Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-azd-2_19-cv-00004/USCOURTS-azd-2_19-cv-00004-0/pdf.json

Nature of Suit Code: 422
Nature of Suit: Bankruptcy Appeals Rule 28 USC 158
Cause of Action: 28:0158 Notice of Appeal re Bankruptcy Matter (BAP)

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WO

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF ARIZONA

Bruce W Gray, et al.,

Appellants,

v. 

CPF Associates LLC, et al.,

Appellees.

No. CV-19-00004-PHX-JAT

ORDER 

Pending before the Court is Appellants’ appeal of the bankruptcy court’s Order 

Resolving Motion for Order to Show Cause. Having considered the parties’ filings, the 

Court now rules on the appeal.

I. BACKGROUND

This appeal involves two Chapter 11 bankruptcy petitions, one filed in May 2016 

and the other in July 2016. (Doc. 26-1 at 5–6). Epicenter Partners LLC and Grey Meyer 

Fannin LLC are the debtor-entities that filed in May (“May Debtors”). (Id.). Sonoran 

Desert Land Investors LLC, East of Epicenter LLC, and Gray Phoenix Desert Ridge II 

LLC are the debtor-entities that filed in July (“July Debtors”). (Id. at 6). Before the start of 

these bankruptcy cases, Bruce Gray managed or controlled each of the May Debtors and 

July Debtors (collectively, “Gray Entities”). (Id. at 7).1

The Gray Entities hold separate leaseholds in the area of Phoenix known as Desert 

 

1 The Court shall refer to the Gray Entities and Bruce Gray together as “Appellants” for 

ease of reference and unless otherwise stated. Likewise, the Court shall refer to CPF Vaseo 

Associates LLC (“CPF”) and R.O.I. Properties LLC (“ROI”) collectively as “Appellees” 

unless noted differently.

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Ridge—a master planned community that currently plays host to various retail, industrial, 

and residential properties and has plans to add more in the future. (Doc. 26-1 at 6). Desert 

Ridge is located on land that the State of Arizona owns and holds in trust under the terms 

of the Arizona–New Mexico Enabling Act. (Doc. 26-9 at 10–11). In 1993, the Arizona 

State Land Department bundled trust land within the Desert Ridge area into two auction 

packages. See generally Campana v. Ariz. State Land Dep’t, 860 P.2d 1341, 1343 (Ariz. 

Ct. App. 1993). The package relevant to this case included “three leases for a total of 563 

acres: (1) 332 acres of commercial core land, (2) 52 acres of resort land and (3) 179 acres 

of golf course land.” Id. The State envisioned that the successful bidder for this package 

“would become the master developer in charge of development of Desert Ridge . . . because 

this bidder would have a long[-]term commitment to the community as the holder of [a] 

99-year lease.” Id. An entity known as Northeast Phoenix Partners (“NPP”) won this 

auction and duly entered into a lease agreement with the Arizona State Land Department. 

Id. Thus, NPP became the master developer of Desert Ridge.

As the master developer, NPP had the right to “oversee and guide the development 

of all the property in Desert Ridge.” (Doc. 26-5 at 4). Then and now, two instruments limit

the alienability of the master developer’s rights: the Declaration of Covenants, Conditions, 

Restrictions and Easements for Desert Ridge Arizona (“Master CCRs”) and Commercial 

Lease No. 03-52415 (“Core Lease”).2 For instance, section 1.33 of the Master CCRs states: 

“Master Developer” shall be [NPP] . . . who simultaneously 

with, and immediately following, the Recording of this 

Declaration, shall enter into the Core Lease to Lease the 

Commercial Core Parcel. Any assignment by Master 

Developer of all or part of the Master Developer’s rights, duties 

or obligations as master developer of Desert Ridge must be 

 

2 The briefs also discuss, but only in cursory detail, other rights arising from the Declaration 

of Covenants, Restrictions and Easements for Desert Ridge Commercial Core that 

Appellants call the “Core Declarant Rights” and Appellees call the “Master Declarant 

Rights.” Initially, NPP held these rights as the Declarant under this instrument. The parties 

seem to agree that these rights are “bundled with” the master developer’s rights and neither 

argues that different provisions of the Master CCRs or the Core Lease, or different 

documents altogether, govern their transfer. Thus, the Court shall refer to the totality of 

rights at issue here as “master developer’s rights.” (See Docs. 20 at 7 n.4; 25 passim).

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made concurrently with and appurtenant to an assignment of 

all or a portion of the Core Lease. The document evidencing 

such an assignment shall: (a) specifically set forth the scope of 

the obligations assigned by Master Developer; (b) be approved 

by Declarant, [defined as the Arizona State Land Department,] 

which approval shall not be unreasonably withheld; and (c) be 

Recorded. 

(Doc. 20-3 at 12). Section 2.1 of the Core Lease also limits the alienability of the master 

developer’s rights: 

Master Developer. Lessee shall be the master developer of 

Desert Ridge. Lessee may not assign its duties and 

responsibilities as master developer of Desert Ridge without 

the express written consent of Lessor, which shall not be 

unreasonably withheld. If portions of this Lease are assigned 

according to the provisions of Article 17, [which allows Lessee 

to make certain assignments to affiliated entities without 

Lessor’s approval,] such Assignments shall not include any 

assignment of Lessee’s obligations and duties as master 

developer of Desert Ridge unless the document evidencing the 

Assignment specifically sets forth the scope of the obligations 

assigned by Lessee and assumed by the Assignee and is 

approved by Lessor.

(Doc. 20-2 at 12). In sum, under these instruments, any purported assignment of the master 

developer’s rights must be specific, must be appurtenant to an interest in the Core Lease, 

must usually be recorded, and must receive state approval.

Eventually, NPP found itself embroiled in litigation against the May Debtors. (Doc. 

26-1 at 7). Ganymede Investments, Ltd. (“Ganymede”) funded the May Debtors’ litigation 

efforts. (Id. at 8). After a jury issued a verdict in the May Debtors’ favor that exceeded

$110 million, NPP and the May Debtors entered into a settlement agreement whereby NPP 

assigned the May Debtors a leasehold to 96.5 acres of vacant land in Desert Ridge (“the 

96.5 Acre Lease”) and the master developer’s rights. (Docs. 26-1 at 7; 26-5 at 4). This 

assignment complied with the applicable terms of the Master CCRs and the Core Lease 

outlined above. (Doc. 26-10 at 10). At around the same time, the May Debtors executed a 

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promissory note in Ganymede’s favor for $50,713,000 with interest accruing at 35% a year. 

(Doc. 26-1 at 8). Before the May Debtors filed their bankruptcy petition, they assigned a 

20-acre portion of their rights under the Core Lease to the July Debtors (“the 20 Acre 

Transfer”). (Doc. 26-12 at 17).

After the 20 Acre Transfer, the May Debtors assigned an interest in the master 

developer’s rights to Ganymede “as additional security” on the promissory note. (Doc. 25 

at 13). The May Debtors eventually fell into default on the Ganymede note. (Doc. 26-1 at 

9). Separately, the July Debtors also defaulted on two notes—for $26,000,000 and 

$3,700,000—executed in favor of an entity known as Pacific Coach, Inc. (Id.). Shortly 

before the Gray Entities filed their bankruptcy petitions, CPF acquired these promissory 

notes from Ganymede and Pacific Coach, Inc. (Id. at 8–9).

The bankruptcy court considered several competing reorganization plans for the 

Gray Entities and ultimately selected CPF’s. (Doc. 26-1 at 61). It confirmed that plan, with 

required modifications, on May 1, 2018. (Doc. 26-2 at 2). Among other things, that plan 

vests the liquidating trustee—ROI—with the power to market and sell the “DR property” 

which specifically includes the master developer’s rights. (Id. at 20–21, 50).

3 The plan 

further requires ROI to satisfy CPF’s secured claim using proceeds from the sale “of the 

96.5 Acre Lease, the 96.5 Acre Personal Property, and all related real property and personal 

property rights, including, but not limited to” the master developer’s rights. (Id. at 41). The 

Gray Entities initially appealed the bankruptcy court’s confirmation order, but voluntarily 

dismissed this appeal. (Doc. 25 at 17 n.7).

On November 20, 2018, Appellees filed a Joint Emergency Motion for Order to 

Show Cause, seeking to hold Appellants in contempt for, among other things, “wrongfully 

asserting control over” the master developer’s rights. (Doc. 26-10 at 3). On this score, the 

joint motion generally alleged that Appellants were interfering with the terms of the 

confirmed plan by claiming that ROI could not market the master developer’s rights 

 

3 The plan defined these rights as “those rights currently held by [May Debtors] under the 

96.5 Acre Lease, as well as under all recorded covenants, conditions and restrictions 

relating to the 96.5 Acre Parcels . . . as the same may have been or may be amended or 

modified from time to time.” (Id. at 27).

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because the July Debtors held them as a result of the 20 Acre Transfer. (Id. at 8). The joint 

motion argued that the May Debtors held the master developer’s rights, rendering them 

subject to ROI’s control, asserting that the 20 Acre Transfer could not also have assigned 

the master developer’s rights because it did not comply with the applicable provisions of

the Master CCRs and the Core Lease discussed above. (Id. at 9–15). The joint motion

sought an expedited hearing for these issues on November 27, 2018. (Id. at 2).

After Appellants objected to this hearing date, (Doc. 26-13), the bankruptcy court 

scheduled a hearing for December 13, 2018, and set deadlines for the parties to submit 

response and reply briefs, (Doc. 26-14 at 3). Appellants filed their response on December 

4, 2018, urging the bankruptcy court to deny the joint motion’s requested relief. (Doc. 26-

15). Broadly, Appellants’ response asked the bankruptcy court to deny Appellees’ request

for relief because (1) no court had ever been asked to determine the scope of the master 

developer’s rights listed in the confirmed plan nor even whether they were assets of the 

bankruptcy estate; (2) the 20 Acre Transfer assigned the master developer’s rights to the 

July Debtors and the confirmed plan contemplated such a transfer; (3) the bankruptcy court 

lacked jurisdiction to decide the scope of the master developer’s rights; and (4) similarly, 

given pending litigation in the district court relating to similar issues, the bankruptcy court 

should refrain from deciding the scope of the master developer’s rights. (Id. at 9–20). 

Three days later, on December 7, the bankruptcy court issued an order to show cause 

to Appellants. (Doc. 26-16). The order directed them to show good cause why they should 

not be held in civil contempt for violating the confirmed plan in two ways:

(i) refusing to surrender exclusive possession of all Assets of 

the May Liquidating Trust and May Debtors’ Estates to the 

Liquidating Trustee; and (ii) interfering with implementation 

of the Plan by, among other things, wrongfully asserting 

control over the [master developer’s rights] owned by the May 

Debtors.

(Id. at 3) (emphasis added). The arguments at the show-cause hearing largely tracked the 

parties’ briefs, with Appellants urging the bankruptcy court not to hold them in contempt 

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because no court had ever determined the precise nature and scope of the master 

developer’s rights. (Doc. 26-19 passim). They also asked the bankruptcy court to continue 

to refrain from making any decision about the master developer’s rights in ruling on the 

contempt issue. (Id.). Appellees, for their part, argued that the bankruptcy court should hold 

Appellants in contempt because the May Debtors’ bankruptcy estate clearly included the 

master developer’s rights and Appellants were interfering with the implementation of the 

confirmed plan by making contrary representations to third parties. (Id. at 64–93).

After hearing these arguments, the bankruptcy court issued its ruling from the 

bench. (Doc. 26-19 at 104). The bankruptcy court began by clarifying a prior ruling 

declining to consider the scope of the master developer’s rights, explaining that it had not 

done so because that dispute was between CPF and a non-debtor third-party over which 

the bankruptcy court believed it lacked jurisdiction under Stern v. Marshall, 564 U.S. 462 

(2011). (Id. at 105). Proceeding to determine “whether the May Debtors transferred all or 

part of the [master developer’s rights] to the July Debtors, or to any other entity,” the 

bankruptcy court concluded that the master developer’s rights “have been, and continue to 

be, held by the May Debtors.” (Id. at 106, 114). It reasoned that the 20 Acre Transfer did 

not comply with the applicable provisions of the Master CCRs and the Core Lease, see 

supra pp. 2–3, meaning that it could not achieve an assignment of the master developer’s 

rights. (Id. at 108–13). The bankruptcy court also rejected Appellants’ argument that they 

could freely transfer the master developer’s rights between affiliated entities under Article 

17 of the Core Lease, because the provisions governing such transfers do not apply to 

purported assignments of the master developer’s rights. (Docs. 20-2 at 12; 26-19 at 110)

Despite these conclusions, the bankruptcy court declined to “enter an order granting 

sanctions or to otherwise grant further relief” because “[t]he issue as to which estate held 

the [master developer’s rights] had not been previously squarely addressed and ruled 

upon,” meaning Appellants “may have had a good-faith belief that they own[ed] these 

rights and that they were proceeding in a legitimate fashion and not contrary to the 

confirmation order.” (Doc. 26-19 at 115). The bankruptcy court instead issued an order 

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directing Appellants to cease and desist from:

(a) exercising or attempting to exercise possession, dominion 

or control over any Assets of the May Debtors, including but 

not limited to the [master developer’s rights], (b) representing 

to any person or entity that Gray currently has the power or any 

legal or equitable right to exercise any right, power, control or 

discretion as Master Developer . . . , (c) exercising any right, 

power or control over any other Assets of the May Debtors’ 

Estates, and (d) taking any positions inconsistent with the 

Confirmation Order, the Plan, or this Order, or otherwise 

taking any other actions to interfere with the implementation 

of the Plan.

(Doc. 26-20 at 6). This appeal followed.

II. DISCUSSION

A. Standard of Review

This Court reviews legal questions, such as whether the bankruptcy court complied 

with the dictates of constitutional due process or had authority to finally adjudicate a claim, 

de novo. Decker v. Tramiel (In re JTS Corp.), 617 F.3d 1102, 1109 (9th Cir. 2010); In re 

Victoria Station Inc., 875 F.2d 1380, 1382 (9th Cir. 1989). The Court will accept any

factual findings “unless ‘the [C]ourt is left with the definite and firm conviction that a 

mistake has been committed.’” In re JTS Corp., 617 F.3d at 1109 (citation omitted).

B. Power of the Bankruptcy Court

Before turning to Appellants’ due-process challenge, the Court must first address 

their contention that the bankruptcy court could not enter a final order or judgment to 

resolve the instant dispute, but instead needed to provide a federal district court with 

proposed findings of fact and conclusions of law before entry of judgment, an issue that

the parties incorrectly label “subject matter jurisdiction.” Characterizing the master 

developer’s rights as entirely independent of the bankruptcy code, Appellants first contend 

this matter is a “non-core” proceeding, meaning that the bankruptcy court could not enter 

a final order or judgment. (Doc. 20 at 19–20). Appellants also argue Article III of the 

United States Constitution prevented the bankruptcy court from finally adjudicating the 

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contempt motion under Stern. (Id. at 20–21). Appellees counter that ruling on the order 

required the bankruptcy court to (1) clarify the property of the bankruptcy estate and (2) 

interpret and enforce the confirmed plan, two issues that the bankruptcy court could finally 

adjudicate. (Doc. 25 at 21–23).

A bankruptcy court’s jurisdiction and its power to finally adjudicate certain claims 

are distinct but related concepts. “Like all federal courts, the jurisdiction of the bankruptcy 

courts is created and limited by statute.” Wilshire Courtyard v. Cal. Franchise Tax Bd. (In 

re Wilshire Courtyard), 729 F.3d 1279, 1284 (9th Cir. 2013) (citation omitted). By statute, 

bankruptcy cases and proceedings belong first in the district court, 28 U.S.C. § 1334, which 

may refer those proceedings to the bankruptcy court, 28 U.S.C. § 157(a). Bankruptcy courts

thus have “subject matter jurisdiction over proceedings ‘arising under [the bankruptcy 

code], or arising in or related to cases under [the bankruptcy code].’” In re Wilshire 

Courtyard, 729 F.3d at 1285 (citation omitted). Proceedings that “arise under” or “arise in” 

a case under the bankruptcy code are “core” proceedings, while proceedings “related to” a 

case under the bankruptcy code are “non-core” proceedings. Stern, 564 U.S. at 476–77. 

The distinction between “core” and “non-core” proceedings, although not going to subject 

matter jurisdiction, is important because 

[i]f a matter is core, the statute empowers the bankruptcy judge 

to enter final judgment on the claim, subject to appellate review 

by the district court. If a matter is non-core, and the parties have 

not consented to final adjudication by the bankruptcy court, the 

bankruptcy judge must propose findings of fact and 

conclusions of law. Then, the district court must review the 

proceeding de novo and enter final judgment.

Exec. Benefits Ins. Agency v. Arkison, 573 U.S. 25, 34 (2014).

The Constitution also limits bankruptcy courts’ ability to finally adjudicate certain 

claims, even when the bankruptcy code labels them “core.” Because bankruptcy courts are

not Article III courts, they cannot exercise “the ‘judicial Power of the United States.’” Id. 

at 35 (quoting Stern, 564 U.S. at 487). “Congress may not bypass Article III simply because 

a proceeding may have some bearing on a bankruptcy case; the question is whether the 

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action at issue stems from the bankruptcy itself or would necessarily be resolved in the 

claims allowance process.” Stern, 564 U.S. at 499. There is, however, a category of claims

“involving public rights, which may be presented in such form that the judicial power is 

capable of acting on them, and which are susceptible of judicial determination, but which 

congress may or may not bring within the cognizance of the courts of the United States, as 

it may deem proper.” Id. at 488–89 (quoting Murray’s Lessee v. Hoboken Land & 

Improvement Co., 59 U.S. (18 How.) 272, 284 (1856)) (emphasis added). “[W]hat makes 

a right ‘public,’” and thus susceptible to final adjudication by a non-Article III court, “is 

that the right is integrally related to particular Federal Government action.” Id. at 490–91.

Because the bankruptcy court did not submit proposed findings for district court 

review, this Court must begin by asking whether the proceeding was “core.” If so, the Court 

must then determine whether the bankruptcy court could finally adjudicate it without 

exceeding Article III’s limitations. If the answer to both inquiries is “yes,” then the 

bankruptcy court did not exceed statutory or constitutional limitations on its power.

Initially, the Court notes that the parties have cited very little authority addressing 

the instant case’s specific procedural context—a post-confirmation proceeding to 

determine whether a party has violated a reorganization plan. The pre-confirmation cases 

that the parties cite lack relevance here because, as the Ninth Circuit Court of Appeals has 

recognized, “post-confirmation bankruptcy jurisdiction is necessarily more limited than 

pre-confirmation jurisdiction.” Montana v. Goldin (In re Pegasus Gold Corp.), 394 F.3d 

1189, 1194 (9th Cir. 2005). After confirmation, “retention of bankruptcy jurisdiction may 

be problematic” because, technically, “it is impossible for the bankrupt debtor’s estate to 

be affected by a post-confirmation dispute” since the estate “ceases to exist once 

confirmation has occurred.” Binder v. Price Waterhouse & Co., LLP (In re Resorts Int’l, 

Inc.), 372 F.3d 154, 165 (3d Cir. 2004), adopted by In re Pegasus Gold Corp., 394 F.3d at

1193–94. Appellees do, however, assert that this case falls under the bankruptcy court’s

jurisdiction “to interpret and enforce its own prior orders,” like the confirmed plan here. 

Travelers Indem. Co. v. Bailey, 557 U.S. 137, 151 (2009) (citing Local Loan Co. v. Hunt, 

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292 U.S. 234, 239 (1934)).

A court’s jurisdiction to interpret or enforce prior orders is often called “ancillary 

jurisdiction.” Battle Ground Plaza, LLC v. Ray (In re Ray), 624 F.3d 1124, 1130–1131 (9th 

Cir. 2010). “Ancillary jurisdiction may rest on one of two bases: (1) to permit disposition 

by a single court of factually interdependent claims, and (2) to enable a court to vindicate 

its authority and effectuate its decrees.” Sea Hawk Seafoods, Inc. v. Alaska (In re Valdez 

Fisheries Dev. Ass’n, Inc.), 439 F.3d 545, 549 (9th Cir. 2006). 

Appellants seemingly attempt to argue ancillary jurisdiction is lacking because the 

confirmed plan required no interpretation. (Doc. 20 at 20). This contention is unpersuasive; 

when Appellants began contending that the May Debtors had transferred the master 

developer’s rights to July Debtors such that ROI could not sell them, it became necessary 

to clarify what the “rights currently held by [the May Debtors] under the 96.5 Acre Lease,”

(Doc. 26-2 at 27), actually were. That determination required examining how to effectively 

transfer the master developer’s rights, under the Master CCRs and the Core Lease, which 

the plan had incorporated by reference. See id. Because Appellees called upon the 

bankruptcy court to determine whether Appellants had violated the terms of the confirmed 

plan, the proceeding fell under the second type of ancillary jurisdiction listed above.

When bankruptcy courts have exercised ancillary jurisdiction to stop violations of a 

confirmed plan, courts have reasoned that such proceedings qualify as “core” under the 

bankruptcy code. ASARCO LLC v. Mont. Res., Inc., No. CV-11-79-BU-SEH, 2012 WL 

12893405, at *2 (D. Mont. May 10, 2012); Hawaiian Airlines, Inc. v. Mesa Air Grp., Inc., 

355 B.R. 214, 218–19 (D. Haw. 2006) (collecting cases); Huse v. Huse–Sporem, A.S. (In 

re Birting Fisheries, Inc.), 300 B.R. 489, 498–99 (B.A.P. 9th Cir. 2003); JCF AFFM Debt 

Holdings. L.P. v. Affirmative Ins. Holdings, Inc. (In re Affirmative Ins. Holdings, Inc.), 565 

B.R. 566, 580 (Bankr. D. Del. 2017); Santander Consumer, USA, Inc. v. Houlik (In re 

Houlik), 481 B.R. 661, 678 (B.A.P. 10th Cir. 2012) (Brown, J., concurring). Actions to 

interpret or enforce a prior order are effectively a continuation of that earlier proceeding, 

thus if that earlier proceeding was “core,” then the later one is too. See McCowan v. Fraley 

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(In re McCowan), 296 B.R. 1, 3–4 (B.A.P. 9th Cir. 2003). Matters concerning the bounds 

of the bankruptcy estate necessarily “arise under” or “arise in” a case under the bankruptcy 

code, and therefore the proceedings that produced the confirmed plan were “core”—a fact 

which Appellants do not, and cannot, dispute—meaning subsequent proceedings to enforce 

those orders were “core” as well. See, e.g., In re Affirmative Ins. Holdings, Inc., 565 B.R.

at 583–84; Bakst v. Smokemist, Inc. (In re Gladstone), 513 B.R. 149, 156 (Bankr. S.D. Fla. 

2014). Any other conclusion (i.e., that the bankruptcy court’s ancillary jurisdiction is “noncore”) would create an anomalous situation where the bankruptcy court would be forced to 

submit proposed findings for district-court approval to enforce its own orders, hindering 

its ability “to manage its proceedings, vindicate its authority, and effectuate its decrees,” 

Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375, 379–80 (1994), and effectively 

rendering its ancillary jurisdiction a dead letter. Thus, the bankruptcy court possessed

statutory authority to enter a final order here.

Next, the Court must consider whether entering a final order exceeded the limits 

that Article III places on the bankruptcy court. Many courts have reasoned that Stern does

not affect the bankruptcy court’s ability to interpret and enforce its own orders—a matter 

that is integrally related to the bankruptcy court’s function. See Musso v. OTR Media Grp., 

Inc. (In re Ladder 3 Corp.), 581 B.R. 7, 14 (Bankr. E.D.N.Y. 2018) (collecting cases);

Yelverton v. Marm (In re Yelverton), No. 09-00414, 2015 WL 276345, at *4 (Bankr. D.D.C. 

Jan. 20, 2015) (“Article III of the Constitution, as interpreted in Stern, does not preclude 

the bankruptcy court form enforcing an order that it had authority to issue.”); Schermerhorn 

v. Centurytel, Inc., (In re Skyport Glob. Commc’ns, Inc.), No. 08-36737-H4-11, 2013 WL 

4046397, at *40 (Bankr. S.D. Tex. Aug. 7, 2013) (collecting cases); In re Garrett-Beck 

Corp., No. 09-3774, 2012 WL 3727318, at *1 (Bankr. S.D. Tex. Aug. 27, 2012). This 

conclusion is reinforced by the fact that the relief requested required the bankruptcy court

to reiterate “what is and is not property of the estate, a decision central to the mission of 

the bankruptcy court.” In re Gladstone, 513 B.R. at 159. Resolving such matters may 

frequently require the bankruptcy court to consider state-law issues, see id. at 156 (citing 

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Butner v. United States, 440 U.S. 48 (1979)), and Stern cannot be read to disturb the 

bankruptcy court’s traditional role to carry out that task, see Stern, 564 U.S. at 502 

(emphasizing that nothing in the opinion “meaningfully changes the division of labor” 

between district and bankruptcy courts).4In other words, not only is the ability of the 

bankruptcy court to enforce its own orders a matter integrally related to a core function of 

that court but, when those efforts implicate the confirmed plan, the proceeding also “stems 

from the bankruptcy itself” such that Stern does not preclude final adjudication. See Stern, 

564 U.S. at 499.

Accordingly, the bankruptcy court had the authority to enter a final order on the 

dispute over the master developer’s rights.

C. Due Process and the Rules of Bankruptcy Procedure

Appellants primary argument on appeal is that the bankruptcy court denied them 

due process when it determined that the May Debtors held the master developer’s rights 

because any such determination required holding an “adversary proceeding” under Federal 

Rule of Bankruptcy Procedure (“Rule”) 7001 and could not proceed as a mere “contested 

matter” under Rule 9001. (Doc. 20 at 13–17). In other words, Appellants premise their 

constitutional claim on the fact that the Rules direct the bankruptcy court to follow certain 

procedures—including requiring a longer time for briefing and imposing certain disclosure 

obligations—when it makes certain determinations and the failure of the bankruptcy court 

to apply those procedures here deprived Appellants of notice and an opportunity to be 

heard. Appellees argue in response that the proceedings here fully afforded Appellants the 

process they were due and, if they did not, any error was harmless. (Doc. 25 at 18–21).

“For all its consequence, ‘due process’ has never been, and perhaps can never be, 

precisely defined.” Lassiter v. Dep’t of Soc. Servs., 452 U.S. 18, 24 (1981). The touchstone 

of due process is “fundamental fairness.” Walters v. Nat’l Ass’n of Radiation Survivors, 

 

4 Although the Ninth Circuit Court of Appeals has not opined on this specific issue, the 

Court further notes that this conclusion is consistent with that court’s approval of the 

Bankruptcy Appellate Panel’s narrow reading of Stern. Deitz v. Ford (In re Deitz), 760 

F.3d 1038, 1043–46 (9th Cir. 2014) (mem.) (explaining that the “majority of decisions 

rendered since Stern follow Chief Justice Robert’s admonition that the decision be applied 

narrowly”); see also 1 Collier on Bankruptcy ¶ 3.02 (16th ed. 2019).

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473 U.S. 305, 320–21 (1985). A fundamentally fair proceeding requires notice and an 

“opportunity to be heard ‘at a meaningful time and in a meaningful manner.’” Mathews v. 

Eldridge, 424 U.S. 319, 333 (1976) (citation omitted); Conner v. City of Santa Ana, 897 

F.2d 1487, 1492 (9th Cir. 1990) (“The fundamental requirements of procedural due process 

are notice and an opportunity to be heard . . . .”). This flexible concept may require different 

procedures depending on the interests at stake, Mathews, 424 U.S. at 334, but ultimately 

the “standard for what amounts to constitutionally adequate notice . . . is fairly low; it’s 

‘notice reasonably calculated, under all the circumstances, to apprise interested parties of 

the pendency of the action and afford them an opportunity to present their objection,’” 

Espinosa v. United Student Aid Funds, Inc., 553 F.3d 1193, 1202 (9th Cir. 2008) (quoting 

Mullane v. Cent. Hanover Bank & Tr. Co., 339 U.S. 306, 314 (1950)). That standard does 

not require actual notice. Dusenberry v. United States, 534 U.S. 161, 171 (2002). The 

purpose of the notice requirement “is to apprise the affected individual of, and permit 

adequate preparation for, an impending ‘hearing.’” Memphis Light, Gas & Water Div. v. 

Craft, 436 U.S. 1, 14 & n.15 (1978) (collecting cases).

Because Appellants ground their due process arguments in their claim that the scope 

of the master developer’s rights could be determined only in an adversary proceeding and 

not in a contempt proceeding (which is a contested matter) it is useful to first understand

some of the differences between the two before turning to the merits of Appellants’ due 

process challenge. Bankruptcy procedure distinguishes “between different types of 

litigated matters and divide[s] them into contested matters and adversary proceedings.” 10 

Collier, supra, at ¶ 7000.01. “Adversary proceedings are separate lawsuits within the 

context of a particular bankruptcy case and have all of the attributes of a lawsuit, including 

the filing and service of a formal complaint and application, with certain modifications, of 

the Federal Rules of Civil Procedure . . . .” Id. at ¶ 7001.01. Contested matters, on the other 

hand, proceed via motion. Id. Some of the Rules applicable to adversary proceedings that 

give them the flavor of a fully-fledged civil lawsuit also apply to contested matters, and the 

bankruptcy court can apply more of those Rules in a contested matter at its discretion. Id. 

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at ¶ 9014.06. Perhaps the most significant differences between the two are that contested 

matters aim to resolve issues with greater speed than adversary proceedings and 

presumptively do not apply certain disclosure rules. Id.; see also In re Fagan, 559 B.R. 

718, 725 (Bankr. E.D. Cal. 2016).

The list in Rule 7001 defines what kinds of proceedings must be treated as 

“adversary proceedings.” Fed. R. Bankr. P. 7001. A matter not listed is a contested matter. 

See Barrientos v. Wells Fargo Bank, N.A., 633 F.3d 1186, 1189 (9th Cir. 2011). Subject to 

exceptions not relevant here, a “proceeding to determine the validity, priority, or extent of 

. . . [an] interest in property,” like the master developer’s rights, is an adversary proceeding.

Fed. R. Bankr. P. 7001(2); 10 Collier, supra, at ¶ 9014.06. Contempt proceedings are not 

listed “and are therefore contested matters not qualifying as adversary proceedings.” 

Barrientos, 633 F.3d at 1190. 

At the outset, the Court believes that Appellants’ contention that failure to proceed 

under Rule 7001 can by itself form the basis for a procedural due process claim somewhat 

misstates the law. (Doc. 20 at 14). Rule-conferred procedures typically are in addition to 

the relatively low requirements of constitutional due process. Thus, the Court observes that 

the inquiry is more properly framed in the following way: When a court fails to follow the 

process contemplated by procedural rules, a reviewing court need not reverse or relieve a 

party from a judgment if the proceeding still afforded due process to the parties. Brawders 

v. Cty. of Ventura (In re Brawders), 503 F.3d 856, 870 (9th Cir. 2007); Tully Constr. Co. 

v. Cannonsburg Envtl. Assocs. (In re Cannonsburg Envtl. Assocs.), 72 F.3d 1260, 1264–

65 (6th Cir. 1996); 10 Collier, supra, at ¶ 9014.01 (“Occasionally, a party who should have 

commenced an adversary proceeding may instead file a motion under Rule 9014. In such 

cases, so long as due process has been afforded to the responding party, the courts will 

apply the harmless error rule and not force the parties to start all over again.”); see also 

Strata Title, L.L.C. v. Pure Country Tower, LLC (In re Strata Title, L.L.C.), BAP No. AZ13-1291-PaKuD, 2014 WL 661174, at *11 (B.A.P. 9th Cir. Feb. 21, 2014) (“The due 

process requirements Debtor invokes are satisfied in both adversary proceedings under 

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Rule 7001 and contested matters under Rule 9014.”).

GMAC Mortgage Corp. v. Salisbury (In re Loloee), 241 B.R. 655 (B.A.P. 9th Cir. 

1999), the principal case that Appellants rely on, follows that analysis. There, the 

bankruptcy court erroneously determined the priority of certain liens via a motion to sell 

real property, not an adversary proceeding as required. Id. at 657–58. When the aggrieved 

lienholder—GMAC—appealed, the Bankruptcy Appellate Panel explained “[m]erely 

erroneous procedure and notice” may not support relief absent a due-process violation. Id. 

at 660. The error in In re Loloee went well beyond mere failure to conduct an adversary 

proceeding because: (1) “GMAC was not served a copy of the motion papers that arguably 

suggested that there may be a lien priority issue;” (2) GMAC did not receive any document 

that might have indicated lien priority would be determined until after its deadline to 

oppose the sale; and (3) the bankruptcy court resolved the lien priority issue ex parte and 

without holding a hearing one day before the time set for the hearing. Id. at 662.

The record here demonstrates that Appellants’ experience in the bankruptcy court 

was far different from GMAC’s in In re Loloee. The only similarity between the two cases 

is that the bankruptcy court decided an issue in a contested matter that involved a property 

right when the Rules contemplate using an adversary proceeding to do so, which does not 

itself suffice to establish a due-process violation. Contrary to Appellants’ contention, the 

record here shows that Appellees’ failure to file an adversary proceeding did not deprive 

Appellants of any notice that the bankruptcy court would even consider, let alone decide, 

which entities owned and controlled the master developer’s rights. 

To begin with, Appellees filed their Joint Motion for Order to Show Cause on 

November 20, 2018, specifically seeking an order to stop Appellants from “interfering with 

the implementation of the Plan by, among other things, wrongfully asserting control over” 

the master developer’s rights “owned by the May Debtors.” (Doc. 26-10 at 3). Compare In 

re Loloee, 241 B.R. at 661 (considering the fact that moving papers were “at best, 

ambiguous” as contributing to lack of notice), with Diatom, LLC v. Comm. of Creditors 

Holding Unsecured Claims (In re Gentile Family Indus.), BAP No. CC-13-1563-KiTaD, 

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2014 WL 4091001, at *6 (B.A.P. 9th Cir. 2014) (considering the fact that the motion was 

clear as to the relief sought in concluding any error was harmless). Appellants’ response to 

the joint motion demonstrated their awareness of that disputed issue, arguing that the July 

Debtors owned the master developer’s rights such that Appellants could not be found to 

have wrongly asserted control over them. (Doc. 26-15 at 9–11). Further, the Order to Show 

Cause described the issues to be addressed at the hearing by quoting, verbatim, the 

aforementioned language from Appellees’ joint motion. (Doc. 26-16 at 3).5 Finally, at the 

hearing held on December 13, 2018, most of the argument centered on whether the 20 Acre 

Transfer validly assigned the master developer’s rights under the Master CCRs and the 

Core Lease. 

These facts show that, at all times in the 23-day period between the joint motion’s 

filing and the show-cause hearing, all relevant parties understood that one of the main 

issues to be decided at the hearing was whether the May Debtors owned the master 

developer’s rights when they filed their bankruptcy petition. Put another way, these filings 

make clear that the operative question at the hearing would be on what grounds did the July 

Debtors base their claim to the master developer’s rights such that they had not violated 

the confirmed plan? These facts belie any contention that Appellants were never even 

apprised of the issues to be decided and had no opportunity to adequately prepare. How the 

bankruptcy court could have determined whether Appellants were wrongfully asserting 

control over the master developer’s rights “owned by the May Debtors” without reference 

to the ownership of those rights is a mystery for which Appellants have no explanation.

Appellants’ arguments to the contrary that are based on acts that the bankruptcy 

court took before the joint motion are unavailing. Under this banner, Appellants argue that 

the bankruptcy court’s prior order declining to define the scope of the master developer’s 

rights gave them reason to believe that the bankruptcy court would do the same throughout 

the case. (Doc. 20 at 8–9, 11). Appellants’ argument proceeds from the flawed premise that 

 

5 Although the Order to Show Cause did not specifically include this language, the Court 

also notes that Appellees’ prayer for relief is replete with requests for the bankruptcy court 

to decide that the May Debtors owned the master developer’s rights before they filed their 

petition. (Doc. 26-10 at 20–21).

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the bankruptcy court’s ruling rejected for all time the idea that it would interpret the Master 

CCRs and the Core Lease. (Id.). Actually, the bankruptcy court never made that ruling; 

instead, the transcript of the hearing makes clear that the bankruptcy court’s concern was 

with the fact that the dispute about the master developer’s rights at issue in the prior 

proceeding involved a non-debtor third-party entity, and thus had very little to do with the 

actual bankruptcy case. See, e.g., Transcript of Hearing at 7–8, 15–16, 48, 63–64, High 

Street Buildings LLC v. Atkins (D. Ariz. Dec. 4, 2018) (No.18-03567), ECF No. 18-12. 

Nothing about that decision indicates that the bankruptcy court would abstain forever from 

determining (or, in this case, clarifying) the ownership of the rights vis-à-vis the parties to 

the bankruptcy.

Likewise, to the extent that Appellants argue that the bankruptcy court’s statement 

at the hearing that “this issue hasn’t really fairly been teed up” somehow undermined (or 

was a comment on) the notice given prior to the hearing, they cite no authority for this 

novel proposition. (Docs. 20 at 11, 17; 28 at 3). At any rate, the Court rejects this argument. 

Again, its premise is incorrect. Before making the statement, the bankruptcy court stated 

that it was “mindful that we should proceed cautiously when it comes to matters of 

contempt.” (Doc. 26-19 at 91) (emphasis added). Placing the quote in its proper context 

thus reveals that it was the issue of contempt that had not “fairly been teed up,” not the 

issue of whether the 20 Acre Transfer also accomplished a transfer of the master 

developer’s rights. The bankruptcy court was simply expressing caution about the scope of 

relief that Appellees could obtain.6

It is also important to note what Appellants do not argue. They do not show that 

they “at any time formally requested that the bankruptcy court conduct an evidentiary 

hearing.” See In re Strata Title, L.L.C., 2014 WL 661174, at *9. Nor do they articulate with 

any specificity how the hearing, and ultimate outcome, might have been different had 

 

6Appellants make much of the fact that the bankruptcy court determined the ownership 

issue after ruling that it would not hold them in contempt. (See, e.g., Doc. 20 at 11–13). 

This conflates the issue of whether Appellees “willfully violated” the confirmed plan with 

the issue of whether they violated the confirmed plan at all, which was necessarily at issue 

in the proceedings in the bankruptcy court.

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Appellees initiated an adversary proceeding. Id. (quoting Ruvacalba v. Munoz (In re 

Munoz), 287 B.R. 546, 551 (B.A.P. 9th Cir. 2002)).7 Although Appellants vaguely assert 

that there was a factual dispute and that dispute required discovery8and evidence to 

resolve, the fact is that Appellants argued before the bankruptcy court that the July Debtors 

owned the master developer’s rights because they are freely assignable between affiliates 

under the Core Lease. As all involved seemed to understand, this dispute turned on the 

interpretation of the Master CCRs and the Core Lease—a legal question that did not require

evidence beyond those documents to resolve. RNI-NV Ltd. P’ship v. Field (In re Maui 

Indus. Loan & Fin. Co.), 580 B.R. 886, 896 (D. Haw. 2018). 

Nor even do Appellants counter the contention that they had consistently informed 

all interested parties, and the bankruptcy court, that the May Debtors owned the master 

developer’s rights. (Doc. 25 at 8). Instead, Appellants argue that events since the 

bankruptcy court selected a plan justified their change in position.9(See Docs. 26-15 at 10–

11; 28 at 6). They acknowledge further that positional change precipitated the need for the 

 

7 Appellants do mention that the “bankruptcy court expressed its doubts” over the validity 

of CPF’s claim on the master developer’s rights. (Doc. 20 at 18 n.11). But they do not 

explain how that somehow undermined the notice that the bankruptcy court eventually 

gave in this matter, which placed those rights squarely at issue. Nor do they explain how 

the bankruptcy court’s earlier doubts show that the bankruptcy court’s later resolution 

would have been different if Appellees had filed an adversary proceeding.

8 Appellants emphasize the lack of discovery here. This position is confusing because

the Constitution does not create an entitlement to discovery. 

See Weatherford v. Bursey, 429 U.S. 545, 559 (1977). Even in 

criminal prosecutions, the constitutional disclosure obligation 

is limited to evidence favorable to the accused, see Brady v. 

Maryland, 373 U.S. 83 (1963)—and for impeaching evidence 

this is a right to disclosure at trial, not a right 

to discovery before trial. See United States v. Ruiz, 536 U.S. 

622, 629–33 (2002).

Young v. Holder, 462 F. App’x 626, 628 (7th Cir. 2012).

9 Additionally, it is not at all clear how the claimed change in circumstances—the July 

Debtors’ exercise of their redemption rights under the plan—meant that the May Debtors’ 

bankruptcy estate no longer included the master developer’s rights. Aside from citing no 

language in the controlling documents to support this assertion, it does nothing to change 

the fact that if the May Debtors never validly transferred the master developer’s rights, 

those rights remained with the May Debtors.

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hearing in the first place. (Doc. 28 at 5–6.). This acknowledgement flies in the face of their 

claim that they had no idea that the ownership of the master developer’s rights would be at 

issue in a hearing prompted by that very change.10

Accordingly, the Court is confident that Appellants received the process that was 

their due despite any technical lack of compliance with the Rules.

III. CONCLUSION

For these reasons,

IT IS ORDERED that the bankruptcy court’s Order Resolving Motion for Order to 

Show Cause is AFFIRMED.

IT IS FURTHER ORDERED, pursuant to Federal Rule of Bankruptcy Procedure 

8024(a), that the Clerk of the Court shall enter judgment accordingly.

Dated this 4th day of March, 2020.

 

10 The Court notes that Appellants have never challenged the terms of the confirmed plan. 

That plan is a final judgment, United Student Aid Funds, Inc. v. Espinosa, 559 U.S. 260, 

269 (2010), and Appellants waived their ability to challenge its terms by voluntarily 

dismissing the direct appeal. To the extent that Appellants seek to change the terms of the 

confirmed plan, the effort is untimely.

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