Court Opinion

ID: 4301732
Source: CourtListenerOpinion
Date Created: 2018-08-07 22:00:38.678287+00
Date Added: 2024-06-11T07:49:00.685875
License: Public Domain

FILED
                                                    AUG 03 2018
                     ORDERED PUBLISHED
                                              SUSAN M. SPRAUL, CLERK
                                                  U.S. BKCY. APP. PANEL
                                                  OF THE NINTH CIRCUIT

         UNITED STATES BANKRUPTCY APPELLATE PANEL
                   OF THE NINTH CIRCUIT

In re:                                    BAP Nos. AZ-17-1280-FSBa
                                                   AZ-17-1292-FSBa
ERIK SAMUEL DE JONG and DARYL                      (Cross-Appeals)
LYNN DE JONG,
                                          Bk. No.        2:14-bk-00886-PS
          Debtors.

ERIK SAMUEL DE JONG; DARYL LYNN
DE JONG,

          Appellants/Cross-Appellees,

v.                                        OPINION

JLE-04 PARKER, L.L.C.,

          Appellee/Cross-Appellant.

                Argued and Submitted on June 21, 2018
                        at Phoenix, Arizona

                         Filed – August 3, 2018

            Appeal from the United States Bankruptcy Court
                      for the District of Arizona

           Honorable Paul Sala, Bankruptcy Judge, Presiding
Appearances:        Michael Warren Carmel argued on behalf of
                    appellants/cross-appellees Erik Samuel de Jong and Daryl
                    Lynn de Jong; Kiersten Ann Murphy of Henze Cook
                    Murphy, PLLC argued on behalf of appellee/cross-
                    appellant JLE-04 Parker, L.L.C.

Before: FARIS, SPRAKER, and BASON,* Bankruptcy Judges.

FARIS, Bankruptcy Judge:

                                 INTRODUCTION

      Chapter 111 debtors Erik Samuel de Jong and Daryl Lynn de Jong

(collectively “Debtors”) refused to vacate appellee JLE-04 Parker, L.L.C.’s

(“JLE”) property for a period of months following termination of their

lease. Instead, they continued their profitable dairy operation. After a trial,

the bankruptcy court awarded JLE damages based on disgorgement of the

relevant portion of the Debtors’ net profits plus the value of silage, a form

of cow feed, which the Debtors’ cows consumed after the lease terminated.

The court separately calculated the damages that accrued before and after

the Debtors filed their bankruptcy petition.

      *
         The Honorable Neil W. Bason, United States Bankruptcy Judge for the Central
District of California, sitting by designation.
      1
       Unless specified otherwise, all chapter and section references are to the
Bankruptcy Code, 11 U.S.C. §§ 101-1532.

                                            2
      This Panel affirmed the bankruptcy court’s judgment except for the

portion of the damages that consisted of the value of silage consumed

during the postpetition period. On remand, the bankruptcy court deducted

that portion from the total damages.

      Both sides are dissatisfied.

      The Debtors argue that the bankruptcy court should have also

reduced the damages by the value of silage consumed during the

prepetition period, even though the Panel did not address this point. We

reluctantly agree. In the first appeal, the Debtors argued at length that the

postpetition silage damages were improper; they only challenged the

prepetition silage damages in a single terse footnote. As a result, this

Panel’s prior decision was silent about the prepetition silage damages, and

our silence misled the bankruptcy court. We perceive no reason why the

prepetition and postpetition silage should be treated differently, and we

will adjust the judgment accordingly.

      JLE cross-appeals, arguing that the bankruptcy court too narrowly

followed the Panel’s mandate and incorrectly calculated the other elements

of damages. We agree in part. Our mandate did not preclude the

bankruptcy court from recalculating all damages on remand. We agree

with one of JLE’s contentions about the award.

      We therefore REVERSE and REMAND for entry of judgment in the

amount set forth below. We publish to clarify the rule of mandate.

                                       3
                          FACTUAL BACKGROUND2

A.    Prepetition events

      The Debtors operated a dairy farm on real property (the “Property”)

owned by Sonora Desert Dairy, LLC. In May 2013, Sonora Desert Dairy,

which was a debtor in a separate bankruptcy case, informed the Debtors

that their lease would terminate on November 30. Separately, a foreclosure

sale of the Property was set for December 6. Despite reminders that they

needed to vacate the Property, the Debtors failed to do so.

      Around this time, the Debtors inquired about moving their operation

to another farm owned by Brian Van Leeuwen (the “Van Leeuwen

Property”), but they learned that there was not enough room for all of the

cows. The Debtors were also worried about the silage inventory, which

they claimed would be worthless if they had to relocate.

      JLE purchased the Property at the December 6 foreclosure sale, but

the Debtors refused to leave, insisting that the lease entitled them to stay on

the Property. JLE filed a forcible entry and detainer proceeding (“FED

Action”) in state court against the Debtors.

B.    Bankruptcy events

      The day before a scheduled trial in the FED Action, the Debtors filed

a chapter 11 petition. The bankruptcy court later modified the automatic

      2
        For a more comprehensive background, see de Jong v. JLE-04 Parker, LLC (In re de
Jong), BAP No. AZ-16-1337-JuLB, 2017 WL 2417189 (9th Cir. BAP June 2, 2017).

                                           4
stay to allow the state court to hold the trial and determine the Debtors’

right to possession. It also ordered JLE not to pursue a writ of restitution or

otherwise enforce the judgment and prohibited JLE from removing or

repossessing livestock, personal property, or feed on the Property without

further order from the bankruptcy court.

      Following trial, the state court found that the nonjudicial foreclosure

of the deed of trust terminated the Debtors’ leasehold interest, such that the

Debtors remained on the property “without any right to be there.”

      JLE then asked the bankruptcy court to compel the Debtors to vacate

the Property. The bankruptcy court ordered the Debtors to vacate the

Property by June 1, 2014.3

      JLE filed a proof of claim for over $8.8 million in damages arising

from the Debtors’ trespass. It sought damages measured mostly by the

disgorgement of the Debtors’ profits and its own lost profits.

      By May 31, 2014, the Debtors had removed all of their cows from the

Property. They relocated their dairy operation to the Van Leeuwen

Property, including approximately 2,000 cows, but had to sell at auction

1,405 cows that could not fit on the smaller property.

      The parties filed cross-motions for summary judgment on the issue of

      3
        Following the court’s ruling, Mr. de Jong sent a text message to one of JLE’s
creditors, bragging that he got exactly what he wanted from the bankruptcy court and
that he was “making a sh**load of money off his cows.” 2017 WL 2417189 at *5.

                                           5
the Debtors’ trespass. The bankruptcy court ruled that the state court’s

judgment (that the Debtors were trespassers) was entitled to issue

preclusive effect and also independently found that the Debtors were

trespassers under Arizona law.

      JLE filed an administrative claim for $7.9 million based on the

Debtors’ postpetition trespass and moved for summary judgment. The

bankruptcy court granted the motion in part as to the unlawful trespass.

However, the court denied summary judgment as to whether the trespass

was intentional and the extent to which the Debtors benefitted from the

trespass.

      In November 2015, the bankruptcy court held a trial to

determine whether the Debtors’ trespass was conscious and the

appropriate measure of damages.

      The bankruptcy court found that the Debtors were conscious

trespassers after the foreclosure sale on December 6, 2013. It held that the

Debtors were liable to JLE for the benefits that the Debtors received from

wrongfully staying on the Property. The court decided that the Debtors

realized two benefits from their retention of the Property: first, they earned

additional net profits from keeping a larger herd at the Property than they

could have maintained at the Van Leeuwen Property; and second, they

used silage that would otherwise have gone to waste.

      To calculate net profits, the bankruptcy court began with the Debtors’

                                      6
draft financial statement which indicated that the Debtors’ net income for

the first six months of 2014 was $2,762,587. (In doing so, it rejected JLE’s

argument that the court should use the monthly operating reports to

determine net income.) The court adjusted this amount to reflect that the

relevant period for purposes of damages was December 6, 2013 to May 31,

2014.

        The bankruptcy court then subtracted the Debtors’ profit realized

from the sale of the cows ($1,050,835), because the court determined that

the Debtors would have earned the same profit even if they had not

remained on the Property after the lease was terminated. The total net

profit was $1,711,752.

        The court prorated the net profits between the prepetition period and

the postpetition period based on the number of days in each period (forty-

seven days and 128 days, respectively).

        Finally, the court further reduced the net profits component of the

damages by about sixty percent because the Debtors could have moved

about sixty percent of their herd to the Van Leeuwen Property and made a

corresponding profit. The court explained that:

        The Debtors directly benefitted to the extent they profited from
        being able to use the 1405 cows that they could not use on the
        Van Leeuwen Property; their likely and eventual business
        home. Where the Debtors owned 3538 cows on the petition
        date, those 1405 cows made up 39.71% of their herd. Thus,
        39.71% of the net profits generated by the Debtors[’] dairy

                                        7
      operations were a direct benefit from their trespass.

(Emphasis added.) In other words, the bankruptcy court concluded that

39.71 percent of the Debtors’ net profit represented the additional benefit

that they gained from wrongfully trespassing on the Property, in excess of

what they would have earned had they not trespassed and instead moved

their cows to the Van Leeuwen Property. According to the court, only that

portion of their total profit needed to be disgorged.

      Next, the bankruptcy court turned to the amount of silage that the

Debtors owned and used. The bankruptcy court reasoned that the silage

should be included in the benefits received by the Debtors from their

trespass because Mr. de Jong testified that moving the silage would have

ruined it. Therefore, “the Debtors benefitted from the use of what would

otherwise have been worthless silage . . . .”

      The court calculated that the Debtors used an average of $8,864.34 of

silage per day, based on available data for an overlapping period. The

court calculated that the Debtors used $416,623.98 of silage during the

prepetition trespass and $1,134,635.52 of silage during the postpetition

trespass.

      The bankruptcy court totaled the silage and profit amounts.4 It then

reduced the award by the prorated amounts that the Debtors paid in pre-

      4
         The bankruptcy court rejected JLE’s claims for lost opportunities, cost of
restoration, annoyance/discomfort, fair market rental value, and punitive damages.

                                           8
and postpetition rent and taxes. It concluded that JLE’s prepetition damage

claim was $558,716.24 and its postpetition administrative claim was

$1,517,069.64.

      The bankruptcy court later entered an amended award (“Amended

Damages Order”) that reduced the credit for the amount of rent paid to

correspond with its proration of the additional “benefit” received by the

Debtors from their trespass: “to ensure that the Debtors do not receive a

duplicative credit for rent paid, the amount of the rent paid that would not

be attributable to JLE’s disgorgement damages (60.29%) should be credited

to reduce JLE’s damages award.” It thus laid out its final calculations as

follows:

      Pre-petition
      Pre-petition silage           $416,623.98
                           5
      Pre-petition profits          $191,541.45
      Pre-petition hay conversion $720.00
            Subtotal                                        $608,885.43
      Credit for 60.29% of pre-petition rent                 ($29,812.92)
      ($49,449.19 x .6029)
            Total pre-petition claim                        $579,072.51

      Post-petition
      Post-petition silage              $1,134,635.52

      5
       These are profits from the additional 1,405 “cows that [the Debtors] could not
have used in their operations had they not trespassed on JLE’s property.”

                                           9
       Post-petition profits6        $521,644.79
             Subtotal                                 $1,656,280.31
       Credit for 60.29% of post-petition rent          ($84,364.20)
       ($139,930.67 x .6029)
             Total post-petition claim                $1,571,916.11

C.     The first BAP appeal

       The Debtors appealed from the bankruptcy court’s Amended

Damages Order. They argued that the bankruptcy court erred by: applying

issue preclusion to the state court’s findings in the FED Action;

independently deciding that the Debtors were trespassers; finding that the

Debtors were conscious trespassers; and applying an incorrect measure of

damages that exceeded the fair market rental value of the Property.

       The Debtors also contended that the bankruptcy court improperly

calculated JLE’s postpetition damages. They argued that the bankruptcy

court erroneously counted silage as a profit, when in actuality it was an

operating cost. As such, the value of the silage could not be awarded to

JLE.

       The BAP affirmed the bankruptcy court in all respects except for the

last damages issue. It held that the bankruptcy court erred in calculating

the postpetition profits by “double counting” the silage:

       This double-counting occurred because the court took the
       amount of silage used in the relevant time period and added

       6
           See footnote 5, supra.

                                      10
     that figure to a portion of the net income derived from its
     profits gained from operating a larger dairy operation on JLE’s
     property. Debtors argue that it was error to include both items
     in the measure of restitution. Debtors also contend that the
     court’s analysis of the amount of silage utilized by Debtors
     during their occupancy is not a proper method to calculate
     “profits” since it is an expense item. We agree.

2017 WL 2417189, at *13. The BAP thus instructed the bankruptcy court to

recalculate the postpetition damages:

            The proper measure of recovery in this case must be the
     benefits, or net profits, received by Debtors from the wrongful
     use of JLE’s property. Net profit is the business’s gross
     revenues less any operating expenses. An operating expense
     would include the silage that was bought by Debtors to feed
     their cows, including the extra cows that Debtors kept on the
     property by virtue of their wrongful trespass. Debtors did not
     generate a direct profit, or benefit, by use of the silage after
     their trespass. Instead, they simply avoided a loss of something
     that they had already paid for. Nonetheless, their purchase of
     the silage was a legitimate operating expense because it was fed
     to the cows which generated the profits that accrued to Debtors
     as a direct result of their wrongful trespass. Accordingly, the
     bankruptcy court erred by considering the silage as a separate
     component of damages which resulted in overstating and
     double counting the wrongfully obtained profits. Therefore,
     we vacate the bankruptcy court’s postpetition damage award
     and remand for a calculation of damages consistent with this
     memorandum.

Id. at *14 (emphasis added).

                                    11
D.    Proceedings on remand

      On remand, the bankruptcy court recalculated JLE’s damages by

eliminating the line item for postpetition silage damages. The court also

called attention to its award of prepetition silage damages. It noted that the

BAP’s decision specifically concerned postpetition damages only, despite

the rationale for awarding silage damages being the same across both pre-

and postpetition periods. It indicated that it might be appropriate to

eliminate the prepetition silage award but that it was constrained by the

BAP’s directive.7

      Accordingly, the bankruptcy court issued its order (“Order After

Remand”) holding that JLE was entitled to a prepetition claim of

$579,072.51 and a postpetition administrative claim of $437,280.59, as

follows:

      Pre-petition
      Pre-petition silage           $416,623.98
      Pre-petition profits          $191,541.45
      Pre-petition hay conversion $720.00
            Total                                           $608,885.43
      Credit for 60.29% of pre-petition rent                 ($29,812.92)
      ($49,449.19 x .6029)
            Total pre-petition claim                        $579,072.51

      Post-petition

      7
       The bankruptcy court noted that the BAP’s decision “specifically refers to
postpetition profits in at least five instances[.]”

                                          12
      Post-petition silage          $0
      Post-petition profits         $521,644.79
            Total                                      $521,644.79
      Credit for 60.29% of post-petition rent           ($84,364.20)
      ($139,930.67 x .6029)
            Total post-petition claim                  $437,280.59

      The Debtors filed a timely notice of appeal from the Order After

Remand. JLE filed a timely notice of cross-appeal.

                              JURISDICTION

      The bankruptcy court had jurisdiction pursuant to 28 U.S.C. §§ 1334

and 157(b)(1) and (b)(2)(B). We have jurisdiction under 28 U.S.C. § 158.

                                   ISSUES

      (1) Whether the bankruptcy court erred by not subtracting the

prepetition silage value from the damages award.

      (2) Whether the bankruptcy court erred by not revising its calculation

of net profits.

                        STANDARDS OF REVIEW

      We review de novo whether the bankruptcy court used the correct

legal standard in computing damages. See Neptune Orient Lines, Ltd. v.

Burlington N. & Santa Fe Ry. Co., 213 F.3d 1118, 1119 (9th Cir. 2000). De

novo review is independent and gives no deference to the trial court’s

conclusions. Roth v. Educ. Credit Mgmt. Corp. (In re Roth), 490 B.R. 908, 915

(9th Cir. BAP 2013).

                                      13
      We also review de novo a whether the trial court complied with an

appellate mandate on remand. See E.M. ex rel. E.M. v. Pajaro Valley Unified

Sch. Dist. Office of Admin. Hearings, 758 F.3d 1162, 1170 (9th Cir. 2014);

United States v. Thrasher, 483 F.3d 977, 982 (9th Cir. 2007) (“[I]f a district

court errs by violating the rule of mandate, the error is a jurisdictional

one.”). We review for abuse of discretion the trial court’s decision to

consider an issue on remand that the mandate does not foreclose. See Hall

v. City of L.A., 697 F.3d 1059, 1067 (9th Cir. 2012) (holding, under an abuse

of discretion standard, that the district court on remand “did not violate the

law of the case [when considering a issue on remand that] . . . had never

been considered or decided by any court”); Carter v. Astrue, 295 F. App’x

868, 869 (9th Cir. 2008) (holding that “[t]he district court acted within its

discretion in construing the remand order” to allow introduction of new

evidence); Nguyen v. United States, 792 F.2d 1500, 1503 (9th Cir. 1986)

(“Absent a mandate explicitly or impliedly precluding amendment, the

decision whether to allow leave to amend is within the trial court’s

discretion.”).

      We also review for an abuse of discretion the bankruptcy court’s

“grant of equitable monetary and injunctive relief.” Consumer Fin. Prot.

Bureau v. Gordon, 819 F.3d 1179, 1187 (9th Cir. 2016). To determine whether

the bankruptcy court has abused its discretion, we conduct a two-step

inquiry: (1) we review de novo whether the bankruptcy court “identified

                                        14
the correct legal rule to apply to the relief requested” and (2) if it did,

whether the bankruptcy court’s application of the legal standard was

illogical, implausible, or without support in inferences that may be drawn

from the facts in the record. United States v. Hinkson, 585 F.3d 1247, 1262-63

& n.21 (9th Cir. 2009) (en banc).

      The bankruptcy court’s “computation of damages is a finding of fact

we review for clear error.” Simeonoff v. Hiner, 249 F.3d 883, 893 (9th Cir.

2001). A finding of fact is clearly erroneous if it is illogical, implausible, or

without support in the record. Retz v. Samson (In re Retz), 606 F.3d 1189,

1196 (9th Cir. 2010). The bankruptcy court’s choice among multiple

plausible views of the evidence cannot be clear error. United States v. Elliott,

322 F.3d 710, 715 (9th Cir. 2003).

                                   DISCUSSION

A.    The bankruptcy court should have removed the silage costs from
      the prepetition damages award.

      The Debtors’ only argument in this appeal is that the bankruptcy

court should have removed the prepetition silage value from the award in

the Order After Remand.8 The Debtors argue that they “merely strive for

consistency in the manner in which damages are calculated. If the silage

      8
         The Debtors submit a lengthy opening brief but admit that they are only
reiterating their arguments raised in the earlier appeal in order to preserve the
arguments for further appellate review. Accordingly, we do not consider those issues.

                                          15
usage expense should be excluded for post-petition profits, it should

similarly be reduced for pre-petition profits.” This requires us to consider

the extent to which our mandate was binding on the bankruptcy court.

      Under the“rule of mandate,” the trial court must adhere to the

appellate court’s decision: “‘The rule of mandate is similar to, but broader

than, the law of the case doctrine.’ The rule provides that any ‘district court

that has received the mandate of an appellate court cannot vary or examine

that mandate for any purpose other than executing it.’” Stacy v. Colvin, 825
F.3d 563, 567-68 (9th Cir. 2016) (citations omitted). The trial court “commits

‘jurisdictional error’ if it takes actions that contradict the mandate.” Id. at

568 (citing Hall, 697 F.3d at 1067).

      Nothing in the BAP’s mandate compelled the bankruptcy court to

disturb its prepetition silage damages award. As the bankruptcy court

correctly noted, the BAP specified in multiple instances that it was vacating

the postpetition damage award and did not refer to prepetition damages.9

      9
         This is consistent with the overwhelming emphasis of the Debtors’ arguments
before the prior Panel. The Debtors’ opening brief mentioned postpetition profits or
damages at least seven times. Only a single terse footnote at the end of the opening brief
made reference to the prepetition silage award: “The Court utilized the same
methodology in calculating Appellee’s pre-petition claim of $579,072.51. The Court’s
calculations of the Pre-Petition disgorgement/silage usage is reversible error for the
same reasons Appellants appeal the Court’s calculation of the amount awarded for the
Post-Petition Administrative claim.” Moreover, the Debtors did not mention prepetition
silage at oral argument. On remand, they admitted to the bankruptcy court that they
did not focus the Panel’s attention on the issue of prepetition damages.

                                           16
Accordingly, the Order After Remand was consistent with the BAP’s

mandate.

      The rule of mandate, however, does not prohibit the trial court from

addressing issues that were not decided by the appellate court or made a

part of the mandate. The Ninth Circuit has stated that the trial court “may,

however, ‘decide anything not foreclosed by the mandate.’” Id. (quoting

Hall, 697 F.3d at 1067). It noted:

            We have previously allowed district courts to reexamine
      any issue on remand that is not inconsistent with the mandate.
      See Odima v. Westin Tucson Hotel, 53 F.3d 1484, 1497 (9th Cir.
      1995). To illustrate, in Odima we remanded with instructions to
      make specific findings concerning an employer’s reasons for
      not promoting the plaintiff. Id. On remand, the district court
      did as we directed but also reevaluated and expanded upon the
      remedies available to the plaintiff. Id. We held the district court
      was free to revisit the issue of remedies on remand because
      “any issue not expressly or impliedly disposed of on appeal [is]
      available for consideration by the trial court on remand.” Id.
      (quoting Firth v. United States, 554 F.2d 990, 993-94 (9th Cir.
      1977)).

Id.; see Hall, 697 F.3d at 1067 (“[W]hen a court is confronted with issues that

the remanding court never considered, the ‘mandate[ ] require[s] respect

for what the higher court decided, not for what it did not decide.’”

(quoting United States v. Kellington, 217 F.3d 1084, 1093 (9th Cir. 2000))). 10

      10
           As an authoritative treatise explains:
                                                                      (continued...)

                                              17
       This Panel’s prior decision was simply silent on the question of the

prepetition silage. Nothing in the Panel’s reasoning implies that the

prepetition silage should be included in the damages award but the post-

petition damages should not. Because the BAP did not consider or decide

the propriety of the prepetition silage award, the bankruptcy court had

discretion to reexamine that award upon remand.

       The bankruptcy court thought, however, that this Panel’s prior

decision precluded it from changing its prepetition damages award. In this

respect, we think that the bankruptcy court was led astray by the lacuna in

our prior decision (and that the prior Panel was led astray by the Debtor’s

decision to bury their discussion of the issue in a single brief footnote).

Therefore, we are constrained to say that the bankruptcy court

misunderstood its powers under the rule of mandate, applied an incorrect

legal standard, and abused its discretion by declining to consider a

       10
         (...continued)
       Focus on the mandate rule is desirable only if its requirements are met—
       if the appellate court in fact did not consider and resolve an issue not
       presented on the first appeal, the trial court acting on remand should
       not be bound as tightly as if the issue had in fact been resolved. The trial
       court should take account of the needs of orderly progression through the
       trial and appeals processes in deciding whether to reconsider its own
       pre-appeal ruling, but so long as further proceedings are otherwise
       appropriate on remand there is no point in pretending that the trial court
       owes fealty to a nonexistent appellate ruling.

18B Wright, Miller & Cooper, Federal Practice and Procedure: Jurisdiction 2d § 4478.6
(2002) (emphases added).

                                            18
modification of the prepetition silage award.

      We agree with the Debtors that striking the prepetition silage award

is appropriate. The prior BAP Panel held that the postpetition silage award

was an operating expense, not a part of the Debtors’ net profit; this logic

applies equally to prepetition silage.

      Fortunately, the bankruptcy court foresaw the possibility of our

conclusion and made a finding about the value of the prepetition silage.

Therefore, rather than remanding the case again, we will simply strike the

silage value ($416,623.98) from the prepetition damage award in the

Amended Damages Order. See Six (6) Mexican Workers v. Ariz. Citrus

Growers, 904 F.2d 1301, 1310 (9th Cir. 1990) (“Our exercise of this discretion

[to recalculate an award prior to remand] is particularly appropriate where

recalculation involves issues that we are equally situated to decide.”);

Felder v. United States, 543 F.2d 657, 671 (9th Cir. 1976) (“Most of the

changes we have made involved arithmetical calculations that we could

perform as easily as the trial court and a remand would necessarily have

involved a waste of judicial resources.”).

B.    The bankruptcy court erred in calculating net profits.

      On its cross-appeal, JLE argues that the bankruptcy court failed “to

follow both the letter and the spirit” of the BAP’s earlier decision because

the Panel directed the court to calculate damages as the gross revenue less

expenses. JLE contends that, on remand, the bankruptcy court erred by

                                         19
failing to recalculate the profits using “the Panel’s formula (the entire

business’s gross profits less expenses)[.]” We disagree with most of JLE’s

contentions, but we hold that our mandate did not constrain the

bankruptcy court as tightly as it thought and that the court should have

made one adjustment to its calculation of net profits.

      1.    JLE did not waive its arguments on cross-appeal by failing to
            raise them in the first BAP appeal.

      In the first appeal, JLE fully supported the bankruptcy court’s

damages calculation. This raises the question whether JLE may attack that

calculation for the first time in this second appeal.

      As a general rule, an appellant may not raise issues in a second

appeal that it failed to raise in a prior appeal:

             By waiting to raise the argument after the first appeal,
      defendants required the district court and plaintiff to deal with
      the case again and have forced our court to deal with a second
      appeal. We do not condone and cannot encourage that
      inefficient and uneconomical approach. Defendants knew
      everything they needed to know about their joint and several
      liability for the attorney fee award at the time of the prior
      appeal. If they wanted to challenge the joint and several
      liability, they should have done so at that time. They did not,
      so the challenge has been waived.

Jimenez v. Franklin, 680 F.3d 1096, 1100 (9th Cir. 2012) (emphases added); see

Jules Jordan Video, Inc. v. 144942 Canada, Inc., 468 F. App’x 676, 678 (9th Cir.

2012) (“To the extent that defendants attempt now to raise new arguments .

                                        20
. . , those matters could have and should have been raised in the initial

appeal. Because they were not, they are waived.”); United States v. Nagra,

147 F.3d 875, 882 (9th Cir.1998) (“When a party could have raised an issue

in a prior appeal but did not, a court later hearing the same case need not

consider the matter.”); Munoz v. Cty. of Imperial, 667 F.2d 811, 817 (9th Cir.

1982) (“[D]efendants . . . are now raising a new issue that they did not raise

in their last appeal to this court. We need not and do not consider a new

contention that could have been but was not raised on the prior appeal.”).

      All of these cases hold that an appellant in the first appeal may not

raise brand new arguments in a second appeal. The remaining question is

whether an appellee may do so. Here, the case law is less clear. The Ninth

Circuit has held that defendant/appellees “did not need to take a cross

appeal in the prior appeal in order to argue, as an alternative ground for

affirming the judgment, that they had qualified immunity” in a second

appeal following remand. Rivero v. City & Cty. of S.F., 316 F.3d 857, 862 (9th

Cir. 2002). Courts in other circuits have reached mixed conclusions. See 18B

Wright, Miller & Cooper, Federal Practice and Procedure: Jurisdiction 2d §

4478.6 (2002) (“some decisions allow renewal on remand of questions that

the appellee did not raise on an earlier appeal, while other decisions bar

renewal”); compare Crocker v. Piedmont Aviation, Inc., 49 F.3d 735, 740 (D.C.

Cir. 1995) (“While there are clear adjudicative efficiencies created by

requiring appellants to bring all of their objections to a judgment in a single

                                       21
appeal rather than seriatim . . . , forcing appellees to put forth every

conceivable alternative ground for affirmance might increase the

complexity and scope of appeals more than it would streamline the

progress of the litigation.”), with Lazare Kaplan Int'l, Inc. v. Photoscribe Techs.,

Inc., 714 F.3d 1289, 1294 (Fed. Cir. 2013) (agreeing with appellant that “the

district court erred by allowing [appellee] to address validity on remand

despite its failure to file a cross-appeal from the adverse final judgment” in

the first appeal), and Kessler v. Nat'l Enterprises, Inc., 203 F.3d 1058, 1059-60

(8th Cir. 2000) (dismissing cross-appeal for failure to raise arguments in

earlier appeal).

      We hold that JLE’s decision to support the judgment in the first

appeal does not preclude it from challenging the damages calculation in

this appeal. The bankruptcy court awarded JLE less than it wanted, but JLE

was apparently willing to live with the reduced award. It is easy to say,

knowing what we know now, that it would have been more efficient if JLE

had raised all of its arguments in the first appeal. But we have the benefit of

hindsight, and we cannot expect an appellee like JLE to have perfect

foresight. To require an appellee to raise all possible challenges to a

damages award, even if the appellee is willing to live with the result,

would expand the scope of many appeals, increasing the burden on

appellants, appellees, and appellate courts. And because the vast majority

of appeals result in affirmance, that additional effort and expense would be

                                         22
wasted in most cases.

      In this case, the BAP substantially altered the dollar amount of the

judgment. The BAP thus “lessened” JLE’s rights under the Amended

Damages Order, which then allowed it to challenge other portions of the

damages award in this second appeal. See Rivero, 316 F.3d at 862 (“If the

court of appeals agrees with the plaintiff-appellant and alters the judgment

in some way, it provides relief that was not provided by the district court,

and thereby ‘enlarges’ the rights of the plaintiff-appellant and ‘lessens’ the

rights of the defendant-appellee.”).

      Accordingly, JLE did not waive its arguments by failing to raise them

in the first appeal.

      2.    The Panel’s mandate did not preclude the bankruptcy court
            from recomputing the lost profits damages.

      JLE contends that the Panel’s mandate in the prior appeal required

the bankruptcy court to revisit its calculation of lost profits. In contrast, the

bankruptcy court believed that our mandate precluded it from doing so.

We disagree with both JLE and the bankruptcy court. The mandate did not

require the bankruptcy court to recompute the profits, and also did not

preclude the court from doing so.

      The Panel said that “[t]he proper measure of recovery in this case

must be the benefits, or net profits, received by Debtors from the wrongful

use of JLE’s property.” 2017 WL 2417189, at *14. The Panel affirmed the

                                       23
court’s use of “a restitutionary measure of damages, including the

disgorgement of profits.” Id. at *13. Thus, nothing in the Panel’s prior

decision required the bankruptcy court to recompute the damages.

      On the other hand, nothing in the Panel’s decision prevented the

court from doing so either. The prior Panel did not reach the issue of

whether the bankruptcy court’s calculations of net profits were correct. JLE

correctly points out that, if the Panel intended to preclude such a

reassessment, the Panel could have simply struck the postpetition silage

award rather than remanding the case. Therefore, the bankruptcy court

was free to revisit that issue on remand.

      The bankruptcy court incorrectly thought that our mandate

precluded it from recalculating the profits. Thus, the bankruptcy court

misapprehended its powers and applied an incorrect legal standard on

remand.

      3.    The bankruptcy court erroneously reduced the disgorgement
            award by the hypothetical profits that the Debtors could have
            earned without trespassing on the Property.

      JLE contends that the bankruptcy court erred in awarding only a

portion of the Debtors’ net profits during the trespass period. We agree that

the bankruptcy court’s measure of damages was incorrect in one respect.

      The Ninth Circuit has recognized that “[d]isgorgement is a remedy in

which a court orders a wrongdoer to turn over all profits obtained by

                                      24
violating the law. A district court has broad equity powers to order

disgorgement, and its disgorgement calculation requires only a reasonable

approximation of profits causally connected to the violation.” Gordon, 819
F.3d at 1195 (internal citation and quotation marks omitted).

      As we noted in our previous decision, the bankruptcy court did not

err by using a restitutionary measure of damages, including disgorgement

of net profits. 2017 WL 2417189, at *13. We also stated that net profits are

determined by subtracting operating costs from gross revenues. Id. at *14.

      But the bankruptcy court did not award all of the net profits that the

Debtors earned while trespassing on JLE’s property. Instead, it reduced the

net profits by 60.29 percent, because the Debtors could have moved 2,133 of

their 3,538 cows to the Van Leeuwen Property and earned a profit there.

This reasoning suffers from a fatal logical flaw; it impermissibly capped the

calculation of net profits. As JLE argues, if the Van Leeuwen Property were

large enough to accommodate the Debtors’ entire herd, the bankruptcy

court’s formula would find that the Debtors received no “benefit” from

trespassing on the Property. That a trespasser could have earned some or

all of those profits without trespassing does not negate the fact that these

net profits were earned by trespassing.11 Therefore, the Debtors were

      11
          The Restatement (Third) of Restitution and Unjust Enrichment instructs that
the trial court should apportion the net profits between the wrongdoer’s lawful and
unlawful activities:
                                                                           (continued...)

                                           25
required to disgorge all of their net profits earned during the trespass.

      Fortunately, we need not remand again for calculation of damages.

The bankruptcy court has already determined the daily net profits, and we

are persuaded that those calculations are consistent with the methodology

we outlined in the prior appeal (the bankruptcy court apparently thought

so too, because, unlike its two alternative silage calculations, it did not offer

any alternative calculation of daily net profits).

      As we have noted above, the bankruptcy court’s calculation of the

Debtors’ net profits started with $2,762,587 net income for the first six

months of 2014 (those six months are not coterminous with the period of

trespass, but they largely overlap and appear to be the closest period of

reliable data presented to the court). The bankruptcy court then deducted

      11
       (...continued)
      When the net profit in question has been realized in part as a result of the
      wrong to the claimant and in part from the defendant’s legitimate
      activities—so that some part, at least, of the defendant’s profit would have
      been realized in the absence of the wrong—what proportion of the net
      profit is attributable to the wrong to the claimant? Because precise
      answers to this part of the apportionment problem are often unattainable,
      the court will reach the best approximation it can under the circumstances.

Restatement (Third) of Restitution and Unjust Enrichment § 51 cmt. g (Am. Law Inst.
2011). While apportionment may be appropriate in other circumstances, such as where
“the underlying wrong to the claimant affects only one” component of the defendant’s
business, id., in this case, apportionment is unnecessary. The Debtors’ wrongful trespass
affected and enabled their entire dairy business, not a mere component of a larger
enterprise. As such, the entire benefit that the Debtors gained is attributable to the
wrongful trespass on the Property and must be disgorged.

                                           26
the Debtors’ profit from the sale of the cows ($1,050,835), because that

profit was not shown to have resulted from the trespass, to arrive at net

profit of $1,711,752 for that six month period. Next, the bankruptcy court

recognized that the Debtors’ profits were not necessarily spread out evenly

during the half-year period, so the bankruptcy court compared milk sales

during the trespass portion of 2014 (January 2014 through May 2014) with

milk sales after the trespass ended (June 2014), and determined that 90.56

percent of the net profits were earned during the trespass period from

January 1 through May 31, 2014 – i.e., $1,550,162.61 in net profits

($1,711,752 x 90.56%). Then the bankruptcy court converted this figure to a

daily net profit amount: it divided the total of $1,550,162.61 by the number

of days from January 1 through May 31, 2014 (151 days, including the start

and end days). This yields a daily net profit of $10,262.98 ($1,550,162.61/151

days).12 Because the herd size did not change between the 2014 trespass

period and the December 2013 trespass period, the court used the same

daily net profit figure for December 2013, so the daily net profit throughout

the entire trespass period was $10,262.98. Neither party has established any

clear error in the court’s determination of daily net profits.

      We convert these daily net profits into total profits below.

      12
         We cannot verify the bankruptcy court's arithmetic concerning the daily net
profit. Nevertheless, the parties do not challenge this figure, and JLE urges us to adopt
the $10,262.98 daily net profit calculation, so we do not disturb this calculation.

                                            27
Meanwhile, we note that, as the bankruptcy court recognized, any damages

must be reduced to account for rent and taxes that the Debtors paid.

Because we reject the bankruptcy court’s proration of the net profits, we

also do not prorate the credit for rent and taxes paid that the court applied

to offset the damages award. Accordingly, we subtract $49,449.19 (rather

than $29,812.92) from the prepetition damages and $139,930.67 (rather than

$84,364.20) from the postpetition damages.

      4.    We reject JLE’s other points of error, with one minor
            exception.

      JLE raises other arguments related to the calculation of profits and

urges us to increase the damages award accordingly. With one minor

exception, we decline to do so.

      First, JLE argues that the bankruptcy court should have calculated the

Debtors’ profits using the monthly operating reports, rather than the draft

financial statement. But the bankruptcy court thoroughly explained its

reasons for rejecting the monthly operating reports, which it found to paint

an incomplete picture of the Debtors’ finances. We discern no clear error.

      JLE also argues in passing that the bankruptcy court should have

awarded it the profits that the Debtors realized from the sale of the 1,405

cows. We find no error. There was no evidence that the profit gained from

the sale of the cows was tied to the wrongful trespass. For example, there is

no evidence that the cows gained value during the period of the trespass.

                                      28
      Regarding the number of days pre- and postpetition, we disagree

with JLE’s argument that they are entitled to forty-eight post-

trespass/prepetition days. The court awarded net profits for forty-seven

days, which excludes the date of the foreclosure sale and continues through

the day before the Debtors filed their petition. JLE does not provide any

evidence that we should count the entirety of December 6, 2013 as a

compensable trespass day. The bankruptcy court counted the days of

trespass beginning the following day, and we find no clear error with its

calculation.

      However, we agree with JLE’s assertion that the bankruptcy court

miscounted the number of postpetition/post-trespass days. The period

from January 23, 2014 to May 31, 2014 is 129 days inclusive of the petition

date and the end date. We adjust the postpetition net profits calculation by

an additional day.

      Finally, JLE contends that the trespass period lasted until June 15,

2014, not May 31. But the bankruptcy court found that the Debtors had

vacated the Property by May 31 as it had ordered, and we discern no clear

error. Although some machinery and equipment remained on the Property

until June 15, there is no dispute that the Debtors removed the cows by

May 31. Disgorgement is based on the profits earned while the Debtors

wrongfully remained on the Property, and the Debtors were no longer

earning money from the Property after May 31. The bankruptcy court was

                                      29
correct to order disgorgement of profits only until May 31.

                               CONCLUSION

      For the foregoing reasons, we REVERSE the bankruptcy court’s

Order After Remand as to (1) the award of prepetition silage, (2) the pre-

and postpetition net profits calculation, (3) the proration of the rent credits,

and (4) the number of postpetition days used in the net profits calculation.

With these four modifications, the prepetition claim and postpetition

administrative claim are adjusted as follows:

      Pre-petition
      Pre-petition silage           $0
      Pre-petition profits          $482,360.06
      (47 days @ $10,262.98/day)
      Pre-petition hay conversion $720.00
            Subtotal                                   $483,080.06
      Credit for 100% of pre-petition rent              ($49,449.19)
            Total pre-petition claim                   $433,630.87

      Post-petition
      Post-petition silage          $0
      Post-petition profits         $1,323,924.42
      (129 days @ $10,262.98/day)
            Subtotal                                   $1,323,924.42
      Credit for 100% of post-petition rent             ($139,930.67)
            Total post-petition claim                  $1,183,993.75

We REMAND for entry of judgment in the foregoing amounts.

                                       30