Irvine Business & Commercial Law Blog

In Bartenwerfer v. Buckley (In re Bartenwerfer), BAP No. NC-19-1178-TaFB (April 23, 2020), the Ninth Circuit Bankruptcy Appellate Panel ("BAP") held that the bankruptcy court correctly determined that all of the appellee's state court attorney's fees were non-dischargeable pursuant to 11 U.S.C. § 523(a)(2)(A).

In Anthony v. Li, 2020 Cal. App. LEXIS 302 (April 13, 2020, the California Court of Appeal held that under Cal. Code of Civ. Pro. ("CCP") § 998, an offer of compromise ("offer") to multiple defendants must be apportioned and not conditioned on acceptance by all defendants. CCP § 998 is a cost-shifting statute which encourages the settlement of actions, by penalizing parties who fail to accept reasonable pretrial settlement offers. For example, if a defendant refuses a reasonable pretrial settlement offer and subsequently fails to obtain a "more favorable judgment," that defendant is penalized by a loss of prevailing party costs and an award of costs in the plaintiff's favor, and vice versa. Furthermore, CCP § 998 has specific requirements for the structuring and acceptance of this offer. Pursuant to CCP § 998, the written offer must contain: (1) a statement of the offer which lays out the terms and conditions of the judgment; and (2) a provision that allows the party to indicate acceptance by signing a statement that the offer is accepted. Additionally, any offer must be clear and specific and must be written with sufficient specificity because the trial court lacks the authority to adjudicate the terms of the settlement. 

In In re Brown (Brown v. Barclay), No. 18-60029 (March 23, 2020), the Ninth Circuit Court of Appeals held that property transferred in bad faith by the Debtor during the pendency of a Chapter 13 case was property of the estate upon conversion of the case to Chapter 7. Generally, only assets that remain in the debtor's control or possession upon conversion from Chapter 13 to Chapter 7 become property of the estate. Further, pursuant to Section 348(f)(1)(A), assets acquired after the Chapter 13 filing do not become property of the estate upon conversion to Chapter 7.

In State of Montana Dept. of Revenue v. Blixseth, No. 18-15064, the Ninth Circuit Court of Appeals held that a creditor only has standing to file an involuntary petition against a debtor if the entirety of its debt is not subject to a bona fide dispute. If the amount of the claim is even partially disputed, the creditor cannot be a petitioning creditor. Pursuant to Section 303(b)(1), a petitioning creditor's claim must not be contingent or the subject of a bona fide dispute as to liability or amount. In Blixseth, the debtor's 2004 taxes were under audit. The debtor conceded that a deduction he took was improper but there were other adjustments and deductions that were unresolved and were in the process of being tried in front of the Montana State Tax Appeals Board. While the complaint was pending, plaintiff and other creditors filed an involuntary petition against the debtor. Plaintiff's claim in the involuntary petition consisted only of the taxes owed, which flowed from the deduction issue that was resolved. Plaintiff contended, however, that it had total claims against the debtor of much more than what was asserted and that most of the additional claims were disputed. The bankruptcy court acknowledged that a taxing authority "has but one claim for each calendar year of a taxpayer's life" and that plaintiff failed to show that it was allowed to create separate claims. The bankruptcy court held that since some of the debtor's liability to the plaintiff for the 2004 tax year was disputed, plaintiff's claim was subject to a bona fide dispute and plaintiff did not have standing to be a petitioning creditor. The district court agreed and the Ninth Circuit affirmed.