Court Opinion

ID: 3036921
Source: CourtListenerOpinion
Date Created: 2015-10-13 22:55:16.21504+00
Date Added: 2024-06-11T11:48:44.131842
License: Public Domain

FOR PUBLICATION
  UNITED STATES COURT OF APPEALS
       FOR THE NINTH CIRCUIT

ESTATE OF THELMA V. SPIRTOS;              
THELMA V. SPIRTOS; MICHELLE
SPIRTOS,
             Plaintiffs-Appellants,
               v.
ONE SAN BERNARDINO COUNTY
SUPERIOR COURT CASE NUMBERED
SPR 02211,
                        Defendant,               No. 03-56405
              and
ESTATE OF BASIL SPIRTOS, Deceased
                                                  D.C. No.
                                               CV-02-01152-VAP
(Nicholas B. Spirtos as estate                    OPINION
representative); BRYAN HARTNELL;
HARTNELL, HORSPOOL & FOX LLP;
NICHOLAS B. SPIRTOS as an
individual; ESTATE OF MICHAEL N.
SPIRTOS (Maria Monokondilos
Spirtos as representative); DAVID
L. RAY; SALTZBURG, RAY AND
BERGMAN LLP,
              Defendants-Appellees.
                                          
        Appeal from the United States District Court
            for the Central District of California
        Virginia A. Phillips, District Judge, Presiding

                  Submitted February 6, 2006*
                     Pasadena, California

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

                                4045
4046         ESTATE   OF   SPIRTOS v. ESTATE   OF   SPIRTOS
                      Filed April 12, 2006

       Before: Harry Pregerson, William A. Fletcher, and
                 Jay S. Bybee, Circuit Judges.

                   Opinion by Judge Bybee
            ESTATE   OF   SPIRTOS v. ESTATE   OF   SPIRTOS   4047

                            COUNSEL

Jon Eardley, Law Offices of Jon Eardley, Whittier, California,
for the appellant.
4048         ESTATE   OF   SPIRTOS v. ESTATE   OF   SPIRTOS
Michael Thomas, Thomas, Donahue, Thomas & Hurevitz,
LLP, Glendale, California, for defendant-appellee Estate of
Michael N. Spirtos (Maria Monokondilos Spirtos as represen-
tative).

Edith R. Matthai and Rebecca D. Lizarraga, Robie & Matthai,
Los Angeles, California, for defendants-appellees David L.
Ray and Saltzburg, Ray and Bergman LLP.

                              OPINION

BYBEE, Circuit Judge:

   In this case, we are faced with the question of whether a
creditor of a bankruptcy estate has standing to bring a claim
on behalf of the estate. We hold that 11 U.S.C. § 323 vests the
bankruptcy trustee with the exclusive right to sue on behalf of
the bankruptcy estate.

        I.   FACTS AND PROCEDURAL HISTORY

   Basil and Thelma Spirtos were married in 1954. They had
six children together, two adopted and four biological. In
1983, Basil and Thelma1 entered into a Marital Settlement
Agreement (“MSA”) which the Los Angeles Superior Court
reduced to judgment in 1984. However, Basil breached the
MSA, and Thelma filed for bankruptcy under Chapter 11 in
1984. In 2001, the bankruptcy court converted Thelma’s
Chapter 11 bankruptcy to a Chapter 7 bankruptcy.

  Basil remarried twice, once in 1985 and again in 1988. In
1987, he also filed for bankruptcy under Chapter 11, but later
converted the proceeding to a Chapter 7 bankruptcy. Because
of Basil’s outstanding obligations to Thelma under their
  1
   As Basil and Thelma share the same surname, we use first names in
order to avoid confusion.
               ESTATE   OF   SPIRTOS v. ESTATE    OF   SPIRTOS          4049
MSA, she is a creditor of Basil’s bankruptcy estate. In 1996,
Basil died. His bankruptcy case remains pending to date.
David Ray is the bankruptcy trustee.

   In October 2002, Thelma2 filed a complaint against nearly
everyone involved in the bankruptcy and probate proceedings
of Basil’s estate, including David Ray and the Office of the
United States Trustee. The complaint alleges various RICO
claims and state causes of action. The substance of plaintiff’s
claims is that the defendants “have jointly conspired to con-
ceal assets belonging to the bankruptcy and probate estates of
Dr. Basil N. Spirtos for the purpose of obstructing the pay-
ment of the Decedent’s creditors and legal heirs . . . .” [E.R.
5 ¶ 16.]

   In July 2003, the district court granted defendants’ motions
to dismiss. The district court ruled that those RICO claims
derived from the administration of Basil’s bankruptcy estate
were being asserted on behalf of the bankruptcy estate, and
that under 11 U.S.C. §§ 323(a)-(b) and 704, the bankruptcy
trustee has the exclusive capacity to sue on behalf of the
estate. Accordingly, the district court ruled that Thelma
lacked standing to bring those RICO claims and dismissed
them. The district court also dismissed the rest of her RICO
claims, which were based on the administration of Basil’s
probate estate, on the ground that abstention was appropriate
under Younger v. Harris, 401 U.S. 37 (1971). The district
court also ruled that Younger abstention was an alternative
ground justifying the dismissal of Thelma’s claims against
Basil’s bankruptcy estate. Thelma appeals the ruling of the
district court.

   After Thelma’s appeal was filed with this Court, the Cali-
  2
    This case is procedurally and factually complicated, but these complex-
ities do not affect the legal analysis. We therefore refer to the plaintiff in
this case as Thelma, even though there are actually two plaintiffs: Thelma
and her daughter, Michelle Spirtos, who is also Basil’s daughter.
4050         ESTATE   OF   SPIRTOS v. ESTATE   OF   SPIRTOS
fornia Court of Appeal ruled that she is not a creditor of the
probate estate because she failed to properly perfect her claim
under California probate law. See Spirtos v. Spirtos (In re
Estate of Basil Spirtos), EO34900/EO35878, (Cal. Ct. App.
Mar. 8, 2005).

                           II.   ANALYSIS

   Thelma brings RICO claims based on both the administra-
tion of Basil’s bankruptcy estate and the administration of
Basil’s probate estate. As Thelma is without standing to bring
claims based on either of these proceedings, we hold that all
of her claims are without merit without considering the appro-
priateness of Younger abstention and we affirm the decision
of the district court. We address the claims based on each
estate in turn.

A.     RICO Claims Derived from Basil’s Bankruptcy Estate

   [1] The Bankruptcy Code provides that the trustee of a
bankruptcy estate is the representative of the estate. 11 U.S.C.
§ 323(a) (2000). As such, he has the capacity to sue on behalf
of the estate, and those with claims against the estate can sue
him. Id. § 323(b).

   [2] To date, we have not squarely addressed the question of
whether the creditor of a bankruptcy estate also has standing
to assert claims on behalf of the estate. However, we have
stated in dicta that, in general, trustees are the exclusive par-
ties possessing the right to sue on behalf of the estate. See
Moneymaker v. CoBen (In re Eisen), 31 F.3d 1447, 1451 n.2
(9th Cir. 1994) (stating that, in the context of an appeal of the
bankruptcy court’s order, “as trustee, Moneymaker is vested
with Eisen’s causes of action, rendering Eisen with no stand-
ing to appeal”); see also Hamid v. Price Waterhouse, 51 F.3d
1411, 1421 (9th Cir. 1995) (holding that the depositors of a
failed bank did not have standing to bring RICO claims on
behalf of the bank); see also id. at 1420 (“Creditors of a bank-
             ESTATE   OF   SPIRTOS v. ESTATE   OF   SPIRTOS   4051
rupt corporation generally do not have standing under
RICO.”). We have held that under some circumstances, the
trustee may authorize others to bring suit, but we implicitly
held that the right to bring suit—or choose not to do so—
belongs to the trustee in the first instance. See Avalanche
Mar., Ltd. v. Parekh (In re Parmetex, Inc.), 199 F.3d 1029,
1031 (9th Cir. 1999) (“Although Defendants are correct that
a trustee must generally file [actions on behalf of the estate],
we hold that under these particular circumstances—where the
trustee stipulated that the Creditors could sue on his behalf
and the bankruptcy court approved that stipulation—the Cred-
itors had standing to bring the suit.”).

   [3] Other circuits have considered this issue and have con-
sistently held that a bankruptcy trustee is vested with the
exclusive power to raise legal claims on behalf of the estate.
See, e.g., Husvar v. Rapoport, 430 F.3d 777, 780 (6th Cir.
2005) (accepting defendants’ argument that “plaintiffs lacked
standing to prosecute the derivative action described in the
complaint because, in the absence of abandonment, only the
debtor-in-possession of Mosler’s bankruptcy estate (the bank-
ruptcy trustee) can prosecute such a claim”); Parker v.
Wendy’s Int’l, Inc., 365 F.3d 1268, 1272 (11th Cir. 2004)
(“[A] trustee, as the representative of the bankruptcy estate, is
the proper party in interest, and is the only party with standing
to prosecute causes of action belonging to the estate.”);
United States ex rel. Gebert v. Transp. Admin. Servs., 260
F.3d 909, 909, 914-15 (8th Cir. 2001) (holding that only the
trustee has standing to bring a claim); Wieburg v. GTE Sw.
Inc., 272 F.3d 302, 306-07 (5th Cir. 2001) (finding that a
trustee is the real party in interest and has exclusive standing
to assert claims that are the property of the bankruptcy estate);
Miller v. Generale Bank Nederland, N.V. (In re Interpictures
Inc.), 217 F.3d 74, 75 (2d Cir. 2000) (“The derivative RICO
claim belongs to the debtor’s estate. Appellant’s status as a
creditor to the debtor does not give him either standing to
prosecute or a possessory interest in this claim.”); Richman v.
First Woman’s Bank (In re Richman), 104 F.3d 654 (4th Cir.
4052           ESTATE   OF   SPIRTOS v. ESTATE   OF   SPIRTOS
1997); see also Bivens Gardens Office Bldg., Inc. v. Barnett
Banks of Fla., Inc., 140 F.3d 898, 908 (11th Cir. 1998) (“A
creditor will [not] have RICO standing . . . if the injury
alleged was suffered only as a result of harm to the corpora-
tion.”); Manson v. Stacescu, 11 F.3d 1127, 1130-31 (2d Cir.
1993) (holding that creditors of bankrupt estate lack standing
to bring RICO claim alleging indirect injury as result of direct
injury to estate).

   In her brief, Thelma argues that because her suit also names
David Ray, the trustee of the estate, as a defendant, it is non-
sensical for the trustee to be the only individual vested with
the power to sue the trustee. This argument is spurious. The
Bankruptcy Code provides a procedure for a creditor to
acquire property of the estate, including legal claims. “On
request of a party in interest and after notice and a hearing,
the court may order the trustee to abandon any property of the
estate that is burdensome to the estate or that is of inconse-
quential value and benefit to the estate.” 11 U.S.C. § 554(b)
(2000). However, Thelma has not sought an abandonment of
the estate’s RICO claims, either below or on appeal. “Unless
the court orders otherwise, property of the estate that is not
abandoned under this section and that is not administered in
the case remains property of the estate.” Id. § 554(d). Simi-
larly, if the trustee is guilty of malfeasance, the proper remedy
is removal under section 324(a), not a RICO claim filed in
another forum. See id. § 324(a) (“The court, after notice and
a hearing, may remove a trustee . . . for cause.”).

  [4] We therefore reaffirm our previous reasoning and that
of our sister circuits and hold that the bankruptcy code
endows the bankruptcy trustee with the exclusive right to sue
on behalf of the estate.3 Accordingly, Thelma, as a creditor of
   3
     We note that our opinion in this case in no way undermines our ruling
in In re Parmetex, Inc., 199 F.3d at 1031, where we held that the creditors
of a bankruptcy estate could assert claims on behalf of the estate when the
trustee stipulated that the Creditors could sue on his behalf and the bank-
ruptcy court approved that stipulation.
               ESTATE    OF   SPIRTOS v. ESTATE   OF   SPIRTOS           4053
the estate who did not receive authorization to sue from the
trustee, lacks standing to assert a RICO claim on behalf of the
estate.

B.    RICO Claims Derived from Basil’s Probate Estate

   [5] Plaintiff also alleges that the administration of Basil’s
probate estate violated RICO. Since the filing of this appeal,
the California state courts have ruled that, as a matter of Cali-
fornia probate law, Thelma is not a creditor of Basil’s probate
estate. See Spirtos v. Spirtos (In re Estate of Basil Spirtos),
EO34900/EO35878 (Cal. Ct. App. Mar. 8, 2005). We are
bound by the California state courts’ determination that
Thelma does not have a claim against Basil’s probate estate
under the “full faith and credit” clause of 28 U.S.C. § 1738
and the doctrines of collateral estoppel and res judicata. See
Jones v. Bates, 127 F.3d 839, 848 (9th Cir. 1997)
(“[C]ollateral estoppel bars parties from relitigating issues of
fact or law that have already been fully and fairly litigated in
prior proceedings.”).

   [6] Therefore, Thelma is not a creditor of Basil’s probate
estate, and consequently she has not been harmed, even indi-
rectly, by any concealment of assets from it.4 Since the sub-
stance of Thelma’s RICO actions arising out of the
  4
    Plaintiff Michelle Spirtos argues in her reply brief that she has standing
because, as Basil’s daughter, she is an heir under California laws govern-
ing intestate succession. However, plaintiffs’ RICO complaint only states
that she is an “interested party” to the probate estate because of Basil’s
“outstanding child support” obligations to Thelma. Under California law,
“the custodial parent, not the child, has the beneficial interest in collecting
arrearages in child support.” County of Shasta v. Smith, 45 Cal. Rptr. 2d
52, 55 (Ct. App. 1995); see also In re Marriage of Lackey, 191 Cal. Rptr.
309, 315 (Ct. App. 1983); In re Marriage of Utigard, 178 Cal. Rptr. 546,
551 (Ct. App. 1981). Thus, irrespective of its merits, Michelle’s argument
that she has standing because of her status as an intestate heir is not prop-
erly before us on appeal. Ove v. Gwinn, 264 F.3d 817, 825 (9th Cir. 2001)
(“To state a civil RICO claim, plaintiffs must allege [that the RICO viola-
tion] caus[ed] injury to plaintiffs’ ‘business or property.’ ”).
4054        ESTATE   OF   SPIRTOS v. ESTATE   OF   SPIRTOS
administration of Basil’s probate estate is that she was harmed
by the intentional and improper exclusion of assets from the
probate estate, it follows that she lacks standing to pursue
these claims as well. See Or. Laborers-Employers Health &
Welfare Trust Fund v. Philip Morris Inc., 185 F.3d 957, 963
(9th Cir. 1999) (“[RICO] provide[s] a private right of action
for damages only to those individuals ‘injured in [their] busi-
ness or property by reason of’ a violation of the law’s sub-
stantive provisions.”) (third alteration in original) (citations
omitted).

                     III.    CONCLUSION

   We affirm the judgment of the district court and hold that,
as a creditor, plaintiff lacks standing to raise RICO claims on
behalf of Basil’s bankruptcy estate because only the bank-
ruptcy trustee has standing to sue on behalf of the estate.
Plaintiff’s claims against the probate estate must also be dis-
missed for lack of standing, as she does not have a valid claim
against the probate estate under California law.

  AFFIRMED.