Court Opinion

ID: 3163780
Source: CourtListenerOpinion
Date Created: 2015-12-17 21:01:04.06011+00
Date Added: 2024-06-11T07:38:43.720811
License: Public Domain

FILED
                           NOT FOR PUBLICATION                              DEC 17 2015

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

                            FOR THE NINTH CIRCUIT

In the Matter of: IMAGING3, INC.,                No. 13-56695

              Debtor,                            D.C. No. 2:13-cv-05414-BRO

JOHN M. VUKSICH,                                 MEMORANDUM*

              Appellant,

 v.

IMAGING3, INC.,

              Appellee.

In the Matter of: IMAGING3, INC.,                No. 14-55466

              Debtor,                            D.C. No. 2:13-cv-05443-BRO

JOHN M. VUKSICH,

              Appellant,

 v.

IMAGING3, INC.,

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

In the Matter of: IMAGING3, INC.,       No. 14-55499

           Debtor,                      D.C. No. 2:13-cv-04879-BRO

JOHN M. VUKSICH,

           Appellant,

v.

IMAGING3, INC.,

           Appellee.

In the Matter of: IMAGING3, INC.,       No. 14-55521

           Debtor,                      D.C. No. 2:13-cv-05484-BRO

JOHN M. VUKSICH,

           Appellant,

v.

IMAGING3, INC.,

           Appellee.

                                    2
                  Appeals from the United States District Court
                      for the Central District of California
     Beverly Reid O’Connell and R. Gary Klausner, District Judges, Presiding

                      Argued and Submitted December 9, 2015
                               Pasadena, California

Before: TASHIMA, CALLAHAN, and HURWITZ, Circuit Judges.

      Plaintiff-Appellant John M. Vuksich (“Vuksich”) appeals various rulings by

the bankruptcy court and the district court concerning the bankruptcy petition filed

by Imaging3, Inc. (“Imaging3”), a California corporation, in which Vuksich was a

shareholder. We have jurisdiction under 28 U.S.C. § 158(d), and we affirm.1

      1.     The bankruptcy court had jurisdiction to consider Imaging3’s

bankruptcy petition. Imaging3’s failure to hold an annual meeting at the required

time did not divest the board of authority to act on behalf of the corporation.

Although shareholders may obtain a court order to hold the annual meeting under

California Corporations Code § 600(c), the mere filing of Vuksich’s derivative suit

did not deprive the board of the authority to add a fourth member in order to reach

a quorum. Moreover, the other board members continued to hold office because

      1
      Vuksich’s motion for judicial notice in Case No. 13-56695 is DENIED AS
MOOT, as the pleading for which Vuksich seeks judicial notice is already included
in Vuksich’s excerpts of record. Vuksich’s motions for judicial notice filed in
Case Nos. 14-55466 and 14-55521 are DENIED.

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no replacements had been elected and qualified. See Cal. Corp. Code § 301(b).

Thus the board had authority to file the bankruptcy petition.

      2.     Vuksich’s challenge to the district court’s dismissals of Vuksich’s

appeals of the denial of his motion to dismiss is moot, because, in his subsequent

appeals, Vuksich was able to raise the main argument in his motion to dismiss –

that the bankruptcy court lacked jurisdiction because the Imaging3 board lacked

authority to file for bankruptcy.2

      3.     Vuksich’s notices of appeal did not divest the bankruptcy court of

jurisdiction to proceed with the case. “If a party wants to stay all of the

proceedings in bankruptcy court while an appeal is pending, it must file a motion

for a stay.” Sherman v. SEC (In re Sherman), 491 F.3d 948, 967 (9th Cir. 2007)

(citations omitted). A litigant cannot automatically stay bankruptcy proceedings

by filing an attack on the bankruptcy court’s jurisdiction and appealing the denial

of that motion.

      2
        Vuksich raised other issues in his motion to dismiss but on appeal relies
virtually entirely on his lack of jurisdiction argument. Even assuming Vuksich
preserved his argument that the bankruptcy petition was filed in bad faith, the
district court did not err in denying the motion to dismiss. Vuksich has not shown
that, as a matter of law, Imaging3’s petition was a “clear abuse of the bankruptcy
process.” See Idaho Dep’t of Lands v. Arnold (In re Arnold), 806 F.2d 937, 939
(9th Cir. 1986).

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       4.     The bankruptcy court’s disallowance of Vuksich’s claims for stock

loss and legal fees did not violate the rule announced in Stern v. Marshall, 131 S.

Ct. 2594 (2011). Allowance and disallowance of claims against an estate are

specifically listed as “core” proceedings under 28 U.S.C. § 157. Moreover, in

contrast to the debtor’s state law counterclaim against a creditor in Stern,

Vuksich’s claims for “stock loss” and “attorney’s fees” were claims directly

against the bankruptcy estate. By filing proofs of claim, Vuksich invoked the

bankruptcy court’s jurisdiction.

       5.     The bankruptcy court did not err in disallowing Vuksich’s claims for

stock loss and legal fees. The claims in Vuksich’s state court litigation do not

allege that Vuksich suffered an injury distinct from that suffered by other

shareholders, and none of his claims would allow him to recover any damages

directly. Thus the bankruptcy court properly found that the claims belonged to the

corporation, not Vuksich directly, see Grosset v. Wenaas, 42 Cal. 4th 1100, 1108

(2008), and he therefore had no “right to payment” under 11 U.S.C. § 101(5)(A)

for his stock loss.

       Vuksich also has not shown that he was entitled to fees under the substantial

benefit doctrine or under California Corporations Code § 711(j). Vuksich has not

established the required causal connection between his suit and the purported

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benefit he conferred on Imaging3. See Westside Cmty. for Indep. Living, Inc. v.

Obledo, 33 Cal. 3d 348, 353 (1983). Nor has he shown that he has met the

requirements for an award of fees under California Corporations Code § 711(j),

because the state court litigation was not an action to enforce § 711’s voting

records requirements and Vuksich has not shown that the defendants in that action

willfully violated § 711.

      6.     Vuksich’s petition for writ of mandamus did not disqualify the district

judge from considering his appeals under 28 U.S.C. § 47. Vuksich’s appeals to the

district court did not, and could not, concern the district court’s denial of

mandamus, but rather, the bankruptcy court’s rulings about jurisdiction. Vuksich

provides no authority in support of his contention that once an appellate court

decides that a lower court has jurisdiction, that appellate court is recused from

hearing any merits appeals.3

      7.     The district court did not abuse its discretion in denying Vuksich’s

motion for judicial notice in connection with his appeal of the confirmation of

Imaging3’s reorganization plan (“the Plan”). See Ritter v. Hughes Aircraft Co., 58

F.3d 454, 458 (9th Cir. 1995). The recordings Vuksich sought to introduce were

      3
       Because the district court did not err in denying Vuksich’s motions to
disqualify, his request that the appeals be remanded and assigned to another district
judge under 28 U.S.C. § 47 is DENIED as moot.

                                            6
not presented to the bankruptcy court, and the truth of the statements in those

recordings is not “generally known” or “capable of accurate and ready

determination” by reference to “sources whose accuracy cannot be reasonably

questioned.” See Fed. R. Evid. 201.

      8.     The bankruptcy court did not err in confirming the Plan’s injunction

and exculpation provisions. The injunction provision provides what the

bankruptcy code already provides to debtors exiting bankruptcy – discharge of

their debts and liabilities. See 18 U.S.C. § 1141(d)(1)(A). Thus the injunction

provision was not required to be in the Plan’s Disclosure Statement under Federal

Rule of Bankruptcy Procedure 3016(c). The injunction provision also does not

release any creditors’ claims against third parties. The state court litigation, as a

derivative suit, is property of Imaging3, and the Confirmation Order provided that

the claims in that litigation would be released and re-vested in reorganized

Imaging3 upon confirmation. The bankruptcy court also did not clearly err in

finding that Imaging3’s reorganization required that its directors and agents be

protected from liability for their actions in connection with the reorganization,

given Imaging3’s past history of litigation, especially from Vuksich himself.

      9.     The bankruptcy court did not clearly err in valuing Imaging3. Given

the evidence in the record, including the report, declarations, and testimony from

                                           7
Imaging3’s expert, the bankruptcy court’s valuation of Imaging3 at $4.8 million

was not illogical, implausible, or lacking support in inferences that may be drawn

from facts in the record. See United States v. Hinkson, 585 F.3d 1247, 1261 (9th

Cir. 2009) (en banc).

      10.    The bankruptcy court did not err in confirming the Plan

notwithstanding Vuksich’s arguments regarding the Gemini and Lee Lenders

claims. Vuksich appears to concede that no one objected to these claims, including

Vuksich, and he provides no authority stating that the bankruptcy court was

required to independently investigate claims for which there were no objections.

See 11 U.S.C. § 502(a). Vuksich does not cite any order of the court stripping him

of standing. Nor does he provide sufficient evidence to show that these lenders

were colluding with Imaging3 when they made secured loans to the company.

      11.    The district court did not err by failing to address Vuksich’s claims

that 1) there was a material inconsistency between the Plan and the Disclosure

Statement and 2) Imaging3 improperly issued new stock without court approval.

Vuksich first raised these issues in his reply brief before the district court, and thus

the district court did not err in failing to address them. See Image Tech. Serv., Inc.

v. Eastman Kodak Co., 136 F.3d 1354, 1356–57 (9th Cir. 1998) (stating that an

                                            8
appellate court will not consider a new issue raised for the first time in the reply

brief).

          12.   The bankruptcy court did not abuse its discretion in denying

Vuksich’s Motion to Abandon Claims. See Johnston v. Webster (In re Johnston),

49 F.3d 538, 540 (9th Cir. 1995). The bankruptcy court did not abuse its discretion

in finding that Vuksich did not meet his burden of showing that the claims in the

state court litigation were “of inconsequential value and benefit to the estate” under

11 U.S.C. § 554. Moreover, because the derivative suit sought only equitable relief

related to the pre-petition company, it is now moot.

          In each of these appeals, the district court is AFFIRMED.

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