Court Opinion

ID: 9961788
Source: CourtListenerOpinion
Date Created: 2024-04-19 19:00:58.798692+00
Date Added: 2024-06-11T08:18:54.573854
License: Public Domain

FILED
                                                                                APR 19 2024
                          NOT FOR PUBLICATION                               SUSAN M. SPRAUL, CLERK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 No. NC-23-1171-SGF
 PROFESSIONAL FINANCIAL
 INVESTORS, INC.,                                   Bk. No. 20-30604
               Debtor.
                                                    Adv. No. 22-03058
 RICHARD MCAVOY; KATHRYN
 MCAVOY,
             Appellants,
 v.                                                 MEMORANDUM*
 MICHAEL GOLDBERG, Trustee of the
 PFI Trust,
             Appellee.

              Appeal from the United States Bankruptcy Court
                   for the Northern District of California
             Hannah L. Blumenstiel, Bankruptcy Judge, Presiding

Before: SPRAKER, GAN, and FARIS, Bankruptcy Judges.

                                 INTRODUCTION

      Richard and Kathryn McAvoy appeal from the bankruptcy court’s

summary judgment in favor of Michael Goldberg, as trustee of the PFI

Trust. The bankruptcy court determined as a matter of undisputed fact and

      *
        This disposition is not appropriate for publication. Although it may be cited for
whatever persuasive value it may have, see Fed. R. App. P. 32.1, it has no precedential
value, see 9th Cir. BAP Rule 8024-1.
law that the McAvoys were liable under Cal. Civ. Code § 3439.04(a)(1) and

(2) for $323,397.30 in “fictitious profits” they received from debtor

Professional Financial Investors, Inc. (“PFI”) and its affiliates, who were

running a massive Ponzi scheme.

      Using an alternative methodology for calculating the amount of their

fraudulent transfer liability, the McAvoys assert that their liability should

have been zero. But their methodology is inconsistent with binding Ninth

Circuit law. They also complain that the bankruptcy court should have

excluded as inadmissible a declaration submitted in support of Goldberg’s

summary judgment motion. But the contents of this declaration were

cumulative of other evidence in the record.

      Because neither of the McAvoys’ arguments justifies reversal, we

AFFIRM.

                                        FACTS1

A.    The Debtors, their bankruptcy filings, and the formal Ponzi scheme
      determination.

      The underlying bankruptcy case is one of many arising from a

massive Ponzi scheme orchestrated by Ken Casey and Lewis Wallach

through debtors PFI and Professional Investors Security Fund, Inc.

(“PISF”). When a group of investors discovered the Ponzi scheme, they

      1
          We exercise our discretion to take judicial notice of documents electronically
filed in the underlying bankruptcy case and adversary proceeding. See Atwood v. Chase
Manhattan Mortg. Co. (In re Atwood), 293 B.R. 227, 233 n.9 (9th Cir. BAP 2003).
                                            2
filed an involuntary chapter 112 petition against PISF in July 2020. Shortly

thereafter, PISF consented to entry of an order for relief, and PFI filed a

voluntary petition. Eventually, virtually all of PFI’s and PISF’s affiliates

became debtors as well (collectively with PFI and PISF, the “Debtors”).

      In April 2021, the official committee of unsecured creditors filed a

complaint for declaratory relief seeking a determination that the Debtors

had been operating a Ponzi scheme. A month later, the bankruptcy court

entered a stipulated judgment formally determining that Debtors’

”businesses were all part of an overarching Ponzi scheme that began no

later than January 1, 2007.”

B.    Plan confirmation and Goldberg’s commencement of avoidable
      transfer litigation.

      In November 2021, the bankruptcy court confirmed the modified

second amended joint chapter 11 plan proposed by the Debtors and the

official committee of unsecured creditors (“Plan”). The Plan appointed

Goldberg to serve as trustee of the “PFI Trust” and authorized him to

pursue avoidance actions on its behalf. With the assistance of FTI

Consulting, Inc. (“FTI”), Goldberg ascertained whether each investor who

invested in the Debtors received a net negative or net positive return on

their investment. The “Net Losers” were entitled to a restitution claim for

      2 Unless specified otherwise, all chapter and section references are to the
Bankruptcy Code, 11 U.S.C. §§ 101–1532, all “Rule” references are to the Federal Rules
of Bankruptcy Procedure, and all “Civil Rule” references are to the Federal Rules of
Civil Procedure.
                                           3
the balance of their investment, which the Plan converted into interests in

the PFI Trust. The “Net Winners” were subject to being sued by Goldberg

for avoidance and recovery of their “Fictitious Profits” in excess of the

balance of their investment.

      In July 2022, Goldberg commenced sixty-seven separate adversary

proceedings against Net Winners, including the McAvoys. Goldberg’s

complaint against the McAvoys stated four avoidance claims for relief—

two under § 548(a)(1)(A) and (B) and two under Cal. Civ. Code

§ 3439.04(a)(1) and (2). The complaint also stated a claim for relief for

unjust enrichment.

C.    The McAvoys’ summary judgment motions.

      In March 2023, the McAvoys moved for summary judgment. They

asserted that the claims were time barred and the unjust enrichment claim

was facially invalid. In April 2023, the bankruptcy court approved the

parties’ stipulation granting the McAvoys summary judgment on

Goldberg’s two § 548 claims and on his unjust enrichment claim. As for the

two remaining avoidable transfer claims under California law, the court

denied the motion.

      In July 2023, the McAvoys again moved for summary judgment,

claiming that their avoidable transfer liability was zero. In support of this

argument they submitted a forensic accounting prepared by FTI on

Goldberg’s behalf detailing four separate Debtor accounts held in the

McAvoys’ names (“FTI Report”). According to the McAvoys, facts

                                       4
sufficient to authenticate the FTI Report were obtained during the

McAvoys’ deposition of Goldberg. More specifically, the McAvoys

submitted deposition transcript excerpts with their second summary

judgment motion, in which Goldberg testified that Deposition Exhibit “L”

—the FTI Report—was a report for the McAvoys’ accounts with the

Debtors FTI prepared showing transfers in and transfers out of the

McAvoys’ accounts and was part of FTI’s larger, global forensic accounting

of the Debtors’ finances.

      The FTI Report included a one-page “Schedule A: Summary of

Clawback Liability” and a nine-page “Schedule B1: Detailed Report of

Account Activity.” For the McAvoys’ four accounts, Schedule A showed

total cash in of $940,628.08 and total cash out of $1,392,784.23. Thus,

Schedule A reflected that the McAvoys recovered $452,157.15 over and

above their total investment. In turn, Schedule B1 showed the total

transfers out of the McAvoys’ accounts during the seven-year avoidable

transfer limitations period, beginning on July 26, 2013 and ending on July

26, 2020. The net total received by the McAvoys within this period was

$323,397.30.

      Critically, the McAvoys did not challenge the authenticity or

accuracy of the FTI Report. Nor did they dispute the specific amounts it

detailed as transferred into and out of the McAvoys’ accounts with the

Debtors. To the contrary, the McAvoys relied on the FTI Report to support

their arguments regarding the dates and amounts of transfers into and out

                                       5
of their accounts with the Debtors. For example, using the FTI Report’s

transfer amounts and transfer dates for Account Nos. 1000723 and 300112,

the McAvoys claimed that none of the amounts transferred out of these

accounts should be considered in figuring their potential avoidable transfer

liability because all transfers out of these two accounts occurred before July

26, 2013, the earliest date within the applicable period for avoidance claims

under California law. At the same time (again using the FTI Report’s

amounts), they claimed that the aggregate amount of “starting balances”

deposited into these two accounts ($344,620.44) should offset any potential

avoidable transfer liability arising from their other two accounts (Account

Nos. 1001915 and 3000110).

      They then calculated their potential avoidable transfer liability with

respect to the two accounts that existed during at least part of the avoidable

transfer period—Account Nos. 1001915 and 3000110. Again, using dates

and amounts from the FTI Report, they asserted that their maximum

potential liability from Account No. 1001915 was $141,213.49, and their

maximum potential liability from Account No. 3000110 was $63,109.67, for

an aggregate maximum potential liability of $204,323.16. Given their

alleged right to offset up to $344,620.44 they deposited into Account Nos.

1000723 and 300112, they claimed that their actual avoidable transfer

liability was zero. The McAvoys offered no evidence other than the FTI

Report to establish the dates and amounts of transfers into and out of their

accounts with the Debtors.

                                      6
      Goldberg opposed the McAvoys’ second summary judgment motion.

He pointed out that the McAvoys had not disputed the FTI Report. Instead,

as Goldberg noted, the McAvoys had used the FTI Report’s transfer dates

and amounts to calculate their avoidable transfer liability—but did so in a

manner inconsistent with binding Ninth Circuit case law. As part of this

argument, Goldberg relied on the exact same FTI Report that the McAvoys

had relied on. Goldberg’s copy of the FTI Report was attached as Exhibit

“2” to the declaration of his counsel Christopher D. Sullivan filed in

support of Goldberg’s summary judgment opposition (“First Sullivan

Declaration”). The declaration additionally summarized the FTI Report’s

contents. It also included as a separate exhibit—Exhibit “1”—a copy of the

declaration of FTI senior managing director Michelle Herman (“Herman

Declaration”). She explained how FTI for each investor accounted for their

cash transfers into and out of the Debtors.

      As Goldberg explained, the FTI Report established that the McAvoys

were Net Winners in the amount of $452,157.15 based on their transactions

between January 1, 2007 and July 26, 2020. However, Goldberg limited his

damages for the avoidable transfers under the applicable statute of

limitations to $323,397.30, calculated on those amounts transferred out of

the McAvoys’ accounts between July 26, 2013 and July 26, 2020. Citing

Donell v. Kowell, 533 F.3d 762, 772-73 (9th Cir. 2008), Goldberg insisted that

his method of calculating the McAvoys’ liability was consistent with Ninth

Circuit law and the McAvoys’ was not.

                                       7
      The McAvoys did not file a reply in support of their second summary

judgment motion. Nor did they object to any of the evidence presented

with Goldberg’s summary judgment opposition (including the First

Sullivan Declaration, the Herman Declaration, and the FTI Report).

      On August 25, 2023, the bankruptcy court issued a written tentative

ruling (“First Tentative Ruling”). Initially, the court acknowledged the

Debtors’ Ponzi scheme and the “more than $300 million in investor funds

[that] had been lost.” The court noted FTI’s role in assisting Goldberg in

analyzing individual investor accounts and determining which investors

had received a net positive return on their investments. The court then

concluded that the existence of the Debtors’ Ponzi scheme was sufficient to

establish actual fraudulent transfers to the Net Winners under Cal. Civ.

Code § 3439.04(a)(1) and constructive fraudulent transfers to the Net

Winners under Cal. Civ. Code § 3439.04(a)(2). It also held that the

McAvoys’ good faith was not a complete defense in the context of a Ponzi

scheme but rather limited Goldberg’s recovery to the McAvoys’ Fictitious

Profits, which were to be calculated by “netting” the aggregate amount

they paid into the Ponzi scheme against the total amount they received.

Any recovery against a Net Winner, therefore, was limited to the amounts

in excess of the “initial investment,” but further capped to those excess

amounts received within the applicable statute of limitations period.

      The court then rejected the McAvoys’ calculation of their

(non)liability. As the court explained, their calculation was inconsistent

                                      8
with the Ninth Circuit’s methodology for calculating Ponzi scheme

avoidable transfer liability and factually meritless because it incorrectly

assumed that Goldberg’s calculation failed to account for money rolled

over from the two accounts that were closed in 2010 (Account Nos. 1000723

and 3000112).

      But the bankruptcy court did not stop there. Relying on the FTI

Report, the court stated that the McAvoys paid into the Ponzi scheme a

total of $940,628.00 and received $1,392,785.23, for a total net profit of

$452,157.15. Again relying on the FTI Report, the court then calculated the

total cash transferred out of the McAvoys’ accounts within the applicable

limitations period to be $323,397.30, and stated that their liability was

capped at that amount. The court later reiterated that this was “the amount

Mr. Goldberg may recover.”

      Importantly, the court observed that the McAvoys had not

challenged the accuracy of the transfer dates and amounts in the FTI

Report supporting the identical calculations made by the court and

Goldberg to reach an identical liability amount of $323,397.30.

      The First Tentative Ruling advised the parties that the court was

inclined to deny the McAvoys’ second summary judgment motion and

gave the parties until August 30, 2023, to inform the court whether or not

they accepted the First Tentative Ruling. After both parties accepted the

tentative ruling, the court entered a Docket Text Order denying the second

summary judgment motion “for the reasons stated in the tentative ruling.”

                                       9
D.    Goldberg’s summary judgment motion.

      Within a week of the Docket Text Order, Goldberg moved for

summary judgment. Goldberg relied on the stipulated judgment entered in

the creditors committee’s declaratory relief action to establish the existence

of the Debtors’ Ponzi scheme. He also relied on the same FTI Report and

calculations to establish that the McAvoys were Net Winners who should

be ordered to disgorge $323,397.30 in Fictitious Profits they received

between July 26, 2013 and PFI’s petition date of July 26, 2020.

      To further support his summary judgment motion, Goldberg

included a “new” declaration from his counsel Christopher D. Sullivan

(“Second Sullivan Declaration”). The Second Sullivan Declaration was new

in the sense that it contained one new paragraph and one slightly altered

paragraph that were not part of the First Sullivan Declaration. The newly

added and amended paragraphs are largely immaterial to our resolution of

this appeal. But Exhibits “1” and “2” to the Second Sullivan Declaration

(the Herman Declaration and the FTI Report) were identical to Exhibits “1”

and “2” attached to the First Sullivan Declaration.

      The McAvoys opposed Goldberg’s summary judgment motion and

objected to the Second Sullivan Declaration. They claimed that Sullivan

lacked personal knowledge to authenticate the previously authenticated

FTI Report. They further pointed out that the Herman Declaration attached

as Exhibit “1” to the Second Sullivan Declaration similarly could not

authenticate the FTR Report attached as Exhibit “2” to the Second Sullivan

                                      10
Declaration. The McAvoys also objected to the Second Sullivan Declaration

as, in part, presenting inadmissible lay opinion testimony in violation of

Federal Rules of Evidence 701 and 702 to the extent it described FTI’s

methodology for calculating the McAvoys’ fraudulent transfer liability.

Additionally, the McAvoys claimed that paragraphs 4, 7, and 8 of the

Second Sullivan Declaration were inadmissible hearsay.

      The McAvoys then reiterated their calculations and analysis from

their second summary judgment motion (again relying on the FTI Report),

which led them to conclude that they had zero liability for fraudulent

transfers. They also asserted that there remained triable issues of fact

regarding amounts deposited before the period covered by FTI’s netting

analysis (which covered between 2007 and 2020), the specific timing of

such deposits, and the McAvoys’ motivation or purpose for making such

deposits.

      Goldberg filed a reply in support of his summary judgment motion.

He argued that the McAvoys’ evidentiary objections were baseless because

they presented the FTI Report in support of their second summary

judgment motion and admitted its authenticity and admissibility for

summary judgment purposes. He noted that, based on this admission and

all parties’ factual reliance on the FTI Report, the court concluded that the

McAvoys were Net Winners in the amount of $452,157.15 and were subject

to disgorging $323,397.30 in Fictitious Profits. Using the correct

methodology as recognized in Donnell for calculating the McAvoys’

                                      11
fraudulent transfer liability, Goldberg contended that as matter of law the

McAvoys were liable for $323,397.30, and their claimed genuine issues of

material fact were irrelevant under the binding Donnell methodology.3

      On October 2, 2023, the bankruptcy court issued a new tentative

ruling expressing its inclination to grant Goldberg’s summary judgment

motion (“Second Tentative Ruling”). The vast majority of this ruling

referenced the same undisputed facts and reiterated the same analysis set

forth in the First Tentative Ruling. In relevant part, the court specifically

noted that in its First Tentative Ruling, “the court determined that the

McAvoys are liable for Fictitious Profits during the Relevant Period in the

amount of $323,397.30.” The court explained that it previously had rejected

the McAvoys’ calculation of their liability and their claim that there were

triable issues of fact regarding the amount of its liability. As the court

stated, “[t]he court will not repeat itself or afford the McAvoys a second

bite at this apple, particularly where they accepted the court’s rationale as

set forth in the [First] Tentative Ruling and as incorporated into the court’s

order denying the Prior MSJ.”

      As for the McAvoys’ evidentiary objections, the court deemed them

      3
         The McAvoys filed a three-page surreply in support of their summary
judgment opposition. They claimed that Goldberg’s reply impermissibly attempted to
reference “new evidence” in the form of materials submitted in support of the
McAvoys’ second summary judgment motion that were not mentioned in Goldberg’s
initial moving papers. The bankruptcy court struck the surreply as an unauthorized
filing.
                                         12
“waived.” According to the court, the McAvoys’ failure to object to the

First Sullivan Declaration and their reliance on, and prior authentication of,

the FTI Report waived their evidentiary objections to the Second Sullivan

Declaration.

      After holding a hearing at which the McAvoys re-argued their

evidentiary objections, the court entered an order adopting its Second

Tentative Ruling and granting Goldberg’s summary judgment motion. On

October 9, 2023, the court entered final judgment against the McAvoys for

$323,397.30. The McAvoys timely appealed.

                              JURISDICTION

      The bankruptcy court had jurisdiction under 28 U.S.C. § 1334. We

have jurisdiction under 28 U.S.C. § 158.

                                   ISSUES

1.    Did the bankruptcy court err when it granted summary judgment in

favor of Goldberg?

2.    Did the bankruptcy court commit reversible error when it overruled

the McAvoys’ evidentiary objections to the Second Sullivan Declaration?

                        STANDARDS OF REVIEW

      We review de novo appeals from summary judgments. Orr v. Bank of

Am., NT & SA, 285 F.3d 764, 772 (9th Cir. 2002). Evidentiary rulings made

in the summary judgment context are reviewed for an abuse of discretion

and only support reversal when they might have affected the outcome of

the summary judgment motion. Id. at 773; see also Defenders of Wildlife v.

                                      13
Bernal, 204 F.3d 920, 927–28 (9th Cir. 2000) (“Evidentiary rulings are

reviewed for an abuse of discretion and should not be reversed absent

some prejudice.”). The bankruptcy court abused its discretion if it applied

an incorrect legal rule or its factual findings were illogical, implausible, or

without support in the record. TrafficSchool.com v. Edriver Inc., 653 F.3d 820,

832 (9th Cir. 2011).

                                DISCUSSION

A.    Summary judgment standards.

      Civil Rule 56 is made applicable in adversary proceedings by Rule

7056. Barboza v. New Form, Inc. (In re Barboza), 545 F.3d 702, 707 (9th Cir.

2008). Under Civil Rule 56, summary judgment is appropriate when “the

pleadings, the discovery and disclosure materials on file, and any affidavits

show that there is no genuine issue as to any material fact and that the

movant is entitled to judgment as a matter of law.” Id. “An issue is

‘genuine’ only if there is sufficient evidence for a reasonable fact finder to

find for the non-moving party.” Far Out Prods., Inc. v. Oskar, 247 F.3d 986,

992 (9th Cir. 2001) (citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248-49

(1986)). And, “[a] fact is ‘material’ if the fact may affect the outcome of the

case.” Id.

      “The moving party bears the initial burden to demonstrate the

absence of any genuine issue of material fact.” Horphag Rsch. Ltd. v. Garcia,

475 F.3d 1029, 1035 (9th Cir. 2007). However, when the moving party meets

this initial burden, “the burden shifts to the non-moving party to set forth,

                                       14
by affidavit or as otherwise provided in [Civil] Rule 56, specific facts

showing that there is a genuine issue for trial.” Id. (cleaned up).

      In meeting these respective “burdens,” the parties may rely on a

broad range of “materials in the record.” See Civil Rule 56(c)(1).4 The court

may consider any such materials in the record but only is required to

consider those that the parties cite. See Civil Rule 56(c)(3). The opposing

party “may object that the material cited to support or dispute a fact cannot

be presented in a form that would be admissible in evidence.” Civil Rule

56(c)(2). But such objections are waived if the opposing party does not raise

them. Orr, 285 F.3d at 773 n.5; see also Hoye v. City of Oakland, 653 F.3d 835,

841 n.3 (9th Cir. 2011) (“Defects in evidence submitted in opposition to a

motion for summary judgment are waived absent . . . objection.” (citation

omitted)).

B.    Analysis and calculation of the amount of the McAvoys’ liability.

      The McAvoys have not disputed that the Debtors operated a Ponzi

      4
        Civil Rule 56(c)(1) states:
      (1) Supporting Factual Positions. A party asserting that a fact cannot be or
      is genuinely disputed must support the assertion by:
              (A) citing to particular parts of materials in the record,
              including depositions, documents, electronically stored
              information, affidavits or declarations, stipulations
              (including those made for purposes of the motion only),
              admissions, interrogatory answers, or other materials; or
              (B) showing that the materials cited do not establish the
              absence or presence of a genuine dispute, or that an adverse
              party cannot produce admissible evidence to support the
              fact.
                                           15
scheme from at least January 1, 2007, until PFI filed bankruptcy on July 26,

2020. Nor have they disputed that the existence of this Ponzi scheme is

sufficient to establish an actual fraudulent transfer under Cal. Civ. Code

§ 3439.04(a)(1) and a constructively fraudulent transfer under Cal. Civ.

Code § 3439.04(a)(2). This conclusion follows from Donell v. Kowell, 533 F.3d

762, 770–71 (9th Cir. 2008), which construed claims for avoidable transfers

under California law to recover payments made as part of a Ponzi scheme.

Donell makes clear that, “[i]n the context of a Ponzi scheme, whether the

receiver [or trustee] seeks to recover from winning investors under the

actual fraud or constructive fraud theories generally does not impact the

amount of recovery from innocent investors.” Id. at 771. In general, an

innocent or “good faith” investor may retain under either fraudulent

transfer theory the amount of their initial investment. Thus, they only must

disgorge what amounts to “profit” on their investment. Id.

       Donell set forth the specific methodology that courts should employ

to determine the amount of a Ponzi scheme investor’s fraudulent transfer

liability:

             Drawing from [avoidable transfer] theory, federal courts
       have generally followed a two-step process. First, to determine
       whether the investor is liable, courts use the so-called “netting
       rule.” Amounts transferred by the Ponzi scheme perpetrator to
       the investor are netted against the initial amounts invested by
       that individual. If the net is positive, the receiver has
       established liability, and the court then determines the actual
       amount of liability, which may or may not be equal to the net

                                       16
      gain, depending on factors such as whether transfers were
      made within the limitations period or whether the investor
      lacked good faith. . . .

            Second, to determine the actual amount of liability, the
      court permits good faith investors to retain payments up to the
      amount invested, and requires disgorgement of only the
      “profits” paid to them by the Ponzi scheme.

Id. at 771-72 (cleaned up). Donell further explained: “Although all payments

of fictitious profits are avoidable as fraudulent transfers, the appropriate

statute of limitations restricts the payments the Ponzi scheme investor may

be required to disgorge. Only transfers made within the limitations period

are avoidable.” Id. at 772 (citing Warfield v. Alaniz, 453 F. Supp. 2d 1118,

1131 (D. Ariz. 2006), aff’d 569 F.3d 1015 (9th Cir. 2009)).

      The bankruptcy court here followed this methodology. Because there

was no dispute that the McAvoys qualified as good faith investors, the

court netted the total amounts paid in against the total amounts they

actually received. The McAvoys initially invested $940,628.08 from and

after January 1, 2007—when the Ponzi scheme was determined to have

started. The McAvoys received the aggregate amount of $1,392,785.23 from

the Ponzi scheme perpetrators during the pendency of the scheme. Netted

together, the McAvoys received $452,157.15 in “net profits” from the Ponzi

scheme. The court then capped the McAvoys’ liability at $323,397.30,

representing the aggregate amount of payments from the Ponzi scheme

perpetrators to the McAvoys within the applicable statute of limitations

                                       17
period, July 26, 2013 through July 26, 2020. See Cal. Civ. Code § 3439.09(a),

(c). 5

         The bankruptcy court’s analysis and calculations are consistent with

Donell. See Donell, 533 F.3d at 773-74. The McAvoys have not argued that

the bankruptcy court misapplied Donell or that Donell’s “netting rule” is

incorrect and should not be followed. Nor did they argue in their appeal

briefs that the amounts from the FTI Report the bankruptcy court relied on

are inaccurate. Instead, they make calculations consistent with their own

methodology, and then conclude that the amount of their liability is zero.

These are the same calculations the bankruptcy court rejected in its denial

of the McAvoys’ second summary judgment motion. As the bankruptcy

court pointed out, the McAvoys cite no authority supporting their

methodology, which is inconsistent with the “netting rule” set forth in

Donell.

         The McAvoys additionally contend:

         The evidence presented by the Complaint in this case and the
         FTI report provide[s] no explanation for where the prior
         deposits came [from], the source of those funds, or why they
         were deposited into accounts held with PFI. Instead, they
         appear without any account history or other information, and
         then are transferred into other accounts again without any
         explanation.

         The parties apparently agree that the applicable limitations period began on
         5

July 26, 2013, and ended on July 26, 2020, when PFI filed bankruptcy. Consequently, we
also accept this as the applicable limitations period.
                                          18
Aplt. Opn. Br. at p. 21 of 25.

      However, as the bankruptcy court pointed out, much of the

McAvoys’ analysis and their purported identification of genuine issues of

material fact are based on a false premise: that the court should have traced

each amount invested and should have identified and followed the

Debtors’ and investors’ original intent in making the transfers in question.

Donell explicitly rejected any sort of tracing requirement in favor of the

“netting rule” it adopted. 533 F.3d at 773-74. Put bluntly, the “netting rule”

is fundamentally inconsistent with any sort of tracing requirement:

      What the [netting] rule means as a practical matter is that a
      trustee need only determine whether an investor was a net-
      winner or net-loser when ascertaining whether the investor
      received profit; the trustee need not match up each investment
      with each payment made by the debtor and follow the parties’
      characterizations of the transfers. This may be the only
      workable rule in the typical Ponzi-scheme case, where
      documentation of transfers is less than complete, payments are
      sporadic and not always in accordance with the documentation
      of the investment, and neither the investor nor the debtor can
      recall precisely what the parties intended.

Fisher v. Sellis (In re Lake States Commodities, Inc.), 253 B.R. 866, 872 (Bankr.

N.D. Ill. 2000) (quoting Mark A. McDermott, Ponzi Schemes and the Law of

Fraudulent and Preferential Transfers, 72 Am. Bankr. L. J. 157, 167 (1998)),

quoted with approval in Donell, 533 F.3d at 774.

      When we review a matter de novo, we give no deference to the

bankruptcy court’s decision. de Jong v. JLE-04 Parker, L.L.C. (In re de Jong),

                                        19
588 B.R. 879, 888 (9th Cir. BAP 2018), aff'd, 793 F. App’x 659 (9th Cir. 2020).

But in this instance, having reviewed the same undisputed facts and the

same legal authority the bankruptcy court reviewed, we come to the same

conclusion. The bankruptcy court correctly and properly determined on

summary judgment that the McAvoys were liable for $323,397.30 in

Fictitious Profits they received from the Debtors between July 26, 2013 and

July 26, 2020.

C.    The McAvoys’ evidentiary objections do not justify reversal.

      According to the McAvoys, “[t]he only supporting evidence that

[Goldberg] presented in support of [his] motion for summary judgment

was the [Second] Sullivan Declaration.” The McAvoys argue that most of

the Second Sullivan Declaration was inadmissible. They point to Civil Rule

56(c)(4), which states that “[a]n affidavit or declaration used to support or

oppose a motion must be made on personal knowledge, set out facts that

would be admissible in evidence, and show that the affiant or declarant is

competent to testify on the matters stated.” They also note that under

Federal Rule of Evidence 602, “[a] witness may testify to a matter only if

evidence is introduced sufficient to support a finding that the witness has

personal knowledge of the matter.” The McAvoys further contend that

portions of the Second Sullivan Declaration are inadmissible as

impermissible opinion testimony of a lay witness under Federal Rule of

Evidence 701, as hearsay under Federal Rule of Evidence 802, or both.

      There is a fatal, overarching problem with the McAvoys’ evidentiary

                                       20
arguments. Evidentiary issues on appeal only are grounds for reversal

when they might have affected the outcome of the summary judgment

motion. See Johnson v. Neilson (In re Slatkin), 525 F.3d 805, 811 (9th Cir. 2008)

(“To reverse [summary judgment] on the basis of an erroneous evidentiary

ruling, we must conclude not only that the bankruptcy court abused its

discretion, but also that the error was prejudicial.”); see also Orr, 285 F.3d at

773 (stating that “we must affirm the district court unless its evidentiary

ruling was manifestly erroneous and prejudicial”).

      The evidentiary issues the McAvoys have raised did not affect the

outcome. Utilizing the First Sullivan Declaration, the Herman Declaration,

and most importantly the FTI Report, the bankruptcy court already had

determined as a matter of undisputed fact and law that the McAvoys were

liable for $323,397.30 in false profits. These materials already were “in the

record” as provided by Civil Rule 56(c)(1). The McAvoys did not object to

this evidence under Civil Rule 56(c)(2). By not objecting to any of these

items, the McAvoys waived any evidentiary objections they might have

raised, and the bankruptcy court permissibly could rely on them. Orr, 285

F.3d at 774 n.5; FDIC v. N.H. Ins. Co., 953 F.2d 478, 484-85 (9th Cir. 1991).

      When one of the parties has authenticated a document in summary

judgment proceedings, all parties may use that document for summary

judgment purposes. Orr, 285 F.3d at 776; see also Cristobal v. Siegel, 26 F.3d

1488, 1494 (9th Cir. 1994) (holding that it is not reversible error for the

district court to admit for summary judgment purposes evidence that the

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opposing party already has authenticated); Hal Roach Studios, Inc. v. Richard

Feiner & Co., 896 F.2d 1542, 1550–51 (9th Cir. 1990) (same). This is exactly

what happened here with respect to the FTI Report. The McAvoys

presented Goldberg’s deposition testimony to demonstrate that this report

is what it purports to be: an accurate accounting of the transfers into and

out of the McAvoys’ accounts with the Debtors between January 1, 2007

and July 26, 2020. Then they repeatedly and affirmatively relied on the FTI

Report to advance their alternative theory for calculating the amount of

their liability. Goldberg used this report for the same purpose.

      The McAvoys placed the FTI Report into the record and have never

contested the accuracy of the evidence or its sufficiency to establish the

amount of their liability under the “netting rule.” In short, under these

circumstances, the Second Sullivan Declaration was cumulative of the other

“materials in the record” to which the McAvoys never objected and

permitted both Goldberg and the court to complete the “netting rule”

analysis set forth in Donell. Consequently, the McAvoys’ challenge to the

admissibility of the Second Sullivan Declaration did not affect the outcome

of the summary judgment motion.6

      6 Though we do not need to reach the merits of the McAvoys’ evidentiary
arguments, it is worth noting that their arguments betray a fundamental
misunderstanding of how many evidentiary issues “play out” in the summary
judgment context. Once an evidentiary objection is properly raised, the proponent has
the burden “to show that the material is admissible as presented or to explain the
admissible form that is anticipated.” Civil Rule 56(c)(2) (Advisory Committee Notes
accompanying 2010 amendments) (emphasis added). In other words, “authentication
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       Finally, the McAvoys contend that Goldberg presented “new

evidence” in support of his summary judgment motion in his reply brief.

Citing Provenz v. Miller, 102 F.3d 1478, 1483 (9th Cir. 1996), the McAvoys

argue that Goldberg’s reference in his reply to the materials from the

McAvoys’ second summary judgment motion—and to the court’s ruling

thereon—constituted “new evidence” and that the bankruptcy court

impermissibly considered these materials without giving them a chance to

respond.

       We disagree. This so-called “new evidence” was not new at all.

Goldberg merely referenced the materials from the prior summary

judgment proceedings. This was a timely and appropriate response to the

McAvoys’ evidentiary objections. See, e.g., Anigbogu v. Mayorkas, 2023 WL

8115046, at *3 (N.D. Cal. Nov. 22, 2023) (citing cases and explaining that the

proponent of summary judgment evidence must be given an opportunity

to respond to summary judgment evidentiary objections and to show that

the materials challenged as inadmissible could be submitted in an

admissible form at trial); SE Prop. Holdings, LLC v. Stewart (In re Stewart),

and hearsay” objections made during summary judgment proceedings should be
overruled, “where the evidence could be presented in an admissible form at trial.”
Hodges v. Hertz Corp., 351 F. Supp. 3d 1227, 1232 (N.D. Cal. 2018) (citing Fraser v. Goodale,
342 F.3d 1032, 1036-37 (9th Cir. 2003)). While the bankruptcy court here did not need to
specifically address it, the prospective admissibility at trial of the key piece of
evidence—the FTI Report—was sufficiently demonstrated by the materials submitted in
support of the McAvoys’ second summary judgment motion, particularly the Goldberg
deposition excerpts.
                                             23
2022 WL 3135293, at *3-4 (Bankr. W.D. Okla. Aug. 3, 2022) (same).

      In their opposition to Goldberg’s summary judgment motion, the

McAvoys had the opportunity to come forward with evidence, facts, and

law to demonstrate a triable issue of fact notwithstanding the bankruptcy

court’s ruling on their second summary judgment motion. Instead, they

chose to ignore their second summary judgment motion as if it never

occurred.

      Based on its ruling denying the McAvoys’ second motion for

summary judgment, the bankruptcy court could have sua sponte granted

summary judgment in favor of Goldberg as the nonmovant under Civil

Rule 56(f)(1)—subject to assuring itself that the McAvoys had a full and fair

opportunity to present and support their positions. The explicit authority

to grant summary judgment in favor of a nonmovant was only added to

Civil Rule 56 in 2010, but it has long been the practice of the Ninth Circuit

and other circuits to grant summary judgment for a nonmovant in

appropriate circumstances. See Albino v. Baca, 747 F.3d 1162, 1176–77 (9th

Cir. 2014) (en banc) (listing cases); Wright & Miller, 10A FEDERAL PRACTICE

AND PROCEDURE, Civil § 2720.1 (4th ed. 2023) (same).

      The bankruptcy court opted not to follow the path of Civil Rule

56(f)(1). Instead, Goldberg filed his own summary judgment motion. But he

relied on the exact same law, undisputed facts, and key evidence (the FTI

Report) to support his position. Under these circumstances, there can be no

legitimate question that Goldberg met his summary judgment burden and

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that the burden shifted to the McAvoys to demonstrate the existence of one

or more genuine issues of material fact. This they failed to do. In the

procedural context the McAvoys created, the bankruptcy court did not

commit reversible error when it granted Goldberg’s summary judgment

motion.

                               CONCLUSION

      In sum, the McAvoys never disputed that Goldberg established the

elements of his avoidable transfer claims under California law based on the

debtors’ Ponzi scheme. Rather, they took issue with the calculation of

damages resulting in their liability. Their calculations are contrary to the

netting of monies in and out required under Donell. The McAvoys did not

present any evidence contradicting the FTI Report, which Goldberg relied

on to calculate his avoidable transfer damages. Instead, they attempted to

challenge its authenticity by objecting to the Second Sullivan Declaration.

But the McAvoys had already placed the FTI Report into the record for

purposes of summary judgment, and the evidence they presented in their

second summary judgment motion demonstrated that the applicable

accounting from the FTI Report could be presented in admissible form at

trial. Thus, the bankruptcy court could consider the accounting from the

FTI Report on Goldberg’s motion for summary judgment. Because the

McAvoys have failed to establish reversible error in the bankruptcy court’s

grant of summary judgment, we AFFIRM.

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