[00:00:01] Speaker 02:
So Mr. Villaplana, you're doing the opening, and then Mr. Carson's doing the rebuttal, is that correct?

[00:00:07] Speaker 02:
Correct, your honor, five minutes of rebuttal.

[00:00:08] Speaker 02:
OK, go ahead.

[00:00:11] Speaker 01:
May it please this court, Victor Villaplana on behalf of the Appalachians matter.

[00:00:17] Speaker 01:
Your honor, I'm going to start first with the idea of what was decided before.

[00:00:23] Speaker 01:
And refer to the order.

[00:00:25] Speaker 01:
Was it decided before, meaning by the bankruptcy court?

[00:00:27] Speaker 01:
Yes, your honor.

[00:00:28] Speaker ?:
OK.

[00:00:29] Speaker 01:
And the order that we have appealed from and was entered is quite clear that the only decision by the judge, the bankruptcy judge, was that the court, in its view, had exclusive jurisdiction over this matter.

[00:00:49] Speaker 01:
and therefore denied our motion to file actions in another court.

[00:00:54] Speaker 02:
And I apologize for not raising this perhaps in an order beforehand.

[00:01:03] Speaker 02:
But as I was reviewing this last night, I started thinking, why do we have jurisdiction here?

[00:01:09] Speaker 02:
Because is that not an interlocutory appeal?

[00:01:12] Speaker 02:
I mean, the district, or excuse me, district court, the bankruptcy court said, I have exclusive jurisdiction.

[00:01:18] Speaker 02:
That didn't deny any of the claims.

[00:01:20] Speaker 02:
You could have still gone forward with them in the bankruptcy court.

[00:01:24] Speaker 02:
And I assume that your answer is going to hinge on some form of finality is different under bankruptcy law.

[00:01:30] Speaker 02:
That would be helpful for me to understand a little bit better why that's the case.

[00:01:34] Speaker 01:
Will there be two answers?

[00:01:35] Speaker 01:
One, she not only said she had exclusive jurisdiction, she ordered us to dismiss other actions we had filed.

[00:01:41] Speaker 02:
I understand that.

[00:01:43] Speaker 02:
But it seems to me that you would have—so is that your hook is the order of dismissal in other cases?

[00:01:50] Speaker 02:
Correct.

[00:01:51] Speaker 02:
And she said we couldn't— But wouldn't you have to appeal that—I mean, wouldn't the proper vehicle be to—

[00:01:58] Speaker 02:
Well, I guess you're right.

[00:01:59] Speaker 02:
You couldn't appeal the dismissal in the district court, the federal district court.

[00:02:05] Speaker 01:
Yes.

[00:02:06] Speaker 01:
OK.

[00:02:06] Speaker 01:
So that's our start there, that she ruled she had exclusive jurisdiction.

[00:02:10] Speaker 01:
That's the order we appealed from.

[00:02:12] Speaker 02:
So you're arguing it really is a final order, at least collaterally, as to the federal district court action.

[00:02:19] Speaker 01:
That is correct, Your Honor.

[00:02:20] Speaker 02:
OK.

[00:02:21] Speaker 01:
Then why did she rule that she had exclusive jurisdiction?

[00:02:25] Speaker 01:
She ruled that on the basis of a statute.

[00:02:27] Speaker 01:
1334, 28 USA 1334, E2.

[00:02:30] Speaker 01:
And E2 gives, as a bankruptcy judge, exclusive jurisdiction to hear matters involving the construction of Section 327.

[00:02:43] Speaker 01:
327 is the section that describes how professionals are employed in a bankruptcy case.

[00:02:52] Speaker 01:
none of our claims, Your Honor, have anything to do with the construction of 327.

[00:02:56] Speaker 01:
If you look at our claims, and we describe them in some particularity in our brief, we call them the underlying breaches.

[00:03:05] Speaker 01:
All these underlying breaches have to do with the

[00:03:09] Speaker 01:
former trustee over-ordering merchandise, paying too much for point of sale information, not getting the right kind of equipment.

[00:03:18] Speaker 06:
But if the bankruptcy court is the appointing authority of the trustee, you are alleging essentially breaches of fiduciary duties by the trustee in the administration of the bankrupt estate.

[00:03:32] Speaker 06:
Why wouldn't the bankruptcy court be this whole place to bring such a claim?

[00:03:37] Speaker 01:
And that gets us to the Barton Doctrine and the exception to the Barton Doctrine in section 959.

[00:03:43] Speaker 01:
And the reason it does create an exception for what you just described is that section 959 says that a trustee can be sued in an appropriate court that has personal jurisdiction and the rest for any act, any act in the operating of the business

[00:04:07] Speaker 06:
but the cases are all toward actions or breach of contract claims the trustees running a railroad and you run over the farmers cowl and now the farmer wants to get reimbursed from the railroad that case you can bring in state court but this is a case that basically challenges how the trustee carried out

[00:04:29] Speaker 06:
his obligations under

[00:04:42] Speaker 01:
You did mention, and you're correct, that it's not just business store claims.

[00:04:46] Speaker 01:
A Supreme Court case involves a breach of contract.

[00:04:48] Speaker 06:
OK.

[00:04:49] Speaker 06:
So if there had been a dispute between East Coast Foods and the company that sold the t-shirts with Roscoe's chicken and waffles displayed, that case could be brought in Superior Court, could it not?

[00:05:06] Speaker 01:
Correct.

[00:05:06] Speaker 01:
And what's the reason for making that distinction?

[00:05:09] Speaker 01:
Because it still operates, the statute says operating a business.

[00:05:13] Speaker 06:
But it wasn't the trustee who was operating.

[00:05:15] Speaker 06:
Didn't the trustee hire another entity that was experienced in the restaurant management business?

[00:05:22] Speaker 01:
Well, it did hire another entity, not experienced in the restaurant business.

[00:05:25] Speaker 06:
But it was that other entity that overordered the merchandise, right?

[00:05:30] Speaker 01:
We don't see, and we would argue that there's no reason to give a trustee any advantage over other businesses where the CEO or the board are responsible.

[00:05:41] Speaker 01:
They're responsible for who they hire.

[00:05:43] Speaker 06:
Would you take the position that if the trustee had appointed a lawyer and the lawyer had engaged in malpractice, could that claim be brought in state court, or would that also have to go before the appointing authority?

[00:05:56] Speaker 01:
It would depend, I think, on whether, under applicable state law, such a claim could be brought.

[00:06:04] Speaker 01:
But if the CEO had liability for what its attorney to company's counsel did, then I think the same would apply.

[00:06:13] Speaker 01:
in a bankruptcy context.

[00:06:14] Speaker 01:
There's no reason to treat the CEO of a company different and give them greater protections and give them a competitive advantage over another business.

[00:06:24] Speaker 01:
And you can always get insurance for those sorts of crimes.

[00:06:27] Speaker 05:
On this, we're talking about, you're now talking about section 959, the exception to Barton.

[00:06:33] Speaker 05:
Correct.

[00:06:34] Speaker 05:
Are there any cases where courts have held that that exception can be

[00:06:39] Speaker 05:
Utilized by what's essentially a disappointed debtor as opposed to some other third party or would Because it seems like a lot of the cases involve some third party as Judge Tallman was referencing who's claiming some injury from the business here The plaintiff is is the former debtor.

[00:06:55] Speaker 05:
Are there any cases involving 959 in that context?

[00:07:00] Speaker 01:
You the only one that I can think of your honor

[00:07:02] Speaker 01:
where it's not a tort victim or what's sometimes referred to a bystander is the Thompson case, which you have a party to a contract.

[00:07:12] Speaker 01:
There you had a party.

[00:07:13] Speaker 05:
He's not just... Was that party the debtor?

[00:07:15] Speaker 05:
I mean, because here we're talking about the debtor itself.

[00:07:19] Speaker 01:
In the Thompson case, it was between the trustee

[00:07:22] Speaker 01:
of entering the contract and not breaching the contract.

[00:07:25] Speaker 01:
But here, the trustee hired these people, entered the contracts, approved the payments, and did all this mismanagement under his watch, and he should be responsible for that.

[00:07:36] Speaker 06:
That's our claim.

[00:07:36] Speaker 06:
But why can't the bankruptcy court adjudicate that?

[00:07:38] Speaker 06:
And it's the bankruptcy court that approved

[00:07:41] Speaker 06:
the payments, so wouldn't the bankruptcy court be the best court in a position to order disgorgement of some or all of the money paid to the trustee in fees?

[00:07:53] Speaker 01:
The bankruptcy court, in fact, did order disgorgement from the company that was hired.

[00:07:59] Speaker 01:
That company was insolvent, so disgorgement was not much of a remedy.

[00:08:07] Speaker 01:
So that did happen.

[00:08:08] Speaker 01:
But in this case, our claims, we believe we're entitled to a trial by jury.

[00:08:15] Speaker 01:
So if we had to go to a bankruptcy court, that would be compromised.

[00:08:18] Speaker 01:
And so that's the reason why we have, insisting on the right to be able to go to a state court.

[00:08:23] Speaker 06:
Also, we haven't talked about who owns the claim.

[00:08:26] Speaker 06:
The bankruptcy court thought that it was actually an asset of the bankruptcy estate, and that to the extent that there might be a

[00:08:34] Speaker 06:
a claim worth prosecuting, it should be brought by the plan successor trustee after the plan of reorganization was approved.

[00:08:42] Speaker 01:
Right.

[00:08:42] Speaker 06:
What's your response to the court's ruling on that?

[00:08:45] Speaker 01:
Two things, Your Honor.

[00:08:47] Speaker 01:
First of all, the court, the bankruptcy court, did not really make that decision.

[00:08:54] Speaker 01:
That didn't make that.

[00:08:56] Speaker 01:
The BAP did.

[00:08:58] Speaker 01:
And what we think that the BAP aired was two things.

[00:09:03] Speaker 01:
It said that we did not have standing because of what you're saying.

[00:09:08] Speaker 06:
Because it belonged to the estate.

[00:09:11] Speaker 01:
Interestingly enough, you have to look at what the bankruptcy plan says.

[00:09:15] Speaker 01:
And it says that the trustee has the sole authority to prosecute actions and all sorts of prosecute, decide, analyze, investigate, evaluate.

[00:09:26] Speaker 01:
estate claims.

[00:09:28] Speaker 01:
So the question is, are these estate claims?

[00:09:31] Speaker 01:
We believe they're not estate claims, because they all rose post-petition.

[00:09:36] Speaker 05:
Estate claims are defined by- Is any of this actually before us?

[00:09:39] Speaker 05:
I mean, because that's a question here.

[00:09:41] Speaker 05:
I mean, the BAP, I guess, ruled on this basis.

[00:09:44] Speaker 05:
But the bankruptcy court, at least when you get to the end of the day, it seemed to be basically saying, what I'm saying is you have to bring the claim here.

[00:09:52] Speaker 01:
Exactly.

[00:09:52] Speaker 01:
And I agree with you.

[00:09:53] Speaker 01:
I don't think that the 541 issue or the standing issue is really in front of you.

[00:10:00] Speaker 01:
I would point out, interestingly enough, that Judge Nelson, in a case involving this very trustee and this very estate, said that the creditor in that case had no standing because all the creditors were paid in full under plan or to be provided.

[00:10:19] Speaker 01:
That's a different issue, right?

[00:10:21] Speaker 01:
But it's standing, right?

[00:10:22] Speaker 01:
It is who can bring this action.

[00:10:25] Speaker 01:
And if no creditor can bring it under the ruling that Your Honor authored.

[00:10:31] Speaker 01:
And the trustee doesn't.

[00:10:33] Speaker 01:
The trustee in this case, when we asked about whether we could prosecute it, he coincided with Your Honor's view in saying, I don't think this involves the estate.

[00:10:43] Speaker 05:
And it doesn't involve the estate.

[00:10:44] Speaker 05:
Before you sit down, what

[00:10:46] Speaker 05:
What relief, if any, has been obtained as a result of the trustees' actions?

[00:10:52] Speaker 05:
Because it did seem that the bankruptcy court was concerned by the trustees' actions.

[00:10:56] Speaker 05:
It seemed like maybe some bills hadn't been approved by the second trustee.

[00:11:03] Speaker 05:
What is the status on getting relief from the trustee or otherwise looking into these issues that have been raised about the trustee?

[00:11:11] Speaker 01:
Nothing.

[00:11:11] Speaker 01:
We've been stymied.

[00:11:13] Speaker 01:
And so we have not been able to proceed.

[00:11:16] Speaker 01:
We did file, because of statute of limitations concerns, we did file a lawsuit in her court.

[00:11:25] Speaker 01:
As she said, I'm the only one that can hear these matters.

[00:11:29] Speaker 01:
And she had dismissed that complaint.

[00:11:33] Speaker 01:
And that's on appeal.

[00:11:33] Speaker 01:
And it's going to be, well, it went to the BAP, the BAP affirmed for a number of reasons.

[00:11:38] Speaker 01:
And that's going to be before the Ninth Circuit.

[00:11:40] Speaker 01:
Our briefs are due, in fact, I think, Thursday.

[00:11:43] Speaker 06:
Then who ordered discouragement of funds from this defunct entity?

[00:11:47] Speaker 01:
Bankruptcy judge.

[00:11:48] Speaker 06:
And that occurred when?

[00:11:50] Speaker 01:
I believe it was in 2018, I could stand corrected.

[00:11:54] Speaker 06:
Before the plan of reorganization was approved?

[00:11:57] Speaker 01:
No, I think it was shortly after, but around the time.

[00:12:01] Speaker 01:
It was almost at the conclusion of the case where final fees were being requested, and this came up.

[00:12:06] Speaker 06:
Was it part of the basis for ordering the disgorgement, the misconduct that you're complaining about?

[00:12:12] Speaker 01:
The base of a disgorgement by the entity that did the practice was... Right.

[00:12:20] Speaker 06:
Even though it's judgment proof, so it was effectively... Exactly.

[00:12:23] Speaker 01:
Exactly.

[00:12:25] Speaker 01:
Exactly.

[00:12:26] Speaker 01:
And I would say to a comment that was made earlier is that we're not seeking disgorgement of fees on the part of the trustee, former trustee.

[00:12:35] Speaker 01:
We're seeking damages.

[00:12:36] Speaker 01:
The measures are completely different.

[00:12:39] Speaker 01:
He may have something in legal fees.

[00:12:42] Speaker 01:
Our damages may be $10,000.

[00:12:45] Speaker 01:
But there are damages.

[00:12:46] Speaker 01:
We think they're much higher.

[00:12:47] Speaker 01:
But damages are unrelated to the fees.

[00:12:50] Speaker 05:
So after the district court issued this order that's in front of us, excuse me, the bankruptcy court issued this order that's in front of us telling you to dismiss your other lawsuits,

[00:12:59] Speaker 05:
Sounds like you did go forward with a with a lawsuit in the bankruptcy court and that was dismissed and that's now the subject of a second pending appeal here Correct.

[00:13:07] Speaker 02:
It went up to the map and is now in front will be before you That sort of gets me back to my sorry to bring us back to jurisdiction, but I don't understand why we have appellate jurisdiction here if you

[00:13:21] Speaker 02:
I mean, your claim is, no, you didn't just have exclusive jurisdiction, but now we have a final decision from the bankruptcy court that's addressing that same issue.

[00:13:31] Speaker 01:
Well, there's no question that some of the issues will overlap from that case that's on appeal to this case.

[00:13:40] Speaker 01:
But what we are asserting in this case

[00:13:43] Speaker 02:
But what are you going to say?

[00:13:46] Speaker 02:
You're going to say, if you lose the bankruptcy court case.

[00:13:51] Speaker 02:
On the merits?

[00:13:52] Speaker 02:
Yeah, if you lose it on the merits, then you're going to say, well, that doesn't matter, because our first choice was to go to federal district court anyway.

[00:14:01] Speaker 02:
But it strikes me that that should have been brought as an appeal

[00:14:08] Speaker 02:
to the bankruptcy court case that's currently pending.

[00:14:12] Speaker 01:
And we have brought that on appeal.

[00:14:15] Speaker 01:
But we're going to decide that now.

[00:14:17] Speaker 01:
Exactly.

[00:14:17] Speaker 01:
You'll have a chance.

[00:14:18] Speaker 01:
And there, the issue of standing, and there's a confusion in the record as to whether the standing is, you have no standing under the contract, under the plan under the contract.

[00:14:27] Speaker 01:
It's under the plan.

[00:14:29] Speaker 01:
Under the plan.

[00:14:30] Speaker 01:
That's the question.

[00:14:32] Speaker 01:
That's the question.

[00:14:33] Speaker 01:
And we believe we do have standing because these are not estate claims and because a trustee can decide how he best wants to prosecute those claims, particularly when he does not believe correctly that the estate is going to benefit from any recovery.

[00:14:50] Speaker 01:
This recovery does not go to the estate.

[00:14:53] Speaker 01:
The estate is solvent, and you're going to pay all the creditors in full.

[00:14:59] Speaker 02:
We'll we'll still give you some time for rebuttaly, but we took you over a little bit.

[00:15:04] Speaker 02:
Thank you very much We're not going to totally cut you off.

[00:15:06] Speaker 02:
We'll give you more than 11 seconds All right Still good morning your honor May it please the court.

[00:15:18] Speaker 00:
My name is Uzi Ornan.

[00:15:19] Speaker 00:
I represent the police

[00:15:22] Speaker 00:
Brad Sharp and DSI.

[00:15:24] Speaker 02:
So sorry to focus on this jurisdictional question, but now I'm even more intrigued by it because I think what happened here is exactly what I started to worry about was you're asking, or the appeal right now is, well, do you just have exclusive jurisdiction?

[00:15:40] Speaker 02:
But then the merits of that have already been decided, and that's coming up on appeal, right?

[00:15:44] Speaker 00:
Well, I would dispute the fact that this is the only issue before the court, and I'd love to go through my analysis of why there is no standing.

[00:15:52] Speaker 02:
I want to settle ourselves, because we do have to ultimately convince ourselves that we have jurisdiction here.

[00:15:59] Speaker 02:
And it sounds like what their claim is is the reason we have jurisdiction over this, what really is an interlocutory appeal of sorts, is because the bankruptcy court ordered dismissal of the federal actions.

[00:16:14] Speaker 00:
Well, it wasn't just that the bankruptcy court ordered the dismissal of district court action or the state court action.

[00:16:19] Speaker 00:
Those actions were not authorized under the Barton Doctrine.

[00:16:23] Speaker 00:
Right.

[00:16:24] Speaker 02:
I understand that they were not authorized.

[00:16:25] Speaker 02:
So I guess, is this the only vehicle, is this the best vehicle to determine whether those were authorized?

[00:16:34] Speaker 00:
I don't think that's the vehicle.

[00:16:35] Speaker 00:
I think what we're here for is because there was a motion for leave to sue the trustee.

[00:16:39] Speaker 00:
That motion was denied.

[00:16:41] Speaker 02:
To sue the trustee in a court.

[00:16:43] Speaker 00:
I'm sorry, to sue the trustee outside the bankruptcy court in a third court, the unauthorizing court.

[00:16:52] Speaker 00:
They were not supposed to file the actions in either district court or state court until after the judge ruled on this motion.

[00:16:59] Speaker 00:
But they did so.

[00:17:00] Speaker 00:
They filed those two actions without notifying the court.

[00:17:03] Speaker 00:
even though the Barton Doctrine specifically says that before you file a lawsuit in a different court, you're supposed to get the authority of the appointing court.

[00:17:12] Speaker 00:
They did so anyway and did not disclose it.

[00:17:15] Speaker 00:
And when we pointed out to the court, certainly the bankruptcy.

[00:17:18] Speaker 02:
And they sought leave after the fact.

[00:17:20] Speaker 00:
Then they sought leave after the fact.

[00:17:21] Speaker 00:
And so the court said.

[00:17:22] Speaker 02:
But Mike, I'm not sure you're addressing my question, which is, do we have appellate jurisdiction over this particular appeal?

[00:17:29] Speaker 02:
You don't have any concerns about that.

[00:17:32] Speaker 00:
I don't, because I think there is a discrete motion to dismiss.

[00:17:36] Speaker 00:
Now, the judge said, you have no standing to assert these claims.

[00:17:40] Speaker 00:
What the judge said was, you can come back to my court and challenge the fees.

[00:17:45] Speaker 00:
And for that, the plan doesn't preclude you from challenging the final fees of the trustee.

[00:17:50] Speaker 00:
But the judge was very clear.

[00:17:51] Speaker 00:
They have no authority, no standing under the plan to bring this action.

[00:17:57] Speaker 06:
Now I'm starting to have the same concern Judge Nelson has.

[00:18:01] Speaker 06:
The bankruptcy court judge was very clear to say, all I am saying is this claim has to be brought before me.

[00:18:09] Speaker 06:
And she hasn't resolved the merits of that claim yet.

[00:18:14] Speaker 00:
That's fair, but that's not exactly what the judge said.

[00:18:17] Speaker 06:
If your honors feel that this is not final judgment, that's fine.

[00:18:25] Speaker 00:
I suppose we go back to square one.

[00:18:32] Speaker 02:
We're used to district court final judgment and we know what those final judgments are.

[00:18:38] Speaker 02:
I am less confident in my ability to determine a final judgment from a bankruptcy court because you operate by some slightly different rules.

[00:18:46] Speaker 02:
So I'm looking for guidance from you on why this fits within that.

[00:18:49] Speaker 00:
Okay, my thoughts.

[00:18:52] Speaker 00:
There was a motion to file for leave to file a lawsuit elsewhere.

[00:18:56] Speaker 00:
The judge said, no, it's denied.

[00:18:59] Speaker 02:
What the judge said is that you have to bring him before my court.

[00:19:03] Speaker 00:
What the judge said was not that you can bring this action that you filed

[00:19:06] Speaker 00:
in the district court or state court in my court, what the judge said is you can come back and challenge the fees of the trustee, the final fees, and that's a completely different issue.

[00:19:17] Speaker 00:
What the judge was saying is you, appellant, have no standing unless all you're doing is challenging the fees.

[00:19:24] Speaker 00:
You can challenge the fees because they're not affected by the plan.

[00:19:28] Speaker 05:
Well, here's the thing.

[00:19:29] Speaker 05:
I mean, the bankruptcy judge had a long hearing, issued a tentative that had a lot of different grounds for it, but at the end of the day,

[00:19:34] Speaker 05:
I don't read the bankruptcy judge to have said anything other than, these lawsuits that you're trying to bring in California State Court, California Federal District Court, you can't do that.

[00:19:43] Speaker 05:
That's what's on review here, and we have ability to review under section 158, final decisions, but also orders, right?

[00:19:52] Speaker 05:
So why wouldn't this be an order of the bankruptcy court?

[00:19:54] Speaker 00:
I think that's true.

[00:19:56] Speaker 00:
I think that's true.

[00:19:57] Speaker 00:
I do think the court has jurisdiction to rule on an order denying a motion for leave to sue because it is basically saying, and it's pretty final, you cannot file a lawsuit elsewhere.

[00:20:08] Speaker 00:
Again, the judge, I believe, ruled very clearly that there's no standing.

[00:20:12] Speaker 00:
Why?

[00:20:13] Speaker 00:
Because the plan precluded all actions post confirmation

[00:20:18] Speaker 00:
save actions that were preserved specifically by the plan.

[00:20:22] Speaker 00:
What were those actions?

[00:20:24] Speaker 00:
Any claims that are state claims, and those were given specifically to the plan trustee, not to the appellant.

[00:20:30] Speaker 00:
So the judge was very clear, not only in the tentative, not only if you read the transcript, and I quote the transcript in our briefs, but the judge then issued a minute order right after the hearing and said, my tentative stands.

[00:20:45] Speaker 02:
Yeah, but there was, okay, but that's not an order.

[00:20:49] Speaker 02:
I mean, there was a final order.

[00:20:52] Speaker 02:
It shows the judge's thinking, and also- I understand that, but look, if we're going to have jurisdiction here, it can't be over all these different things, tenet of rulings and everything else.

[00:21:04] Speaker 02:
It has to be over the order, and the order basically just says, I have exclusive jurisdiction over these claims.

[00:21:13] Speaker 00:
What the judge was saying, and if you read the order carefully, it says, based on the factual findings and conclusions of the law made at the hearing, I find that I have the exclusive jurisdiction.

[00:21:22] Speaker 00:
Why?

[00:21:23] Speaker 00:
Because the judge under Barton Doctrine does have the right to say,

[00:21:27] Speaker 00:
It's going to be in my court and not elsewhere.

[00:21:29] Speaker 00:
But the judge was very clear that there were other grounds.

[00:21:32] Speaker 00:
Not only that, but the court can, and it's pointed in our briefs as well, can rule based on the record that there are other grounds.

[00:21:39] Speaker 00:
And there are.

[00:21:40] Speaker 00:
The fact that there's a plan that specifically says- How do you deal with the judge?

[00:21:43] Speaker 05:
I'm just looking at the transcript.

[00:21:44] Speaker 05:
The only thing I'm actually deciding on a final basis is you can't go somewhere else because that's what this motion is about.

[00:21:50] Speaker 05:
So the rest of my comments, I wouldn't characterize them as final findings.

[00:21:55] Speaker 00:
That was in the context of them saying, judge, because I said to the judge, why don't you rule with prejudice?

[00:22:03] Speaker 00:
Don't let them then come back and say, I want to amend.

[00:22:05] Speaker 00:
And the judge said, I'm not ruling on the merits of the underlying claims.

[00:22:10] Speaker 00:
I'm just ruling that they shouldn't be brought elsewhere.

[00:22:12] Speaker 00:
So the judge was basically saying, if they want to

[00:22:15] Speaker 00:
challenge the trustees fees in my courtroom, I'm not precluding them.

[00:22:20] Speaker 05:
It turns out that they did pursue this in the bankruptcy court and lost.

[00:22:27] Speaker 05:
This is a bit of an academic discussion in the sense that the judge has entertained, I don't know what this order says because it wasn't provided to us, but the

[00:22:34] Speaker 05:
The judge has ruled on this and they disagree with that, so this does seem a little strange to be talking about the judge's first order and what she meant by it if she then proceeded to entertain the case.

[00:22:45] Speaker 00:
And the judge, I believe, ruled they have no standing in the next .

[00:22:48] Speaker 00:
.

[00:22:48] Speaker 00:
.

[00:22:48] Speaker 05:
Right, and so some panel can decide that if that's .

[00:22:50] Speaker 00:
.

[00:22:50] Speaker 00:
.

[00:22:51] Speaker 00:
I think that's fair.

[00:22:52] Speaker 06:
That's the appeal that's also pending somewhere on our docket.

[00:23:00] Speaker 06:
But why shouldn't we dismiss this action for lack of jurisdiction and leave you to argue another day about the merits of the decision that the bankruptcy court actually made on whether or not there was a prosecutable case here against the former trustee?

[00:23:17] Speaker 00:
Because I think there are two different issues.

[00:23:19] Speaker 00:
One is an issue of whether they have a right to go elsewhere.

[00:23:22] Speaker 00:
The other one is whether they have the merits when they came to the bankruptcy court.

[00:23:25] Speaker 00:
So I think there may be two different issues involved.

[00:23:28] Speaker 06:
The only reason I agree with you is the language that Judge Breast just read where the court was very clear, the only thing I'm saying is if you're going to bring this claim, you've got to bring it in front of me.

[00:23:42] Speaker 06:
That's all she ruled.

[00:23:44] Speaker 06:
And then he took an appeal from that ruling.

[00:23:48] Speaker 00:
Well, again, I think one needs to read that language in context.

[00:23:51] Speaker 00:
It was in the context of, should the dismissals in the district court and state court be with prejudice?

[00:23:58] Speaker 00:
And the judge was saying, I'm not ruling on the merits of those claims.

[00:24:02] Speaker 00:
I'm saying you bring it here.

[00:24:04] Speaker 00:
But the judge was also very clear.

[00:24:06] Speaker 05:
I take it the second appeal that's pending here is the same parties?

[00:24:10] Speaker 05:
Yes.

[00:24:10] Speaker 05:
Same counsel?

[00:24:12] Speaker 00:
Yes.

[00:24:12] Speaker 05:
Right.

[00:24:13] Speaker 05:
So if there were any question about the finality of the current appeal, these two appeals could just be consolidated.

[00:24:18] Speaker 05:
And at that point, clearly, there is a final decision because the judge actually proceeded to rule on the actual claim on the merits.

[00:24:28] Speaker 00:
I think it's a fair question.

[00:24:29] Speaker 00:
I suppose I look at it as two different issues.

[00:24:32] Speaker 00:
One is an issue of whether the Barton doctrine applies.

[00:24:36] Speaker 00:
In other words, this was a motion for leave to sue the trustee.

[00:24:40] Speaker 00:
The judge made a very clear determination.

[00:24:43] Speaker 05:
I'm inclined to agree with you on that as my questions, but it doesn't that what I'm saying is even if there were a question about this This could be handled by consolidating the appeals and treating them as a single appeal It's absolutely the courts prerogative.

[00:24:58] Speaker 00:
It just seems to me I'm not I'm not agreeing.

[00:25:01] Speaker 00:
I'm saying it's prerogative

[00:25:03] Speaker 06:
Yeah, but I disagree that they're the same Appeal I think different issues I have is we have a completely different record exactly second appeal exactly because that's now a merits record presumably there's exactly Testimony motions practice.

[00:25:17] Speaker 06:
I don't maybe a summary judgment exactly exactly and none of that's in the record before us and we don't have the Have you briefed it yet?

[00:25:25] Speaker 00:
Actually someone else in my firm so I don't know to be honest

[00:25:29] Speaker 00:
But you're right.

[00:25:30] Speaker 00:
It's a question of one, whether Section 9A, U.S.C.

[00:25:35] Speaker 00:
Section 959A applies.

[00:25:38] Speaker 00:
Is that an exception?

[00:25:39] Speaker 00:
Is there a standing?

[00:25:40] Speaker 00:
These are discrete issues that have to do with whether they can go elsewhere versus the merits of the case, which is now before the bankruptcy judge.

[00:25:48] Speaker 00:
I think it's two different appeals, two different records, two different issues.

[00:25:52] Speaker 00:
While I would say it's prerogative, I would disagree that that's an appropriate way to go because I think we've now gone through

[00:25:59] Speaker 00:
the bankruptcy court denying a motion for reconsideration.

[00:26:04] Speaker 00:
It went to the BAP.

[00:26:05] Speaker 00:
The BAP published a decision and said, you're wrong.

[00:26:08] Speaker 00:
959 does not apply, and you have no standing.

[00:26:11] Speaker 00:
And now we're here to consolidate the two.

[00:26:14] Speaker 02:
I went and read the BAP's opinion.

[00:26:16] Speaker 02:
I didn't see anywhere where it discussed this question of jurisdiction.

[00:26:19] Speaker 02:
And again, it might be because I'm not as steeped in bankruptcy.

[00:26:27] Speaker 02:
I would have thought that that would have been a question.

[00:26:29] Speaker 02:
I mean, it can't be that every single time that a bankruptcy court issues an order, that's automatically immediately appealable.

[00:26:37] Speaker 02:
Or is it?

[00:26:38] Speaker 00:
No, but the question of finality.

[00:26:40] Speaker 02:
If a party comes to the court and says... And that's what I'm struggling with, because I don't see... And I think the fact that you decided these questions on the merits shows why it really wasn't final at the

[00:26:53] Speaker 00:
Well, first of all, I'm not saying that.

[00:26:56] Speaker 02:
Because the bankruptcy court could have gone the other way and given them the relief that they were seeking.

[00:27:01] Speaker 02:
And then I bet they wouldn't, they'd probably be asking to dismiss this appeal.

[00:27:06] Speaker 00:
Right.

[00:27:07] Speaker 00:
I think it's possible, and honestly I wasn't involved in that part, that the judge ruled on procedural grounds, including standing.

[00:27:13] Speaker 00:
So I don't know that there were, there was long.

[00:27:15] Speaker 02:
Although it wasn't necessarily a marriage.

[00:27:17] Speaker 00:
Exactly, exactly.

[00:27:18] Speaker 00:
So to consolidate the two I think would complicate things because it would complicate

[00:27:23] Speaker 00:
different orders and different issues.

[00:27:25] Speaker 00:
The real issue here is now did the court abuse?

[00:27:28] Speaker 02:
But back to the exclusive jurisdiction, you're saying the bankruptcy court got it right.

[00:27:33] Speaker 00:
Correct.

[00:27:34] Speaker 00:
Yeah.

[00:27:34] Speaker 00:
Correct.

[00:27:35] Speaker 00:
This is a case where a bankruptcy trustee, a Chapter 11 trustee, under the auspices and oversight of the bankruptcy court performed very difficult duties.

[00:27:45] Speaker 00:
I can go through a whole

[00:27:49] Speaker 00:
factual background about the fact that an examiner was appointed to this case initially and found all kinds of unusual practices in terms of governance of management of the entity, the finances, there was cash that was missing.

[00:28:03] Speaker 00:
And because of that, the bankruptcy court appointed a trustee.

[00:28:07] Speaker 00:
And that trustee redid the books and records or had an accounting do it.

[00:28:12] Speaker 06:
Was that the initial trustee?

[00:28:15] Speaker 00:
Yes, completely hired an accountant.

[00:28:18] Speaker 00:
They've actually created books and records that didn't exist.

[00:28:21] Speaker 00:
It was a cash business where a lot of things were missing.

[00:28:23] Speaker 00:
Taxes were not filed.

[00:28:24] Speaker 00:
The trustee had accountants do all kinds of services.

[00:28:28] Speaker 00:
Tax preparers did file tax returns.

[00:28:31] Speaker 00:
Not only that, but it turned out that the main asset of the debtor, which was the intellectual property, the chicken, the Roscoe's chicken and waffle's name was transferred weeks before the bankruptcy.

[00:28:44] Speaker 00:
The trustee sued and brought that back.

[00:28:46] Speaker 00:
This is why we're here today.

[00:28:48] Speaker 06:
This is vengeance.

[00:28:49] Speaker 06:
That became avoidable transfer.

[00:28:51] Speaker 00:
Exactly.

[00:28:51] Speaker 00:
This is revenge.

[00:28:52] Speaker 00:
The trustee did amazing work in this case to get it to a point where there was value to the entity and the plan was confirmed.

[00:29:00] Speaker 00:
And the creditors, presumably, will get $0.00 on the dollar.

[00:29:04] Speaker 00:
And because of that, he's being sued and pursued in this court.

[00:29:07] Speaker 00:
And the bankruptcy court has the factual background on all this, saw all of this in her court.

[00:29:12] Speaker 00:
And the court said,

[00:29:14] Speaker 00:
number one, the prima facie has not been established.

[00:29:17] Speaker 00:
The court said this.

[00:29:18] Speaker 00:
Number two, I have exclusive jurisdiction.

[00:29:20] Speaker 00:
And by the way, the court was very clear.

[00:29:22] Speaker 00:
Don't come back and file these actions in my court.

[00:29:25] Speaker 00:
The court said, I'll give you the standing to challenge the fees of the trustee.

[00:29:30] Speaker 00:
The court didn't say you have standing to assert these claims, because clearly the plan precludes that standing.

[00:29:37] Speaker 00:
The plan was very clear.

[00:29:37] Speaker 05:
I don't think the court said you have standing.

[00:29:39] Speaker 05:
I'm not sure the court said they don't.

[00:29:41] Speaker 05:
It seems that the court just kind of parked that issue.

[00:29:44] Speaker 00:
Your honor, I can quote chapter and verse.

[00:29:46] Speaker 00:
The court very specifically said, you have no standing.

[00:29:48] Speaker 05:
There was a lot said at the hearing, but we don't just review what somebody says at a hearing.

[00:29:53] Speaker 05:
We review the order, and the order doesn't talk about standing.

[00:29:57] Speaker 00:
Well, the record does.

[00:29:59] Speaker 00:
The court said, you have no standing, and it's quoted from the record.

[00:30:04] Speaker 00:
Now, why is that the plan?

[00:30:06] Speaker 00:
The plan is very clear and it's on the record.

[00:30:08] Speaker 00:
The briefs that we filed, opposing the motion, that's in the record.

[00:30:11] Speaker 05:
Isn't this the subject of the second appeal?

[00:30:13] Speaker 05:
Isn't that what somebody, perhaps we, will have to deal with in the second case?

[00:30:19] Speaker 00:
Certainly that could be one of the issues, but we are here now and this is an issue before the court.

[00:30:23] Speaker 00:
Did the bankruptcy court abuse its discretion by denying the motion for leave?

[00:30:29] Speaker 00:
And I'm suggesting that number one, the court gave six reasons

[00:30:33] Speaker 00:
The record supports those reasons.

[00:30:34] Speaker 00:
And number two, not only did the judge say, the bankruptcy judge, you have no standing, but the record is very clear.

[00:30:41] Speaker 00:
The plan is in the record.

[00:30:42] Speaker 00:
And the plan says that the only claims that survive the plan

[00:30:48] Speaker 00:
are the claims of the estate and those claims are exclusively the right of the plan trustee.

[00:30:56] Speaker 00:
I think it's pretty clear on the record that there is no standing.

[00:30:59] Speaker 00:
So whether the judge actually said you have no standing and she did and whether or not the order says that and the judge says based on my

[00:31:07] Speaker 00:
factual findings and conclusions of law I'm finding as such, I think the record is very clear there was no standing.

[00:31:14] Speaker 00:
I think the record is clear from the questions I also believe you agree that Barton Doctrine's exception under 959A doesn't apply here.

[00:31:22] Speaker 00:
This is not a case where someone slip and fell

[00:31:26] Speaker 00:
On the premises, this is not a case where someone is suing because a trustee entered into a contract post-petition.

[00:31:33] Speaker 00:
This is a case where the debtor or the owner of the debtor is not happy with what the trustee did.

[00:31:38] Speaker 00:
And that's the purview of the bankruptcy court.

[00:31:40] Speaker 00:
That's exactly what the bankruptcy court is supposed to do, is oversee the fiduciary that it appointed.

[00:31:45] Speaker 00:
OK.

[00:31:46] Speaker 02:
Any other questions?

[00:31:48] Speaker 02:
If not, we'll turn the time over for rebuttal.

[00:31:51] Speaker 02:
Thank you.

[00:31:51] Speaker 00:
I appreciate it.

[00:31:52] Speaker 00:
Thank you.

[00:31:52] Speaker 02:
We'll give you three minutes for rebuttal.

[00:32:02] Speaker 04:
Thank you, Your Honors, and may it please the court, Benjamin Carson, also for the appellant.

[00:32:06] Speaker 04:
I want to clarify very quickly, the other appeal that's pending before this court only deals with standing under the plan.

[00:32:13] Speaker 04:
No merits briefing.

[00:32:15] Speaker 02:
OK, but it was the follow on.

[00:32:20] Speaker 02:
when the bankruptcy court said I have exclusive jurisdiction, this is the result of that proceeding.

[00:32:25] Speaker 02:
Correct, but that dismissal consistent with the BAPS ruling is only based on lack of standing under the- I understand it, but it resolves, it finally resolves the claims that are being brought here saying that there's no standing.

[00:32:37] Speaker 04:
Well, not really, Your Honor, because even if this Court were to uphold that there's no standing under the plan, the plan, when a final decree is entered in the bankruptcy case, all those quote-unquote estate claims that are vested in the plan trust right now would revest in East Coast foods after there's a final decree.

[00:32:59] Speaker 04:
Even if the court were to affirm what the BAP said there, it would actually still allow us to file a claim against the former trustee after a final decree is entered.

[00:33:09] Speaker 06:
Is that right?

[00:33:10] Speaker 04:
Yes.

[00:33:10] Speaker 06:
If we were to affirm the district, or excuse me, the bankruptcy courts ruling that your client has no standing to bring these claims, then your client could not pursue them further.

[00:33:26] Speaker 04:
I respectfully disagree, Your Honor, because there's a provision in the plan that says the claims revest in the debtor after the plan trust is dissolved.

[00:33:36] Speaker 02:
I mean, I don't know what that means, but I don't think revest means that it absolves a decision that we make that there was no stand.

[00:33:44] Speaker 02:
I mean, how does revesting allow stand?

[00:33:46] Speaker 04:
Because the issue on appeal in the other case is only standing under the plan.

[00:33:50] Speaker 04:
It's not constitutional standing.

[00:33:51] Speaker 02:
Oh, I see.

[00:33:52] Speaker 02:
So you're saying you would have

[00:33:53] Speaker 02:
you would have standing outside of the plan.

[00:33:57] Speaker 02:
Or once the plan is, I guess, rolled in, that's your... Yes, Your Honor.

[00:34:04] Speaker 04:
Your Honors, if I can get into the issue of appellate jurisdiction real quick.

[00:34:08] Speaker 04:
The reason why there is finality here and this court does have appellate jurisdiction is because the bankruptcy court said, I am dismissing with prejudice

[00:34:18] Speaker 04:
any claim against the former trustee in a court outside of my own.

[00:34:23] Speaker 04:
You can't file an amended version of this complaint.

[00:34:26] Speaker 04:
You can't file a new complaint.

[00:34:28] Speaker 04:
You can't file anything against him outside of my court.

[00:34:32] Speaker 04:
So if this court were to dismiss for lack of jurisdiction, that order would stand and it would be final.

[00:34:38] Speaker 02:
But that could have still been challenged along with the standing in the second case.

[00:34:45] Speaker 06:
well he was challenged and that's what we challenged in this case because the order was made in this matter so but that's the reason why there's finality and why this court has appellate jurisdiction and I don't think there's any question in my mind that they're standing with regard to the second appeal if the bankruptcy court said you don't have standing to bring this claim because it's an asset of the

[00:35:08] Speaker 06:
of the estate and only the successor trustee can bring them clearly we have jurisdiction to to resolve that question but if we interpret what the court said to simply be if you have any claim at all it can only be brought before me and that's all i'm ruling at this point there isn't a determination on standing in that language

[00:35:37] Speaker 04:
Not on standing, Your Honor, but there's a determination that significantly compromises our access to trial by jury.

[00:35:44] Speaker 04:
And 959A claims normally allow the plaintiff to have to sue the trustee before a jury, just like they could sue anyone else for torts before a jury.

[00:35:55] Speaker 04:
That right is now permanently compromised because she said, with prejudice, you can never take this case anywhere else except my court.

[00:36:04] Speaker 02:
I understand that.

[00:36:06] Speaker 02:
But anyway, we'll have to analogize that to other Article III standing.

[00:36:13] Speaker 06:
Do you have a case number for that pending appeal?

[00:36:17] Speaker 03:
Yes, Your Honor, I believe it is.

[00:36:19] Speaker 03:
Let me look through my notes here.

[00:36:25] Speaker 04:
I believe it is 24-9469, also 24-9470, but the court consolidated those two cases.

[00:36:35] Speaker 06:
There are two cases?

[00:36:36] Speaker 04:
Well, there are two that had the exact same ruling for the BAP entered.

[00:36:40] Speaker 04:
There were two BAP matters, but the BAP consolidated it and then entered the exact same rulings in both of those cases.

[00:36:49] Speaker 06:
Okay, so those are BAP numbers or Court of Appeal?

[00:36:51] Speaker 04:
No, those are Court of Appeal Ninth Circuit numbers, but what happened was we moved the other side of greed.

[00:36:59] Speaker 04:
Let's consolidate the two Ninth Circuit matters arising from the two BAP matters.

[00:37:03] Speaker 06:
Okay, so 9469 and 947.

[00:37:06] Speaker 04:
Yes, I believe so.

[00:37:07] Speaker 04:
I don't have a copy of that case in front of me.

[00:37:10] Speaker 04:
That's what I have in my notes.

[00:37:11] Speaker 06:
But the parties are the same?

[00:37:12] Speaker 06:
Parties are the same, yes.

[00:37:13] Speaker 06:
Okay, we'll find out.

[00:37:15] Speaker 02:
Thank you.

[00:37:16] Speaker 02:
Thank you, Your Honors.

[00:37:17] Speaker 02:
Thank you.

[00:37:18] Speaker 02:
The case is now submitted and that concludes argument for the day.

[00:37:21] Speaker 02:
Thank you.

[00:37:23] Speaker 03:
I'll rise.

[00:37:38] Speaker 03:
This court for this session stands adjourned.