Category Archives: 9th Circuit Case Updates

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Ninth Circuit Affirms that Liens Pass Through Bankruptcy Even if Underlying Claim is Disallowed

The Ninth Circuit on June 1 affirmed a key bankruptcy principle that liens may survive and “pass through” the bankruptcy process even if the underlying claim secured by the lien is disallowed.  The facts in Lane v. The Bank of New York Mellon (Ninth Cir. Ct. Of Appeals, No. 18-60059,  June 1, 2020) are all … Continue Reading

To Report or Not to Report – Is it Really A Question?

In a May 15, 2017 Bankruptcy Court decision (Gardens Decision) from California’s Central District (In re Gardens Regional Hospital and Medical Center, Inc. (Bankr. C.D.Cal., May 15, 2017, No. 1617463), Judge Ernest M. Robles wrote that the grant of oversight and approval authority given to California’s Attorney General over buy/sell and change-in-control transactions between nonprofit … Continue Reading

Ninth Circuit Rulings on Equitable Mootness in Transwest and Sunnyslope Impact Third Party Investors

The doctrine of equitable mootness provides that Chapter 11 reorganization plans will be deemed moot, and therefore not subject to appellate review, if a plan has been substantially consummated and granting appellate relief would impair the rights of innocent third parties relying on the confirmation order.  Since the development of the court-created mootness doctrine nearly … Continue Reading

Bankrupt Municipality May Reduce Retiree Benefits

By Aaron Kleven The bankruptcy of the largest U.S. city to file a chapter 9 bankruptcy petition has yielded a decision with serious implications for municipal creditors. Specifically, the United States Bankruptcy Court for the Eastern District of California overruled the objections asserted by retired employees of the City of Stockton, California and authorized the … Continue Reading

Altered Ego: New Ninth Circuit Opinion Overrules Previously Well-Settled Law Regarding Exclusive Standing Of Bankruptcy Trustees To Pursue General Claims On Behalf Of The Estate

On October 21, 2010, the Ninth Circuit overruled what many thought to be well-settled law, and held that a bankruptcy trustee does not have standing to pursue alter ego claims, at least in cases governed by California law. The court first held that California state law does not recognize a general alter-ego cause of action that … Continue Reading

When Are Goods Received For The Purpose Of Asserting Administrative Priority Status Under Section 503(b)(9) Of The Bankruptcy Code?

A bankruptcy court recently held that in order for a supplier of goods on credit to establish an administrative claim under Bankruptcy Code section 503(b)(9) in the bankruptcy case of its buyer, the supplier will need to show that its buyer "physically" received the goods within 20 days prior to the buyer’s bankruptcy filing, regardless … Continue Reading

Ninth Circuit Confirms Existence Of Ride Through Doctrine In Chapter 11 Cases

In Diamond Z Trailer, Inc. v. JZ, LLC (In re JZ, LLC), No. 07-1011 (9th Cir. B.A.P., June 18, 2007), the Ninth Circuit Bankruptcy Appellate Panel affirmed a Bankruptcy Court decision holding that an unscheduled executory contract rides through the bankruptcy if not assumed or rejected during the bankruptcy.  Further, a debtor has standing to … Continue Reading

Fobian Overruled

In Travelers Cas. and Sur. Co. of America v. Pacific Gas & Electric Co., 127 S. Ct. 199 (2007) ("Travelers"), the United States Supreme Court overturned a Ninth Circuit Court of Appeals opinion that had made pre-petition contractual provisions awarding attorneys’ fees to the prevailing party unenforceable in bankruptcy to the extent the parties litigated … Continue Reading

Credit Managers Association of California v. Countrywide Home Loans, Inc. – A Second California State Appellate Court Holds That California Code of Civil Procedure § 1800 Is Not Preempted By The Bankruptcy Code

On October 4, 2006, the California Court of Appeals for the Fourth District held in Credit Managers Association of California v. Countrywide Home Loans, Inc., 2006 WL 2820882 (Cal.App.4 Dist.) ("CMAC") that Bankruptcy Code §§ 544 and 547, the provisions governing the avoidance of preferential transfers, do not preempt California Code of Civil Procedure § … Continue Reading

Supreme Court Grants Certiorari to Resolve Attorney Fees Dispute in PG&E Bankruptcy

The Supreme Court recently granted certiorari to hear an appeal from the Ninth Circuit, arising out of the Pacific Gas and Electric ("PG&E") bankruptcy case, concerning a creditor’s claim for attorney fees. The appeal, brought by Travelers Casualty and Surety Company of America (Travelers"), seeks review of the Ninth Circuit’s holding that, in bankruptcy, creditors … Continue Reading

Return Of Preferential Payment Arising From Fraud Settlement Does Not Revive Creditor’s Nondischargeability Claim

In Busseto Foods, Inc. v. Charles Laizure (In re Laizure), No. 06-1112 (9th Cir. B.A.P., September 1, 2006), the Ninth Circuit Bankruptcy Appellate Panel affirmed a Bankruptcy Court decision holding that where a creditor receives a settlement payment on a nondischargeable debt within 90 days prior to bankruptcy but then is compelled to return that … Continue Reading

Supreme Court Resolves Split in Authorities With Respect to Priority Treatment of Unpaid Workers’ Compensation Premiums

In Howard Delivery Service, Inc. v. Zurich American Ins. Co., 126 S.Ct. 2105 (2006), in a six-to-three decision, the Supreme Court has resolved a split in the circuits over whether claims for unpaid workers’ compensation premiums are entitled to priority under Bankruptcy Code section 507(a)(5).  Relying primarily on the legislative history of Section 507, the … Continue Reading

Claimant May Not Argue Merits of Underlying Claim Objection After 10-Day Period for Appeal Has Expired

On August 14, 2006, the Ninth Circuit Court of Appeals, Bankruptcy Appellate Panel, held in United Student Funds, Inc. v. Wylie (In re Wylie), 2006 Bankr. Lexis 2088 (9th Cir. BAP 2006), that a claimant filing a motion to reconsider an order sustaining a claim objection, after the 10-day period for appeal, was not entitled … Continue Reading

A Bankruptcy Court’s Inherent Authority Is Limited To The Authority Appropriate And Necessary To Carry Out The Provisions Of The Bankruptcy Code

On July 7, 2006, the United States Bankruptcy Appellate Panel for the Ninth Circuit, in Johnson v. TRE Holdings LLC (In re Johnson), BAP No. CC-05-1268 (9th Cir. B.A.P. 2006), held that bankruptcy courts do not have authority under section 105(a) of the Bankruptcy Code to preclude the application of the automatic stay in subsequent … Continue Reading

Ninth Circuit BAP Holds That Direct Appeal Provision Only Applies To Bankruptcy Cases Commenced On Or After October 17, 2005

On June 12, 2006, the United States Bankruptcy Appellate Panel of the Ninth Circuit, in Berman v. Maney, (In re Berman), BAP No. AZ-06-1133, held that the direct appeal provision of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA) and the Interim Rules adopted to effectuate it do not apply to appeals arising from … Continue Reading

California Court of Appeals Disagrees With Sherwood Partners and Holds That California Preference Laws Are Not Preempted by the Bankruptcy Code

On May 31, 2006, the California Court of Appeal for the Second Appellate District, in Haberbush v. Charles and Dorothy Cummins Family Ltd. Partnership, Case No. B175947, disagreed with the Ninth Circuit’s majority opinion in Sherwood Partners v. Lycos, 394 F.3d 1198 (9th Cir. 2005) and held that California Code of Civil Procedure section 1800 is not preempted by the federal … Continue Reading

Bankruptcy Trustee Has The Exclusive Right To Assert Legal Claims On Behalf Of The Bankruptcy Estate

In Estate of Spirtos v. Estate of Spirtos, No. 03-56405 (9th Cir. April 12, 2006), the Ninth Circuit joins the 2nd, 4th, 5th, 6th, 8th, and 11th circuits by holding that 11 U.S.C. § 323 vests the bankruptcy trustee with the exclusive right to assert legal claims on behalf of the bankruptcy case. In Spirtos, … Continue Reading

Ninth Circuit Rules That Collateral Estoppel Prevents Re-Litigation of Fraud Claim In Nondischargeability Action

The Ninth Circuit Court of Appeals held in Muegler v. Bening, 413 F.3d 980 (9th Cir. 2005) that collateral estoppel can be used to prevent a debtor from re-litigating the issue of fraud in a nondischargeability action in bankruptcy court. In Muegler, a federal district court found the debtor guilty of intentional fraud under Missouri … Continue Reading

Crown Vantage: Leave Must Be Sought from Bankruptcy Court Before Initiating an Action Against a Bankruptcy Trustee in Another Forum.

In In re Crown Vantage, Inc., 421 F. 3d 963 (9th Cir. 2005), the Ninth Circuit Court of Appeals joined the First, Second, Sixth, Seventh, and Eleventh Courts of Appeal Circuit in applying the so-called "Barton Doctrine" to bankruptcy cases.  The Barton Doctrine, articulated by the Supreme Court in Barton v. Barbour, 104 U.S. 126 … Continue Reading

In re Ybarra: Ninth Circuit Holds That Claims Arising from the Debtor’s Postpetition Pursuit of Litigation Commenced Prepetition Are Non-Dischargeable

In “Boeing North American, Inc. v. Ybarra (In re Ybarra)”, 424 F. 3d 1018 (9th Cir. 2005), the Ninth Circuit Court of Appeals has held that an award of attorney’s fees and costs incurred post-petition in defending a cause of action commenced pre-petition is not discharged.… Continue Reading

Ninth Circuit Holds that Bankruptcy Section 364(e) Broadly Protects the Validity of Post-Petition Loans, Including Clauses Restricting the Use of Loan Proceeds

Ninth Circuit Court of Appeals recently issued its decision in Weinstein, Eisen & Weiss, LLP v. David A. Gill, Chapter 11 Trustee (In re Cooper Commons), 2005 U.S. App. LEXIS 19708 (9th Cir. September 13, 2005), holding that the provisions of an unstayed order approving a postpetition financing agreement could not be undone on appeal.… Continue Reading

Ninth Circuit Rules Security Deposit Must Be Deducted From “Capped Damages” Rather than “Gross Damages” in Calculating Rejection Damage Claims under the Bankruptcy Code – AMB Property

On July 19, 2005, the Ninth Circuit Court of Appeals issued an opinion in AMB Property, L.P. v. Official Creditors for the Estate of AB Liquidating Corp. (In re AB Liquidating Corp.) that adopted the framework of the Second Circuit case Oldden v. Tonto Realty Co., 143 F.2d 916 (2nd. Cir. 1944), which held that … Continue Reading

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