David Bradlow v. the Castano Group

FILED
NOT FOR PUBLICATION FEB 22 2010
MOLLY C. DWYER, CLERK
UNITED STATES COURT OF APPEALS U .S. C O U R T OF APPE ALS
FOR THE NINTH CIRCUIT
DAVID A. BRADLOW, Plan Disbursing No. 08-16172
Agent for the Estate of Melvin M. Belli,
D.C. No. 3:06-cv-05344-MJJ
Plaintiff-Appellant,
v. MEMORANDUM *
THE CASTANO GROUP; et al.,
Defendants-Appellees.
Appeal from the United States District Court
for the Northern District of California
Martin J. Jenkins, District Judge, Presiding
Argued and Submitted December 8, 2009
San Francisco, California
Before: SCHROEDER and CALLAHAN, Circuit Judges, and LUCERO, ** Circuit
Judge.
*
This disposition is not appropriate for publication and is not precedent
except as provided by 9th Cir. R. 36-3.
**
The Honorable Carlos F. Lucero, Circuit Judge for the Tenth Circuit,
sitting by designation.
The bankruptcy estate of Melvin Mouron Belli (the “Estate”) appeals the
district court’s affirmance of a partial summary judgment order entered by the
bankruptcy court in favor of the Castano Group. Exercising jurisdiction under 28
U.S.C. § 158(d), we affirm.
I
Belli was a prominent California attorney who practiced law under the name
“the Law Offices of Melvin M. Belli.”1 In 1994, Belli joined with other attorneys
to form an unincorporated consortium known as the Castano Group. The purpose
of the group was to fund and coordinate multiple lawsuits against tobacco
companies. Although the Castano Group initially lacked a written partnership
agreement, Belli and other founders made capital contributions to the group.
The Castano Group’s first major initiative involved filing a federal class
action suit on behalf of all smokers and nicotine-dependent individuals in the
United States, as well as survivors of individuals who had suffered tobacco-related
deaths. Although the group obtained class certification in the district court,
Castano v. Am. Tobacco Co., 160 F.R.D. 544, 559-60 (E.D. La. 1995), the Fifth
1
This court “view[s] the evidence and inferences therefrom in the light most
favorable to” the Estate. Sigma Micro Corp. v. Healthcentral.com (In re
Healthcentral.com), 504 F.3d 775, 788 (9th Cir. 2007) (quotation omitted).
Circuit later decertified the class, Castano v. Am. Tobacco Co., 84 F.3d 734, 752
(5th Cir. 1996). Belli was personally involved in this litigation.
Unfortunately, Belli began having personal problems during the Castano
case. In December 1995, he filed for Chapter 11 bankruptcy protection. Shortly
thereafter, Belli was diagnosed with a terminal illness. He passed away in July
1996.
Just weeks after Belli’s death, the Castano Group filed suit in Ellis v. R.J.
Reynolds Tobacco Co., No. 706458 (Cal. Super. Ct. filed July 26, 1996), a case
that ultimately led to a master settlement agreement under which the Castano
Group received $1.25 billion in attorneys’ fees. Around the same time, the
Castano Group reduced its formerly implied partnership agreement to writing. The
Castano Plaintiffs Attorneys Agreement (“1996 Agreement”) was signed in
October 1996, but was “entered into effective as of January 1, 1994.” The 1996
Agreement lists the Law Offices of Melvin M. Belli as a member, with Belli’s son
as representative.2
On July 14, 2004, the Estate filed a complaint against the Castano Group in
bankruptcy court, claiming entitlement to a portion of the $1.25 billion fee award.
The bankruptcy court granted summary judgment in favor of the Castano Group on
2
Belli’s son does not have an ownership interest in the Law Offices of
Melvin M. Belli.
the Estate’s claims to a portion of the Ellis award, but let proceed the Estate’s
claim to an ownership interest in the Castano Group as valued at the time of Belli’s
death. After the parties stipulated that the Estate’s remaining claim was valued at
$50,000, the court certified its partial grant of summary judgment as final pursuant
to Federal Rule of Civil Procedure 54(b). The district court affirmed, and the
Estate timely appealed.
II
This court reviews “de novo a district court’s judgment on appeal from a
bankruptcy court.” Neilson v. United States (In re Olshan), 356 F.3d 1078, 1083
(9th Cir. 2004) (citation omitted). Viewing the facts in the light most favorable to
the Estate, we must determine if “there are no genuine issues of material fact”
warranting a trial. Margolis v. Ryan, 140 F.3d 850, 852 (9th Cir. 1998). We
conclude that the Estate fails to demonstrate a genuine issue of material fact
regarding its entitlement to a portion of the Ellis award under either the 1996
Agreement or the earlier implied agreement.
The Law Offices of Melvin M. Belli was organized as a sole proprietorship,
which lacks legal existence independent of the sole proprietor under Louisiana
law.3 See Robinson v. Heard, 809 So. 2d 943, 946 (La. 2002). Accordingly,
the Estate cannot claim a portion of the Ellis award as the owner of the Law
Offices of Melvin M. Belli.
As a result, the Estate may only base its claim on a subrogation theory—that
is, it may claim only funds to which Belli would be personally entitled had he not
filed for bankruptcy. See 11 U.S.C. § 541(a); Begier v. IRS, 496 U.S. 53, 59
(1990). Had he not filed for bankruptcy, Belli’s personal interest in the Castano
Group would have terminated at the time of his death. See La. Civ. Code art. 2818.
When a partner’s interest is terminated, he is entitled to receive only “an amount
equal to the value [of his partnership interest] at the time membership ceased,”
unless the parties agreed to compensate the former partner in a different amount.
Id. art. 2823.
Thus, to be entitled to a portion of the $1.25 billion award, the Estate must
come forward with evidence showing that the parties agreed to pay Belli a portion
of any fee awards earned by the Castano Group after Belli’s death. It fails to do so.
The text of the 1996 agreement does not provide for payment to former
partners for fees awarded after their departure. Contrary to the Estate’s contention,
the inclusion of the Law Offices of Melvin M. Belli in the 1996 Agreement’s list of
3
The parties agree that federal bankruptcy law, Louisiana partnership law,
and Louisiana contract law govern this action.
members does not demonstrate a binding agreement to compensate Belli’s
successor-in-interest using future fee awards. If anything, it indicates a mistaken
assumption that the Law Offices of Melvin M. Belli continued to exist as a legal
entity after Belli’s death.
Nor does the Estate proffer evidence that an earlier implied agreement
entitled former members of the Castano Group to collect post-departure fees.
Statements made by a founding Castano Group member suggest that current
members of the group may be entitled to proceeds from actions on which they did
not work. However, these statements shed no light on the rights of former
members.
III
For the foregoing reasons, we AFFIRM the judgment of the district court.