FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

IN RE: ADAMSON APPAREL, INC.,

Debtor.

ALBERTA P. STAHL, CHAPTER 7

TRUSTEE OF ADAMSON APPAREL,

INC.,

Appellant,

v.

ARNOLD H. SIMON,

Appellee.

No. 12-57059

D.C. No.

2:11-cv-01204-

VAP

OPINION

Appeal from the United States District Court

for the Central District of California

Virginia Phillips, District Judge, Presiding

Argued and Submitted

December 11, 2014—Pasadena, California

Filed May 6, 2015

Before: Ronald Lee Gilman,* Susan P. Graber,

and Consuelo M. Callahan, Circuit Judges.

* The Honorable Ronald Lee Gilman, Senior United States Circuit Judge

for the Sixth Circuit, sitting by designation.
2 IN RE ADAMSON APPAREL, INC.

Opinion by Judge Gilman;

Dissent by Judge Graber

SUMMARY**

Bankruptcy

Affirming the district court’s affirmance of the

bankruptcy court’s judgment after a bench trial in an

adversary proceeding, the panel held that a corporate insider

who personally guaranteed his corporation’s loan is absolved

of any preference liability to which he might otherwise have

been subjected, where he had previously waived his

indemnification rights against the corporation, he had a bona

fide basis for doing so, and he took no subsequent actions to

negate the economic impact of that waiver.

The panel held that the insider did not have any

preference liability regarding a pre-petition payment of the

loan because, in light of his indemnification waiver, he was

not a creditor of the corporation, which was a chapter 7

debtor. The panel declined to follow a line of bankruptcy

court cases holding that an insider guarantor is subject to

preference liability where a transfer works to his benefit, even

if he has unconditionallywaived all claims against the debtor.

Dissenting, Judge Graber wrote that she would follow

every bankruptcy court to have decided the issue and hold

that insider-guarantors such as the insider here are creditors. 

** This summary constitutes no part of the opinion of the court. It has

been prepared by court staff for the convenience of the reader.
IN RE ADAMSON APPAREL, INC. 3

She also wrote that, in deciding that the waiver was valid, the

majority erred by making a finding regarding the purpose of

a payment made by the insider and in relying on a statement

made by counsel at oral argument.

COUNSEL

James K.T. Hunter (argued) and Malhar S. Pagay, Pachulski

Stang Ziehl & Jones LLP, Los Angeles, California, for

Appellant.

Leslie A. Cohen (argued) and J’aime K. Williams, Leslie

Cohen Law PC, Santa Monica, California, for Appellee.

OPINION

GILMAN, Circuit Judge:

This case presents an unresolved issue of bankruptcy law. 

The question is whether a corporate insider who personally

guaranteed his corporation’s loan is absolved of any

preference liability to which he might otherwise have been

subjected, where he had previously waived his

indemnification rights against the corporation, he had a bona

fide basis for doing so, and he took no subsequent actions to

negate the economic impact of that waiver. Bankruptcy

courts have split on this issue, and neither party has been able

to cite to any district- or appellate-court decision addressing

the question.
4 IN RE ADAMSON APPAREL, INC.

Both the bankruptcy court and the district court below

ruled in favor of the corporate insider. For the reasons set

forth below, we AFFIRM the judgment of the district court.

I. BACKGROUND

A. The loan, pledges, and guaranties

Adamson Apparel, Inc. (Adamson) manufactures and

sells clothing and accessories. On April 18, 2002, Adamson

took out a multimillion-dollar loan from CIT Group

Commercial Services, Inc. (CIT). To secure the loan,

Adamson granted CIT a lien on its inventory and accounts

receivable. Arnold H. Simon, Adamson’s president and

CEO, subsequentlyentered into two separate agreementswith

CIT to guarantee the loan: a Cash Collateral Pledge

Agreement (the Pledge) and a Limited Guaranty (the

Guaranty). In these agreements, Simon took responsibility

for Adamson’s debt in the event that Adamson was unable to

fully repay the loan. Simon would ordinarily have been

entitled to have Adamson reimburse him for any amount that

he was obligated to pay on the corporation’s behalf to settle

the loan with CIT, but the agreements waived that right to

indemnification. (As used throughout this opinion, Simon’s

right to “indemnification” encompasses his rights to

subrogation,reimbursement, or anyother form of repayment.)

Over the next 18 months, the Pledge and the Guaranty

were revised several times. Both agreements were initially

signed on November 12, 2002. The Guarantywas updated on

February 11, 2003, then “amended and restated” on April 9,

2003. Both documents were further “amended and restated”

on April 25, 2003, then updated again on August 5, 2003. A
IN RE ADAMSON APPAREL, INC. 5

letter dated December 2, 2003 increased the amount that had

been guaranteed in the August 5, 2003 update of the Pledge.

Toward the end of 2003, an entity known as BP Clothing

L.L.C. purchased a large amount of merchandise from

Adamson. On December 18, 2003, Adamson instructed BP

Clothing to transfer the purchase price (specifically,

$4,989,934.65) to CIT in partial satisfaction of the debt owed

by Adamson to CIT, this being the very debt guaranteed by

Simon. Adamson filed for bankruptcy under Chapter 11 of

the Bankruptcy Code nine months later. On or about March

31, 2004, Simon paid the balance of the loan, totaling over

$3.5 million, from his personal funds.

B. Lower-court proceedings

After Adamson filed for Chapter 11 bankruptcy in

September 2004, the Committee of Unsecured Creditors (the

Committee) was appointed to represent the interests of

Adamson’s unsecured creditors. The Committee filed this

adversary action against Simon under a preference-liability

theory. Preference liability is “a mechanism that allows [a]

debtor or trustee to recover from creditors who received

payments in the weeks or months prior to the bankruptcy so

that they can be distributed to all bankruptcy estate creditors

in accordance with their priority.” Leslie A. Cohen & J’aime

K. Williams, Guarantor Preference Liability, 31 Cal. Bankr.

J. 795, 795 (2011). The Committee sought to recover from

Simon the $4,989,934.65 paid by BP Clothing to CIT in

December 2003, arguing that Simon was a corporate insider

who received a preference because he had guaranteed the

loan from CIT. Any reduction in that debt was therefore to

his benefit.
6 IN RE ADAMSON APPAREL, INC.

In June 2007, Simon filed a motion for summary

judgment, contending that because he had waived his right to

claim indemnification from Adamson, he was not a creditor

and therefore not subject to preference liability. The

bankruptcy court granted that motion the following month. 

It held that Simon had fully waived his right to

indemnification, which eliminated his status as a creditor for

preference-liabilitypurposes. The Committee appealed to the

district court.

The district court reversed the grant of summary judgment

and remanded the case to the bankruptcy court for further

factual development. It pointed out that an ambiguity existed

between the Pledge and the Guaranty as to whether Simon

had fully and irrevocablywaived his right to indemnification. 

The case was remanded to the bankruptcy court for a

resolution of this issue.

A bench trial in bankruptcy court took place in September

2010. At trial, Simon testified that he understood at all times

that he would never have any right to seek indemnification

from Adamson for any funds that he expended to settle its

debt to CIT. He told the court that CIT had required him to

include the indemnification waiver in the Pledge and the

Guaranty, although his own preference would have been to

retain the right to seek reimbursement. Simon also pointed

out that he had never filed a proof of claim in Adamson’s

bankruptcy case.

In addition to Simon’s testimony, the bankruptcy court

took a plethora of documentaryevidence under consideration. 

The court entered its decision in favor of Simon in December

2010. It held that the Committee had failed to carry its

burden of establishing Simon’s “creditor” status under
IN RE ADAMSON APPAREL, INC. 7

11 U.S.C. §§ 101(10) & 547(b). Simon’s testimony as to his

understanding of his rights under the Pledge and the

Guaranty, together with his failure to file a proof of claim in

Adamson’s bankruptcy case, defeated the Committee’s

arguments based on the ambiguous wording of the

documents. The bankruptcy court subsequently entered

judgment in favor of Simon, holding that he was exempt from

preference liability because he was not a creditor of

Adamson.

The Committee again appealed to the district court, which

affirmed the judgment of the bankruptcy court in August

2012. It held that the bankruptcy court did not commit clear

error in concluding that the Committee had failed to establish

that Simon was a creditor of Adamson. This timely appeal

followed, with the duly appointed Trustee being substituted

for the Committee after Adamson’s bankruptcy case was

converted from Chapter 11 to Chapter 7.

II. ANALYSIS

A. Standard of review

“We review de novo the district court’s decision on

appeal from the bankruptcy court, applying the same

standards applied by the district court, without deference to

the district court.” In re Thorpe Insulation Co., 677 F.3d 869,

879 (9th Cir. 2012) (citation omitted). The bankruptcy

court’s findings of fact are reviewed under the clear-error

standard, and its conclusions of law are reviewed de novo. 

Id. The parties agree that New York state law governs the

substance of this case in accordance with the choice-of-law

provisions in the contracts at issue.
8 IN RE ADAMSON APPAREL, INC.

B. Simon’s status as an alleged creditor of Adamson

Title 11 U.S.C. § 547(b)(1) requires that the transfer of

assets in question must be “to or for the benefit of a creditor”

in order for preference liability to attach. In relevant part, a

creditor is defined in § 101(10) of the Bankruptcy Code as an

“entity that has a claim against the debtor that arose at the

time of or before the order for relief concerning the debtor.” 

11 U.S.C. § 101(10). A claim is further defined as a “right to

payment” or a “right to an equitable remedy for breach of

performance if such breach gives rise to a right to payment.” 

11. U.S.C. § 101(5). The Trustee bears the burden of

establishing that Simon meets this definition, as well as

satisfying each of the other preference-liability requirements,

in order to prevail on its claim against him. 11 U.S.C.

§ 547(g); see also Universal Serv. Admin. Co. v. PostConfirmation Comm. of Unsecured Creditors of Incomnet

Commc’ns Corp., 463 F.3d 1064, 1070 (9th Cir. 2006).

1. The contracts at issue are ambiguous as to whether

Simon waived his indemnification right

In support of its argument that Simon retains a claim

against Adamson, the Trustee points to the Pledge documents

dated November 12, 2002 and April 25, 2003. These

documents provide that Simon “defers all statutory,

contractual, common law, equitable, and all other claims

against [Adamson],” including those for “subrogation,

reimbursement, exoneration, contribution, indemnification,

setoff or other recourse,” “[u]nless and until [CIT has]

received final payment and satisfaction in full” for the loan. 

The Trustee argues that simply deferring a claim does not

extinguish it, so that Simon retains a claim against Adamson

and is properly considered a creditor. It contends that these
IN RE ADAMSON APPAREL, INC. 9

Pledge documents were never superseded by any subsequent

document.

To counter this argument, Simon points out that his

November 12, 2002 Guaranty states that he “irrevocably

waives and agrees he will not exercise any and all rights

which he has or may have at any time . . . to assert any claim

against Adamson or any other party on account of payments

made under this Guaranty or otherwise, including . . . any and

all existing and future rights of subrogation, reimbursement,

exoneration, contribution, and/or indemnity.” That Guaranty

was executed on the same date as the November 12, 2002

Pledge.

As for the documents dated April 25, 2003, they do not

contain a clear waiver of the right of indemnification, but do

confirm that the amendment and reinstatement “shall not, in

any manner, be construed to constitute payment of, or impair,

limit, cancel or extinguish or constitute a novation in respect

of, the indebtedness and other obligations and liabilities of

Pledgor evidenced by or arising under the Existing

Guaranty.” The April 9, 2003 version of the Guaranty was in

place at the time that the Pledge was amended on April 25,

2003 and contains an indemnification waiver identical to the

one in the original November 12, 2002 Guaranty. An

identical waiver also appears in the August 5, 2003 update to

the Pledge.

This discrepancy between the deferral of indemnification

rights in the Pledge and the unconditional waiver of the same

rights in the Guaranty creates an ambiguity on the face of the

documents. “Ambiguity is determined by looking within the

four corners of the document, not to outside sources.” Kass

v. Kass, 696 N.E.2d 174, 180 (N.Y. 1998) (citing W.W.W.
10 IN RE ADAMSON APPAREL, INC.

Assocs. v. Giancontieri, 566 N.E.2d 639, 641–42 (N.Y.

1990)). “The entire contract must be reviewed and particular

words should be considered, not as if isolated from the

context, but in the light of the obligation as a whole and the

intention of the parties as manifested thereby.” Riverside S.

Planning Corp. v. CRP/Extell Riverside, L.P., 920 N.E.2d

359, 363 (N.Y. 2009) (internal quotation marks omitted). 

Where multiple documents exist in support of the same

transaction or purpose, the documents should generally be

interpreted as a single contract. BWA Corp. v. Alltrans Exp.

U.S.A., Inc., 493 N.Y.S.2d 1, 3 (N.Y. App. Div. 1985). 

“Whether an agreement is ambiguous is a question of law for

the courts.” Kass, 696 N.E.2d at 180 (citing Van Wagner

Adver. Corp. v. S&M Enters., 492 N.E.2d 756, 758 (N.Y.

1986)).

Here, the district court properly concluded that the

discrepancy discussed above creates an ambiguity as to

whether Simon’s right to indemnification was fully waived. 

One set of documents says that the right is simply deferred

until CIT has been fully paid, while the other set of

documents says that the waiver is unconditional. Because

these two positions are inconsistent, we find no error in the

district court’s remand of the case to the bankruptcy court to

resolve the ambiguity.

2. The bankruptcy court did not commit clear error in

finding that the waiver of Simon’s indemnification

rights was unconditional

When a contract is deemed ambiguous, its interpretation

becomes a question of fact, Mellon Bank, N.A. v. United Bank

Corp. of N.Y., 31 F.3d 113, 116 (2d Cir. 1994), and we review

that interpretation under the clear-error standard, Dist. Lodge
IN RE ADAMSON APPAREL, INC. 11

26, Int’l Ass’n of Machinists &Aerospace Workers, AFL-CIO

v. United Techs. Corp., 610 F.3d 44, 54 (2d Cir. 2010). Clear

error exists when, although there is evidence to support the

lower court’s conclusion, the reviewing court is left with the

“definite and firm conviction that a mistake has been made.” 

ASM Capital, LP v. Ames Dep’t. Stores, Inc. (In re Ames

Dep’t Stores, Inc.), 582 F.3d 422, 426 (2d Cir. 2009) (citing

United States v. U.S. Gypsum Co., 333 U.S. 364, 395 (1948)).

The district court was not left with such a conviction, nor

are we. In addition to seeing the unconditional waiver set

forth in the Guaranty, the bankruptcy court heard Simon’s

testimony that CIT had insisted on the waiver and that Simon

had never questioned its effectiveness. This testimony was

reinforced by the fact that Simon never filed a proof of claim

in the Adamson bankruptcy case. The bankruptcy court thus

had more than sufficient evidence to conclude that Simon had

fully waived his right of indemnification from Adamson.

3. Having fully waived hisright of indemnification and

taken no subsequent actions that would negate the

economic impact of that waiver, Simon has no claim

against Adamson and thus cannot be considered a

creditor

The Trustee offers no additional theory regarding any

claim that Simon might have against Adamson that would

cause Simon to meet the definition of a creditor as set forth in

the Bankruptcy Code. Instead, it urges this court to join

several bankruptcy courts in stepping away from the plain

text of the Code and subjecting an insider guarantor to

preference liability where a transfer works to his benefit, even

if he has unconditionallywaived all claims against the debtor. 

See Miller v. Greystone Bus. Credit II, L.L.C. (In re USA
12 IN RE ADAMSON APPAREL, INC.

Detergents, Inc.), 418 B.R. 533, 541–42 (Bankr. D. Del.

2009); Russell v. Jones (In re Pro Page Partners, LLC),

292 B.R. 622, 631–33 (Bankr. E.D. Tenn. 2003); Telesphere

Liquidating Trust v. Galesi (In re Telesphere Commc’ns,

Inc.), 229 B.R. 173, 176 n.3 (Bankr. N.D. Ill. 1999).

The above line of cases relied upon by the Trustee stems

from the Seventh Circuit’s decision in Levit v. Ingersoll Rand

Fin. Corp. (In re Deprizio), 874 F.2d 1186, 1194 (7th Cir.

1989), and Congress’s subsequent response to Deprizio in

1994. In principle, the Bankruptcy Code seeks to effect an

equitable distribution of a debtor’s assets to the debtor’s

various creditors through the Code’s statutory provisions and

the use of a bankruptcy trustee. A simple way to achieve that

goal in many situations is to collect all of a debtor’s assets at

the time of bankruptcy and apportion those assets ratably to

the creditors according to their priority. But Congress has

recognized that such a simple scheme would not be equitable

if creditors who sensed financial difficulty could demand

payment and have their demands fully satisfied in the period

leading up to the filing of a bankruptcy petition, leaving the

remaining creditors with a shortfall. See id. (describing this

reasoning in more detail).

To remedy that concern, Congress empowered the trustee

to set aside any transactions benefiting a creditor in the 90

days before the filing of a bankruptcy petition. See 11 U.S.C.

§ 547(b). Congress apparently decided that 90 days is an

adequate time for reasonablyalert creditors to notice potential

preferential treatment and force a debtor to either pay up or

face an involuntary bankruptcy petition.

But, as courts have noted and Congress has recognized,

“[i]nsiders pose special problems.” In re Deprizio, 874 F.2d
IN RE ADAMSON APPAREL, INC. 13

at 1195. The Bankruptcy Code defines insiders of a

corporation as any director, officer, general partner, or person

in control of the corporation, as well as any of their relatives. 

See 11 U.S.C. § 101(31)(B). The court in Deprizio

highlighted the particular complications that they cause as

follows:

Insiders will be the first to recognize that the

firm is in a downward spiral. If insiders and

outsiders had the same preference-recovery

period, insiders who lent money to the firm

could use their knowledge to advantage by

paying their own loans preferentially, then

putting off filing the petition in bankruptcy

until the preference period had passed.

In re Deprizio, 874 F.2d at 1195.

Congress responded to that concern by extending the

preference-recovery period to one year for transactions that

benefit insiders, where the insider is a creditor. The

Bankruptcy Code implements this policy through 11 U.S.C.

§ 547(b):

Except [for certain exceptions not relevant

here], the trustee may avoid any transfer of an

interest of the debtor in property (1) to or for

the benefit of a creditor; [and] . . . (4) made

(A) on or within 90 days before the date of the

filing of the petition; or (B) between ninety

days and one year before the date of the filing

of the petition, if such creditor at the time of

such transfer was an insider[.]
14 IN RE ADAMSON APPAREL, INC.

For ordinary transactions, that provision is

straightforward. But what happens when a lender makes a

loan to the debtor and, as part of the loan, an insider

personally guarantees the loan? May the trustee avoid

payments made to the lender during the extended preferencerecovery period? The Seventh Circuit in Deprizio held that,

by the plain text of the Bankruptcy Code, the answer is “yes”

—the longer preference-recovery period applies to those

payments. See In re Deprizio, 874 F.2d at 1200–01.

In so holding, the Seventh Circuit reasoned that “[a]

guarantor has a contingent right to payment from the debtor:

if Lender collects from Guarantor, Guarantor succeeds to

Lender’s entitlements and can collect from Firm. So

Guarantor is a ‘creditor’ in Firm’s bankruptcy.” Id. at 1190. 

Accordingly, the requirements of § 547(b) are met and the

longer preference-recovery period of one year applies to

payments on loans guaranteed by insiders. Other circuit

courts, including this one, soon adopted the Seventh Circuit’s

analysis in Deprizio. See, e.g., Official Unsecured Creditors

Comm. of Sufolla, Inc. v. U.S. Nat’l Bank of Or. (In re

Sufolla, Inc.), 2 F.3d 977, 986 (9th Cir. 1993).

Congress remedied the perceived inequity to innocent

lenders ensnared by Deprizio and its progeny in a 1994

amendment to the BankruptcyCode. Under that amendment,

which is still in effect, the extended recovery period applies

to payments made on loans guaranteed by insiders, but the

trustee may seek recovery only from the insider and not from

the lender. 11 U.S.C. § 550(c).

Two separate lines of cases developed in Deprizio’s

wake; one is relied upon by the Trustee and the other by

Simon. The caselaw favorable to Simon developed first, after
IN RE ADAMSON APPAREL, INC. 15

Deprizio was handed down but before the 1994 amendment

to the Bankruptcy Code. Those cases conclude that bona fide

indemnification waivers are valid and excuse an insider

guarantor from preference liability. See O’Neil v. Orix Credit

Alliance, Inc. (In re Ne. Contracting Co.), 187 B.R. 420,

423–24 (Bankr. D. Conn. 1995); Hostmann v. First Interstate

Bank of Or., N.A. (In re XTI Xonix Techs. Inc.), 156 B.R. 821,

833–34 (Bankr. D. Or. 1993); Hendon v. Assocs. Commercial

Corp. (In re Fastrans), 142 B.R. 241, 245 (Bankr. E.D. Tenn.

1992). They “apply the letter of the statute to the facts before

[them]” rather than focusing on broader concerns of public

policy. In re Fastrans, 142 B.R. at 246; see also In re Ne.

Contracting Co., 187 B.R. at 423; In re XTI Xonix Techs.

Inc., 156 B.R. at 833–34. Because a guarantor has no legally

cognizable claim against the borrower’s estate once he has

waived his right to indemnification, these courts concluded

that insider guarantors who had done so in good faith were

not “creditors” under the Bankruptcy Code and therefore

were not subject to preference liability.

The cases relied upon by the Trustee, on the other hand,

conclude that such waivers are simply not valid. See In re

USA Detergents, Inc., 418 B.R. 533, 542 (Bankr. D. Del.

2009); In re Pro Page Partners, LLC, 292 B.R. 622, 631

(Bankr. E.D. Tenn. 2003); In re Telesphere Commc’ns, Inc.,

229 B.R. 173, 176 n.3 (Bankr. N.D. Ill. 1999). As explained

by the court in Telesphere,

such a waiver has no economic impact—if the

principal debtor pays the note, the insider

guarantor would escape preference liability,

but if the principal debtor does not pay the

note, the insider could still obtain a claim

against the debtor, simply by purchasing the
16 IN RE ADAMSON APPAREL, INC.

lender’s note rather than paying on the

guarantee. Thus, the “Deprizio waiver” could

only be seen as an effort to eliminate, by

contract, a provision of the Bankruptcy Code. 

The attempted waiver of subordination rights

was thus held to be a sham provision,

unenforceable as a matter of public policy.

In re Telesphere, 229 B.R. at 176 n.3. The subsequent cases

of In re Pro Page Partners, 292 B.R. at 631, and In re USA

Detergents, 418 B.R. at 542, adopted Telesphere’s reasoning. 

Despite this split of authority in the bankruptcy courts, no

district or circuit court has yet weighed in on the validity of

these so-called “Deprizio waivers.”

We begin our assessment by noting that the latter cases’

concern about the possibility of “sham” waivers is a valid

one. A savvy insider guarantor might well agree to waive his

right to indemnification from the corporate debtor, but then

simply purchase the debt from the lender rather than pay it off

if the debtor is later unable to meet its obligations. Such

maneuvering would transform the original guarantor into the

lender directly rather than by way of subrogation and, in that

capacity, he would clearly have a claim against the debtor’s

bankruptcy estate without the burden of the one-year

preference period for insider guarantors.

But the mere possibility of such avoidance does not mean

that it will routinely occur. The post-1994 bankruptcy courts

that have considered this question, as well as our dissenting

colleague, would establish a bright-line rule based on a fear

of what could happen. We believe the sounder approach is to

consider what actually has happened. Rather than negating

every Deprizio waiver based on a hypothetical scenario, the
IN RE ADAMSON APPAREL, INC. 17

courts should instead examine the totality of the facts before

them for evidence of “sham” conduct in the circumstances

presented. In the present case, all evidence in the record

indicates that the waiver at issue was not a sham.

First, CIT held a lien on Adamson’s inventory and

accounts receivable to secure the loan. This lien gave CIT a

priority claim against these assets of Adamson in the event of

bankruptcy. CIT’s claim would therefore have been satisfied

to the extent of the remaining inventory and accounts

receivable even in the absence of Simon’s guarantee.

Second, Simon never filed a proof of claim in the

bankruptcy case. Counsel for both sides acknowledged at

oral argument that the funds at issue here were not sufficient

to cover Adamson’s entire debt to CIT, and that Simon

personally paid CIT over $3.5 million to clear Adamson’s

debt without ever seeking reimbursement. If the concern

raised by the post-1994 bankruptcy cases were at play here,

Simon would have simply purchased the balance of the CIT

note and then filed a claim as the successor to CIT in the

bankruptcy case. Instead, he personally paid the debt without

ever filing a claim against the estate.

Our dissenting colleague, however, is not persuaded that

the balance of Adamson’s debt to CIT was paid from Simon’s

funds because that question was a contested fact in the

original trial. But as discussed in more detail in the dissent,

the Trustee’s counsel acknowledged at oral argument that

Adamson’s debt to CIT—the debt against which the

December 18, 2003 payment from BP Clothing was

credited—was “fully paid off on March 31st [2004] . . . when

it got the amounts from the cash collateral accounts.” And
18 IN RE ADAMSON APPAREL, INC.

the record makes clear that the cash collateral accounts in

question indisputably belonged to Simon.

We have every right to treat this concession at oral

argument as binding on the Trustee. See Hilao v. Estate of

Marcos, 393 F.3d 987, 993 (9th Cir. 2004) (“A party (or . . .

a nonparty) is bound by concessions made in its brief or at

oral argument.”). Out of an abundance of caution, however,

we gave the Trustee an opportunity in supplemental briefing

to explain her counsel’s statement and to clarify the Trustee’s

position on when Adamson’s debt was paid off. But the

Trustee failed to directly address the concession in her

response, instead contending that her counsel’s review “had

revealed that the record below does not definitively establish

either when or from what source the Adamson Apparel debt

to CIT was satisfied.” Despite this somewhat dubious claim

of ambiguity, we note that the Trustee does not dispute the

key fact that the Adamson debt to CIT has been fully paid

without Simon filing a claim against the bankruptcy estate. 

This adds to our confidence that the concession made at oral

argument was not simply a “slip of the tongue.”

And contrary to the characterization of the evidence

presented in the dissent, the Committee at trial did not argue

that the $3.5 million payment made on March 31, 2004 was

for a personal debt that Simon owed to CIT. It instead

contended that Simon made the $3.5 million payment in

connection with what the Committee called the “Grupo”

transaction rather than with the transaction at issue in this

case.

As made clear from the record below, however, Grupo

Xtra of New York, Inc. was a company that had previously

licensed trademarks that were eventually relicensed to
IN RE ADAMSON APPAREL, INC. 19

Adamson Apparel. Before going bankrupt, Grupo had

incurred liabilities to CIT in connection with these

trademarks. In earlyNovember 2002, CIT asked Adamson to

assume the liabilities and try to collect Grupo’s receivables. 

The Grupo transaction was thus simply a subset of

Adamson’s indebtedness to CIT. In short, the $3.5 million

that Simon paid to CIT on March 31, 2004 was for

Adamson’s benefit, yet Simon never sought reimbursement

for any portion of that payment in bankruptcy.

A third factor indicating that the waiver here was not a

sham is the fact that Simon had no unilateral right to purchase

the note from CIT if Adamson defaulted. Although he could

have pursued that possibility, CIT was also free to refuse to

sell him the note and instead insist on payment. This factor

might explain why Simon did not, in fact, purchase the note

rather than pay it off when called upon to do so. If Simon

had had a contractual right to purchase the note from CIT,

then we would be more concerned about the waiver being a

sham.

Finally, the Trustee presented no evidence that the debt in

question was the only debt that Simon guaranteed on

Adamson’s behalf. Adamson is a closely held corporation,

and Simon is its president and CEO. There is no reason to

assume that he did not personally guarantee additional

Adamson debts that he has been called upon to satisfy. Under

such circumstances, Simon would have received no benefit

by satisfying CIT’s debt first rather than any other debts of

equivalent magnitude that he might have personally

guaranteed. The Trustee’s failure (or inability) to establish

that the CIT loan was the only one personally guaranteed by

Simon further lessens our concern about the bona fide nature

of the waiver.
20 IN RE ADAMSON APPAREL, INC.

All of these factors lead us to the conclusion that the

waiver at issue in this case was not a sham. The concern of

the Telesphere line of bankruptcy cases is simply not present

where Simon’s waiver prevented him from filing a claim to

recover the amount that he personally paid to satisfy the

balance of Adamson’s debt to CIT. We cannot say that a

waiver totally eliminating Simon’s right to recover over $3.5

million has no economic substance. Given that the waiver is

valid, Simon does not have a claim against the Adamson

estate and thus does not meet the definition of a creditor

under the Bankruptcy Code.

Moreover, when faced with a clearly drafted statute, we

are not at liberty to deviate from the text in favor of a

generalized notion of public policy. The Supreme Court

decided in Norwest Bank Worthington v. Ahlers, 485 U.S.

197, 206 (1988), that “whatever equitable powers remain in

the bankruptcy courts must and can only be exercised within

the confines of the Bankruptcy Code.” In order to be subject

to preference liability, a person or an entity must be a

creditor. 11 U.S.C. § 547(b). A person is a creditor only if

he has a right to payment from the debtor. 11 U.S.C.

§ 101(10). Here, Simon waived any such right at the

insistence of CIT. Nothing in the BankruptcyCode prevented

him from doing so, nor does any portion of the Code subject

Simon to preference liability simply because he received a

benefit—and a contingent one at that—from the payment by

BP Clothing to CIT. See In re Deprizio, 874 F.2d at 1190–92

(holding that corporate insiders were not “creditors” subject

to a preference claim when the corporation paid the Internal

Revenue Service for delinquent wage withholding taxes,

despite the benefit that they received by being relieved of

personal liability for the taxes).
IN RE ADAMSON APPAREL, INC. 21

The public-policy concern raised by the Trustee in this

case is far from frivolous, but that concern is more properly

addressed to Congress, which has the ability to amend the

Bankruptcy Code. This court’s equitable powers are limited

by the text of the Code as presently worded. Norwest,

485 U.S. at 206. Accordingly, we hold that when an insider

guarantor has a bona fide basis to waive his indemnification

rights against the debtor in bankruptcy and takes no

subsequent actions that would negate the economic impact of

that waiver, he is absolved of any preference liability to

which he might otherwise have been subjected.

III. CONCLUSION

For all the reasons set forth above, we AFFIRM the

judgment of the district court.

GRABER, Circuit Judge, dissenting:

I respectfully dissent. The majority’s conclusion that

Arnold Simon is not a “creditor” for purposes of the

Bankruptcy Code is wrong for two independent reasons. 

First, I would follow every bankruptcy court to have decided

the issue and hold that insider-guarantors such as Simon are

“creditors.” The majority errs by looking to extraneous facts

to decide whether the waiver is valid. Second, even if we

were to look to additional facts, the majority’s analysis

depends heavily on a “fact” that the bankruptcy court

expressly declined to find.
22 IN RE ADAMSON APPAREL, INC.

A. Insiders and the Right to Indemnity

As its president and CEO, Simon is an insider of

Adamson Apparel, Inc. Adamson took out a loan from CIT

Group Commercial Services, Inc. Simon personally

guaranteed the loan. Adamson made a partial payment of

about $5 million on the loan in December 2003. In

September 2004, Adamson filed for bankruptcy.

Title 11 U.S.C. § 547(b) authorizes the bankruptcytrustee

to avoid certain pre-filing transfers: all transfers made in the

90-day period before filing and all transfers made for the

benefit of a “creditor” in the one-year period before filing. 

Because the December 2003 partial payment occurred less

than a year before filing but more than 90 days before filing,

the trustee’s ability to avoid the transfer turns on whether

Simon was a “creditor” of Adamson in December 2003.

Every bankruptcy court to have addressed this issue since

the important 1994 amendments to the BankruptcyCode have

agreed: insider-guarantors such as Simon are “creditors” for

purposes of the Code even if they nominally have waived

their right to indemnity. Miller v. Greystone Bus. Credit II,

L.L.C. (In re USA Detergents, Inc.), 418 B.R. 533, 542

(Bankr. D. Del. 2009); Russell v. Jones (In re Pro Page

Partners, LLC), 292 B.R. 622, 630–31 (Bankr. E.D. Tenn.

2003); Telesphere Liquidating Trust v. Galesi (In re

Telesphere Commc’ns, Inc.), 229 B.R. 173, 176 n.3 (Bankr.

N.D. Ill. 1999).1 The courts’ reasoning is important:

1 The bankruptcy courts that decided the issue before the 1994

amendments all addressed the inequitable situation that Congress fixed in

1994—allowing a trustee to seek the funds from the lender. As the
IN RE ADAMSON APPAREL, INC. 23

[S]uch a waiver has no economic impact—if

the principal debtor pays the note, the insider

guarantor would escape preference liability,

but if the principal debtor does not pay the

note, the insider could still obtain a claim

against the debtor, simply by purchasing the

lender’s note rather than paying on the

guarantee. Thus, the [waiver] could only be

seen as an effort to eliminate, by contract, a

provision of the Bankruptcy Code. The

attempted waiver of subordination rights was

thus held to be a sham provision,

unenforceable as a matter of public policy.

Telesphere, 229 B.R. at 177 n.3; see USA Detergents, 418

B.R. at 542 (quoting and agreeing with that text from

Telesphere); Pro Page, 292 B.R. at 630–31 (same).

The majority opinion generally agrees with the quoted

analysis. But the majority opinion then goes a step

further—looking at additional facts in an open-ended inquiry

into whether the waiver was a “sham.” Maj. op. at 11–21. I

disagree with that approach, which is not supported by

precedent or by the logic of what Congress tried to

accomplish. The waivers are invalid for purposes of the

BankruptcyCode because they attempt to defeat the one-year

look-back period via contract, even though the waivers have

no real-world economic impact. The majority opinion

searches for clues as to whether Simon actually planned to

purchase the note, but that inquiry is irrelevant. Because

Simon easily could have purchased the note as of December

majority correctly recognizes, those cases plainly do not apply here, where

the trustee seeks the funds from the insider.
24 IN RE ADAMSON APPAREL, INC.

2003, the waiver had no real-world effect other than to defeat

the Bankruptcy Code’s longer look-back period for insiders. 

Therefore, Simon was a creditor.

I would follow the unanimous view of the bankruptcy

courts that have ruled on this issue and would hold that an

insider-guarantor is a “creditor” for purposes of the

Bankruptcy Code.

B. Reliance on a New Fact

The majority opinion’s primary reasoning is that, because

Simon later paid $3.5 million toward the Adamson-CIT loan

with his personal funds and did not file a bankruptcy claim

against Adamson, we should be less worried that Simon’s

waiver of indemnification rights was a sham. As explained

above, I disagree as a matter of law that those facts are

relevant. But even if we must consider additional facts, the

majority opinion errs by considering a “fact” that the

bankruptcy court expressly declined to find.

No one disputes that, in March 2004, Simon paid CIT

about $3.5 million. But the reason for that payment was hotly

disputed before the bankruptcy court. Simon asserted that the

payment was in satisfaction of the Adamson-CIT loan. 

Plaintiff strongly disagreed and presented evidence that the

payment was to satisfy a personal debt, owed by Simon to

CIT, that had nothing whatsoever to do with Adamson. For

our purposes, if the $3.5 million payment was made only to

satisfy a personal debt, then that payment does not

demonstrate anything with respect to whether the waiver on

the Adamson-CIT loan was a “sham.”
IN RE ADAMSON APPAREL, INC. 25

Everyone agrees that the bankruptcy court declined to

reach this factual question. In effect, the majority decides a

disputed issue of fact. But “[t]rial courts find facts. We do

not.” Fisher v. Roe, 263 F.3d 906, 912 (9th Cir. 2001),

overruled in other part by Payton v. Woodford, 346 F.3d

1204, 1217 n.18 (9th Cir. 2003) (en banc).

Making that factual finding is all the more egregious

because the record strongly (if not conclusively) suggests that

the $3.5 million payment was not on Adamson’s behalf but

was for a personal debt that Simon had acquired with respect

to a different transaction and company (Grupo). In Simon’s

favor is Simon’s own self-serving testimony. In Plaintiff’s

favor is proffered evidence that included:

• Financial statements by CIT in early 2004

showing (1) that no credit of $3.5 million

appeared and (2) that, as of March 15,

2004—before the $3.5 million payment—

Adamson owed CIT less than $200,000.

• A separate note, which nowhere references

Adamson and is a personal note: “FOR

VALUE RECEIVED, ARNOLD H. SIMON,

an individual (the “Debtor”), hereby

unconditionally promises to pay on demand to

the order of THE CIT GROUP . . .

$3,379,630.00 . . . .”

• A letter dated January 7, 2003, that describes

the loan to Simon as “your personal loan from

CIT.”
26 IN RE ADAMSON APPAREL, INC.

• A letter from CIT that describes the loan as

“the personal note to us dated November 5,

2002 with an approximate amount of $3[.]455

M,” which included interest on the principal

amount.

• A draft settlement agreement in late 2004

that states: “On or about November 5, 2002,

CIT made a personal loan to Simon in the

amount of $3,379,630 for which Simon

executed a Demand Promissory Note . . . in

favor of CIT in said amount.”

• An email in late 2004 that describes the

loan in similar terms.

The majority opinion attempts to justify its appellate

factual finding in two ways. First, it asserts that, because the

personal debt arose as part of the “Grupo transaction,” and

because Adamson assumed some of Grupo’s liabilities, “[t]he

Grupo transaction was thus simply a subset of Adamson’s

indebtedness to CIT.” Maj. op. at 19. The bankruptcy court

never made factual findings on these points, so the majority

opinion attempts to justify one improper factual finding by

making others. Moreover, whether Adamson assumed certain

liabilities to CIT is wholly irrelevant to the question of the

nature of the debt between Simon and CIT. As noted above

and as evidenced by the note itself and by other documents

from 2002 and 2003, the debt in question was a personal one,

owed by Simon in his individual capacity. Accordingly,

when Simon paid that personal debt, it was for his own

benefit, not Adamson’s.
IN RE ADAMSON APPAREL, INC. 27

Second, the majority opinion asserts that Plaintiff’s

lawyer “acknowledged at oral argument that . . . Simon

personally paid CIT over $3.5 million to clear Adamson’s

debt.” Maj. op. at 17. Such an acknowledgment would be a

startling concession given that the issue was disputed

vigorously before the bankruptcycourt. Unfortunatelyfor the

majority opinion, the transcript of oral argument reveals no

such concession.

After oral argument, we ordered supplemental briefing on

the effect of the following exchange:

JUDGE GILMAN: I’ve just got one question. 

I want to know, was the debt to CIT fully paid

off on December 18, 2003, when the BP

Clothing amount was roughlyfive million was

in fact diverted to . . .

ATTORNEY HUNTER: No, I think it was

fully paid off on March 31st when it took the

. . . uh . . . March 2004, when it got the

amounts from the cash collateral accounts.

That statement cannot be considered a concession on the

question of the reason for the March 2004 payment. Judge

Gilman asked whether the debt was fully paid in December

2003, and the lawyer answered “no.” In context, the question

concerned timing, not the reason for the 2004 payment. 

Moreover, the lawyer stated only that “I think” that the debt

was satisfied by the March 2004 payment. (Emphasis added.) 

In the supplemental briefing, the lawyer explained that, after

reviewing the record, his statement at oral argument had been

incorrect.
28 IN RE ADAMSON APPAREL, INC.

We of course have held that a “judicial admission is

binding” when a party “clearly and expressly conceded [an

issue] on appeal, both in briefing and at oral argument.” 

United States v. Crawford, 372 F.3d 1048, 1055 (9th Cir.

2004) (en banc). And as the majority opinion properly notes,

an unambiguous concession at oral argument can be binding. 

Maj. op. at 18. But the majority opinion improperly extends

that principle to a statement at oral argument that starts with

the equivocal phrase “I think,” on a topic different from the

topic of the question posed, on a matter that was litigated

extensively before the trial court, and as to which the

purported concession later was renounced in a supplemental

brief. See Jonibach Mgmt. Trust v. Wartburg Enters., Inc.,

750 F.3d 486, 491 n.2 (5th Cir. 2014) (“To qualify as a

judicial admission, the statement must be . . . deliberate,

clear, and unequivocal . . . .” (internal quotation marks

omitted)); Sicor Ltd. v. Cetus Corp., 51 F.3d 848, 859–60 (9th

Cir. 1995) (holding that a judicial admission may be

retracted). Not only is there no support for the majority

opinion’s incredibly strict application of the judicial

admissions doctrine, we do ourselves and the litigants a great

disservice if lawyers must be constantly wary that a mistaken

guess about the content of the factual record, intended to aid

the court, will be held against their clients conclusively.

Iwould reverse the bankruptcycourt’s holding that Simon

was not a “creditor” and would remand for further

proceedings. Accordingly, I dissent.