Opinion ID: 3034719
Heading Depth: 3
Heading Rank: 2

Heading: The Second Appeal (Appeal from the Judgment

Text: Enforcing the Settlement Agreement)
Rains asserts that his filing of a notice of appeal from the order approving the settlement agreement transferred jurisdiction to the district court, thereby depriving the bankruptcy court of jurisdiction to enter the judgment enforcing the settlement agreement. We are not persuaded. [11] We review de novo whether the bankruptcy court had jurisdiction. Dunmore v. United States, 358 F.3d 1107, 1111 (9th Cir. 2004). It is generally true that the timely filing of a notice of appeal divests the trial court of jurisdiction. See In re Silberkraus, 336 F.3d at 869 (9th Cir. 2003). However, if the order at issue is interlocutory, any appeal would be premature and would not transfer jurisdiction to an appellate court. See Riggs v. Scrivner, Inc., 927 F.2d 1146, 1148 (10th Cir. 1991); see also United States Abatement Corp. v. Mobil Exploration & Producing U.S., Inc. (In re United States Abatement Corp.), 39 F.3d 563, 568 (5th Cir. 1994) (holding that premature notice of appeal from interlocutory bankruptcy order was of no effect).7 Rather, the trial court retains jurisdiction to enter final judgment. See Albiero v. City of Kankakee, 122 F.3d 417, 418 (7th Cir. 1997). Additionally, the rule that a notice of appeal will divest a court of jurisdiction “is not absolute.” Neary v. Padilla (In re Padilla), 222 F.3d 1184, 1190 (9th Cir. 2000). For example, a trial court retains “jurisdiction to take actions that preserve the status quo during the pendency of an appeal,” although the 7 The trustee contends that the bankruptcy court retained jurisdiction to enter judgment because the order approving the settlement agreement was interlocutory. We need not resolve this question because of our conclusion that whether the order was final or interlocutory, the bankruptcy court acted within its jurisdiction. IN RE: RAINS 15225 court “may not finally adjudicate substantial rights directly involved in the appeal.” Id. (citations omitted). And “[a]bsent a stay or supersedeas, the . . . court also retains jurisdiction to implement or enforce the judgment or order but may not alter or expand upon the judgment.” Id. (citations omitted). [12] In this case, the bankruptcy court’s judgment enforcing the settlement agreement, whether considered a final order or an interlocutory order, did not change the status quo or materially alter the issues on appeal. The judgment merely effectuated the express terms of the settlement agreement, and did not alter or expand upon the order approving the settlement agreement.8 As a result, the bankruptcy court acted within its jurisdiction when it entered judgment, even though Rains had already filed a notice of appeal from the order approving the settlement agreement. 2. The District Court’s Jurisdiction Over the Second Appeal [13] We review the timeliness of a notice of appeal de novo. Feldman v. Allstate Ins. Co., 322 F.3d 660, 665 (9th Cir. 2003). Under the district court’s analysis, whether Rains’s appeal was timely depends on whether his motion to alter or amend the judgment was properly before the bankruptcy court. A bankruptcy court retains jurisdiction to consider a timely motion under Fed. R. Bankr. P. 9023 to alter or amend the judgment, even when the motion is filed subsequent to a notice of appeal. See Fed. R. Bankr. P. 8002(b)(4); see also Resolution Trust Corp. v. Keating, 186 F.3d 1110, 1114 n.1 (9th Cir. 1999) (interpreting analogous provision in 8 The settlement agreement did not explicitly require Rains to remit $250,000 in retirement plan funds to the trustee. However, as discussed below, Rains’s agreement that the funds would become part of the bankruptcy estate in the event he failed to make a timely cash payment triggered a legal duty on his part to surrender the funds to the trustee. See 11 U.S.C. § 521(4). 15226 IN RE: RAINS Fed. R. App. P. 4(a)(4) as granting district court jurisdiction to entertain timely motion to alter or amend the judgment after notice of appeal is filed). The previously filed notice of appeal does not become effective “until the entry of the order disposing of the . . . motion . . . .” Fed. R. Bankr. P. 8002(b)(4).9 [14] Rains’s notice of appeal from the order approving the settlement agreement, although filed prior to the motion to amend judgment, did not divest the bankruptcy court of jurisdiction to consider that motion. See Fed. R. Bankr. P. 8002(b)(4) (listing various post-judgment motions); see also Keating, 186 F.3d at 1114 n.1. A motion to alter or amend a judgment must be filed within 10 days after entry of the judgment. Fed. R. Bankr. P. 9023; Fed. R. Civ. P. 59(e). The bankruptcy court entered judgment on May 23, 2003. Rains’s motion to alter or amend the judgment enforcing the settlement agreement, filed on June 2, 2003, was therefore timely. [15] Rains’s notice of appeal from the entry of judgment enforcing the settlement agreement was also timely.10 A party 9 In Keating, we stated that when a motion to alter or amend the judgment is filed, any previously-filed notice of appeal is rendered ineffective. Keating, 186 F.3d at 1114 n.1. In so stating, we relied upon Griggs v. Provident Consumer Discount Co., 459 U.S. 56, 61 (1982). Id. In Griggs, the United States Supreme Court held that a notice of appeal filed before a Rule 59(e) motion to alter or amend the judgment “simply selfdestructs.” 459 U.S. at 61 (citation omitted). This holding was effectively overruled when “Rule 4(a)(4) [of the Federal Rules of Appellate Procedure] was amended . . . to provide that when a notice is prematurely filed, it shall be in abeyance and become effective upon the date of entry of an order disposing of the Rule 59(e) motion.” Schroeder v. McDonald, 55 F.3d 454, 458 (9th Cir. 1995). Thus, Rains’s notice of appeal from the order approving the settlement agreement, rather than self-destructing when the motion to amend was filed, was simply in abeyance. 10 Because of the unique manner in which this case proceeded through the bankruptcy court and the district court, there are two operative notices of appeal. The first notice addresses the order approving the settlement agreement. The second notice pertains to the judgment enforcing the settlement agreement and denying the motion to amend the judgment. IN RE: RAINS 15227 wishing to appeal a decision of the bankruptcy court must file the notice of appeal “within 10 days of the date of the entry of the judgment, order, or decree appealed from.” Fed. R. Bankr. P. 8002(a). A timely motion to alter or amend the judgment under Fed. R. Bankr. P. 9023 tolls the time period for filing a notice of appeal. Fed. R. Bankr. P. 8002(b)(2). In that case, “the time for appeal for all parties runs from the entry of the order disposing” of the motion. Fed. R. Bankr. P. 8002(b). The order denying the motion to amend judgment was entered on July 7, 2003. Rains filed a notice of appeal ten days later, on July 17, 2003. As a result, the district court had jurisdiction to hear the appeal (as do we).11 The district court erred in dismissing Rains’s appeal as untimely.12 3. Rains’s Interest in the Retirement Plan [16] Section 541(c)(2) of the Bankruptcy Code provides that “[a] restriction on the transfer of a beneficial interest of the debtor in a trust that is enforceable under applicable nonbankruptcy law is enforceable in a case under this title.” 11 U.S.C. § 541(c)(2). “The natural reading of [this] provision entitles a debtor to exclude from property of the estate any interest in a plan or trust that contains a transfer restriction enforceable under any relevant nonbankruptcy law.” Patterson v. Shumante, 504 U.S. 753, 758 (1992). The United States Supreme Court has held that an anti-alienation provision in an 11 As Rains points out, the district court probably lacked jurisdiction to reverse itself on the issue of whether the order approving the settlement agreement was “final” for purposes of appeal, because the district court’s reversal of its prior ruling occurred on May 18, 2004, after the prior ruling was appealed to us on August 6, 2003. See In re Silberkraus, 336 F.3d at 869. In any event, because we review the bankruptcy court’s rulings de novo, any error committed by the district court in determining the finality of the settlement order does not affect our analysis. 12 However, as we may affirm on any basis supported by the record, we nevertheless affirm the district court’s judgment in favor of the trustee, as discussed below. See Parker N. Am. Corp. v. Resolution Trust Corp. (In re Parker N. Am. Corp.), 24 F.3d 1145, 1151 (9th Cir. 1994). 15228 IN RE: RAINS ERISA-qualified pension plan constitutes such a restriction for purposes of the § 541(c)(2) exclusion. Id. at 760. The exclusion is permissive rather than mandatory: “a debtor’s interest in an ERISA-qualified pension plan may be excluded from the property of the bankruptcy estate pursuant to § 541(c)(2)[.]” Id. at 765 (emphasis added). A bankruptcy court lacks subject matter jurisdiction over excluded ERISAqualified pension plan funds. In re McClellan, 99 F.3d 1420, 1423 (7th Cir. 1996). [17] In the settlement agreement, Rains agreed that if he did not make a timely cash payment to the trustee or post alternative collateral, his exemption claim to the ABA retirement plan would be denied up to the amount of $250,000. Rains now contends that his interest in the ABA retirement plan must be excluded from the bankruptcy estate pursuant to the Employee Retirement Income Security Act (ERISA),13 and that the bankruptcy court therefore lacked jurisdiction to order him to withdraw $250,000.00 in retirement plan funds and remit it to the trustee. However, by ceding his claim of exemption in the settlement agreement, Rains necessarily agreed to include the retirement plan funds in the bankruptcy estate pursuant to the “well settled rule that property cannot be exempted unless it is first property of the estate.” Heintz v. Carey (In re Heintz), 198 B.R. 581, 586 (B.A.P. 9th Cir. 1996); see also Owen v. Owen, 500 U.S. 305, 308 (1991) (“No property can be exempted . . . unless it first falls within the bankruptcy estate”) (emphasis in the original). Rains cannot now seek to exclude funds from the estate that he previously agreed were included in the estate. As a result, the bankruptcy court’s denial of the exemption, in accordance with the terms of the settlement agreement, triggered a legal duty to surrender the retirement plan funds to the trustee. See 11 U.S.C. § 521(4) (“The debtor shall . . . surrender to the trustee all property of the estate . . . .”). Thus, the bankruptcy court acted within its jurisdiction when it ordered Rains to 13 29 U.S.C. § 1001 et seq. IN RE: RAINS 15229 withdraw $250,000 in plan funds and remit that amount to the trustee.14 4. Rains’s Due Process Claim Finally, Rains claims the bankruptcy court violated his due process rights when it ordered him to surrender the $250,000 in retirement plan funds, because the ordered relief fell outside the scope of the agreement and settlement order. Rains arguably waived this claim by not properly raising it before the bankruptcy court. See Cold Mountain, 375 F.3d at 891. Regardless, Rains’s contentions that he was never given notice of Flinn’s intention to seek payment from the retirement plan funds, and that the bankruptcy court violated his due process rights by ordering him to surrender the funds, have no merit. [18] Under the Bankruptcy Code, property of the estate generally includes “all legal or equitable interests of the debtor in property as of the commencement of the case,” 11 U.S.C. § 541(a)(1), unless the property is excluded or exempted under state or federal law, see e.g. 11 U.S.C. §§ 522(b), 541(b), (c)(2). When Rains agreed to the settlement, he expressly acknowledged that his claimed exemption of retirement plan funds would be denied up to the amount of $250,000, and these funds would become part of the bankruptcy estate in the event he failed to make a timely cash payment. As discussed above, Rains became legally obligated to deliver the funds to the trustee once the exemption was denied. See 11 U.S.C. § 521(4). Therefore, the judgment was 14 The United States Supreme Court’s recent decision in Rousey v. Jacoway, 125 S. Ct. 1561 (2005) does not alter our conclusion. In Rousey, the Supreme Court ruled that debtors may exempt assets in their Individual Retirement Accounts from the bankruptcy estate pursuant to 11 U.S.C. § 522(d)(10)(E). Id. at 1564. Rains does not contend that the retirement plan funds are exempted from the estate under § 522(d)(10)(E). Rather, he argues that the funds are excluded from the estate altogether pursuant to 11 U.S.C. § 541(c)(2). 15230 IN RE: RAINS consistent with the provisions of Chapter 11 of the Bankruptcy Code, the settlement agreement, and the order approving the settlement agreement, and did not violate Rains’s due process rights. Rains also complains that the application for entry of judgment was made without notice or a hearing. However, “[a] bankruptcy court, as a court of equity, . . . possesses the power to summarily enforce settlements.” City Equities Anaheim, Ltd. v. Lincoln Plaza Dev. Co. (In re City Equities Anaheim, Ltd.), 22 F.3d 954, 958 (9th Cir. 1994) (citation omitted). The Federal Rules of Bankruptcy Procedure generally prohibit a trustee from making ex parte contact with the court “concerning matters affecting a particular case or proceeding.” Fed. R. Bankr. P. 9003(b) (emphasis added). The application for entry of judgment in this case did not affect a pending proceeding, because the issues had previously been adjudicated, and all that remained for the court to do was enter a judgment in accordance with the order approving the settlement agreement. See Texas Extrusion Corp. v. Lockheed Corp. (In re Texas Extrusion Corp.), 844 F.2d 1142, 1164 (5th Cir. 1988) (concluding that the bankruptcy judge did not violate rule against ex parte contact by adopting findings and conclusions after communications with creditor’s attorney because written findings merely confirmed prior verbal ruling). Thus, any ex parte contact was not improper. In any event, Rains had sufficient opportunity to air his objections in his motion to amend the judgment and in the hearing held on the motion. Rains’s due process rights were fully preserved.