Aspen Skiing Co. v. Cherrett (In Re Cherrett)
873 F.3d 1060
| 9th Cir. | 2017Background
- Paul Cherrett accepted a senior VP hospitality job with Aspen after Aspen offered a $500,000 below‑market housing loan plus salary and an annual bonus timed to cover interest for the loan’s first ten years; repayment penalties applied if he left within specified years.
- Cherrett purchased a Colorado condominium with the loan while his wife and children initially remained in Wyoming; he treated the condo as a temporary "place holder."
- Cherrett filed Chapter 7 in 2013 owing Aspen $550,000 under the housing loan; Aspen moved to dismiss under 11 U.S.C. § 707(b)(1) arguing the loan was consumer debt and dismissal for abuse was appropriate.
- The bankruptcy court found the loan was incurred for a business purpose (part of compensation to induce Cherrett to join Aspen) and denied dismissal; the BAP affirmed that ruling and held the order appealable.
- The Ninth Circuit affirmed the BAP: it held the denial of a § 707(b) dismissal order was final and appealable and that the bankruptcy court did not clearly err in finding the housing loan was primarily for a non‑consumer (business) purpose.
Issues
| Issue | Plaintiff's Argument (Aspen) | Defendant's Argument (Cherrett) | Held |
|---|---|---|---|
| Whether the bankruptcy court’s denial of a § 707(b) motion is final and appealable | Denial is not final typically; should not be immediately appealable | Order resolves the discrete issue of dischargeability and is properly appealed | Court: Denial was final/appealable because it resolved substantive rights and a discrete issue in bankruptcy context (affirmed BAP) |
| Whether the housing loan is "consumer debt" under 11 U.S.C. § 101(8) | Loan financed purchase of a residence and therefore is consumer debt; dismissal for abuse appropriate | Loan was part of compensation to induce employment and primarily served a business purpose; not consumer debt | Court: Loan was primarily for a non‑consumer (business) purpose; bankruptcy court’s factual finding not clearly erroneous (affirmed) |
| Proper standard of review for characterization of debt | (Aspen) Where facts undisputed, legal question => de novo review | (Cherrett) Characterization involves factual weighing of motives => clear‑error review | Court: Treated purpose inquiry as essentially factual and reviewed for clear error (but said it would reach same result on de novo review) |
| Whether employer subsidies/bonus structure alters analysis of purpose | Employer bonus does not change that the loan purchased a residence for personal use | The below‑market loan plus bonuses were integral to compensation and necessary to secure employment — supports business purpose | Court: The loan and bonus were integral to the compensation package and the particular facts supported a business purpose finding |
Key Cases Cited
- Zolg v. Kelly, 841 F.2d 908 (9th Cir. 1988) (mortgages can be consumer or non‑consumer; purpose of debt governs)
- McDow v. Dudley, 662 F.3d 284 (4th Cir. 2011) (order denying § 707(b) motion is appealable where it conclusively resolves the abusive‑case threshold)
- SS Farms, LLC v. Sharp (In re SK Foods, L.P.), 676 F.3d 798 (9th Cir. 2012) (finality standard in bankruptcy appeals: resolves substantive rights and determines a discrete issue)
- United States v. Hinkson, 585 F.3d 1247 (9th Cir. 2009) (distinguishing factual findings from legal or mixed questions for standard of review)
- Stewart v. U.S. Trustee (In re Stewart), 175 F.3d 796 (10th Cir. 1999) (debt incurred for family support during education constituted consumer debt; treats purpose question as legal review)