Lowenschuss, In re
| Decision Date | 17 March 1999 |
| Docket Number | No. 98-15292,98-15292 |
| Citation | 171 F.3d 673 |
| Parties | Bankr. L. Rep. P 77,919, 99 Cal. Daily Op. Serv. 1913, 1999 Daily Journal D.A.R. 2479 In re: Fred LOWENSCHUSS, Debtor. Fred Lowenschuss, individually and in all capacities, Appellant, and Laurance Lowenschuss, Trustee of the Fred Lowenschuss Associates Attorneys at Law Pension and Profit Sharing Plan, Intervenor-Appellant, v. Beverly Selnick, Appellee. |
| Court | U.S. Court of Appeals — Ninth Circuit |
Robin L. Filion, Baker & McKenzie, San Francisco, California, for the appellant.
Michael R. Griffinger, Gibbons, Del Deo, Dolan, Griffinger, & Vecchione, Newark, New Jersey, for the intervenor-appellant.
Joseph S. Kistler, Gordon & Silver, Ltd., Las Vegas, Nevada, for the appellee.
Appeal from the United States District Court for the District of Nevada; Edward C. Reed, Jr., District Judge, Presiding. D.C. No. CV-96-00767-ECR.
Before: SNEED, HALL, and RYMER, Circuit Judges.
Fred Lowenschuss ("Debtor") appeals from the district court's order affirming the bankruptcy court's November 1, 1996 order: (1) ruling that the Fred Lowenschuss & Associates at Law Pension Plan ("Pension Plan") was not ERISA qualified on the petition date, and was therefore not excluded from the bankruptcy estate under 11 U.S.C. § 541(c)(2); (2) ruling that Nevada law would be applied to determine whether Debtor's interest in the Pension Plan was exempt from the bankruptcy estate under 11 U.S.C. § 522; and (3) granting Beverly Selnick's ("Selnick") renewed motion for the appointment of a Chapter 11 Trustee. The Pension Plan Trustee intervened in this appeal. We have jurisdiction under 28 U.S.C. § 158(d), and we affirm.
On September 28, 1981, Selnick filed for divorce in the Pennsylvania courts. Almost ten years later, in July 1991, a Pennsylvania divorce court entered an order (the "Divorce Decree") for the equitable distribution of the marital property of Debtor and Selnick. The Divorce Decree awarded Selnick, inter alia, an ownership interest in 38.7% of the assets of the Pension Plan. However, instead of transferring to Selnick her share of the Pension Plan assets, Debtor transferred over $8 million in Pension Plan assets out of Pennsylvania to avoid the jurisdiction of the Pennsylvania courts. Debtor followed his assets out of Pennsylvania, relocating in Nevada where, on August 24, 1992, he filed a Chapter 11 bankruptcy petition. 1 On his bankruptcy petition, Debtor listed as excluded from the bankruptcy estate his beneficial interest in the Pension Plan as an ERISA qualified plan under 11 U.S.C. § 541(c)(2) and Patterson v. Shumate, 504 U.S. 753, 112 S.Ct. 2242, 119 L.Ed.2d 519 (1992). In the alternative, Debtor claimed that his interest in the Pension Plan was exempt from the bankruptcy estate under 11 U.S.C. § 522.
In deciding the composition of Debtor's bankruptcy estate, the bankruptcy court determined that the Pension Plan was "ERISA qualified," and therefore excluded from the bankruptcy estate Debtor's beneficial interest in the Pension Plan (the "Exclusion Order"). Selnick appealed the Exclusion Order, but while that appeal was still pending, the bankruptcy court confirmed Debtor's plan of reorganization (the "Confirmation Order"). Selnick appealed the Confirmation Order.
On appeal, the district court vacated the Exclusion Order, and remanded the case to the bankruptcy court to hear additional testimony on the exclusion issue. Pending resolution of the exclusion issue, the district court stayed Selnick's appeal of the money judgment ruling and the Confirmation Order, and issued a related minute order declaring that the plan of reorganization could not be confirmed until the exclusion issue had been resolved. Debtor immediately appealed the district court's order, and the Ninth Circuit dismissed the appeal for lack of jurisdiction.
On remand, the bankruptcy court determined that the Pension Plan was not ERISA qualified, and that therefore Debtor's beneficial interest in the Pension Plan could not be excluded from Debtor's bankruptcy estate (the "Inclusion Order"). After concluding that Debtor's interest in the Pension Plan was included in the bankruptcy estate, the bankruptcy court determined that Nevada law would control the issue of whether Debtor's interest in the Pension Plan was exempt from the bankruptcy estate under 11 U.S.C. § 522 (the "Exemption Law Order"). 2 Finally, the bankruptcy court granted Selnick's motion for the appointment of a Chapter 11 Trustee for cause under 11 U.S.C. § 1104(a)(1), and for the best interests of the creditors under 11 U.S.C. § 1104(a)(2) (the "Trustee Order").
Debtor appealed the bankruptcy court's orders to the district court, and the district court affirmed all three orders. Debtor now appeals those orders to this Court. The Pension Plan Trustee has intervened in this appeal for the first time.
Selnick contends that the Pension Plan Trustee lacks standing to intervene in this appeal. We disagree because the issues raised in this appeal implicate the status of the Pension Plan as an ERISA-qualified plan, and therefore directly affect the potential obligations and liabilities of the Pension Plan Trustee. Therefore, the Pension Plan Trustee has standing to intervene in this appeal. Cf. In re Moses, 215 B.R. 27, 34-35 (B.A.P. 9th Cir.1997), aff'd, 167 F.3d 470 (9th Cir.1999).
Debtor and the Pension Plan Trustee contend that Selnick's appeal is moot because Selnick released all of her claims against Debtor by endorsing checks paid to her under the terms of the plan of reorganization. In addition, the Pension Plan Trustee contends that Selnick's appeal of the Exclusion Order is equitably moot because Selnick failed to obtain a stay pending her appeal of the Confirmation Order, and that principles of res judicata barred Selnick's initial challenge to the Exclusion Order. We disagree with each of these contentions.
Debtor contends that this bankruptcy proceeding is moot, and the Pension Plan Trustee contends that the Inclusion Order must be reversed, because Selnick released any claims she held against Debtor and the Pension Plan when she negotiated checks bearing a restrictive endorsement. 3 We disagree because the bankruptcy court ordered that Selnick could negotiate the checks she received under the plan of reorganization, notwithstanding the restrictive endorsements. 4 For this reason, the Pension Plan Trustee's reliance on Lockheed Corp. v. Spink, 517 U.S. 882, 116 S.Ct. 1783, 135 L.Ed.2d 153 (1996), is misplaced. Therefore, Selnick's negotiation of the instruments bearing a restrictive endorsement could not have released her claims against Debtor, the Pension Plan, or any other party listed in the restrictive endorsements. Because Selnick did not release her claims, her appeal is not moot and the Inclusion Order does not need not be reversed.
The Pension Plan Trustee contends that Selnick's failure to obtain a stay of the Confirmation Order pending her appeal of the Exclusion Order mooted her appeal of the Exclusion Order. 5 We disagree because this case does not present transactions that are so complex or difficult to unwind that the doctrine of equitable mootness would apply. Compare In re Spirtos, 992 F.2d 1004, 1007 (9th Cir.1993) (), with In re Roberts Farms, Inc., 652 F.2d 793 (9th Cir.1981) (), and In re Combined Metals Reduction Co., 557 F.2d 179 (9th Cir.1977) (). As in Spirtos, we could simply order Selnick to return to the bankruptcy estate those payments she received under the plan of reorganization. Because we are able to fashion effective relief for events that transpired as a result of the bankruptcy court's refusal to grant Selnick's request for a stay, Selnick's appeal is not equitably moot. 6 See Spirtos, 992 F.2d at 1006.
The Pension Plan Trustee contends that Selnick's challenge to the Exclusion Order was barred by principles of res judicata because the Chapter 7 Trustee dismissed with prejudice a turnover action against the Pension Plan Trustee. We disagree. The turnover action involved a dispute between the Pension Plan Trustee and the Chapter 7 Trustee, while the challenge to the Exclusion Order involves a dispute between Debtor and Selnick. Because the Pension Plan Trustee cannot demonstrate that the parties in the first action are "the same parties or their privies" as the parties in the current action, his res judicata argument fails. See Montana v. United States, 440 U.S. 147, 153, 99 S.Ct. 970, 59 L.Ed.2d 210 (1979); Ross v. International Bhd. of Elec. Workers, 634 F.2d 453, 457 (9th Cir.1980).
In addition, even if the Pension Plan Trustee could establish the same parties requirement, res judicata would not help the Pension Plan Trustee's cause. The Chapter 7 Trustee did not have the authority to dismiss the turnover action because the Chapter 7 Trustee's authority to act in this bankruptcy proceeding terminated when the case was converted from Chapter 7 to Chapter 11, see 11 U.S.C. § 348(e), which occurred more than one year before the dismissal of the turnover action. Consequently, the Chapter 7 Trustee's dismissal of the turnover action had no legal effect on Selnick's ability to challenge the Exclusion Order.
Debtor contends that the bankruptcy court (1) lacked jurisdiction to reconsider the exclusion issue, and (2) erred by finding that Debtor's beneficial interest in...
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