FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

In re: ONECAST MEDIA, INC. dba 

Seasonticket.com,

Debtor.

FIRST AVENUE WEST BUILDING,

LLC; FIRST WEST BUILDING 00, No. 04-35324

LLC, D.C. No. Appellants,  CV-03-02811-TSZ

v. OPINION

NANCY JAMES, in her capacity as

Chapter 7 Trustee of Bankruptcy

Estate of Onecast Media, Inc. dba

Seasonticket.com and Comerica

Bank – California,

Appellee. 

Appeal from the United States District Court

for the Western District of Washington

Thomas S. Zilly, District Judge, Presiding

Argued and Submitted

December 6, 2005—Seattle, Washington

Filed February 23, 2006

Before: Ronald M. Gould and Marsha S. Berzon, Circuit

Judges, and William W Schwarzer,* Senior District Judge.

*The Honorable William W Schwarzer, Senior United States District

Judge for the Northern District of California, sitting by designation. 

1965
Opinion by Judge Schwarzer

1966 IN RE: ONECAST MEDIA
COUNSEL

John R. Rizzardi and John R. Knapp, Cairncross & Hempelmann, P.S., Seattle, Washington, for the appellants. 

IN RE: ONECAST MEDIA 1967
Andrew A. Guy, Stoel Rives LLP, Seattle, Washington, for

the appellee.

OPINION

SCHWARZER, Senior District Judge: 

OneCast Media, Inc. (OneCast) held a lease for office

space in a building owned by First Avenue West Building,

LLC, later acquired by First West Building 00, LLC (the

Landlord). The lease was secured by a substantial security

deposit comprised of cash and a letter of credit. In November

2000, OneCast ceased paying rent and filed for bankruptcy.

Nancy James was appointed bankruptcy trustee for the estate

(Trustee) and rejected the lease. The Landlord drew down the

letter of credit and retained the proceeds as a security deposit.

In an adversary proceeding in bankruptcy court, the Trustee

sought to recover the remaining security deposit. The court

ruled that to the extent the claim sought recovery of the portion of the security deposit secured by the letter of credit, the

letter of credit was not property of the bankruptcy estate and

therefore not within the bankruptcy court’s jurisdiction. The

Trustee moved for reconsideration, which the bankruptcy

court denied. The Trustee then appealed to the district court

and that court reversed and remanded to the bankruptcy court

to permit the Trustee to pursue recovery of damages up to the

full amount of the security deposit, including the letter of

credit. This appeal by the Landlord from the district court’s

order followed. For the reasons stated below, we affirm. 

STANDARD OF REVIEW 

“We review de novo a district court’s decision on appeal

from a bankruptcy court.” In re Dawson, 390 F.3d 1139, 1145

(9th Cir. 2004). “[W]e review the bankruptcy court’s decision

independently and give no deference to the district court’s

1968 IN RE: ONECAST MEDIA
determinations.” Id. A bankruptcy court’s denial of a motion

for reconsideration is reviewed for abuse of discretion. In re

Kaypro, 218 F.3d 1070, 1073 (9th Cir. 2000). A court abuses

its discretion in denying a motion to reconsider if the underlying decision “involved a clear error of law.” McDowell v. Calderon, 197 F.3d 1253, 1255 (9th Cir. 1999) (en banc). 

I. TIMELINESS OF THE MOTION TO

RECONSIDER

At the bankruptcy court trial in July 2002, that court ruled

that “the letter of credit and its proceeds were never property

of the estate.” It went on to find that on the facts the Trustee

was not entitled to any of the cash security deposit. It issued

no order or judgment on its rulings but directed counsel for

the Landlord to prepare and present orders.1 This was never

done. The bankruptcy court docket reflects the oral rulings

made by the bankruptcy judge, but no written judgment or

orders were ever entered. On March 10, 2003, almost eight

months after the court’s ruling, the Trustee filed a motion for

reconsideration in the bankruptcy court, arguing that the ruling excluding the letter of credit from the estate was manifest

error. The Trustee explained that she had been waiting for the

Landlord’s attorney to prepare an order from which to seek

reconsideration, but as no order had been submitted, the

Trustee based the motion on the court’s oral ruling. On

August 5, 2003, the court denied the motion. On August 15,

the Trustee filed a notice of appeal to the district court.2 We

1The Western District of Washington’s Bankruptcy Local Rule 9021-1

provides that “[u]nless the court directs otherwise, all orders, findings of

fact and conclusions of law, and judgments shall be prepared by the prevailing party.” 

2The Trustee appealed both the July 2002 ruling and the denial of the

motion to reconsider to the district court. The district court found that it

lacked jurisdiction over the July 2002 ruling because no written order setting forth the judgment had been entered. The Trustee does not challenge

that determination on appeal to this Court. Accordingly, we limit our analysis to the motion to reconsider, which formed the basis for the district

court’s decision. 

IN RE: ONECAST MEDIA 1969
raised the issue of the timeliness of the motion to reconsider

sua sponte at oral argument, neither party having raised the

issue in briefs or oral argument. 

[1] A timely motion for reconsideration is governed by

Federal Rule of Civil Procedure 59(e). See Bestran Corp. v.

Eagle Comtronics, Inc., 720 F.2d 1019, 1019 (9th Cir. 1983);

see also FED. R. BANKR. P. 9023 (applying Rule 59 to bankruptcy cases). A Rule 59(e) motion must be filed within ten

days after entry of judgment. See also W.D. WASH. BANKR. R.

9013-1(h) (stating that such motions must be filed within ten

days after entry of judgment or order). Here, no written judgment or order was entered and the motion for reconsideration

was filed almost eight months after the bankruptcy court’s

oral ruling. 

Federal Rule of Civil Procedure 58 defines when entry of

judgment has occurred. See also FED. R. BANKR. P. 9021

(applying Rule 58 to bankruptcy proceedings). At the time of

the bankruptcy court’s ruling and until December 1, 2002,

Rule 58 did not limit the time for filing a motion for reconsideration when no separate written judgment has been entered.

See Carter v. Beverly Hills Sav. & Loan Ass’n, 884 F.2d

1186, 1189-90 (9th Cir. 1989) (holding that a notation on the

docket indicating court’s decision, without a separate written

order or judgment, did not start time for post-judgment

motion). On December 1, 2002, an amendment of Rule 58

took effect, providing that where no separate written judgment was entered, the entry of judgment would occur “when

150 days have run from entry in the civil docket under Rule

79(a).” FED. R. CIV. P. 58(b)(2)(B). The court’s ruling that it

lacked jurisdiction over the letter of credit claim was entered

on the bankruptcy docket on August 6, 2002. The motion to

reconsider, filed March 10, 2003, was therefore untimely

under the amended Rule. 

The order of the Supreme Court amending Rule 58 states

the amendment “shall govern in all proceedings in civil cases

1970 IN RE: ONECAST MEDIA
thereafter commenced and, insofar as just and practicable, all

proceedings then pending.” 207 F.R.D. 50, 53 (2002). Ordinarily, we would proceed to determine whether application of

the amended Rule to this case is just and practicable. See In

re Kaypro, 218 F.3d at 1077; Schroeder v. McDonald, 55

F.3d 454, 459-60 (9th Cir. 1995).3

[2] Here, however, there is no need to consider the application of Rule 58 as amended to this case. Under Kontrick v.

Ryan, 540 U.S. 443 (2004), time constraints contained in the

bankruptcy rules are claim-processing rules and do not affect

federal subject matter jurisdiction. In Kontrick, a creditor

failed to object to the debtor’s discharge within the sixty-day

time limit set by Federal Rule of Bankruptcy Procedure 4004.

Id. at 456-57. Rule 9006 allows extension of the Rule 4004

time limit only to the extent permitted by Rule 4004. When

the creditor in Kontrick did raise an objection, the debtor

responded by addressing the merits of the objection, and did

not raise the timeliness issue until later. Id. at 449, 451. The

Court held that the rule limiting the time for filing an objection was a claim-processing rule that did not implicate subject

matter jurisdiction and that the debtor’s failure to timely

assert it resulted in a forfeiture under the rule.4Id. at 456-59.

Rule 59 is as much a claim-processing rule as the rule at issue

in Kontrick. See also Eberhart v. United States, 126 S. Ct.

403, 407 (2005) (holding that the time limit to move for a new

trial under Federal Rule of Criminal Procedure 33(b)(2) is

claim-processing rule forfeited by government’s failure to

timely raise it); Brickwood Contractors, Inc. v. Datanet

3

In Ford v. MCI Communications Corp. Health & Welfare Plan, 399

F.3d 1076, 1080-81 (9th Cir. 2005), the court, without discussion, applied

the 150-day rule to a pending case and found that the notice of appeal had

been timely filed. 

4

“Characteristically, a court’s subject-matter jurisdiction cannot be

expanded to account for the parties’ litigation conduct; a claim-processing

rule, on the other hand, even if unalterable on a party’s application, can

nonetheless be forfeited if the party asserting the rule waits too long to

raise the point.” Kontrick, 540 U.S. at 456. 

IN RE: ONECAST MEDIA 1971
Eng’g, Inc., 369 F.3d 385, 396 (4th Cir. 2004) (en banc)

(finding that Rule 11’s safe harbor provisions are claimprocessing rules that are forfeited if not timely raised). 

[3] As neither the amendment to Rule 58, nor any timeliness challenge to the motion for reconsideration was raised by

the Landlord in its briefs, we consider the timeliness issue forfeited. 

II. REJECTION OF THE LEASE

The Landlord contends that the Trustee’s rejection of the

lease eliminated any rights of the Trustee under the lease and

removes it from the bankruptcy estate and thus from the jurisdiction of the bankruptcy court. This contention is beside the

point. The Trustee’s suit is for the Landlord’s breach of the

lease based on its retention of funds from the security deposit,

after drawing down the letter of credit, to which it was not

entitled. 

[4] Section 365 of the Bankruptcy Code provides that a

trustee may assume or reject an executory contract or unexpired lease. 11 U.S.C. § 365(a) (2000). A rejection of an

unexpired lease removes the lease from the bankruptcy estate,

and “constitutes a breach of such contract or lease” that is

effective immediately before the petition for bankruptcy.

§ 365(g). “ ‘[R]ejection of an executory contract serves two

purposes. It relieves the debtor of burdensome future obligations while he is trying to recover financially and it constitutes

a breach of a contract which permits the other party to file a

creditor’s claim.’ ” In re Rega Props., Ltd., 894 F.2d 1136,

1140 (9th Cir. 1990) (quoting In re Norquist, 43 B.R. 224,

225 (Bankr. E.D. Wash. 1984)); see also In re Pac. Express,

Inc., 780 F.2d 1482, 1486 n.3 (9th Cir. 1986). 

[5] While rejection of a lease prevents the debtor from

obtaining future benefits of the lease (such as ongoing possession of leased premises), it does not rescind the lease or defeat

1972 IN RE: ONECAST MEDIA
any pending claims or defenses that the debtor had in regard

to that lease. See 3 COLLIER ON BANKRUPTCY § 365.09[1] (Alan

N. Resnick & Henry J. Sommer eds., 15th rev. ed. 2005)

(“Rejection does not . . . affect the parties’ substantive rights

under the contract or lease, such as the amount owing or a

measure of damages for breach and does not waive any

defenses to the contract.”). 

According to 11 U.S.C. § 365(g), the rejection of

Debtor’s unexpired lease constitutes a pre-petition

breach of the lease agreement leaving Creditor with

potential remedies under applicable state law. The

statutory breach of contract simply put the estate in

the position of a breaching party to the executory

contract. Rejection under the Bankruptcy Code did

not divest the estate from the breaching party’s rights

under the terms of the contract and applicable state

law. 

In re Thompson-Mendez, 321 B.R. 814, 819 (Bankr. D. Md.

2005); see also In re G.I. Indus., Inc., 204 F.3d 1276, 1281-

82 (9th Cir. 2000) (allowing the debtor, after rejection, to

raise the invalidity of the contract as a defense to creditor’s

claims); In re Murphy, 694 F.2d 172, 174 (8th Cir. 1982)

(“rejection of an executory contract in accordance with applicable provisions of the Bankruptcy Act is not the equivalent

of rescission”); In re Lavigne, 183 B.R. 65, 72 (Bankr.

S.D.N.Y. 1995). The rejection of the lease here does not bar

the Trustee’s breach of contract action to recover the balance

of the security deposit. 

III. LETTER OF CREDIT

The district court held that the bankruptcy court erred in its

July 2002 ruling, and therefore abused its discretion when it

denied the motion to reconsider. On appeal, the Landlord contends that the district court erred in reaching the merits of the

bankruptcy court’s July 2002 ruling and not limiting its analyIN RE: ONECAST MEDIA 1973
sis to the motion to reconsider. We disagree. While the denial

of a motion to reconsider is reviewed for abuse of discretion,

a court abuses its discretion if the legal conclusions underlying the court’s determination are clearly erroneous. McDowell, 197 F.3d at 1255. 

[6] Letter of credit transactions involve three relationships:

that of the bank to its customer who purchases the letter of

credit; that of the bank to the beneficiary to whom it makes

a promise to pay; and finally, that between the customer and

the beneficiary. See Kenney v. Read, 997 P.2d 455, 458

(Wash. Ct. App. 2000). Under the so-called principle of independence, each of those three transactions must be treated

separately. 1 RICHARD A. LORD, WILLISTON ON CONTRACTS

§ 2:23 (4th ed. 1999). This case does not involve the first two

relationships. There is no issue concerning the bank’s performance under the letter of credit. Indeed, the Landlord, the

beneficiary, has drawn down the full amount of the letter of

credit. What is at issue here is simply the controversy between

the Landlord and the Trustee over how much of the funds

held by the Landlord it is entitled to retain. Following OneCast’s default under the lease, the Landlord drew down the

entire letter of credit as the security deposit. The Trustee now

seeks to recover so much of the security deposit as exceeded

the Landlord’s damages. The Trustee’s interest in those funds

is property of the estate, 11 U.S.C. § 541(a)(1) (2000), and

thus within the bankruptcy court’s jurisdiction. In re Kaiser

Group Int’l Inc., 399 F.3d 558, 566 (3d Cir. 2005); In re Graham Square, Inc., 126 F.3d 823, 828 (6th Cir. 1997) (“It is

one thing to attempt to prevent the distribution of the proceeds

of a letter of credit, an attempt the doctrine of independence

is designed to prevent; but it is quite another to bring an

action on the underlying contract that created the letter of

credit.”); In re Papio Keno Club, Inc., 247 B.R. 453, 460

(B.A.P. 8th Cir. 2000) (“The fact that Debtor seeks the return

of funds that are proceeds of a letter of credit does not negate

the breach of contract claim on the underlying obligation.”).5

5The cases cited by the Landlord are not apposite. All involved situations where a debtor or trustee challenged or sought to enjoin payment by

1974 IN RE: ONECAST MEDIA
Because the bankruptcy court committed clear error in holding that it had no jurisdiction, its denial of the motion to

reconsider was an abuse of discretion. See McDowell, 197

F.3d at 1255. 

CONCLUSION

For the reasons stated, the district court’s order is

AFFIRMED.

the bank to the beneficiary. In re Compton Corp., 831 F.2d 586, 589 (5th

Cir. 1987) (“a bankruptcy trustee is not entitled to enjoin a post-petition

payment of funds under a letter of credit from the issuer to the beneficiary,

because such a payment is not a transfer of debtor’s property”), modified

on reh’g, 835 F.2d 584 (5th Cir. 1988); In re Page, 18 B.R. 713, 716

(D.D.C. 1982); In re Farm Fresh Supermarkets of Md., Inc., 257 B.R. 770,

772 (Bankr. D. Md. 2001) (challenging validity of post-petition draw on

letter of credit); In re Baja Boats, Inc., 203 B.R. 71, 74 (Bankr. N.D. Ohio

1996) (“A trustee cannot enjoin the post-petition payment of a letter of

credit because such a payment is not a transfer of the debtor’s property.”);

In re Ill.-Cal. Express, Inc., 50 B.R. 232, 234-35 (Bankr. D. Colo. 1985)

(arguing that draw on letter of credit violated automatic stay). 

IN RE: ONECAST MEDIA 1975