Ebell Media, Inc. v. Reaty Corp. (In Re Ebell Media Inc.)

FILED
NOT FOR PUBLICATION DEC 19 2011
MOLLY C. DWYER, CLERK
UNITED STATES COURT OF APPEALS U .S. C O U R T OF APPE ALS
FOR THE NINTH CIRCUIT
In the Matter of:
No. 10-55654
EBELL MEDIA, INC.,
D.C. No. 2:09-cv-00752-SVW
Debtor,
MEMORANDUM *
EBELL MEDIA, INC.,
Appellant,
v.
REATY CORPORATION,
Appellee.
Appeal from the United States District Court
for the Central District of California
Stephen V. Wilson, District Judge, Presiding
Submitted November 14, 2011 **
Pasadena, California
* This disposition is not appropriate for publication and is not precedent
except as provided by 9th Cir. R. 36-3.
**
This panel unanimously finds this case suitable for decision without
oral argument. See Fed. R. App. P. 34(a)(2).
Before: W. FLETCHER, and RAWLINSON, Circuit Judges, and SINGLETON,***
Senior District Judge
Ebell Media, Inc., (“Ebell”) and Sun C. Chen (“Chen”), its counsel, appeal
from the final judgment of the district court affirming on appeal the decision of the
bankruptcy court terminating the automatic stay and awarding sanctions to Reaty
Corporation (“Reaty”).
We review the decision of a district court on appeal from a decision of the
bankruptcy court de novo, without deference to the district court’s decision. Hale
v. United States Tr., 509 F.3d 1139, 1145 (9th Cir. 2007). The decision of a
bankruptcy court to grant or deny relief from the automatic stay is reviewed for an
abuse of discretion. Gruntz v. County of Los Angeles (In re Gruntz), 202 F.3d
1074, 1084 n.9 (9th Cir. 2000) (en banc). Likewise, a bankruptcy court’s award of
sanctions is also reviewed for an abuse of discretion. Hale, 509 F.3d at 1146.
A dispute arose between Reaty and Ebell concerning performance under a
contract between them. Reaty initiated arbitration proceedings in accordance with
the arbitration provision in the contract. When the arbiter informed the parties she
was prepared to enter an award, Ebell filed a voluntary petition for relief under
Chapter 7 of the Bankruptcy Code.
***
Honorable James K. Singleton, Senior District Judge, District of
Alaska, sitting by designation
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“[B]ad faith commencement of [a bankruptcy] case justifies lifting [the]
stay.” Raleigh v. Ill. Dept. of Revenue, 530 U.S. 15, 25 (2000). “To determine bad
faith a bankruptcy judge must review the totality of the circumstances.” Eisen v.
Curry (In re Eisen), 14 F.3d 469, 470 (9th Cir. 1994) (per curiam) (internal
quotation marks and citation omitted). The bankruptcy court’s finding of bad faith
is reviewed for clear error. Marsch v. Marsch (In re Marsch), 36 F.3d 825, 828
(9th Cir. 1994). In this case, it is undisputed that: (1) this case involved solely a
two-party dispute; and (2) the only possible effect of the bankruptcy filing was to
stop the arbitration proceeding. Given the timing of the petition, its delay of the
arbitration proceeding, and the absence of any estate to be administered, there can
be no doubt that the petition was filed in bad faith. See St. Paul Self Storage Ltd.
P’ship v. Port Authority of the City of St. Paul (In re St. Paul Self Storage Ltd.
P’ship), 185 B.R. 580, 584 (9th Cir. BAP 1995) (finding bad faith under similar
facts). The bankruptcy court did not abuse its discretion in terminating the stay to
permit the pre-petition arbitration proceeding to go forward.
The bankruptcy court imposed sanctions on Chen under Federal Rule of
Bankruptcy Procedure 9011. Chen argues that, because the contract between Ebell
and Reaty was executory and the bankruptcy trustee did not assume it within 60
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days of the date the bankruptcy petition was filed, as required by 11 U.S.C.
§ 365(d)(1), the contract was deemed rejected as a matter of law.
The contract was not executory at the time Ebell filed its bankruptcy
petition. The contract had been breached and, except for the payment of money
from Ebell to Reaty, no other performance was due under the terms of the contract.
The mere fact that money may be due from one party to the other without a
reciprocal obligation on the payee to do some act does not make a contract
“executory.” See Hall v. Perry (In re Cochise College Park, Inc.), 703 F.2d 1339,
1349 & n.7 (9th Cir. 1983) (finding a contract executory where, in addition to the
requirement that payment be made, the payee had an obligation under the contract
to perform some act).
We have considered Chen’s other arguments and find them to be without
merit. The bankruptcy court did not abuse its discretion in imposing sanctions on
Chen. Accordingly, the decision of the district court is affirmed.
AFFIRMED.
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