). to transfer the assets to whomever he wished. In other A party alleging civil contempt must therefore prove by words, he argues once the assets were transferred through clear and convincing evidence that the order its adversary this foreclosure-sale exception, the injunction no longer violated was “clear and unambiguous.” Reliance Ins. Co., applied. But this ignores the clear language of the order. 84 F.3d at 377. The court is to construe any ambiguities The order banned Anderer from making any transfer in favor of the party the court is being asked to hold in except one in connection with the foreclosure sale. Once contempt. Id. he had made such a transfer, the order continued to bar all other transfers. Anderer contends the February 25 preliminary injunction (enjoining him personally) did not clearly prohibit him We thus agree with the district court that its February from transferring the trademark assets to Dermagen 25 preliminary injunction clearly prohibited Anderer’s International, LLC. The district court concluded the transfer to Dermagen International. February 25 injunction clearly enjoined Anderer’s actions. While formally a question of law, “[w]e give deference to the district court’s interpretation of its own order.” Auto- Owners Ins. Co. v. Summit Park Townhome Ass’n, 886 F.3d 2. Granting of the injunctions 863, 872 (10th Cir. 2018); see Griffin v. Gomez, 741 F.3d Anderer also contends the district court should have 10, 25 (9th Cir. 2014). vacated the contempt orders because it had erroneously granted them. We conclude the district court did not abuse Applying this deference, we conclude the district court’s its discretion in granting the injunctions. interpretation is correct: the February 25 injunction clearly proscribed Anderer’s conduct. The injunction A movant seeking a preliminary injunction must establish ordered Anderer not to “transfer the Trademark or “(1) a substantial likelihood of success on the merits; (2) Domain Name or any interest therein ... except in irreparable injury to the movant if the injunction is denied; connection with a foreclosure based on the Debtor In (3) the threatened injury to the movant outweighs the Possession (DIP) Financing.” App. 1439–40 (emphasis injury to the party opposing the preliminary injunction; added). Because Anderer’s transfer to Dermagen was not and (4) the injunction would not be adverse to the “in connection with” the foreclosure, it came under the public interest.” Dominion Video Satellite, Inc. v. EchoStar injunction’s prohibition. Satellite Corp., 269 F.3d 1149, 1154 (10th Cir. 2001). We find the district court’s conclusions as to each of these *5 Anderer argues the order’s exception expressly factors were not an abuse of discretion. allowed him to conduct the foreclosure sale and purchase the assets. He emphasizes that 4EverYoung recognized this was so because it moved to delete this foreclosure-

cannot be a right to payment, and so 4everYoung is not a creditor protected by the Act. a. Substantial likelihood of success on the merits

Anderer makes several arguments why 4EverYoung could But the district court reasoned that 4everYoung could not prevail on its fraudulent transfer claim. obtain money damages for the violation of its right to purchase, even though it chose to request specific First, Anderer says the trademark and domain name performance instead. In the court’s view, this possible cannot constitute “assets” under Utah fraudulent transfer claim for damages meant 4EverYoung had a “right to law because the Utah Fraudulent Transfer Act (UFTA) payment” as defined by the Act. And because the UFTA is defines “asset” to exclude “property to the extent it is to be “liberally construed,” National Loan Investors, L.P. encumbered by a valid lien.” Utah Code Ann. § 25-6-102. v. Givens, 952 P.2d 1067, 1069 (Utah 1998), the district In other words, he claims transfers of property pursuant to court found Anderer’s interpretation too restrictive. See a lien are not within the UFTA’s scope. Similarly, Anderer also Payment, Black’s Law Dictionary (2d ed) (“[T]he argues transfers pursuant to a UCC security interest are performance of a duty, promise, or obligation ... by the also not within the UFTA’s scope. delivery of money or other value.” (emphasis added) ).

But the UFTA is not so easily defeated. It is true the For these reasons, the district court did not abuse its Act does not apply to transfers pursuant to valid liens discretion by concluding that 4EverYoung was likely to and security interests (which is unsurprising, given the prevail on the merits. Act is only meant to prevent fraudulent transfers). Yet the Act does prohibit the fraudulent creation of liens and security interests as a way of fraudulently transferring b. Irreparable harm property. § 25-6-102(16). This is clear from the fact the Act defines “transfer” to include “creation of a lien or The district court also reasonably found 4EverYoung other encumbrance.” Id. So the fact Anderer created a would suffer irreparable harm if the court did not lien or security interest on the trademark assets through grant the preliminary injunctions. The court decided the either his 2014 Note or the debtor-in-possession loan does trademark and domain name were unique assets for which not exempt his actions from Utah’s fraudulent transfer 4EverYoung could obtain specific performance. It also statute. Instead, the liens and security interest are part of found Anderer would have outbid 4EverYoung at any the scheme to fraudulently transfer the asset. public sale. Given these reasonable conclusions, we cannot say the court abused its discretion by finding 4EverYoung Second, Anderer argues DermaPen was not insolvent at would suffer irreparable harm. the time. He points to the fact the bankruptcy court found DermaPen’s liabilities did not exceed its assets. Anderer contends any harm is 4EverYoung’s own fault Again, the district court’s conclusion was reasonable. The because it did not negotiate more protective provisions for court found Derma Pen was insolvent because DermaPen its contractual right of first refusal. But that logic would declared itself insolvent when it filed for bankruptcy and apply to any contractual failure to specify fraudulent because the 2014 Note and the Confession of Judgment transfers as prohibited conduct, and does not preclude a concerned all of DermaPen’s assets. And in any event, finding of irreparable harm here. 4EverYoung did not have to prove insolvency to prevail; insolvency is only one factor in determining whether there was “intent to hinder, delay, or defraud any creditor of the c. The balance of harms debtor.” See Utah Code Ann. § 25-6-102. The district court concluded 4EverYoung’s potential *6 Third, Anderer asserts 4everYoung is not a “creditor” harms if the court did not grant a preliminary injunction as defined by the UFTA. The UFTA defines “creditor” outweighed the harms Anderer and Derma Pen might as “a person that has a claim,” and it defines “claim” as suffer if an injunction were wrongfully granted. This too “a right to payment.” Utah Code Ann. § 25-6-102 (3)-(4). was reasonable. While Anderer and Derma Pen could Anderer insists a right to purchase the trademark assets recover money damages for their temporary inability

© 2018 Thomson Reuters. No claim to original U.S. Government Works. 5 Derma Pen, LLC v. 4EverYoung Limited, --- Fed.Appx. ---- (2018) to transfer the trademark, the court reasonably found to resolve waived arguments. I respectfully disagree with 4EverYoung had a good case for specific performance. the majority’s approach. I would conclude this appeal is untimely and dismiss this case for lack of jurisdiction. The majority’s method suffers from three flaws, each fatal on its own. d. Public interest

As for the public interest, the district court reasonably found the public interest in contract enforcement I outweighed any contrary public interests. On May 8, 2017, the district court entered final judgment * * * in favor of Derma Pen. The district court’s order stated, “[t]his is a Final Judgment. The clerk is directed to On the whole, we find the district court did not abuse its close the case.” Supp. App. Case No. 17-4105, at 136 discretion by affirming its decision to grant preliminary (hereinafter “Supp. App.”). The docket also accurately injunctions against Anderer and Derma Pen. reflected that final judgment was entered in the case:

FINAL JUDGMENT AND B. The injunction bond PERMANENT INJUNCTION We now turn to Anderer’s motion to release the injunction entered in favor of Derma bond. We also review a district court’s decision to grant Pen and against 4EverYoung or deny damages on a bond for abuse of discretion. Front Limited, BioSoft, Equipmed Range Equine Rescue v. Vilsack, 844 F.3d 1230, 1233 (10th International, Stene Marshall: Cir. 2017). plaintiff is awarded $11,907,320.00 in monetary damages and Anderer moved for the district court to award him $3,668,007.53 in attorneys’ fees and the injunction bond 4EverYoung had previously posted costs, plus postjudgment interest both as a further sanction against 4EverYoung and as at the rate provided by 28 USC damages because the court had erroneously granted the 1961(a), from the date this judgment injunctions. On appeal, Anderer does not dispute the is entered until the date this district court’s refusal to award him the injunction bond judgment is paid—CASE CLOSED. as a sanction against 4EverYoung. He only argues the court should have done so because it erroneously granted Id. at 118–19. the injunctions. Since we have concluded the court did not abuse its discretion by finding it had not erroneously Through this ruling and docket entry, the district court: issued the injunctions, we affirm the district court. (1) declared its intention that the order embody a final judgment and be the court’s final action in the case, see United States v. F. & M. Schaefer Brewing Co., 356 U.S. 227, 232, 78 S.Ct. 674, 2 L.Ed.2d 721 (1958); and (2) III. Conclusion reduced the damages to a sum certain that Derma Pen shall recover, see Harbert v. Healthcare Services Group, *7 We therefore AFFIRM. Inc., 391 F.3d 1140, 1145 (10th Cir. 2004). If a court does these two things, its decision “constitutes [the] final judgment.” F. & M. Schaefer, 356 U.S. at 232, 78 S.Ct. BRISCOE, Circuit Judge, dissenting 674. The majority concludes this appeal arises from a final post-judgment decision separate and apart from the The majority concludes that in its May 8, 2017 final district court’s final judgment on the merits entered judgment, the district court “did not decide the two on May 8, 2017. Upon reaching this conclusion, motions relevant here,” highlighting that “the district the majority addresses the merits of a now-vacated court carefully listed the motions it was deciding in the preliminary injunction central to the underlying litigation May judgment, and did not list” Anderer’s motions to: (1)

© 2018 Thomson Reuters. No claim to original U.S. Government Works. 6 Derma Pen, LLC v. 4EverYoung Limited, --- Fed.Appx. ---- (2018) vacate the contempt orders against him, and (2) release $140,000 in bond to him. Majority, at –––– n.2. However, As is evidenced by the “Request to Submit for Decision,” the district court only listed in its May 8, 2017 final Anderer’s “Motion for Release of $130,000 [sic] Bond” judgment the orders it was granting or holding moot. was ripe for decision on April 1, 2017—over a month The district court did not list any motions that it was before final judgment was entered. That is, as of April 1, denying on the merits. And, the district court was correct 2017, Anderer could have—and likely should have—filed in omitting such motions, as by entering final judgment, a “Request to Submit for Decision.” Yet, his request did the district court implicitly denied all motions pending on not come until more than a month later, after the district the docket—including those to vacate contempt orders court had entered final judgment in this case. and release $140,000 in bond, which were filed on October 21, 2016, and March 17, 2017, respectively, and pending Anderer’s “Request to Submit for Decision” did not before final judgment. See Thompson v. Coulter, 680 purport to be a motion filed under any of the Federal Fed.Appx. 707, 712 (10th Cir. 2017) (unpublished) (“By Rules of Appellate Procedure that toll the time to file an entering final judgment, however, the court implicitly appeal. See Fed. R. App. P. 4(a)(4)(A)(i)-(vi). Nor is it denied the pending motions.”). Consequently, the district such a motion; it is simply a request to rule. Thus, Anderer court resolved all motions pending before it. With did not timely file a notice of appeal, and case number knowledge of language indicating that the “CASE [IS] 17-4105 should be dismissed. CLOSED,” Anderer was put “on notice of the need to appeal,” O’Connor v. Midwest Pipe Fabrications, Inc., 972 F.2d 1204, 1208 (10th Cir. 1992), which he had 30 days II to do, Fed. R. App. P. 4(a)(1)(A). As explained, the district court had resolved the motions *8 Rather than file a timely notice of appeal from the to vacate contempt orders and release bond in its May district court’s May 8, 2017 final judgment, nine days 8, 2017 final judgment. The majority gives weight to the after its entry, on May 17, 2017, Anderer filed at the district court’s statement in its June 7, 2017 post-judgment district court a “Request to Submit for Decision” under order that the motions to vacate contempt orders and the District of Utah’s local rule, DUCivR 7-3. Dkt. 1048. 1 release bond were “left ... unresolved” following its May A “Request to Submit for Decision” is intended to alert 8, 2017 final judgment. Majority, at –––– n.2 (quoting the district court that a pending motion is ripe for decision. Supp. App., at 191). If this were true, the majority still errs A party is to file a “Request to Submit for Decision” once in exercising jurisdiction. We may review post-judgment a pending motion is fully briefed or when the time to file collateral orders. However, the order and matters before a response or reply has expired, likewise rendering the us in this appeal are not collateral to the merits of this case. motion ripe for decision at the district court’s discretion. In other words, this type of motion is intended for use The majority concludes that Anderer’s motions to vacate during litigation, not after a final judgment that resolves contempt orders and release bond—and presumably the all pending motions. district court’s June 7, 2017 resolution thereof—are collateral to the merits of the case because they “had Anderer’s “Request to Submit for Decision” stated in its nothing to do with the findings of fact and conclusions of entirety: law the district court entered in the May judgment.” Id. I disagree. Michael Anderer, through counsel and pursuant to DUCivR 7-3, hereby requests to submit for decision In his motion to vacate the contempt orders filed at the his “Motion for Release of $130,000 [sic] Bond.” Mr. district court, Anderer presented three arguments. First, Anderer filed the motion on March 17, 2017. There Anderer claimed that the district court should vacate was no opposition filed, and the fourteen days to do so the contempt orders to further sanction Defendants for under DuCivR 7-1(b)(3)(B) has passed. No party has abandoning the litigation. Second, he argued that the requested oral argument. Accordingly, the motion is district court should vacate the contempt orders because ripe for decision. Defendants “abandoned the litigation before the award of damages became final.” Dkt. 946, at 4. Third, Anderer Dkt. 1048 (footnotes omitted).

© 2018 Thomson Reuters. No claim to original U.S. Government Works. 7 Derma Pen, LLC v. 4EverYoung Limited, --- Fed.Appx. ---- (2018) contended that the injunctions on which the contempt is a decision on the merits which was effectively resolved orders were based were wrongfully entered. by the May 8, 2017 final judgment. The district court notes, “there has been no order or finding that Derma Pen *9 In his motion to release bond, Anderer presented and Anderer were wrongfully enjoined,” the preliminary two similar arguments. First, he claimed that the district injunction had not been vacated on the merits, nor court should release the bond to him to further sanction was it vacated nunc pro tunc. Id. at 197. Rather the Defendants for failing to participate in proceedings. district court vacated the preliminary injunction “because Second, he argued again that the injunctions were of Defendants’ failure to appoint counsel,” which is erroneously entered. also the reason “Defendants’ rights [to the trademark] terminated,” as supported by the findings of fact and In arguing that the injunctions were erroneously issued conclusions of law entered on May 8, 2017, which the in his motions to vacate the contempt orders and release district court then quotes in its June 7, 2017 decision. Id. bond, Anderer depended on the facts that Defendants at 197–98 (emphasis added). “abandoned the ... litigation,” “fail[ed] to appear or appoint counsel,” and did not “pay ... attorneys.” See, e.g., Thus, the district court’s resolution—or, re-resolution id. at 4–5. As the district court noted, Anderer “relie[d] on on June 7, 2017—of Anderer’s motions to vacate the a series of inferences” in support of his “argument that the contempt orders and release bond is a determination not injunctions were wrongfully entered.” Supp. App., at 196. separate and apart from the merits of the underlying Anderer claimed that 4EverYoung’s “failure to prosecute litigation. 2 Anderer’s motions did not raise “important its claims” suggested that 4EverYoung “never intended questions that arose after a final judgment was entered.” to purchase the Trademark” and therefore “4EverYoung Shaw v. AAA Eng’g & Drafting Inc., 138 Fed.Appx. was not likely to succeed on its claims, nor would it 62, 72 (10th Cir. 2005) (unpublished). Nor were they had suffered irreparable harm had a restraining order or unreviewable on appeal from the district court’s May injunction not issued.” Dkt. 946, at 7. Thus, at the heart 8, 2017 final judgment; they should have been appealed of both Anderer’s motions to vacate the contempt orders therefrom. 3 and release bond was Defendants’ failure to participate in the litigation and prosecute its counterclaims.

As the majority aptly suggests, collateral issues are III those “having no bearing what[so]ever on the judgment.” F.C.C. v. League of Women Voters of California, 468 U.S. *10 Finally, Anderer waived the arguments he now 364, 373 n.10, 104 S.Ct. 3106, 82 L.Ed.2d 278 (1984). Yet, raises. As a reminder, in support of his motion to vacate Defendants’ failure to participate in proceedings served as at the district court, Anderer argued that the district court the very basis for the district court’s decisions to: (1) strike should vacate the contempt orders: (1) as further sanctions and dismiss Defendants’ counterclaims; (2) vacate the against Defendants for abandoning the litigation, Dkt. preliminary injunctions; (3) enter a certificate of default 946, at 4; and (2) because the district court wrongly entered against Defendants; and most importantly, (4) enter its the injunctions, as 4EverYoung’s “failure to prosecute findings of fact and conclusions of law in the May 8, 2017 its claims” suggested that 4EverYoung “never intended final judgment. Indeed, in its May 8, 2017 final judgment, to purchase the Trademark” and therefore “4EverYoung the district court concluded, “[b]ecause 4EverYoung failed was not likely to succeed on its claims, nor would it to reasonably participate in proceedings to establish the had suffered irreparable harm had a restraining order or DERMAPEN Marks’ value as required by the Sales injunction not issued,” id. at 7. That is, Anderer argued Distribution Agreement and this Court’s orders, any that the injunctions were wrongfully entered because of rights that 4EverYoung may have had to purchase the Defendants’ subsequent failure to participate in court DERMAPEN Marks or Domain Name terminated in the proceedings. course of the current litigation.” Supp. App., at 175. In this appeal Anderer also argues that the injunctions The district court’s analysis in its June 7, 2017 giving rise to the contempt proceedings were invalid, memorandum decision and order demonstrates that this but he does so on a different basis than that in his motion to vacate the contempt orders. See Aplt. Op.

Br. Case No. 17-4105, at 19–20. On appeal, Anderer raising Anderer’s arguments regarding the district court’s contends one of the injunctions was not sufficiently injunctive relief and civil contempt orders.” Aplt. Op. Br. definite. Id. at 20–23. Anderer also claims the district Case No. 17-4105, at 1–2. court wrongly issued the preliminary injunctions because: (1) 4EverYoung was not likely to succeed on the merits; *11 Anderer’s contention that the district court’s rulings (2) 4EverYoung could not establish irreparable harm; regarding injunctive relief and contempt are reviewable (3) the balance of equities did not favor 4EverYoung; in this appeal would only make sense if the June 7, 2017 and (4) injunctive relief was not in the public’s interest. decision were the final judgment in this case. But it is Id. at 23–37. In support of his claim that 4EverYoung not. Rather, as the majority agrees, the district court’s was not likely to succeed on the merits Anderer presents May 8, 2017 order was the final judgment in this case. three arguments. Anderer contends that the trademark Therefore, for our jurisdiction to have been “unassailable” and domain name cannot constitute “assets” under the to consider the issues in case number 15-4040, which Utah Fraudulent Transfer Act (the “UFTA”), nor was merged into the final judgment entered on May 8, 2017, 4EverYoung a “creditor” under the UFTA. Anderer Anderer should have appealed from the May 8, 2017 final further argues that Derma Pen was not insolvent at the judgment. preliminary injunction stage of litigation. Anderer also contends that any harm 4EverYoung may have suffered Yet, although “Anderer’s appeal is not timely to challenge at the preliminary injunction stage of litigation was self- the final judgment in this case,” Majority, at ––––n.2, imposed because it should have negotiated more favorable the majority nonetheless considers the arguments not contractual provisions regarding its right of first refusal. raised in Anderer’s motion to vacate contempt, but rather These arguments analyzed by the majority, among others presented in case number 15-4040. See O & J Case presented in this appeal, were not set forth in Anderer’s No. 15-4040, at 3 (“In any event, we have dealt with motion to vacate the contempt orders filed in the district many of the same issues in Anderer’s appeal after final court. Thus, while the majority’s Order and Judgment judgment in case number 17-4105.”). In essence, the claims to review Anderer’s motion to vacate, it analyzes majority relies on the purported timeliness of this appeal arguments not found therein. to address arguments on the merits presented in case number 15-4040, but not raised in Anderer’s motion to Instead, Anderer’s arguments in this appeal are all but vacate. identical to the ones he lodged over two years earlier in case number 15-4040, in support of his argument that the district court erred by holding him in contempt for IV violating the injunctive relief orders in the first instance. See Aplt. Op. Br. Case No. 15-4040, at 35–49; 55–57; I decline to set aside the multitude of jurisdictional and Aplt. Op. Br. Case No. 17-4105, at 1 (“Some of the issues procedural hurdles presented here to reach the merits of presented by Appellant Michael Anderer in this appeal Anderer’s appeal. Anderer is not a litigant that would be were also presented in” case number 15-4040). This is unfairly denied his day in court. His claims have been perhaps unsurprising as Anderer’s opening brief in this adjudicated in state court, bankruptcy court (pronounced appeal reveals his belief that the district court’s June to have been filed in bad faith), district court, and now 7, 2017 order was the final judgment in this case. See by us. The district court entered final judgment in Derma Aplt. Op. Br. Case No. 17-4105, at 1 (“This court has Pen and Anderer’s favor, awarding them over 15 million jurisdiction pursuant to 28 U.S.C. § 1291. The district dollars in monetary damages and attorneys’ fees and costs. court entered a final order, resolving all of the remaining The issues Anderer raises in this appeal are not collateral issues, on June 7, 2017. Appellant Michael Anderer to the issues resolved in the district court’s May 8, 2017 timely appealed from this order on June 23, 2017.”). final judgment. If he thought the May 8, 2017 judgment Indeed, in this appeal Anderer purports to “renew th[e] was wrongly decided, his option was to appeal from that arguments” he raised in case number 15-4040 “to ensure judgment. I would dismiss this appeal as untimely filed. that the court’s jurisdiction to consider th[o]se issues is now unassailable” believing that this appeal “presents an undisputedly appropriate jurisdictional vehicle for

All Citations

--- Fed.Appx. ----, 2018 WL 2684268

Footnotes * In accordance with our order of March 21, 2018, this matter was submitted on the briefs. ** This order and judgment is not binding precedent except under the doctrines of law of the case, res judicata and collateral estoppel. It may be cited, however, for its persuasive value consistent with Fed. R. App. P. 32.1 and 10th Cir. R. 32.1. 1 See generally Derma Pen, LLC v. 4EverYoung Ltd., 2017 WL 2258362 (D. Utah May 22, 2017); Derma Pen, LLC v. 4EverYoung Ltd., 2015 WL 803148 (D. Utah Feb. 26, 2015), vacated, 2016 WL 4532106 (D. Utah Aug. 29, 2016). 2 While Anderer’s appeal is not timely to challenge the final judgment in this case, it is a timely appeal of the district court’s post-judgment order denying the two motions at issue here. The district court entered final judgment in its May 8 order, but it did not decide the two motions relevant here. First, both motions were collateral to the merits—they had nothing to do with the findings of fact and conclusions of law the district court entered in the May judgment. Second, the district court carefully listed the motions it was deciding in the May judgment, and did not list these two. See Supp. App. 185– 87. Third, in the postjudgment order denying these two motions, the district court explicitly noted that the May judgment “left the ... motions unresolved.” Supp. App. at 191. That being so, even if we might normally presume a final judgment implicitly denies all unaddressed motions, there is more than sufficient indication the judgment here did not do so. See also Hill v. SmithKline Beecham Corp., 393 F.3d 1111, 1116 (10th Cir. 2004). As a result, Anderer was not “on notice of the need to appeal” on these collateral issues after the May judgment. See O’Connor v. Midwest Pipe Fabrications, Inc., 972 F.2d 1204, 1208 (10th Cir. 1992). He was entitled to appeal the district court’s post-judgment order denying the two pre-judgment motions separately. Cf. Turnbull v. Wilcken, 893 F.2d 256, 257–59 (10th Cir. 1990) (per curiam) (unadjudicated sanctions issues pending at the time of judgment are separately appealable once resolved). 3 The dissent argues Anderer forfeited his arguments on appeal because he did not make the same arguments before the district court. But 4EverYoung did not raise forfeiture—or, indeed, even file a brief. Though we have discretion to raise forfeiture sua sponte, we decline to do so here. See United States v. Rodebaugh, 798 F.3d 1281, 1314 (10th Cir. 2015); United States v. Elliott, 684 Fed.Appx. 685, 688 (10th Cir. 2017) (unpublished). 4 In his opening brief, Anderer only challenges the February 25 injunction for insufficient clarity. In a previous interlocutory appeal, he argued the other orders were also insufficiently clear, but he did not renew those arguments in this appeal. Even if he had done so, however, we find each of the court’s orders sufficiently proscribed Anderer’s conduct. 5 Anderer challenges the district court’s denial of his motion to vacate the contempt order by attacking the contempt orders themselves. He does so in part by calling into question the injunction he violated. While it is unclear whether a party can even contest a contempt order by challenging the validity of the injunction he or she violated after that injunction has already been vacated, having received no argument on this point from the appellees, we assume Anderer can do so here. 1 Anderer omitted the documents found in the district court’s docket entries 946 and 1048 from his supplemental appendix filed in this appeal, as well as the appendices filed in the related appeals in case numbers 15-4040 and 17-4096. Because they are relevant to the resolution of this case, I take judicial notice of these publicly-filed documents. See Fed. R. Evid. 201; Allen v. Zavaras, 416 Fed.Appx. 784, 785 n.2 (10th Cir. 2011) (unpublished). 2 The arguments Anderer advances in this appeal—distinct from those in his motion to vacate contempt orders at the district court—also go to the merits of this case. On appeal, Anderer attacks the validity of the preliminary injunctions based on their definiteness, as well as the elements of a preliminary injunction and Defendants’ alleged failure to meet them. The district court entered preliminary injunctions to prevent the transfer of the trademark that gave rise to, and was the subject of, this litigation. Moreover, the district court’s entry of contempt was intended to remedy the alleged injury that gave rise to Defendants’ counterclaims against Anderer. These issues were thoroughly considered by the district court at the preliminary injunction and contempt stages of litigation, hundreds of docket entries prior. The district court’s interlocutory decisions merged into the final judgment entered on May 8, 2017. Thus, Anderer is challenging the district court’s findings of fact and conclusions of law entered prejudgment. 3 To the extent Anderer was seeking to “sanction” Defendants for their litigation conduct in his motions to vacate contempt orders and release bond, a motion for sanctions can be collateral to the district court’s merits determination and separately reviewable. Cf. Turnbull v. Wilcken, 893 F.2d 256, 257–59 (10th Cir. 1990) (per curiam) (unadjudicated sanctions issues pending at the time of judgment are separately appealable once resolved). However, this does not provide us with

jurisdiction here. As the majority acknowledges, “[o]n appeal, Anderer does not dispute the district court’s refusal to award him the injunction bond as a sanction against 4EverYoung. He only argues the court should have done so because it erroneously granted the injunctions.” Majority, at ––––(emphasis added). Anderer lodges this same claim as regards the motion to vacate contempt orders—“Anderer argues the district court should have vacated the contempt orders for two reasons: first, because the February 25 injunction did not prohibit his conduct in a sufficiently clear way; second, because the district court incorrectly granted the injunctions on the merits.” Id. at 10. Stated differently, on this appeal from a purported collateral order, Anderer seeks review of the merits of injunctions entered and vacated during the course of litigation. Such determinations merged into the final judgment, and we are without jurisdiction to address them now.

Gardner v. United States (In re Gardner), 913 F.2d 1515, 1518 (10th Cir. 1990) (per curiam) (citation omitted). 2018 WL 3025284 United States Bankruptcy Court, D. New Mexico. A bankruptcy court can retain jurisdiction following IN RE: DEE'S FOODSERVICE ABQ INC. and dismissal of the underlying bankruptcy case over noncore, Dee's FoodService El Paso, LLC, Debtors. related proceedings commenced before bankruptcy case dismissal, although ordinarily noncore, related Case No. 16–11560–j11 proceedings are also dismissed upon dismissal of the | underlying bankruptcy case. In re Johnson, 575 F.3d Signed 6/15/2018 1079, 1083 (10th Cir. 2009). Even so, a bankruptcy court does not have jurisdiction over noncore proceedings first Attorneys and Law Firms commenced after dismissal of the underlying bankruptcy case. Cf. Id. (dicta in Johnson suggests that a bankruptcy William J. Arland, III, Santa Fe, NM, for Debtors. court does not have jurisdiction over noncore proceedings first commenced after dismissal of the underlying MEMORANDUM OPINION AND ORDER bankruptcy case). A proceeding is noncore when it does OVERRULING UNITED STATES TRUSTEE'S not arise in a case under Title 11 or arise under Title 11. Id. OBJECTION REGARDING UNCLAIMED FUNDS

Robert H. Jacobvitz, United States Bankruptcy Judge B. Claims to unclaimed funds after a structured dismissal are noncore. *1 THIS MATTER came before the Court at a final In a structured dismissal where a plan is not confirmed, hearing on the Debtors' Motion for Entry of Order: (I) claims to unclaimed funds only arise after the case is Determining Claims against the Debtors; (II) Authorizing dismissed and are not governed by any provision of the Disbursement of Funds to Creditors: (III) Dismissing the Bankruptcy Code. As such, claims to unclaimed funds do Debtors' Cases; and (IV) Granting Related Relief (the not arise in a case under Title 11 or arise under Title 11 and “Motion”). See Docket No. 182. Counsel appeared as are therefore noncore. noted on the record. At the hearing, the United States Trustee objected to the Motion to the extent it does not provide for the deposit of unclaimed funds in the 1. Claims to unclaimed funds do not arise in a case Court's unclaimed funds registry after this chapter 11 case under Title 11. is dismissed. The Court overrules the objection of the When a debtor or case trustee unsuccessfully attempts to United States Trustee because the Court does not have distribute funds to a creditor or other party in interest, jurisdiction over claims to unclaimed funds where the the funds are what is known as “unclaimed funds.” 1 claim arises after dismissal of a chapter 11 case in which In a structured dismissal, distributions to creditors and no plan has been confirmed. other parties in interest occur after the case is dismissed. Therefore, any claim to unclaimed funds arising from post-dismissal distributions necessarily arises following A. The Court does not have post-dismissal jurisdiction dismissal and does not arise in a case under title. over noncore matters first arising after dismissal of the bankruptcy case. After a bankruptcy case is dismissed, the Court 2. Claims to unclaimed funds do not arise under Title retains jurisdiction over certain core proceedings. Core 11. proceedings are matters “arising under title 11, or arising *2 In addition, claims to unclaimed funds following in a case under title 11.” See 28 U.S.C. § 157(b)(1). “Core a structured dismissal do not arise under Title 11. In a proceedings are proceedings which have no existence chapter 11 case in which no plan is confirmed Title 11 does outside of bankruptcy. “Actions which do not depend not govern claims to unclaimed funds. 2 on the bankruptcy laws for their existence and which could proceed in another court are not core proceedings.” Bankruptcy Code §§ 347(b) and 1143 govern unclaimed funds in connection with a chapter 11 case. But those

© 2018 Thomson Reuters. No claim to original U.S. Government Works. 1 In re Dee's FoodService ABQ Inc., Slip Copy (2018) 65 Bankr.Ct.Dec. 214 sections apply to unclaimed funds only if a plan is 11 U.S.C. § 1143. confirmed in a chapter 11 case. Section 347 governs the treatment of unclaimed property under the Code. Section When read in combination with § 347(b), § 1143 provides 347(b) applies in chapter 11 and by its plain language that any funds that remain unclaimed after the expiration governs in chapter 11 cases only if distributions are made of five-years from confirmation of a chapter 11 plan may under a confirmed plan. Section 347 provides: be reclaimed by the debtor. See In re Sterling Fin. Servs. Any security, money, or other of Fla.–1, Inc., 374 B.R. 327, 329–30 (Bankr. M.D. Fla. property remaining unclaimed at the 2007) (“In general, there is a five-year window for a person expiration of the time allowed in to claim funds on deposit for distribution pursuant to a a case under chapter 9, 11, or 12 Chapter 11 plan ... After plan proceeds are deposited into of this title for the ... performance the registry of court ...”). See also In re Entire Supply, Inc., of any other act as a condition 2008 WL 336316, at *1 (Bankr. N.D. Ohio Feb. 5, 2008). to participation in the distribution Neither § 347(b) nor § 1143 applies when funds are under any plan confirmed under section 943(b), 1129, 1173, or 1225 distributed after dismissal of a chapter 11 in which no plan of this title, as the case may be, was confirmed. Because sections of the Code that govern becomes the property of the debtor unclaimed funds do not apply to claims for unclaimed funds following a structured dismissal of a chapter 11 case, or of the entity acquiring the assets of the debtor under the plan, as the such claims do not arise under Title 11. case may be.

11 U.S.C. § 347(b) (emphasis added). C. Conclusion Because any claims to unclaimed funds following a Section 1143 imposes a five-year period following structured dismissal of this chapter 11 case necessarily first confirmation for a claimant to complete any condition arise only after the case is dismissed and therefore will not necessary to receive a distribution under a plan and by arise in a case under Tittle 11, and will not arise under Title its plain language it is also limited to chapter 11 cases in 11, the Court does not have jurisdiction over claims. which a plan is confirmed. 11 U.S.C. § 1143. Section 1143 provides: *3 Based on the foregoing, the Court will overrule the United States Trustee's objection that the Debtors If a plan requires presentment or should be required to deposit unclaimed funds in the surrender of a security or the Court's unclaimed funds registry following dismissal of performance of any other act as this chapter 11 case. 3 The Court lacks jurisdiction over a condition to participation in claims to unclaimed funds that first arise after dismissal of distribution under the plan, such a chapter 11 case in which no plan has been confirmed. action shall be taken not later than five years after the date of the WHEREFORE, IT IS ORDERED that the United States entry of the order of confirmation. Trustee's objection to the Motion is overruled. Any entity that has not within such time presented or surrendered such entity's security or taken any such All Citations other action that the plan requires Slip Copy, 2018 WL 3025284, 65 Bankr.Ct.Dec. 214 may not participate in distribution under the plan.

Footnotes

1 When unclaimed funds are deposited with the Court, a case trustee or debtor in possession files a report of record with an accounting of the unclaimed funds. Ordinarily, the report is filed and the deposit is made while the bankruptcy case is open. 2 28 U.S.C. §§ 2041–2042 provide overarching statutory authority for the treatment of funds deposited with the Court and the process for withdrawing those funds. As these sections are contained in Title 28, not Title 11, the Court cannot derive “arising under” jurisdiction from these provisions. 3 As stated on the record at the final hearing, the Court believes the Debtors' proposal to donate unclaimed funds to a charity of the Debtors' choice is appropriate but only if the amount of unclaimed funds is less than $20,000. Otherwise, the Debtors should redistribute those funds pro rata in proportion to allowed claim amounts to other holders of nonpriority unsecured claims. If the funds are redistributed, the Debtors; counsel should be entitled to a reasonable fee for doing that work.

Joseph H. Driver, Robert Brett Adair, Michael 2018 WL 3188663 Christopher Guarino, Carr Allison, Birmingham, AL, for United States Court of Appeals, Eleventh Circuit. Defendants–Appellees.

Timothy WEAKLEY, Plaintiff–Appellant, Before ED CARNES, Chief Judge, MARCUS , and v. ROSENBAUM, Circuit Judges. EAGLE LOGISTICS, Celadon Trucking, Defendants–Appellees. Opinion Timothy Weakley, Plaintiff–Appellant, PER CURIAM: v. Jennifer Roberts, Quality *1 In this consolidated appeal, Timothy Weakley Companies, Defendants–Appellees. appeals the district court’s grant of summary judgment against him in favor of Eagle Logistics Services and No. 17-14022 Celadon Trucking Services, and its grant of summary | judgment against him (in a separate lawsuit) in favor Non-Argument Calendar of Jennifer Roberts and Quality Companies. Weakley | contends that the district court abused its discretion by No. 17-14023 dismissing his two lawsuits based on the doctrine of | judicial estoppel as a result of Weakley’s failure to disclose (June 29, 2018) them in his bankruptcy proceeding.

Synopsis [1] [2] [3] We review only for abuse of discretion the Background: Plaintiff filed two pro se lawsuits in Alabama district court’s application of judicial estoppel. Slater v. state court asserting claims for breach of contract U.S. Steel Corp., 871 F.3d 1174, 1180 n.4 (11th Cir. and intentional interference with contractual relations. 2017) (en banc). A debtor who has filed for bankruptcy Following removal, the United States District Court for “must file sworn disclosures listing his debts and his assets, the Northern District of Alabama, Nos. 3:16–cv–00205– including any pending civil claims, and identifying any HNJ and 3:16–cv–00403–HNJ, Herman N. Johnson, lawsuits he has filed against others.” Id. at 1176. When a Jr., United States Magistrate Judge, 2017 WL 3781339, debtor fails to list a pending civil claim as an asset in a granted defendants' motion for summary judgment. bankruptcy proceeding, the equitable doctrine of judicial Plaintiff appealed. estoppel allows a court to exercise its discretion to dismiss the debtor’s civil claim. See id. at 1180.

[Holding:] The Court of Appeals held that district court [4] We use a two-part test to guide district courts in did not abuse its discretion by applying judicial estoppel applying judicial estoppel: (1) Whether the plaintiff “took and dismissing plaintiff's two lawsuits based on his failure a position under oath in the bankruptcy proceeding that to disclose lawsuits in his bankruptcy proceeding. was inconsistent with the plaintiff’s pursuit of the civil lawsuit[s],” and (2) whether the inconsistent positions “were calculated to make a mockery of the judicial Affirmed. system.” Id. at 1180–81 (quotation marks omitted). There is no question that Weakley took an inconsistent position under oath in a separate proceeding. In his Chapter Appeals from the United States District Court for the 13 bankruptcy proceeding he failed to disclose the two Northern District of Alabama, D.C. Docket No. 3:16–cv– lawsuits and the claims in them as assets after asserting 00205–HNJ, D.C. Docket No. 3:16–cv–00403–HNJ those claims and an entitlement to damages in the Attorneys and Law Firms lawsuits. See Robinson v. Tyson Foods, Inc., 595 F.3d 1269, 1275 (11th Cir. 2010) (“[F]ailure to timely amend a Timothy Weakley, Pro Se. Chapter 13 reorganization plan to reflect a pending claim while simultaneously pursing that claim in another court

© 2018 Thomson Reuters. No claim to original U.S. Government Works. 1 Weakley v. Eagle Logistics, --- F.3d ---- (2018) 65 Bankr.Ct.Dec. 226 of law constitutes inconsistent positions under oath.”). As bankruptcy proceeding two other lawsuits he had filed, a result, we turn to the second prong. both of which were of much lesser potential value than the two nondisclosed ones, which together sought damages [5] [6] [7] As for the second prong, district courts in excess of $14,000,000. The district court reasoned that must “look to all the facts and circumstances of the case his failure to disclose the two higher claim lawsuits while to decide whether a plaintiff intended to mislead the disclosing the other two lesser claim ones “indicates a court....” Slater, 871 F.3d at 1186. For example, a court motive to exclude the potentially more lucrative, non- may consider: exempt [lawsuit assets] from the bankruptcy proceedings.” Finally, the court took into account the fact that Weakley the plaintiff’s level of sophistication, had filed four other bankruptcy petitions, “demonstrating whether and under what that [he] should have been familiar with the requirements.” circumstances the plaintiff corrected the disclosures, whether the plaintiff Although the district court reached its ruling before this told his bankruptcy attorney about Court issued its en banc decision in Slater, its analysis the civil claims before filing the is consistent with that decision. Slater overruled our bankruptcy disclosures, whether the precedent that allowed courts to automatically infer a trustee or creditors were aware of plaintiff’s intent to mislead based solely on the plaintiff’s the civil lawsuit or claims before the failure to disclose a civil claim in a bankruptcy proceeding. plaintiff amended the disclosures, See id. at 1185. The district court did not infer Weakley’s whether the plaintiff identified other intent to mislead the court based only on his failure to lawsuits to which he was [a] party, disclose but instead made its determination based on the and any findings or actions by the facts and circumstances relating to the bankruptcy filings bankruptcy court after the omission and nondisclosure. Our Slater decision requires a district was discovered. court to consider the entire record, see id., which is what the district court did. Id. at 1185. The court may also consider the plaintiff’s explanation for the omission, id. at 1177, although it need Weakley also argues that the judicial estoppel issue is not credit that explanation, id. at 1186 n.12; see also moot because he voluntarily dismissed his Chapter 13 id. at 1190–91 (Carnes, C.J., concurring) (“[I]n deciding 1 whether a plaintiff intended to mislead when she omitted bankruptcy petition. It isn’t moot. The judicial estoppel a claim from her bankruptcy schedules, or failed to update issue presented to us in this appeal is not about what a schedule to include the claim, the district court is not should happen in the bankruptcy proceeding, a case that required to accept the plaintiff’s denial of her intent. And has not been appealed to us. Instead, the issue is whether that is true even if her denial is made under oath and not the district court abused its discretion in dismissing on contradicted by other evidence.”). judicial estoppel grounds the two lawsuits that Weakley filed against the appellees in the appeal before us. Weakley *2 [8] In concluding that Weakley intentionally misled did not dismiss either one of these two lawsuits; instead, the bankruptcy court, the district court considered that he has appealed the district court’s dismissal of them. The he not only failed to include the two lawsuits in his propriety of that dismissal is not moot. initial bankruptcy filings but he also failed to include them in any of the six separate amendments that he [9] To the extent Weakley argues that his voluntary made to his schedules and filings during the bankruptcy dismissal of his bankruptcy petition makes the district proceeding. The court pointed out that it was not until court’s application of the judicial estoppel doctrine an the defendants in both lawsuits had relied on his failure abuse of discretion in this case, we reject that contention. to disclose as grounds for dismissal of the lawsuits that Judicial estoppel serves to “prevent the perversion of the Weakley finally amended his bankruptcy filings to disclose judicial process and protect its integrity.” Id. at 1180 those two lawsuits and the claims they asserted. The court (quotation marks and alterations omitted). It cannot serve also considered his ability to benefit financially at his that purpose as well if a duplicitous debtor is assured creditors’ expense by concealing the two lawsuits. Not that he can always avoid the doctrine’s bite by dismissing only that but Weakley had disclosed as assets in the his bankruptcy petition after his duplicity is found out.

And that is what Weakley sought to do. He didn’t he intended to mislead the bankruptcy court, see id. at voluntarily dismiss his bankruptcy petition until after the 1185, it did not abuse its discretion by applying judicial defendants moved for summary judgment on the grounds estoppel and dismissing these two lawsuits that he failed that he intentionally omitted these two lawsuits from his to disclose in his bankruptcy proceeding. bankruptcy filings. To guarantee Weakley and others in his situation that, if caught, they could always undo the *3 AFFIRMED. application of the judicial estoppel doctrine would render it toothless. All Citations

Because the district court considered all the facts and --- F.3d ----, 2018 WL 3188663, 65 Bankr.Ct.Dec. 226 circumstances of Weakley’s cases in determining whether

Footnotes 1 In his briefs Weakley also makes several factual allegations that he did not make in the district court. We can’t and won’t consider those allegations. See Daniel v. Taylor, 808 F.2d 1401, 1404 n.2 (11th Cir. 1986) (“[T]his Court cannot consider evidence which was not before the district court.”).

Slater v. United States Steel Corp.

United States Court of Appeals for the Eleventh Circuit June 12, 2018, Decided No. 12-15548

Reporter 891 F.3d 1329 *; 2018 U.S. App. LEXIS 15719 **; 27 Fla. L. Weekly Fed. C 979; 2018 WL 2924969 Circuit Judges, and SCOLA,* District Judge. SANDRA SLATER, Plaintiff — Appellant, versus U.S. STEEL CORPORATION, Defendant — Appellee. Opinion Prior History: [**1] Appeal from the United States District Court for the Northern District of Alabama. D.C. Docket No. 2:09-cv-01732-KOB. [*1329] PER CURIAM:

Sandra Slater failed to disclose to the Bankruptcy Court Slater v. U.S. Steel Corp., 820 F.3d 1193, 2016 U.S. in her pending Chapter 7 case the employment App. LEXIS 3225 (11th Cir. Ala., Feb. 24, 2016) discrimination claims she was prosecuting in the instant case against U.S. Steel Corporation. Upon discovering Disposition: VACATED AND REMANDED. Slater's failure to disclose the claims to the Bankruptcy Court, U.S. Steel, citing our precedent in Burnes v. Core Terms Pemco Aeroplex, Inc., 291 F.3d 1282 (11th Cir. 2002), moved the District Court to dismiss her claims under district court, disclosures, bankruptcy court, judicial the [**2] doctrine of judicial estoppel. U.S. Steel argued system, mockery, doctrine of judicial estoppel, that Slater's maintenance of inconsistent positions in the inconsistent statement, fail to disclose, civil claim, two judicial proceedings, standing alone, constituted a circumstances, proceedings, omission, VACATED, "mockery of the judicial system." See id. at 1285 factors, lawsuit (quotation omitted). The District Court agreed and granted U.S. Steel's motion, and this panel affirmed. Counsel: For SANDRA SLATER, Plaintiff - Appellant: Slater v. U.S. Steel Corp. ("Slater I"), 820 F.3d 1193 Roderick Dale Graham, Graham & Associates, (11th Cir. 2016). BIRMINGHAM, AL; Charles C. Tatum, Jr., Attorney at Law, JASPER, AL. Upon rehearing en banc, this Court overruled the 1 For U.S. STEEL CORPORATION, Defendant - portions of Burnes "that permitted the inference that a Appellee: Anthony Francis Jeselnik, Samuel Franklin plaintiff intended to make a mockery of the judicial Reynolds, Jr., Law Department, PITTSBURGH, PA; system simply because he failed to disclose a civil William H. Morrow, Ivan B. Cooper, Lightfoot Franklin & claim" and remanded the case to the panel for further White, LLC, BIRMINGHAM, AL; Kathleen M. Sullivan, consideration of the District Court's judicial estoppel William Adams, Quinn Emanuel Urquhart & Sullivan, ruling. Slater v. U.S. Steel Corp. ("Slater II"), 871 F.3d LLP, NEW YORK, NY. 1174, 1185 (11th Cir. 2017). For NATIONAL ASSOCIATION OF CONSUMER In Slater II, we said that BANKRUPTCY ATTORNEYS, Amicus Curiae: Jon Erik Heath, Law Offices of Jon Erik Heath, SAN FRANCISCO, CA. * Honorable Robert N. Scola, Jr., United States District Judge for the Southern District of Florida, sitting by designation. Judges: Before TJOFLAT and WILLIAM PRYOR, 1 Also overruled was the portion of Barger v. City of Cartersville, 348 F.3d 1289 (11th Cir. 2003), which adhered to the overruled portion of Burnes' holding.! Page 2 of 2 891 F.3d 1329, *1329; 2018 U.S. App. LEXIS 15719, **2

to determine whether a plaintiff's inconsistent statements were calculated to make a mockery of the judicial system, a court should look to all the facts and circumstances of the particular case. When the plaintiff's inconsistent statement comes in the form of an omission in bankruptcy disclosures, the court may consider such factors as the plaintiff's level of sophistication, whether and under what circumstances the plaintiff corrected the disclosures, [**3] whether the plaintiff told his bankruptcy attorney about the civil claims before filing the bankruptcy disclosures, whether the trustee or creditors were aware of the civil lawsuit or claims before the plaintiff amended the disclosures, whether the [*1330] plaintiff identified other lawsuits to which he was party, and any findings or actions by the bankruptcy court after the omission was discovered.

Id. We emphasized that this list "is not exhaustive; the district court is free to consider any fact or factor it deems relevant to the intent inquiry." Id. n.9.

The District Court, bound as it was by Burnes, considered none of these factors in granting U.S. Steel's motion for summary judgment. Its application of the judicial estoppel doctrine therefore constituted an abuse of discretion. For that reason, we vacate its summary judgment order and remand the case for further proceedings not inconsistent herewith.

VACATED AND REMANDED.

End of Document