In re: Trent Allen Bateman Mountain Thunder Coffee Plantation International, Inc. Naturescape Holding Group International, Inc.

FILED
AUG 7 2019
NOT FOR PUBLICATION SUSAN M. SPRAUL, CLERK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 Nos. HI-18-1302-TaSKu
HI-18-1306-TaSKu
TRENT ALLEN BATEMAN; MOUNTAIN HI-18-1307-TaSKu
THUNDER COFFEE PLANTATION
INTERNATIONAL, INC.; NATURESCAPE
HOLDING GROUP INTERNATIONAL, INC., MEMORANDUM*
Debtors.
TRENT ALLEN BATEMAN, Bk. No. 1:17-bk-01101
Appellant, Adv. No. 1:18-ap-90002
v.
GEMCAP LENDING I, LLC,
Appellee.
*
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.
TRENT ALLEN BATEMAN, individually; LISA Bk No. 1:16-bk-00984
J. BATEMAN, individually; LISA J.
BATEMAN, Co-Trustee; TRENT ALLEN Adv. No. 1:17-ap-90008
BATEMAN, Co-Trustee; BROOKE DECKER,
Appellants,
v.
GEMCAP LENDING I, LLC; ELIZABETH A.
KANE, TRUSTEE; UNITED STATES TRUSTEE,
Appellees,
TRENT ALLEN BATEMAN, individually; LISA Bk No. 1:16-bk-00982
J. BATEMAN, individually; LISA J.
BATEMAN, Co-Trustee; TRENT ALLEN Adv. No. 1:17-ap-90007
BATEMAN, Co-Trustee; BROOKE DECKER,
Appellants,
v.
GEMCAP LENDING I, LLC; ELIZABETH A.
KANE, TRUSTEE; UNITED STATES TRUSTEE,
Appellees.
2
Argued and Submitted on July 18, 2019
at Pasadena, California
Filed – August 7, 2019
Appeal from the United States Bankruptcy Court
for the District of Hawaii
Honorable Robert J. Faris, Chief Bankruptcy Judge, Presiding
Appearances: Frederick John Arensmeyer of Dubin Law Offices argued
for appellants; and Mark C. Taylor of Waller Lansden
Dortch & Davis, LLP argued for appellee GemCap
Lending I, LLC.
Before: TAYLOR, SPRAKER, and KURTZ, Bankruptcy Judges.
INTRODUCTION
Despite appointment of a chapter 111 trustee, renewed litigation
involving prepetition lender GemCap Lending I, LLC rapidly erupted in
the involuntary cases of Mountain Thunder Coffee Plantation
International, Inc. and Naturescape Holding Group, International, Inc.
GemCap confronted obstacles to realization on its collateral, subsequently
filed an adversary complaint, and obtained orders compelling cooperation
1
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
from the Mountain Thunder and Naturescape principals, Trent A.
Bateman, Lisa J. Bateman, and Brooke Decker. When it discerned a
violation of the bankruptcy court’s directives, it requested contempt
sanctions against the individuals. And when Mr. Bateman filed his own
chapter 7case, it sought determinations of nondischargeability on account
of the contempt and alleged prepetition fraud and conversion. After a four
day trial, the bankruptcy court found in GemCap’s favor in all respects.
The Batemans and Ms. Decker appeal from these judgments.2 Their
appellate strategy, however, does not lead to success. As to Ms. Bateman
and Ms. Decker, they ignore the consequences of their decision to refrain
from testimony before the bankruptcy court, the fact that the bankruptcy
court orders at issue required affirmative action, and the record that
evidences no such effort on their part. As to Mr. Bateman, he contests the
bankruptcy court’s factual findings by reproducing his trial testimony and
faulting the bankruptcy court for believing GemCap’s witnesses and
finding him not credible.
We owe significant deference to the bankruptcy court’s findings of
credibility and fact, and we discern no error on the record before us.
Accordingly, we AFFIRM.
2
The parties filed combined briefs addressing all three appeals. Because of the
substantial overlap in the appeals, which resulted in a joint trial, we dispose of them in
a single decision.
4
FACTS
Prepetition, Trent Bateman, Lisa Bateman, and Brooke Decker
operated Mountain Thunder and Naturescape (collectively, “Borrowers”).
The Batemans are married; Brooke Decker is their daughter. Mr. Bateman
was Mountain Thunder’s president, but despite being involved in its day-
to-day management, he was not an officer or shareholder of Naturescape.
Ms. Bateman was also an officer of Mountain Thunder and both she and
Ms. Decker were Naturescape officers.
Borrowers purchased coffee from growers, processed it, and sold it at
wholesale and retail.
In 2011, Borrowers entered into a lending agreement (the
“Agreement”) with GemCap and obtained a $440,000 term loan and a
$1,550,000 revolving line of credit. They provided a first priority lien on all
assets to secure their repayment obligations. The Agreement required
Borrowers to deposit collections in a lockbox account.
The Batemans, as Mountain Thunder officers, and Ms. Bateman and
Ms. Decker, as Naturescape officers, signed certificates confirming
corporate ownership of the identified collateral and affirming the
correctness of the Agreement’s representations.
The Agreement was amended in 2013. As relevant here, it reduced
the term loan amount to $327,775.77 but increased the line of credit to
$2,550,000.
5
The Batemans and Ms. Decker unconditionally guaranteed the
Borrowers’ obligations under the Agreement and reaffirmed the
guarantees whenever the loan documents were amended.
As is customary in asset-based lending, Borrowers’ ability to draw on
the line of credit was limited by the amount of their eligible accounts and
inventory. Thus, in connection with each draw, GemCap required
submission of a borrowing base certificate that identified the asset basis for
borrowing and was certified by a responsible officer. Mr. or Ms. Bateman
signed most of the borrowing base certificates.
Borrowers were also required to provide monthly certificates listing
all equipment in their possession. They delivered many; Mr. or
Ms. Bateman signed all of them, and Mr. Bateman actively participated in
their preparation.
But Borrower’s business operations were not successful; they were
unable to make required payments in 2015 and defaulted under the
Agreement. Unknown to GemCap, however, there were also two
additional relevant defaults already in existence. First, at the direction of
the Batemans and Ms. Decker, Borrowers had diverted $771,669 from the
lockbox account; GemCap never received these proceeds. Second,
Borrowers had provided inflated borrowing base certificates that
overstated receivables for years. The initial misrepresentation was
allegedly inadvertent, but the Borrowers and the Batemans discovered it
6
shortly thereafter and neither corrected it nor otherwise informed GemCap.
Indeed, over a two-year period, they repeated the misrepresentation 102
times, and, in reliance on the false borrowing base certificates, GemCap
lent an additional $2,049,179.10.
Unaware of these additional serious defaults, GemCap provided
formal notice of default based on the missed payments but then entered
into a forbearance agreement.3 In it, Borrowers, the Batemans, and
Ms. Decker acknowledged the payment default, reaffirmed their respective
obligations, and confirmed their representations and warranties.
But forbearance was short-lived; GemCap discovered the additional
defaults. In December 2015, GemCap filed suit in state court against the
Batemans, Ms. Decker, and Borrowers. The state court appointed a receiver
but allowed Mr. Bateman to resume management under the receiver’s
supervision. It also deferred enforcement proceedings after partial
summary judgment to allow Borrowers an opportunity to refinance their
obligations.
Eventually, GemCap became dissatisfied with both the state court
proceedings and the receiver’s performance. So it (and others) filed
involuntary chapter 11 petitions against Naturescape and Mountain
3
In its findings, the bankruptcy court did not identify when GemCap discovered
the additional defaults. During trial, GemCap submitted testimony that it did not
discover them until it audited Mountain Thunders’ books and records in 2015 and that
it did not know about them when it signed the forbearance agreement.
7
Thunder. The bankruptcy court entered orders for relief and also ordered
appointment of a trustee, who shut down Borrowers’ business operations
in January 2017.
GemCap and the trustee entered into a purchase agreement allowing
GemCap to acquire its collateral. The bankruptcy court approved the
transaction over objections from Naturescape, the Batemans, and
Ms. Decker, and GemCap designated Palani Farms, LLC as the acquiring
entity.
But an order approving the sale did not lead to an orderly turnover of
collateral. As the bankruptcy court put it: “The Batemans [took] many
actions to interfere with GemCap’s effort to enforce its rights in its
collateral. These actions began around the time that the state court
appointed the receiver, and continued and accelerated when the
bankruptcy trustee sought approval of the Asset Purchase Agreement.”
GemCap responded to this interference with adversary proceedings
and requests for injunctive relief against the Batemans and Ms. Decker (and
others).4 After a hearing, the bankruptcy court entered a temporary
restraining order:
prohibiting the [] Batemans and Ms. Decker from using,
transferring, or physically moving any of the purchased assets,
or interfering with the sale of the assets, and requiring them to
4
GemCap filed adversary proceedings in both Naturescape and Mountain
Thunder’s cases; the parties and bankruptcy court treated them as consolidated.
8
turn over to GemCap the domain and website
www.mountainthunder.com, emails, telephone numbers
associated with the Borrowers, and customer lists, to give
GemCap access to the wet mill portion of the Kaloko Property,
and to promptly identify the location and condition of all assets
which the defendants claimed were their personal property.
The temporary restraining orders did not yield compliance. Thus,
after a two-day evidentiary hearing, the bankruptcy court issued
preliminary injunctions. The injunctions required the Batemans and
Ms. Decker very specifically:
• “to, immediately upon entry of this preliminary injunction, (I)
comply with Sale Order . . ., (ii) turnover possession, custody, control,
title and (if applicable) passwords, lock combinations, keys or other
information needed for access and use for any and all items identified
in the Asset Schedule, . . . (viii) transfer all collateral as identified in
Section 5 of the Loan and Security Agreement . . .”;
• “to immediately permit GemCap or its designee full, unfettered, and
continuing unimpeded access to the Kaloko Property, including, but
not limited to, the orchard, driveway and area around all offices and
commercial buildings, the Kaloko Wet Mill, and the Kainaliu
Property;”
• “to identify the location and condition of inventory, and turnover all
of the assets on the Asset Schedule, within three (3) days of the entry
of this preliminary injunction;” and
9
• “to immediately identify the location and condition of inventory and
turnover all assets any Enjoined Party contested as a Purchased
Asset, including, without limitation, all equipment, machinery, tools,
merchandise, inventory, cash, accounts, merchant accounts,
Square.com accounts, roasted and unroasted coffee, and coffee
cherry[.]”
The bankruptcy court also enjoined them “from interfering with any access
to any part of the Kaloko Property (except the personal residences of Trent
and Lisa Bateman and Brooke Decker), Kainaliu Property, and any other
property used in connection with or otherwise related to the Business and
from interfering with GemCap or [its designee’s] possession of any of the
assets on the Asset Schedule located on any of those properties, including
Kainaliu.”
While the tumult in the Borrowers’ bankruptcies was evolving,
Mr. Bateman filed his own chapter 7 petition. GemCap filed a claim based
on his guaranty of the Borrowers’ obligations and damages for conversion
and contempt and commenced an adversary complaint seeking a
nondischargeability determination as to the entire amount.
Leading up to a joint trial in the adversary proceedings commenced
by GemCap in the three bankruptcy cases, the parties submitted
declarations in lieu of direct and rebuttal testimony. The bankruptcy court
then held a four day evidentiary hearing. Ms. Bateman and Ms. Decker
10
neither provided a declaration nor testified at trial.
The bankruptcy court issued findings of fact and conclusions of law.
As to the request for sanctions based on noncompliance with the
temporary restraining order and the preliminary injunction, the
bankruptcy court found that the Batemans and Ms. Decker knew about its
orders, could have complied with them, but failed to do so because they
did not provide full, unfettered, and continuing, unimpeded access to the
Kainaliu Property and otherwise interfered with the turnover of equipment
collateral. This lack of required cooperation made it impossible for
GemCap or its designee to recover collateral worth $262,330.
As for Mr. Bateman’s specific interference, we quote the bankruptcy
court’s decision extensively:
Other items of GemCap’s collateral are located on the Kainaliu
Property. When the state court receiver was in possession of
the Kainaliu Property, he would not allow Palani Farms and
GemCap access unless his representative and a representative
of the Batemans was present. GemCap was able to enter the
Kainaliu Property once and removed items that the receiver’s
representative believed were included in GemCap’s collateral.
But the receiver would not allow GemCap to remove other
items claimed by GemCap and Palani Farms because the
Batemans refused to meet again for a coordinated access to the
property. These assets . . . were part of GemCap’s collateral, are
included in the purchased assets, remain on the Kainaliu
Property, and belong to GemCap and Palani Farms.
Mr. Bateman testified that all of the items left on the Kainaliu
11
Property ‘has [sic] considered abandoned and either has been
or will be removed or destroyed.” This statement about
abandonment is factually false (GemCap and Palani Farms
never voluntarily gave up their rights in those items) and
legally unsustainable (Mr. Bateman has offered no authority for
the proposition that these items should be deemed abandoned).
If any of these items have been destroyed, Mr. Bateman is
accountable.
The bankruptcy court thus held the Batemans and Ms. Decker in
contempt. But it limited sanctions to the value of the equipment that they
put beyond GemCap’s reach, $262,300, and made the sanction award
subject to reduction if the Batemans or Ms. Decker turned over equipment
in the future. It also concluded that the sanction was nondischargeable in
Mr. Bateman’s bankruptcy case.
It also concluded that GemCap’s claim against Mr. Bateman was
otherwise nondischargeable. Dischargeability under § 523(a)(2) was
appropriate in part because he provided false borrowing base certificates
that caused GemCap to lend an additional $2,049,179.10 to Borrowers. It
also found and concluded that Mr. Bateman’s diversion and conversion of
$771,669 of lock box cash collateral warranted nondischargeability under
§ 523(a)(6).
The bankruptcy court entered separate, final judgments in both
adversary proceedings. The Batemans and Ms. Decker timely appealed.
12
JURISDICTION
The bankruptcy court had jurisdiction under 28 U.S.C. § 1334157(b)(2)(A), (E), and (I). We have jurisdiction under 28 U.S.C. § 158.
ISSUES
Did the bankruptcy court abuse its discretion in finding Appellants in
civil contempt and imposing sanctions?
Did the bankruptcy court clearly err when it found that Mr. Bateman
provided false borrowing base certificates and diverted $771,669 from the
lockbox accounts?
STANDARD OF REVIEW
“We review for abuse of discretion the bankruptcy court’s finding of
civil contempt and imposition of sanctions.” Kismet Acquisition, LLC v. Diaz-
Barba (In re Icenhower), 755 F.3d 1130, 1138 (9th Cir. 2014). “We review for
clear error the bankruptcy court’s findings of fact in connection with the
civil contempt order.” Id.Whether a claim is excepted from discharge under § 523(a) presents
mixed issues of law and fact. Carrillo v. Su (In re Su), 290 F.3d 1140, 1142
(9th Cir. 2002). Mixed questions of law and fact are usually reviewed
de novo. Id. But in the context of a dischargeability analysis, the bankruptcy
court’s factual findings are reviewed under the clearly erroneous standard.
Candland v. Ins. Co. of N. Am. (In re Candland), 90 F.3d 1466, 1469 (9th Cir.
1996); see In re Su, 290 F.3d at 1142.
13
“Clearly erroneous review is significantly deferential, requiring that
the appellate court accept the [trial] court’s findings absent a definite and
firm conviction that a mistake has been made.” United States v. Syrax,
235 F.3d 422, 427 (9th Cir. 2000) (internal quotation marks omitted); see
Anderson v. City of Bessemer City, 470 U.S. 564, 573 (1985). The bankruptcy
court’s choice among multiple plausible views of the evidence cannot be
clear error. United States v. Elliott, 322 F.3d 710, 714 (9th Cir. 2003). Put
differently, a factual finding is clearly erroneous if it is illogical,
implausible, or without support in inferences that may be drawn from the
facts in the record. See TrafficSchool.com, Inc. v. Edriver Inc., 653 F.3d 820, 832
(9th Cir. 2011).
DISCUSSION
Appellants argue that the bankruptcy court erred in three respects:
first, in finding Ms. Bateman and Ms. Decker in contempt; second, in
finding Mr. Bateman in contempt; and, third, in finding that Mr. Bateman
provided false borrowing base certificates and diverted money from the
lockbox. We disagree.
A. The bankruptcy court did not clearly err in finding
Ms. Bateman and Ms. Decker in contempt and did not abuse
its discretion in imposing sanctions.
“Under traditional principles of equity practice, courts have long
imposed civil contempt sanctions to ‘coerce the defendant into compliance’
with an injunction or ‘compensate the complainant for losses’ stemming
14
from the defendant’s noncompliance with an injunction.” Taggart v.
Lorenzen, 139 S. Ct. 1795, 1801 (2019); cf. In re Dual-Deck Video Cassette
Recorder Antitrust Litig., 10 F.3d 693, 695 (9th Cir. 1993) (“Civil contempt in
this context consists of a party’s disobedience to a specific and definite
court order by failure to take all reasonable steps within the party's power
to comply.”). Bankruptcy courts have authority to hold parties in contempt.
Taggart, 139 S. Ct. at 1801.
To find a party in civil contempt, the movant must prove by clear and
convincing evidence that the alleged contemnor violated a specific and
definite order of the court. Knupfer v. Lindblade (In re Dyer), 322 F.3d 1178,
1190–91 (9th Cir. 2003). The bankruptcy court must also find that the
contemnor had sufficient notice of the order’s terms and the fact that
sanctions would follow a failure to comply. Hansbrough v. Birdsell (In re
Hercules Enters., Inc.), 387 F.3d 1024, 1028 (9th Cir. 2004). Whether the
contemnor violated a court order is not based on subjective beliefs or intent
in complying with the order, “but [based on] whether in fact [the] conduct
complied with the order at issue.” In re Dyer, 322 F.3d at 1191 (citation
omitted). The standard for evaluating civil contempt, thus, is an objective
one. Taggart, 139 S. Ct. at 1804. It asks whether there was a “fair ground of
doubt” about whether the conduct was proper. Id.Once a contemnor’s noncompliance with a court order is established,
the burden shifts, and it must produce sufficient evidence of its inability to
15
comply to raise a question of fact. In re Icenhower, 755 F.3d at 1139. This is
because a “contemnor in violation of a court order may avoid a finding of
civil contempt only by showing it took all reasonable steps to comply with
the order.” Kelly v. Wengler, 822 F.3d 1085, 1096 (9th Cir. 2016).
And, under § 105(a), a bankruptcy court may both hold a party in
civil contempt and impose compensatory or coercive sanctions. In re Dyer,
322 F.3d at 1189–90; Renwick v. Bennett (In re Bennett), 298 F.3d 1059, 1069
(9th Cir. 2002); Walls v. Wells Fargo Bank, N.A., 276 F.3d 502, 506–07 (9th Cir.
2002); Nash v. Clark Cnty. Dist. Attorney’s Office (In re Nash), 464 B.R. 874,
880 (9th Cir. BAP 2012).
On appeal, Ms. Bateman and Ms. Decker argue that no evidence
implicated them in any failure to provide access to collateral or showed
that they interfered with the asset transfer. At oral argument, they argued
that GemCap failed to meet its evidentiary burden. But Ms. Bateman and
Ms. Decker miss the point.
In reviewing a determination of contempt, we first ask whether there
was a clear and definite order—there was: the preliminary injunction.
Appellants do not dispute that the preliminary injunction required them to
provide GemCap or its assignee with full access to specific real property
and to identify and turnover specific assets.
Second, we ask whether there was clear and convincing evidence that
Ms. Bateman and Ms. Decker knew about the preliminary injunction. The
16
bankruptcy court found that they did; we agree that the evidentiary record
supports this conclusion.
Next, we consider whether Ms. Bateman and Ms. Decker knew that
the preliminary injunction applied to their actions or inactions. They assert
that they cannot be held in contempt because there was no testimony
establishing that they actively interfered with the transfer of assets. But this
argument ignores that the preliminary injunction required their active
participation in identifying and turning over the assets. Put simply, the
order required action, and they did not act as required.
At oral argument, Ms. Bateman and Ms. Decker’s counsel suggested
that GemCap failed to meet its burden of going forward because it did not
provide evidence of active interference with asset turnover. But this
evidence was unnecessary; the bankruptcy court found, based on clear and
convincing evidence, that Ms. Bateman and Ms. Decker failed to act as
required by the preliminary injunction; this failure to act, standing alone, is
noncompliance with the preliminary injunction.
As a result, the burden then shifted to Ms. Bateman and Ms. Decker to
show that they were unable to comply or substantially complied with the
preliminary injunction. But they provided no such evidence in connection
with the trial. They did not even testify. So we discern no error in the
bankruptcy court’s conclusion that they were in contempt of the
preliminary injunction order.
17
And finally, Ms. Bateman and Ms. Decker do not dispute the
bankruptcy court’s calculation of damages. To the extent Ms. Bateman or
Ms. Decker yet acts in good faith and assists in the turnover of the
equipment, they can seek a reduction in the amount of the sanction. The
bankruptcy court’s judgment of contempt, thus, amounts to more than just
a civil compensatory monetary award—it is also a civil coercive award,
designed to induce compliance. Appellants conceded this at oral argument.
In sum, we conclude that the bankruptcy court did not err when it
held Ms. Bateman and Ms. Decker in contempt and imposed damages.
B. The bankruptcy court did not clearly err in finding
Mr. Bateman in contempt and did not abuse its discretion or
clearly err in imposing nondischargeable sanctions.
The bankruptcy court held Mr. Bateman in contempt and entered a
corresponding nondischargeable judgment against him for $262,300.
Our analysis above applies equally here. The preliminary injunction
was a specific and definite order, Mr. Bateman knew about it, and the
preliminary injunction required Mr. Bateman to actively assist in the
turnover of equipment and assets. Part of Mr. Bateman’s appellate
argument reduces to the supposition that he could do nothing and avoid
contempt. But that was not an option for Mr. Bateman. And Mr. Bateman
does not contest that GemCap was unable to acquire certain assets or that
they were worth $262,300.
Mr. Bateman also argues, on appeal, that GemCap’s own witness
18
conceded on cross-examination, first, that he never asked Mr. Bateman
where the various pieces of equipment were and, second, that he also
recalled that Mr. Bateman asked GemCap to remove assets from the
property. This, he supposes, absolves him of liability because he made an
effort to comply. And at oral argument, Mr. Bateman’s counsel emphasized
that Mr. Bateman was displaced by both the state court receiver and a
bankruptcy trustee.
We acknowledge that Mr. Bateman presented and marshaled
evidence suggesting that he provided limited cooperation. The bankruptcy
court noted this cooperation, but then found that it was insufficient and
provided in order to mask actions inconsistent with the preliminary
injunction. As a result, Mr. Bateman’s appellate argument fails—his facial
compliance efforts do not amount to a showing that he took all reasonable
steps to comply with the preliminary injunction. Kelly, 822 F.3d at 1096. And
as with Ms. Bateman and Ms. Decker, Mr. Bateman does not dispute the
amount of the sanction and has the ability to reduce it through post-
judgment turnover of assets.
Finally, Mr. Bateman does not dispute the bankruptcy court’s
accompanying conclusion that the $262,300 sanction is appropriately
nondischargeable in his bankruptcy case. We deem the matter waived.
Padgett v. Wright, 587 F.3d 983, 985 n.2 (9th Cir. 2009).
As such, we conclude that the bankruptcy court did not err in holding
19
Mr. Bateman in contempt, imposing sanctions, and concluding that the
sanction was nondischargeable.
C. The bankruptcy court did not err in entering a $2,820,848.10
nondischargeable judgment against Mr. Bateman.
Mr. Bateman next disputes the determination that an additional
$2,820,848.10 of GemCap’s claim was nondischargeable. The bankruptcy
court based this on its finding, first, that Mr. Bateman prepared false
borrowing certificates that GemCap relied on and, second, that Mr. Bateman
diverted $771,669 from the lockbox.
Again, Mr. Bateman does not dispute the bankruptcy court’s legal
conclusions that the sums are nondischargeable under § 523 in
Mr. Bateman’s bankruptcy case. We treat any challenge to this legal
conclusion as waived. Instead, he focuses on the factual findings.
Mr. Bateman’s appellate argument is not persuasive; he reproduces
substantial portions of his direct testimony, notes that he was cross-
examined, and then states that his testimony was consistent with his
declaration and was thus credible. He continues:
There was absolutely no reason identified by the Bankruptcy
Court that it should have been disregarded. Yet, for some
unknonwn [sic] reason, the Bankruptcy Court seems to have
completely disregarded his testimony, and instead rubber-
stamped the unsupported allegations asserted by GemCap, that
Trent Bateman prepared fraudulent borrowing base certificates
and fraudulently diverted GemCap’s funds. In fact, the
Batemans never prepared the borrowing base certificates. Those
20
certificates were always prepared by GemCap. And, when a
mistake was made in inventory, Trent Bateman immediately
notified GemCap of that error. That is far from fraud.
In disregarding Trent Bateman’s testimony and instead rubber-
stamping GemCap’s unsupported allegations, the Bankruptcy
Court abused its discretion . . . .
Opening Br. at 15–16. This is far from convincing.
To start, Mr. Bateman’s framing of his argument is nearly self-
defeating. As the Supreme Court once explained: “[W]hen a trial judge’s
finding is based on his decision to credit the testimony of one of two or
more witnesses, each of whom has told a coherent and facially plausible
story that is not contradicted by extrinsic evidence, that finding, if not
internally inconsistent, can virtually never be clear error.” Anderson,
470 U.S. at 575.
Mr. Bateman is particularly flummoxed by the bankruptcy court’s
credibility finding: he concedes that the bankruptcy court found him not
credible, and he allegedly does not understand why. But his chagrin is of no
moment; a “trial court’s finding that a witness is not credible is entitled to
special deference.” Allen v. Iranon, 282 F.3d 1070, 1078 n.8 (9th Cir. 2002)
(citing, Anderson, 470 U.S. at 573); see Kirola v. City & Cty. of San Francisco,
860 F.3d 1164, 1179–82 & n.7 (9th Cir. 2017). Our review of the record and
the bankruptcy court’s decision discloses ample evidence in support of this
finding: the bankruptcy court found that Mr. Bateman testified falsely
21
multiple times. Findings of Fact & Conclusions of Law at 9 (“Mr. Bateman
testified . . . . This testimony was false. . . . Mr. Bateman’s willingness to say
whatever suits his family’s interests at the moment makes his testimony
incredible.”), 18 (“Mr. Bateman took the position (indeed, he testified under
oath) . . . . Mr. Bateman’s testimony was false. . . . Mr. Bateman changes his
story intending to use the domain name for the benefit of himself and his
family . . . .”), 19 (“Mr. Bateman contended that . . . . These claims were false
. . . .”), and 21 (“Mr. Bateman testified that . . . . This statement about
abandonment is factually false . . . and legally unsustainable . . . .”).
Mr. Bateman’s particular assertion that he never prepared borrowing
base certificates also provides no basis for reversal. He relies exclusively on
his direct testimony that “Lisa and I have NEVER done a borrowing base.”
This does not amount to a showing that the bankruptcy court clearly erred.
First, this is contradicted by the record; the exhibits presented at trial
include borrowing base certificates signed by both Mr. and Ms. Bateman
and support the bankruptcy court’s factual conclusions. And further, the
bankruptcy court also found that Mr. Bateman directed Borrowers to submit
false borrowing certificates to GemCap. This finding is adequately
supported by third party testimony in the record.
Mr. Bateman’s attempt to downplay the magnitude of the borrowing
basis certificate error is also insufficient. He argues that the mistake was not
“unusual” and a “non-issue.” But the bankruptcy court found otherwise.
22
And this finding was supported by other testimony in the record.
Finally, other than reproducing Mr. Bateman’s direct testimony on the
matter, Mr. Bateman never discusses the diversion of the funds from the
lockbox beyond a categorical statement that the bankruptcy court erred in
so finding. This is not enough to dispute the finding. Cf. Christian Legal Soc.
Chapter of Univ. of California v. Wu, 626 F.3d 483, 487 (9th Cir. 2010) (“[W]e
won’t consider matters on appeal that are not specifically and distinctly
argued in appellant’s opening brief. Applying this standard, we have
refused to address claims that were only argued in passing or that were
bare assertions . . . with no supporting argument.”) (internal quotation
marks and alterations omitted). In any event, the finding was adequately
supported by testimony in the record.
In short, Mr. Bateman does not adequately challenge the bankruptcy
court’s factual findings. They have support in the record. And he admits
that the bankruptcy court believed GemCap’s witnesses and disbelieved
him. He then fails to discredit GemCap’s witnesses by reference to anything
other than his discredited testimony. He fails to show clear error.
CONCLUSION
Based on the foregoing, we AFFIRM.
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