FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

In re: CELLULAR 101, INC., 

Debtor,

PATRICK T. LOWERY; CELLULAR No. 06-55779

101, INC., BAP No. Appellants,  CC-05-01093-HBK

v. OPINION

CHANNEL COMMUNICATIONS, INC.;

JOHN PRICE; UNITED STATES

TRUSTEE,

Appellees. 

Appeal from the Ninth Circuit

Bankruptcy Appellate Panel

Klein, Brandt, and Haines, Bankruptcy Judges

Argued and Submitted

February 15, 2008—Pasadena, California

Filed August 21, 2008

Before: Stephen S. Trott, Richard R. Clifton, and

Consuelo M. Callahan, Circuit Judges.

Opinion by Judge Clifton

11311
COUNSEL

Timothy J. Lowery (argued); William E. Winfield, Susan M.

Seemiller, Nordman Cormany Hair & Compton LLP, Oxnard,

California, for the appellants. 

Kenneth P. Roberts (argued), Kenneth P. Roberts, APLC,

Woodland Hills, California, for the appellees. 

OPINION

CLIFTON, Circuit Judge: 

The question posed by this case is whether a party’s failure

to timely inform the court of appeals of a settlement that it

IN RE: CELLULAR 101 11313
believes disposes of a pending appeal precludes the party

from asserting the affirmative defense of settlement and

release in a later proceeding. Over its objection, Chapter 11

debtor Cellular 101, Inc. was ordered to pay an administrative

claim of approximately $200,000. Cellular 101 appealed the

order to this court. While the appeal was pending, Cellular

101 entered into a settlement agreement that it believed

released the claim. Rather than advise the court of appeals of

the settlement, though, Cellular 101 continued to pursue its

appeal on other grounds. That effort proved unsuccessful, as

we affirmed the award. After it lost on appeal, Cellular 101

tried to fend off payment of the award by raising a settlement

and release defense. The bankruptcy court and the Bankruptcy

Appellate Panel (BAP) both concluded that it was too late for

Cellular 101 to unveil that argument and ordered disbursement of funds to pay the administrative claim. We agree and

affirm, answering “Yes” to the question posed above. 

I. Background

This case arises out of a bankruptcy court order in 2001

awarding $206,317.60 to Channel Communications, Inc. and

John Price from the estate of Cellular 101, for attorneys’ fees

and costs incurred in connection with Cellular 101’s Chapter

11 proceedings. The details of that award are not necessary

for resolution of the current appeal, but some understanding

of the relationship among the players and the genesis of the

award may be helpful. 

As its name suggests, Cellular 101 sold wireless telephone

services and equipment in Santa Barbara, California. It did so

as an agent of Channel, which was an authorized AT&T wireless services dealer. Cellular 101 was thus a subdealer of

AT&T wireless services in the area. At the time the relevant

events began, Channel was entirely owned by John Price and

his wife. Cellular 101 had a right of first refusal if Price sold

Channel. 

11314 IN RE: CELLULAR 101
AT&T sought to terminate its contract with Channel, complaining that Channel and Cellular 101 engaged in improper

business practices. To resolve their dispute, Price and AT&T

agreed that Price would sell a controlling interest in Channel

to AT&T. AT&T and Channel took the position that the sale

would not trigger Cellular 101’s right of first refusal because

it would involve a transfer of only 80 percent of Channel’s

shares, and they left Cellular 101 out of the deal. Cellular 101

saw things differently and sued AT&T in state court for interference with its business. Cellular 101 also filed a petition for

reorganization under Chapter 11 in bankruptcy court. 

Once in bankruptcy court, Cellular 101 failed to present a

reorganization plan. After the statutory period of exclusivity

expired, Price, Channel, and AT&T jointly filed a reorganization proposal that permitted the partial sale of Channel to

AT&T to go forward and included a payment to Cellular 101

of nearly $2 million from the proceeds. The plan also permitted Cellular 101 to continue to prosecute its lawsuit against

AT&T. The bankruptcy court approved the plan over Cellular

101’s objections. 

Shortly thereafter, Channel and Price filed an administrative priority claim seeking $495,252.83 in attorneys’ fees and

costs pursuant to 11 U.S.C. § 503(b) for their “substantial

contribution” to Cellular 101’s reorganization. The bankruptcy court granted the claim, in a reduced amount, over the

objection of Cellular 101. It awarded $175,000 in fees and

$31,317.60 in expenses, for a total of $206,317.60. Cellular

101 appealed to the district court, which affirmed. Cellular

101 then filed its first appeal to this court. See Cellular 101,

Inc. v. Channel Commc’ns, Inc. (In re Cellular 101, Inc.), 377

F.3d 1092 (9th Cir. 2004). 

After briefing, but before oral argument, Cellular 101 executed a settlement agreement with AT&T, resolving the state

court lawsuit. According to Cellular 101, the broad language

of the agreement’s irrevocable release of all claims against

IN RE: CELLULAR 101 11315
Cellular 101 held by AT&T, its subsidiaries, predecessors, or

affiliates, also encompassed the administrative claim of Channel and Price against Cellular 101.1

 Cellular 101 did not

inform this court of the settlement, however, or argue to us

that the settlement released the administrative claim that was

the subject of the appeal. Instead, the questions Cellular 101

presented on appeal concerned only the statutory basis for the

claim. Id. at 1094. Specifically, Cellular 101 argued that Price

and Channel were ineligible to recover fees and costs under

11 U.S.C. § 503(b) for their assistance in Cellular 101’s reorganization because (1) Price was not a “creditor” of the estate,

(2) Channel did not “substantially contribute” to the reorganization plan, and (3) Price and Channel acted in their own self

interest. Id. at 1095-98. Unaware of the settlement agreement

or of its potential impact on the dispute, we issued a published

opinion considering and rejecting Cellular 101’s arguments

and affirming the bankruptcy court’s award in full. Id.

Shortly after our decision, Price and Channel filed a motion

with the bankruptcy court to disburse the funds held to pay

their administrative claim. At that point Cellular 101 asserted

that the claim had been released by its agreement with AT&T.

In an oral ruling, the bankruptcy court held that the AT&T

settlement agreement did not apply to the administrative claim

and ordered disbursement of the funds. The court also noted

that, if the release did apply to the administrative claim, as

Cellular 101 asserted, then the prior appeal was 

moot by the time that it got to the Ninth Circuit for

oral argument, [and the argument] certainly could

have been and should have been raised there. If this

ultimately goes back up to the Ninth Circuit, I won1Cellular 101 offered a number of theories to explain why AT&T had

the power to release Price’s interest in the claim, including (1) that Price

was a predecessor in interest or affiliate of AT&T and (2) that Channel

had become a subsidiary of AT&T and the claim was a joint claim of Price

and Channel subject to release by either joint claimant. 

11316 IN RE: CELLULAR 101
der what kind of reception it would get when the

Ninth Circuit finds out, “Well, you were rolling the

dice to see if the judge on — below would get

reversed. Otherwise, you’ve got another arrow in

your quiver.” I think you have to shoot all the arrows

at one time. 

Cellular 101 appealed again, but chose to present its appeal

to the BAP rather than to the district court. The BAP affirmed

the bankruptcy court’s disbursement order, declining to reach

the merits of Cellular 101’s argument that its settlement with

AT&T released Channel and Price’s joint administrative

claim on behalf of Price. It simply held that Cellular 101 had

an obligation to raise the release issue when it was before the

Ninth Circuit previously because “the alleged release would

have mooted the appeal.” The BAP concluded that Cellular

101 had therefore waived the argument. Cellular 101 petitioned for rehearing, arguing that a party cannot waive a

mootness defense because it is jurisdictional. The BAP denied

the petition, stating that Cellular 101 had not raised a mootness defense, only the non-jurisdictional affirmative defense

of settlement and release. Cellular 101 timely appealed. 

II. Discussion

We review decisions of the BAP de novo. Price v. U.S. Tr.

(In re Price), 353 F.3d 1135, 1138 (9th Cir. 2004); Christian

Life Ctr. Litig. Def. Comm. v. Silva (In re Christian Life Ctr.),

821 F.2d 1370, 1373 (9th Cir. 1987). We review the bankruptcy court’s conclusions of law de novo and its factual findings for clear error. See Price, 353 F.3d at 1135; see also

Salazar v. McDonald (In re Salazar), 430 F.3d 992, 994 (9th

Cir. 2005). 

The litigation over this administrative claim has been going

on since 2001, and the parties have fought their way over the

issue from the bankruptcy court to this court twice, passing

through the district court and the BAP one time each along

IN RE: CELLULAR 101 11317
the way. As a result, the matter has now been considered by

no fewer than eleven judges and is the subject of two published opinions of this court. Cellular 101 contends that it has

followed proper procedure and that it was appropriate for it to

wait to raise its settlement defense when it did. We disagree.

[1] The Supreme Court has held that all counsel have a

duty “to bring to the federal tribunal’s attention, without

delay, facts that may raise a question of mootness.” Arizonans

for Official English v. Arizona, 520 U.S. 43, 68 n.23 (1997)

(internal quotations, citations and emphasis omitted). According to the argument now made by Cellular 101, its settlement

with AT&T released Channel and Price’s administrative

claim and rendered the litigation moot. That happened while

Cellular 101’s first appeal was pending before this court, as

Cellular 101 was necessarily aware. Cellular 101 had an obligation to inform the court of the settlement and its belief that

the claim had been released. 

[2] The obligation to inform the court of a potential settlement is of such critical importance to the maintenance of

orderly proceedings and to the prevention of needless delay

that a lawyer who fails to fulfill that obligation may be personally subject to sanctions. See Gould v. Bowyer, 11 F.3d 82,

84 (7th Cir. 1993) (“[I]n order to spare busy courts unnecessary work, parties must advise a court when settlement is

imminent. . . . The duty is implicit in the characterization of

lawyers as officers of the court, and a breach of it therefore

opens a lawyer to sanctions.”) (citation omitted); see also

DHX, Inc. v. Allianz AGF MAT, Ltd., 425 F.3d 1169, 1174-75

(9th Cir. 2005) (Beezer, J., concurring) (noting that “[w]e are

engaged to decide live cases or controversies as presented by

the attorneys of record, and it is not for a court to smoke out

who settled with whom,” and that the “failure to promptly disclose” complete and accurate settlement information is “sanctionable conduct”). A party claiming the benefit of a

settlement is no less accountable. 

11318 IN RE: CELLULAR 101
[3] Cellular 101’s current appeal rests upon the premise

that the AT&T agreement released the administrative claim.

But if that is true now, it was true when Cellular 101 appeared

before this court the first time. Even if we assume that Cellular 101 knew that Channel and Price would contest the assertion that the AT&T agreement released their claim, Cellular

101 still should have brought the agreement to the court’s

attention. If the court ultimately concluded that the claim was

released, the disclosure would have obviated the need for the

court to resolve the other issues raised in the first appeal. At

a minimum, knowledge of the agreement and the parties’

arguments would have permitted the court to determine, logically and properly, which issues it needed to reach and in

what order they should be addressed. Cellular 101 chose,

instead, to arrogate to itself the power to make those judgments. Cellular 101 elected to try to win its appeal with the

arguments it had already briefed, presumably hoping that if it

lost, it could try for a second bite at the apple by raising the

release defense afterwards. Regardless of Cellular 101’s

motives, we cannot permit the court to be subject to such

manipulation. We conclude that by failing to raise the release

issue in the prior appeal, Cellular 101 waived its right to

assert the defense in subsequent proceedings. 

[4] Settlement and release is an affirmative defense and is

generally waived if not asserted in the answer to a complaint.

See FED. R. CIV. P. 8(c) (“In responding to a pleading, a party

must affirmatively state any avoidance or affirmative defense,

including: . . . release”); Metcalf v. Golden (In re Adbox, Inc.),

488 F.3d 836, 841 (9th Cir. 2007).2 Even though Cellular 101

2Although, consistent with our prior decisions, we use the term waiver

here to describe the loss of an affirmative defense through the failure to

raise it in a timely manner, a more accurate term may be forfeiture. See

United States v. Olano, 507 U.S. 725, 731 (1993) (holding that “a constitutional right, or a right of any other sort, may be forfeited in criminal as

well as civil cases by the failure to make timely assertion of the right

before a tribunal having jurisdiction to determine it”) (internal quotations

IN RE: CELLULAR 101 11319
could not have asserted the defense at the pleading stage

because its settlement with AT&T did not occur until Cellular

101’s first appeal was already pending, Cellular 101 had an

opportunity and an obligation to raise the issue at that time

because the purported release, in its view, mooted the appeal.

[5] We have held that we “need not and do not consider a

new contention that could have been but was not raised on the

prior appeal.” Munoz v. County of Imperial, 667 F.2d 811,

817 (9th Cir. 1982). Permitting a case to proceed to a decision

on the merits before asserting a previously available defense

“undermines the integrity of the judicial system,” “wastes

judicial resources,” and “imposes substantial costs upon the

litigants.” Hill v. Blind Indus. & Servs., 179 F.3d 754, 756

(9th Cir. 1999); see also Fogel v. Chestnutt, 668 F.2d 100,

109 (2d Cir. 1981) (Friendly, J.) (“It would be absurd that a

party who has chosen not to argue a point on a first appeal

should stand better as regards the law of the case than one

who had argued and lost.”). 

We already decided that Cellular 101 is required to pay

Price and Channel’s administrative claim, when it affirmed

the bankruptcy court’s order. Cellular 101, Inc., 377 F.3d at

1098. That decision has achieved finality. It is the law of the

case, and Cellular 101 may not now attack it on a ground that

it had a fair opportunity to argue previously. Munoz, 667 F.2d

at 817.3

and citations omitted). The term forfeiture may also be more precise

because the “waiver” in this context need not be knowing or intentional.

See id. at 733 (clarifying that “[w]hereas forfeiture is the failure to make

the timely assertion of a right, waiver is the intentional relinquishment or

abandonment of a known right”) (internal quotations and citations omitted); see also Harris v. Sec’y, U.S. Dep’t of Veterans Affairs, 126 F.3d

339, 343 n.2 (D.C. Cir. 1997) (discussing the potential inaccuracy of the

term waiver and holding that “[t]he failure to plead need not be intentional

for the party to lose its right to raise the defense”). 

3Cellular 101 maintains that the failure to raise an issue in a prior appeal

does not result in waiver, citing U-Haul International, Inc. v. Jartran, Inc.,

11320 IN RE: CELLULAR 101
Cellular 101 contends that it properly waited until its case

was remanded to the bankruptcy court before raising its settlement and release defense because it accurately anticipated that

Price and Channel would contest the applicability of the

release to their claim and because the viability of the defense

turned on facts not present in the appellate record. It argues

that the defense therefore could not have been raised previously because it did not fit within the three exceptions to the

general rule that appellate courts will not consider an issue

raised for the first time on appeal: (1) where “review is necessary to prevent a miscarriage of justice or to preserve the

integrity of the judicial process,” (2) “when a new issue arises

while appeal is pending because of a change in the law,” or

(3) “when the issue presented is purely one of law and either

does not depend on the factual record developed below, or the

pertinent record has been fully developed.” Bolker v. Comm’r,

760 F.2d 1039, 1042 (9th Cir. 1985). Cellular 101 insists that

even if it had raised the release issue during the prior appeal,

we would have been required to remand the matter for factual

findings, implying that its failure to inform the court of the

settlement agreement was harmless and should be without

consequence. 

First, the above list of exceptions is not exhaustive. Appellate courts may always consider challenges to their jurisdiction, including any relevant factual developments, regardless

of whether the issue was raised below. See Lowry v. Barnhart,

329 F.3d 1019, 1024 (9th Cir. 2003) (discussing when a court

may look outside the district court record and noting that

“[c]onsideration of new facts may even be mandatory, for

example, when developments render a controversy moot and

793 F.2d 1034 (9th Cir. 1986). U-Haul involved a prior interlocutory

appeal, however, where the court’s jurisdiction was limited to consideration of a specific issue. Id. at 1037-38. Accordingly, the other issues

raised in the later appeal could not have been raised previously, because

the court of appeals did not have jurisdiction over them, and the appellant,

unlike Cellular 101, did not forgo any opportunity to present its arguments

or defenses at an earlier time. Id.

IN RE: CELLULAR 101 11321
thus divest us of jurisdiction”). That there actually be an

ongoing dispute to resolve is a prerequisite for jurisdiction.4

Second, the question of whether the release applied to Price

and Channel’s administrative claim was arguably “purely one

of law” capable of being resolved by this court without

remand for factfinding, and thus may have fallen within the

third exception identified above. Cellular 101 argues that

AT&T, through its ownership and control of Channel, may

have released the claim held jointly by Price and Channel

because California Civil Code § 1475 provides that a release

by one joint claimant entirely releases a jointly held debt.

Relying on Hurley v. Southern California Edison Co., 183

F.2d 125, 131 (9th Cir. 1950), Cellular 101 maintains that the

validity of the release turns on its knowledge at the time of the

AT&T agreement, including whether it had reason to know

that AT&T would not account to Price, and that factfinding

and further development of the record was therefore necessary. Had Cellular 101 apprised us of the AT&T settlement

during the first appeal, however, we might have held as a matter of law that the terms of the AT&T agreement were unambiguous and did not release Price and Channel’s

administrative claim. Alternatively, we could have concluded

that the provisions of California Civil Code § 1475, which

4We have held that we lack jurisdiction over cases in which all the parties have signed a settlement contract that we have interpreted as resolving

the issues on appeal. See, e.g., Lasar v. Ford Motor Co., 399 F.3d 1101,

1108-09 (9th Cir. 2005) (holding that a settlement applied only to the parties to the agreement); Exxon Corp. v. Heinze, 32 F.3d 1399, 1400, 1403

(9th Cir. 1994) (declining to issue an advisory opinion reviewing a district

court order resolving claims both parties agreed were later settled). 

Lest there be any doubt about the present appeal, we note that the parties continue to contest the applicability of the settlement agreement, of

which Price is not a signatory. Although Cellular 101 may have an argument that Price’s right to collect the administrative claim was extinguished

by that agreement, we are satisfied that a live dispute requiring adjudication of the parties’ respective rights persists and that we therefore continue

to have jurisdiction over the case. 

11322 IN RE: CELLULAR 101
pertain to obligations held by joint creditors, are simply inapplicable to joint administrative claims awarded in a bankruptcy proceeding. Indeed, it appears that, when the case was

actually remanded, the bankruptcy court rejected Cellular

101’s settlement and release argument on the merits without

reference to any newly discovered evidence and without making any findings regarding Cellular 101’s mental state. 

Third, and most importantly, regardless of the likelihood

that remand for factfinding might have been necessary, the

decision whether and when to remand the matter was one for

the court to make, not Cellular 101. Cellular 101 usurped the

decision as to how the case should be organized when it proceeded with the arguments it had already presented on appeal

and elected not to advise the court of an event which it

believed disposed of the claim. The bankruptcy court was correct in its assessment that, having taken its shot, Cellular 101

does not get another opportunity to reach into its quiver for

another arrow. Cellular 101 did not have the right to compel

the court to reach Cellular 101’s other arguments and to

devote considerable effort to writing a published opinion,

prior to ascertaining whether the parties had already resolved

their dispute. 

III. Conclusion 

[6] Cellular 101 breached its duty to timely inform the

court that it had reached a settlement with AT&T that it

understood potentially mooted its prior appeal. As a consequence of failing to timely raise the defense of settlement and

release, it waived or forfeited that defense. The BAP properly

affirmed the bankruptcy court’s order to disburse funds to pay

the administrative claim. 

AFFIRMED.

IN RE: CELLULAR 101 11323