Benham v. Hagen (In re Benham)

220 F.Supp.3d 1033

IN RE Erik BENHAM, Debtor

(Erik Benham, Appellant

v.David R. Hagen (Chapter 7 Trustee), Appellee)

Case No. LA CV 15–08472–VBF

United States District Court, C.D. California.

October 20, 2016

Erik Benham, Santa Maria, CA, Pro Se

David Seror, Brutzkus Gubner Rozansky Seror Weber LLP, Woodland Hills, CA, James I. Stang, Pachulski Stang Ziehl and Jones LLP, Los Angeles, CA, for Appellee.

PROCEEDINGS (in chambers): Order Determining that Benham Has Not Carried Burden of Establishing Bankruptcy Appellate Standing;

Permitting Taxation of Non–Fee Costs Under Fed. R.B.P. 8021; Declining to Sanction Benham Under Fed. R.B.P. 8020(a);

Terminating and Closing the Case

HONORABLE VALERIE BAKER FAIRBANK, SENIOR UNITED STATES DISTRICT JUDGE

Appellant Erik Benham filed a petition for bankruptcy protection under Chapter 7 of the U.S. Bankruptcy Code on June 24, 2008. The matter was assigned Central District of California Bankruptcy Case No. 9:08–bk–11432–PC, and the United States Bankruptcy Trustee ("the Trustee") was appointed on December 7, 2009. The Trustee issued a Trustee's Final Report ("TFR") reciting gross receipts of about $1.235 million; payments to creditors of about $526,280; administrative expenses of about $380,068; and a balance on hand of about $317,936. See TFR, reproduced at Exhibit ("Ex") 1, at 1. The Trustee proposed paying nothing toward the claims of secured creditors, See Ex 1 at 6. The Trustee noted that "[i]n addition to the expenses of administration listed above as may be allowed by the Court, priority claims totaling $838,743.68 must be paid in advance of any dividend to general (unsecured creditors), see Ex 1 at 7. The Trustee further noted in the TFR that "[t]imely claims of general (unsecured) creditors totaling $7,529,833.15 have been allowed and will be paid pro rata only after all allowed administrative and priority claims have been paid in full", see Ex 1 at 8.

United States Bankruptcy Judge Peter H. Carroll adopted the Trustee's proposed final distribution of the funds in the Benham bankruptcy estate and entered an oral order adverse to debtor Erik Benham on September 30, 2015. The order was filed in that court on October 9, 2015.

Benham filed a notice of appeal with the Clerk of the U.S. Bankruptcy Court, and appellee Hagen has not contended that the appeal was untimely under FRBP 8002(a).¹ See FRBP 8003(a)(1) ("An appeal from a judgment, order, or decree of a bankruptcy court to a district court or BAP under 28 U.S.C. § 158(a)(1) or (a)(2) may be taken only by filing a notice of appeal with the bankruptcy clerk within the time allowed by Rule 8002.").

On October 29, 2015, as permitted by FRBP 8005, appellee David R. Hagen, named as "Chapter 7 Trustee", filed a statement of election to proceed in the United States District Court (Doc 3), and the United States Bankruptcy Appellate Panel of the Ninth Circuit issued a notice transferring Benham's appeal here (Doc 4). See FRBP. 8001(b) (defining BAP as "a bankruptcy appellate panel established by a circuit's judicial council and authorized to hear appeals from a bankruptcy court under 28 U.S.C. section 58"); cf. FRBP 8006 (providing for certification of a direct appeal from the bankruptcy court to the United States Court of Appeals).

This appeal was initially assigned to United States District Judge John F. Walter (Doc 6), who issued a Standing Order on November 5, 2015 (Doc 9). On November 30, 2015, appellee Hagen filed a Notice (Doc 10) expressing the view that this appeal is related to LA CV 12–01279–VBF, a bankruptcy appeal which this Court previously dismissed for lack of bankruptcy appellate standing. The undersigned agreed with appellee and the case was reassigned to me by order issued on December 4, 2015 (Doc 11).

"According to [FRBP] 8001(a), Part VIII of the Federal Rules of Bankruptcy Procedure ‘govern the procedure in a United States district court and a bankruptcy appellate panel on appeal from a judgment, order, or decree of a bankruptcy court.’ This includes Fed. R. Bankr. P. 8001 through 8028." In re Ashai, Debtor (Ghadimi v. Ashai) , No. LA CV 14–05057–VBF Doc. 13 at 2, 2016 WL 7155837, 211 F.Supp.3d 1215 (C.D. Cal. Sept. 29, 2016) (Fairbank, J.).

"In deciding this appeal, the Court will apply the Federal Rules of Civil Procedure and Evidence unless the FRBP or Local Bankruptcy Rules provide otherwise." In re Ashai , Doc. 13 at 3, 2016 WL 7155837, 211 F.Supp.3d at 1219 (citing C.D. Cal. L. Bankr. R. 1 with nn. 1–2).

In early 2016, Hagen filed a motion to dismiss the appeal for lack of appellate standing (Doc 14), accompanied by a Request for Judicial Notice (Doc 15). After receiving an extension of time, Benham timely filed a brief opposing the motion to dismiss (Doc 19). Appellee Hagen elected not to file a reply. Pursuant to FRBP 8019(b)(2), the Court determines that oral argument is unnecessary "because ... the dispositive issue or issues have been authoritatively decided." Essentially for the reasons set forth in Hagen's motion to dismiss, the Court will dismiss Benham's bankruptcy appeal for lack of bankruptcy appellate standing.

LEGAL STANDARD: BANKRUPTCY APPELLATE STANDING

The Supreme Court unanimously applied its principles of standing in Susan B. Anthony List v. Driehaus , ––– U.S. ––––, 134 S.Ct. 2334, 189 L.Ed.2d 246 (2014). The Supreme Court began by noting that Article III of the Constitution limits the jurisdiction of the federal courts to "cases" and "controversies", U.S. Const. Art. III, § 2, and explaining that "[t]he doctrine of standing gives meaning to those constitutional limits by ‘identify[ing] those disputes which are appropriately resolved through the judicial process.’ " SBA List , 134 S.Ct. at 2341 (quoting Lujan v. Defenders of Wildlife , 504 U.S. 555, 560, 112 S.Ct. 2130, 119 L.Ed.2d 351 (1992) ). "The law of Article III standing, which is built on separation-of-powers principles, serves to prevent the judicial process from being used to usurp the powers of the political branches." Clapper v. Amnesty Int'l USA , 568 U.S. 398, ––––, 133 S.Ct. 1138, 1146, 185 L.Ed.2d 264 (2013).

As the party invoking appellate jurisdiction, Benham has the burden of establishing that he has appellate standing.See SBA List , 134 S.Ct. at 2342 (citing Clapper , 568 U.S. at ––––, 133 S.Ct. at 1448); accord In re Hope 7 Monroe Street Ltd. P'ship , 743 F.3d 867, 872 (D.C. Cir. 2014) ("As in other jurisdictional contexts, the party invoking appellate jurisdiction to review a bankruptcy court order has the burden of demonstrating prudential standing.") (citing Spenlinhauer v. O'Donnell , 261 F.3d 113, 118 (1st Cir. 2001) ); Rohm & Hass Texas, Inc. v. Ortiz Bros. Insulation, Inc. , 32 F.3d 205, 208 (5th Cir. 1994) ("[T]he putative appellant shoulders the burden of alleging facts sufficient to demonstrate that it is a proper party to appeal."). The Court determines bankruptcy appellate standing by reference to the facts as they stood when the appellant filed the notice of appeal. See McCormack v. Hiedeman , 694 F.3d 1004, 1023–24 (9th Cir. 2012) (" ‘Standing is determined by the facts as they exist at the time the complaint is filed.’ ") (quoting Clark v. City of Lakewood , 259 F.3d 996, 1006 (9th Cir. 2001) and citing ACLU of Nevada v. Lomax , 471 F.3d 1010, 1015 (9th Cir. 2006) ).

To establish Article III standing outside the bankruptcy context, a plaintiff or appellant must show (1) "an injury in fact", (2) a sufficient "causal connection between the injury and the conduct complained of", and (3) a "likel[ihood]" that the injury "will be redressed by a favorable decision." See SBA List , 134 S.Ct. at 2341 (quoting Lujan , 504 U.S. at 560–61, 112 S.Ct. 2130 ) (brackets and bracketed text in SBA List ). The Supreme Court emphasizes that the injury-in-fact requirement "helps to ensure that the plaintiff [here, the appellant] has a ‘personal stake in the outcome of the controversy.’ " SBA List , 134 S.Ct. at 2341 (quoting Warth v. Seldin , 422 U.S. 490, 498, 95 S.Ct. 2197, 45 L.Ed.2d 343 (1975) ). To satisfy Article III, the alleged injury to appellant must be "concrete and particularized" and "actual or imminent, not conjectural or hypothetical." SBA List , 134 S.Ct. at 2341 (quoting Lujan , 504 U.S. at 560, 112 S.Ct. 2130 ) (internal quotation marks omitted). An allegation of future injury may suffice only if the threatened injury to appellant is "certainly impending" or if there is a "substantial risk" that the harm will occur. See SBA List , 134 S.Ct. at 2341 (quoting Clapper , 568 U.S. at –––– and –––– n.5, 133 S.Ct. at 1147 and 1150 n.5 (internal quotation marks omitted and emphasis deleted by SBA List ).

More specifically, appellate standing in bankruptcy is determined by applying the "person aggrieved" test, which reflects the principle that "only one who is directly and adversely affected pecuniarily has standing to appeal a bankruptcy court's order." Menk v. Lapaglia (In re Menk) , 241 B.R. 896, 917 (9th Cir. BAP 1999).

Significantly, the person-aggrieved test for appellate bankruptcy standing is more exacting than the requirements for general Article III standing. See Morrison Hecker LLP (In re Dexter Distributing Corp.) , 2010 WL 6466583, *4 n.14 (9th Cir. BAP 2010) (quoting In re Andreuccetti , 975 F.2d 413, 416 (7th Cir. 1992) ). Accord In re Heatherwood Holdings, LLC , 746 F.3d 1206, 1216 (11th Cir. 2014) (" ‘Bankruptcy's person [-]aggrieved doctrine restricts standing more than Article III standing, as it allows a person to appeal only when they are ‘directly and adversely affected pecuniarily by the order.’ ") (citation omitted); In re AFY , 734 F.3d 810, 819 (8th Cir. 2013) ("Appellate standing in bankruptcy cases is more limited than Article III standing or the prudential standing requirements associated therewith.") (citations omitted); In re W.R. Grace & Co. , 532 Fed.Appx. 264, 268 n.5 (3d Cir. 2013) ("Because we conclude that Garlock lacks bankruptcy standing, it also lacks bankruptcy appellate standing,...