Court Opinion

ID: 4510660
Source: CourtListenerOpinion
Date Created: 2020-02-26 21:00:46.114894+00
Date Added: 2024-06-11T12:13:37.988451
License: Public Domain

NOT FOR PUBLICATION                      FILED
                        UNITED STATES COURT OF APPEALS                     FEB 26 2020
                                                                      MOLLY C. DWYER, CLERK
                                                                        U.S. COURT OF APPEALS
                                 FOR THE NINTH CIRCUIT

In re: BARBRA WILLIAMSON,                        No.    18-60062

                   Debtor,                       BAP No. 17-1375

------------------------------
                                                 MEMORANDUM*
BARBRA WILLIAMSON,

                   Appellant,

  v.

PARS,

                   Appellee.

                              Appeal from the Ninth Circuit
                               Bankruptcy Appellate Panel
             Lafferty III, Spraker, and Faris, Bankruptcy Judges, Presiding

                         Argued and Submitted February 14, 2020
                                  Pasadena, California

Before: SCHROEDER, BERZON, and R. NELSON, Circuit Judges.

       Barbra Williamson appeals a decision by the bankruptcy court, affirmed by

the Bankruptcy Appellate Panel, concluding that PARS, the administrator of

       *
             This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.
Williamson’s pension plan, did not violate the automatic stay triggered by

Williamson’s chapter 13 bankruptcy. The court concluded that PARS’s post-

petition withholding of Williamson’s monthly pension payments to recoup pre-

petition overpayments constituted equitable recoupment, which is not subject to the

automatic stay. It denied Williamson’s motion for sanctions under 11 U.S.C.

§ 362(k) for violation of the stay. We affirm.

      “We review de novo the scope or applicability of the automatic stay under

the Bankruptcy Code, 11 U.S.C. § 362, because it is a question of law.” In re

Palmdale Hills Prop., LLC, 654 F.3d 868, 875 (9th Cir. 2011).

      1.     Williamson’s argument that the doctrine of equitable recoupment is

invalid because it is a judicially created exception to 11 U.S.C. § 362, the statute

providing for the automatic stay, is foreclosed by binding precedent. The common

law doctrine of equitable recoupment is valid even though it “does not owe its

legitimacy to anything in the Bankruptcy Code.” See In re TLC Hosps., Inc., 224

F.3d 1008, 1011 (9th Cir. 2000). Use of recoupment in bankruptcy has been

approved by the Supreme Court and the Ninth Circuit. See, e.g., Reiter v. Cooper,

507 U.S. 258, 265 n.2 (1993) (observing that the use of recoupment is permitted in

bankruptcy cases); In re TLC Hosps., 224 F.3d at 1011; Newbery Corp. v.

Fireman’s Fund Ins. Co., 95 F.3d 1392, 1399 (9th Cir. 1996).

      Binding precedent further makes clear that the equitable recoupment is not

                                          2
subject to the automatic stay. In re TLC Hospitals noted that “[a]s applied in

bankruptcy, recoupment is an equitable doctrine that ‘exempts a debt from the

automatic stay’” when it applies. 224 F.3d at 1011 (quoting United States v.

Consumer Health Servs. of Am., Inc., 108 F.3d 390, 395 (D.C. Cir. 1997)). In re

TLC Hospitals held that because the doctrine did apply, the party seeking

recoupment “may recoup its overpayments by applying them against its post-

petition underpayment liabilities to [debtor], without being affected by the

automatic stay.” Id. at 1014 (emphasis added). Bound by these decisions, we reject

Williamson’s argument that the doctrine of equitable recoupment is an invalid

exception to the automatic stay.

      2.     Equitable recoupment is permissible only where mutual debts arise

from “the same transaction,” and where “it would . . . be inequitable for the debtor

to enjoy the benefits of that transaction without meeting its obligations.” See

Newbery, 95 F.3d at 1399, 1403 (citations omitted). Williamson does not distinctly

contest in her brief that the test for equitable recoupment was met here, and

appears to have waived this point at oral argument.

      In any event, the court here properly applied the logical relationship test

used in this circuit to determine whether the two claims arose from the same

transaction. See In re TLC Hosps., 224 F.3d at 1012; Newbery, 95 F.3d at 1402.

PARS’s obligation to pay Williamson pension benefits and Williamson’s debt for

                                          3
prior overpayments “logically relate to one another,” In re TLC Hosps., 224 F.3d at

1012, as they both “arise[] from the same aggregate set of operative facts,” see In

re Lazar, 237 F.3d 967, 979 (9th Cir. 2001) (internal citations omitted). Both debts

arise from Williamson’s pension plan; the errors in her signed enrollment packet

resulted in the miscalculation of her monthly benefit; and the subsequent correction

of that miscalculation demonstrated that Williamson had already received the

amount due each month by virtue of the earlier overpayment. The court also

properly concluded that the equities favor recoupment. Equitable recoupment is

thus appropriate.

      AFFIRMED.

                                         4