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ORDERED PUBLISHED

UNITED STATES BANKRUPTCY APPELLATE PANEL

OF THE NINTH CIRCUIT

In re: ) BAP No. AZ-15-1279-KuJaJu

)

CRAIGHTON THOMAS BOATES, ) Bk. No. 2:14-bk-17115-GBN

)

Debtor. ) Adv. No. 2:15-ap-00269-GBN

______________________________)

)

DALE D. ULRICH, Chapter 7 )

Trustee, )

)

Appellant, )

)

v. ) ORDER ON MOTION FOR REHEARING

)

SCHIAN WALKER, P.L.C., )

)

Appellee. )

______________________________)

Before: KURTZ, JAIME1 and JURY, Bankruptcy Judges.

This panel has received and reviewed appellee Schian

Walker’s motion for rehearing filed pursuant to Rule 8022. In

the motion, Schian Walker raises a single point it claims this

Panel misapprehended. Contrary to this Panel’s ruling, Schian

Walker contends that, under the adversary proceeding retainer

agreement it entered into with Boates, the $60,000 flat fee was

supposed to constitute full advance payment not only for services

to be rendered but also for all litigation costs to be incurred.

Schian Walker has admitted that its form statement of

Billing Policies and Procedures is incorporated into every

FILED

JUL 08 2016

SUSAN M. SPRAUL, CLERK

U.S. BKCY. APP. PANEL

OF THE NINTH CIRCUIT

1Hon. Christopher D. Jaime, United States Bankruptcy Judge

for the Eastern District of California, sitting by designation.
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representation agreement it enters into, including the

November 5, 2014 letter agreement it entered into with Boates. 

Indeed, the letter agreement (prepared by Schian Walker) contains

a provision in which Boates is required to acknowledge that he

has read both the letter agreement and the Billing Policies and

Procedures statement and that he has agreed to both of them.

Along similar lines, the Billing Policies and Procedures

statement contains the following introductory paragraph: 

It is the policy of Schian Walker, P.L.C. (the “Firm”)

to provide this statement of Billing Policies and

Procedures (the “Policy”) to each of its clients,

together with a cover letter that defines the scope of

the representation and reflects any other agreed terms

that may be unique to a particular client or

representation (the “Engagement Letter”).

(Emphasis added.)

The Billing Policies and Procedures statement contains a

paragraph specifying that Boates is liable “for all out-of-pocket

costs incurred in connection with the matter.” Meanwhile, the

letter agreement never refers to costs at all. Instead, it

focuses exclusively on the services Schian Walker was promising

to provide in exchange for a flat fee of $60,000. For instance,

the letter agreement stated that Schian Walker was willing to

defend Boates in the anticipated nondischargeability litigation

for a flat fee of $60,000 and that the flat fee would cover “the

value of all work we will perform through the conclusion of the

Adversary Proceeding.” To reiterate, the letter agreement says

absolutely nothing about costs.

In our June 9, 2016 Opinion, we construed the parties’

contract as including an obligation by Boates to pay all

litigation costs. This construction was based on the seemingly

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unequivocal language on the face of the contract. This

construction also was based on the argument included in Ulrich’s

appeal brief that the legal services contract between Boates and

Schian Walker was an executory contract, in part, because of the

costs provision. Schian Walker’s responsive appeal brief

cursorily addressed the costs aspect of Ulrich’s executory

contract argument, but Schian Walker never explained how the

seemingly unequivocal language of the letter agreement could be

interpreted to address litigation costs when the letter agreement

never mentions them.

In its rehearing motion, Schian Walker in essence contends

that, when it referred in its letter agreement to a flat fee for

services to be rendered, it really meant a flat fee for services

to be rendered and for all litigation costs to be incurred. To

support this alternate construction of the parties’ contract,

Schian Walker relies for the first time upon extrinsic evidence,

which it claims demonstrates the parties’ true intent – that

Boates’ $60,000 advance payment would cover both fees and costs.

It is not necessary for us to resolve the question of

contract interpretation raised by Schian Walker’s rehearing

motion. Even if we were to conclude that Boates did not owe

Schian Walker any costs under the retainer agreement and even if

we were to conclude, based thereon, that the retainer agreement

was not an executory contract, this would not change the ruling

we made in our June 9, 2016 Opinion.

Contract rights held by the debtor on the date of his or her

petition filing are property of the bankruptcy estate regardless

of whether the rights are associated with an executory or non3
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executory contract. See Gordon v. Hines (In re Hines), 147 F.3d

1185, 1189 (9th Cir. 1998) (stating that a prepaid contractual

right to future legal services that “exists at the outset of the

bankruptcy case . . . becomes property of the debtor’s estate”).

In re Hines’s statement regarding the scope of bankruptcy

estate property, and the inclusion of contract rights within it,

is by no means novel. As early as 1984, the Ninth Circuit held

that prepetition contract rights are included within the

Bankruptcy Code’s definition of bankruptcy estate property. Rau

v. Ryerson (In re Ryerson), 739 F.2d 1423, 1425 (9th Cir. 1984);

see also Sliney v. Battley (In re Schmitz), 270 F.3d 1254, 1258

(9th Cir. 2001) (listing additional Ninth Circuit cases); Johnson

v. Taxel (In re Johnson), 178 B.R. 216, 218-19 (9th Cir. BAP

1995) (holding that proceeds of contracts rights arising from

prepetition sales contract were estate property).

The Ninth Circuit’s more recent decisions dealing with

contract rights in bankruptcy are consistent with In re Hines, In

re Ryerson and In re Johnson. See, e.g., Gladstone v. U.S.

Bancorp, 811 F.3d 1133, 1136 (9th Cir. 2016) (holding that

debtor’s rights arising from prepetition life insurance policies

were estate property); First Ave. W. Bldg., LLC v. James (In re

Onecast Media, Inc.), 439 F.3d 558, 563 (9th Cir. 2006) (opining

that trustee’s rejection of lease did not divest the bankruptcy

estate of whatever lease rights debtor was entitled to under the

lease and under applicable nonbankruptcy law as of the date of

the petition filing).

In our June 9, 2016 Opinion, we did not address the status

in bankruptcy of contract rights arising from non-executory

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contracts because we did not consider it necessary to our

resolution of the appeal. However, Schian Walker’s rehearing

motion has opened the door to our considering whether the result

would be the same for both executory contracts and non-executory

contracts. We hold that the result is the same based on the

Ninth Circuit case law set forth above.

Accordingly, to the extent we might have erred in holding

that the retainer agreement was executory, any such error was

harmless error, and we must ignore harmless error. Van Zandt v.

Mbunda (In re Mbunda), 484 B.R. 344, 355 (9th Cir. BAP 2012),

aff’d, 604 F. App’x 552 (9th Cir. 2015).

For the reasons set forth above, Schian Walker’s motion for

rehearing is hereby ORDERED DENIED.

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