Opinion ID: 150183
Heading Depth: 2
Heading Rank: 1

Heading: facts

Text: In August and September of 2005, Hitachi purchased a large number of DVD players from CyberHome for approxiTA CHONG BANK v. HITACHI HIGH TECHNOLOGIES 9651 mately $1.2 million. Since May 2004, the Bank had entered into a series of factoring agreements whereby it agreed to purchase from CyberHome certain of CyberHome’s accounts receivable. CyberHome assigned to the Bank all of its right, title and interest in and to all amounts due from Hitachi under the invoices. On or about August 18, 2005, the Bank and CyberHome gave Hitachi notice in writing that effective September 1, 2005, CyberHome’s future invoices to Hitachi would bear a notice that such invoices were assigned to the Bank. The notice instructed Hitachi that all payments on those CyberHome invoices must be made directly to the Bank. Despite this assignment, in January 2006, Hitachi paid CyberHome the full amount owed for the DVDs. Neither the Bank nor the CIT Group/Commercial Services, Inc. (“CIT”), which handled the processing of certain accounts receivable factored by the Bank, received any portion of the payment made to CyberHome. The payment was made to CyberHome without the Bank’s or CIT’s knowledge or consent. On September 5, 2006, eight months after CyberHome was paid in full by Hitachi, CyberHome filed for Chapter 7 bankruptcy in the U.S. Bankruptcy Court for the Northern District of California. The Bank has made demand on Hitachi for payment of the $1,214,852.20 that it paid to CyberHome, but Hitachi has not made any payment to the Bank. On December 19, 2006, the Chapter 7 Trustee for CyberHome’s bankruptcy estate filed an adversary proceeding against the Bank asserting several claims, including a claim to avoid the Bank’s security interest in property of the CyberHome bankruptcy estate, including its accounts receivable. The trustee claimed that the accounts receivable constituted a preferential transfer and that the Bank had failed to perfect its security interest prior to 90 days before the bankruptcy petition. On December 22, 2006, the Bank filed a secured proof of claim in the CyberHome bankruptcy case in the amount of 9652 TA CHONG BANK v. HITACHI HIGH TECHNOLOGIES $83,000,000 for amounts due under several credit accounts extended to CyberHome, including the accounts receivable at issue in this case. On February 2, 2007, the Bank filed a counterclaim for (1) fraud, (2) negligence, and (3) breach of contract in the adversary proceeding. The Bank attached its previously filed proof of claim as an exhibit to the counterclaim. The trustee subsequently moved for summary adjudication against the Bank. On June 13, 2007, the bankruptcy court entered an order which, in part, advised account debtors to disregard any request from the Bank. The order provided that only the trustee was authorized to collect any receivables. The Bank did not oppose the trustee’s motion for summary adjudication, and the bankruptcy court granted the motion on August 10, 2007. The Bank did not appeal the bankruptcy court’s order. Seven months after the bankruptcy court’s order granting the trustee’s motion for summary adjudication, the Bank brought suit in state court against Hitachi. The complaint asserted several causes of action under California law, including (1) goods sold and delivered, (2) open book account, and (3) account stated. The Bank’s complaint sought payment from Hitachi of the $1.2 million that Hitachi previously paid to CyberHome. The Bank also attached as exhibits invoices between Hitachi and CyberHome. Hitachi removed the action to federal court. The district court granted Hitachi’s motion to dismiss the case for failure to state a claim and entered a judgment of dismissal. In granting the motion, the court found that by filing the action, the Bank was attempting an “end run around” the bankruptcy process and that the case was “an improper appeal of the bankruptcy court’s order.” The district court also found that the bankruptcy court’s order was res judicata as to the Bank’s interest in CyberHome’s accounts receivable. It held that the bankruptcy court implicitly found the $1.2 million at TA CHONG BANK v. HITACHI HIGH TECHNOLOGIES 9653 issue to be part of the bankruptcy estate because it had been paid during the pendency of the bankruptcy court’s order. The Bank subsequently filed a motion pursuant to Federal Rule of Civil Procedure 59(e) to alter or amend the previous judgment. The Bank contended that the district court had erred in finding that Hitachi paid $1.2 million to CyberHome during the bankruptcy proceedings. The district court denied the motion to alter or amend the judgment, finding that the error regarding timing in its prior order “did not rise to the level of ‘manifest error’ requiring that the judgment be vacated.”