Evoq Properties, Inc. v. Richard Meruelo
669 F. App'x 930
| 9th Cir. | 2016Background
- Richard Meruelo was CEO and Chair of MMPI (later EVOQ) and sought severance pay after termination following the company's bankruptcy and reorganization.
- Meruelo claimed his severance should be allowed as an administrative expense under 11 U.S.C. § 503(b)(1)(A) after the bankruptcy court confirmed a reorganization plan.
- The bankruptcy court held Meruelo had no substantive right to severance: his employment agreement had expired before termination and he failed to prove entitlement in quantum meruit (no evidence of reasonable value of services).
- The Bankruptcy Appellate Panel (BAP) reversed and remanded, concluding the bankruptcy court applied the wrong standard for § 503 administrative expense claims, but it did not decide whether a substantive right to payment existed.
- The Ninth Circuit exercised jurisdiction over the appeal, addressed the threshold substantive-right question, and concluded the bankruptcy court correctly ruled Meruelo had no contractual or quantum meruit right to severance.
- The Ninth Circuit reversed the BAP and remanded with instructions to reinstate the bankruptcy court’s ruling; appellee to bear costs.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Meruelo had a substantive contractual right to severance | Meruelo argued he was owed severance despite termination after his agreement, implying a right arose or survived | MMPI/EVOQ argued the executive employment agreement expired before termination, so no contractual entitlement existed | Court held no contractual right: agreement had expired prior to termination |
| Whether Meruelo could recover severance in quantum meruit | Meruelo argued equitable recovery for services rendered should provide reasonable-value payment | Opponent argued Meruelo failed to prove the reasonable value of services and thus cannot prevent unjust enrichment | Court held quantum meruit failed: Meruelo offered almost no evidence of reasonable value |
| Whether administrative-expense treatment under § 503(b)(1)(A) should control | Meruelo (and BAP) urged administrative-expense standard applies, potentially allowing priority payment | MMPI argued threshold substantive right must exist under state law before § 503 relief; bankruptcy court had applied appropriate threshold analysis | Court held administrative-expense analysis irrelevant because no underlying substantive right existed; bankruptcy court did not err on that threshold issue |
| Scope of appellate jurisdiction over BAP remand order | Meruelo contended review appropriate to resolve legal standards for administrative claims | Appellee contested finality but court considered pragmatic factors for exercising jurisdiction | Court exercised jurisdiction under 28 U.S.C. § 158(d) given efficiency and lack of prejudice |
Key Cases Cited
- Scovis v. Henrichsen, 249 F.3d 975 (9th Cir. 2001) (framework for appellate jurisdiction over BAP orders and pragmatic finality)
- Lundell v. Anchor Constr. Specialists, 223 F.3d 1035 (9th Cir. 2000) (discussing finality in bankruptcy appeals)
- In re Scholz, 699 F.3d 1167 (9th Cir. 2012) (factors favoring exercise of jurisdiction over BAP decisions)
- Teamsters Local No. 310 v. Ingrum (In re Tucson Yellow Cab Co.), 789 F.2d 701 (9th Cir. 1986) (administrative-expense requires an underlying state-law right or quantum meruit recovery)
- Carolco Television Inc. v. Nat’l Broad. Co. (In re De Laurentiis Entm’t Grp. Inc.), 963 F.2d 1269 (9th Cir. 1992) (definition and proof required for quantum meruit recovery)