Court Opinion

ID: 4473502
Source: CourtListenerOpinion
Date Created: 2020-01-15 21:00:29.493917+00
Date Added: 2024-06-11T12:08:24.202208
License: Public Domain

NOT FOR PUBLICATION                          FILED
                    UNITED STATES COURT OF APPEALS                         JAN 15 2020
                                                                      MOLLY C. DWYER, CLERK
                                                                        U.S. COURT OF APPEALS
                             FOR THE NINTH CIRCUIT

CHRISTOPHER EPSHA,                              No.    18-56108

                Appellant,                      D.C. No.
                                                2:17-cv-07438-R
 v.

PEOPLE OF THE STATE OF                          MEMORANDUM*
CALIFORNIA, by and through the
Commissioner of Business Oversight,

                Appellee.

                   Appeal from the United States District Court
                      for the Central District of California
                    Manuel L. Real, District Judge, Presiding

                     Argued and Submitted December 9, 2019
                              Pasadena, California

Before: WARDLAW and LEE, Circuit Judges, and KENNELLY,** District Judge.

      Christopher Epsha appeals from the district court’s order affirming the

bankruptcy court’s ruling that he cannot discharge his debt arising from his violation

of state securities laws. We have jurisdiction under 28 U.S.C. § 158(d)(1). We

      *
             This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.
      **
            The Honorable Matthew F. Kennelly, United States District Judge for
the Northern District of Illinois, sitting by designation.
review de novo the bankruptcy court’s conclusions of law, In re Ashley, 903 F.2d
599, 602 (9th Cir. 1990), and the district court’s decision on appeal from the

bankruptcy court, In re Harmon, 250 F.3d 1240, 1245 (9th Cir. 2001). We affirm.

      Epsha was the founder and managing member of Investco Management &

Development, LLC (IM&D), a real estate investment company. On February 18,

2009, the Commissioner of the California Department of Business Oversight issued

a Desist and Refrain Order to Epsha, Steven Thompson (another managing member),

and IM&D for violation of state securities law. After a three-day evidentiary

hearing, an Administrative Law Judge upheld the Desist and Refrain Order, finding

that IM&D, Epsha, and Thompson had sold unqualified, non-exempt securities and

omitted material information from potential investors.

      The State of California then sued Epsha, Thompson, and IM&D in state court

for the securities violations. The parties settled that dispute, and Epsha agreed to

provide restitution to the investors. Epsha, however, later filed for bankruptcy,

seeking to discharge the debt that he had agreed to pay under the settlement

agreement. The bankruptcy court held that Epsha’s debt resulted from a securities

law violation and was nondischargeable under 11 U.S.C. § 523(a)(19). The district

court affirmed and Epsha now appeals.

      Although the Settlement Agreement contains a non-liability provision, courts

may “look behind” the settlement agreement to find that the settlement debt arose

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from fraud and is thus nondischargeable. See Archer v. Warner, 538 U.S. 314, 320–

22 (2003). Here, the Administrative Decision upholding the D&R Order satisfies

the § 523(a)(19) provision that a debt for securities law violation cannot be

discharged. The ALJ found that Epsha had personally convinced an investor to

move forward with his investment after he expressed “buyer’s remorse.” In addition,

the ALJ upheld the D&R Order against “Christopher P. Epsha, Steven G. Thompson,

and Investco Management & Development LLC.”

      Epsha next argues that the bankruptcy court and the district court erred in

applying issue preclusion against him because the administrative proceeding

purportedly did not involve him personally and involved different issues. We review

the availability of issue preclusion de novo, and the decision to apply issue

preclusion for abuse of discretion. See Wabakken v. Cal Dep’t of Corr. & Rehab,

801 F.3d 1143, 1148 (9th Cir. 2015).

      Contrary to Epsha’s assertions, the administrative proceeding (1) involved the

same factual allegations, (2) the parties actually litigated Epsha’s violations, (3) the

ALJ necessarily decided the issue, (4) the administrative decision was final and on

the merits, and (5) Epsha was a party to the administrative action. Accordingly, the

district and bankruptcy courts properly applied issue preclusion to the ALJ’s finding

that Epsha violated securities law. See Lucido v. Superior Court, 795 P.2d 1223,

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1225 (Cal. 1990); see also Astoria Fed. Sav. & Loan Ass’n v. Solimino, 501 U.S.
104, 107 (1991).

      AFFIRMED.

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