Parker v. Bain, 94-55123

• Citation: 68 F.3d 1131
• Decision Date: 28 September 1995
• Docket Number: No. 94-55123,94-55123
• Parties: , Bankr. L. Rep. P 76,652, 95 Cal. Daily Op. Serv. 7577, 95 Daily Journal D.A.R. 12,982, Pens. Plan Guide P 23,914 G. Steven PARKER, Plaintiff-Appellant, v. David L. BAIN, Esq.; Pacific Ship Repair & Fabrication Profit Sharing Plan, Inc.; Bank of America National Trust & Savings Association, Defendants-Appellees.
• Court: United States Courts of Appeals. United States Court of Appeals (9th Circuit)

Page 1131

68 F.3d 1131 64 USLW 2287, Bankr. L. Rep. P 76,652,
95 Cal. Daily Op. Serv. 7577,
95 Daily Journal D.A.R. 12,982,
Pens. Plan Guide P 23,914 G. Steven PARKER, Plaintiff-Appellant,
v.
David L. BAIN, Esq.; Pacific Ship Repair & Fabrication
Profit Sharing Plan, Inc.; Bank of America
National Trust & Savings Association,
Defendants-Appellees. No. 94-55123. United States Court of Appeals,
Ninth Circuit. Argued and Submitted May 9, 1995.
Decided Sept. 28, 1995.

Page 1133

Jerry Michael Suppa and Samy S. Henein, Suppa, Highnote & Lee, San Diego, California, for plaintiff-appellant.

Edward D. Vogel, David M. Beckwith and Karin Dougan Vogel, Sheppard, Mullin, Richter & Hampton, San Diego, California, for defendant-appellee Pacific Ship Repair and Fabrication Profit Sharing Savings Plan.

Richard M. Segal, Pillsbury, Madison & Sutro, San Diego, California, for defendant-appellee Bank of America National Trust and Savings Association.

Appeal from the United States District Court for the Southern District of California.

Before: HALL and LEAVY, Circuit Judges, and LEVI, ^* District Judge.

HALL, Circuit Judge:

Steven Parker was co-owner of a ship repair company. In order to prevent the company from financial ruin, he stole funds from his company's pension plan (the Plan) and transferred the funds into his company's general account. He was prosecuted and pleaded guilty to several federal charges.

A complex round of civil litigation then ensued. This appeal involves Parker, the Plan, and Bank of America, which is the trustee of the Plan. The district court granted summary judgment in favor of the Plan on its claim that Parker had breached his fiduciary duty to the Plan, and dismissed for lack of standing Parker's claim that Bank of America breached its fiduciary duty to the Plan. Parker filed a voluntary Chapter 11 petition in bankruptcy and then appealed both decisions.

The district court had jurisdiction under 28 U.S.C. Sec. 1331. The parties dispute whether this Court has jurisdiction over the appeal from the grant of summary judgment because Parker's notice of appeal may have been untimely. This Court has jurisdiction over the dismissal of Parker's claim against Bank of America under 28 U.S.C. Sec. 1291. For the reasons that follow, we conclude that Parker's appeal from the grant of summary judgment against him is stayed by the automatic stay, but that his appeal from the dismissal of his claim against Bank of America is not. We affirm the dismissal of his claim against Bank of America.

I.

Steven Parker was Vice President and eighty-percent owner of Pacific Ship Repair and Fabrication, Inc. (Pac Ship), a San Diego company with approximately 400 employees. David Bain was President, CEO, and Chairman of the Board. Bain owned the remaining twenty percent.

Pac Ship experienced financial difficulties, prompting its creditors to file an involuntary petition in bankruptcy. In order to avoid

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bankruptcy, ¹ Parker and Bain conspired to and did embezzle approximately $1.4 million from Pacific Ship Repair and Fabrication Profit Sharing Savings Plan, their company's ERISA governed pension plan.

The U.S. Attorney learned of these misdeeds and prosecuted. As the result of a plea bargain, Parker waived indictment and pleaded guilty to a four-count superseding information, which included two counts of conspiracy, one count of knowingly filing a false income tax return, and one count of knowingly assisting in the filing of a false IRS form 5500. In pleading guilty, Parker admitted that he directed employees of Pac Ship to "cash in" assets of the Plan, which he then transferred to Pac Ship's general account. Parker used this money to reduce his personal debt to Pac Ship and to pay Pac Ship's creditors. He then attempted to cover up the embezzlement by filing false personal tax returns and false corporate IRS forms.

Civil litigation followed close on the heels of the criminal prosecution. Parties joined in the litigation included Parker, Bain, Pac Ship, Arcwell Corporation (predecessor corporation to Pac Ship), the Plan, Bank of America (the named trustee of the Plan), two employees of Pac Ship, and one employee of Bank of America.

Some of the claims have been dismissed or settled, and some have been actively litigated during the pendency of this appeal. Following is a schematic description of the particular parties and claims giving rise to this appeal:

1) Parker ----> Plan 3d amended complaint
                 (declaratory relief, re: whether Parker was fully
                 vested in the Plan)
                2) Parker  Plan 1st amended counterclaim
                 (declaratory relief re: whether the Plan should seek
                 reimbursement from Pac Ship on an alleged note
                 obligating Pac Ship to repay monies "borrowed"
                 from the Plan by Parker and Bain)
                4) Parker ----> Bank 1st amended counterclaim 2
                 of
                 Ameri- (declaratory relief as described in # 3, breach of
                 ca fiduciary duty) 3
                

After two and one-half years of litigation, the Plan filed a motion for summary judgment on its counterclaim against Parker. Bank of America filed a motion to dismiss the counterclaim against it for failure to state a claim, or in the alternative, for summary judgment.

The district court granted the Plan's motion for summary judgment by minute order on August 9, 1993. On September 23, it issued a written order ruling that Parker was a de facto fiduciary of the Plan, and that he had breached his fiduciary duty to the Plan.

Page 1135

The district court also held a hearing to determine the amount of damages suffered by the Plan and the amount of benefits due Parker under the Plan. It then filed a thirty-one page written order, which explained the court's calculation of damages and attorney's fees. It also dismissed Parker's counterclaim against Bank of America on the ground that, because Parker's breach extinguished any interest he had in the Plan, he was no longer a "participant" and therefore lacked standing under ERISA to bring a suit for breach of fiduciary duty.

On October 20, the district court entered judgment in favor of the Plan in the amount of $405,614.56 in damages, $58,557.55 in attorney's fees, and $3,142.29 in costs. This judgment also dismissed Parker's complaint and counterclaim against the Plan, reasoning that Parker's interest in the Plan was extinguished by setoff against the damages suffered by the Plan. On October 21, the district court entered judgment in favor of Bank of America and awarded it costs.

Parker then filed a voluntary Chapter 11 petition in bankruptcy on November 10. Six days later, on November 16, Parker filed his Notice of Appeal. Although Parker obtained permission from the bankruptcy court to employ the attorney who represents him in this appeal, he neither sought nor obtained relief from the automatic stay before filing his notice.

The Notice of Appeal itself is rather confusing. It states that Parker appeals from two things: 1) the October 1st order granting summary judgment for the Plan and dismissing the counterclaim against Bank of America; and 2) the October 19th judgment ⁴ in favor of Bank of America. Additionally, Parker's appellate brief makes reference to several matters outside the record, most notably an alleged "side agreement" between Parker and Bain in which Bain agreed to keep Parker on payroll at minimum wage until his pension fully vested. The Plan moved to strike Parker's brief and dismiss the appeal. A motions panel of this Court denied the motion on July 21, 1994.

II.

Before reaching the merits of Parker's arguments, we first must decide whether the automatic stay resulting from Parker's bankruptcy petition affects this appeal. ⁵ Our analysis begins with the relevant language of the bankruptcy code:

Sec. 362. Automatic stay

(a) Except as provided in subsection (b) of this section, a petition filed under section 301, 302, or 303 of this title ... operates as a stay, applicable to all entities, of--

(1) the commencement or continuation, including the issuance or employment of process, of a judicial, administrative, or other action or proceeding against the debtor that was or could have been commenced before the commencement of the case under this title, or to recover a claim against the debtor that arose before the commencement of the case under this title.

11 U.S.C. Sec. 362. We think it clear from this language that the automatic stay would apply, if at all, if this appeal constitutes the "continuation" of a "judicial ... action or proceeding against the debtor." Id.

We need not spill a great deal of ink discussing the assertion, pressed by Parker, that an appeal by the debtor cannot constitute the continuation of an action against the debtor. This Court, as well as seven other courts of appeals, ⁶ has concluded that the

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automatic stay can operate to prevent an appeal by a debtor when the action or proceeding below was against the debtor. "[S]ection 362 should be read to stay all appeals in proceedings that were originally brought against the debtor, regardless of whether the debtor is the appellant or the appellee...." Ingersoll-Rand Fin. Corp. v. Miller Mining Co., 817 F.2d 1424, 1426 (9th Cir.1987) (quoting Cathey v. Johns-Manville Sales Corp., 711 F.2d 60, 62 (6th Cir.1983)); see also Delpit v. Commissioner Internal Revenue Serv., 18 F.3d 768, 770-71 (9th Cir.1994). This rule finds its source in the language of section 362, which extends the automatic stay to the continuation, as well as the commencement, of an action against the debtor.

Nor are we taken with the Plan's argument that Bankruptcy Rule 6009 provides an exemption from the automatic stay. That rule provides:

With or without court approval, the trustee or debtor in possession may prosecute or may enter an appearance and defend any pending action or proceeding by or against the debtor, or commence and prosecute any action or proceeding in behalf of the estate before any tribunal.

Bankruptcy Rule 6009. This rule derives from the former...