In re: Laura A. Valente ( 2023 )

FILED
MAY 5 2023
NOT FOR PUBLICATION SUSAN M. SPRAUL, CLERK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. SC-22-1182-SGB
LAURA A. VALENTE,
Debtor. Bk. No. 19-01594-CL7
LAURA A. VALENTE, Adv. No. 19-90056-CL
Appellant,
v. MEMORANDUM*
THOMAS NOWLAND,
Appellee.
Appeal from the United States Bankruptcy Court
for the Southern District of California
Christopher B. Latham, Chief Bankruptcy Judge, Presiding
Before: SPRAKER, GAN, and BRAND, Bankruptcy Judges.
INTRODUCTION
In a prior decision, this Panel vacated and remanded the bankruptcy
court’s judgment under 11 U.S.C. § 523(a)(2)(A)1 that debtor Laura Valente
was indebted to Thomas Nowland for “actual fraud.” We remanded the
*
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.
Unless specified otherwise, all chapter and section references are to the
1
Bankruptcy Code, 11 U.S.C. §§ 101–1532.
case for additional findings regarding the value of assets Valente caused to
be fraudulently transferred from Valente Hair & Co., Inc. (“VHCI”) to
Valente Bella Industries, Inc. (“VBI”). On remand the parties and the
bankruptcy court examined specific VHCI cash transfers made by Valente.
The bankruptcy court concluded that Valente had VHCI fraudulently
transfer the identified funds to various entities for VBI’s benefit. The
bankruptcy court held Valente individually liable for the fraudulent
transfers and entered an amended judgment for Nowland in the amount of
$33,775.83. Because her debt arose from a fraudulent transfer scheme, the
court held that it was excepted from discharge under § 523(a)(2)(A).
Valente again appeals. Because she has not established that the
bankruptcy court’s amended judgment was based on any clearly erroneous
factual findings or on any error of law, we AFFIRM.
FACTS 2
Most of the facts material to this appeal are found in our prior
decision. See Valente v. Nowland (In re Valente), BAP No. SC-21-1225-SFB,
2022 WL 2176785 (9th Cir. BAP June 16, 2022). In turn, they were largely
derived from the bankruptcy court’s original findings of fact rendered
prior to remand. Valente did not challenge in her prior appeal the
bankruptcy court’s determination that she orchestrated a fraudulent
2
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
transfer scheme using VHCI and VBI. See id. at *6. Thus, to the extent she
now attempts to challenge matters she failed to challenge in her prior
appeal, she cannot. Those issues have been forfeited. See de Jong v. JLE-04
Parker, L.L.C. (In re de Jong), 588 B.R. 879, 891 (9th Cir. BAP 2018), aff'd, 793
F. App’x 659 (9th Cir. 2020) (citing cases).
A. VHCI’s formation, capitalization, and operations.
Valente and Nowland began regularly seeing each other in 2014. At
the time, Valente was a hairstylist in her early twenties. Nowland was a
businessman and attorney in his fifties, as well as a licensed general
contractor. Nowland provided Valente with a monthly allowance, a new
car, payments for her personal rent, and occasional gifts and vacations.
In 2015, Valente told Nowland that she hoped to open a hair salon.
Based on their discussions, Valente incorporated VHCI to operate the hair
salon, and Nowland invested $25,000.00. In exchange, he received half of
the ownership of VHCI. Valente owned the other half. They further agreed
that Valente would serve as VHCI’s chief executive officer, president,
secretary, and manager. Nowland would serve as the company’s chief
financial officer.
VHCI rented a vacant shop on Girard Avenue in La Jolla, California
(“Girard Salon”), renovated it, and opened the salon for business in
February 2016. Both before and after the Girard Salon opened, Nowland
made dozens of small infusions of capital to VHCI, usually ranging from
$1,000.00 to several thousand dollars. Nowland treated the transactions as
3
loans and required Valente to sign promissory notes on behalf of VHCI.
By the end of June 2016, the personal relationship between Nowland
and Valente had soured. Nowland stopped infusing capital into VHCI and
began to sever his ties with VHCI. He formally resigned as VHCI’s chief
financial officer and had no ongoing role in the business by March 2017. By
the time he resigned, VHCI had borrowed more than $200,000.00 from him.
B. VHCI’s struggles and its ultimate demise.
VHCI continued to operate after Nowland stopped making loans to
support the Girard Salon. Valente contributed no less than $68,111.50 to
maintain VHCI’s operations between February and November 2017. These
funds came from another benefactor, Barton Siggson. Similar to Nowland,
Valente took promissory notes from VHCI for virtually all of the funds she
claimed to have invested in VHCI in both 2017 and 2018. The face amount
of her notes from VHCI totaled over $210,000.00.
Valente’s testimony during the trial demonstrated that VHCI relied
on these loans to continue its operations. She testified that VHCI typically
had a monthly operating loss of roughly $10,000.00, sometimes
significantly more. The court found that VHCI struggled to pay its
employees and its rent throughout its existence. On October 24, 2018,
VHCI’s landlord sued to evict VHCI from the Girard Avenue premises.
Even before that, however, the landlord’s attorneys were demanding
payment of $103,000.00 in unpaid past due rent by letter dated October 11,
2018. According to Nowland, he discovered upon receipt of that letter that
4
VHCI had failed to pay any rent to its landlord in 2018. On November 30,
2018, Valente executed on behalf of VHCI a stipulated judgment for
damages and agreed to turnover possession of the premises by December
16, 2018. This marked the end of VHCI’s operations.
C. VBI’s formation, operations, and sale to a third party.
While the eviction proceedings were pending, Valente was working
on opening a new salon on Prospect Street in La Jolla (“Prospect Salon”).
The Prospect Salon was to be owned and operated by VBI. At least
nominally, VBI was owned by Valente’s father, John Valente. He
incorporated VBI in December 2018, “very shortly after VHCI was evicted
and closed its doors.” However, Valente had begun working on securing a
new salon location by no later than mid-October 2018. Emails between
Valente and the landlord of the Prospect Salon show that Valente was
negotiating a sublease for the premises and had submitted a lease
application by that time. Valente’s father and her boyfriend, Andrew Somo,
signed the Assignment, Assumption, Modification and Consent Agreement
for the sublease of the Prospect Salon on October 31, 2018. Valente signed a
consent to the sublease and guaranteed the obligation on that same date.
Valente insists she never had any ownership interest in VBI. She
claims she merely worked for her father by providing the Prospect Salon
with secretarial, marketing, and management services. But she was
involved in, or controlled, essentially every facet of the business. As noted
above, she found and negotiated the lease for the Prospect Salon.
5
Additionally, Valente was instrumental in transferring assets and staff
from the Girard Salon to the Prospect Salon. Valente later maintained that
the Prospect Salon was “new” and had little or no connection to the Girard
Salon, but VBI advertised the Prospect Salon as a “relocation” of the prior
salon. Evidence at trial showed that VBI celebrated its commencement of
operations with a “reopening party.”
The exact date VBI opened for business is not clear from the record.
Nowland claimed that it started its business on December 20, 2018, only
four days after VHCI was required to turn over possession of the Girard
Salon. The bankruptcy court, however, noted that VBI held its “reopening
party” in early 2019. Valente did not operate VBI for long. VBI sold the
Prospect Salon to a third party, Ediane Crawford, in July 2019 for
$41,000.00. The sale included the salon’s assets, an assignment of the
salon’s lease, and a three-year noncompete agreement.
D. Valente files bankruptcy and Nowland sues for
nondischargeability based on actual fraud.
Shortly after opening the Prospect Salon, but before VBI sold the
business to Crawford, Valente filed her chapter 7 case. In June 2019,
Nowland filed his adversary proceeding against Valente, her father, VBI,
and others. By the time the court entered its pretrial order in February
2021, Nowland had abandoned or dismissed all claims against all
defendants except his § 523(a)(2)(A) claim against Valente.
The bankruptcy court held eleven days of trial over the course of two
6
months and entered detailed findings of fact and conclusions of law. It
found for Valente on all but one aspect of Nowland’s § 523(a)(2)(A) claim
for actual fraud. It held that she actively participated in, orchestrated, and
coordinated the fraudulent transfer of VHCI’s inventory, equipment, and
other hard and intangible assets to VBI with the intent and purpose of
defrauding Nowland and VHCI’s other creditors.
However, the court rejected Nowland’s arguments that Valente had
fraudulently transferred $350,522.02 in cash, comprised of more than 1,500
transactions, to herself and other entities for her personal benefit. The court
did not analyze any individual cash transfers. Instead, after considering the
cash transfers as a whole, it concluded that Valente, and therefore VHCI,
did not have the requisite intent to defraud VHCI’s creditors in making the
cash transfers. On the other hand, the bankruptcy court found the requisite
culpable intent existed with respect to the noncash assets and determined
that the value of the fraudulently transferred non-cash assets was equal to
the $41,000.00 purchase price Crawford paid to VBI when she bought the
Prospect Salon. The court entered a $41,000.00 judgment against Valente
based on Nowland’s § 523(a)(2)(A) claim. Valente appealed.
In June 2022, this Panel issued a memorandum decision vacating the
judgment. The Panel affirmed the bankrupt court’s uncontested findings as
to Valente’s participation in a scheme to fraudulently transfer VHCI’s
assets to VBI, and her personal liability for the transfers. The Panel
remanded, however, for further findings as to the valuation of VHCI’s non-
7
cash assets supporting the $41,000.00 judgment. In re Valente, 2022 WL
2176785, at *9. We additionally instructed that the bankruptcy court was
free to consider on remand alternate means of measuring Nowland’s
damages resulting from Valente’s fraudulent transfer scheme.
E. Bankruptcy court proceedings on remand.
On remand, the bankruptcy court gave both parties the opportunity
to concurrently brief three issues:
(1) whether $41,000 accurately captures the value of [non-cash] assets
transferred from [VHCI] to the Prospect Salon; (2) if so, whether the
lease assignment, noncompete agreement, or any new improvements
not funded with redirected VHCI capital to the [Prospect Salon]
reduces that sum; and (3) if not, whether there is an alternative means
supported by the record of valuing the assets transferred.
After the parties completed the additional briefing, the bankruptcy
court rendered its findings, conclusions, and order after remand.
Initially, the court reiterated its prior findings that VHCI transferred all of
its tangible and intangible non-cash assets to VBI in December 2018. It also
reaffirmed that Valente had knowingly and intentionally acted on behalf of
both entities to effectuate these fraudulent transfers. The court additionally
pointed to this Panel’s prior remarks that Valente had not challenged these
findings on appeal.
The court further noted that Nowland declined to defend or support
on remand the prior valuation of the non-cash assets fraudulently
transferred based on the sale of the Prospect Salon. Instead, Nowland
8
claimed that the alleged book value of the tangible and intangible assets
could be used to value those assets. The bankruptcy court rejected book
value as reliable evidence of the value of those assets at the time of transfer.
Lacking any reliable evidence of the value of these fraudulently transferred
assets, the bankruptcy court awarded nominal damages of $1.00 in
recognition that VHCI had fraudulently transferred non-cash assets to VBI.
Nowland has not appealed this determination, but Valente appeals the
award of $1.00 for the fraudulent transfer of VHCI’s non-cash assets to VBI.
At Nowland’s urging the bankruptcy court revisited VHCI’s cash
transfers. It focused on a handful of transactions that occurred after he
terminated his active involvement with the Girard Salon. The court
remarked that its findings before remand viewed all of the cash transfers as
a whole without reference to specific periods of time or payments. The
court was persuaded by Nowland’s post-remand brief that there was
sufficient evidence to justify reconsideration of its findings as to $33,774.83
in specific cash transfers that occurred during the last quarter of 2018. The
court explained that this period was significant as VHCI had already been
sued by its landlord for eviction, and Valente had decided she needed to
move her business out of the Girard Avenue premises. The court held that
Valente used VHCI’s funds to make the following fraudulent transfers to
benefit VBI in her efforts to open the Prospect Salon:
9
Date of Amount From To Use
Transfer of Transfer
11/6/2018 $ 16,021.00 VHCI A-440 VBI Rent
12/6/2018 $ 2,701.43 VHCI State College Dstrb. Flooring
11/13/2018-12/24/18 $ 4,037.08 VHCI Various Misc. Purchases
10/9/1/-12/17/18 $ 7,865.92 VHCI Valente, Inc Net Transfers
12/14/18-12/20/18 $ 2,072.00 VHCI Home Depot
12/4/18-12/21/18 $ 1,077.40 VHCI Amazon
TOTAL $ 33,774.83
As to each of these transfers from VHCI, the bankruptcy court found
virtually all of the badges of fraud were present. In turn, the court inferred
that Valente made each transfer from VHCI with the intent to hinder or
delay VHCI’s creditors. The court similarly found that Valente engaged in
“deceit, artifice, trick, or design involving direct and active operation of
mind, used to cheat another” when she received the benefits of the cash
transfers on behalf of herself and VBI.
The bankruptcy court also rejected Valente’s affirmative defense
based on Cal. Civ. Code § 3439.08(a), which provides that a transfer is not
avoidable if it is taken in good faith and for reasonably equivalent value. In
so holding, the court once again found that Valente was an “active
participant in the fraud.” As the court put it, she controlled both VHCI and
VBI and acted as “instigator and puppeteer” in effecting the fraudulent
transfer scheme. Given her involvement in this scheme, the court held that
she failed to prove good faith. The bankruptcy court additionally rejected
Valente’s reasonably equivalent value allegations as unsupported by the
record.
On August 25, 2022, the bankruptcy court entered its judgment after
10
remand determining that Valente was liable to Nowland for $33,775.85
resulting from her fraudulent transfer scheme ($33,774.85 in cash
fraudulently transferred plus $1.00 in nominal damages for noncash
transfers). This debt was declared nondischargeable under § 523(a)(2)(A).
Valente timely appealed.
JURISDICTION
The bankruptcy court had jurisdiction under 28 U.S.C. §§ 1334 and
157(b)(2)(I). We have jurisdiction under 28 U.S.C. § 158.
ISSUES
1. Did the bankruptcy court properly award nominal damages of $1.00
based on the value of all non-cash assets fraudulently transferred
from VHCI to VBI?
2. Did the bankruptcy court clearly err when it found that Valente made
cash transfers from VHCI for VBI’s benefit?
3. Did the bankruptcy court clearly err when it found that the funds
Valente deposited into VHCI did not negate the cash fraudulent
transfers she orchestrated between VHCI and VBI?
4. Were any of the bankruptcy court’s intent findings clearly erroneous?
5. Did Nowland have standing to seek nondischargeability under
§ 523(a)(2)(A) concerning Valente’s liability for orchestrating the
fraudulent transfer of assets between VHCI and VBI?
STANDARDS OF REVIEW
Except for her standing issues, all of Valente’s issues on appeal are
11
factual issues, which are subject to a clearly erroneous standard of review.
“A court's factual determination is clearly erroneous if it is illogical,
implausible, or without support in the record.” Retz v. Samson (In re Retz),
606 F.3d 1189, 1196 (9th Cir. 2010).
Standing issues are questions of law subject to de novo review. All.
United Ins. v. Krasnoff (In re Venegas), 623 B.R. 555, 560 (9th Cir. BAP 2020).
When we consider a matter de novo, we give no deference to the
bankruptcy court’s decision. Francis v. Wallace (In re Francis), 505 B.R. 914,
917 (9th Cir. BAP 2014).
DISCUSSION
Typically, creditors of the transferor may recover against either the
transferee of a fraudulent transfer, or the entity for whose benefit the
transfer was made.3 In re Valente, 2022 WL 2176785, at *4 (citing Cal. Civ.
Code § 3439.08, and Lo v. Lee, 24 Cal. App. 5th 1065, 1072–73 (2018)).
Valente is neither the transferee nor the entity benefitted by the transfers.
Nonetheless, California law provides that an individual who perpetrates a
fraudulent transfer scheme through an entity may be held individually
liable for the resulting damages even though she is not the transferee or
transfer beneficiary. See, e.g., Sanger v. Ahn, Case No. 18-cv-07204-JCS, 2019
3
We previously addressed Valente’s personal liability for VHCI’s fraudulent
transfers in In re Valente, 2022 WL 2176785, at *4-6, but we summarize our prior analysis
here because the legal theory underlying Valente’s liability is not a garden-variety
fraudulent transfer claim.
12
WL 1229660, at * 7 (N.D. Cal. Mar. 15, 2019) (citing Filip v. Bucurenciu, 129
Cal. App. 4th 825, 837 (2005), and holding that an active participant who
conspires to commit a fraudulent transfer may be held liable even if not the
transferee or beneficiary of the transfer). 4
The bankruptcy court originally found that VHCI, acting through
Valente, had fraudulently transferred tangible and intangible assets, other
than money, to VBI and valued the transfers based on a subsequent sale of
the business to a third party. In our prior decision, we noted that “Valente
has not challenged the court’s determination that both VHCI and VBI,
acting through Valente, fraudulently transferred assets from VHCI to VBI,
or her active and knowing participation in those fraudulent transfers.” In re
Valente, 2022 WL 2176785, at *6. Valente’s active and knowing participation
in the scheme on behalf of both companies established her debt and that
her liability arose from actual fraud for purposes of excepting it from
discharge under § 523(a)(2)(A). Husky Int’l Elecs., Inc. v. Ritz, 578 U.S. 356,
365 (2016); Bonnett v. Moirbia Scottsdale, LLC (In re Bonnett), BAP No. AZ-19-
1293-BTL, 2020 WL 4371881, at *4 (9th Cir. BAP July 30, 2020), aff'd sub nom.
4 Under California agency law, a plaintiff sufficiently pleads fraud against a
defendant agent by alleging that the agent “had knowledge of, and participated in” the
principal’s fraud scheme. PowerPC Comercio De Equipamentos De Informatica LTDA v. Sky
Glob. Servs. Inc., Case No. 8:18-CV-614-JLS-JDE, 2018 WL 6521497, at *3 (C.D. Cal. Aug.
8, 2018); see also Aleo Solar Deutschland GmbH v. Innovative Mech. & Elec., Inc., Case No.
2:12-CV-2629-ODW SPX, 2012 WL 3709632, at *3 (C.D. Cal. Aug. 28, 2012) (“an agent
who knowingly participates in a fraudulent transaction is responsible for his or her own
misconduct.” (citing Jacobs v. Freeman, 104 Cal. App. 3d 177, 193 (1980))).
13
Bonnett v. Moirbia Scottsdale, LLC, 860 F. App’x 473 (9th Cir. 2021). As stated
in Bonnett, a fraudulent transfer debt falls within § 523(a)(2)(A) when:
1) the transferor conveyed the property with the intent to hinder or
delay his creditors; and 2) the transferee was a participant in the
fraud, such that it could be said that the debtor engaged in “deceit,
artifice, trick, or design involving direct and active operation of the
mind, used to circumvent and cheat another.”
In re Bonnett, at *4–5 (quoting Fisher v. Quay (In re Quay), Adv. No. 04-6065,
2005 WL 6488242, at *9 (Bankr. N.D. Ga. Mar. 29, 2005)).
Based on the post-remand briefing, the bankruptcy court held that
Nowland had not adequately proven the value of the non-cash assets
fraudulently transferred by VHCI to VBI but awarded Nowland $1.00
against Valente in recognition that she had fraudulently transferred those
assets to VBI. Valente appeals the court’s valuation on remand of the non-
cash assets at $1. As to these assets, the only viable issue in this appeal is
the valuation issue because Valente did not challenge in her prior appeal
the court’s determination that VHCI had fraudulently transferred them or
that she had fraudulently orchestrated those transfers. See In re de Jong, 588
B.R. at 891.
The bankruptcy court did make new findings on remand as to several
cash transfers from VHCI between October and December 2018, to various
entities. The court held that VHCI made specific transfers of funds for the
benefit of VBI while closing VHCI, or afterwards. As detailed above, the
transfers were grouped into categories: $16,021.00 for VBI’s first month’s
14
rent and security deposit for the Prospect Street premises, $2,701.43 to
purchase flooring for the Prospect Salon, $7,865.92 in net transfers made for
hair products and related inventory from Valente, Inc. (a separate Valente
company), $4,037.08 to purchase additional inventory from other
companies, $2,072.00 for tools and hardware needed from Home Depot,
and $1,077.40 to purchase additional items from Amazon.com. The court
found that VHCI, acting through Valente, intended to defraud VHCI’s
creditors when it made each of the challenged cash transfers. As to each of
these transfers, it was undisputed that the cash withdrawn from VHCI was
used to procure items “for the salon.” Except for the rent, security deposit,
and flooring, however, Valente asserted that the items were for the Girard
Salon and not the Prospect Salon. The bankruptcy court found to the
contrary. As in its original decision, the court found that Valente’s knowing
participation in making the transfers, and in VBI’s receipt of the benefit of
the transfers, established her culpability for purposes of excepting her
liability from discharge under § 523(a)(2)(A).
Valente does not deny that she withdrew the funds from VHCI’s
bank account to make these purchases or the nature of the purchases. She
does, however, contend that there is no evidence to support a finding that
VHCI made the cash transfers for VBI’s benefit.5 She argues, therefore, that
5 Unlike the court’s decision as to the non-cash assets, the bankruptcy court did
not make individualized findings as to specific cash transfers prior to remand. Because
Valente had no opportunity to address the court’s post-remand findings as to the cash
transfers in her prior appeal, she properly raises them in this appeal.
15
there are no underlying fraudulent transfers for which she is liable. She
also contends that in light of the monies she and others deposited into
VHCI the court erred when it found that VHCI’s subsequent transfers were
made with the actual intent to defraud its creditors. Finally, she repeats
arguments we rejected in the first appeal that Nowland lacked standing to
sue her for damages arising from her involvement in VHCI’s fraudulent
transfers.
Before we address these arguments, we first address Valente’s
argument that the bankruptcy court erred in awarding Nowland $1.00 in
damages for the transfer of VHCI’s non-cash assets as it raises a much
narrower question than the claims based on the cash transfers.
A. The bankruptcy court properly awarded Nowland $1.00 for the
fraudulent transfer of VHCI’s non-cash assets.
Valente contests the bankruptcy court’s award after remand of $1.00
for the fraudulent transfer of the non-cash assets. This argument is woven
into her broader argument that Nowland failed to prove that VHCI made
any transfer for VBI’s benefit. But the bankruptcy court originally held that
Valente was individually liable for VHCI’s transfer of its non-cash assets to
VBI including “salon chairs, mirrors, cabinets, computers, desks, products
to be used in the shop and sold to customers, customer lists, marketing
materials and products, different types of software, and a variety of
intellectual property.” The court also found that these assets were
transferred directly to VBI and used as part of the Prospect Salon. The court
16
originally found, and reaffirmed after remand, that VBI was the transferee
of the fraudulent transfer that Valente engineered on both ends. The record
supports these findings. Furthermore, Valente’s first appeal did not
challenge her liability for these transfers to VBI—only the valuation of the
assets transferred. It is too late for her to do so now after remand. See In re
de Jong, 588 B.R. at 891.
Valente also baldly states that “the $1.00 in ‘nominal damages’
should not be allowed.” Having determined that Valente caused VHCI to
fraudulently transfer its non-cash assets to VBI, the award of nominal
damages was appropriate despite Nowland’s inability to prove any specific
value.
B. VHCI’s fraudulent cash transfers were for VBI’s benefit.
Turning to the cash transfers the bankruptcy court found to be
fraudulent transfers on remand, Valente first argues that the bankruptcy
court clearly erred because Nowland failed to “trace” the benefit of the
items purchased with VHCI’s funds to either Valente or VBI. Absent a
transfer to VBI, or proof that it benefitted from the transfer, Valente
contends that Nowland failed to prove a fraudulent transfer for which she
may be held liable.
As we previously stated, liability arises under California fraudulent
transfer law when a voidable transfer is made to a transferee or to a
“transfer beneficiary.” In re Valente, 2022 WL 2176785, at *4 (citing Cal. Civ.
Code § 3439.08 and Lo, 24 Cal. App. 5th at 1072–73). For purposes of
17
imposing liability for a fraudulent transfer, “[t]ransfer beneficiary status
depends on three aspects of the ‘benefit’: (1) [the benefit (as opposed to the
assets themselves)] must actually have been received by the beneficiary; (2)
it must be quantifiable; and (3) it must be accessible to the beneficiary.” Lo,
24 Cal. App. 5th at 1073-74 & n.4 (cleaned up) (citing Baldi v. Lynch (In re
McCook Metals, L.L.C.), 319 B.R. 570, 590–94 (Bankr. N.D. Ill. 2005)).
VBI was not a direct transferee of the challenged cash transfers.
Rather, Nowland argued that they were made for VBI’s benefit in setting
up VBI’s new salon while VHCI was closing. Valente maintains that VBI
was not a transfer beneficiary. She contends that Nowland failed to prove
that any of the miscellaneous purchases from Valente Inc., Home Depot,
Amazon, and others for supplies, inventory, and equipment were actually
transferred to VBI. Though she concedes that the inventory, supplies, tools,
equipment, and other items were purchased “for the salon” during the last
quarter of 2018, she argues that they were purchased for VHCI’s Girard
Salon, and there was nothing fraudulent in maintaining its business
operations. Valente contends that the transfers made between October and
December 2018 did not materially differ from the year before. But VHCI
was not closing its business in late 2017. For most of that time she was still
getting funds from Siggson to lend to VHCI.
Valente’s argument presupposes that VHCI remained a viable,
ongoing business in late 2018. As explained by the bankruptcy court, the
challenged cash transfers were “limited to payments made in VHCI’s final
18
months that were not consented to, did not go to legitimate or fringe VHCI
purposes, and were not used for Defendant’s personal support.” The
transfers were made in VHCI’s last quarter of existence, between October 9,
2018 and December 31, 2018, though overwhelmingly the specific transfers
occurred in November and December including many dates near or after
VHCI’s stipulated date to turn over the Girard Salon.
Nowland argued, and the court found, that these transfers “were
clearly for VBI purposes.” The rent payment VHCI made for VBI on
November 6, 2018, and the payment on December 6, 2018, for VBI’s
flooring, were clearly made for VBI’s benefit and established that VHCI
was using its funds to benefit VBI during this time. The payments for
inventory and equipment are not as obvious. But the court reviewed the
amounts and the timing of the transfers and found that Valente used
VHCI’s funds to make specific purchases to help open VBI for business
during the last three months of 2018.
Valente maintains that the bankruptcy court should not have
discredited her testimony that VHCI needed these items for the busy
holiday season. But based on the timing, frequency, and amounts of the
transfers, the bankruptcy court held that VHCI had no legitimate need for
these items and that Valente purchased them for VBI’s benefit. Throughout
this period VHCI could not pay its operating expenses and owed its
landlord roughly $100,000.00 in back rent. The landlord had sued for
eviction. Valente was working to procure and remodel the Prospect Salon
19
as VBI’s business premises. Valente’s father signed the sublease for VBI on
October 31, 2018. At the same time, Valente consented to the sublease and
guaranteed VBI’s lease obligations. Valente, on behalf of VHCI, then signed
a Stipulated Judgment with its landlord on November 30, 2018. That
judgment acknowledged the landlord’s right to a writ of possession, but
the landlord agreed that VHCI would not be locked out until December 16,
2018. In short, this chronology demonstrates that as of October 2018, VHCI
should have been in the process of winding down its business while facing
imminent closure. Valente’s actions demonstrate that VHCI was not
moving to the Prospect Street location to continue its business. Rather, she
was starting a new company, using a new entity. Moreover, there was no
legitimate business purpose for VHCI to be purchasing inventory, supplies,
and equipment for future business in light of its debts, its inability to pay
operating expenses, and its imminent eviction. The timing of events
ultimately leading to VHCI’s closing amply supports the bankruptcy
court’s conclusion that VHCI’s challenged cash transfers, made by Valente,
were for VBI’s benefit. 6
6
The only other evidence Valente points to is a chart showing amounts
withdrawn from VHCI’s bank account for hardware store purchases throughout 2017
and 2018. Valente says that the amounts in the chart demonstrate the routine nature of
the roughly $2,000 in Home Depot purchases Valente paid from VHCI’s account in
December 2018. We disagree. The chart shows that VHCI’s December 2018 Home Depot
expenditures were roughly 10 times more than the sum of VHCI’s hardware store
purchases during the preceding two-year period. If anything, this chart supports the
bankruptcy court’s inference.
20
The bankruptcy court was not required to accept Valente’s
explanation. “Where there are two permissible views of the evidence, the
factfinder's choice between them cannot be clearly erroneous.” Anderson v.
City of Bessemer City, 470 U.S. 564, 574 (1985). The circumstantial evidence
that the purchases were for the benefit of the business that was starting
rather than the one that was closing strongly supports the court’s finding
that Valente used VHCI’s funds to purchase items for VBI’s benefit. Its
finding that the challenged transfers were for the benefit of VBI was not
clearly erroneous.
C. Valente used VHCI’s assets to pay VBI’s rent, security deposit, and
flooring.
Valente separately challenges her liability for VHCI’s payment of
VBI’s first month’s rent, security deposit, and flooring based on the
bankruptcy court’s finding that VHCI fraudulently transferred those funds
for VBI’s benefit. She does not seriously dispute that these payments were
made for VBI’s benefit. Nor does she argue that VHCI somehow benefitted
from making these payments. Rather, she contends that they were not
made from VHCI’s property and therefore cannot constitute fraudulent
transfers for which she may be held liable. She maintains that she (through
Valente, Inc.), her boyfriend Andrew Somo, and her friend Jim Nickel
deposited roughly $23,000.00 into VHCI’s checking account to pay for the
rent, security deposit, and flooring.
By way of explanation, Valente contends that VBI’s landlord required
21
that the rent and security deposit be paid by cashier’s check. She maintains
that her father was unable to accomplish this, so she transferred money
from Valente, Inc. into VHCI to assist her father. VHCI’s bank records
show that on November 1, 2018, Valente, Inc. deposited $12,387.78 into
VHCI’s account, and there was a separate deposit of $2,000.00, which
Valente says was from Nickel. VHCI’s bank records also show another
$2,000.00 deposited on November 6, 2018, which Valente says came from
Somo. That same day, November 6, 2018, Valente withdrew $16,021.00
from VHCI’s bank account and obtained a cashier’s check payable to A-440
Enterprises, Inc., VBI’s landlord, to pay VBI’s first month of rent and its
security deposit.
The bankruptcy court noted that Nickel and Somo required VHCI to
execute promissory notes for their deposits. This establishes that VHCI
borrowed the funds. As such, the funds were VHCI’s property. The
resulting debt also was VHCI’s. Those funds were placed into VHCI’s bank
account. This was the same account Valente used to pay VBI’s rent and
security deposit. As the bankruptcy court properly noted, VHCI received
reasonably equivalent value for the debt it created. Stone v. Morton Cmty.
Bank (In re Int’l Supply Co.), 631 B.R. 331, 343-44 (Bankr. C.D. Ill. 2021). But
VHCI received nothing for paying VBI’s obligations.
The bankruptcy court similarly rejected Valente’s contention that
Valente, Inc.’s November 1, 2018 deposit of $12,387.78 into VHCI did not
become property of VHCI. The bankruptcy court found that on October 29,
22
2018, VHCI had transferred out $13,000.00 to Valente, Inc. The court
concluded that Valente, Inc.’s deposit into VHCI three days later was in
substantial repayment of VHCI’s prior $13,000.00 transfer. On appeal,
Valente does not address the bankruptcy court’s finding. Rather, she
reiterates that Valente, Inc. deposited $12,387.78 into VHCI ‘s account to
fund VBI’s rent and security deposit. Simply rearguing on appeal one of
two inferences the court permissibly could have drawn from the facts
presented at trial does not establish that the bankruptcy court clearly erred.
Anderson, 470 U.S. at 574.
Even under Valente’s version of events, it remains unclear why
Valente, Inc. did not simply pay VBI’s rent and security deposit directly
rather than deposit funds into VHCI’s account for that purpose. More
importantly, there is no contemporaneous evidence that VHCI accepted
any deposit for a limited purpose. Indeed, the promissory notes issued to
Nickel and Somo demonstrate that VHCI was borrowing money. It had no
reason to borrow money for VBI’s benefit. Nor did it have any reason to
accept a deposit from Valente, Inc. for VBI’s benefit. Rather, VHCI was a
separate entity with its separate obligations to its creditors, including its
landlord, Nowland, Nickel, and Somo.
Valente, Inc. voluntarily deposited its funds into VHCI’s bank
account without limitation. Once it did so those funds became VHCI’s
unrestricted assets. See Parker v. First Cmty. Bank (In re Bakersfield Westar
Ambulance, Inc.), 123 F.3d 1243, 1246 (9th Cir. 1997) (citing Cal. cases) (upon
23
deposit title to the deposited funds passed to the bank, and account owner
became a creditor of the bank with a contract claim for the amount of the
funds deposited.) This had consequences. VHCI’s assets, including the
funds held in its bank account, were liable for VHCI’s debts. Given its
apparent insolvency at the time, VHCI owed a fiduciary duty to its
creditors. See generally Berg & Berg Enters. v. Boyle, 178 Cal. App. 4th 1020,
1041 (2009) (explaining that upon insolvency corporate insiders owe a
fiduciary duty under California law to the corporation’s creditors not to
divert, dissipate, or unduly risk “corporate assets that might otherwise
have been used to satisfy creditors’ claims.”). The record amply
demonstrates that the $16,021.00 paid for VBI’s rent and security deposit
was property of VHCI, that VHCI received nothing for the transfer, and
that it constituted a fraudulent transfer from the perspective of VHCI’s
creditors.
Finally, the analysis supporting the bankruptcy court’s finding that
VHCI, acting through Valente, fraudulently transferred $2,701.43 to pay for
VBI’s flooring is virtually identical to that set forth above regarding VBI’s
first month’s rent and security deposit. Valente claims on appeal that funds
to pay for VBI’s flooring were deposited into VHCI’s bank account but
originally came from Valente, Inc., Nickel, and Somo in the same manner
she alleged the funds for VBI’s rent and security deposit came to VHCI. We
reject this argument for the exact same reasons we rejected her argument
with respect to the rent and the security deposit.
24
D. VHCI, acting through Valente, made the cash transfers with the
actual intent to defraud its creditors.
Valente further contends that the bankruptcy court’s findings of
fraudulent intent for the fraudulent transfers that serve as the predicate for
her liability are clearly erroneous. Under California law, a transfer is
avoidable as fraudulent under Cal. Civ. Code § 3439.04(a)(1) if the debtor
made the transfer with the actual intent to hinder, delay, or defraud any
creditor. Whether the conveyance was made with the requisite culpable
intent is a question of fact that typically must be inferred from the
surrounding circumstances. Filip, 129 Cal. App. 4th at 834 (citing Annod
Corp. v. Hamilton & Samuels, 100 Cal. App. 4th 1286, 1294 (2002)). Cal. Civ.
Code § 3439.04(b) sets forth well-known “badges of fraud” that can assist
the trier of fact in determining whether the transfer was made with the
required intent, which include:
(1) Whether the transfer or obligation was to an insider.
(2) Whether the debtor retained possession or control of the
property transferred after the transfer.
(3) Whether the transfer or obligation was disclosed or concealed.
(4) Whether before the transfer was made or obligation was
incurred, the debtor had been sued or threatened with suit.
(5) Whether the transfer was of substantially all the debtor's assets.
(6) Whether the debtor absconded.
(7) Whether the debtor removed or concealed assets.
(8) Whether the value of the consideration received by the debtor
was reasonably equivalent to the value of the asset transferred
or the amount of the obligation incurred.
(9) Whether the debtor was insolvent or became insolvent shortly
25
after the transfer was made or the obligation was incurred.
(10) Whether the transfer occurred shortly before or shortly after a
substantial debt was incurred.
(11) Whether the debtor transferred the essential assets of the
business to a lienor that transferred the assets to an insider of
the debtor.
However, as Filip cautioned:
these factors do not create a mathematical formula to establish actual
intent. There is no minimum number of factors that must be present
before the scales tip in favor of finding of actual intent to defraud.
This list of factors is meant to provide guidance to the trial court, not
compel a finding one way or the other.
Filip, 129 Cal. App. 4th at 834.
The court considered the badges of fraud and applied them to each
set of cash transfers. It found that substantially all the badges were present
in each instance.
In her opening brief, Valente recites the badges of fraud and states
that none apply. This is simply not the case. Again, Valente’s mere
disagreement with the court’s findings does not constitute reversible error.
The bankruptcy court properly found that VHCI made the challenged
transfers to benefit VBI, an insider of VHCI, by virtue of her control of both
entities. There was no legitimate reason for VHCI to use its assets to fund
VBI’s opening. VHCI never disclosed that it was paying VBI’s expenses.
During these transfers, VHCI was being sued by its landlord for substantial
nonpayment of rent and was facing immediate eviction from its sole place
of business and a judgment of roughly $170,000.00. The unrefuted evidence
26
shows that VHCI could not pay its rent or employees and depended on
regular “business loans” from Nowland, Siggson, and others that it did not
and could not repay. In short, VHCI was insolvent and facing entry of a
judgment and immediate eviction from its sole place of business. The
challenged transfers served no business purpose for VHCI, and the
bankruptcy court duly found that it received no value for making any of
the challenged transfers. The record is replete with evidence of VHCI’s
fraudulent intent for the transfers identified by the bankruptcy court.
In attacking the court’s badges of fraud findings, Valente focuses
almost exclusively on reasonably equivalent value.7 As she stated in her
reply brief on appeal: “The Appellant is rightly perplexed as to how she is
unjustly facing $33,875.83 in fraudulent transfer charges, when it is
unrefuted that she has personally injected $99,282.58 in value into VHCI.”
The $99,282.58 Valente references is comprised of: $68,111.50 in monies she
received from Barton Siggson between February and November of 2017;
$27,171.08 in funds from Valente Inc. transferred between March and
December of 2018; and $4,000.00 from the November 1, 2018 deposit of
7 Reasonably equivalent value also is material to a transferee’s defense to a
fraudulent transfer under Cal. Civ. Code § 3439.08(a). As stated in the statute, “a
transfer or obligation is not voidable . . . against a person that took in good faith and for
reasonably equivalent value given to the debtor . . . .” Valente had the burden of proof
to establish that VBI acted in good faith and gave VHCI reasonably equivalent value.
See Cal. Civ. Code § 3439.08(f). The bankruptcy court did not err in holding that
Valente’s active and knowing orchestration of the fraudulent transfer scheme between
VHCI and VBI vitiated any claim of good faith and precluded this affirmative defense.
27
$2,000.00 from Nickel, and the November 6, 2018 deposit of $2,000.00 from
Somo previously discussed. According to Valente, these contributions
prove that VHCI did not intend to defraud its creditors when it made the
challenged cash transfers.
Where a transfer is challenged as being made with the actual intent to
hinder, delay, or defraud, reasonably equivalent value is not a per se
defense. Rather, value is only one of the applicable badges of fraud the
court was entitled to consider. Filip, 129 Cal. App. 4th at 834; Betancourt v.
Ballmer (In re Betancourt), BAP No. CC-17-1016-KuLTa, 2017 WL 3482035, at
*6 (9th Cir. BAP Aug. 14, 2017), aff'd, 756 F. App’x 741 (9th Cir. 2019) (“the
presence or absence of reasonably equivalent value is just one of several
factors courts typically consider when assessing whether the debtor had
the requisite state of mind to commit an actual fraudulent transfer.”). Even
if these deposits were given in exchange for some or all the transfers, the
bankruptcy court’s finding that the transfers were fraudulent was not
clearly erroneous on this record based on the existence of multiple other
badges of fraud. However, the timing and circumstances of the deposits
demonstrate that they were not made in exchange for the challenged
transfers.
Cal. Civ. Code § 3439.03 defines value for fraudulent transfer
purposes as “given for a transfer or an obligation if, in exchange for the
transfer or obligation, property is transferred or an antecedent debt is
secured or satisfied, but value does not include an unperformed promise
28
made otherwise than in the ordinary course of the promisor's business to
furnish support to the debtor or another person.” (Emphasis added.) As the
bankruptcy court correctly observed, “the requirement that the debtor
must have ‘received’ the value in question expresses a temporal condition
demanding an element of contemporaneity in the determination of
whether something close to the reasonable equivalence has been
exchanged.” Greenspan v. Orrick, Herrington & Sutcliffe LLP (In re Brobeck,
Phleger & Harrison LLP), 408 B.R. 318, 342 (Bankr. N.D. Cal. 2009) (quoting
Jackson v. Mishkin (In re Adler Coleman Clearing Corp.), 263 B.R. 406, 466–67
(S.D.N.Y. 2001)). Thus, to support a transfer the value received by the
transferor must be “bargained for at the date of the original transaction.” In
re Brobeck, Phleger & Harrison LLP, 408 B.R. at 342 (citing 5 Collier on
Bankruptcy, ¶ 548.05[1][b] at 548-38 (15th ed. rev. 2002)). It is not necessary
that the value exchanged come from the transferee so long as it is
“sufficiently concrete and identifiable.” Id. at 341 (citing Frontier Bank v.
Brown (In re N. Merch., Inc.), 371 F.3d 1056, 1058 (9th Cir. 2004)).
Significantly, “[b]ecause the policy behind fraudulent transfer law is to
preserve assets of the estate, reasonably equivalent value is determined
from the standpoint of creditors; it is not determined from the defendant’s
perspective.” Id. (quoting Brandt v. nVidia Corp. (In re 3dfx Interactive, Inc.),
389 B.R. 842, 863 (Bankr. N.D. Cal. 2008)). Courts measure value at the time
29
of the transfer. Id. (citing BFP v. RTC, 511 U.S. 531, 546 (1994)). 8
The bankruptcy court acknowledged that VHCI received deposits
from various sources including the deposits identified by Valente. But the
monies deposited into VHCI had little to do with VHCI’s transfers shortly
before it closed and VBI opened its doors. There is no credible evidence
that these deposits were made in exchange for any of VHCI’s challenged
transfers. Indeed, most of the deposits substantially pre-date the subject
transfers. Deposits into VHCI predating the challenged transfers could not
be made in exchange for its subsequent transfers. 9
Moreover, it is undisputed that the monies from Siggson, Nickel, and
Somo were loans to VHCI. As the bankruptcy court noted, the lenders and
VHCI exchanged mutual value in the form of money lent to VHCI by the
lenders and the promissory notes from VHCI. This is the holding of cases
cited by Valente, such as In re International Supply Co., 631 B.R. at 343-44,
which recognized that debt incurred in exchange for monies lent
constitutes equivalent value. This simply means that the loans evidenced
8
California courts have long applied substantially the same standards. See
Hansen v. Cramer, 39 Cal. 2d 321, 324 (1952). Indeed, the latest version of Cal. Civ. Code
§ 3439.03 defining what constitutes value for fraudulent transfer purposes is derived
from § 548(d)(2)(A) of the Bankruptcy Code. California courts typically look to
bankruptcy court decisions for guidance when the California fraudulent transfer
provision has its genesis in bankruptcy law. See Lo, 24 Cal. App. 5th at 1072-73.
9 Siggson deposited $68,111.50 into VHCI’s bank account a year or more before
the first challenged transfer. Valente’s own accounting shows that $3,358.00 of Valente,
Inc.’s deposits were made in small amounts months prior to the first challenged cash
transfer.
30
by the promissory notes given to Siggson, Nickels and Somo were for
reasonable value. That is not the issue. The question is whether value was
received in exchange for the challenged transfers. Though the satisfaction
of antecedent debt may constitute value under Cal. Civ. Code § 3439.03,
Valente does not argue, and there is no evidence, that any of the challenged
transfers satisfied VHCI’s obligations under the notes given to its lenders.
Rather, VHCI used its funds to benefit a third-party insider, VBI. VHCI
received no benefit from these transactions. Accordingly, the finding that
VHCI did not receive value for the identified cash transfers is not clearly
erroneous.
Finally, Valente argues that since her associates lent or deposited
more monies in total than she used from VHCI to assist VBI’s new business
there was no harm to VHCI to support any fraudulent transfer claims. This
is simply a recast of her prior argument regarding reasonably equivalent
value. Valente has not shown that the prior deposits had any relationship
to the specific challenged transfers. As noted above, the monies deposited
by Nowland, Siggson, and Valente herself, were documented as loans to
VHCI, that it could not pay and further evidenced VHCI’s insolvency.
VHCI’s payment of VBI’s start-up costs provided no benefit to VHCI and
deprived it of the limited assets it had to repay its debts, including the
loans owed to Nowland and VHCI’s other creditors.
We find no error in the bankruptcy court’s consideration and
application of the badges of fraud or its conclusion that VHCI, acting
31
through Valente, had the actual intent to defraud its creditors. Nor was
there any error in the bankruptcy court’s determination under Bonnett that
Valente actively and knowingly participated in the fraudulent transfers on
behalf of both VHCI and VBI.
E. Valente has not established any error in the court’s determination
that Valente transferred $7,865.92 in net funds out of VHCI to
Valente, Inc. with fraudulent intent.
Valente’s reasonably equivalent value arguments extend equally to
VHCI’s transfers to Valente, Inc. Unlike the other challenged transfers, the
bankruptcy court netted the transactions between Valente, Inc. and VHCI.
The court found that VHCI transferred $30,669.00 to Valente, Inc. between
October and December 2018. The court subtracted $22,813.08 in deposits
from Valente, Inc. into VHCI’s bank account during the same period to
calculate the fraudulent transfers based on the “net” loss to VHCI of
$7,865.92 ($30,669.00 - $22,813.08 = $7,865.92). 10
The bankruptcy court reasoned that VHCI had historically purchased
products and inventory from Valente, Inc. for its hair salon business. It
accepted that VHCI had historically made certain valid purchases from
Valente, Inc. in furtherance of its business “because [Valente] produced
invoices demonstrating purchases and because those were logical—both in
time and amount—under her narrative.” However, the court questioned
10
Nowland proposed this calculation, though using slightly different amounts, in
his supplemental briefing after remand.
32
why VHCI would transfer funds to Valente, Inc. after October 10, 2018, to
purchase products and inventory from Valente, Inc. for its own use given
VHCI’s impending closure. The court noted that Valente was unable to
produce invoices for these transactions, unlike those that occurred earlier
in 2018. Additionally, the court observed that in its last three months of
2018, VHCI’s transfers to Valente, Inc. differed from those supported by
invoices. The court explained that the later transfers were “inconsistent
temporally and numerically with her pattern of small purchases.”
Finally, the court found it implausible that VHCI purchased over
$30,000.00 in product when it knew it would be evicted from the Girard
Salon especially when Valente was already negotiating the Prospect Street
lease for VBI. Accordingly, the court agreed with Nowland that VHCI’s
$7,865.92 in net transfers to Valente, Inc. in and after October 2018 served
no business purpose and thus were for the purchase of products for the
benefit of VBI.
We find no clear error in these factual findings. Importantly, the
bankruptcy court did not find fraudulent the entire $30,669.00 in gross
transfers from VHCI to Valente, Inc. 11 Instead, the bankruptcy court
credited Valente for all of Valente, Inc.’s deposits into VHCI during the last
quarter of 2018.
11
This included the $13,000.00 transfer from VHCI to Valente on October 29,
2018, as the bankruptcy court otherwise held that Valente had paid $12,387.78 to VHCI
on November 1, 2018, as substantial payment for the $13,000.00 it received from VHCI.
33
Nowland does not challenge the netting of these amounts on appeal.
But Valente would have us double count the $22,813.08 in Valente Inc.
deposits. These same deposits are a significant part of the funds Valente
claims she gave as reasonably equivalent value for the challenged cash
transfers overall. Valente cannot have it both ways. She cannot first accept
the court’s crediting of these deposits to reduce the $30,669.00 in gross
transfers from VHCI to Valente, Inc. to reach a net cash transfer amount of
$7,865.92 and then count the same deposits a second time as so-called
reasonably equivalent value given in exchange for the challenged cash
transfers in total.
F. Valente’s standing arguments have no merit.
Finally, Valente attempts to re-argue the same standing arguments
she raised in her prior appeal. She mischaracterizes Nowland’s
§ 523(a)(2)(A) claim against her as a fraudulent transfer or avoidance claim
belonging to VHCI. She further claims that Nowland unsuccessfully tried
to sue her as VHCI’s alter ego. According to Valente, she is not individually
indebted to Nowland; only VHCI is.
As we explained in our prior decision—and reiterated above—
Valente may be held personally liable for her tortious conduct in
orchestrating the fraudulent transfer scheme between VHCI and VBI.
In re Valente, 2022 WL 2176785, at *7 (citing Sanger, 2019 WL 1229660, at *7).
Consequently, Nowland is not asserting against Valente any rights he
holds against VHCI or that qualify as an asset belonging to VHCI.
34
Valente’s liability to Nowland is related to but independent of Nowland’s
claim against VHCI for the amounts VHCI owes him.
We made these same determinations in our prior decision before
remand. See id. Those determinations are law of the case. See Blixseth v.
Credit Suisse, 961 F.3d 1074, 1081 (9th Cir. 2020) (citing Herrington v. Cnty. of
Sonoma, 12 F.3d 901, 904–05 (9th Cir. 1993)). Though the Ninth Circuit
recognizes some exceptions to the law of the case doctrine, none of those
exceptions are applicable here. See Gonzalez v. Arizona, 677 F.3d 383, 389 n.4
(9th Cir. 2012) (en banc), aff'd sub nom. Arizona v. Inter Tribal Council of Ariz.,
Inc., 570 U.S. 1 (2013). 12
CONCLUSION
For the reasons set forth above, we AFFIRM.
12
As stated in Gonzalez, the exceptions to the law of the case doctrine are: “(1) the
[prior] decision is clearly erroneous and its enforcement would work a manifest
injustice, (2) intervening controlling authority makes reconsideration appropriate, or (3)
substantially different evidence was adduced at a subsequent trial.” Id. (quoting Jeffries
v. Wood, 114 F.3d 1484, 1489 (9th Cir. 1997) (en banc)).
35