Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-4_06-cv-02788/USCOURTS-cand-4_06-cv-02788-4/pdf.json

Nature of Suit Code: 422
Nature of Suit: Bankruptcy Appeals Rule 28 USC 158
Cause of Action: 28:1334 Bankruptcy cases and proceedings under title 11

---

United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF CALIFORNIA

In re RAMIN YEGANEH,

Debtor.

__________________________________

RAMIN YEGANEH,

Appellant,

v.

CHARLES E. SIMS, Trustee in

Bankruptcy,

Appellee.

 /

No. C 06-2788 CW

ORDER AFFIRMING

THE ORDER OF THE

BANKRUPTCY COURT

Bankruptcy No.

05-30047 TEC

Appellant has appealed from the bankruptcy court's "Order

Authorizing Compromise" (Docket No. 30). Having considered all of

the papers filed by the parties, the Court AFFIRMS the order of the

bankruptcy court.

Case 4:06-cv-02788-CW Document 55 Filed 10/23/06 Page 1 of 19
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28 2

BACKGROUND

The genesis of this dispute is a lawsuit filed on October 4,

1999 against Appellant in San Mateo County Superior Court, Ingram

v. Yeganeh, No. 410586. Plaintiff Edith Ingram sued on her own

behalf, and plaintiff Nozipo Wobogo sued on behalf of the general

public, pursuant to the former “private attorney general” clause of

California’s Unfair Competition Law (UCL), Cal. Bus. & Prof. Code

§ 17200 et seq. The plaintiffs accused Appellant of unlawful loan

brokerage practices. Ms. Ingram settled her claims against

Appellant on April 25, 2001. 

In March, 2001, Appellant plead no contest to four criminal

counts of violating the foreclosure consultant law, California Code

of Civil Procedure § 2945 et seq. Under California law, the pleas

had the same effect as guilty pleas for purposes of other actions

based on the same subject matter.

In November, 2003, Temporary Judge John S. Blackman issued an

order prohibiting contact between Appellant and the individuals

claiming to have been harmed by him (Plaintiffs). Appellant

violated that and other court orders. He was adjudicated in

contempt and jailed.

On June 3, 2004, after a series of hearings on Plaintiffs'

individual claims, Judge Blackman entered judgment against

Appellant and ordered restitution to Plaintiffs in the amount of

$270,000. The record of these individual hearing was not

transcribed. The parties to that case stipulated that no postjudgment interest would accrue on the June 3, 2004 judgment “until

after the court has heard and ruled upon plaintiffs’ motion for

Case 4:06-cv-02788-CW Document 55 Filed 10/23/06 Page 2 of 19
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28 3

award of attorney’s fees and costs, any sanctions motion(s)

plaintiffs may bring along with the fee motion, and any motion for

permanent injunction that plaintiffs may bring . . .” (Yeganeh

Dec., Motion to Stay Bankruptcy Court's Order Authorizing

Compromise, Exh. F, June 16, 2004 Order on Stipulation Re Accrual

of Post-Judgment Interest.) The stipulation further provided,

“Once the above-referenced rulings have been made, the June 3, 2004

judgment will be amended to include any further amounts adjudicated

to be owed by any party hereto.” (Id.) 

Ms. Wobogo moved pursuant to California Code of Civil

Procedure § 1021.5 for an award of attorneys’ fees and costs

incurred by her counsel, DLA Piper Rudnick Gray Cary US LLP (Gray

Cary). In support of that motion, one of Ms. Wobogo's attorneys

declared that they had also spent time on civil and criminal cases

related to Ms. Wobogo's case. (Docket No. 25, Exh. AA.) The civil

cases included Evans v. Yeganeh, No. 412706, and a small claims

case, Yeganeh v. Raffington, No. SCS 106526. (Id.) Their work on

the criminal case, People v. Yeganeh, No. SC 46012A, involved

coordination of efforts between themselves and the District

Attorney's office. (Id.) 

In a separate judgment, filed on September 9, 2004, Judge

Blackman awarded approximately $3.5 million in attorneys' fees

(including $2.3 million in principal with a 1.5 multiplier) and

$32,000 in costs against Appellant, as well as pre-judgment

interest of approximately $130,000, for a total of $3.9 million. 

He found that the attorneys’ work resulted in the enforcement of

important rights affecting the public interest, explaining that

Case 4:06-cv-02788-CW Document 55 Filed 10/23/06 Page 3 of 19
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28 4

The amounts of money restored to individuals through plaintiff

attorneys’ work may not seem like much to defendant, but these

are highly significant sums of money to many of the claimants,

many of whom live very modestly. Plaintiff attorneys’ actions

in prosecuting this suit have also prevented a large number of

members of the public from falling victim to the same

practices as the named claimants herein, through the vigorous

prosecution of this lawsuit as well as by way of obtaining

injunctions.

(Request for Judicial Notice, Motion to Stay Bankruptcy Court's

Order Authorizing Compromise, Exh. B, September 9, 2004 Order re

Award of Attorney's Fees, Costs, Prejudgment Interest and Related

Findings at 2.) He found that the private enforcement there was

necessary, risky, and imposed a heavy financial burden on the

lawyers who performed the services. He further found,

The factual and legal questions involved in this case were

novel and difficult. The complexity of the case, together

with defendant’s evasive and obstreperous conduct as outlined

in several of the previous orders issued in this case made

this case more time-consuming for plaintiffs’ attorneys than

it otherwise might have been . . . . [D]efendant has

presented no compelling, specific evidence that shows that

plaintiffs overworked this case or did not legitimately spend

the amount of hours they are claiming they spent. The Court

finds that the time expended by plaintiffs’ counsel in terms

of manning their case was reasonable under the difficult

circumstances of this case. . . . The Court has also taken

into account the fact that plaintiffs’ attorneys and staff

spent many hours for which they are not seeking reimbursement,

as stated in plaintiffs’ moving papers.

(Id. at 2-3.) 

Appellant timely appealed the State court restitution and

attorneys' fees judgments against him. 

On November 2, 2004, the California electorate passed

Proposition 64, which amended the UCL to eliminate the ability of

private individuals to bring actions on behalf of the general

public. The UCL now requires a private plaintiff bringing an

action for injunctive or restitutionary relief to establish that he

Case 4:06-cv-02788-CW Document 55 Filed 10/23/06 Page 4 of 19
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28 5

or she “has suffered injury in fact and has lost money or

property.” Cal. Bus. & Prof. Code § 17204. Proposition 64 was

silent on the question of whether these new standing requirements

should be applied to pending cases. 

In order to ensure the validity of the restitutionary judgment

against Appellant, the current Plaintiffs moved to intervene. The

State court granted the motion to intervene on January 7, 2005.

According to Appellant, the judgments against him are more

than his net worth, which is primarily comprised of real estate. 

Appellant filed a petition for Chapter 13 bankruptcy on January 7,

2005. On January 21, 2005, the bankruptcy court granted

Plaintiffs’ motion to convert the case to Chapter 7, and appointed

Charles Sims as Trustee. The bankruptcy court later denied

Appellant’s motion for reconsideration of the conversion. 

After the case was converted to Chapter 7, the bankruptcy

court solicited the filing of proofs of claims. Plaintiffs filed a

total of $4.7 million in claims, and other creditors filed

approximately $800,000 in claims. In addition to the

restitutionary judgment, attorneys’ fees and costs awarded by the

State court in Ingram, and interest thereon, Plaintiffs filed

claims for approximately $800,000 in post-judgment attorneys’ fees

and $39,000 in post-judgment costs incurred between August 1, 2004

and January 7, 2005. Plaintiffs also claimed a 1.5 multiplier on

this requested post-judgment fee award. 

Appellant asked the bankruptcy court for a stay of the

bankruptcy proceedings in order to allow his appellate counsel to

pursue his State civil appeals. His motion for a stay was denied

Case 4:06-cv-02788-CW Document 55 Filed 10/23/06 Page 5 of 19
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28 6

on December 5, 2005. 

On February 17, 2006, the Trustee filed a notice of intent to

compromise with Plaintiffs. He negotiated with Plaintiffs for a

$200,000 reduction in the principal attorneys’ fees claim and a

corresponding $100,000 reduction in the multiplier. Plaintiffs

also agreed that the reduced attorneys’ fee award “will be treated

as a general unsecured claim on par with all other general

unsecured claims and the multiplier claim will receive a

distribution only after those general unsecured claims are paid in

full.” (Request for Judicial Notice, Motion to Stay Bankruptcy

Court's Order Authorizing Compromise, Exh. 210, Notice of Trustee's

Intent to Dismiss Appeals and Compromise with Creditors at 2.) The

compromise also included a $400,000 reduction in Plaintiffs'

$800,342.75 claim for post-judgment attorneys' fees. Appellant's

estate would still owe Plaintiffs and their attorneys more than

$4.1 million. In exchange, the Trustee agreed to dismiss

Appellant’s State court civil appeals. 

On March 31, 2006 the bankruptcy court held a hearing on the

proposed compromise and Appellant's motion to compel the Trustee to

abandon the civil appeals so that he could prosecute them himself. 

At the hearing, the parties extensively addressed the legal issues

at stake in the underlying State court action. Plaintiffs later

submitted supplemental briefing on issues relating to their

intervention in the underlying State lawsuit. The bankruptcy court

stated its findings of fact and conclusions of law on the record at

an April 5, 2006 telephonic hearing. Judge Carlson concluded that

the California Supreme Court likely would find Proposition 64 to be

Case 4:06-cv-02788-CW Document 55 Filed 10/23/06 Page 6 of 19
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28 7

retroactive, but would not require reversal of judgments where

plaintiffs such as those here could have met its more stringent

pleading requirements if they had known of them at the time of

trial. He found that Plaintiffs here likely could have met the

Proposition 64 requirements had they known of them from the outset. 

He also found that any retroactive effect of Proposition 64 would

be unlikely to affect the attorneys' fees award in this case. He

noted the very deferential standard of review applied to attorneys'

fees awards. 

In evaluating the fairness of the Trustee's proposed

compromise, Judge Carlson described the costs of going forward with

the litigation as a "very powerful factor in this case" that

"strongly bolstered" the appropriateness of the settlement. 

(Docket No. 28, Transcript of Bankruptcy Court's April 5, 2006

Telephonic Hearing Authorizing Trustee's Proposed Compromise at 7.)

He found that proceeding with Appellant's State civil appeals would

be "unusually costly," not cost effective, and would entail

substantial delay, which in turn would further increase the costs

to the estate as the post-judgment interest increased. (Id. at 8.) 

Finally, he found that the interests of Plaintiffs favored approval

of settlement. Judge Carlson also denied Appellant's motion to

have his State civil appeals abandoned as property of the estate,

on the grounds that the appeals are not "burdensome asset[s]." 

(Id. at 11.) 

On April 17, 2006, Appellant moved the bankruptcy court for a

stay of enforcement of the compromise pending resolution of his

appeal to this Court of the order authorizing the compromise. This

Case 4:06-cv-02788-CW Document 55 Filed 10/23/06 Page 7 of 19
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28 8

motion was denied on April 28, 2006. However, the court issued a

temporary stay until May 12, 2006, in order to allow this Court to

hear Appellant's emergency motion to stay the bankruptcy

proceedings.

On May 12, 2006, this Court denied Appellant's motion for a

stay of the bankruptcy court order authorizing the compromise. The

motion was denied because Appellant failed to establish either a

likelihood of success or a serious and substantial question on the

merits of his appeal and therefore was not entitled to a

discretionary stay. (May 12, 2006 Order at 13.) On September 14,

2006, this Court denied Appellant's motion for leave to file a

motion for reconsideration of the May 12, 2006 Order. The Court

now reviews the merits of Appellant's appeal. 

STANDARD OF REVIEW

 A district court has jurisdiction to hear appeals from a 

bankruptcy court pursuant to 28 U.S.C. 158(a). An order

authorizing a compromise in a bankruptcy case is reviewed for an

abuse of discretion. In re A & C Properties, 784 F.2d 1377, 1380

(9th Cir. 1986). The district court reviews the bankruptcy court's

embedded findings of fact for clear error and reviews findings of

law de novo. Fed. R. Bankr. P. 8013; In re Lockard, 884 F.2d at

1174 (9th Cir. 1989).

In order to determine the "fairness, reasonableness and

adequacy of a proposed settlement agreement, the court must

consider:

(a) The probability of success in the litigation; (b) the

difficulties, if any, to be encountered in the matter of

collection; (c) the complexity of the litigation involved, and

Case 4:06-cv-02788-CW Document 55 Filed 10/23/06 Page 8 of 19
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28 9

the expense, inconvenience and delay necessarily attending it;

(d) the paramount interest of the creditors and a proper

deference to their reasonable views in the premises."

In re A & C Properties, 784 F.2d at 1381. 

DISCUSSION

Appellant argues that the bankruptcy court abused its

discretion in applying the A & C Properties factors to the

compromise reached between the Trustee and Plaintiffs and in

approving the compromise. 

I. Probability of Success in the Litigation

A. Plaintiffs' Restitutionary Judgment

Appellant contends that, as a result of Proposition 64,

Plaintiffs' State court judgment is sure to be reversed on appeal

and the approval of the compromise dismissing his State appeals was

therefore an abuse of discretion. Specifically, Appellant argues

that because Ms. Wobogo sued on behalf of the general public, she

asserted a right independent from that asserted by Plaintiffs. 

Therefore, he argues, Plaintiffs' claims will not relate back to

those alleged in the original complaint but rather will be timebarred by the UCL's four-year statute of limitations. 

However, the bankruptcy court made an accurate prediction of

the effect of Proposition 64 on the validity of Plaintiffs' State

court judgment. As the bankruptcy court predicted, the California

Supreme Court held that Proposition 64 applies to pending cases. 

Branick v. Downey Sav. and Loan Ass'n, 39 Cal. 4th 235, 240-41

(2006). However, it held that Proposition 64 does not prohibit

plaintiffs in pending UCL cases from substituting those actually

harmed for unharmed plaintiffs suing on behalf of the general

Case 4:06-cv-02788-CW Document 55 Filed 10/23/06 Page 9 of 19
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28 10

public. Id. at 241. Rather, after Proposition 64, trial courts

retain the discretion in UCL cases to permit a party to amend a

pleading to add a party under the existing California relation-back

doctrine, which requires only that new parties rely on the same

general facts, injury, and instrumentality as did the original

party. Id. at 242-44. 

The State trial court, in ruling on Plaintiffs' motion to

intervene, had the discretion to find that Plaintiffs' claims

relied on the same general facts, injury, and instrumentality as

did Ms. Wobogo's. Therefore, Plaintiffs' intervention was

permissible under Branick, as the bankruptcy court had predicted it

would be. Accordingly, the bankruptcy court did not abuse its

discretion in attributing little settlement value to Appellant's

State appeals to the extent they were based on this issue. 

B. Plaintiffs' Attorneys' Fees Judgment

1. Necessity of Ms. Wobogo as a Plaintiff

Appellant argues that the bankruptcy court made an error of

law in determining that Plaintiffs' attorneys' fees award would be

upheld on appeal and thereby abused its discretion in approving the

compromise. Appellant argues that without Ms. Wobogo as a

plaintiff in the State case, there is no longer a valid judgment in

that case. Therefore, he argues, the attorneys' fees award is not

valid either. 

However, as discussed above, Plaintiffs have been permissibly

substituted for Ms. Wobogo. Therefore, the underlying judgment

remains valid, as does the award of attorneys' fees. Accordingly,

the bankruptcy court did not make an error of law on this point.

Case 4:06-cv-02788-CW Document 55 Filed 10/23/06 Page 10 of 19
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28 11

Furthermore, the attorneys' fees do not belong to Ms. Wobogo,

as Appellant claims. Under California law, attorneys' fees are

properly awarded to the plaintiffs' attorneys. Folsom v. Butte Co.

Ass'n of Governments, 32 Cal. 3d 668, 682 n.26 (2001). Therefore,

the bankruptcy court did not make an error of law in determining

that the attorneys' fees associated with the underlying judgment

were properly awarded. Accordingly, the bankruptcy court did not

abuse its discretion in attributing little settlement value to

Appellant's State civil appeals on this issue.

2. Work on Collateral Matters

Appellant also argues that Plaintiffs' attorneys' fees award

impermissibly compensated the attorneys for work on collateral

matters. Because of this error, he argues, the attorneys' fees

award is subject to reversal on appeal. 

The California court of appeal reviews attorneys' fees awards

for abuse of discretion. Atkins v. Enterprise Rent-A-Car of San

Francisco, 79 Cal. App. 4th 1127, 1134 (2000). As Appellant points

out, California courts are permitted to award attorneys' fees for

time spent on collateral matters when those matters are closely

related and useful to the resolution of the matter at issue. 

Children's Hospital & Medical Center v. Bonta, 97 Cal. App. 4th

740, 779-80 (2002). 

Appellant argues that the related civil and criminal cases for

which Plaintiffs' attorneys worked and were awarded fees were not

sufficiently related to Plaintiffs' case to justify an award of

fees for the time spent on them. However, Appellant identifies no

evidence in the record supporting his argument. Therefore, this

Case 4:06-cv-02788-CW Document 55 Filed 10/23/06 Page 11 of 19
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28 12

Court has no basis upon which to find that the bankruptcy court

abused its discretion in attaching little settlement value to this

argument. 

Appellant also argues that the time spent by Plaintiffs'

attorneys conducting real estate and litigation searches was

unrelated to the result reached in the underlying litigation,

rendering the attorneys' fees award subject to reversal on appeal. 

California law requires that the time spent conducting this type of

work be related to the result reached in litigation. Ciani v. San

Diego Trust & Savings Bank, 25 Cal. App. 4th 563, 575 (1994).

Had the attorneys not conducted these searches or placed liens

on Appellant's property, Appellant might have transferred all of

his valuable property to others. That would have made it difficult

for Plaintiffs to receive the money from the judgement their

attorneys helped them win. Therefore, this work was related to the

result reached in the State case. Accordingly, the bankruptcy

court did not abuse its discretion in affording little settlement

value to this argument.

3. Fraud

Additionally, Appellant argues that Plaintiffs' attorneys

committed fraud on the court when they represented to the temporary

judge that they do not regularly practice in real estate law. 

However, Appellant does not cite any evidence in the record that

this statement to the court was false. Furthermore, it was

permissible for the attorneys to take this case despite the fact

that they might have been unfamiliar with real estate law because,

through education, they were able to achieve competence in real

Case 4:06-cv-02788-CW Document 55 Filed 10/23/06 Page 12 of 19
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28 13

estate law. (Docket No. 25, Exh. AA at ¶¶ 111-113.) Appellant

also argues that attorneys' fees should not exceed one third of the

monetary judgment but cites no authority for his argument. 

Therefore, the bankruptcy court did not abuse its discretion in

affording these arguments little settlement value.

C. Other Grounds for Appeals

1. The Stipulation to a Temporary Judge in State Court

Appellant argues that the bankruptcy court abused its

discretion in not attributing a greater settlement value to his

State court appeal because he did not stipulate to allowing

Plaintiffs to present their restitution claims to the temporary

judge. Because he did not agree to this procedure, Appellant

argues, the underlying judgment is invalid and will be reversed on

appeal.

However, the stipulation that Appellant signed granted the

temporary judge the power to resolve all remaining issues,

including issues related to restitution. (Docket No. 25, Exh. A.) 

Accordingly, the bankruptcy court did not abuse its discretion in

attributing little settlement value to the appeal based on this

argument. 

2. Due Process Claims

Appellant argues that the bankruptcy court abused its

discretion in not attributing a greater settlement value to his

State court appeals because the restitution hearings violated his

rights to due process and protection of the California Evidence

Code. Because of these violations, he argues, the underlying State

court judgment is invalid and will be reversed on appeal. 

Case 4:06-cv-02788-CW Document 55 Filed 10/23/06 Page 13 of 19
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28 14

By failing to make a record of a proceeding, a party forfeits

its right to argue on appeal that there was error at the

proceeding. People v. Seneca Ins. Co., 116 Cal. App. 4th 75, 80

(2004). In the absence of a transcript of the hearings, the

California court of appeal will presume that a trial court's orders

and judgments are correct. Id. Appellant failed to make a record

of the restitution hearings. Therefore, he forfeited his right to

argue that the temporary judge erred in his evidentiary rulings or

failed to afford Appellant due process. Accordingly, the

bankruptcy court did not abuse its discretion in attributing little

settlement value to this argument. 

3. Pre-Judgment Interest

Appellant argues that the bankruptcy court abused its

discretion in approving the compromise because the judgment

included an impermissible award of pre-judgment interest. 

Specifically, Appellant argues that pre-judgment interest is not

permitted on restitution awards in UCL cases. However, Appellant

is incorrect. See People ex. rel. Kennedy v. Beaumont Investment,

Ltd., 111 Cal. App. 4th 102, 132 (2003). Therefore, it is unlikely

that this portion of the award would be reversed on appeal. 

Appellant also argues that Plaintiffs' pre-judgment interest

award was impermissible because Plaintiffs' damages were not

liquidated as required by California law for pre-judgment interest. 

However, this argument is unlikely to prevail on appeal because

Appellant did not preserve a record of the restitution hearings

from which the California court of appeal could determine that

Plaintiffs' damages were not liquidated. Therefore, the bankruptcy

Case 4:06-cv-02788-CW Document 55 Filed 10/23/06 Page 14 of 19
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28 15

court did not abuse its discretion in affording little settlement

value to these arguments.

4. Post-Judgment Attorneys' Fees

Appellant argues that the compromise is not actually a

compromise because it provides for payment of approximately

$400,000 in post-judgment attorneys' fees that was not included in

the State court attorneys' fees judgment. However, the compromise

reduces the estate's payment towards the post-judgment attorneys'

fees by $400,000. 

Appellant presents no argument that the State trial court

would not have approved the claimed post-judgment fees as

reasonable or that the California court of appeal would have

reversed such an award. The compromise actually reduced by half

the principal amount of post-judgment fees claimed. In the absence

of the compromise, Appellant's estate could become liable for the

entire $800,000 in claimed post-judgment fees, plus the multiplier,

in addition to the $3.9 million owed under the original attorneys'

fees judgment. Therefore, the bankruptcy court did not abuse its

discretion in approving a compromise containing a provision for

payment of half of the claimed post-judgment fees.

5. Post-Judgment Interest

Appellant argues that the bankruptcy court abused its

discretion in approving the compromise because the judgment

included claims for post-judgment interest. He argues that this is

impermissible under the June 16, 2004 stipulation by the parties to

the State suit, approved by the State court, that provided that

post-judgment interest would not accrue until the court had ruled

Case 4:06-cv-02788-CW Document 55 Filed 10/23/06 Page 15 of 19
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

1

This argument was raised for the first time in Appellant’s

reply memorandum, and neither the Trustee nor Plaintiffs have had

an opportunity to respond. Indeed, Appellant did not raise this

particular argument before the bankruptcy court. See Docket No.

25, Debtor’s Objection to Trustee’s Notice of Intent to Dismiss

Appeals and Compromise with Creditors at 10-17. 

16

on Plaintiffs’ motion for an award of attorneys’ fees and costs and

any motions brought for sanctions or a permanent injunction. 

Appellant argues that because Plaintiffs brought a motion for

sanctions that was not ruled on, any award of post-judgment

interest is invalid.1 

However, it was not possible for the State court to rule on

the sanctions motion because Appellant's bankruptcy filing stayed

the State case. But for this stay, the State court would have

timely ruled on the sanctions motions. The parties’ stipulation

sought only to toll briefly the accrual of post-judgment interest. 

Therefore, the bankruptcy court did not abuse its discretion in

approving claims that included post-judgment interest. 

II. Delay and Expense

Appellant argues that the bankruptcy court wrongly determined

that the delay and expense that would result from rejecting the

compromise weighed in favor of approving the compromise. As

previously discussed, the bankruptcy court correctly determined

that there was a high probability that the Proposition 64 issues

would be resolved in favor of intervention by Plaintiffs. 

Therefore, it was reasonable for the bankruptcy court to determine

that the significant expense and delay associated with pursuing the

appeals, on balance, weighed in favor of approving the compromise,

to benefit all of the creditors of the estate. Accordingly, the

Case 4:06-cv-02788-CW Document 55 Filed 10/23/06 Page 16 of 19
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28 17

bankruptcy court did not abuse its discretion in weighing this

factor in favor of the compromise.

III. The Paramount Interest of Creditors

Appellant argues that the bankruptcy court wrongly determined

that the interest of the creditors weighed in favor of approving

the compromise. Specifically, Appellant argues that, had the

bankruptcy court granted his motion to have his State civil appeals

abandoned as property of the bankruptcy estate, he could have saved

the estate the expense of prosecuting them. 

A bankruptcy court may order a trustee to abandon any property

of an estate that is burdensome to the estate or that is of

inconsequential value to the estate. 11 U.S.C. § 554(b). However,

the bankruptcy court here found no statutory basis for abandonment

of the appeals. (Docket No. 28, Ruling on Trustee's Motion for

Authority to Execute Proposed Settlement at 11.)

Prosecuting the appeals would be burdensome to the estate. 

However, not only did the compromise free the estate of that

burden, it benefitted the estate by reducing Plaintiffs' original

claim by $300,000, reducing the claim of post-judgment attorneys'

fees by $400,000, paying the attorneys' fees award as an unsecured

claim, and paying the multiplier portion of the award last. The

estate could not have received these benefits had the Trustee

abandoned the appeals to Appellant to prosecute, as Appellant

requested. The burden of prosecuting the appeals was resolved by

compromising them. Therefore, the bankruptcy court correctly found

that there was no basis on which it could order the Trustee to

abandon the appeals to Appellant to prosecute. 

Case 4:06-cv-02788-CW Document 55 Filed 10/23/06 Page 17 of 19
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28 18

Additionally, Appellant contends that he offered to pay

Plaintiffs' claims so that they would not be prejudiced by the

delay associated with prosecution of his appeals. However,

Appellant does not cite any evidence of this proposal in the

record. Furthermore, such a proposal would not prevent prejudice

resulting from delayed payment of the attorneys' fees portion of

the award. Accordingly, the bankruptcy court did not abuse its

discretion in resolving this factor in favor of the compromise.

CONCLUSION

For the forgoing reasons, the order of the bankruptcy court is

AFFIRMED.

IT IS SO ORDERED.

Dated: 10/23/06 

CLAUDIA WILKEN

United States District Judge

Copies mailed to counsel

as noted on the following page

Case 4:06-cv-02788-CW Document 55 Filed 10/23/06 Page 18 of 19
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28 19

Julie Glosson

Office of U.S. Trustee

235 Pine St. 

Suite 700 

San Francisco, CA 94105 

Thomas E. Carlson

United States Bankruptcy Court in San Francisco 

235 Pine St. 

P.O. Box 7341 

San Francisco, CA 94120-7341 

U.S. Bankruptcy Manager

U.S. Bankruptcy Court 

235 Piine St. 

P.O. Box 7341 

San Francisco, CA 94120-7341 

Case 4:06-cv-02788-CW Document 55 Filed 10/23/06 Page 19 of 19