Court Opinion

ID: 2769605
Source: CourtListenerOpinion
Date Created: 2015-01-13 21:00:55.686602+00
Date Added: 2024-06-11T11:11:18.456291
License: Public Domain

NOT FOR PUBLICATION

                    UNITED STATES COURT OF APPEALS                            FILED
                            FOR THE NINTH CIRCUIT                              JAN 13 2015

                                                                          MOLLY C. DWYER, CLERK
                                                                            U.S. COURT OF APPEALS

In the Matter of: R2D2, LLC,                     No. 12-56481

              Debtor,                            D.C. No. 2:12-cv-01886-PSG

RONALD TUTOR AND ZELUS, LLC,                     MEMORANDUM*

              Appellants,

  v.

RONALD L. DURKIN, Chapter 11
Trustee,

              Appellee.

                   Appeal from the United States District Court
                       for the Central District of California
                   Philip S. Gutierrez, District Judge, Presiding

                    Argued and Submitted December 12, 2014
                             Pasadena, California
In the Matter of: R2D2, LLC,                     No. 12-56483

              Debtor,                            D.C. No. 2:12-cv-01627-PSG

        *
             This disposition is not appropriate for publication and is not precedent
except as provided by 9th Cir. R. 36-3.
DAVID BERGSTEIN,

              Appellant,

  v.

RONALD L. DURKIN, Chapter 11
Trustee,

              Appellee.

                   Appeal from the United States District Court
                       for the Central District of California
                   Philip S. Gutierrez, District Judge, Presiding

                           Submitted December 12, 2014**
                               Pasadena California

Before: PREGERSON, WARDLAW, and BERZON, Circuit Judges.

       Ronald Tutor, Zelus, LLC, and David Bergstein appeal the district court’s

order affirming the bankruptcy court’s order authorizing the Trustee of R2D2,

LLC’s bankruptcy estate to use R2D2’s one-hundred percent membership interest

in non-debtor Pangea Media Group, LLC (Pangea), to adopt a resolution removing

Bergstein as Pangea’s manager, and authorizing the Trustee to place Pangea into

       **
         The panel unanimously concludes this case is suitable for decision without
oral argument. See Fed. R. App. P. 34(a)(2).

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bankruptcy proceedings. We have jurisdiction pursuant to 28 U.S.C. § 158(d)(1),

and we affirm.

      Under 28 U.S.C. § 158(d)(1), we have jurisdiction over appeals from “final

orders of the district courts reviewing bankruptcy court decisions.” In re SK

Foods, L.P., 676 F.3d 798, 801 (9th Cir. 2012) (quoting In re Westwood Shake &

Shingle, Inc., 971 F.2d 387, 389 (9th Cir. 1992)). A district court order is final

only if the underlying bankruptcy court order is final. Id. at 801-02; In re Rains,

428 F.3d 893, 901 (9th Cir. 2005). Here, the bankruptcy court’s order finally

determined a discrete issue—that the Trustee could use R2D2’s membership

interest in Pangea to vote to remove Bergstein as Pangea’s manager. And no

further determination or order will be required to allow the Trustee to place Pangea

into bankruptcy, if the Trustee so decides. This order seriously affects Bergstein’s

substantive rights by divesting him of his managerial position in Pangea. Under

our “pragmatic approach” to finality in bankruptcy appeals, In re AFI Holding,

Inc., 530 F.3d 832, 836 (9th Cir. 2008) (quoting In re Lazar, 237 F.3d 967, 985

(9th Cir. 2001)), the bankruptcy court’s order was final, and we therefore have

jurisdiction to entertain the appeal of that order.

      The district court did not err in concluding that the bankruptcy court had

constitutional authority to enter its order. A bankruptcy court exercises the

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“judicial Power of the United States” and infringes on the authority of Article III

courts when it “enter[s] final judgment on a common law tort claim.” Stern v.

Marshall, 131 S. Ct. 2594, 2601 (2011). Here, although the bankruptcy court

considered whether the Trustee could remove Bergstein as Pangea’s manager

pursuant to Pangea’s operating agreement, the bankruptcy court did so for the sole

purpose of delineating the Trustee’s right to “use” R2D2’s property under 11

U.S.C. § 363(b), rather than to adjudicate a common law claim. The bankruptcy

court, therefore, determined a public right, and its order was permissible under

Stern. See Stern, 131 S. Ct. at 2611-15; see also In re Deitz, 760 F.3d 1038, 1044

(9th Cir. 2014).

      Nor did the district court err in concluding that the bankruptcy court acted

within its “considerable discretion” in approving the Trustee’s use of R2D2’s

property. In re Walter, 83 B.R. 14, 17 (9th Cir. BAP 1988). The Trustee

submitted ample evidence to support the bankruptcy court’s reasonable conclusion

that Bergstein could not be trusted to manage Pangea, which was wholly owned by

R2D2. Specifically, the Trustee provided evidence that Bergstein failed to identify

to the Trustee that Pangea was 100 percent owned by R2D2; verified bankruptcy

schedules for R2D2 that did not list Pangea as a subsidiary; failed to provide the

Trustee with any federal tax returns or financial statements for Pangea; and,

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through counsel, submitted papers to the bankruptcy court in 2010 that suggested

Pangea was an operating, successful business, but later represented that Pangea

was “a woefully insolvent entity.” Based on this evidence, the bankruptcy court

reasonably concluded that Bergstein’s representations and decisions concerning the

assets and financial status of Pangea were not to be trusted; that the Trustee has a

right to investigate and determine whether Pangea has assets that can be recovered

to benefit the bankruptcy estate; and that the Trustee may place Pangea in

bankruptcy for that purpose if he determines that to be the prudent course. See 11

U.S.C. § 1106(a)(3).

      AFFIRMED.

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